Gold Retreats Deeper into the Range
Aug 08 a.m. (USAGOLD) — Gold has retreated deeper into the range that has dominated for the past three months. A surge in the dollar and softer oil prices have prompted a test of the June lows at 859.15/857.45.

The dollar surged in overseas trading as the market continued to digest ECB president Jean-Claude Trichet’s comments from Thursday. Although there was a strong emphasis on inflation, Trichet also warned that the Eurozone economy would weaken substantially in the second and third quarters.

Trichet’s heightened concern about growth risks has been interpreted by the market as an indication that the ECB will not be raising rates again any time soon. The reversing out of these expectations has weighed heavily on the euro and the dollar has benefited.

The FX market has been largely short dollars — for a multitude of very good reasons, which have not gone away — but when you’re short dollars you must simultaneously be long some other currency. Like euros. It is the squaring of these positions that is driving the dollar higher, despite the absence of any strong fundamental reason to be long the greenback.

Increased worries that the effects of the credit crisis are now spreading around the world plays into this scenario as well. We have seen a significant rise in the dollar, not only against the euro, but also against sterling, Swiss franc and the yen as well, as investors scale back their overseas bets.

A huge £5.9bn ($11.3bn) writedown by the Royal Bank of Scotland is just the most recent evidence of contagion. The UK’s second largest bank reported a net H1 loss of £802m ($1.5bn).

In the past couple of weeks, we’ve also seen a rather precipitous drop in the commodity currencies. The sharp drop in commodity prices has weighed on CAD, AUD and NZD, which in turn has bolstered the dollar.

Repatriation of dollars is certainly helping to bolster the greenback, but it’s not really a case of renewed confidence in the dollar. All of the world’s currencies are extremely vulnerable as a result of the spreading credit/liquidity crisis, but you have to have your assets denominated in some currency.

I would argue that gold is the best asset when wealth preservation is of paramount concern. Once the market realizes that, we should see the yellow metal rebound.

Gold Market Movers:

US wholesale sales for Jun +2.8%, well above expectations.

US productivity (prelim) for Q2 rose 2.2%, below expectations.

Canada employment for Jul tumbles 55.2k. Unemployment rate 6.1%.

That sinking feeling

RBS slumps to loss after £5.9bn writedown

Fannie tallies a $2.3 bln loss

Global writedowns nearing $0.5 trillion

UBS to buy back stricken debt securities

Gold, oil ratio ‘out of whack‘ after declines

Gold production falls by 12.3pc in South Africa

(Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.)

It gets old here really quick, especially in defence of suppression of free speech on gold and related social and economic commentary.
Sundeck, (cocktail in hand?) posts now just enough to stroll off the patio and hail and laud the flawless and superior state of the US, deriding us as doomers, now accusing us of playing “games” that threaten gold before retreating back into surly self-righteous self-satisfaction.

Back again, a schizophrenic poster from NZ has also recently taken on parts as smarmy dissembler and obscure scold.
“How golden is silence”, he and Sundeck have mastered their senses, feelings and thoughts he insists.
Must we then close the forum and let slavishly enlightened ones conduct the “game”? Their “fundamental” ruse could not be more apparent.

So as their bitter spittle dries on the page, it is with such obseqious self-indulgence that two otherwise artfully flamboyant posters can turn self-righteous indignation into treacherous dissuasion and foul stagnation.

excerpts
08.08.08 (Forbes) — Currency traders were buying the dollar in droves on Friday, after the European Central Bank’s warning about the euro zone economy raised concerns about slowing growth outside of the United States.

The greenback hit a five-month high against the euro, on Friday…

It came after the ECB’s president, Jean Claude Trichet, talked up the euro zone growth problem on Thursday, after announcing that the central bank would keep euro zone interest rates on hold…

“There is a bullish dollar mood in the market at the moment,” said Daragh Maher, a senior currency strategist at Calyon…

“As the talk of more trouble ahead in the European economies grows, the mood drags the dollar in a positive position versus the euro,” he added…

Analysts say that it now looks like the dollar is set to rebound strongly in the coming months…

Peter Scullion, vice president of the currency department of Nomura in London, said, “As Europe faces a couple of negative quarters and the rest of the world’s economies weaken, the dollar will gain momentum.”

How long will the greenback stay robust? “These things tend to never operate in a straight line,” said Maher. “Geopolitical risks in Iran could spike oil prices and send the dollar downward again.”

^_(from hyperlink)_^

If you are wondering how economic weakness elsewhere in the world can result in support for a U.S. dollar that is itself fundamentally weak, you need only to remind yourself that there is a vast financial complex (hedge funds, investment banks, etc.) that shuffles trillions around the globe daily, but is largely constrained to making their choices only from amongst the (papery) trash that fills their dumpster.

In essence, “stirring the garbage” is the only thing these guys can do.

So when they all crowd together into one corner of their dumpster to effectively lift one currency above the others, those of us outside the dumpster can temporarily enjoy cheaper prices (on items priced in terms of that currency) — that is, until they stir the garbage again and temporarily hold aloft some other selection of litter. Those poor schmucks.

It’s good to be on the outside where a wider range of rational choices can be made! Choose gold.

R.

It’s all very co-ordinated. First the savage, panic selling down of gold - $854 at this writing.
(Last night I said I thought that “UNDER $850″ was the objective of the present offensive.

The anti-gold crowd - it is vast and international - has decreed that the trenches of the gold bulls shall be overrun and the bulls massacred.

“OK, OK! Have it your way!” So the trenches are overrun and now we are down to $854 and the enemy is not done with gold yet. $843 would be their objective, suitably distant from $850 to humiliate the bulls and rout them.

Then come the commentators. I remember many yearsago, a cover on “The Economist” announcing the DEATH OF GOLD. We’ll have more in that line: “Commodities falter”, “Gold PLUNGES”, every possible interpretation of this attack on gold will be directed to convincing the masses that gold stinks. “It’s on its way down, it’s time has passed”, etc. etc.

A little voice inside me, asks “do you suppose they are hammering the price of gold, because what is coming is very grave and they want the price way down to begin with, otherwise it will be well over $1K when the expected new development comes to be known?”

This “trench warfare” being waged against gold, will finally exhaust the aggressors, who are in a state of absolute panic. The defenders only need to hold on to their gold, and buy more if they can, at these low prices.

SIERRA
It’s only a question of time.

Want to learn more about gold ownership?

Click here…

Thanks to Mr Powell for the link. This Blackstone Group obviously has much in common with GATA. Perhaps there’s some synergy to be gained between the two.

But the story inside of the story here is fairly important

Walker, ex Bush bean counter- now whistle blower with attitude, teams up with billionaire Peterson. They then buy the I.O.U.S.A. movie from starving artist types, with the intention of making as much noise as possible with it. Instantly, ‘educating the masses’ becomes a possibility, including the consequences of market intervention.

For added strength I’d like to see them recruit (beyond Buffett) a half dozen more icons such as Steve Forbes (gold standard), Ron Paul (outspoken on government fraud), and high profile movie/rock stars to command sheeple attention.

Keeping my eye on this. If ever there was an Illuminati/Big government call to arms, this would be it. In the very least, expect compromising dirt on their Blackstone Group to hit mainstream shortly.

SNIP

“…Since 2005, Walker (former head of the Bush GAO) has been traveling the country on the catchy-sounding “fiscal wake-up tour,” preaching his apocalyptic message to half-empty rooms, at least at the start. The tour picked up steam after Walker’s message was featured in a “60 Minutes” piece in March 2007.

In March of this year, Walker resigned from the GAO so he could be even more vocal on the debt crisis, becoming chief executive of the newly formed Peter G. Peterson Foundation, set up by Peterson, billionaire co-founder of the Blackstone Group, a major private-equity player.

Their message: You probably know that the national deficit is $9.6 trillion and rising. What you don’t know is how bad things really are. If you include all the unfunded entitlement obligations — Social Security, Medicare, Medicaid and so forth — we are actually in a $53 trillion hole, Walker says.

And it will only get deeper as we get older.

In an interview, Walker is full of grim one-liners, such as: “The debt has increased our risk of being held hostage by foreign lenders” and “Our situation is serious, and it is deteriorating with the passage of time” and “The financial condition of the U.S. is worse than advertised….”

SNIP

“…the film made it to Sundance and got a standing ovation, Wiggin said.

Peterson’s foundation, with Walker at the helm, had promised to pay for the movie’s distribution. But they liked it so much, they bought it from Agora for $2.5 million.

The film will debut in 400 theaters around the country on Aug. 21, followed by a live video town hall meeting from Omaha, featuring Walker, Peterson and Buffett. The next day, the film opens in 10 cities, including Washington….”

Since the beginning of this forum I have somewhat been an outsider because I tend to harp if not nag on about letting heat and velocity do the work for gold . i have spoken about the sensory at length ( five sences ) outer … ; our thoughts ( various degree of cognition ) lol and our feelings, inner… ( which are in essence evaluative responces to our thoughts ) By the way like gold ; feelings dont age but its what we think about our feelings that actually matters and or otherwise changes . So if we are not perplexed about all this we can move onto intensions, inner … and once we are clear on these intensions one is free to move forward and act out life itself ; outer … This is the condition of humanity and perhaps this in essence is that which gves us a sence of continuity over time . Your post about 88888 mate was a core to the bone as it gets in a gold forum and really lets face it its all about love for the periodic table and its elements . Its an inate truth as is light and it was great to see a link on the straight and narrow other than gossip which may well me the only thing faster than the speed of light lol . Well said Sundeck :). lets get back to fundamentals . Pure beauty that post that does not DV8 from its essence .

great idea - gold dividends
it’s just what I suggested to a friend who works in mining

your first post shows that you too are using this Forum to think, clarify and sum up how to invest
I agree with your fundamental distrust of anything but gold

Steve

So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof.

When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 million of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 million, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve’s custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.

So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff.

With this intervention, central banks have bought some time. But alas, they have not fixed the problem. Central bank intervention does not make the dollar “as good as gold”, the description that once accurately described the dollar.

In the final analysis, it is fundamental factors that determine the course of markets and the process of price discovery that results from them. Central bank intervention - like fiat currency itself - is ephemeral. In contrast, gold lasts throughout the ages. So what would you rather own? A sick dollar that it requires central bank intervention to prop it up? Or gold?

First,this is the paper “20min”,a “gratis” daily newspaper which most people here are reading (incl. Knallgold but its boulevard crap style is disgusting for me ever more)-but this report hasn’t been in the paper version the last days.I translated it as closest as possible because so you can see its dripping 1 dimensional propaganda charakter.About 5x they write the same “SNB to sell 1000t Gold”.I will comment later on it as I’m at work at the moment,but this looks like a cheap scam,hey,that would mean the SNB is disbanded and the Swiss banking system is bankrupt and gone!Smells like a continuation of the recent war of the US authorities against the Swiss banking system,UBS and such.The US better should clean before their own door we have a saying here.Don’t judge,or you will be judged-I think someone will be caught with its pants down…

———————————————————————————————————–

Translation of article:

At the SNB,the sale of 1000t of Gold is on debate,the editor of a Swiss stocknewsletter reports.Is this announcement true,the whole Goldstock is on the touch and go.

This is a real Goldshock:the SNB probes the sale of 1000t of Gold.The publishing firm “Börsenzeit” (a newsletter with stock tipps from Zürich) reports of this intention to the media,citing “confidential and integer sources”.

Goldreserves on the go

When the announcement is true,the whole Gold holdings of the SNB are on debate to sell.At the moment,the reserves stand at 1077t.In 2000,the SNB started in a big way with selling its Gold.So far,1213 have been put on the market.

The full dissolving of the stock is,if at all,probably only possible in increments over a large time frame.”The CB’s of the eurozone incl. Switzerland and Sweden have put together in an agreement that they can sell only 500t yearly”,says Eliane Tanner of Credit Suisse.Would Gold be sold in a short time at costant demand,the Goldprice would drop,says the analyst.

Denial of the SNB

“Theres no talk at the SNB of selling a further 1000t”,says SNB speaker Werner Abegg.”Within the frame of the already announced sale of 250t,until Sept. 2009 only 37t will be sold”,according to Abegg.How it will proceed,he can’t say. end of article

I am still waiting for the gold producer who has sufficient cash flow to pay out dividends in actual gold coin, rather than cash. I know, I know, it would create a lot of paperwork, and what about very small shareholders. But what about a company like GG. If you have less than a certain amount of shares you would be paid in cash, otherwise, you would be paid in either 1/10th ounce, 1/4 ounce, 1/2 ounce, or full ounces of gold coin. The company first covers all cash expenses and keeps enough cash to grow, but excess cash is dividended back to shareholders in actual gold. This takes that much gold off the market, as you can be pretty confident most shareholders would hold the physical gold. Wonder what such a strategy would do for the company’s share sponsorship from investors. My guess is it would be very supportive of their share ownership!

Imagine a big slice of the industry doing this, and how much newly produced gold for sale would be taken off the market! And yes, I understand newly produced gold is a small amount relative to the previously produced gold in human history. Still,you have to think it would support prices….zero

888888888888888888888888888888888888888888888888888888888888888888
888888888888888888888888Happy Olympic Games to All8888888888888888888
888888888888888888888888May you collect much gold88888888888888888888
888888888888888888888888This is a very auspicious post888888888888888888
888888888888888888888888GOLD88888888888888888888888888888888888888
888888888888888888888888Atomic number 79 what a pity88888888888888888
888888888888888888888888it was not 80 or 88 even better8888888888888888
888888888888888888888888Good night and good luck888888888888888888888
888888888888888888888888888888888888888888888888888888888888888888

I lived in San Anton & Austin for about three years until 1988.

“Do you party?” is one of the things I learnt.
After 1987 it was like “First Month Free [with Lease]” and almost no lights in the Gulf. Gas then dropped from $1.40 to 87¢. (And I then just switched from a 72 Olds Toronado [454 cid] to an 83 Toyota SR5 Hatchback with flip-up headlights. — Those were very stupid - if you needed to flash someone, you had to wait until they came up - too late)

But, first, in 1986? they changed all the folded-up signs “Watch for Ice” from “Drive Friendly” [my Eng teach claimed ‘wrong, should be ‘Friendlily”] to ‘Don’t Mess with Texas’ [ie, Don’t Litter].

Your post was *very* readable. Encore!

gl0d

I doubt very much the truth of the rumor. Sale of that gold - now that it is “known” they are selling - would depress the price of gold way down. They would probably get something like $20 dollars a gram. Now, 1,000 tonnes at that price would bring $20 billion. A pittance which would not save their banks at all.

Maybe the rumor has something to do with tomorrow’s gold price? The Treasury and the Fed desperately need to kill, kill, KILL gold! They are doing their damnedest right now! They want gold at under $850 tomorrow, and the lower the better! KILL the uptrend. Delay the price rise at all costs!

I think that rumor originated accordingly - “who benefits?” from the rumor, is the clue.

Sleep tight!

SIERRA

Link

>>Officials at CERN [Conseil Européen pour la Recherche Nucléaire], the European Center for Nuclear Research, outside Geneva, announced Thursday that their new particle accelerator, the world’s largest, would begin operation on Sept. 10.ink]

Will life end the next day?

0

It appears to me after laundering, er swapping a small cache of family Nazi gold through the good offices of the Swiss authorities, our debt service costs have all but been eliminated and cash on hand will be adequate for the comfortable retirement in Paraguay. With enough left over for bribes, er campaign contributions to the full membership of our esteemed House of Reprobates, er Reprehensitives. They and a large herd of the commie Senate, are seeking reelection in Oct, er Nov and merit our tax-deductible bribe, er contribution. A great American institution, double-dealing and conflict of interest, I mean the Republican party.
My alphabet boys, IRS, NSA, I mean NEC will twist a few, I mean make a few calls, and levered grants, granted levers and submersible ballots, er subsidies will be the makings of victory.
One more rout, crowd-pleaser, a miracle on two-legs.
After all, the Olympics are not the only game in town.
Can we talk about tax breaks, favorable legislation and lucrative contracts for our “industry”? Daddy did it but I’m the decider.
My gold swaps will also buy us time before the whiners come calling for the strategic reserves and action against Big Oil monopolies. What do they expect, new refineries?
It would have been better to stun gun myself than give up the gold to those greedy double-crossdressers, er crossers.
But my negative net worths not all THAT bad- I hear South America welcomes two-bit deciders.

Indebted Ever After

Scared by National Deficit? You Should Be, Filmmakers Say

By Frank Ahrens
Washington Post
Thursday, August 7, 2008

A private-equity billionaire, a former federal government official, and a Baltimore newsletter editor have made a documentary film that they hope can do what an endless parade of policy papers has not: Persuade Americans that debt has created a looming economic crisis that would make the Great Depression look like a market correction.

The movie, “I.O.U.S.A.,” debuting Aug. 21, is an 87-minute alarum on what it calls the tsunami of debt bearing down on the United States’ future, caused by the rising national deficit, the trade imbalance, and the pending costs of baby boomers cashing in on entitlements.

Early reviewers have dubbed the film “An Inconvenient Truth” for the economy, meaning it’s not exactly the feel-good movie of late summer 2008.

Except for budget wonks in love, it hardly counts as a date movie. The film’s thrilling action sequence has a guy going to a refrigerator for a Tab. There are no car chases and nothing blows up. …

* * *

For the full story:

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/06/AR2008080603569.html

By Ambrose Evans-Pritchard
The Telegraph, London
Friday, August 8, 2008

Three years ago, the world’s top watchdog warned that the global economy was veering out of control. Defending orthodoxy against the easy debt policies of the Greenspan era, the Bank for International Settlements said interest rates were being held too low for safety in most of the mature economies.

America had embarked on an unprecedented experiment. The US savings rate had fallen to near zero for the first time since the Slump. The current account deficit had reached levels that were incompatible with the dollar’s role as the anchor of the global system.

The rising powers of Asia were preventing adjustment by holding down their currencies, and flooding the world with cheap credit in the process. Incipient bubbles were ubiquitous. “Most industrial countries are showing symptoms of over-heating in the housing market,” it said.

New-fangled securities were allowing banks to take “highly leveraged positions.” It was unclear how these untested inventions would “handle a string of credit blow-ups.”

“One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations,” concluded the BIS. That was in June 2004. …

* * *

For the full commentary:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/08/ccrisis108.xml&page=1

… imagine how it might botch regulation of the gold and silver markets too.

* * *

Big CFTC Data Revision Raises Oil Traders’ Eyebrows

By Robert Campbell
Reuters
Tuesday, August 5, 2008

NEW YORK — A quiet data revision that has boosted by nearly 25 percent the number of oil futures contracts U.S. regulators think are held by speculators is raising eyebrows in the energy trading community.

The revision means that speculators controlled 48 percent of the open interest in NYMEX crude oil futures and options as of July 15, compared with just over 38 percent under the previous classification.

“That’s huge when you look at the numbers,” said Phil Flynn of Alaron Trading in Chicago.

“It changes the whole way you look at the recent moves in this market.”

The U.S. Commodities Futures Trading Commission announced on July 18 that it was reclassifying some trading positions that it had reported as commercial hedging positions as noncommercial speculative positions.

The data revision converted approximately 327,000 long and 330,000 short NYMEX crude oil futures and options positions into mostly spreading positions held by speculators.

The big shift is all the more surprising, oil traders and analysts said, since the CFTC apparently reclassified only one unidentified oil trader at the same time as the data revision. …

* * *

For the full story:

http://www.reuters.com/article/companyNews/idUSN0535661120080805

Glad to have you join us at this great oaken table. Insightful and informative first post. Hope to see you around here often.

PA

Gold market lethargic as ECB holds rates steady

The COMEX December gold futures contract closed down $5.10 Thursday at $877.90, trading between $874.80 and $892.60

August 7, p.m. excerpts:
(from Bloomberg & MarketWatch) — Gold fell for a fifth straight session, the longest losing streak since June 2007, as a rebound in the dollar eroded the appeal of the precious metal as an alternative investment. The metal last fell for five straight sessions from June 4 to June 8, 2007.

Gold for December delivery fell $5.10 to close at $877.90 an ounce on the New York Mercantile Exchange. On Wednesday, the benchmark gold contract dropped $3.10 an ounce, and prices have tallied a loss of $44.80, or 4.9%, from the close of $922.70 on July 31. Gold touched a record $1,033.90 in March as the dollar headed for an all-time low against the euro.

The dollar rose against the euro on speculation an economic slowdown will prevent the European Central Bank from raising interest rates this year. The dollar rallied for a third straight day after ECB President Jean-Claude Trichet said economic growth in the region will slow in the second half of 2008. The ECB’s benchmark rate is 4.25 percent, compared with the U.S. federal funds rate of 2 percent.

“It’s the turnaround in the dollar that’s driving gold lower,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “You’re going to have people selling into any gold strength at this point.”

Still, gold may rebound as the lowest prices since June 16, attract buyers, analysts said.

“Prices for gold and silver look attractive down here,” said Walter Otstott, a senior broker at Dallas Commodity Co. in Dallas. “The weak longs have been flushed out. A lot of bargain hunting is setting in at this point. It’s seasonal for gold to rally until the first quarter of next year.”

Gold has advanced in the fourth quarter of every year since 2001.

Jewelers, who are the biggest buyers of the metal, have begun buying again, said UBS AG metals strategist John Reade. “Our daily sales to jewelry clients have picked up tremendously over the past week,” Reade said. “If the jewelry market remains strong, it may limit the downside from speculative long liquidation.”.

“We can assign the fresh drop in gold to the continuing vigor being exhibited by the U.S. dollar,” said Kitco’s senior analyst, Jon Nadler.

The dollar gained on the euro Thursday, after the European Central Bank held policy steady and hinted that no more interest rate hikes are coming for a while. In economic news Thursday, the National Association of Realtors reported that an index of sales contracts on previously owned U.S. homes rose 5.3% in June from the prior month, potentially signaling that the U.S. housing market may strengthen in the coming months. Separately, the Labor Department reported first-time claims for state unemployment benefits remained unusually high in the latest week, rising to 455,000, up 7,000 from the last week of July. The figure was the highest in more than six years.

“Structurally, the dollar may be getting ahead of itself given the once again rising unemployment numbers and we do not believe that home sales data played that big a role in the dollar’s advance in the past couple of hours,” Nadler said Thursday afternoon.

But any “signs of renewed weakness in the dollar would bolster gold,” said Peter Grant, a senior metals analyst at USAGOLD-Centennial Precious Metals, in a daily report. “Strong jewelry demand, particularly out of India has contained the downside thus far, leaving the $850/$845 support level unmolested.”

see full news, 24-hr newswire…

BACKGROUND: I’ve spent my entire 25 year career in the housing industry here in Texas. Our small family company barely survived the great oil and real estate crash of the late eighties, which really bludgeoned Texas. And, of course we’ve seen several booms. My dad started our company with $ 800 borrowed from his mom, in 1971. Today our little company has assets of around $ 10 million and employs around 70 people. We have little debt, and have conservatively run our company since inception. We’ll probably survive this current disaster but I can assure you, recovery is a LONG way off.

Since WWII, where my father fought and was wounded at Iwo Jima, housing has always led the US economy into a recession, and out of a recession. The industry is that massive, and has more correlated economic activity than any other industry by far. What people tend to forget about US housing is that almost every item of it is domestic. Yes, you import some steel, and some lumber, but all labor is done here, and most products that go into US housing is manufactured here, as well. And, any ancillary things like landscaping, pools, etc. All that labor is done here. Some plants are grown in Mexico, but very little.

Anyway, we’re blessed currently because 70% of our sales are in Texas, which has been, by far, the strongest region of the country in regards to construction activity. Oklahoma has also been strong because of oil related boom. I knew 5 years ago this downturn, when it happened, was going to be ugly. We should have sold the business in 2006, when investment bankers wanted to broker deals with us. Nobody but me wanted to sell.

The cheap, low interest rate money made the traditional housing cycle of about 7 years twice as long on the upside. Basically our industry was up up and up from 1991 to 2006. I knew instinctively that we were due for a correction as early as 2000, but the optimism of the great Tech riches/rally, and then the plunging of interest rates by Greenspan continued fueling the investment in housing. We made a lot of money.

I had no idea of the sub prime mess when I was thinking a correction was due. I was aware of the gift programs whereby the seller would gift a buyer the down payment, so I figured that was adding new fire to the boom, and bringing in people who really couldn’t afford a house. But qualifying people with bad credit histories, no income documentation, and all this, on top of a twice as long business cycle……at inflated prices. I believe we are looking at a 5-10 year down cycle in new home construction. The wave of foreclosures WILL spread to prime mortgages, no matter a Fannie Freddie rescue.

The ripples will not end any time soon. It honestly makes me wonder if Greenspan was Knighted because he and his European cronies knew what his low interest rates would lead to, and the fortunes one could make by properly positioning oneself in advance of such an unfolding disaster. Does it make you wonder?

Texas has held up well in this construction contraction, we benefit a lot from high oil and gas prices. But the last 2 months have seen a substantial slowdown in activity. The mortgage crisis is hitting here, too. The high, spiraling costs of living are hitting here, too. Electricity prices here are up 50% in the last few months because over 52% of our electricity comes from natural gas-fired plants. So even us Texans are getting squeezed from all sides.

So connect the dots. If housing can’t recover, the US economy can’t recover. We are YEARS away from a recovery in housing. They will have to print print print in a vain attempt to keep this sinking ship afloat. I suspect they will have an increasingly hard time keeping the boat afloat. So a good part of my liquid wealth is in the irrefutable currency, gold. My belief is you need a lot of cash in the coming days of hardship. My view on gold is that it IS cash, in any currency. I’m increasing my holdings as they continue to vainly try to float the boat. Zero

and the financials

and the price of gold

and it makes you just want to say

O TAY BUTT WHEAT

and buy something ………….like you’d buy back in 89 during the crash …..of Japans Nikkei

before the big inning ……….of borrow and 1 per cent and invest in US at 7 to ten …………… EXCEPT/

but now they spent all their dry powder and it’s imploding ……all around the globe…….so paper is burning wildly and widely/ no fidelity to be found / GREED SIEZED ON THE BANKERS…….and the fallout is going to bring FEAR as GREED’S exhaust as their MEDIA FRIENDS FOIST A CLOUD upon us all at the appointed time …..indicating …..bad dark clouds ………

I think they are going to use lying and the media to salve this sad droopy dismal business along for ten years …….US come a Japanese recession ….15 years and .5 interest rates ………chewing gum and lots of paper mache ….

THINGS DEAR will grow in acceptance and SUPPLY AND DEMAND will rule things dear……….

What does one seek for safety ……..and reliability ………..

OLD RELIABLE……………………..or you may invest in his brother TRUSTEE : their armour is always resident and working ….

IN the meantime , new industries are being born in garages because of the oppression of the IMPERIAL WIZARDS trying to bring serfdom back I N using the Oil patch ………looks likes a new dawn coming up over the horizon ……….IMF BE DAMNED.

Who wants to play with the IMF and the failed bankers of SOCIAL ENGINEERING INFAMY………………

WELCOME TO DECENTRALIZation of
POWER growing in the GRASS ROOTS….

GLOBALIZATION has turned on it’s head and the stench is coming from DERIVITIVE LEACH FIELD backing up in the living room because when the world quit buying the “BS” and liquidity dried up ……..it was as if someone put a GAG around the breather on the LEach field exhaust pipe…..GOT HOT IN THERE and then it backed up into our FRESH CNBC BOOB TUBE ATMOSPHERE of PLEASANTRIES ………….

WHAT YOU GONNA DO………CALL IN THE CAVALRY …….
and sit and watch calmly and resolutely in peace and serenity ….
You won’t need any sleeping pills …..GOLD AND SILVER are like MELATONIN to your soul……….just rest and be at peace.

If they would quit sponsoring BRIBERY and LYING ………and the JUDICIAL BRANCH and the SEC would put the CHEATERS BEHIND BARS……….and let the banks fail ………….this crap would not continue to repeat itself…over and over and over…………..

WHAT DO YOU DO TO PROTECT YOURSELF FROM THESE BasTURDS and their TOXIDITY……………………

5000 years of FIDELITY and SECURITY ………..

OLD RELIABLE and TRUSTEE…………………..

Regarding this article:
Ausverkauf bei der Nationalbank?

With a nice round thousand tonnes left in their reserves after they complete sales of the remaining 37 tonnes of their preannounced 250 tonne reallocation program between now and the end of September 2009 (scheduled within terms of the CBGA II), the Swiss could do it, but the real question is would they do it?

Half of it… maybe. But all of it???

It strikes me as something highly unlikely, [unless there is much more behind the scenes than meets the eye.]

Just to provide a little perspective, read this recent article, and ask yourself if Philipp Hildebrand sounds anything like the sort of desperado who would willingly liquidate the central bank’s gold reserves to the very last ounce?

HEADLINE: Switzerland’s central bank hints at leverage limits
excerpts
19June2008 (Telegraph) — Switzerland’s central bank has foreshadowed limits on leverage among new rules for the country’s banks to safeguard against the “dire consequences” of a collapse.

Philipp Hildebrand, vice-chairman of the Swiss National Bank board, said yesterday that “fundamental adjustments” to capital requirements were necessary following the credit crisis…

He said a limit on leverage, or a leverage ratio, was necessary alongside tier-one ratios — the risk-weighted measurements of tangible equity against assets that have grown in prominence as the crisis has gathered pace.

Mr Hildebrand said he was convinced that private sector bank executives would “continue to misjudge situations in the future”.

He added: “The financial system therefore needs to be made more resilient. This means the buffers system have to be increased. Should a big bank collapse, the consequences for Switzerland would be dire.”

^_(from hyperlink)_^

If there is any shred of verisimilitude to the 1000 tonne sale rumor, you can be sure it stems from a combination of Hildebrand’s above-stated concern for dire consequences regarding a collapse of, for example, UBS and Credit Suisse, coupled with the following revelation:

A report on financial stability released by the Swiss central bank [June 2008] reveals that the country’s big banks are among the most leveraged in the world.

Since the mid-1990s, their collective average indebtedness has climbed from 90% to 97% — or SFr97 of borrowed capital for every SFr3 of equity.

Bottom line: If gold is to be put forth as rumored, it is only because there is no other asset capable of filling a dire breach.

What else can be said other than, “Well, THAT’S gold for ya!” (A hero in a world that needs heros.)

R.

8/6/08 (yesterday) on Bloomberg.com

the deficit “will grow from $500 billion to $600 billion to $700billion” (just a few days ago Bill said to “$1 trillion”)
foreign central banks and sovereign funds are “frustrated” with our treasuries’ low yields so now they are investing
in other currencies and global markets and in their own internal economies

investing in US stocks is “sort of blocked” (by events)

implications
growing deficit = US sells more Treasuries …their yields will climb to keep the foreigners buying
higher yields = piles more debt interest to the deficit = driving foreigners away even more
————————————–
Obama said he will give $1,000 to every American family from the oil companies’ profits
implications: oil companies will spend less to expand production and develop alternatives in order to maintain their dividends
…this, less S & P earnings and a hike in the capital gains tax will drive the stock market down…
and will drive money out of the stock market into what? bonds??? R.E.??? Gold???

Steve

Rumors of central bank sales and one of our specials nearly sells out in less than 36 hours from first annoucement.

About 400 coins (of 2000) left. . .first-come, first-served!

August 2008 Buyers’ Group

or call the Trading Desk, Extension #100

We will speak to the Swiss rumor when we know more about it, i.e. whether or not the rumor floating the market has any substance.

Hoping someone can give us a decent translation, and verify the article source posted below by 968 as reliable.

Commodities Are Down…Hooray?
Lower prices are welcome, but a global slowdown is a big part of the change, and that’s no reason to cheer
Peter Coy, BW Economics Editor - Business Week Magazine, August 18, 2008
Excerpts:

“These days, even the good news is bad news. The good news, which helped the stock market to its biggest gain in four months on Aug. 5, is that commodity prices, led by oil, have been plunging. The bad news is why commodities have fallen: One big factor is a slowdown in global economic growth, with prospects for worse ahead.”

Mikal - The reason for the declines varies form commodity to commodity, stemming from distict market conditions, although they share in the fallout when several large hedge funds must dump their positions and when momentum traders chase swings and when traders fear government intervention and threatened action against speculators, and when traders heed rumors about global demand destruction in a market that’s in along term uptrend.

“On the bright side, lower commodity prices, all else being equal, help hold down inflation and ease strains on consumers and commodity-buying businesses…

Overall, the S&P GSCI—a global commodity index created by Standard & Poor’s (MHP) and Goldman Sachs Group (GS)—is off 19% since early July.
Trouble is, the welcome price drop owes a lot to unwelcome world economic weakness. Traders…

Slowing auto production has cut demand for palladium for catalytic converters.
Jiangxi Copper told Bloomberg Financial Markets on Aug. 5 that Chinese makers of refrigerators and air conditioners cut copper purchases because of slowing demand.”

Mikal- But middle-class auto demand is forecast to soar in emerging markets alongside appliances, plumbing, power lines, motors, as population and income grows all out of proportion to available supplies.

“And high prices have encouraged increased production of food and some metals, swelling inventories…”
Mikal- This is another example of putting the cart before the horse, as if the challenge was solved overnight.

“Some speculators are bailing because they’ve decided the party’s over for now, while others fear punitive regulations in the U.S., analysts say. “The sense of doom and gloom overhanging the commodity markets at the moment is palpable,” John Reade, a bullish analyst at UBS (UBS) in London, wrote in an Aug. 5 recent report.”

Mikal- These are more good contrarian signs and sentiments indicating more than a little complacency among the bears.

“Will it last? Environmentalists cheer the commodity plunge as evidence of “demand destruction”—as when utilities permanently quit using oil to generate electricity after its price spiked in the 1970s. But analyst Kevin Norrish of Barclays Capital in London thinks demand will snap back soon despite the sluggish economy, partly because of today’s lower prices. Indeed, MasterCard Advisors (MA) estimated on Aug. 5 that the volume of gasoline purchased in the U.S. had risen for the previous four weeks in a row as prices fell. That’s certainly not good news.”

http://www.20min.ch/finance/news/story/24990645

Swiss Central Bank considers selling Another 1000 tonnes of gold ????

The price of gold is not set by physical supply and demand but by the supply and demand for futures.

Thanks Chris,this is a small but encouraging marker on the Goldtrail.If only the paper drunk westerners could awake …

Gold Traders Move to Stall Futures Listing

By Darana Chudasri
Bangkok Post, Thailand
Thursday, August 7, 2008

The Gold Traders Association has asked securities regulators to delay the introduction of gold futures on the Thailand Futures Exchange. Jitti Tangsitpakdi, the association president, met with the Securities and Exchange Commission last week to ask for the futures delay.

“While gold shops may not be affected much in the first year, we could see over half of the 7,000 shops in Thailand closed in three years as investors move from physical gold investment to futures trading,” Mr Jitti said. …

* * *

For the full story:

http://www.bangkokpost.com/070808_Business/07Aug2008_biz43.php

Gold Remains Consolidative Within Tuesday’s Range
Aug 07 a.m. (USAGOLD) — Gold is maintaining a consolidative tone, confined to the range that was established on Tuesday. Support offered by higher oil prices is being offset to some degree by a firm dollar.

Interest rates have been the focus of this week’s trading. The Fed held steady on interest rates on Tuesday, leaving Fed funds at 2.0%. Today, both the BoE and the ECB followed suit, leaving interest rates unchanged at 5.0% and 4.25% respectively. The Bank of Korea hiked rates by 25bp to 5.25%, citing inflation concerns.

Weaker economic data in the Eurozone over the past several weeks led to diminished expectations of a rate hike. While inflation in Europe is likely to remain stubbornly high for some time, the recent retreat in energy and food costs provided the ECB with the necessary cover to leave rates unchanged.

The ECB’s press conference will likely acknowledge downside risks to growth, while maintaining a very hawkish tone on inflation. Just how hawkish the tone is will probably set expectations with regard to any future rate hikes, which will in turn set the near-term tone for the euro.

Recent euro weakness has forced the dollar back toward the high end of its 4-month range. The EUR-USD rate probed briefly below the 1.5400 level yesterday, but these losses could not be sustained. The lower limits of the range are defined by 1.5306 (13-Jun low) 1.5286 (08-May low), which remain well protected at this point.

A decidedly hawkish tone in the press conference would increase the chances of tighter monetary policy later in the year and could spark some position taking on the long side of the euro. A move in the EUR-USD back above 1.5515/16 would ease short-term pressure on the downside, favoring a return to an area just above 1.5600, where the 20, 50 and 100-day moving averages are converging.

The euro continues to display good resilience on a cross-rate basis. EUR-JPY remains within striking distance of the 169.97 historic high from July. A similar positive tone is evident in EUR-CHF, where a breach of resistance at 1.6370/78 would suggest potential back to the 1.6829 peak from Oct-07. A move back above 0.8000 in the EUR-GBP would return focus to the .8098 high from Apr.

Persistent euro strength against the major crosses is likely to limit the downside in the euro against the dollar. Given the ECB’s single mandate of price stability, we will probably see another rate hike in Europe before we see tighter policy in the US.

The dollar index has pressured the range high at 74.31 (13-Jun high), but this level has capped the upside thus far. A retreat below 73.56/53 would take the pressure off the upside and favor a return to the 72.00 zone.

Signs of renewed weakness in the dollar would bolster gold, which continues to trade below $900. Strong jewelry demand, particularly out of India has contained the downside thus far, leaving the 850/845 support level unmolested.

India is the world’s largest consumer of physical gold. Seeing them back in the market, in a fairly aggressive manner, is encouraging. As Mike Kosares likes to point out, paper sales offer physical buying opportunities.

Gold Market Movers:

US initial claims +7k to 455k.

ECB holds steady on rates at 4.25%.

BoE holds steady on rates at 5.0%.

German production for Jun +0.2%.

BoK raises rates by 25bp to 5.25%, citing inflation concerns.

The Fed’s next move is down

Is the U.S. banking system safe?

Credit crisis continues to weigh on Asia

Crude oil rises as Turkey says pipeline repair may take 2 weeks

Stock index futures suggest a lower open on Wall Street

(Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.)

SEC may turn a blind eye to this

If the SEC wants to investigate something, it should investigate how Citigroup might have been aware of an important rule change a week in advance.

But contrary to what Crittenden says, Citigroup does not have things well in hand. Citigroup will be in worse shape two months from now and in even worse shape one year from now. The value of that $1.1 trillion in garbage that Citigroup is holding off the books is declining every day. Look at Merrill Lynch for an example of what some of Citigroup’s assets might be worth.

http://globaleconomicanalysis.blogspot.com/2008/08/not-practical-to-tell-truth.html

***************************************************************
Cities have turned into jungles.
And corruption is strangling the land.
The police force is watching the people.
But the people just don’t understand.
We don’t know how to mind our own business.
Cause the whole world has to be just like us.
Now we are fighting a War over there.
No matter who’s the winner .
We can’t pay the cost.

Yes there’s a Monster on the loose.
He has our head inside the noose.
And he just sits there.
Watching.

Steppenwolf/ Monster/1971

Words coming back to haunt us?
Slingshot————-$

What does the leverage of 220 really mean? I think it the ratio of the market capitalization to the value of the outstanding loans. Right now the market capitalization of the 2 are 15.5 billion. Multiply by 300 and you get the loan balance of 5 trillion, which is backed by the worst of the “conforming loans”.

Remember, each mortgage company/bank decides which deals to self-finance, and which to send to Freddie and Fannie. So while these are not “sub prime”, they still are not doing so well lately.

Let us ask what is the hit to the equity if 10% of the loans are non-performing. This is where the leverage of 220 comes into play. It shows how busted these enterprises are. Those holding the stock are gambling that the federal government will buy them out at a better price.

As I have said before on this forum, I think that Fannie (and probably Freddie) are holding the wrong end of gold derivitives. If you want to know who is providing the financing for wrong way bets on the gold price, look no further than these guys.

Why? look up “Gibson’s Paradox”. low gold price yields low interest rates. They want low interest rates, so they use their financial arm to hold down the gold price. Now housing values are falling and gold is going up. The combination in a neutron star of financial implosion. We are all watching this from “the Restaurant at the End of the Universe”. [This is a lame reference to Douglas Adams and Hitchhiker’s Guide to the Universe]

Banks are so disparate for physical gold, they probably hired fake policemen to steal it back

From a Dutch newspaper badly translated by Google
http://translate.google.com/translate?u=http://www.telegraaf.nl/binnenland/1632267/__Nepagent_maakt_miljoen__buit__.html?p=24,1&ie=UTF8&sl=nl&tl=en

Nepagent = fake policemen

Gold drifts sideways, awaits ECB and BOE rate decisions Thursday

The COMEX December gold futures contract closed down $3.10 Wednesday at $883.00, trading between $880.50 and $894.60

August 6, p.m. excerpts:
(from MarketWatch) — Gold futures closed lower Wednesday to tally a four-session loss of almost $40 an ounce as weaker oil prices and strength in the U.S. dollar against other major currencies dulled investment demand for the metal. Gold for December delivery dropped $3.10 to close at $883 an ounce on the New York Mercantile Exchange. It’s trading at the lowest level since mid June.

“Gold suffered technical damage yesterday with a close below the 200-day moving average at $887 an ounce,” said Mark O’Byrne, a Dublin-based director at Gold and Silver Investments Ltd. “The short-term trend remains down; however, gold’s long-term fundamentals remain sound,” he said.

On the currency markets, the U.S. dollar maintained its firmer tone Wednesday, buoyed against major rivals by more evidence of deteriorating economic fundamentals in Europe and Japan, in the wake of the U.S. Federal Reserve’s decision to hold policy steady for now. After the close of regular gold trading Tuesday, the U.S. Federal Reserve kept interest rates unchanged at 2%.

A policy statement from the Fed gave no sign that the central bank plans to shift policy in the foreseeable future.

“It looks like the commodity markets may be doing the Fed’s job on its behalf at least regarding bringing down inflation,” said Kitco’s senior analyst, Jon Nadler. “It’s the [weak economic] growth part that has commodity sellers crowding the market exit doors.”

But Peter Grant, a senior analyst at USAGOLD-Centennial Precious Metals, said “inflationary pressures are going to remain stubbornly high, despite the pullback in commodity prices.”

And “the best way to protect yourself against a weaker dollar and the resulting inflation, along with persistent risks to the banking system, is to own physical gold,” he said in a daily report.

see full news, 24-hr newswire…

There are those among us who choose to expose themselves to Golds potential via a shareholding in Gold-mining ventures.

This group (as reflected in the accompanying index Chart) are right now at max angst and discomfort.

The logic where the expectation that Gold (the antithisis of Fiat) could possibly be able to increase in percieved Fiat value sufficiently over and above the background “noise” to warrant “investment” has always struck me as being a bit “out-there” …nonetheless, it would seem now would be an excellent paper market entry point IMHO.

John Browne argues convincingly IMO, that the Fed’s next move will be to lower rates. I would not be surprised to see them “acting decisively” (as the press would report) even so far as to cut before the next meeting.
Fed likes to “do a change up”, using variety in their fight routine.
Too, it’d promote the all-important “decisive”, confident image and leave the market traders guessing.
Financial and economic squeezes at most businesses and banks, such as late payments, defaults and reduced volume, are piling on stress.
Illiiquidity and stagflation are showing on balance sheets in disarray alongside growing losses, job dislocations and tax and revenue shortfalls.
As Fed and Treasury bailouts and injections replicate, reproduce and multiply throughout the financial world with their Yen, Euro and other bretheren, a struggle to offset falling demand for bonds and and derivatized products also has it’s counterpart in the perceived “tightness” and unavailability of credit, ‘lending credence’ as Peter Grant would say, to the case for “easy does it” as if we haven’t seen enough inflation already. They aren’t yelling “fire” (recession), but everywhere there are instructions to “Bring on the fire hoses!”.

The Fed’s Next Move is Down
Wednesday, 6 August 2008 - GoldSeek.com
Excerpts:

“Below please find the latest economic commentary from John Browne, senior market advisor for Euro Pacific Capital.

…Although few monetary hawks felt that there was any reasonable chance for an inflation-fighting rate hike this week, there was hope that lone FOMC dissenter Richard Fisher would be joined by other committee members in voting against the current round of liquidity injections. No such luck there. For now at least, Mr. Fisher is still a one man band. The rest of the Committee still shows no stomach to really take on inflation (despite this week’s alarming CPI report) and plenty of willingness to push back on the gathering recession. As a result, my feeling is that the next rate move will be down.

Last summer I predicted on CNBC’s Kudlow Show, that the Fed would lower rates from 5.25 to near 1.00 percent and that the U.S. dollar would continue in relative decline. I was scoffed at and ridiculed. Well, I believe that today’s Fed Statement indicates that rates will soon head south, towards 1.00 percent or even lower.

…As a student of the Great Depression, Fed Chairman Bernanke has correctly, in my view, sensed that whereas inflation does the greatest long-term economic damage, it is recession that his political masters most fear…

With 5 million American homes vacant, the “Big 3” auto giants heading towards bankruptcy and some $4 trillion already wiped off of American home values, things look bad for American consumer demand…

Looking ahead, Nouriel Roubini, the former Clinton White House economist, forecasts credit losses will amount to some $2 trillion. So, while the Fed has applied Band-Aids to the financial crisis, the evidence is that internally, financial institutions are still bleeding fast…

The pullback in oil and other commodities will give him the golden opportunity to lower interest rates further to avoid the looming recession from morphing into depression.
Investors should expect falling worldwide interest rates… As hyper-stagflation and acute financial stress becomes manifest, gold will likely rise significantly.”

China is manufacturing 6 million new cars per year and India will get up to 2 million in about a year
8 million+ new cars over 5 years = 40 million cars + Brazil Russia and even the US are making more gas guzzlers

the oil OPECs may allow oil to drop until they see if a hurricane in our Gulf doesn’t push the price up again
(the Hurricane season peaks in the month of Sept)

I think that if oil stays low (er), then by Sept the OPECs meeting may decide to cut production
the price of oil is political with a tight(ening) supply fundamental

something -OPECs - something politically decided will drive oil up
Russia and Iran are going to keep the USA over a barrel.

Steve

To “If the dollar keeps falling our exports will be denominated in Euros” (or a basket of currencies) - which will imply that our reserve foreign currency will be weighted away from the dollars and our currency system will stabilize to falling no faster than what’s in the basket.

If that doesn’t work, which it won’t, I would expect the next step would be Randy’s (or Another’s or FOA’s) Gold Reserve Balanced Currency Valuation Process for Export Settlement to play out. (If anyone doesn’t yet understand this theory, Randy is a GREAT source). I also don’t expect any single country to apply this gold reserve process without being labeled as ‘not playing well with others.’ No, it will be a unified process to recover from the non-functioning dollar.

Meanwhile, Gold is on sale!

Leveraged 220 to 1.1quadrillion?Isn’t that the same number Sinclair recently put up as total notional value on all derivatives?In the end all was build on Freddie Krüger and Fannie Monsters GSE guaranteed homeloan assets.It would explain that their official bankruptcy can’t be announced at any cost.

And they were saying this 220 leverage on CNBC?

China loosens lending controls, fearing slowdown
Elaine Kurtenbach - Associated Press
August 6, 2008

Gold Firms Post-Fed
Aug 06 a.m. (USAGOLD) — Gold has firmed in the wake of Tuesday’s Fed decision to hold steady on interest rates. An uptick in oil prices, along with a slightly easier dollar are helping to support the yellow metal.

As expected, the Fed opted yesterday to leave the target for Fed funds unchanged at 2.0%. Subsequently, changes to the policy statement have received extensive scrutiny in an effort to determine when and if the Fed will raise interest rates in an effort to get inflation in check.

The recent pullback in energy prices probably provided the Fed with a little breathing room, yet they still ratcheted their inflationary concerns higher in the statement:

“Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.”

Adding, “Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee.”

Worthy of note is the addition of “significant concern.” A subtler difference is the fact that they led off their comments on inflation with the very direct statement, “Inflation has been high.”

In the June statement, the inflation paragraph began with, “The Committee expects inflation to moderate later this year and next year.” That statement was relegated to the end of the paragraph this time around.

Heightened concerns about inflation come as no surprise. Chairman Bernanke was obliged to offer FOMC hawks some concessions in the statement, or risk additional dissent. Like in June, the lone dissent vote came from the Dallas Fed’s Richard Fisher. Without the stronger statement on inflation, there was the risk that Philly Fed’s Plosser and Minneapolis Fed’s Stern might have cast dissenting votes as well.

At this juncture the Fed has enough credibility issues. Three dissents to policy would have been extremely problematic for Chairman Bernanke.

The Fed did not completely ignore persistent risks to growth: “labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters.”

However, the most telling change between the June statement and the August statement with respect to downside risks to growth was the omission of “appear to have diminished somewhat.”

Ultimately it seems that the Fed has increased concerns over both price risks and growth risks. We ended up with a mixed reaction in the market with stocks rallying on expectations that the Fed won’t be raising interest rates any time soon. At the same time, the dollar remained firm within its range, presumably due to expectations that deteriorating economic conditions elsewhere in the world will prevent interest rate differentials from widening further.

The retreat in energy prices in recent weeks is likely to provide the ECB with the necessary cover to hold the refi rate steady at 4.25% tomorrow. The BoE will likely leave the base rate unchanged at 5.0% as well.

Note that yields in the Eurozone and the UK are more than twice the yield in the US. Flows in the FX market tend to follow yield, so present interest rate differentials do not bode well for the dollar.

Despite the uptick in inflation concerns, Fed funds futures are viewing the FOMC’s statement as more dovish. Rate hike expectations that emerged in June following extremely hawkish comments from Mr. Bernanke continue to get reversed out. Odds of a 25bp rate hike by the end of Q3 have diminished to 12%. Meanwhile, odds of such a tightening by year-end are now just 54%.

We have consistently maintained that the Fed would continue to focus on risks to growth and employment at the expense of higher inflation. It simply doesn’t make sense to raise interest rates, while simultaneously flooding the market with liquidity in an effort to prevent a collapse of the banking system.

Higher interest rates would also kill demand in an already disastrous housing market. The root of the current economic turmoil is the deflation of the housing bubble. The situation is unlikely to stabilize until housing finds a bottom, so it seems extremely unlikely that the Fed would thwart efforts to bolster housing by raising rates.

The bottom line is that easy and expansionary monetary policy is here to stay for some time. As a result, the upside in the dollar is likely to be limited. At the same time, inflationary pressures are going to remain stubbornly high, despite the pullback in commodity prices.

The best way to protect yourself against a weaker dollar and the resulting inflation, along with persistent risks to the banking system is to own physical gold. Gold offers non-correlated diversification and an excellent means of wealth preservation within the contemporary portfolio.

The first chapter of The ABCs of Gold Investing, the book written by the president of our firm, ends with this: “No matter what happens in this country, with the dollar, with the stocks and bond markets, the gold owner will find a friend in the yellow metal — something to rely upon when the chips are down. In gold, investors will find a vehicle to protect their wealth. Gold is bedrock.”

Gold Market Movers:

EIA crude oil inventories at 10:30 EDT.

US MBA mortgage market index for the week ended 01-Aug +2.8%; purchases +1.8%, refis +4.4%.

German orders for Jun fell 2.9% m/m, much worse than the market was expecting. The seventh consecutive monthly decline.

Japan leading index for Jun -1.7.

Freddie Mac sinks to $800m loss

Economic free fall?

How Merrill trampled the little guys

The recovery and the storm

US urges ‘punitive’ steps on Iran

Stock index futures suggest a lower open on Wall Street

(Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.)

I was listening to CNBC yesterday and one commentator said that FRE and FNM’s 5 trillion dollar debt is leveraged 220 times. Yikes , if this is true that’s 1.1 Quadrillion. How could they possible leverage themselves that much?

Cytek

This is from the Richter Report. “Has Anything Changed”

Slingshot—————–$
*********************************************

Has Anything Changed?

——————————————————————————–

1) Is General Motors a company into which you want to invest your life’s savings?

2) Is Wachovia a company into which you want to invest your life’s savings?

3) Is Ford a company into which you want to invest your life’s savings?

4) Is Washington Mutual a company into which you want to invest your life’s savings?

5) Is Lennar a company into which you want to invest your life’s savings?

6) Is Starbucks a company into which you want to invest your life’s savings?

7) Is Lehman Brothers a company into which you want to invest your life’s savings?

Is Hovnanian a company into which you want to invest your life’s savings?

9) Is the US Dollar a currency into which you want to invest your life’s savings?

10) Is Citigroup a company into which you want to invest your life’s savings?

11) Is Merrill Lynch a company into which you want to invest your life’s savings?

12) Is Home Depot a company into which you want to invest your life’s savings?

13) Is Circuit City a company into which you want to invest your life’s savings?

14) Do you think that we ae going to see more foreclosures or fewer foreclosures during the next year?

15) Do you think that bankruptcy lawyers are hiring more “support staff” or less?

16) Do you think that real estate “always goes up?”

17) Do you think that real estate closing attorneys are hiring more “support staff” or less?

18) Do you think that the Federal Reserve Bank is going to raise the Fed Funds rate by at least 3% to 5% at its next meeting in order to “pull a Volcker” and crush inflation out of our economy?

19) Do you think that Congress will cut spending and lower taxes before the November election?

20) Do you think that the current moral and ethical climate in the United States is indicative of an ascendant culture or of one in decline?

21) If we had a power failure, how would you pay your bills?

22) If we had an oil embargo or gasoline rationing, how would you get to work?

23) If the tractor-trailers were unable to deliver food to your local supermarket, how long would you be able to feed your family?

24) If the FDIC has about $53 billion with which t0 insure TRILLIONS of US bank deposits, is that enough?

25) If US government bonds are paying about 4% at most, do you think that is a positive return after one considers taxes and inflation?

I realize that I have asked a lot of questions. However, I have recently watched as tangible assets have been absolutely “trashed” and the DOW has gone up by more than 300 points in a single day. Therefore, I had a few questions to ask. Obviously, when the DOW and the US Dollar go up so strongly, the “worst must be over,” n’est pas? (That’s French, just in case you were wondering). The fundamentals must have changed, RIGHT? Paper investments must be better than tangible ones, right?

Welcome to the Caligula economy! Next thing you know, we’ll be asked to declare a horse a god and a member of the Senate! Go ahead…make my day! Sell all your gold, silver, mining shares, and energy shares! I will keep mine.

P.S. Do you think that a piece of gold is worth more or less than a piece of paper with ink on it?

August 2008 Buyers’ Group An offer to send gold’s summer doldrums packing!

According to my most readily available supply of stats, at 1.57ish reals per dollar, the Brazilian currency has gained approximately 13% against the U.S. dollar so far this year, more than doubling it’s strength since 2002.

So we have every reason to take the Minister of Economy, Mantega, at his word when he expresses some of his concern about the pass-through impact on Brazil’s balance of trade and external accounts.

Fortunately, he also recognizes that the real’s appreciation “have helped to reduce inflationary pressures”, so while all involved in competitive export operations may struggle a bit, all who partake of imports in any form have less cause to complain.

And lest we paint the wrong picture, we should quickly point out that the situation in not exactly bleak for the Brazilain export sector. Minister of Trade and Industry, Miguel Jorge, today said he expects exports to grow by 31% through 2010, even in light of the impact of the real’s appreciation. But as it concerns the balance of trade, he did in fact suggest that the pace of imports will still outpace this growth in exports.

Given that this balance of import and export trade involves flow to and from many nations and not merely the United States, the only intelligent thing to say is that the particulars (to and from each trading partner) are best left to the market’s dynamic (interrelated) determination of both flow and individual local exchange rate vis-à-vis a freely floating real on an ongoing basis.

To that end, it is not helpful that the Brazilian monetary officials have seemingly fixated upon management of the real/dollar exchange rate as if it were magically the single philosopher’s stone to cure all multilateral economic ills or imbalances. But as things currently stand, under the auspices of “boosting its international reserves” (even when it is so apparent that the goal is to moderate the appreciation of the real/dollar exchange rate), on a nearly daily basis since October the Brazilian central bank has been holding auctions to buy dollars.

As a result, Brazil’s foreign exchange reserves now exceed US$200 billion, of which assets denominated in foreign currency is the vast majority (of which we can assume the U.S. dollar to be the lion’s share) whereas it’s meager gold holdings of 33.6 tonnes represents a mere US$1 billion at present mark-to-market valuation.

So what’s the bottom line? Giving full consideration to the sentiment conveyed in my fifth paragraph [“Given that this balance of import and export trade involves flow to and from many nations… etc.”], Brazil would be well-advised to curb it’s fixation and accumulation of dollar reserves. The soft fiscal and monetary policies of the U.S. Treasury and Federal Reserve, respectively, ought to be enough justification to give Brazil reason to pause, but if more evidence must be cited, the list can begin with the U.S.-led subprime lending meltdown, and continue onward to the growing socialism within the body politic, wrapping up the list with the baby boomer demographic bulge now beginning to enter their Social Security demanding years. It is not difficult to predict the coming central banking vexation caused by a balance sheet that has appreciating reals on the liability side offset (or maybe I should rather say no longer sufficiently offset) by a toxic collection of depreciating dollar-denominated bonds on the asset side.

If you are bright, and I know you are, it is not hard to read between the lines to get the proper course of action implied in the above comments. That is, if Brazil wants to tweak its currency supply for the anticipated general knock-on effect to its multilateral exchange rates in the course of pursuing the sort of dirty (i.e. “managed”) domestic float to tweak the social balance regarding exporter/importer favoritism to which all nations are more or less guilty, then Brazil should become a buyer of gold assets (”purely” floating physical metal) rather than dollar assets (which themselves are floating dirtily) as its mechanism to facilitate the emission (issuance) of additional domestic liabilities in the form of the Brazilan currency. (Or occasionally become a seller of gold at such time that domestic policy desires to mop up excess reals to foster a generally stronger currency.)

Following that blueprint, trade flows (and exchange rates) would ultimately be “as market-driven (auto-adjusting/balancing) as can be possible“ within the inescapable political context of international economics. The resulting improvement in the stability of the international monetary system is so much a desired effect within official circles that we are evolving in this direction inevitably and universally, regardless of national socio-political dogma or ideology. The process is observable to those who know how to look for it, it’s been underway for over a century, and I echo ANOTHER/FOA who have opined words to this effect — we shall see it “in our lifetime.” The tea leaves tell me this new/modified public and private usage of gold (”not as before”) will result in stratospheric prices (also “not as before”) by the time the balloons and confetti usher in 2012 — that’s less than four years on the outside.

Those individual who already have some gold will likely have the wisdom and courage to continue accumulating more throughout this timeframe. Those who have been conscious during this past decade and yet do not already have gold at this point in time are likely lacking more than this. I hope for their sake they each have a gold-rich benefactor in their family to help mitigate their personal woe.

Amen.

R.

P.S. Thanks for the question and for the link. At that article I was also pleased to discover that a golden friend (I.C.) remains very much alive and well.

My first thought was,oops is it really possible the $ CAN further fall, because to many countries a too dependent on it??
They can eventually support it worldwide by surrender to the US by for example d evaluating their currencies…?
Where are the own identities of the countries? They must come up for them self and not be afraid of a dollar fall my opinion.

My first thought was,oops,the first is already raining on yesterdays $ parade …