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Market News

Bloomberg: Silver Bear Market Seen Ending on Europe Crisis: Commodities

Wednesday, 19 Oct 2011 4:00 AM

Bloomberg 10/19/2011, Glenys Sim, Nicholas Larkin:

Silver, the best-performing and most-volatile precious metal of the past year, may rebound from a bear market as investors bet on growth in developing nations and an extended European debt crisis.

The metal may average $38 an ounce this quarter and rise to a record $42 by the final three months of 2012, compared with $31.97 at 9:19 p.m. in Singapore yesterday, according to the median in a Bloomberg survey of 11 analysts. The gains will mean record profit for producers Pan American Silver (PAAS) and Fresnillo Plc (FRES), analyst estimates compiled by Bloomberg show.

China, the biggest emerging-market user, is expanding at more than five times the speed of the U.S., driving consumption of the precious metal most used in industry. Demand is also coming from investors looking for an alternative to cash and gold, which costs about 50 times more than silver. The 30-week correlation coefficient between the two metals is now at 0.82, from as low as 0.47 in 2005, data compiled by Bloomberg show, with a figure of 1 meaning the two move in lockstep.

“Prices now look relatively cheap to where they have been recently,” said David Wilson, an analyst at Societe Generale SA in London and the most accurate silver forecaster tracked by Bloomberg in the two years through June. “The backdrop is still very supportive for gold and we think that silver will leverage off the back of that. Emerging markets are going to be important for demand for sure.”

Solar Panels

Silver slumped as much as 48 percent after reaching a 31- year high of $49.845 in April. Used in everything from jewelry and coins to solar panels and film, the commodity returned more than any other major precious metal over the past year with a gain of 34 percent. Gold rallied 24 percent as the MSCI All- Country World Index of stocks fell 3.9 percent. Treasuries returned 5 percent, Bank of America Corp. indexes show.

While silver has swung from losses of 2.8 percent to gains of 104 percent over the past 12 months, exceeding moves in gold, platinum and palladium, it is still on track for its highest- ever annual average.

The metal tumbled 28 percent last month, the biggest drop since 1980, as equities and commodities slumped on signs growth was slowing. Spain, Italy and Greece are among euro-region nations which had their credit ratings cut this year. About $5 trillion was wiped off the value of global stocks and the Standard & Poor’s GSCI gauge of 24 commodities retreated 12 percent, the largest decline in almost three years.

Monetary Fund

Economists tracked by Bloomberg are more bullish. The global economy will expand 2.86 percent next year, accelerating from 2.77 percent in 2011, according to a composite of regional forecasts compiled by Bloomberg. The Internation Monetary Fund is forecasting world growth of 4 percent next year, driven by a 6.1 percent gain in developing economies.

Industrial and numismatic demand for silver fell almost 11 percent in 2009, Morgan Stanley estimates, during the worst global recession since World War II. Prices still rose 49 percent because consumption was underpinned by investment, with holdings in exchange-traded products backed by the metal jumping 48 percent, data compiled by Bloomberg show. Combined assets in ETPs rose 5.1 percent to 17,573 metric tons since mid-July, equal to almost nine months of mine production, the data show.

That may not be enough to erode a glut. Global supply of silver has exceeded non-investment demand since 2008 and this so-called fundamental surplus will persist until at least 2016, Morgan Stanley predicts. Output from mines will rise 1.4 percent this year, accelerating to 4.5 percent in 2012, says the bank.

‘Very Weak’

“The fundamentals still look very weak,” said Suki Cooper, a commodities analyst at Barclays Capital in New York who expects silver to average $27 in the fourth quarter of next year. “The downside still looks much more vulnerable, given that we’re not seeing the same strength in industrial demand that we have seen previously, and given that mine supply still looks very healthy.”

Silver may also fail to protect investors’ assets should economies tip back into recession. It slumped 24 percent in 2008, the most in almost a quarter century, as gold rose 5.5 percent.

Investors for now are getting more bullish. As well as adding to ETP holdings, they are also buying bullion coins, with the U.S. Mint selling 4.46 million ounces of American Eagles in September, the most since January. Record low interest rates in the U.S. should make holding bullion, which generally earns investors returns only through price gains, more attractive. The U.S. Federal Reserve pledged in August to keep interest rates at a historic low until at least mid-2013 to shore up the recovery.

Futures Trading

The most widely held option on futures gives the owner the right to buy silver at $50 by November, according to data from the Comex exchange in New York. Money managers raised bets on higher prices for the first time in more than a month in the week ended Oct. 11, Commodity Futures Trading Commission data show. The net-long position gained 1.3 percent to 11,573 futures and options contracts.

Pan American Silver, the fourth-largest producer, will report profit of $347.8 million this year, compared with $112.6 million in 2010, according to the mean of four analysts’ estimates compiled by Bloomberg. Shares of the Vancouver-based company slumped 31 percent since the start of January.

Fresnillo, the second-largest producer, will make $911.8 million in 2011, compared with $665.1 million in 2010, the mean of six estimates shows. Shares of the Mexico City-based company dropped 6.7 percent in London this year.

“I don’t see any sustainable solution for the debt crisis, so investor interest will stay,” said Thorsten Proettel, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany and the fourth-best precious-metals forecaster tracked by Bloomberg over the past two years. “Silver should get support from economic growth in the newly industrialized countries.”

Greece is Bound to Miss Lowered Fiscal Targets as Strikes Bring Economy to a Halt

Wednesday, 19 Oct 2011 4:00 AM

As EU leaders prepare for the October 23rd summit that will hopefully produce some measures that will alleviate market concerns that the Eurozone is heading for dissolution, Greek citizens are showing their enthusiasm with another general strike. Reports out of the highly indebted nation show a country in complete dissarray. This, unfortunately, has become a recurring event as protests against government austerity measures ratchet ever higher. The predictable result has been an ever widening budget gap as the economy slumps further and farther than all estimates.

The implications for Greece and the world in general is that Greece will need to have its debt slashed, or the country must leave the currency union and bring back its currency, the drachma. At this point, suggestions that Greece leave the currency union are on the fringes, but talk of a substantial cut in Greek debt is now on the front page. Recent reports indicate that Germany is looking to cut Greek debt by 50%-60%. France is resisting such calls, implying that German banks are much better prepared for this possibility than their French counterparts.

Some of the more interesting factoids regarding the current Greek strikes include the clear escalation of violence, and the closure of the Finance Ministry. Both factors hinder government efforts to meet EU, ECB, and IMF demands for meeting fiscal targets. The fact that the Finance Ministry is actually closed naturally leads to speculation over how Greece is collecting any taxes in a country reknowned for tax evasion. The violence on the street will not only bring economic activity to a halt, it will also weigh on the massive privatization goals that are being demanded. Greece’s lowered fiscal targets and GDP estimates are likely to require further downward revisions as a result.

Precious metals, like the broader global financial market, remain held hostage to headlines coming from the Eurozone. Each headline either produces a moment of euphoria, with the predictable surge in the EUR and decline in the USD. In these moments, stocks, bonds, gold, and silver all rise. Conversely, negative headlines produce moments of near total despaire with the EUR plunging and the USD surging. In these moments the exact opposite happens as stocks bonds, gold and silver all decline.

October 23rd remains the date to watch for the next bout of either euphoria or despair. Of course, official leaks of what is to come out of the meeting could dampen October 23rd’s thunder. Expect this frustrating investing environment to continue until Europe can convince the world that it is on top of the situation. It would appear highly probable, that Octboer 23rd won’t be the day that convinces the world.

Reuters: U.S. Cracks Down on Commodity Traders; Will It Stick?

Tuesday, 18 Oct 2011 4:00 AM

(Reuters) – The United States pushed through its toughest measures yet to curtail speculation in commodity markets in a tight vote on Tuesday, likely shifting the focus of a fierce four-year debate from the regulators to the courts.

In a measure decried by Wall Street and trading companies as a misguided political attempt to cap soaring oil and grain prices, the Commodity Futures Trading Commission voted 3-2 to approve “position limits” that will cap the number of futures and swaps contracts that any single trader can hold.

The rule, which was being modified until the last minute even after months of intense review, offers some relief for the industry, relenting on several contentious provisions, as expected.

But that will do little to temper frustration over a plan that could force banks like Morgan Stanley and traders including grains giant Cargill to scale back business, and could stanch the flow of financial capital into commodities.

The divisiveness was stark from the opening, making a legal challenge potentially more likely. That would be another hurdle for CFTC Chairman Gary Gensler, who is struggling against emboldened Republicans and a hostile Wall Street to put in place the rules required by recent financial reforms.

Swing vote Michael Dunn, a Democrat whose term has already expired, said he would follow the Dodd-Frank financial reform law but blasted the limits as a dangerous distraction from bigger issues. Dunn can remain through the end of 2012 until a replacement is confirmed by the Senate.

“Position limits are a sideshow that has unnecessarily diverted human and fiscal resources away from actions to prevent another financial crisis,” Dunn said. “At worst the limits may harm the very markets they are intended to protect” by making prices more volatile and hedging more difficult.

The decision also failed to appease those who had called for tougher limits, such as British charity Oxfam and Senator Bernie Sanders, long a vocal proponent of tougher limits.

“The CFTC has moved a step forward, but much more has to be done and I intend to play an active role in that process,” Sanders said in a statement.

CHALLENGE LOOMS

As expected, the commission’s two Democrats, Dunn and Bart Chilton, voted with Gensler, while Republicans Jill Sommers and Scott O’Malia opposed the measure. O’Malia said the agency had overreached its mandate and echoed the industry’s argument that there was no “empirical evidence” to substantiate the rule.

“We went beyond the statute” by doing things like narrowing the bona fide hedge exemption, Sommers told Reuters. “Those are the things that people can use for a legal challenge.”

The CFTC has never faced a lawsuit over one of its rules, according to an agency spokesman.

A lack of proof that excessive speculation leads to high prices is at the heart of the issue. Without evidence of any damage wrought by failing to limit traders, it may be difficult to demonstrate the net benefit of the measure.

Dozens of academic, government and bank studies on the subject have differed on whether speculators — in particular the institutional investors who have poured some $300 billion into commodity markets over the past decade — influence prices or whether prices simply respond to market conditions.

Analysis: Draft of Euro Summit Statement on EFSF – Expect Disappointment Monday

Thursday, 20 Oct 2011 4:00 AM

Precious metal investors are no doubt tired of being buffeted by the endless stream of conflicting headlines out of Europe. Gold and silver have experienced wild swings as financial markets alternate between euphoria and despair. The upcoming October 23rd EU summit is supposed to clarify market concerns over the EU’s response to the economic crisis. A draft statement being prepared for the meeting has been leaked to the U.K.’s Telegraph. It highlights the very high likelihood that Europe is far from satisfying market concerns. The below is a list of key elements that have not yet been agreed to, and a quick analyis of each.

1. Strengthening of the monitoring of the Greek program. Quick Analysis: It is clear that the most recent assessment of Greece’s compliance with its two bailout programs will have to be adjusted downward again. The country’s latest austerity measures, ongoing strike’s and the escalating level of violence means that these estimates will surely be missed.

2. Private sector involvement in Greek debt restructuring. Quick Analysis: Greece needs a massive reduction in its debt burden if it is to reach a sustainable fiscal position. Estimates at this point are for a haircut of 50%-60%. Complicating matters, the debt reduction would need to be voluntary, and not trigger a “credit event.” How this all can be accomplished remains beyond fathomable.

3. Increasing the efficiency of the EFSF. Quick Analysis: The rumors on how to leverage the EFSF reflects the difficulty facing the EU. The two most credible options set forth include using the 440 billion EUR EFSF as a first-loss insurance provider on debt issued by governments. The second option is to let the EFSF provide credit lines of up to 10% of a country’s GDP. The significance of how to utilize the EFSF make the EU’s current indecision likely insurmountable by Monday.

4. Reinforcement of the banking sector: Quick Qnalysis: The only rumor thus far on bank recapitalization was a FT article stating that current plans call for 100 billion in bank recapitalization funds. Unfortunately, most estimates envision between 200 billion – 400 billion EUR needed to stabilize Europe’s banking sector. Some estimates pin the number at 1 trillion EUR.

Given the scope and scale of decisions the EU has yet to make, Monday morning’s open seem fraught with uncertainty. Whether the EU leaders can overcome differences to chart a clear path on each of these issues remains the question of the day. Meanwhile, expect all markets, including gold and silver, to remain hostage to headlines out of Europe.

German Parliament Taking Control of EU Debt Crisis – Sounds Like Bad News For Europe

Friday, 21 Oct 2011 4:00 AM

There has now been an added level of complexity to the EU debt crisis with the German Parliament passing a resolution that greatly restricts PM Merkel’s ability to manuever. The following are the restrictions that EU leaders will need to work around as they scramble over the next 6 days to find some sort of comprehensive resolution for the never ending crisis.

“The resolution requires Merkel to reject any deal on the European Financial Stability Facility, or EFSF, that would grant the euro-zone bailout fund a banking license and allow it to borrow money from the European Central Bank. Merkel must also reject any deal that would expand German guarantees pledged to the 440 billion euro ($609 billion) fund that go beyond current German pledges of EUR211 billion.”

“Any model transforming the EFSF into a commercial bank or increasing the fund’s financing through the European Central Bank is ruled out,” the resolution states. “In particular, the EFSF must not receive a banking license.”

Germany’s parliament voted last month to grant itself the last word on any new vailout for Greece or any other beleaguered euro-zone member, transforming the parliament into a player in European bailout politics.

At the end of the day, the crucial fact is that Greek sovereign debt needs to be signficantly reduced, with most estimates ranging to at least a 50%-60% cut to make Greece’s debt burden sustainable. Furthermore, this reduction needs to be done in a way that does not trigger a credit event. Until this hurdle is passed, it is likely that the worst has not been seen with regards to the EU debt crisis. The decision by the German Parliament to further constrict PM Merkel’s ability to manuever only increases the risks faced by EU policy makers.

As a final note, much fanfare was given to yesterday’s news of the addition of October 26th as another EU summitt. However, adding an official day to work through a solution does not mean Europe is any closer to resolving the Gordian knot that is Europe’s sovereign debt crisis.

Gold and silver investors can be excused for being completely exasperated at the ongoing soap opera.

FT: Is There a Shadowy Plot Behind Gold

Monday, 24 Oct 2011 4:00 AM

Over the weekend, Financial Times U.S. managing editor, Gillian Tett wrote a piece asking whether there is manipulation of the price of gold. For precious metal investors, the question of whether there is “cabal of western central bankers secredtly determined to manipulate the world’s markets,” has been an ongoing debate. The fact that the FT is bringing to light these concerns suggests that the spotlight on possible market manipulation on a global scale is going mainstream.

In the article, Ms. Tett talks of her conversation with Chris Powell, the treasurer of the Gold Atni-Trust Action Committee (GATA). GATA has spent years trying to bring to light this alleged manipulation. For those that haven’t visted GATA’s homepage, it is worth the effort – gata.org.

Gillian writes, “For my money, though, I think there are at least two reasons why it would be foolish simply to deride or ignore GATA. Firstly, some of its points have at least a grain of truth.

Even if you find it hard to believe that central bankers would be dastardly enough to create a plot – or competent enough to do what Gata claims – the fact is that global commodity markets are pretty murky, central banks are often opaque and western rhetoric about “free” markets is often hypocritical. Those issues merit far more debate, not just among journalists, but central bankers too.

Secondly, even if western elites hate these gold conspiracy theories – in fact, especially if they do – they need to recognise that they tap into a deep cultural vein. Right now, many western voters are profoundly frightened about the economy. They are also confused by its unpredictable and mysterious nature. Consequently, the idea of a central bank “plot” packs an increasingly powerful emotional appeal, and voters are hungry for explanations and scapegoats. In that sense, the work of Gata might be seen as an echo of the cargo cults that anthropologists study in the Pacific islands: something that offers pattern and meaning amid terrifying disorder.”

Full Article

For what its worth, Gillian Tett has long been my favorite journalist, and the Financial Times, the only newspaper I read on a regular basis. Hopefully, this examination of claims of gold price manipulation will resonate with the broader public. For investors who have been buying gold bullion and silver bullion, these assertions are no doubt not new.

BusinessWeek: Solar Power is Beginning to go Mainstream – Solar Power Demand Key Factor for Silver

Monday, 24 Oct 2011 4:00 AM

It is a well known fact that the primary driver for silver remains industrial demand. Data from the industry association, the Silver Institute, indicates that industrial silver demand increased 20.7% to 487.4 million ounces in 2010. Silver bears note that supply from mines totalled 735.9 million in 2010, far exceeding industrial demand. However, demand for silver by the solar industry is expected to explode in the years ahead. The Silver Institute reports that “Silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common type of solar cell.”

Yesterday, Bloomberg/BusinesWeek put out an article which should be of interest to all silver investors: Solar Power is beginning to go Mainstream. The article outlines the rapidly declining cost of solar power over the last twelve months. If the solar industry were to experience a surge in demand, the implications for silver demand would be profound. Among the highlights of the article is the fact that the phase out of German solar subsidies has caused a sharp drop in demand there, and a corresponding surge in supply. The result has been a sharp fall in the cost of solar panels. The current cost for solar power is now $1.34 per watt in mid-September, down from $1.90 at the beginning of 2010, and $4 a watt in 2008.

Bloomberg/BusinessWeek, Jonathan Fahey October23rd:

Solar energy may finally get its day in the sun.

The high costs that for years made it impractical as a mainstream source of energy are plummeting. Real estate companies are racing to install solar panels of office buildings. Utilities

are erecting large solar panel “farms” near big cities and in desolate deserts. And creative financing plans are making solar more realistic than ever for homes.

Solar power installations doubled in the United States last year and are expected to double again this year. More solar energy is being planned than any other power source, including nuclear, coal, natural gas and wind.

“We are at the beginning of a turning point,” says Andrew Beebe, who runs global sales for Suntech Power, a manufacturer of solar panels.

Full Article

Europe’s Big Weak Link Italy Struggles with Austerity

Tuesday, 25 Oct 2011 4:00 AM

The primary fear for investors today is the possibility that Italy, with EUR 1.8 trillion in sovereign debt, will require a bailout. To prevent this, the ECB has been doing its highly controversial, and exceptional, bond buying of Italian debt to keep the country’s borrowing costs low. Tomorrow’s EU Summit is in large measure an attempt to reassure investors that the firepower exists to contain any contagion of the current sovereign debt crisis. In return, Italy has been tasked with reigning in its budget deficit, and begin the task of reducing the country’s overall debt burden, currently 120% of GDP.

Today we see that further austerity in Italy is being met with fierce resistence. Prime Minister Berlusconi’s government is fighting to stay alive amid internal divisions on further austerity, including increasing the retirement age to 67 from the current 65. The impasse threatens to unleash a tidal wave of uncertainty if Berlusconi’s coalition government were to fall.

Economic data out of Europe has been universally negative over the past week. Today saw news that Italian consumer confidence dropped to a three-year low as the ongoing crisis and previous austerity measures take their toll.

It is notable that Belusconi was virtually laughed at by his German and French counterparts when the two issued a joint press conference on Monday. When Merkel and Sarkozy were asked of Italy’s commitment to further austerity and their confidence in Berlusconi’s government, both leaders were forced to supress laughter.

The added drama the political infighting in Italy provides is no doubt the last thing anyone wanted. It is certainly unclear how the gold and silver bullion market would react if Italy ever required a formal bailout.

Related Aricle: FT – Berlusconi fights to save coalition

Are Gold and Silver Safe Havens Again – After Weeks of Rising Correlation With Stocks, Precious Metals Diverge

Tuesday, 25 Oct 2011 4:00 AM

Since late September, precious metals have exhibited a high degree of correlation with stocks. For investors in gold and silver, this has been clearly unwelcome as equity markets slumped in September and the early part of October on economic growth concerns and fears that Europe’s sovereign debt crisis was set to worsen. Today has seen a complete reversal of this recent correlation phenomenon, with gold and silver surging despite a slump in stocks. It is clearly too premature to say with any certainty, but today’s market action suggests that gold and silver’s role as a safe-haven may be re-asserting itself.

It is no secret that a primary driver for gold and silver bullion are fears that fiat currencies are being printed at an ever alarming rate. With the European Summit upon is, it seems a good bet that the end result will be a massive expansion in debt to satisfy investor concerns that Italy and Spain will not join the PIGS in a sovereign bond market meltdown. Perhaps its this reailization that has caused gold and silver prices to finally diverge from their recent correlation with risk assets.

Whether gold and silver are trading anomalously today, or whether a new trend is being formed will be something to watch for in the days ahead.

Daily Dish: Gold Touches New Record, Other Metals Holding Strong

Tuesday, 19 Apr 2011 4:00 AM
Gold futures are at record levels for the second day in a row, as consumers turn away from a lower dollar. Gold for June delivery was up $2.20 (0.2%) to $1,495.10 an ounce on the Comex division of the New York mercantile Exchange. Earlier levels were recorded as high as $1,500 an ounce. The dollar index fell from 75.504 to 75.124 today, though housing starts rose more than expected, up 7.2% in March.

Other metals were also climbing today. Copper for May delivery was adding 3 cents (0.8%) to $4.23 a pound, and silver is still pushing 31-year highs, with May delivery up 78 cents (1.8%) to $43.73 an ounce.

Since silver prices have risen to over $43, with spot prices currently holding at $43.64 an ounce, the U.S. Mint yesterday placed two more of its silver products on hold. With these two holds, four silver products are now “temporarily unavailable.” This makes the third time that suspensions have been enacted in the last month.

Oil is still down, now below $107 a barrel, as markets continue to respond to S&P’s negative rating of the state of the U.S. economy.

Daily Dish: S&P’s Negative Rating Pushes Gold Up, Oil Down

Monday, 18 Apr 2011 4:00 AM
The rating agency Standard and Poor’s (S&P) has revised its outlook for U.S. debt: it now sees the U.S.’s future as negative, rather than stable. Despite some investors’ insistence that this is an overly pessimistic outlook, the announcement has caused a drop in stocks and oil, and climb in gold so far today. June delivery for gold is up $11.80 (0.8%) to $1,496.20 an ounce on the Comex division of the New York Mercantile Exchange. Despite earlier decline in electronic trading, gold is now back up after S&P’s newest rating. If gold keeps these levels, it will find a new milestone, beating gold’s latest record reached on Friday, when it closed at $1,486 an ounce.

Further gains in gold were due to concerns in Finland and Greece, stemming from anti-euro opinions and further debt crises.

Silver is also looking positive: May delivery is up 71 cents (1.7%) to $43.28 an ounce. The dollar index is up to 75.524, a gain on late Friday’s level of 74.867.

Crude oil futures took an opposite direction after hearing S&P’s new rating; light, sweet crude for May delivery was last falling $2.57 (2.3%) to $107.07 a barrel on the New York Mercantile Exchange.

Standard & Poor’s has given Washington a two-year deadline to “enact meaningful change.” – Read more about the S&P’s outlook.

Daily Dish: Gold and Silver Are Still Climbing

Friday, 15 Apr 2011 4:00 AM
Today’s Dish is taken from Bloomberg Business Week, and gives us a look at precious metals heading into the weekend.

April 15 (Bloomberg) — Gold rose to a record in New York on speculation that the sovereign-debt crisis in Europe will worsen, boosting the appeal of the precious metal as an alternative to currencies. Silver touched a 31-year high.

The price of gold reached an all-time high of $1,486.40 an ounce after Moody’s cut Ireland’s credit rating by two levels to the lowest investment grade, eroding the value of the euro. The dollar, while up today, is headed for the third straight weekly decline against a basket of currencies as Congress debates measures to reduce a record government deficit.

“Gold has become the currency of choice,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis. “The debt crises in Portugal and Ireland are getting worse. The U.S. has its own deficit problems. There’s just so much debt that the U.S. will have to continue quantitative easing to carry the deficit.”

Gold futures for June delivery rose $13.60, or 0.9 percent, to $1,486 at 11:28 a.m. on the Comex. Gold for immediate delivery in London rose as much as 0.8 percent to a record $1,485.57.

The precious metal may rise to $1,750 this year in anticipation of “the dollar getting ready to fall off the face of the earth,” Cohen said.

The Federal Reserve has kept its benchmark interest rate at zero percent to 0.25 percent since December 2008 and pledged to buy $600 billion in Treasuries through June to stimulate growth.

Inflation Concern

Gold also rallied on demand from investors seeking a hedge against inflation.

Consumer prices in China, the world’s fastest-growing major economy, rose 5.4 percent in March, the quickest pace since 2008, exceeding the government’s 2011 target for a third month.

Inflation in the 17-nation euro region quickened to 2.7 percent from 2.4 percent in February, the European Union’s statistics office said today. U.S. wholesale costs climbed 5.8 percent in March compared with a year earlier, and the government said today that the cost of living rose for a ninth straight month.

“The inflationary numbers in the backdrop are very bullish for gold,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “With the sovereign-debt problems in Europe and the U.S., investors want metals to protect them.”

Silver topped $42, heading for the biggest gain this year among the 19 commodities tracked by the Thomson Reuters/Jefferies CRB Index.

Silver futures for May delivery rose $1.066, or 2.6 percent, to $42.73 an ounce on the Comex in New York. Earlier, the price rose to $42.755, the highest since 1980, when the metal rose to a record $50.35.

–With assistance from Nicholas Larkin in London. Editors: Steve Stroth, Patrick McKiernan

Daily Dish: Gold Rises on a Weaker Dollar, Oil Shoots Up to Over $108

Thursday, 14 Apr 2011 4:00 AM
The weaker state of the U.S. dollar today has helped push gold to over $1,460 an ounce. Gold for June delivery is adding $8.40 (0.6%) to $1,464 an ounce on the Comex division of the New York Mercantile Exchange. The dollar index was last trading at 74.886, overcoming an earlier dip of 74.617 – its lowest level since December of 2009. In addition to U.S. currency, precious metals are being helped by concerns about the euro, as well as debt issues in Europe.

With plenty of time left in the day, there is room for a change in markets. So far today, silver for May delivery is up 96.8 cents to $41.205 an ounce, and May copper is down 2.2 cents to $4.273 a pound. Palladium for June delivery was last tacking on 70 cents to $766 an ounce, while platinum for July delivery was up $4.30 to $1,781.50 an ounce.

Crude oil was gaining momentum again today, with the weaker dollar pushing prices higher. Crude for May delivery was last seen up 75 cents (0.7%) to $107.84 a barrel on the New York Mercantile Exchange.

Jobless claims are currently at their highest level since mid-February, with about 412,000 new applications for jobless benefits recently recorded.

Though not currently the center of attention, the crisis in Japan and continuing conflicts in the Middle East are still key factors in financial markets this week.

Daily Dish: Obama to Propose Deficit Reduction Plan Today. Precious Metals Still High

Wednesday, 13 Apr 2011 4:00 AM
President Obama is expected to propose his long-term deficit-reduction plan, which aims to cut the U.S. budget deficit by $4 trillion in 12 years or less, in his speech this afternoon.

Gold futures are still high today; June delivery is up $2 (0.1%) to $1,455.60 an ounce on the Comex Division of the New York Mercantile Exchange. Earlier in the day, gold dipped on news of U.S. Currency’s slight increase, but rebounded to finish out trading strong.

Silver for May delivery was up 24.4 cents (0.6%) to $40.31 an ounce, and platinum for July delivery was up 4.10 to $1,778.40 an ounce. Both palladium for June delivery and copper for May delivery were losing ground today, however.

A new update shows oil back to black, trading at around $106.56 a barrel, despite ongoing tensions in the Middle East, and concerns over nuclear crises in Japan.

Daily Dish: Precious Metals, Stocks, and Crude Oil Slip in Afternoon Trading

Tuesday, 12 Apr 2011 4:00 AM
Gold has fallen about 1% today, as dips in oil and equities minimized its safe-haven appeal. Gold for June delivery was down $15.90 (1.1%) to $1,452.40 an ounce on the Comex division of the New York Mercantile Exchange. Earlier trading saw lows of $1,445 an ounce.

Crude futures, the cause of gold’s drop, were falling over 3% today, helped by an increasingly pessimistic view of the economy and doubts over future demand for oil. Despite setbacks, investors anticipate a long-term positive outlook for gold.

Silver was also retreating from its 31-year record highs today. May silver was down 70 cents (1.8%) to $39.89 an ounce. The dip in precious metals was lessened slightly by a similar drop in the value of U.S. currency. The dollar index was last trading at 74.974, compared with Monday’s value of 74.989.

Japan has raised its assessment of the nuclear crisis it is combating to 7 – the highest level on an international nuclear-disaster scale. Authorities are quick to point out, however, that the amount of radiation leaking from the Fukushima Daiichi plant is only 10% of that released in the Chernobyl disaster of ’86. Officials and workers are still struggling to contain the damage of the crippled nuclear plant.

Daily Dish: Crude Oil Climbs to $112, Silver and Gold Still Climbing

Friday, 8 Apr 2011 4:00 AM
Crude oil futures are up 1% so far today, trading at a 30-month high of just over $112 a barrel. Oil’s rise comes on the heels of the dollar’s decline. The European Central Bank yesterday hiked interest rates to lift the euro, which further pressures U.S. currency. Investors worried about the Middle East and an oil fire in Libya are turning towards safe-haven markets such as gold. The U.S. government is still in talks to decide the budget for the rest of the fiscal year, as their Friday night deadline approaches.

Gold futures are continuing their upwards trend: June delivery is adding $12.30 (0.8%) to $1,471.60 an ounce on the Comex Division of the New York Mercantile Exchange. Earlier it was trading as high as $1,474.50 an ounce. So far this week the metal is up 3%, and if its levels remain this high, it will reach a fifth straight day of gains. Silver for May delivery is performing higher as well, adding 87 cents (2.2%) to $40.43 an ounce. This is its highest price since early 1980, and its fourth session gain in a row. Copper is also being given a boost by demand for other commodities; it has traded 2% higher so far, with May delivery adding 8 cents to $4.50 an ounce.

Daily Dish: Another Quake Strikes Japan, Government Still In Budget Talks

Thursday, 7 Apr 2011 4:00 AM
Just as Japan was starting to recover, another quake struck today. The 7.1 magnitude quake hit at 7:32 Pacific time (11:32 local time), and a pair of 7.4 quakes reportedly struck the same region earlier. Although a local tsunami warning was issued, the U.S. National Weather Service did not issue a warning for the U.S. mainland or Hawaii. No new damage has been recorded at the site of Japan’s nuclear plants, but U.S. Stocks have been sliding in response. Another sharp decline following the quake came from a major exchange-traded fund (ETF) that invests in Japanese companies.

Negotiations have just recommenced in Washington this afternoon, as President Obama and congressional leaders struggle to come to a compromise about budget spending for the remainder of the fiscal year. There is less than two days’ worth of government funding left, and many are worried that there will be a partial government shutdown on Saturday morning.

Meanwhile, gold is reaching for a third straight day of record highs, fluctuating between small gains from nervousness about European countries, and losses based on interest-rate increases in the euro zone and a higher dollar. Gold for June delivery was last adding $1.50 0.1%) to $1,459.80 an ounce on the Comex division of the New York Mercantile Exchange. Silver so far today has avoided losing any ground, maintaining its near 31-year high. Silver for May delivery was adding 15 cents (0.3%) to $39.52. Gold and silver both saw an increase in buying following Japan’s 7.1 quake earlier today.

Daily Dish: Silver at 31-Year High, Worries Center on Possible Government Shutdown

Wednesday, 6 Apr 2011 4:00 AM
Precious Metals’ appeal as a safe-haven option remains strong today, sending gold to new record levels, and silver to a 31-year high. Silver for May delivery was up 53.2 cents (1.4%) to $39.75 an ounce. The previous day’s contract had finished at a 31-year high. Gold was also hitting new highs, rallying to more than $1,460 an ounce and hitting a new intraday record of $1,467 an ounce, beating Tuesday’s record close of $1,455.50 an ounce.

Rising oil prices are encouraging safe-haven buying. Crude futures today are climbing again, after a slight decline on Tuesday. May delivery crude was up 66 cents to a new level of $108.98 a barrel.

Further worries come from Washington, where only three days of funding remain for the federal government. Financing talks on Capitol Hill are still in progress, but nothing has been decided. The Obama administration warned that aid for small businesses and
federally backed home-loan guarantees would have to be halted if a partial shutdown comes as early as Saturday morning. Negotiators are working to come to an agreement about what amount to cut from spending levels; Republicans and Democrats cannot agree on a budget plain for the rest of the fiscal year ending September 30th.

Other metals have also been advancing today: copper for May delivery was last gaining 9.1 cents (2.1%) to $4.356 a pound, palladium for June delivery was up $4.90 to $798 an ounce, and platinum for July was adding $17.70 to $1,814.50 an ounce.

Daily Dish: Gold At New Record High, Dollar Trades Morning Gains for Afternoon Losses

Tuesday, 5 Apr 2011 4:00 AM
Gold is once again in record territory, rising past $1,443. Safe-haven value is high against Middle East and North African conflicts, demonstrations in Yemen, and worries over a potential U.S. government shutdown. Gold for June delivery was up $10.30 (0.7%) to $1,443.40 an ounce on the Comex division of the New York Mercantile Exchange. Gold’s last record high was on Thursday, when it closed at $1,439.90 an ounce; today’s levels, if maintained, would beat that record. Read this morning’s report.

News was released that China was set to tighten its interest rates, and this news initially dampened gold’s rise. However, the yellow metal saw an increase in buying because of the proposed plan by Republicans in the House of Reps that is so far stalled. Read more about the proposed bill to fund the U.S. government for the rest of 2011.

Though initially gaining ground, the dollar has turned downwards in afternoon trading, while silver for May delivery is turning up, gaining 43 cents (1.1%) to $38.94 an ounce. So far this year silver has risen over 23%, and gold has gained 0.8%. Copper for May delivery was also up slightly, adding 1 cent (0.3%) to $4.27 a pound.

Daily Dish: Oil Futures Continue to Rise Alongside Silver and Gold

Monday, 4 Apr 2011 4:00 AM
Gold and silver futures were trading higher this morning, a recovery from the previous session’s losses. Last Thursday saw gold up to a record high of $1,439.90 an ounce, but it lost ground on Friday, dropping $11. Gold and silver’s gains today have been helped by rising oil prices and falling U.S. dollar prices, which are encouraging investment in precious metals. Gold for June delivery was up $7.70 (0.5%) to $1,436.60 an ounce on the Comex Division of the New York Mercantile Exchange. Silver for May delivery was up by 72.3 cents to a new level of $38.455 an ounce. The dollar index as of late last Friday had dropped to 75.846, down from 75.857 in North American trade.

Other metals were also seing gains: May copper was up 2.3 cents to $4.281 a pound; July platinum added $10.10 to $1,787 an ounce, and June palladium gained $6.25 to $781.30 an ounce.

With fears still high that its supply will slow or halt in many areas, crude oil is gaining today. Light, sweet crude for May delivery was up 69 cents (0.6%) to $108.63 a barrel on the New York Mercantile Exchange. This brings total gains for oil up to 19.0% this year, and last week’s close brought oil to its highest settlement in over five months.

Middle East tensions continued this weekend: protesters in Yemen fought against riot police, and officials in Bahrain have shut down the opposition’s leading newspaper. Conflicts in Libya are still dominating the world’s attention, and no clear winner has become apparent as rebels continue a drawn-out fight against government forces.

Daily Dish: Crude Oil Tops $107 a Barrel On Strong Employment Data, America the Beautiful Quarters Released

Friday, 1 Apr 2011 4:00 AM
Crude oil futures were topping $107 a barrel today, after a report for U.S. jobs was released for March, showing better-than-expected numbers. Light, sweet crude for May delivery was up $1.08 (1%) to $107.88 a barrel. If crude holds this level, it would be its highest since September 2008. Oil prices have been climbing to a total of %17 percent gains so far this year.

Gold futures were also dipping on employment numbers, last falling $23.40 (1.6%) to $1,416.50 an ounce. Despite a better payroll report, Goldman Sachs says there will not be an immediate affect on the monetary policy outlook. Read more on the March job report.

U.S. Mint gold and silver bullion coin sales continue to perform well. Sales total for gold reached 23,000 ounces, while silver bullion sales reached 697,500. The U.S. Mint has today, as of 12pm, released the second annual America the Beautiful Quarter Silver Proof Set. Prices will be slightly higher, as the market price of silver is rising. Read more about the release.

Daily Dish: Dollar Weakens, International Turmoil Continues, Gold Climbs

Thursday, 31 Mar 2011 4:00 AM
Gold futures were rising 1% today, a new record trading territory, as turmoil continues in the Middle East, euro-zone debt causes anxiety for investors, and the U.S. dollar lost more ground. The yellow metal’s safe-haven appeal has increased, with gold for May delivery up $13.80 (1%) to $1,438.70 an ounce on the Comex Division of the New York Mercantile Exchange. Gold is not alone in gains; silver for May delivery was up 15 cents to $37.66 an ounce, nearing a fresh 31-year high.

Spot prices for gold, silver, platinum, and palladium are currently up; follow the live chart at http://www.gainesvillecoins.com/

Crude is also up: May delivery was last adding $2.14 (2%) for a new 30-month high of $106.77 a barrel. The rise is largely a reaction to Libya’s current difficulties; rebels recently lost the oil city Ras Lanuf to Gadhafi’s military forces. Earlier hopes that rebels might be able to go around the regime and export oil through Qatar have been crhsbed, and through the month oil has gained 9.7%.

Many analysts are looking ahead to a potential funds hike by the feds later this year, if inflation continues to climb. This in turn could cause further rallies for gold and silver. Currently, the dollar index is down to around 75.929.

Daily Dish: After Early Gains, Gold Dips Slightly, Followed by Copper

Wednesday, 30 Mar 2011 4:00 AM
Despite gold’s gains of up to $13 an ounce in early Wednesday trading, its prices in early afternoon were heading back down. Gold for June delivery was earlier up to as much as $1,431.70 an ounce, and most recently was down to $1,419.80, still a gain of $2.30 on the Comex division of the New York Mercantile Exchange. Earlier support came from euro-zone debt worries and continued fighting in Libya, making the yellow metal’s safe-haven appeal stronger. Later, however, anticipation of a European Central Bank rate hike pushed gold down, since raised interest rates make holding gold more expensive.

Silver for May delivery was last up 35 cents to a level of $37.34 an ounce, palladium for June delivery was up 80 cents to $753.75 an ounce, and platinum for July delivery was adding $22.60 to a new level of $1,766.70 an ounce. Copper, on the other hand, was down 7.5 cents to $4.272 a pound.

President Obama has outlined a plan to boost U.S. energy production, in order to help the U.S. become less reliant on imported oil. His plan comes amidst ever-rising gasoline prices and as crude-oil futures trade above $100 a barrel. Obama has called for reducing oil imports by a third by 2025. Read more.

Daily Dish: Gold is Lower, While Other Metals Turn Higher

Tuesday, 29 Mar 2011 4:00 AM
Gold futures were coming up on a fourth session of dipping prices, as some investors were focusing on their most recent profits. Gold for June delivery dropped 80 cents to $1,420.50 an ounce on the Comex division of the New York Mercantile Exchange.

In contrast, several other metals were looking up today. Silver for May delivery was up 3 cents (0.1%) to $37.12 an ounce, and copper for May delivery was rising 2 cents to $4.37 a pound. Spot prices are mixed today: gold, silver, and platinum were last trending downwards, and palladium was gaining ground.

Japan is still working to contain radiation leaks at its Fukushima Daiichi power plant, and global anxiety is rising on reports of contamination in nearby water. U.S. and U.K. officials met with opposition leaders in Libya to discuss military intervention, while Gadhafi’s military forces continued to pressure rebels out of towns and cities.

Consumer confidence has dropped sharply during the month of March, mainly in response to rising food and fuel prices. U.S. currency was also moving higher in trading today: the dollar index was trading at 76.279, a gain on its last level of 76.182 on Monday. U.S. stocks are looking up today, as home prices continue their downwards track.

Daily Dish: Gold Turns Lower as Geopolitical Issues Stabilize a Little More

Monday, 28 Mar 2011 4:00 AM
Gold futures today have been dipping below $1,420 an ounce, mainly because no new crises have reinforced its safe-haven value. Gold for April delivery was down $11 (0.8%) to $1,415.20 an ounce on the Comex Division of the New York Mercantile Exchange. If gold keeps these numbers, it will close at its lowest point in about a week. Despite this slight ease of anxiety, however, investors foresee a resume of yellow metal’s appeal in the future, as global tensions persist.

Concerns are still most focused on Libya’s anti-government protests, the debt crises in Europe, and threat of nuclear radiation spreading to seawater in Japan. Read more about Japan’s nuclear reactor crisis.

The dollar index was last down to 76.131, compared with its higher level of 76.242 on Friday.

Other precious metals were also down today: silver for May delivery was down 13 cents (0.4%) to $36.93 an ounce, and copper for May delivery was down 5 cents (1.3%) to $4.36 a pound. Palladium for June delivery was dropping $4.40 (0.6%) to $746 an ounce, while platinum for July delivery was down by $9.50 (0.5%) to a level of $1,740.90 an ounce.

Oil is also down today, as rebel forces capture more oil sights, giving fresh hope that conflicts will soon begin to die down. Unrest in
Syria is particularly dramatic, with protests in Deraa taking center stage. NATO is lending its support through a series of air strikes against Gadhafi’s regime. Crude oil for May delivery was last seen down about 77 cents (0.8%) to $104.62 a barrel on the New York Mercantile Exchange.

Daily Dish: Precious Metals Waver on Dollar’s Gain, Japan’s Crisis

Friday, 25 Mar 2011 4:00 AM
Gold futures were high and then low today, alternating between gains and losses. The dollar’s strength was tempering gains, but Japan and the Middle East were encouraging safe-haven buyers. Gold for April delivery was last up 30 cents to $1,435.20; earlier it traded up to $1,428 an ounce. Over all, gold has gained 1.4% this week.

Despite a weak start, silver has succeeded in reaching a 31-year high, and has gained 7% overall this week. Silver for May delivery was up 12 cents (0.3%) to a level of $37.50 an ounce. May copper was also gaining ground today, adding 1 cent (0.3%) to $4.44 a pound. Overall, the metal has risen about 2.3% this week.

The dollar’s gain is a reaction to the latest issues regarding Europe’s sovereign-debt crisis, and U.S. stocks are up for the third consecutive day.

In addition to ongoing fighting in Libya, many people are worried that news in Japan is about to get even worse, as high radiation levels in Fukushima cause more evacuations, and authorities warn of electricity scarcity in the coming months.

Daily Dish: Gold Is On Record-Setting Track, and Focus Returns to Europe’s Debt Crisis

Thursday, 24 Mar 2011 4:00 AM
Gold has been gaining ground today, on track for a new record-high settlement. Gold for April delivery was up $5.80 (0.4%) to $1,443.80 an ounce on the Comex Division of the New York Mercantile Exchange.

Focus on Europe has aided gold’s rise, as worries about its debt crisis continue. Most recently, attention was centered around news that Fitch has downgraded Portugal’s sovereign debt. Other anxiety came from predictable sources today: the war in Libya, strife in the Middle East, and the state of affairs in Japan as it works to recover from the earthquake and tsunami.

Silver is also up today, trading at a 31-year high. Silver for May delivery was up 52 cents (1.4%) to $37.72 an ounce. Copper was slipping slightly today, with May’s contract down 1 cent to $4.42 a pound.

Daily Dish: Gold Trades In Record Territory, Oil Tops $105 a barrel

Wednesday, 23 Mar 2011 4:00 AM
Gold was trading in record territory today, adding to highs on the fast-approaching end of floor trading. Gold for April delivery was up $12 (0.8%) to $1,439.70 an ounce on the Comex Division of the New York Mercantile Exchange. If it can hold onto these levels, gold will close at a new record: its highest price ever to date was on March 2nd, when it closed at $1,437.70 an ounce. Silver and spot gold were also finding higher ground today.

Crude oil futures were up to well over $105 a barrel, as worries persist over strife in Libya and the Middle East. The risk of further delays or even halts in supply has helped keep oil’s price up this week. Crude for May delivery was lately up by about 83 cents (0.6%) to a level of $105.82 a barrel on the New York Mercantile Exchange. If oil can hold onto these levels, it will surpass its last high record in September of 2008.

The U.S. dollar was rising against the euro and the British pound today, as worries continue over sovereign-debt issues in Europe. The dollar index was up to 75.779 (a gain over its last level of 75.418 on Tuesday).

Fighting continues unabated in Libya, where Col. Moammar Gadhafi is conducting air attacks, and at least six protesters are confirmed dead in Syria.

Daily Dish: Precious Metals Mixed on Latest International News

Tuesday, 22 Mar 2011 4:00 AM
After a gain of nearly $34 an ounce over the last four weeks, gold is pulling back today. April futures were down 70 cents to $1,425.70 an ounce on the Comex Division of the New York Mercantile Exchange. Earlier levels were as low as $1,419.50 and as high as $1,432.30. A stronger yen today also boosted gold sales. Other metals gained in early trading: silver for May delivery was up 20 cents to $36.30 an ounce, and copper for May delivery was up 2.55 cents to a new high of $4.312 a pound. In contrast, platinum for April delivery was down by $4.10 to $1,740.80 an ounce, and palladium for June delivery lost $1.80 to $740.50 an ounce.

Crude oil was coming up by more than 1%: crude for April delivery was up $1.29 (1.3%) to $103.62 a barrel on the New York Mercantile Exchange.

Unrest in Yemen and Libya continues to dominate international news; efforts to establish a no-fly zone encountered a setback yesterday, in the form of a crashed U.S. military jet overnight. Protests in Syria are still going this week, and investors continue to worry that strife will hit key oil exporters in the Middle East and North Africa.

Daily Dish: Gold and Oil Are On the Rise as Worries Increase in Japan and Libya

Monday, 21 Mar 2011 4:00 AM
Gold futures were climbing again today, as uncertainty in Japan and Libya turned investors towards the precious metal as a safe haven option. Gold for April delivery was up $14.70 (1%) to $1,430.80 an ounce on the Comex Division of the New York Mercantile Exchange. Earlier levels were as high as $1,435.10. Silver for May delivery was adding 95.2 cents (2.7%) to $36.01 an ounce. Palladium for June delivery was up $10.60 to about $741.80 an ounce, and platinum for April delivery rose $17.40 to $1,740.80. In contrast, copper for May delivery was losing 6.15 cents, for a new level of $4.278 a pound.

Libya’s situation has investors more worried, following a decision on the part of the U.S. and its allies this weekend to commence air attacks on Col. Moammar Gadhafi. Japan has also earned further attention as workers continue efforts to restore power to nuclear plants in Fukushima.

The dollar index was down to 75.554 in late Friday trading, as the yen garnered strength, adding to gold’s appeal. Light, sweet crude for April delivery was rising $1.69 to $102.74 a barrel on the New York Mercantile Exchange. Earlier, it rose as high as $103.35 a barrel.

Daily Dish: Gold Futures Gain on Libya Cease-Fire; U.S. Stocks Rise After Fed’s Decision

Friday, 18 Mar 2011 4:00 AM
Gold futures were adding to earlier gains today, as Libya’s government agreed to a cease-fire in exchange for the UN’s approval of a no-fly zone over the country. Many anticipate air strikes from Gadhafi to begin within a few days. Further support for the precious metal comes in the form of ever-rising tensions in the Middle East and North Africa. Gold for April delivery was up by $14.30 (1%) to a new level of $1,418.50 an ounce on the Comex Division of the New York Mercantile Exchange.

Silver for May delivery was up 72 cents to $34.97 an ounce; Copper added 1 cent (0.2%) to its May futures, giving it a level of $4.34 a pound.

News was positive for the dollar, as well, after the Group of Seven nations (G-7) made a rare move to intervene in foreign-exchange markets, in order to curb the yen’s rise. The dollar added 2.6%. U.S. crude futures dropped to $101 a barrel, while U.S. stocks carried gains from yesterday into further positive highs today. Demand for U.S. Treasurys was mixed: 2-year was flat, while 10-year was up 3.26%.

Daily Dish: Crude and U.S. Stocks Are Up Alongside Metals

Thursday, 17 Mar 2011 4:00 AM
Crude is back up to a little over $100 a barrel, and U.S. stocks and gold are following oil’s positive trend. Gold for April delivery was last adding $4.40, (0.3%) to $1,400.40 an ounce on the Comex division of the New York Mercantile Exchange. The yellow metal has been benefiting from inflation, as well as fears of potentially higher levels of inflation in the future, since it is a hedge against price increases. Physical demand for bullion remains strong, most notably in Asia, where the country pays premium for gold bars.

Other metals were mirroring gold’s modest gains: silver for May delivery was adding 1 cent to $34.49 an ounce, and platinum for April delivery was up 0.1% to $1,702.30 an ounce. Palladium for June delivery was climbing $9.80 (1.4%) to $714.85 an ounce, as copper pulled ahead, adding 13 cents (3.1%) to a new level of $4.33 a pound.

Anxiety in Japan continues to add volatility to world markets today. In its latest attempt to cool nuclear reactors damaged by the tsunami, firefighters and military personnel in Japan have been approaching the facilities with water cannons and aerial soaking. It is unclear how much this latest tactic is helping, and worries continue that future radiation leaks are possible.

Daily Dish: Metals and Oil Climb

Wednesday, 16 Mar 2011 4:00 AM
Crude oil has been making a comeback today: April futures were up 87 cents (1%) to $98.22 a barrel on the New York Mercantile Exchange. The small boost came despite increased worries in Japan, partly because of positive U.S. inventory reports, and also because of a boost given by bargain hunters recently.

Japan’s stock market has improved today, adding strength to the appeal of precious metals. Gold for April delivery was up $8.00 (0.6%) to $1,400.80 an ounce on the Comex Division of the New York Mercantile Exchange. Earlier trading measured gold as high as $1,406.60 an ounce. Silver for May delivery was rising by 52 cents (1.6%) to $34.65 an ounce, and palladium for June delivery was adding $10.70 (1.5%) to a trade level of $715.60 an ounce. Copper for May delivery was up 9 cents (2.1%) to $4.22 a pound.

Japan is still battling to contain its disastrous nuclear crisis, and European stocks have fallen in response, while the dollar and the yen have gained ground.

Daily Dish: U.S. Gold Futures and Stocks Are Down on Increased Worries in Japan

Tuesday, 15 Mar 2011 4:00 AM
Gold was down 2.3% this afternoon, to a new level of $1,392.80 an ounce, as national and international markets continue to react to events in Japan. Silver dropped about $2.35 (6%) to settle around $33.56. Platinum dropped $66 to new lows of around $41,689, and palladium was down about $44, for new estimates of $700 an ounce.

As the world’s third largest economy, Japan has an enormous impact on world political and economic decisions, and with investors worrying that supply chains will soon halt, stocks, commodities and oil have all plummeted. The most recent worries are centered around Japan’s nuclear power plant explosions, which have caused several casualties, and an increased fear because of ‘substantial’ radiation leaks from the plant. (Read more about Japan’s nuclear troubles)

The dollar was down against the yen, and crude oil for April delivery was down 2.5% to $98.71 a barrel. Japan’s president is trying to instill calm, reassuring citizens that there is sufficient supply of food and water, while at the same time advising those in areas affected by the nuclear plants to remain indoors and avoid unnecessary exposure to the elements.

Daily Dish: Markets Volatile In Response to Japan’s Earthquake and Tsunami Aftermath

Monday, 14 Mar 2011 4:00 AM
Japan continues to scramble, following Friday’s devastating earthquake and tsunami. The economy’s production has been slowed, and in some cases halted, as all efforts turn to saving lives and containing the damage left by Friday’s historic natural disaster as much as possible. There is worry that several nuclear plants will fail completely, and many power and telecommunication outages are still not fixed.

The dollar has slipped to 76.47, a loss of 0.08, and gold has been holding on to gains, as investors seek to insure their safe-haven assets.The yellow metal was last up by $6.80, bringing spot prices to an early level of $1,426.40. Historically, Japan is responsible for a large quantity of gold consumption, and there is a possibility that its latest misfortunes will encourage private gold sales in the near future.

Crude oil is continuing its decline, losing 68 cents to an earlier recorded price of $100.47. Silver is slightly up, though only by about 3 cents, with an early pricing of around $35.93 an ounce. Noble metals, however, may not be so lucky, with an estimated three to six months expected for their recovery in the country.

Japan is also a key consumer of platinum and palladium, which are used in automobile factories and for jewelry creation. This week both metals have been lower, as production in many factories and plants in Japan is at a standstill.

For more, see Kitco’s commentary: Earth in Upheaval.

Daily Dish: Gold Rallies and Oil Falls In Response to Japan’s Natural Disaster

Friday, 11 Mar 2011 5:00 AM
In the latest update from the New York Times:

An 8.9-magnitude earthquake struck off the coast of Japan on Friday, the strongest ever recorded in the country and one of the largest anywhere in the last century. The quake churned up a devastating tsunami that swept over cities and farmland in the northern part of the country and set off warnings as far away as the West Coast of the United States and South America. (See the full story).

In response to this catastrophe, gold has seen a rise in buying, and oil has dipped down to about $100 a barrel. Crude oil for April delivery was last falling $2.26 (2.2%) to $100.45 a barrel on the New York Mercantile Exchange. Previously it had traded as low as $99.01 a barrel. Gold for April delivery was up 40 cents to $1,412.90 an ounce on the Comex Division of the New York Mercantile Exchange. Silver was also trending upward, adding 9 cents (0.3%) to $35.16 an ounce, while copper for May delivery was tracking lower, down 3 cents (0.8%) to $4.16 a pound.

Discouraging news recently came from China, which is reportedly still struggling with higher-than-expected inflation. China is a top crude oil consumer, along with Japan and the U.S.

Friday was scheduled to be the “Day of Rage” in Saudi Arabia, where citizens were to hold a protest calling for democratic reforms. The oil market, investors, and political analysts were braced for the worst;
however, no violence or demonstrations of any kind of have been reported in the Saudi capital Riyadh. Meanwhile, fighting continues in Libya, and European Union leaders were scheduled to hold a summit meeting today to discuss options for how to respond.

Daily Dish: Libya Still Center of Attention as Gold and Oil Retreat

Thursday, 10 Mar 2011 5:00 AM
As investors continue to monitor fighting in Libya, oil turned downwards, followed by precious metals and commodities. Crude oil for April delivery was down $30.10 (3%) to $101.28 a barrel on the New York Mercantile Exchange. Earlier it had reached lows of $100.62 a barrel. Gold for April delivery was down $20.50 (1.4%) to around $1,409.10 an ounce on the Comex division of the New York Mercantile Exchange. Silver for May delivery was down 98 cents (2.7%) to $35.07 an ounce, and May copper was fluctuating, most recently up 1 cent to $4.20 a pound. The dollar was coming up stronger against the euro today.

Another recent concern comes in the form of Thursday’s report that China unexpectedly posted a trade deficit of $7.3 billion in February. Investors are also waiting in anticipation for Friday’s “Day of Rage” in the world’s no. 1 oil exporter, Saudi Arabia. Libya’s oil production is already sharply down as fighting continues between rebel forces and forces loyal to Gadhafi.

Daily Dish: Gold and Silver Climb, Oil Wavers

Wednesday, 9 Mar 2011 5:00 AM
Gold and silver were both gaining ground this morning, as violence escalates in Libya, particularly in Western towns where Muammar Qaddafi has pushed forward with more attacks. Gold for April delivery was up $2.80 (0.2%) to $1,430 this morning. Silver for May delivery was up 17.2 cents (90.5%) to $36.83 an ounce. This is double what silver’s price was 12 months ago.

Copper futures were turning downwards today, trading at their lowest levels in 11 weeks, on worries that demand from China is beginning to cool. Copper for May delivery dropped 14 cents (3.4%), to $4.19 a pound on the Comex division of the New York Mercantile Exchange. A close around these levels would be copper’s lowest since December 20, when it closed at $4.21 a pound.

Light, sweet crude oil for April delivery was down 21 cents to $104.79 a barrel on the New York Mercantile Exchange. Oil has fluctuated between small gains and losses so far today. Investors are buying precious metals and keeping a close watch on oil futures ahead of Friday’s scheduled ‘Day of Rage’ in Saudi Arabia, where demonstrators will gather to protest the regime. Investors are concerned that this will impact the way in which the world’s top oil exporter deals with unrest in its own backyard.

Daily Dish: Oil Drops in Response to News of Possible Compromise Talks in Libya

Tuesday, 8 Mar 2011 5:00 AM
After reaching their highest level in 29 months, oil futures were coming down today. Crude oil was down 55 cents (0.5%) to $104.90 a barrel on the New York Mercantile Exchange. Earlier in the day oil was down to 103.90 a barrel. The drop is owed to news that Gadhafi’s advisers are inviting rebels and tribal leaders to a talk to discuss political solutions. However, some investors expect the dip in crude’s price to be short-lived.

Precious metals also dipped in reaction to Libya’s political position. Gold for April delivery was down $5.40 (0.4%) to $1,429.20 an ounce on the Comex division of the New York Mercantile Exchange. Silver was also lower today, after previously attaining a three-decade high. Silver for May delivery was down 10 cents (0.3%) to $35.78 an ounce. Copper for March delivery was also dropping, down 4 cents ( 1%) to $4.27 a pound.

Daily Dish: Oil Spikes Around $107 as Gold Continues to Climb

Monday, 7 Mar 2011 5:00 AM
Oil was rising sharply today, as fighting in Libya worsens and investors become increasingly worried that oil may become harder to acquire. Crude oil for April delivery was up 51 cents (0.5%) to $104.94 a barrel. Despite this climb, this early afternoon price is much lower than oil’s earlier high of $106.95 a barrel. Particularly unsettling are reports of heavy fighting between government forces and protesters who are currently holding key towns. One coastal town, Ras Lanuf, was bombed recently; it houses an oil export terminal as well as an oil refinery. Further worry comes from the possibility that other neighboring countries will feel the effects of the chaos in Libya and also slow or halt oil shipments.

Gold has profited from these tensions, however; April futures were up $11.40 (0.8%) to $1,439.60 an ounce on the Comex division of the New York Mercantile Exchange. If these levels can be maintained, gold will close at a new record. Silver also saw success today, trading at a 31-year high. Silver for May delivery was up $1.15 (3.3%) to $36.47 an ounce.

Metals associated with industrial production underperformed: copper for March delivery was down 6 cents (1.5%) to $4.41 a pound, platinum for April delivery was down $13 (0.7%) to $1,824.40 an ounce, and palladium for June delivery was down $22,50 (2.8%) to $788 an ounce.

Daily Dish: Oil Rises, U.S. Stocks Drop, and Precious Metals Gain Ground

Friday, 4 Mar 2011 5:00 AM
U.S. stocks are dropping today, as oil climbs back up to $104 a barrel on the New York Mercantile Exchange. Oil’s rising price underlines fears that violence in the Middle East and particularly Libya will disrupt supply. Loyalist forces have reportedly opened fire on protesters in Tripoli (Libya’s capital), as rebel forces fight to hold onto control of several key cities in Eastern Libya. So far, Colonel Moammar Gadhafi has insisted that he will not step down. Most recently, reports of at least 13 dead have been confirmed in a Libyan town where the leader’s government attacked protesters.

Gold is so far holding onto gains, as loyal investors choose to invest in the precious metal as a safe haven against riskier commodities, rising inflation, and economic and political conflicts overseas. Gold for April delivery was up $8.20 (0.6%) this morning, to $1,424.50 an ounce on the Comex division of the New York Mercantile Exchange.

Silver is still hovering around a thirty-hear high, with its May futures up 6 cents (1.7%) to $34.92 an ounce, and Spot gold, silver, and platinum have climbed into positive territory. See the Gainesville Coins spot precious metal chart for constantly updated pricing.

The Labor Department has released a report detailing job prospects in February: 192,000 jobs were added, and the unemployment rate fell to an unanticipated low of 8.9%.

Daily Dish: Gold Futures Down As Oil Dips and Unemployment Claims drop

Thursday, 3 Mar 2011 5:00 AM
Gold for April delivery was dropping $14.50 (1%) to $1,423.10 an ounce on the Comex division of the New York Mercantile Exchange. Gold had previously closed at a record high of $1,437.70 an ounce, aided by fears of inflation and worries about global issues abroad. Gold’s drop comes after the European Central Bank says it will try to raise interest rates within the month to push inflation down.

Silver was also lower today, after achieving a three-decade high. Silver for May delivery was down 48 cents (1.4%) to $34.35 an ounce. Yesterday’s close was $34.83 an ounce.

U.S. stocks were gaining ground on fresh news that employment is gaining some ground, as oil drops in price. The number of new filings for unemployment claims were unexpectedly dropping: they fell by 20,000 to end at 368,000 when last recorded at the week ending February 26th. This is the lowest level of claims since May 2008. Crude oil futures were recently down to under $102 a barrel, helping investors and stock holders gain some optimism about the state of the U.S. economy.

Daily Dish: Oil Is Up to $101 a Barrel, and Precious Metals Are Reaching For Record Highs

Wednesday, 2 Mar 2011 5:00 AM
Gold for April delivery was continuing to climb today, up $5.90 (0..4%) to $1,437 an ounce on the Comex division of the New York Mercantile Exchange. In its previous session it saw a record close of $1,431.20 an ounce. Silver followed gold into positive territory, with May futures adding 42 cents (1.2%) to $34.84 an ounce. If it maintains these levels, silver would make a new 31 year record high.

Fresh highs come on the heels of oil’s spike to $101 a barrel, and instability in the Middle East that is now spreading to Saudi Arabia and other oil-producing nations. As oil prices rise, so do inflation concerns. Light, sweet crude oil was up to $1.81 (1.8%) for a recent quote of $101.44 a barrel.

Although most precious metals were strong today, copper was the outlier, down 2 cents (0.5%) to $4.47 a pound, as fresh concerns about weak economic recovery made the industrial metal less appealing.

Daily Dish: Gold and Silver Still Strong

Tuesday, 1 Mar 2011 5:00 AM
Gold for April delivery was adding $11.60 (0.8%) to $1,412.30 today, as tensions continue in the Middle East and North Africa. Silver for May delivery was adding 44 cents (1.4%) to $34,30 an ounce. A close around these levels would be silver’s highest since its $50 an ounce close in 1980.

Other precious metals were continuing a positive performance: platinum for April delivery was up $21.40 (1.2%) to $1,830 an ounce. Palladium for March delivery was adding $12.30 (1.5%) to $809.95 an ounce. Since metals are used for automotive purposes, today’s auto maker sales report (both U.S. and foreign) is expected to impact the rise or fall of metals. Copper was the odd metal out, dropping 2 cents (0.6%) to $4.45 a pound.

The biggest factor is the constantly changing situation overseas, and precious metals, stocks, and commodities will continue to respond to political tension there.

Daily Dish: Turmoil in Middle East Continues, Gold Levels Still High

Monday, 28 Feb 2011 5:00 AM
The safe haven appeal is still strongly in gold’s favor, as rising inflation and turmoil in the Middle east and North Africa continue to drive investors towards the precious metal as a more stable option.

Gold for April delivery was up $4.50 (0.3%) to $1,413.80 an ounce in late morning trading. Other precious metals were also performing well today. Silver for May delivery was adding 2.8% to $33.83 an ounce, and palladium for June delivery was up 1.1% to $796.50 an ounce. Platinum for April delivery was gaining 0.1%, to $1,804.90 an ounce.

Slightly more positive readings for the future of the U.S. economy, as well as oil’s stabilization at about $97 a barrel have helped push U.S. stocks higher today.

Daily Dish: Gold Retreats Slightly, Oil Stabilizes

Friday, 25 Feb 2011 5:00 AM
After maintaining a seven-week high, gold retreated slightly this morning, followed closely by silver. Gold for April delivery was down $5.30 (0.4%) to $1,410.60 an ounce on the Comex division of the New York Mercantile Exchange. Silver for April delivery was down 16 cents (0.5%) to $33 an ounce. Despite these dips, both metals have recovered from lower levels earlier in the trading session.

Copper, platinum, and palladium, on the other hand, have seen gains so far today. Copper for March delivery was up 8 cents (1.8%) to $4.40 a pound, and platinum for April delivery was up $12.20 (0.7%) to $1,799 an ounce. Palladium for March delivery was up $8.20 (1%) to $785.95 an ounce.

Oil has been the main cause for precious metals’ recovery; crude oil has stabilized slightly more since yesterday, since Saudi Arabia has stepped in to fill the gap left by Libya’s slow in oil production.

Protests are continuing in the Middle East and North Africa, and investors warn that markets will remain ‘extremely sensitive’ as tensions and conflicts carry on.

Daily Dish: Dollar Index Falls, Oil spikes

Thursday, 24 Feb 2011 5:00 AM
U.S companies were recovering ground today as anxiety continues over the state of Middle East politics. As predicted, gasoline prices shot up today, as crude oil jumped to about $100 a barrel. Oil is becoming a larger issue daily, because of worries that Libyan exports could go from their current faltering pace to completely halting in the next several days.

U.S. jobless claims fell by 22,000 last week, to end at about 391,000, which was better than analysts had initially expected. The U.S. Dollar Index dropped 0.4%, while Treasurys rose and gold futures climbed slightly higher. Spot gold is up, with spot platinum alternating between highs and lows, and spot silver declining.

Daily Dish: Gold and Oil Are Still Rising, Mass Evacuations Continue in Libya

Wednesday, 23 Feb 2011 5:00 AM
Conditions continue to grow more volatile in the Middle East, pushing investors consistently towards safe-haven assets. Gold futures for April today rose another 0.8%, or $11.50, to about $1,412.50 an ounce on the Comex division of the New York Mercantile Exchange.

U.S. stocks are continuing to slide today, as crude oil futures edge closer to $100.00 a barrel.

In Libya, army units are defecting, and rumors are spreading that Muammar Qaddafi’s regime may be over in a matter of days. Expats are fleeing Libya by the thousands, with their governments working around the clock to help evacuate them. The U.S. has chartered a ferry to take American citizens from Libya to Malta. Turkey says it is in the midst of its largest evacuation to date, as efforts continue to get 5,000 nationals out, via sea and air transport. In the U.K., taking British citizens out of Libya is the Foriegn Office’s top priority, and a Royal Navy frigate has been deployed to help. Italy and South Korea are also seeing a flood of expats returning, and Italy’s Foreign Minister has stressed the importance of preparing for the “economic and social burden of an immigration wave” that is heading for Europe. For more, see coverage by Bloomberg News.

Libya pumps about 1.6 million barrels of oil each day, with most of it selling to Europe. This is about 1.8% of world supply, and concerns have skyrocketed internationally, hiking oil rates and reinforcing the safe-haven appeal of precious metals, most notably gold.

Daily Dish: Precious Metals Reach New Heights

Tuesday, 22 Feb 2011 5:00 AM
Precious metals continue to perform well today: gold futures are up to a new seven-week high, and silver has reached a new thirty-one year record high.

Gold for April delivery has risen about $15.50 (1.1%) to $1,404.10 an ounce. If prices hold, gold will close at its highest level since early January, and claim a seven-day streak of gains. Silver for March delivery saw fresh highs as well, adding 88 cents (2.7%) to $33.15 an ounce. This is sightly lower than its performance early this morning, which hit $34.33 an ounce.

Concern continues unabated in the Middle East, and investors are still rushing towards safe-haven assets. Precious metals top the list, with gold and silver recently being the most popular choices. This is because metals such as copper and palladium are linked more closely with industry, as opposed to investment assets.

A number of Middle Eastern areas are being closely watched this week, with Libya now taking center stage. U.S. stock futures have lost some ground as a consequence, but oil has surged forward, as Libya’s leader, Gadhafi, appears to be losing ground because of the ongoing protests there. Read more about Gadhafi’s conflict with the people.

Daily Dish: Safe Haven Appeal of Gold Still High, Protests Continue in Middle East

Monday, 21 Feb 2011 5:00 AM
For the sixth day and counting, gold prices have topped $1,400 an ounce, as political turmoil continues in the Mideast and North Africa. Oil also continues to make headway. Gold futures have seen a 1.3% gain, and silver is up 4.4%.

Gold for April delivery was up $17.40 to$1,406 an ounce in electronic trading on Globex. Silver was also rising; March delivery silver was up $1.42 to #33.72 an ounce on Globex. Precious metals are maintaining high levels as investors turn to them as a stable investment against uncertain financial and political climates abroad.

Crude oil futures were rising: April delivery oil was last recorded up $4.54 (5%) to $94.23 a barrel. The price of crude oil is still climbing as protests continue unabated in Libya: at least 233 people are dead, and the concern of investors is that oil supplies will be interrupted due to the chaos.

Other areas are protesting as well; most recently, coverage has centered around Bahrain, Yemen, and Morocco, in addition to Libya and Egypt.

U.S. markets have been closed for Presidents’ Day.

Daily Dish: Gold Still Near Five-Week Highs and Silver Performing at 20-Year Best

Friday, 18 Feb 2011 5:00 AM
Gold has been hanging onto five-week highs so far today, and silver is edging nearer to its strongest level since 1980. Interest in precious metals has spiked because of political turmoil in the Middle East. Gold futures so far today have risen $7 an ounce. April gold was last recorded $6 up, to $1,391.10 an ounce.

Silver has been a powerful influence in markets this week; it recently caught up to its highest level in 31 years, at $32 an ounce, and has jumped about 3.6% in early afternoon trading. March silver is up another $1.15 from yesterday, and was trading at $32.72 an ounce. These trade levels represent a 9% increase from last Friday’s close at $29.995 an ounce.

Reports indicating that Egypt will allow two Iranian warships through the Suez Canal has increased interest in the appeal of safe-haven investments. Inflation worries, particularly over China’s interest hike, have also helped gold and silver take the lead.

Daily Dish: Gold Rides Wave of Middle East Tensions

Thursday, 17 Feb 2011 5:00 AM
Gold’s safe-haven appeal remains strong, as tensions and unrest in the Middle East continue to take center stage. Most recently, Bahrain, Yemen, Iran, and several other surrounding Arab countries have been experiencing chaos. The warships said to be embarking on a trip down the Suez Canal now seem to be canceling their endeavors; the reasons for this change are unclear.

Gold for April delivery was last seen up $5.30 (0.4%) to $1,380.30 an ounce, further supported the U.S. currency’s dip. Gold has gained about $48 during the month of February, and gold shares followed gold upwards early this morning.

Copper for March delivery was last quoted down 2 cents (0.6%) to $4.45 a pound, and silver for March delivery was last recorded up 22 cents (0.7%) to $30.87 an ounce.

Spot prices for gold, silver, platinum and palladium are all up today.

The Labor Department released a new report on the number of initial jobless claims, which climbed 410,000, reinforcing the volatility of the U.S. economy.

Daily Dish: Iran Causes Anxiety, Bringing Crude Oil and Gold Prices Up

Wednesday, 16 Feb 2011 5:00 AM
Reports from media sources came in today that Iranian warships are preparing to make their way down the Suez Canal to Syria. This surprising news has caused a change in today’s markets. Crude oil futures for March delivery were adding $1.15 (1.4%) to $85.46 a barrel on the New York Mercantile Exchange. This price is down slightly from its original spike directly after the report, when it shot up to $85.91 a barrel.

Gold for April delivery added $7.70 (0.5%) to $1,381.50 an ounce. Spot gold and palladium continue to climb in positive territory, while silver and platinum are slightly down.

In other news, President Obama’s proposed budget for the 2012 Fiscal Year calls for charging a 5% royalty on the gross proceeds of hardrock minerals mined on public lands including silver, gold and copper. This is in addition to reductions on oil and gas subsidies, which Obama says will save the country $3 billion over the next 10 years. Part of the budget also allocates funds to clean up abandoned mines.

Read more: Obama Administration Calls for 5% Royalty on Gross Proceeds of Mines.

Daily Dish: Gold Still Rising, Copper Comes Down from Monday’s Record High

Tuesday, 15 Feb 2011 5:00 AM
Turmoil in the Middle East continues to bolster gold’s appeal, and investors are buying up the precious metal as a safe-haven option against global financial insecurities. Gold for April delivery was last adding $11.10 to $1,376.20 an ounce on the Comex division of the New York Mercantile Exchange. If gold can keep its momentum up through the afternoon, it could close at its highest levels since mid-January. Spot gold was also gaining ground, rising by over $13.

Silver was adding 31 cents to $30.85. Unease about the situation in China and the U.K. has helped to advance precious metals this week.

Copper finished at a record high on Monday, and came down slightly in this morning’s readings. Yesterday’s close saw copper up 2% to finish at $4.63 a pound. Today, copper is down just one cent (0.4%) and was last hovering around $4.61 a pound.

Euro-zone finance ministers have said they will increase the size of the euro’s permanent bailout fund to $500 billion. This announcement has furthered gold’s appeal.

Further reading: Silver, Gold Prices Break Key Resistance Marks

Daily Dish: Gold and Copper Turn Higher

Monday, 14 Feb 2011 5:00 AM
After two sessions of lost ground, gold was trading higher today. Stats for April delivery showed the yellow metal adding $4.40 (0.3%) to $1,365 an ounce on the Comex division of the New York Mercantile Exchange.

Copper has been following in gold’s footsteps, with March delivery seeing a gain of 7 cents (1.4%) to $4.60 a pound. Copper’s last record high was on February 7th, when it closed at $4.58 a pound, and a close at today’s current levels would overthrow that record.

Silver turned higher today as well, with a gain of 38 cents (1.3%) bringing prices to $30.38 an ounce. If silver can hold steady, it will see its highest close since December 31st of 2010.

Ongoing market volatility will be apparent as Egypt’s military takes over the role of restoring some order there. Investors are prepared to see highs and lows across markets, as precious metals, global currencies, and stock markets fluctuate in response to turmoil abroad.

Daily Dish: Excitement Builds in Egypt; Precious Fluctuate Between Highs and Lows

Friday, 11 Feb 2011 5:00 AM
Egyptian citizens today were celebrating openly in the streets of Cairo, after news that president Hosni Mubarak will step down and turn power over to the military. This has caused a mixed batch of readings for precious metals. Gold has dipped and climbed all morning, with no signs of stopping heading into the afternoon. Gold for April delivery was last quoted down 20 cents to $1,362.40 an ounce on the Comex division of the New York Mercantile Exchange. Continued unrest in Egypt should result in more gold buying, and investors expect the yellow metal to remain supported.

The dollar index was most recently sited at 78.428, which is a gain from yesterday’s 78.221. This added strength has had a variety of outcomes for other precious metals. Silver for March delivery was down 3 cents (0.1%) to $30.06 an ounce, and copper for
March delivery was up 1 cent to $4.54 a pound. Platinum for April delivery was up 0.2%, or $3.70, to about $1,834.50 an ounce.

Crude oil continues to fall today, last down 17 cents to $88.73 a barrel.

Daily Dish: Gold Gains and Loses Ground Periodically; Dollar Adds Value Against Euro

Thursday, 10 Feb 2011 5:00 AM
Gold was gaining ground this morning, up to about 1,366.30 an ounce, on tensions in Egypt and news that Mubarak is planning to step down. Anxiety and worries abroad were aiding gold’s climb, but as the dollar gained some support this afternoon, gold turned lower, losing $4.30 to settle at about $1,361. The dollar was gaining 1% against the euro, as well as gathering strength against other currencies. The U.S. currency index was rising to 78.190 from 77.661 late Wednesday. Due to the volatility of markets recently, gold will most likely continue to fluctuate throughout the rest of today’s trading session.

Copper has turned upwards again today, adding cents (0.4%) to $4.54 per pound. Although still below its trading goal, silver was also gaining some ground today.

U.S. stock futures were dipping lower today, and Egypt is still in the spotlight: Mubarak is expected to deliver a speech later today, tendering his resignation. Read more: Reports that Egypt’s Mubarak Will Step Down.

Daily Dish: Gold Dips on Dollar’s Gain; Oil Loses Some Ground

Wednesday, 9 Feb 2011 5:00 AM

Daily Dish: China Hikes Rates Again, Dollar Drops, Gold Gains

Tuesday, 8 Feb 2011 5:00 AM
The People’s Bank of China has announced that it will raise interest rates yet again, this time by 0.25%, in an effort to curb rising inflation. The dollar lost ground in response, falling against other currencies, and pushing gold forward. Less confidence in gold leads to increased buying of the precious metal, which is considered a safe haven against economic fluctuation. Gold futures for April were rising to $14.60, or 1.1%, to $1,362.70 an ounce this morning. Silver and Platinum also made headway: silver was up to $29.74 an ounce, and platinum advanced to $1,848 an ounce.

Crude oil has also been losing ground this week. Earlier today, March oil futures were falling $1.24 to $86.24 a barrel.

Daily Dish: Copper Reaches Record High, As Oil Falls Below $89 a Barrel

Monday, 7 Feb 2011 5:00 AM
As investors continue to worry about copper’s future availability in light of recent economic developments (particularly Chile’s announcement that power shortages could make mining copper difficult), the metal is rising to new highs today. Copper for March delivery was gaining 3 cents (0.7%) to $4.61 a pound on the Comex division. If it continues at these levels, copper could surpass its earlier record close of $4.58 on Friday.

Gold is making small steps forward today; April gold is adding $2.70 (0.2%) an ounce to $1,351 an ounce. Some have attributed Friday’s drop to Mubarek’s announcement that he will step down, although he insists that he will not do so immediately. Politics in the Middle East have effected gold both positively and negatively: as situations improve, gold loses some safe heaven appeal, and as turmoil prevails, gold attracts investors looking for a more stable investment option.

Silver for March delivery is adding 28 cents (0.9%) to about $29.33 an ounce, and platinum is also rising slightly, gaining $3.10 to about $1,848.90 an ounce.

Crude oil prices for March delivery have been dropping today, now down 70 cents (0.8%) to $88.33 a barrel. (Read more). If these levels remain steady, oil’s close will be the lowest since January 27th.

Daily Dish: Precious Metals Rise and Fall, Jobless Claims Register Surprising Drop

Friday, 4 Feb 2011 5:00 AM
Economists were pleasantly surprised to see the U.S. unemployment rate fall to a 21-month low, as January registered a drop to 9.0% (36,000) jobless claims. Many have no explanation for the sudden turn; others suggest outside factors, such as bad weather last month, were a heavy influence. There is no way of knowing for sure, investors agree, until February’s data is released.

This surprisingly encouraging jobless claims data is impacting gold and other precious metals’ performance on Friday. Gold for April delivery has been in and out of negative territory today: its most recent status was down $1.30 (0.1%) to $1,352.20 an ounce on the Comex division of the New York Mercantile Exchange. April gold for yesterday had been up 1.6%.

Copper was in very positive territory today, with March delivery adding 5 cents (1.1%) to $4.60 a pound.

Cyclone Yasi has temporarily closed zinc, nickel, and copper mines in Australia, and Chile has announced a cutback in electricity availability, due to a longer than expected drought. With Australia’s mine closings and Chile’s drop in hydroelectric power have many investors concerned about production issues in the future.

Daily Dish: Gold Futures Fluctuate, Euro Drops on ECB Decision

Thursday, 3 Feb 2011 5:00 AM
Gold futures have dropped significantly and then recovered ground rapidly so far today. Gold for April was last recorded around $10.40, to $1,342.60 an ounce, a gain of 0.8% on earlier levels. Gold’s recovery has the European Central Bank (ECB) to thank, as worries about the euro have encouraged investors to turn towards the yellow metal as a safe-haven investment.

ECB president Jean-Claude Trichet has decided to leave interest rates at a record low of 1%, and made assurances earlier that the euro-zone officials are closely monitoring rising inflation price pressure. Continuing clashes in Egypt have also highlighted gold’s appeal as a hedge against fluctuating markets. Read more on the ECB’s announcement.

Copper continues to perform well: it traded at as high as $10,000 a metric ton in London. U.S. March copper futures were up 2 cents to $4.546 a pound.

Trading in Asia has been quieter, since some markets are closed for the Chinese New Year celebration happening this week.

Daily Dish: Copper Closes at Record High as International Turmoil Continues

Wednesday, 2 Feb 2011 5:00 AM
Copper for March delivery rose to a new record yesterday, up 9 cents, (2%) to end at $4.547 a pound. This price marked the metal’s highest closing level ever on the Comex division of the New York Mercantile Exchange.

Gold lost some ground, with April futures down $6.20 to $1,334.10 an ounce. Some analysts agree that this is a much-needed correction for gold, which most recently spiked at much higher rates than usual. As employers report a higher percentage of added jobs, and political and economic turmoil continues abroad, gold is holding its ground as much as possible.

Spot prices of silver and palladium were going up this morning. In contrast, long-term precious metal prices were dipping slightly. Silver for March delivery was down 8.9 cents to $28.43 an ounce, and March palladium was down $4.85 to about $818.70 an ounce. Platinum was the contrary metal, gaining some momentum and rising 30 cents to $1,833.30 an ounce.

Unrest in Egypt continues to fuel fears of potential oil inflation that would have far-reaching impacts in the future. The clashes there have also aided in the dollar’s small gains today.

Daily Dish: Copper Nears Record High

Tuesday, 1 Feb 2011 5:00 AM
Copper was trading in record-high territory today. March delivery prices were up 5 cents (1.1%), to a total of $4.508 a pound on the Comex Division of the New York Mercantile Exchange. Yesterday’s close for copper was the same as that of January 3: $4.458 a pound. If this level is maintained, it would be copper’s highest ever close. Analysts predict that copper, along with other metals, will continue to rise in price.

Gold was losing some ground today; April futures were dropping $3.90 (0.3%) to $1,330.60 an ounce on the Comex division.

The dollar index was also dropping, with a recorded dip of 0.48% to finish at $77.37. This was a contrast to the euro, which was adding 0.33% to $1.37 against the dollar. This retreat may give gold an edge during the rest of the week.

Daily Dish: Precious Metals To Gain Momentum, Analysts Say

Monday, 31 Jan 2011 5:00 AM
Despite a dip earlier today, analysts expect precious metals to continue in Friday’s direction and advance as the week goes on. Influences include tensions in Egypt and the Middle east, Europe’s economic crises, a desire on the part of investors to store up safe-haven commodities, and the Chinese New Year, which encourages the purchase of physical gold. The Chinese New Year will be on February 3rd, and many Asian markets are preparing to close in observance, starting mid-week.

Crude oil prices are higher so far today, up 75 cents (0.9%) to $90.13 a barrel on the New York Mercantile Exchange.

Attention is still on Egypt this week; although it is not a major player in oil markets, it is close to some key oil exporters, and investors are anxious about the potential for Egypt’s unrest to spread, causing a negative impact on supplies.

Daily Dish: Gold Futures Up, Consumer Sentiment Down

Friday, 28 Jan 2011 5:00 AM
Final readings on consumer sentiment in January saw a drop to 74.2, down from 74.5 in December. Worries about food and fuel top the list, as well as insecurities about other household commodities and economic pressure abroad.

After losing ground during this past week, gold futures have turned higher: gold for February delivery was adding $5.10 to $1,323.50 an ounce on the Comex division of the New York Mercantile Exchange.

In international news, protests continue in Egypt, with thousands of people on the streets, after internet and SMS were shut down early Friday morning. President Mubarek is expected to address the country, as the protests continue into their fourth day (Read more).

Daily Dish: Dollar Index Up, Precious Metals Down

Thursday, 27 Jan 2011 5:00 AM
The dollar index was back into positive territory early this afternoon, by a slim 0.1%. Stocks were trading flat, as a startling 454,000 new applications were filed for jobless benefits. This spike is explained in part by bad winter weather. Unemployment offices in Alabama, Georgia, North Carolina and South Carolina were backlogged, after being open for few hours and processing fewer claims.

Gold for February deliver was up 10 cents to $1,333.10 an ounce on the Comex division of the New York Mercantile Exchange. Spot gold was the surprise this morning, as prices dropped $10.00. Crude oil is also continuing to lose ground today. Crude oil for March delivery was down $1.32 (1.5%) to $86.01 a barrel on the New York Mercantile Exchange.

Daily Dish: Fed Decision Anticipated; Dollar, Gold Down

Wednesday, 26 Jan 2011 5:00 AM
The Federal Open Market Committee (in charge of setting monetary policies) will be releasing a statement later today that many hope will reflect a small improvement in the economy. Expectations are for a FED decision to maintain low interest rates and clarify the terms of the enormous bond-buying program underway.

The statement will have an affect on the comfort level of investors, and metal traders are poised to analyze potential investors’ level of security, as it will determine market strength in the weeks ahead.

Gold for February delivery was down $1.50 (0.1%) to $1,330.70 an ounce. The dollar index was down to 77.874, a drop from Tuesday’s 77.973 in North American trading. Gold is still in high physical demand overseas, particularly as China’s Lunar New Year approaches.

Daily Dish: Stocks Bounce, Commodities Slide

Tuesday, 25 Jan 2011 5:00 AM
The State of the Union address will air tonight, and anticipation is high; President Obama is expected to propose both a federal budget freeze, and a ban on earmarks. The Federal Reserve policy committee is also in the beginning stages of a two-day meeting. The Dow Jones Industrial Average was off 31 points, and public opinion about the state of the economy has been fluctuating throughout January. The Conference Board has seen small signs of encouragement, however, as the consumer confidence index for January gained some ground, from 54.4 to 60.6.

The dollar is up against the euro once again, with the euro trading at $1.3642, down from Monday’s $1.3645. Crude oil prices fell to below $87 (a 7-week low), and gold futures were also dropping this morning.

Daily Dish: Safe-Haven Appeal of Gold Apparent

Monday, 24 Jan 2011 5:00 AM
Investors were uncertain about the state of the economy at the beginning of a new week. Trading got started this morning with gold futures making small gains, as its safe-haven appeal rose. Gold for February delivery was adding $2.40 (0.2%) to $1,323.20 an ounce on the Comex division; futures were up as high as $1,352.50 an ounce earlier in the trading session.

This week, the Reserve Bank of India is expected to raise its key lending rate by up to 25 basis points (up to 6.5%) as it fights to keep its inflation problems under control. Furthermore, the U.S. State of the Union address will fall on Tuesday this year, and investors anticipated trading for precious metals, as well as the U.S. currency’s performance, to be affected by both events.

Though several other metals dropped this morning, including silver, was was down 12 cents (0.5%) to $27.29 an ounce. Copper, on the other hand, followed gold’s upward trend, gaining 3 cents (0.7%) to $4.34 a pound.

Daily Dish: Precious Metals Mixed, Dollar Down

Friday, 21 Jan 2011 5:00 AM
Further signs of economic improvement, slim as they may be, have encouraged investors towards riskier investments, particularly stocks. Gold for February delivery reacted by dropping to about $1,344.30 an ounce (down 0.2%), ending on a downward note compared to mid-week levels.

The dollar index was down 0.7% to 78.26. This drop has encouraged gains in other precious metals. Palladium for March delivery was up $3.40 (0.4%) to $819.25 an ounce, and silver for March delivery was up 5 cents (0.2%) to $27.52 an ounce. Copper also saw gains heading into the weekend, adding 6 cents (1.3%) to $4.33 a pound.

Daily Dish: Jobless Claims Drop, Dollar Recovers Slightly

Thursday, 20 Jan 2011 5:00 AM
Unemployment benefit claims have dropped 37,000, for a current total of 404,000. This latest wave of economic optimism has encouraged the dollar’s recovery: the most recent reading of the dollar index was 79.04, up from Wednesday’s close of 78.549.
This rise in U.S. currency value has pushed metal prices down.

Gold for February delivery was dropping $24.10 (1.8%), to trade around $1,349.90 an ounce on the Comex division of the NY Mercantile Exchange. Silver for March delivery was losing $1.21 to $26.61 an ounce, and palladium futures were down $22.50 to $797.25 an ounce.

Some analysts have pointed out that, despite recent scrutiny of consistent ups and downs in precious metals markets, bullion is not very far below its peak in early December.

More fluctuation in price value of both the dollar and precious metals is expected to continue, as consumer optimism changes with the most recent unemployment claims and housing data.

Daily Dish: U.S. Stocks, Currency Fall; Precious Metals Rise

Wednesday, 19 Jan 2011 5:00 AM
U.S. stocks were losing ground this morning, and housing starts have been reported at their lowest level in over a year. The dollar is down for the second day in a row, to its lowest level since November. It dropped 0.7 percent to $1.3480 per euro this morning.

Gold and other precious metals have gained on the dollar’s drop: gold for February delivery was up $3.30 (0.2%) to $1,371.50 an ounce, and high grade copper was up to as much as $4.47 a pound, after having touched an earlier record. Palladium for March delivery gained $15.55 (1.9%) to $826 an ounce, and April platinum rose $15.50 0.9%) to $1,844.60 an ounce.

Daily Dish: Gold Rises as Dollar, Bank Stocks Fall

Tuesday, 18 Jan 2011 5:00 AM
Gold futures for February were making a rebound this morning, with a gain of $11 (0.8%) to $1,370.80. This is direct contrast to last Friday’s results, when gold futures lost more than $26 an ounce – their weakest closing level in almost 8 weeks.

There are several reasons for this positive turn of events early in the week. Firstly, the Lunar New Year celebration in Asia is approaching. Demand for physical gold is strong during this season, when buying up the precious metal is encouraged. Secondly, U.S. currency value was going down today: the dollar index declined 0.7% to 78.81, losing ground to both the euro and the British pound.

Other precious metals also supported gold’s move: palladium for March delivery was up $15 (2%) to $805.50 an ounce, and copper for March delivery was up 2 cents (0.4%) to $4.43 a pound.

Materials and industrial companies gained ground today, encouraging higher U.S. stock value, while bank stocks declined.

Daily Dish: Gold Largely Unchanged, Chinese Yuan Vies For Global Spot

Monday, 17 Jan 2011 5:00 AM
Gold has not seen any major changes so far today; current prices were last quoted around $1,359.30 an ounce, compared with Friday’s close of $1,360.85. The dollar gained some strength, which influenced gold’s steady but not climbing state.

Silver was down to $28.23 from Friday’s quote of $28.42, and platinum was falling to $1,801.74 an ounce, against Friday’s quote of $1,809.00 an ounce. Palladium was seeing slight gains, rising to $791.72, versus Friday’s close at $791.50.

Investors and analysts are still closely watching the euro zone’s ongoing debt issues, and China’s push to have a bigger presence in the global market is getting U.S. and international attention. Mr. Hu has called attention to China’s efforts to expand the reach and use of the yuan in cross-border investment and trading.

To read more on the yuan’s place in global trading, and Mr. Hu’s predictions for the Chinese economy, see the Wall Street Journal’s recent news coverage.

Daily Dish: Stocks Up, Consumer Sentiment Down, Dollar Lower

Friday, 14 Jan 2011 5:00 AM
According to a recent poll, consumer sentiment has fallen so far in January, down to 72.7 from December’s rating of 74.5. This is contrary to market analysts, who had hoped to see a number around 76.0. Some loss in positivity is due to a more pessimistic outlook on the economy, and other loss comes in the form of gas’s 8.5.% jump in December. Retail sales and business inventories, though gaining some ground, increased by a much smaller amount than investors previous expected.

In a switch from earlier in the week, gold was losing some ground this morning, while stocks were edging up. This is most likely due to the euro’s rebound and improved outlook for 2011. Bond sales were a success for Portugal, Spain, and Italy; and their sales were supported by Chinese, Japanese, and European Central Bank buying efforts. The dollar was also dropping this morning against other currencies, in response to the euro’s small rebound and consumer skepticism. (See Chart of Currency Conversion & Latest Rates)

Daily Dish: Gold Advances on Dollar’s Drop

Thursday, 13 Jan 2011 5:00 AM
Gold futures for February were up this morning, boosted by the dollar’s new one-week low. Gold for February delivery was up $3.10 (0.2%) to $1,388.90 an ounce early this morning. The dollar’s drop is a reaction not only to European debt issues, but also to the disappointing rise in jobless claims in the first week of January. Claims for the week ending January eighth jumped 35,000 to 445,000 – a good dealer higher than initially expected by market analysts.

As reported by MarketWatch, GFMS Metals Consultancy, located in London, predicts a climb for gold this year, with highs reaching $1,600. The agency expects gold’s possible upward climb to be driven by “still-low interest rates, poor returns elsewhere, the elevated level of government debts in Europe, the United States and Japan, and lastly nagging concerns over quantitative easing in the United States and its ramifications for the dollar.”

Some further support for the yellow metal may come from Asia, where jewelry and bar buying could help support gold’s physical market.

Stock futures are up in the U.S., rallying on Portugal’s success with its bond auction earlier this week.

Daily Dish: Auction Boosts Portugal’s Economy, Pressures Gold

Wednesday, 12 Jan 2011 5:00 AM
Portugal’s bond auction was successful today: the country sold 1.25 billion euros ($1.62 billion) in government bonds, offering proof of its continuing ability to access the markets. Investors are still skeptical about its future strength, but the auction’s success remains encouraging. Other good news came in the form of Europe’s possible bailout fund increase.

Gold was down a bit today: February delivery prices were dropping $4.50 (0.3%) to finish at about $1,379.70 an ounce. It was earlier trading at around $1,377.70 an ounce. On the opposite side, silver for March delivery was adding 2 cents (0.1%) to finish around $29.53 an ounce, and copper for March delivery was up 7 cents (1.6%) to $4.42 a pound.

The dollar index was lower today, down 0.6% to 80.40.

Read more: Debt: Portugal Sells Bonds at Top of Range, 10-Year Fields Fall

Daily Dish: Portugal Making Efforts to Improve, Gold Continues to Gain Ground

Tuesday, 11 Jan 2011 5:00 AM
U.S. stocks gained ground today on news that Japan will follow China in buying bonds issued by Europe’s financial-aid fund. Portugal is still under pressure as Wednesday approaches; it will be holding a government bond auction, and analysts and consumers are eager to see the outcome. Portugal has denied potential for a European Union bailout, though fears for its fiscal security continue to drive gold up. Read more on Portugal’s decision and upcoming bond auction.

Physical demand for gold has increased in anticipation of the Lunar New Year celebrations that will take place in Asia during the month of February. Gold for February delivery was adding $3.80 (0.3%), for a total of roughly $1,377.80 an ounce on the Comex division. In earlier trading, it performed even higher, at $1,386.80 an ounce.

Other precious metals were also up, with silver for March delivery adding 56 cents (2%) to $29.41 an ounce. March copper was gaining 6 cents (1.3%), to a total of about $4.32 a pound.

Crude-oil futures gained $1.96 to $91.22 a barrel on the New York Mercantile Exchange, and the dollar index was holding steady at 80.838.

Daily Dish: Gold Performing Higher At Start of New Week

Monday, 10 Jan 2011 5:00 AM
Gold was holding at about $1,370 this morning, bolstered by worries about Portugal’s sovereign debt. Anxious buyers were more inclined to offset these international concerns by buying up gold as a safe haven. Spot gold was last bidding around $1,372 an ounce (up from $1,360.80 an ounce late Friday). U.S. Gold for February delivery was last bid around $1,370 an ounce. Though a strengthening dollar usually competes against gold, crises in the euro zone have helped to aid both the dollar and gold. The euro was last quoted down 0.1% against the dollar.

Spot silver was up this morning, last quoted at about $28.77 an ounce, compared with last week’s $28.69 close. Platinum also saw gains this morning, last quoted at about $1,735.99 an ounce, compared with its former closing price of $1,731 an ounce. Palladium was going up to about $749.47, bettering last week’s quote of $748.50 an ounce.

Some investors speculate that this year will be largely influenced by Chinese buying, particularly in the retail market. There is also speculation that the economy is picking up globally, particularly in emerging economies like China, India, and Brazil.

Daily Dish: Gold, Hiring Stats Still Low, But Investors Remain Optimistic

Friday, 7 Jan 2011 5:00 AM
Gold for February delivery was down another $5.20 this morning, a drop of about 0.4%, to settle at $1,366.40 an ounce on the Comex division of the New York Mercantile Exchange. The drop is a reflection of both further optimism about the economy, and the dollar’s slight gain.

Several other metals also dipped lower today: silver for March delivery was down 0.7%, or 19 cents, to $28.93 an ounce, and copper for February delivery was down 0.6%, or 2 cents, to $4.30 a pound.

Despite gold’s less than positive performance in the last week, investors are still optimistic about its future sales in 2011. The metal remains very strong in Asia, where many consumers pay high prices for gold bars. The Chinese New Year, which takes place in early February, is also expected to strengthen gold’s sales.

Many people have expressed disappointment in the low number of jobs added, and the economy’s slow recovery is partly explained by this lack of hiring. During the heigh of the recession, over 8 million Americans lost their jobs, and this has triggered the longest period of extended unemployment since WWII. Yet despite being lower than expected, the total jobs added in December 2010 still reached about 103,000, pushing the nation’s unemployment rate down 9.4%. The number of people officially classified as unemployed fell from 15 million to 14.5 million last month, and some point to this drop as an indication of the economy’s recovery, even if it is a sluggish and painstaking process.

Daily Dish: Unemployment Reports Cause Fresh Concerns and Affect Precious Metal Market

Thursday, 6 Jan 2011 5:00 AM
Gold was continuing to drop this morning: February delivery declined by $3.80 (0.3%) to $1,370.20 an ounce on the Comex division. The leading cause for the sudden drop came from the Labor Department’s release of unemployment stats: 409,000 people have applied for unemployment benefits. This number is up from the much lower 388,000 jobless claims filed the previous week, when applications had fallen to their lowest levels in over two years. This report comes just ahead of tomorrow’s monthly unemployment claims report.

Palladium for March delivery was falling $11.20 (1.5%) to $764.05 an ounce, and copper for March delivery fell 8 cents (1.8%) to $4.33 a pound. Silver was the outlier, gaining 7 cents to $29.27 an ounce.

Barclays Capital released its predictions for gold’s performance in the upcoming year: they anticipate an average $1,495 an ounce for trading, with a possible high of about $1,620 an ounce.

As reported by Marketwatch this morning, precious metals anayst Suki Cooper predicts an upturn for gold: “We expect investment demand to propel gold prices to fresh record highs this year, while its fundamentals are unlikely to drag prices lower. Physical demand for gold has softened but remains healthy for the time of year.” For now, gold has settled at a three week low, strongly affected by the week’s U.S. economic woes.

Daily Dish: Gold Still Down, Impressions Mixed

Wednesday, 5 Jan 2011 5:00 AM
Gold is still trying to recover from an unexpected drop early this week; prices today were down another $5.70, to $1,373.10 an ounce on the Comex division. This surprising drop is attributed in large part to better-than-expected economic news; as investors are more positive, they tend to invest in riskier areas – one of the biggest draws now is stocks. Another influence is money managers and hedge funds locking in 2010 gains as a new year begins.

Despite this setback, many analysts foresee an upward trend in gold’s future; the question of how to buy gold is on persistent buyers’ minds, and investors are hoping for a rise in physical buying of the precious metal coming up. Global inflation could help gold’s chances, as well as global economic turbulence. Some experts believe that China’s decision to allow the yuan to rise 5% against the dollar would mean a weaker US currency, and that would in turn lend strength to gold, while others believe China’s price hike will have a neutral affect. Consumers and investors alike are undecided about gold’s performance in 2011, though many believe a recovery to some degree is forthcoming.

Silver was losing 42 cents to $29.08 this morning, and the dollar index was up 1% to $80.22 against the euro, which was losing 1.12% to $1.31 against the US currency. Stocks continue to go up.

Daily Dish: Precious Metals Drop, Oil Gains on Positive Economic News

Tuesday, 4 Jan 2011 5:00 AM
Gold price was down $17.25 this morning, to $1,397.55 per ounce. Silver also dropped 1.6%, to $30.20 an ounce.Copper, on the other hand, continues to rise, and oil is at about $92.58 a barrel (its highest price since 2008). Economic data, more positive than previously expected, helped spur buyers towards riskier investments, explaining gold’s slight decline.

Unemployment benefit claims dropped to a seasonally adjusted 388,000 (their lowest level since July 2008), a drop of 34,000 claims. Officials caution, however, that this dip in claims may be influenced by Christmas week, which complicates how claims are counted, and jobless claims may increase again heading into the new year. A report by the Labor Department is due to be released on Friday that will detail the number of jobs added, as well as the overall unemployment rate, in December. (Read more on jobless claims)

Despite some downturn in response to recent economic data, some note that gold is extremely resilient, sighting as an example its ability to hold within 1.3% of its all-time record high on Monday. Many investors and analysts are affirming that gold and other precious metals will continue to be a solid investment this year, despite the economic ups and downs that 2011 will undoubtedly bring.

Daily Dish: Gold, Platinum, Silver, and Palladium Finish Year Strong

Monday, 3 Jan 2011 5:00 AM
Gold, platinum, silver and palladium all finished out 2010 on a high note. Gold futures for February settled at a record $1,421.40 an ounce, an annual gain for an astonishing 10th year in a row. 2010 saw an increase of 29.7% over 2009, when it settled at $1,096.20.

Silver futures for March were nearly $31 an ounce, marking the occasion of its 30th high year-end finish. The 83.7% annual gain over 2009′s $16.845 put prices at $30.937 an ounce. Analysts note that silver was the second best performing metal in 2010.

Palladium this year earned the title of best performing precious metal of 2010. Its futures for March closed at $803.50 an ounce, with earlier prices seen at $804.90 an ounce. This was an increase of 96.5% over its 2009 closing price of $408.85.

Platinum did not jump ahead as much as its other precious metal counterparts, but still saw gains: futures for April were at $1,778.20 an ounce. This was an annual gain of 20.9% over 2009′s close at $1,471.00.

Tom Pawlicki, precious metals analyst at MF Global in Chicago, predicted “firm trading over the next quarter or two” for gold, as he was quoted in a Reuters interview. The overall impression given by analysts for the new year is positive so far.

Read more about year-end precious metal gains.

Read more about Pawlicki’s interview with Reuters.

Daily Dish: 2011 American Gold Eagle Release Date Set for Coming Week

Friday, 31 Dec 2010 5:00 AM
Today: A special update for all our numismatic collectors and precious metal portfolio investors: 2011 American Gold Eagle bullion coins will go on sale this coming week.

Happy New Year! -the Gainesville Coins Inc. Team

–

Article originally published on the Gold and Silver blog: “2011 American Gold Eagle Release Date” on December 29, 2010

The United States Mint will begin accepting orders from authorized purchasers for 2011 Gold Eagle bullion coins on January 3, 2011. This will coincide with the start of sales for the 2011-dated Silver Eagles.

Initially, the US Mint will only offer the one ounce version of the 2011 Gold Eagle. Each year since 1986, fractional weight coins have also been offered to accommodate different investment levels and provide greater flexibility. Other sizes include one-half ounce, one-quarter ounce, and one-tenth ounce coins. For the past two years, the Mint has released the one ounce coins first, with the fractional versions offered later in the year.

American Gold Eagles feature Augustus Saint Gaudens’ design used for the $20 double eagle, minted from 1907 to 1933, on the obverse. This is paired with an image depicting a family of eagles on the reverse, designed by Miley Busiek. The composition of the Gold Eagle is 22 karat, or 91.67% purity. Each coin contains its stated weight in pure gold.

As with other bullion coins, the US Mint utilizes a network of authorized purchasers to distribute Gold Eagles to the public. There are six primary distributors who may purchase gold bullion directly from the Mint. The price paid is determined based on the London PM Gold Fix on the date following the order date, plus a premium of 3% (for one ounce coins). The minimum order quantity is 1,000 ounces.

The US Mint will continue to sell 2010 Gold Eagles to authorized purchasers as long as inventories remain. Any 2010-dated coins remaining on January 3, 2011 will be sold on a ratio basis to authorized purchasers who order 2011-dated coins.

Daily Dish: Gold Lower Today

Thursday, 30 Dec 2010 5:00 AM
Gold gave up some of yesterday’s gains earlier today, falling $9.50 to $1,404.00 an ounce, as the dollar gained some ground against the yen. Despite this dip, gold is only 1.5% below its record highs. Gold’s price has risen by almost 30% over the course of 2010; this year marks its strongest yearly performance since 2007, when there was a 31 cent rise.

Silver has seen a rise in popularity this year, hitting a record high of $1,430.95 in early December.

Palladium has nearly doubled in gains over the course of 2010, to nearly $800 an ounce. It is this year’s top performing commodity. Platinum saw brief grains, but was falling to $1,748.24 an ounce, a loss of 0.5%.

Copper has also seen new highs; March delivery added 4 cents (0.9%) to $4.35 a pound, outdoing its earlier record on Tuesday.

Daily Dish: Gold Still Going Up

Wednesday, 29 Dec 2010 5:00 AM
Gold was nearing two-week highs this morning, and Palladium was up to a new nine-year record high. Gains were attributed in part to renewed concerns about the U.S. economy, and a weakened dollar.

U.S. gold futures for February were last quoted at about $1,411 an ounce, and the bidding value for spot gold was last recorded at about $1,410 an ounce. Gold is thought to be on course to reach a nearly 30% gain this year, as investors gravitate towards the precious metal’s stability against a volatile economy.

Spot silver was also up today, at a three-week high of $30.64 an ounce (up 1%). Platinum was down 0.4% to $1,745.49, though it is still holding nearly a seven-week high. Crude oil is leveling off to just above $91 a barrel.

Daily Dish: United States Mint Announces Release Dates for 2011 Sets

Tuesday, 28 Dec 2010 5:00 AM
Release dates for the 2011 Proof Set, 2011 Mint Set, and 2011 Silver Proof Set will be in January and February, according to a recent announcement by the U.S. Mint. The release dates are particularly early this year because of high demand by collectors and investors, and in order to give people who are gift-shopping the opportunity to stock up early. Last year’s proof sets were released in July and August.

The 2011 Proof Set is comprised of 14 unique coins struck at the San Francisco Mint. The set will be released on January 11, 2011. The 2011 Silver Proof Set contains 90% silver versions of the proof dime, quarters, and half dollar, as well as other coins in standard compositions, and is set to be released January 25, 2011. The 2011 Mint Set contains 28 coins struck at the Philadelphia and Denver Mints, and features a brilliant, rather than satin, finish. The collection will be released on February 8, 2011.

Despite the pending release of the 2011 sets, the U.S. Mint has confirmed that sale of the 2010 Proof Set, 2010 Mint Set, and 2010 Silver Proof Set will continue to be available until the end of 2011.

Further Reading:

Mint News Blog

Coin Update News

Daily Dish: China Raises Interest Rates, Gold and Copper Gain Against Weaker Dollar

Monday, 27 Dec 2010 5:00 AM
For the second time in less than three months, Chinese authorities have raised lending and deposit rates at the central bank in an effort to keep property prices, bank lending, and inflation under control. The move has many Chinese citizens worried that this latest effort will not be effective enough to curb soaring inflation, which has risen sharply over the last 6 months. The one-year lending rate now sits at 5.81% (read more).

Gold has made headway against a weakened dollar: the dollar index on Thursday was 80.487, compared with today’s index of 80.345. Gold for February delivery was up $150 to $1,382 an ounce. Copper has also risen: March delivery rates were up to as much as $4.2985 a pound earlier today, and most recently traded at $4.27 a pound (a gain of one penny).

Crude oil futures have also retreated somewhat since last week; previously, oil futures were up to their highest rate since 2008. Today prices for February have dropped to $91.03, a decrease from last week’s price of about $92 a barrel.

Holiday buying has thinned out trading in Asia and Europe; U.S. markets were closed on Friday, and London markets will remain closed through Tuesday.

Daily Dish: Dollar Gains Strength, Gold Declines, Consumer Spending Up

Thursday, 23 Dec 2010 5:00 AM
Despite gains earlier in the week, gold has slipped by about one percentage point this morning. The euro is still playing second fiddle to the dollar, which has held steady today. U.S. gold futures were sliding about 0.61%, down to $1,380 an ounce, while spot gold prices were down 0.5% to $1,379. Although gold is experiencing dips, it is still on its way to its 1st weekly gain in the last 3 weeks.

Some analysts believe that, as the clash between the euro and the dollar calms a little towards the end of the year, gold will remain steady, and that gold and other precious metals could gain a lot of ground in the coming year. Further reading: “Gold’s Prospects Rosy in 2011“

Reports showed consumer spending in November was up for the 5th month in a row. Sales of new single-family homes were gaining ground, rising 5.5% in November. The housing market, while still weak, is showing signs of stability.

Daily Dish: Gold Declines, Oil and Copper Rise

Wednesday, 22 Dec 2010 5:00 AM
Gold has fluctuated between gains and losses this week: the dollar’s weakening state has caused small gains, while investors’ tendency to buy up rallying metals towards the year’s end has caused losses. Gold for February delivery has been cited as far down as 80 cents, to $1,388 an ounce on the Comex division of the NY Mercantile Exchange (Tuesday’s close considered this a gain, compared to numbers earlier in the week). However, gold has also seen gains as high as $1,391.70 an ounce.

With the U.S.’s revision of third-quarter growth numbers to reflect a slightly more positive outlook, gold has again made small gains, further assisted by European debt crises.

Copper has been seeing a turnaround: Tuesday night’s close for March delivery was up 7 cents (1.7%), to $4.276 a pound. (Read more from Goldman Sachs about why copper reached record highs yesterday) Silver for March delivery was also higher, closing at a gain of 4 cents (0.1%), to $29.39 an ounce. Palladium saw gains of $8.3 (1.1%) to $753.05 an ounce, and platinum for January delivery was up $11.20 (0/7%) to $1,721.90 an ounce.

In other markets, U.S. stocks have risen to a new 2-year high, and oil has passed the $90 mark: prices were last quoted at $90.3.

Daily Dish: E.U. Concerns and Tensions in Asia Raise Gold Futures Sale Value

Tuesday, 21 Dec 2010 5:00 AM
The U.S. dollar index was down slightly today, and worries about the European Union’s debt crises caused higher demand for gold. February Comex gold was trading at $1,386.90, an increase of 80 cents, and spot gold was trading at $1,386.00, an increase of 10 cents. U.S. stocks also opened slightly higher this morning, as Chinese Vice Premier Wan Qishan voiced support on behalf of his people for the European officials’ efforts to stabilize global markets that have been effected by the euro zone’s debt crisis.

Silver for March delivery was down to $29.32 this morning, a drop of 3.5 cents. Crude oil prices were up slightly this afternoon, approaching $90 a barrel, while the U.S. dollar index dropped $0.3.

As reported by the New York Times, Moody’s Investor Service warned this morning that it is considering downgrading Portugal’s A1 rating by one to two notches, pending an analysis that may take up to 3 months. Markets worry that Portugal may be the next to take a bailout, despite Moody’s confidence that it will be able to meet all of its debt problems head-on and handle them without requiring outside help. The euro dropped slightly

As reported by Business Week, Europe’s financial aid funds will begin selling bonds to raise money. The total may be as high as 34.1 billion euros ($45 billion) for Ireland in 2011, and 14.9 billion euros in 2012, according to the European Commission.

Daily Dish: Gold Prices Up to Compete with U.S. Dollar

Monday, 20 Dec 2010 5:00 AM
Gold prices were rising this morning as investors bought the precious metal against fluctuating currencies and global tensions. Gold for February delivery was adding $4.20 to $1,383.40 an ounce. The U.S. dollar index was gaining 0.25% to $80.57, and the euro was losing ground, down to 0.58%, to finish at $1.31 against the dollar. Spot gold prices were up 13.01, to $1,388.09.

South Korea was continuing its military exercises off the coast of Yeonpyeong, even though North Korea has threatened retaliation. South Korean civilians have been advised to seek shelter, and investors concerned about the conflict are buying up gold as a precaution. Further buying increase comes from worries about Europe’s debt situation, particularly in Ireland and Spain.

Silver prices were rising this morning, adding 8 cents to $29.22. Copper was also up, adding 5 cents to $4.21.

Daily Dish: Gold Fluctuating as Dollar Holds Its Own

Friday, 17 Dec 2010 5:00 AM
Gold futures fluctuated between minor gains and losses earlier today: gold for February delivery was last down about 60 cents on the Comex division, to $1,370.40 an ounce.

The dollar is making headway against the euro, bringing down gold sales slightly as investors are calmed by the U.S. currency’s gain today. Despite this slight dip, however, India and the Far East have been taking advantage of falling prices to buy up some of the precious metals in the last two days.

Silver for March delivery was up today, adding 10 cents to $28.89 an ounce. This is a gain of 0.9% this week, and a gain of 71% this year.

Tensions remain high, as analysts voice their skepticism over the European Union’s ability to capably handle future debt crises.

Daily Dish: Stocks Up, Jobless Claims Steady

Thursday, 16 Dec 2010 5:00 AM
Stocks were up a bit this morning, as FedEx announced a raised full-year forecast and optimism for economy. The Dow rose 33 points (0.3%) to 11491. Bank of America added 2.2%, following updates on its latest discussions with its largest mortgage investors.

Initial jobless claims for unemployment benefits were lower than expected, yet no significant gains have been made for those searching to be hired. A growing percentage of the U.S. public is more optimistic about the economy’s recovery, despite continued unemployment or European debt crises.

As reported by MarketWatch, the dollar continues to perform better against the euro and the yen. Crude oil prices and gold futures fell behind earlier today.

Daily Dish: Gold Dips, Dollar Gains

Wednesday, 15 Dec 2010 5:00 AM
U..S. data today showed that inflation has not gone up by as much as expected, and as manufacturing growth continues to strengthen, the dollar was passing precious metals in value. Consumers are encouraged by the possibility that economy may be on the mend, and the dollar was also gaining some ground against the euro and yen. A recent report showed consumer prices up 0.1% in November.

Gold for February delivery was falling $16.90 (1.2%), to $1,387.40 an ounce on the Comex division, and those expecting the Fed to announce more bond purchases were disappointed. This decision caused the demand for gold to drop today.

Investors and market experts see another possible high for gold in the future, however, as a variety of economic and global issues continue to put pressure both on precious metals and U.S. currency.

Daily Dish: China Decides to Delay Interest Hike; Gold and Dollar Markets Still Unsteady

Tuesday, 14 Dec 2010 5:00 AM
Gold was down slightly this morning, as retail sales went up. Global inflation continues to cause anxiety globally. China’s demand for oil is at a record high of 93 million barrels per day in November, and is slightly below $90 billion barrels so far today.

At last night’s close, gold for February delivery was up $13.10 to $1398.00. Gold continues to be a top draw for investors trying to hedge their bets against rising inflation. Gold was further buoyed by china’s decision not to hike interest rates – a possibility many people expected to see become reality over the weekend.

Further complicating investor strategies is today’s outcome of a meeting of the Fed policy makers, who are still discussing their options concerning the bond buying program. As the dollar fluctuates and investors worry that such a monetary policy could lead to a weakening purchasing power, gold is strengthened in response.

Daily Dish: High Inflation Still Troubling China; U.S. Dollar Slipping

Monday, 13 Dec 2010 5:00 AM
U.S. stocks and commodities rose on Monday, encouraged by the possibility of global financial improvement. As investors bought up more risky assets in response to strong Chinese economic results, the dollar’s demand fell. The dollar index fell from 80.067 to 79.442 late Friday.

Gold futures for February delivery were up this morning, as Chinese officials announced that they will not raise interest rates. Price per ounce jumped 0.7% ($10.20) to $1,395.10.

Silver for March delivery also benefited, rising 88 cents (3.1%) to $29.49 an ounce. Palladium and platinum enjoyed similar gains. Palladium for March delivery rose 3.3% ($23.90) to $756.60 an ounce, and platinum for January delivery rose 1.4% ($23.10) to $1,698.40 an ounce.

Daily Dish: China Prepares to Invest in Foreign Exchange-Traded Funds Backed By Gold

Friday, 10 Dec 2010 5:00 AM
China has decided to begin investing in foreign exchange-traded funds (ETFs) which will be backed by gold. The pioneer company is the Lion Fund Management Company, (founded 2003) based in Shenzhen, China. The company was granted permission to launch a gold fund that will allow them to invest clients’ money outside of China (with some limitations). The company has announced that a startling 80% of its assets will be in gold ETFs, and they expect 3.3 billion yuan to result from the plan. The yields will be converted to hard currency, which they then plan to invest in gold.

Many Chinese investors are expected to get involved in the new venture, since gold consumption is already high in China, and a popular investment there. Furthermore, it will give investors more choices, since the gold fun allows for the buying of more than just gold bars, jewelry, or investing through an exchange. Now, there will be more flexible possibilities because of the gold fund’s launch. A silver ETF is rumored to be in the works, though there has been no confirmation to date.

Daily Dish: Gold Regaining Upper Hand, Job Market Slightly Better

Thursday, 9 Dec 2010 5:00 AM
Weekly jobless claims have fallen to lower levels than initially expected, and 10-year treasury yields have risen a quarter point. The U.S. government’s further effort to stimulate long-term economic growth, as well as its decision to extend tax cuts, has encouraged some buyers to invest in hard assets, while at the same boosting the dollar a little more today. Despite its slight upturn today, gold is set for its largest weekly fall since October, following record highs on Tuesday.

Thursday’s stabilization in precious metal is due largely to physical acquisition from Asia, particularly India, though gold is still lower than it has been in the past. Silver has also dropped in price today, despite more public optimism about the state of the U.S. economy this week.

Daily Dish: Special John Lennon Commemorative Coin Produced By U.K. Mint

Wednesday, 8 Dec 2010 5:00 AM
On the thirtieth anniversary of the shooting of John Lennon, the Royal Mint has struck the John Lennon Commemorative Coin; the latest coin added to the “Great Britons” series, which honors famous British citizens of the past. Included in the series are such famous names as Sir Winston Churchill, Charles Darwin, and William Shakespeare.

Making the John Lennon coin’s inclusion particularly noteworthy is the fact that it was voted into existence by the public: for the first time, the Royal Mint solicited votes from its people, asking who they thought the next coin should honor, and John Lennon was chosen. There were over 30,000 total votes cast.

The coin was cast in three different varieties; the special edition sterling silver proof was capped at 5,000 and sold out within a week. But those who weren’t able to purchase one of the silver coins were given a second chance with the creation of a cupro-nickel proof coin for 24.99 pounds. Today is the last day that these coins can be ordered.

The final coin, still yet to be seen, will be a single 24-karat gold version of the coin. This special creation will be presented to the John Lennon Estate.

Read more about the John Lennon commemorative coin at coinnews.net.

Daily Dish: Gold Prices Even Out, Silver Still Climbing

Tuesday, 7 Dec 2010 5:00 AM
Precious metals continue to perform well, as investors seek stability in an increasingly volatile currency market. Gold has leveled off below Monday’s record high, at just under $1,410 an ounce, and spot gold fell to $1,416 an ounce. Despite this slight dip, investors agree that the metal is on firm footing, as other markets fluctuate and investors continue to buy up commodities towards the end of the year. Silver, on the other hand, has reached a 30-year high, closing last night at about $30 an ounce.

During Sunday’s interview with 60 Minutes, Federal Reserve Chairman Ben Bernanke announced the possibility of expanding the current economic stimulus package, which could mean the printing of even more U.S. currency. These remarks, in addition to already heightened worries about Europe’s bailout and China’s inflation dilemmas, have caused buyers to invest more in precious metals, ahead of a weakening dollar.

In world news, China’s gold imports have surged five fold, and Beijing is in position to surpass India as the largest consumer of gold.

Further reading: Silver Prices Soar Amid Inflation Concerns [Daily Finance]

Daily Dish: Gold and Other Precious Metals Still Gaining Ground

Monday, 6 Dec 2010 5:00 AM
As noted by the Wall Street Journal this morning, precious metals continue to be the main beneficiaries of the conflict abroad. As Europe’s debt crisis continues to dominate the world financial and economic stage, gold is trading at record highs. Price for February delivery rose $10.80 (0.8%) on Monday, to settle at $1,417 an ounce on the Comex division. Its earlier price had risen to $1,420 an ounce.

Silver also saw gains: March delivery added $0.50 (1.7%) to $29.77 an ounce. Despite the dollar’s slightly stronger value on Monday, precious metals are still selling high. Last week’s high value for gold settled at $1,406.20, a gain of nearly $17 (3.2%).

U.S. eyes are also on the FED, as it considers the possibility of further contributions to the current $600 billion asset purchases it has committed to so far.

Daily Dish: U.S. Gold Prices Down, China’s Gold Market Advancing Rapidly

Friday, 3 Dec 2010 5:00 AM
In a change from the last three days, gold prices fell slightly on Thursday, closing at $1,386.25 an ounce. Silver rose slightly (0.5%) and closed at $28.60 an ounce. The euro has also gained ground some ground, increasing slightly against the dollar.

China is drawing attention this week, as reports of its advancing gold market are examined more closely. As reported by the Shanghai Gold Exchange, during the first 10 months of this year, China’s gold imports grew to nearly 210 tons. This is an increase from 45 tons in all of 2009, as investors have been demanding more gold in the past year.

According to Morgan Gold, China’s demand for gold bullion is anticipated to overtake India’s by 2010, if not before. Proof of this growth is found with private Chinese consumers, who bought as much gold bullion in the last 2.5 years as the People’s Bank of China currently owns. Furthermore, gold accounts for 1.6% of the reserves now held by the People’s Bank of China, according to the World Gold Council.

Daily Dish: Gold Still Up, Reports Anticipated Today, Tomorrow

Thursday, 2 Dec 2010 5:00 AM
Comex gold futures prices were again trading positively this morning, as the U.S. dollar value remains weak. February delivery Comex gold was trading at $1,390.10 per ounce, up $1.80, and spot gold was trading at $1,389.00 per ounce, up $2.10. Investors continue to buy up the yellow metal as anxieties about foreign politics, and the drop in U.S. dollar value, make gold a logical choice.

U.S. economic data is set to be released today, and pertains to weekly jobless claims reports, foreign bank holdings of U.S. debt, and even upcoming home sales. Also anticipated is Friday’s U.S. unemployment report. Many officials remain optimistic in advance of seeing the numbers, expecting the reports to show growth in the jobs sector and added strength in the economy.

Daily Dish: Gold Continues to Rise

Wednesday, 1 Dec 2010 5:00 AM
The U.S. has announced its intention to assist in the rescue of Europe’s economy, using funds from the International Monetary Fund. The outcome of this news was a further drop in the dollar value, and a further gain for gold and oil.

Gold for February delivery was up $5.80 (0.4%), to settle at $1391.90 an ounce. 100 ounce gold traded higher on the Comex today, up 0.29% to $1,390. This is a $4.00 gain from yesterday’s close of $1,386.

Daily Dish: Gold Gains Momentum, Copper & Silver Follow Suit

Tuesday, 30 Nov 2010 5:00 AM
Gold futures rose today, as investors continue to worry about the ongoing debt crisis in Europe. According to the Wall Street Journal, gold for February delivery was up 18.10, or 1.3%, to $1,385.50 an ounce on the Comex division of the New York Mercantile Exchange, and is on track to gain about 2.1% in November.

Further news about China revealed that its government has approved a gold fund for investment overseas, which has encouraged higher silver and copper sales.

As Europeans nervous about their own currency invest in gold, far east investors do likewise, driven by their own unease about the worsening situation between North and South Korea. Gold traded at $1.30 per euro today, while U.S. stocks traded slightly lower, also due to concerns abroad.

Daily Dish: Euro Falls, Metal Market Prices Unstable As Trade Resumes Today

Monday, 29 Nov 2010 5:00 AM
Amidst worries over Ireland’s bailout, the growing financial strain on Portugal, Spain, and Greece, and tensions between North and South Korea, trading resumed uncertainly this morning. The euro experienced another drop in value over the weekend, which in turn boosted the U.S. dollar’s value. Gold prices fell to $1.90 this morning, for a quoted $1,362.30 per ounce. In contrast, silver began the trading session with a slight gain, showing an 11 cent increase and leveling out temporarily at $26.81. Palladium also gained momentum, rising $3.00 to $682.00, and Rhodium remained constant at about $2,280 per ounce. Platinum changed course and dropped $7.00 to $1,639.00.

Black Friday’s results will also impact the upcoming financial changes in the economy, but it remains to be seen exactly how much the 70% turnout of American shoppers will shape sales for the end of this year. As reported by the New York Times, the National Retail Federation estimated that 212 million people shopped, which was a gain from last year’s 195 million.

Traders, investors, and officials will also be scrutinizing upcoming reports on car sales, housing prices, job market stats, and other economic and social surveys in the weeks to come.

Daily Dish: Proof Silver Eagles Disappear; Mint Apologetic

Wednesday, 24 Nov 2010 5:00 AM
The U.S. Mint today is continuing its efforts to reach over 2700 customers whose coin orders have been deleted. All lost transactions were placed online, and the Mint has assured customers who placed phone orders that their transactions have not been lost. According to the most recent analysis of the situation, it appears that most, if not all, of these faulty transactions occurred in the space of about one hour, between 2pm and 3pm this past Friday.

The Mint experienced extremely heavy traffic Friday afternoon, as thousands of customers vied for a spot on the order list before the limit was reached. Out of the 2,700 orders, about 2,200 orders were specifically for the 2010 Proof Silver Eagle.

A note on the U.S. Mint’s website explaining the mishap assures customers that any order placed after 7:30pm should not be affected. This situation only causes further embarrassment for the Mint, as the week before saw them assuring buyers that an email indicating their 2010 Proof Silver Eagle orders had been canceled was in fact erroneous.

The Mint is now offering free next-day shipping to all customers whose orders have been lost, and is accepting re-orders over the phone.

Daily Dish: Futures for Oil, Gold Fluctuate, Thanks In Part To Korean Controversy

Tuesday, 23 Nov 2010 5:00 AM
Economic investors influenced both gold and oil futures on Tuesday. Crude oil for January delivery dropped by 0.9% (75 cents), to finish at $81.02 a barrel.

Gold, on the other hand, gained momentum, adding 0.6% ($8.80) to December delivery. This leveled the price out to $1.368.60 an ounce on the Comex.

Tuesday’s drop in oil futures and spike in gold futures was thought to be the result of investors’ anxiety about the global economy, particularly as it pertains to North and South Korea. This morning, it was confirmed that North Korea had fired over 200 rounds of artillery at a South Korean island near the countries’ disputed western sea border.

Daily Dish: Ireland’s Bailout Decision Causes Push for Early Elections, Confusion in Gold Prices

Monday, 22 Nov 2010 5:00 AM
After a lengthy debate, Ireland agreed late Sunday to accept a bailout package worth over $100 billion. European Union officials are offering assistance to Ireland for the second time in just six months, and this deal is worth an estimated 80 to 90 billion euros (adding up to between $109 and $123 billion).

On a positive note, Ireland’s bailout will enable it to operate its banks and conduct other financial business without being forced to borrow money at exorbitant rates. On a less than positive note, however, a major ratings agency cautioned that this decision could lead to a “credit negative” for the country, and Ireland’s citizens are now calling for early elections.

Since the US learned of Ireland’s bail-out decision yesterday, gold and other precious metals have been wavering between highs and lows, and prices continue to fluctuate. So far, gold has traded as low as $1,350.90 an ounce and as high as $1,364.80 an ounce.

Daily Dish: China Changes Reserve Requirements, Gold Drops

Friday, 19 Nov 2010 5:00 AM
The U.S. precious metal market experienced some changes Friday, with gold and silver losing ground and palladium seeing slight gains. American stocks and oil also dipped in response to international crises in China and Europe. China is fighting a battle against rising inflation, and on Friday announced plans to have its banks put up 0.5% more in reserve requirements. China’s decision could have negative consequences; along with India, it is a top consumer of gold, and raising borrowing costs could discourage many people from acquiring more of the precious metal.

Silver for December delivery was down 24 cents to $26.59 an ounce. Copper for December dropped just a penny to round out at $3.82 a pound. Palladium was the wild card, adding $2.75 (0.4%), to finish at $698.25 an ounce. This jump might be due to concerns that Russia is running out of its palladium supplies, though Russia has released no official report affirming or denying such speculation.

Read more on the bailout proceedings in Ireland

Read more on China’s reserve requirement decision

Daily Dish: Gold, Other Metals Make Small Gains

Thursday, 18 Nov 2010 5:00 AM
As reported earlier this morning, gold futures gained Thursday, as the dollar showed renewed signs of weakness. In contrast to gold’s three-week low at Wednesday’s close, Gold for December delivery rose 0.9%, or $12.50, settling at $1,349.20 an ounce on the Comex division.

Other noteworthy metals showing slight improvement were December silver (gaining 87 cents, or 3.4%, to $26.39 an ounce) and December copper (gaining 7 cents, or 1.8%, to trade at $3.79 a pound).

According to the GFMS, global investment in silver is set to reach a record of $4 billion this year.

Daily Dish: Value of Gold, US Currency Fluctuates Amidst International Turmoil

Wednesday, 17 Nov 2010 5:00 AM
The U.S. dollar traded overnight at nearly a 2-month high, due in large part to worries about China’s future actions to thwart high inflation. After gold’s recent drop, bargain hunters are testing the waters cautiously, slightly bolstering sales of the metal on Wednesday. Gold for December delivery was off 70 cents (0.1%) to settle at $1,337.70 per ounce. Spot gold was a little higher, at $1,342 an ounce (a gain of $3.30). Silver gained 1%, with December delivery prices adding 29 cents (1.1%), to settle at $25.52 an ounce.

Despite higher trading overnight, the euro gained ground over the dollar on Wednesday, amidst continued worries about Ireland’s impending bailout. Buyers hope that Ireland’s problems will be prevented from affecting other European economies such as Greece, Spain, and Portugal, who would have to borrow at higher costs, further exacerbating issues within their own struggling economies. So far no agreement has been reached between Ireland and euro-zone finance ministers.

Daily Dish: Precious Metal Prices Still Floundering

Tuesday, 16 Nov 2010 5:00 AM
Apprehension about China’s tactics to combat inflation, and the euro’s weakened state, led to further drops in precious metals today. Gold reached a two-week low, closing at under $1,350.00 per ounce yesterday, and struggling to maintain that level today. Platinum fell $14 to $1,675, palladium dropped $15 to $655.00 an ounce.

Other commodities also fell today; Crude oil lost $1.60 (almost 2%), copper dropped 2.7%, and the Dow fell more than 135 points, as anxiety was further heightened by not only China’s inflation worries, but also the pending bailout that may be required in Ireland.

Daily Dish: Gold Prices Down Mid-Month

Monday, 15 Nov 2010 5:00 AM
In New York this morning, another fluctuating and unpredictable day was expected, as the mid-month session commenced. With the aftermath of Friday continuing into the week, leftover selling pressure depressed gold prices beginning this morning.
Spot gold bullion traded at $9.10 per ounce lower than previously, with a bid quote of $1,359.70. Silver dropped $0.20, with an expected bid falling at $25.85.
Traders are closely watching the US economic data, as well as forthcoming retail sales and NY’s manufacturing index. China continues to remain the US public eye, adding to the volatility of trading and bullion prices in the coming week.

Daily Dish: Apprehension About China’s Interest Rate Decision Causes Drop in Gold Futures

Friday, 12 Nov 2010 5:00 AM
Gold futures retreated today amidst consumer worry that China will try to counter its inflation by raising interest rates. On Thursday, China reported that its inflation had risen to 4.4%, its highest levels in two years. Electronic trading on Globex showed gold rates for December delivery had dropped $15.80 to settle at $1,378.50 an ounce. Previously, the contract had traded at levels as low as $1,377.30 an ounce.

In overnight hours, apprehension over China’s decision caused a $31 drop in gold. Today’s losses in gold price were also related to a drop in the U.S. dollar index – down to 77.894 from reported 78.16 on Thursday.

As reported by the WSJ’s MarketWatch, Silver for December delivery also declined by 16 cents (0.6%), to settle at $27.27 an ounce. Palladium was the only outlier, with its December delivery rates up to $1.80 (.3%) to $705.95 an ounce.

Daily Dish: Mortgage Rates Fall To New Lows

Thursday, 11 Nov 2010 5:00 AM
As reported by the Associated Press and Freddie Mac, this week the rates on fixed mortgages plummeted to their lowest levels seen in decades. The drop comes on the heels of the Federal reserve’s decision to begin a massive program to buy back $600 billion in Treasury bonds. Their hope is that this bond-buying initiative will kindle economic growth.

The average rate for 15-year fixed loans fell to 3.57% (down from 3.63) and the average rate for 30-year fixed loans fell to 4.17% (down from 4.24%). Rates on 5-year adjustable-rate mortgages hit their lowest level in five years, averaging 3.25% (down from 3.39%). The stand-alone in the equation is the one-year adjustable-rate home loan, which remained unchanged at 3.26%. Treasurys are beginning to produce lower yields for investors, which will in turn effect Mortgage rates.

Investors have been putting more money into Treasurys as concern over the global economy increases. This shift has lowered the rates on bonds, as well as on consumer and business loans

Daily Dish: US Mint 1 Ounce Proof Gold Eagle Sells Out, Coin Prices Rise

Wednesday, 10 Nov 2010 5:00 AM
Since the 2010 Proof Gold Eagle sold out recently, buyers are focusing on buying the other Gold Eagle coin products still available. Sales both of fractional coins and 4-coin proof sets rose drastically, outperforming their gains from the previous weeks.

Prices for the coins were expected to increase yesterday, depending upon the London PM fixing (The US Mint has followed their fixing to set Gold Eagles since their release).

Expected price increases were $25 for the half ounce, $12.50 for the quarter ounce, $5 for the on tenth ounce, and $92.50 for the four-coin set.

For more, visit this related article from Coin News.

Daily Dish: Gold, Silver Reach Record Highs At Start of Week

Tuesday, 9 Nov 2010 5:00 AM
By the end of Monday, the price of U.S. bullion gold rose to over $1400 per oz., to cap a third straight day of all-time record highs. Silver also gained momentum, reaching a three-day streak of increase, as well as a thirty-year high. Its price increased to over $27 per oz. Not to be left behind, Palladium also shot up, reaching its highest price since 2001.

The U.S. Mint American Gold and Silver Eagles also saw an increase in sales: the 1 oz. Gold American Eagle gained 4,000 for a total of 988,500 sales, the 1/2 oz. gained 1,000 for a total of 40,000 sales, and the 1/4 oz. gained 2,000 for a total of 58,000 sales. The 1 oz. American Silver Eagle gained 225,000 sales, bringing its total to over 9 million.

Some analysts believe that the increase of price in precious metals at the beginning of the week can be attributed in large part to renewed anxiety over European, Irish, and Portuguese debt.

Daily Dish: U.S. Dollar Recovers Slightly, Gold Fluctuates In a Narrow Range

Monday, 8 Nov 2010 5:00 AM
The U.S. dollar recovered slightly from late Sunday to early Monday, rising to just above the 77 mark. This gain comes on the heels of news that German industrial production dropped in September. The common currency also fell to the $1.40 level because of some apprehension regarding European’s fiscal state.

Gold prices between Sunday night and Monday morning fluctuated within a relatively narrow range: between $1,386 to $1,394. New York’s gold prices this morning opened with a a very small, $0.60 drop, quoted at $1,393.50 per troy ounce. Silver experienced a a 16-cent rise, to about $26.92 per ounce. Palladium advanced $12 to a spot-bid quote of $695.00 per ounce.

Daily Dish: Gold Jumps To $1,340 An Ounce At The End Of October

Wednesday, 3 Nov 2010 4:00 AM
Despite some ups and downs, gold closed out on a positive note at the end of October, jumping up to over $1,340 an ounce – a rally of 1.5 percent.

The price of precious metals has been steadily rising, as US currency value continues to fall. Gold sales offer wealth protection and a hedge against potential dips in the U.S. currency, and consumers have been recognizing this fact, as evidenced by the recent increase of gold sales.

Other precious metals (including copper) have also gained momentum over the last several days. Platinum rose 0.8 percent and palladium went up 1.7 percent. Silver saw the highest gain, ascending to 2.0 percent and at one point climbing above $24 an ounce.

Many financial experts predict that gold’s investment prices will continue to rise and stay strong as we come to the end of 2010. This is largely due to concerns about the U.S.’s financial recovery time frame: many investors are looking for safer ways of retaining their monetary assets.

In U.S. Mint 2010 Bullion Coin Sales stats, the American Eagle Gold Coin (1 oz) saw the highest gain: In October alone, 86,500 sales were completed, bringing the total for 2010 up to 974,000 sales.

Daily Dish: October Sees Consumer Sentiment Drop to 67.7

Friday, 29 Oct 2010 4:00 AM
During the month of October, U.S. consumer sentiment fell to 67.7, down from 68.2 in September. The survey was released on Friday the 29th by Reuters and the University of Michigan.

Before the survey’s release, a number of economists polled by MarketWatch (marketwatch.com) had anticipated consumer sentiment for October to fall around 68.5, but this appears to have been a little overly optimistic.

The most likely explanation for this even further drop in positive consumer sentiment is that consumers are worried about the job market, and stressed by its struggle for recovery.

Before the most recent recession, the average level of the index for consumer sentiment was about 88, and October’s ratings are hardly surprising, given the slow progress of the U.S. economy, and its numerous setbacks on the way to find jobs for the millions of unemployed.

http://www.marketwatch.com/story/consumer-sentiment-falls-in-october-to-677-2010-10-29

Gainesville Coins Earns “Best Bullion” Award

Tuesday, 29 Jun 2010 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT - Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins Earns Prestigious “Best Bullion” Award

LUTZ, Fla. — (June 29, 2010) — Gainesville Coins, a global leader in online coin and bullion sales, has earned the “NIA 2010 Best Bullion Award” from the National Inflation Association (NIA). The NIA awarded Gainesville Coins its highest rating in all five categories during its original evaluation earlier this year, and noted that Gainesville Coins has since improved beyond that five-star rating.

Originally launched January 14, 2010, the NIA’s rating program offers gold and silver bullion investors a comprehensive rating of major online gold and silver bullion sellers. The NIA evaluates dealers in five categories: Pricing, Selection, Shipping/Processing, Customer Experience and Overall Performance. Each dealer receives up to five stars in each category. In January, Gainesville Coins earned the maximum rating of five stars in each category and overall.

During its update on June 28, 2010, the NIA awarded Gainesville Coins the “NIA 2010 Best Bullion Award”, citing its customer-friendly improvements. The NIA praised Gainesville Coins for offering precious metals spot prices on the website, as well as “Deal of the Week,” “Featured,” “New Arrivals” and “Top Sellers” browsing areas on GainesvilleCoins.com. These features give shoppers an exceptional online shopping experience.

“We’re constantly seeking to improve our customer experience,” says Gainesville Coins President Michael Yaffe, “so winning the NIA 2010 Best Bullion Award is just the beginning for us. We strive to exceed our customers’ expectations every time they visit our site and shop with us.”

Gainesville Coins most definitively distinguished itself from other online gold and silver bullion dealers with exceptional pricing. The NIA found that Gainesville Coins consistently offered the lowest prices, setting the standard for other online gold and silver dealers. “Excellent service begins with fair prices on all our products, and our customers always know that they’ll get the best prices on their bullion and coin purchases,” said Yaffe. See all of the NIA’s Gold and Silver Seller Reviews to compare bullion dealers.

About the National Inflation Association:
The National Inflation Association is an organization that is dedicated to preparing Americans for hyperinflation and helping Americans not only survive, but prosper in the upcoming hyperinflationary crisis. Their goal is to help as many Americans as possible become aware of the disaster we are rapidly approaching. The wealth of most Americans could get wiped out during the next decade, but it will be an opportunity for a small percentage of Americans to become wealthy by investing in companies that historically have prospered in an inflationary environment, such as Gold and Silver miners and Agriculture producers. Find out more at Inflation.us/.

About Gainesville Coins:
One of the largest bullion and modern coin wholesalers in the United States, Gainesville Coins is based in Lutz, Florida. The company sells precious metal bullion and numismatic coins from the US and abroad. Gainesville Coins strives to provide customers with exceptional prices and customer service. The company works with collectors and investors from around the globe, and offers an extensive collection of world, modern, and other bullion and numismatic products. For more information on Gainesville Coins, Inc., please visit GainesvilleCoins.com/.

Gainesville Coins, Inc. Launches Mobile Website

Tuesday, 8 Jun 2010 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT - Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins, Inc. Proudly Launches Mobile Website

Gainesville Coins, Inc., an online precious metals broker, announced the launch of a mobile version of their popular online bullion store, GainesvilleCoins.com. Inspired by an increasingly mobile society, this development was a natural progression in serving their tech-savvy customer base.

“We’re constantly striving to stay at the forefront of technology,” said Gainesville Coins, Inc. President Michael Yaffe. “We consulted our web development partner, Magnetic, to help serve our on-the-go customers. Global precious metal markets move quickly, and our customers need to stay up to date – where ever they may be at the time. The idea of a mobile website just made sense.”

Notable features of the Gainesville Coins, Inc. mobile website, Mobile.GainesvilleCoins.com, include:

• Access from any Internet-Capable Cellular Phone: The mobile site was designed to give Smart Phone users the ability to easily access spot pricing, product pricing (both bank wire and credit card price) and other precious metals market information. To this end, the mobile website has been designed for ease of access from any internet-capable cellular phone, without the need to download a program or application.
• Search All Products: Striving to add to the growing list of mobile-friendly websites and create a better customer experience, Gainesville Coins included an easy-to-use search function on their mobile website. For ease of navigation, this feature allows customers to find products by a keyword, such as the name of a specific coin or type of coins.
• Live Spot Pricing: Precious metals investors know to closely watch spot prices, and Gainesville Coins is committed to helping investors make smart purchases. The new mobile website includes a feature which extends this information on a moment-to-moment basis.
• Click-to-Connect: When the time and price is right to make a purchase, Gainesville Coins’ mobile site makes it easy with a Click-to-Call feature. With the click of one button, customers can be instantly connected to a precious metal expert who’s ready to help or send an email for more information.

In combination with Gainesville Coins’ Price Level Alerts, customers who buy precious metals at certain price levels can be automatically notified of their preferred price and easily get more information and/or purchase their preferred products with ease.

If you don’t have an internet capable phone, take a sneak peak at Mobile.GainesvilleCoins.com.

About Gainesville Coins
One of the largest bullion and modern coin wholesalers in the United States, Gainesville Coins is based in Lutz, Florida. The company sells precious metal bullion and numismatic coins from the US and abroad. Gainesville Coins strives to provide customers with exceptional prices and customer service. The company works with collectors and investors from around the globe, and offers an extensive collection of world, modern, and other bullion and numismatic products. For more information on Gainesville Coins, Inc., please visit GainesvilleCoins.com.

New Website Design Launched on Gainesville Coins

Thursday, 6 May 2010 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

New Website Design Launched on GainesvilleCoins.com

Gainesville Coins, Inc., an online precious metals broker, proudly announced the launch of their newly-designed website on Friday April 9th, 2010. Created with the customer in mind, the fresh design first and foremost makes the website easier to use.

Tampa, Florida May 6, 2010 – Gainesville Coins, Inc., a Five Star rated coin and precious metal dealer, announced the launch of a new design for their online store, GainesvilleCoins.com. Powered by customer usability, the decision for a new website design was the natural next step in enhancing the customer experience.

“Our customers are savvy shoppers and we needed a website that accommodated their busy lifestyle,” said Gainesville Coins President Michael Yaffe. “It is important to us that our customers are able to find the exact coin they are looking for swiftly. Magnetic, our web development partner, created an advanced yet easy-to-use search tool and simplified the entire buying process. We feel this goes a long way towards ensuring an enjoyable and successful customer experience for everyone.”

Notable differences to the GainesvilleCoins.com site include:

• Improved Readability: Through design features, increased font sizes and a simplified organization structure, GainesvilleCoins.com is now easier to read. The site is also more easily navigated through a drop down sub-navigation and footer navigation, allowing customers to use a variety of methods to find the precious metal investment of their choice.

• Featured Coins: For modern coin collectors and investors, the new bullion and collector coins on the market offer an exciting chance to increase a collection or portfolio. Gainesville Coins has added a “Featured Products” section to the website to keep these customers up-to-date on the latest opportunities available for purchase. Customers can now choose from the “Deal of the Week”, “New Arrivals” and “Top Sellers” categories.

• Search Capabilities: Most of Gainesville Coins’ customers already know what they are looking for. An improved search feature was essential for the new website. Searches can quickly and easily be performed by country of origin, metal type, weight, coin type, grade or by coin grading service, yielding desired results, faster.

• Simplified Checkout Process: Realizing that many times, the otherwise enjoyable experience of shopping online can be marred by a complicated and confusing checkout process, Gainesville Coins elected to simplify the shopping cart experience by making the checkout steps among the easiest to use on the internet. With the use of pre-determined login information, one need only make his or her final selections and hit the “checkout” button.

• Spot Prices: GainesvilleCoins.com has always served the numismatic aficionado and bullion investor alike. Recognizing that global spot prices of precious metals are important to both these customers, the company has placed a spot price ticker on the front page of their website. Customers can now stay abreast of Gold, Silver, Platinum, and Palladium prices even as they shop for them.

Gainesville Coins Earns 5-Star Ratings

Tuesday, 19 Jan 2010 5:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins, inc. Earns 5 Star Rating by the National Inflation Association

Lutz, FL – January 19, 2010 – Leading online coin dealer Gainesville Coins Inc. earned the highest possible rating, 5 Stars, from the National Inflation Association (NIA). NIA rated all major online sellers of bullion products, based on pricing, customer experience, shipping and processing, and selection. Gainesville Coins was the only company to earn the NIA’s highest rating in all categories.

NIA launched the review in response to their members’ desire for an unbiased appraisal of gold and silver bullion dealers. The organization intends to add more reviews each quarter, to include companies requested by members. NIA will also reevaluate each company quarterly, to continually deliver accurate information about online bullion dealers. “We’re honored to be included in the NIA’s review,” said Gainesville Coins President Michael Yaffe, “and we welcome these consistent evaluations. We strive to give our customers unsurpassed service and selection, so this kind of feedback shows that we’re right on track.”

Key factors in Gainesville Coins’ high ratings included the innovative, state of the art website’s “Quick Search” feature, which makes it easy to find not only bullion products, but also numismatic coins from around the world. Filters allow visitors to sort search results by price, weight, condition, date, and several other factors. In conjunction with its user-friendly website, Gainesville Coins offers “the lowest prices for gold coins and bars out of all the companies in our review” according to NIA. Bullion buyers can easily find products through the “Modern Bullion” button on the left side, and from there, may select among gold, silver, platinum, and palladium.

While other online bullion dealers require customers to complete transactions via phone, Gainesville Coins offers 24/7 ordering directly through their website. This added convenience means that customers can finalize their purchases from the privacy of their own homes, without speaking to a representative. Gainesville Coins’ sophisticated and intuitive ordering system makes the buying process fast and simple.

Gainesville Coins was also the only company to provide complete transparency regarding credit card and bank wire prices, because the company prominently displays this information with every product. “Our customer service philosophy centers around straightforward information and empowering our clients with information,” said Yaffe. “Whether it’s numismatic expertise or pricing information, we offer our clients complete access to the latest industry information.”

Ultimately the streamlined process of finding, ordering, and receiving products from Gainesville Coins exceeded reviewers’ expectations. The dynamic combination of Gainesville Coins’ intuitive website and professional staff made for an exceptional coin purchasing experience.

2009 Saint Gaudens to Be Unveiled at World’s Fair

Friday, 27 Mar 2009 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

2009 Saint Gaudens to Be Unveiled at World’s Fair of Money in Baltimore This July

The much anticipated unveiling of the 2009 Saint Gaudens shall take place in Baltimore this July. This collector coin is the modern version of a Theodore Roosevelt commissioned set from 1907 and is one of the highlights of the World’s Fair of Money.

Baltimore, MD, March 27, 2009 – Avid coin collectors all over the world are holding their breath for the unveiling of the 2009 Saint Gaudens, which will take place at the World’s Fair of Money at the Baltimore Convention Center. The highly anticipated event will be on July 30, and the famous coin will be available for viewing at 9:30am, following the Fair’s opening ceremonies.

First commissioned by President Theodore Roosevelt in 1906 and struck in 1907, this collectible is considered to be the most beautiful coin produced, which makes its current release a momentous event, a defining moment in American coinage.

This $20 denominated collector coin will have a diameter of 27 millimeters, will be 50% thicker than other U.S. one-ounce coins, and will be minted in 24-karat gold. It will be released only in 2009, unless inventory remains for 2010, after which, palladium versions may be struck if the Original Saint Gaudens Double Eagle Ultra-High Relief Palladium Bullion Coin Act should get passed.

It shall differ from its predecessor in that it will have 50 stars, instead of the original 46 stars on the obverse, taking into consideration the additional four states that have been added to the United States since 1907. Also, it shall bear the inscription “In God We Trust,” which was not on the original 1907 coin, but was included in later versions. To give it a consistent edge, a small border was also added to the design.

As gold prices fluctuate, the price for this coin has not yet been determined, but 2009 Saint Gaudens’ are available for pre-order at GainesvilleCoins.com or by calling 1-352-653-3009.

About Gainesville Coins, Inc.
Gainesville Coins is one of the most well-known coin wholesalers in the industry, and boasts of having one of the largest rare and modern coin selections available. They are famous for their world-class service, exceptional talent and extremely competitive prices. For more information about their services, call 813.482.9300 or go to GainesvilleCoins.com.

Gainesville Coins Offers the Biggest Selection of

Friday, 13 Mar 2009 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins Offers the Biggest Selection of Rare Coins

Gainesville coins.Com has one of the largest inventories of rare coins in the United States. Coin collecting is always a pleasurable experience with the features and services available at GainesvilleCoins.com.

Tampa, FL, March 13, 2009 - Gainesville Coins, one of the biggest wholesalers of contemporary coins, has the largest inventory of rare coins dating back to the pre-1933 period of gold coin production. They have achieved utmost recognition in the industry for their world-class service, extremely competitive prices, and ability to provide collectors with a wide range of numismatic choices. Through their customer-friendly web product catalog, coin collectors can immediately check if Gainesville offers the coins of their liking anytime they want to.

Since the website has a wide array of coins, it is unlikely that a collector won’t be able to find his desired piece or the missing coin in his diverse collection. Gainesville Coins offers gold, silver and platinum coins and bullions for both amateur and expert coin collectors. These rare coins are offered with the most reasonable prices and no hidden fees.

With Gainesville’s superior team of highly professional numismatists and customer service representatives, collectors will find their hobby an engaging experience. Customers can call or send an e-mail if they have any inquiries. Through the website’s “Live Help” feature, collectors can immediately contact the company’s support staff for any questions regarding the coin pieces or the buying process and policies. With Gainesville Coins, collectors can always make informed choices.

About Gainesville Coins
Gainesville Coins is one of the largest rare and modern coin wholesalers headquartered in the United States. Gainesville Coins is the place to buy rare and contemporary U.S. gold and silver coins. For more information about the company and its services, visit GainesvilleCoins.com. or call 813.482.9300.

U.S. Mints Coins on GainesvilleCoins.com Allow Col

Tuesday, 24 Feb 2009 5:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

U.S. Mints Coins on GainesvilleCoins.com Allow Collectors to Own A Part of History

Gainesville Coins, Inc. is an online provider of U.S. Mints coins and coinage from other countries. This service now allows collectors to browse the catalogs and order the coins they believe will expand their collection significantly.

Tampa, FL, February 24, 2009 – U.S. Mints are charged with producing circulating coinage for used to conduct trade and commerce. The first coins were produced in Philadelphia, Pennysylvania, though other facilities can be now found in Denver, Colorado; San Francisco, California; and West Point, New York. GainesvilleCoins.com is an online provider of coins for numismatics. These coins range from bullion to certified rare coins to modern coins.

Coins of major interest to collectors are the Presidential Dollar, First Spouse G$10, Ultra High Relief, and State Quarters. The sale of gold coins were briefly halted in August 2008, but was reinstated by December 2008. GainesvilleCoins.com has the 2008 Gold Eagle available for purchase should anyone wish to own one for themselves. The coins mentioned above, as well as silver ones, are also available. Several U.S. Mints coins are also designated as charity coins under the company’s Collect for a Cause Charity Program; proceeds go to the Garcia Pass It On Foundation and the America’s Second Harvest of Tampa Bay.

New additions are the 2009 First Day Issue Lincoln Birth and Childhood coin and the 2000-W Library of Congress Bi-Metallic coin. Any collector would be lucky to have these illustrious coins in their collection. Gainesville Coins, Inc. is eager to help people own a piece of history, whether they be serious coin collectors or amateurs trying it out for the first time.

For additional information about U.S. Mints coins and GainesvilleCoins Inc.’s services, visit the company’s website at www.GainesvilleCoins.com or call 813.482.9300.

About Gainesville Coins, Inc.
Gainesville Coins, Inc. is an online retailer of U.S. and world coins whose aim is to help people expand their coin collections or diversify their investment portfolios. Among the staff are professional numismatists that guarantee the quality and authenticity of the coins. Customer service representatives are on-hand by chat, email, or phone, to discuss coin purchases with potential customers. For more information, please visit the company’s website at http://www.GainesvilleCoins.com or call 813.482.9300.

Top Gold Coin Company launches its 2009 Line-Up

Friday, 30 Jan 2009 5:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Top Gold Coin Company launches its 2009 Line-Up

To the sure delight of coin collectors, GainesvilleCoins.com has just launched its remarkable 2009 coin lineup. GainesvilleCoins.com also features a large collection of modern and historic coins for collection purposes.

Tampa, Florida January 30, 2009 Gainesville Coins Inc. promises a pleasant gold coin buying experience with its 2009 line-up of gold coins and gold bullions. The company’s website features the 2009 American Gold Eagle, a purely commemorative 2009 edition of the Gold Maple Leaf coin and a 1986 China 1000 Yuan, among others.

The one-ounce $20 Gold Coins have a consistently strong market because of their familiar and attractive Eagle and Statue of Liberty design, and their intrinsic value as a collectors’ item. On the other hand, the one-ounce Gold Maple Leaf Coin, which features an embossed sketch of Queen Elizabeth II, is significant because it has a mintage of only 50,000. Finally, the 1986 China Yuan is remarkable for its 12 oz. gold content, as well as the gold panda in front and the temple on the back side.

Gainesville.com takes pride in its pool of professional numismatists and knowledgeable client representatives who can ably assist investors. The company has 30 years of experience in assisting gold clientele on high-volume orders from thousands of clients in different locations, especially in the US and Europe.

Moreover, its state of the art but user-friendly website allows investors 24/7 access to one of the largest modern and pre-1933 gold and silver inventories in the country, including the current industry prices for each item.

In addition, buying gold coins through GainesvilleCoins.com comes with an option to participate in the company’s Collect for a Cause Charity Program, which benefits the Garcia Pass It On Foundation as well as America’s Second Harvest of Tampa Bay.

About GainesvilleCoins.com
Gainesville.com is the website of one of the largest rare and modern coin wholesalers based in the United States. Recognized in the industry for world-class service, and highly competitive prices, Gainesville Coins is indeed the place to buy rare and contemporary gold and silver coins. Visit www.GainesvilleCoins.com for more information.

New Breed of Coin Investors: Buy Online

Tuesday, 23 Dec 2008 5:00 AM
FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

New Breed of Coin Investors

With the help of the internet, coin collection has been made easier for both part time hobbyists and commercial investors. The internet, together with Gainesville Coins has made it easier to sell and acquire rare coins and to have them appraised.

Tampa, FL, December 23, 2008 – 24 karat gold is considered pure gold. However, the American Gold Eagle Coin gold continues to be made with 22 karats in order to uphold historical tradition. It’s this kind of historical tradition that multiplies the value of coins. This is because avid coin collectors take the time to know the composition, market value, grade, how rare their coins are and, most importantly, the history behind their coins.

Today, there’s a new breed of coin investors looking to buy gold. The internet connects investors and allows coins to change hands more easily. People have a place to go to other than their local coin shops when they’re looking to make a new investment or cash in on an old one. This has been made possible, in part, by Gainesville Coins.

Gainesville Coins is well known by coin investors and coin collectors for their exceptional numismatic talent, world-class service, and for their ability to provide customers with an extensive selection of rare collectible coins. They handle a range of transactions from common coins to part-time hobbyists to the multi-million dollar purchases and sales of extremely rare coins by commercial businesses.

Also, because of the internet, rare coin gold numismatic services and grading services are available online to give you the peace of mind that comes with a professional opinion.

For more information, visit GainesvilleCoins.com or call to speak with a customer representative at 813.482.9300.

About Gainesville Coins
The company has one of the largest modern and pre-1933 gold and silver coin inventories in America. This inventory is made available to you via the user-friendly and technologically advanced

Gainesville Coins is the Place to Go for Gold Coin

Thursday, 6 Nov 2008 5:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins is the Place to Go for Coin Gold Collecting and Investing

With the financial markets in turmoil, many people look to coin gold as an alternative investment. Gainesville Coins has a wide selection of coins that mirrors the price of gold and offers quality and dependability for collectors and investors alike.

Tampa, Florida, November 6, 2008 – Many people are turning to rare coins as an alternative to investing in the financial markets because they see gold and silver bullion as being a more stable investment in these uncertain times. People who are unfamiliar with coin gold investing may not know how to go about making the right purchase or how a coin appreciates in value. The experts at Gainesville Coins are on hand to help both the investor and collector make the right choice for their particular needs.

Whether a person is a seasoned collector or new to the world of coin collecting and investment, Gainesville Coins has a wide selection of quality gold coins and bullion that range from rare to modern, that are valuable for the collector and the investor. Coin gold is not that much different than investing in gold bars. You don’t have to own a vault to store gold bars in to be a gold investor. There are plenty of gold coins that are rare or just minted that can add value to your portfolio plus make an attractive addition to any collection.

Gainesville Coins features coin gold and gold bars that are ideal for the novice investor or the seasoned veteran. They offer some of the best wholesale prices in the business which allows a customer to make an investment in a quality coin at a price that is fair and will help insure investment value as well as add to a collection without breaking the bank. Many collectors and investors have trusted Gainesville Coins for their expertise and their vast selection of gold and silver coins from all over the world. These rare and modern coins tend to appreciate in value over time and many experts agree they are a safe investment alternative for people who are shy of the more unstable financial markets.
For additional information, visit http://www.gainesvillecoins.com or call 813.482.9300.

About Gainesville Coins, Inc.
Gainesville Coins, Inc. is one of the largest rare and modern coin dealers in the United States. They are well known and respected throughout the industry for their knowledge, talent and expertise in selling rare and valuable coins. They are committed to providing their customers with a wide range of choices of valuable coins for collecting and investment with world-class service.

Gold Bullion Becoming a Safe Haven for Stock Weary

Friday, 26 Sep 2008 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gold Bullion Becoming a Safe Haven for Stock Weary Investors

Interest in gold bullion is on the rise as shaky stock and real estate markets send weary investors running for cover. Gainesville Coins offers a wide array of gold bullion and rare coins for the discerning collector of investor.

Tampa, Florida September 26, 2008 – The world markets have taken a beating in the last few weeks, and gold bullion is being mentioned as an attractive investment vehicle for those who want a more tangible and stable portfolio. Gold is often referred to as the “anti-Dollar” because usually when the Dollar loses value, the price of gold goes up. Investors and collectors alike see the benefits of gold bullion as a solid investment.

Gainesville Coins Inc. has built a solid reputation in the coin industry as a world-class dealer in gold bullion and gold and silver coins. They have a wide array of coins to choose from and some of the best products on the market. Their well-trained staff is equipped to help the experienced collector or novice investor select the right coin to add value to their collection, or to beef up a battered stock and investment portfolio.

Gold bullion is considered a stable investment and many experts are recommending that people start adding gold coins in their investment portfolios as the stock markets grow sluggish and the real estate market crashes. Gainesville Coins offers U.S, and foreign gold bullion and other rare coins and allows customers to go online and see the tangible merchandise for themselves. They also may offer a significant discount to those who choose to do a bank wire payment option.

As shaky investors turn to gold bullion to shore up a retirement plan or a college savings program, Gainesville Coins and their team of experts can be there to assure they get the best service, a fair price and a coin that will not lose value over the long haul.

For additional information, visit www.gainesvillecoins.com or call 813.482.9300.

About Gainesville Coins, Inc.
Gainesville Coins is well known throughout the industry for the exceptional talents of its staff numismatists and its world-class service providing gold and silver coins with a wide range of choices and prices for its clients.

GainesvilleCoins.com is now Accepting Bank Wires

Thursday, 7 Aug 2008 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins, Inc. is now Accepting Web Orders Paid via Bank Wire

Gainesville Coins, Inc. now accepts payments for gold bullion via bank wire for their web based orders. Investors with accounts at Gainesville Coins, Inc. can actually save a few dollars on some of their bullion purchases if they pay via bank wire.

Tampa, FL: August 7, 2008 –Gold is always a timely investment because its value is always reliable. Because Gainesville Coins, Inc. is giving investors more options for how to purchase bullion. People can now purchase the most reliable investment possible with greater ease. With such ease of purchasing, investors will gain better gold collections and greater wealth.

Because bullion is worth no more than its weight in precious metal, whether cast as coins, ingots or bars, gold bullion is always worth the going rate for gold, so you can count on it to hold its value better than other investments. Particularly because the price of gold usually rises you can count on its value as a good investment.

Purchasing gold bullion versus purchasing stock in gold is usually a more lucrative way to invest in gold. While no one can guarantee that a person can sell their gold at the current value of gold, if you actually own pieces of gold that you keep in a safe place, regardless of the economic situation in the country you will have a valuable nest egg, whereas, the stock market can often be more volatile and less sure.

To learn more about gold bullion and to learn more about Gainesville Coins, Inc., visit GainesvilleCoins.com or call 813.482.9300.

About Gainesville Coins, Inc.
The experienced and knowledgeable numismatics at Gainesville Coins, Inc. offer their customers the best possible experience in purchasing gold coins and gold bullion. Gainesville Coins guarantees its entire inventory of raw and certified rare coins to be genuine.

How Much is Gold Bullion Worth?

Tuesday, 13 May 2008 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins Puts a Price on Gold Bullion

How much is gold bullion worth? If one shops at Gainesville Coins, the Internet’s shiniest online coin dealer, you may be in for a pleasant surprise.

Lutz, Florida, May 13, 2008—Gainesville Coins is one of the Internet’s biggest coin trading and selling companies. The company is staffed by professional numismatists, serious students, and collectors of coins and coin trading. Its business is in buying and selling rare quality coins such as a gold bullion coin. The most recent victory of the successful online company has been the merging of Gainesville Coins with University Coins, one of the company’s foremost competitors. Now with the merger behind them, Gainesville Coins expects to find even greater success in the highly competitive coin trading business.

Gold bullion refers to a precious golden coin made through a specific process. Bullion, by definition, usually refers to precious metals in bulk form; that is, metals that are high in demand or in market value. Bullion can then be minted into a coin. Bullions (particularly gold bullion) are valued by their mass and purity.

Gainesville Coins realizes the selling potential of the gold bullion coin and offers these rare items for sale on its website. One of its most popular offerings is a one ounce collection of 2007 bullion coins, including the prominent Gold Eagle $50 coin as well as other bullions of silver, platinum, and ultra cameo. The store is currently offering the rare collection for $4,575.

Despite carrying high priced rare coins, the company states that what separates them from the competition is its average low price for most collectible coins. The price of gold bullion may not be priceless after all.

About Gainesville Coins
Gainesville Coins is one of the leading retailers of coins online, and also one of the most trusted. The company has the endorsements of the Independent Grading Company as well as the Numismatic Guarantee Corporation.

Gainesville Coins Makes Buying Gold Coins Simple

Sunday, 13 Apr 2008 4:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Gainesville Coins Makes Buying Gold Coins a Simple Process, Even from Overseas

Gainesville Coins, Inc is recognized as an industry leader in coin collecting and retailing. Their quality offerings, innovative shipping and highly accurate information allow numismatists around the world to easily find the coins they seek.

Tampa, Florida April 13, 2008 – Buying gold coins has never been easier, thanks to the efforts of one online company. Gainesville Coins has become the industry leader in affordable rare coins, modern coins and gold coins of all types, including bullion and much more.

Buying gold coins internationally has long been a problematic process; Gainesville Coins has changed that procedure and streamlined the shipping process. Today, U.S. consumers and international numismatists can find the gold coins that they want, quickly and easily, through one central location.

Gainesville Coins also offers highly accurate buying and collecting information for numismatists around the world. With their expert tutorials, anyone can learn what should be looked for in coin collecting. They can learn what makes a rare coin truly valuable or merely interesting, as well as the best modern coins to add to their collection. Their huge inventory of popular gold coins, silver coins and other collectibles means that any coin collector can find something that appeals to him or her.

For additional information about buying gold coins visit the Gainesville Coins website or call 813.482.9300.

About Gainesville Coins
Gainesville Coins has become the industry recognized leader in information about buying gold coins, as well as housing the largest collection of rare and hard to find gold and silver coins in the U.S. The company’s commitment to customer support, collector information, and providing only the highest quality coins for their customers has resulted in a reputation for excellence that is second to none in the industry.

Seekers of Gold Bullion Flock to Gainesville Coins

Thursday, 7 Feb 2008 5:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

Seekers of Gold Bullion Flock to GainesvilleCoins.com

Gainesville Coins offers its gold bullion collection for more than a pretty penny but less than what you would expect.

Lutz, FL, 2008, February 7— How much is a 2006 American Buffalo $50 Ultra Cameo Gold Bullion worth? Quite a bit more than the $50.00 value it bears, as this coin sells for upwards of $1,000.00 US dollars. Gold bullion may look like pocket change, but these coins are actually struck from a precious metal and collected for their unique qualities.

Gold bullion coins are collected by investors, coin dealers, and coin enthusiasts who know a good (and rare) face when they see one.

Some examples of gold bullion images offered by Gainesville Coins include Chinese pandas, American Buffalo Indians, and historical American presidents along with their wives. While the Abigail Adams First Spouse Gold Bullion has a legal value of $10.00, collectors are willing to pay much more for this historical monument. This former first lady is worth at least $600.00 according to today’s coin standards.

There are many coins to be found and nearly as many online dealers. Any collector will know the importance of finding a fair and reliable dealer. Gainesville Coins offers the rarest and most sterling of coins, along with a staff of educated and experienced numismatists. The store keeps its overhead at a minimum, and offers its coin collections at a discounted price. An additional discount is offered for bank wire money transfer over credit card purchases. The company also guarantees its bullions to be certified and genuine, as proven by the Independent Grading Company, the Numismatic Guarantee Corporation, and the Professional Coin Grading Services.

About Gainesville Coins
Gainesville Coins is one of the largest wholesalers of coins headquartered in the United States. In October 2006 the company merged with University Coins Inc. for a combined effort of coin-dealing services. Gainesville Coins knows a golden collector’s coin never depreciates in value—it just goes on sale. Buy gold at GainesvilleCoins.com today!

U.S. Gold Coins Popular at Gainesville Coins

Saturday, 5 Jan 2008 5:00 AM

FOR IMMEDIATE RELEASE:

CONTACT – Gainesville Coins, Inc.
17860 N. US Highway 41
Lutz, FL 33549
Phone: 813.482.9300
sales@gainesvillecoins.com

The Sale of U.S. Gold Coins are Popular at Gainesville Coins

The internet is full of strong websites that offer US gold coins for sale, including the Gainesville Coins website. Coin collectors are encouraged to turn to this website for all of their rare and new coin collecting needs.

Lutz, FL, January 5, 2008 – Searching for a US gold coin from a particular date may seem like a tedious task. But that which is painstakingly dull for most people is the essence of life for the dedicated collector. Because coins see so much use, and travel so far, finding specific coins can be very difficult. It’s easy for them to get lost in the shuffle. Finding rare coins that are in good condition is especially challenging.

American history has many famous coins, such as the Susan B. Anthony dollar, the American Liberty Series, and the gold and silver American Eagle coins to name a few. All of these are in high demand, and may have a market value significantly higher than their original worth. This is especially true for U.S gold coins. Because it is difficult to obtain these coins, collectors rely on specialized retailers. Many rare coin dealers sell their wares on the Internet. An example of this can be found in Gainesville Coins.

This popular website specializes in selling a wide variety of American coins. Collectors can find items like the American Buffalo gold coins, double headed eagle coins, presidential coins, and more. All of these are in high demand among collectors. Coin collectors searching for non-circulated coins are sure to be pleased with the website, as there are many minted, non-struck coins available for purchase. Interested coin collectors can examine the wares by visiting GainesvilleCoins.com.

About Gainesville Coins
Gainesville Coins now works in cooperation with University Coins, Inc. This merge in late 2006 has proven to be beneficial for both companies as well as their customers, as they can now provide hard-to-find and current coin sales at any time.

Daily Dish: Gold and Silver Settle on Higher Ground

Thursday, 26 May 2011 4:00 AM

Both silver and gold rallied in late afternoon trading Wednesday, as the
dollar lost its higher footing. Gold for June delivery gained $3.40 (0.2%) to
$1,526.70 an ounce on the Comex division of the New York Mercantile Exchange.
This settlement marks the yellow metal’s best closing level since May 3rd.
Silver gained 4% overall in Wednesday’s trading, with July contract closing at
$37.64 an ounce. This is silver’s highest close since May 10th. The metal has
appeared particularly attractive to investors looking for something other than
U.S. currency, but less expensive than gold.

Metals have been profiting from ongoing worries about the euro-zone debt
crisis. Officials in Bombay expect India’s gold imports to rise to a level as
high as 1,000 metric tons – a new record for the country. If the monsoon rainfall
is particularly good, the rural population’s income increases, and they are
able to buy more gold.

Contagion Impact from a Greek Default

Thursday, 26 May 2011 4:00 AM

Contagion Impact from a Greek Default

One year since Greece first became a catalyst for worldwide global risk aversion, Greece’s sovereign debt crisis is again making daily headlines. Last May bond market turmoil for the more indebted countries of the Eurozone prompted the creation of the European Financial Stability Facility. With the International Monetary Fund (IMF), the EFSF has now provided multi-billion dollar packages for Greece, Ireland, and most recently for Portugal. Unfortunately, skeptics refuse to go away, and Greece’s debt issues continue to get worse.

How Indebted is Greece

Greece’s debt to GDP ratio is projected to rise to 156% in 2011, up from 143% in 2010. This would mean total debt of $345 billion EUR for Greece’s $230 billion EUR economy by the end of this year.

The rising levels of debt come despite austerity measures taken by the Greek government. While spending has been reduced, the impact on the overall Greek economy has been negative. According to the Greek Central Bank, Greece’s economy contracted 4.2% in 2010, and is projected to decline by about 3% in 2011.

Where are we Now

The next disbursement of Greek aid is due in June. Without it, Greece has stated that it will be forced to default on the obligations coming due. Because Greece’s debt problems continue to get worse, the IMF and the EFSF are seeking additional austerity measures before the next tranche is disbursed. Unfortunately, this would likely mean further contraction of Greece’s economy, and rather than ending the debt spiral, would likely just make it worse. Asset sales are being called for, with the proceeds used as collateral for the next tranche of aid. Once again, this is unfortunate since Greece would be selling its state assets at distressed prices, and getting less than it would probably recover in other circumstances.

The last few days have seen a number of conflicting statements that have done little to stabilize the situation. The idea of a “reprofiling” of maturities has been floated. However, this seems to be just a new way to say debt restructuring. European officials have gone out of their way not to specifically say debt restructuring, since this would equate with a debt default.

If Greece Were to Default

The financial contagion that swept world financial markets following the collapse of the mortgage market in 2008, or some version of it, is the feared outcome. For instance, prior to 2008, many banks used mortgage backed securities as collateral for short term financing. When the values of the underlying mortgages became suspect, banks stopped accepting these assets as collateral, effectively freezing up the interbank lending market. In the end, the Federal Reserve was forced to step in and fill the gap.

Greek sovereign debt, while not nearly as large as the U.S. mortgage market, is still used as collateral for short-term financing. According to the ECB, sovereign debt rated BBB or higher is acceptable collateral. Since Greek debt is now rated below BBB by all three major credit rating agencies, one wonders why there isn’t a European banking crisis right now. However, if Greece were to “reprofile,” or restructure its debt, this would constitute a default. Greek sovereign debt would no longer be eligible as collateral, and solvency concerns would be raised for a host of financial institutions that hold any concentration of Greek related debt. Like the mortgage crisis of 2008, fears would also mount regarding credit default swap exposure (CDS). AIG was forced to take a government bailout after having written hundreds of billions of CDS contracts on bad mortgage backed bonds. Since there is no disclosure on CDS exposure by individual firm, there would be no way for the market to know if someone wasn’t at risk.

The likely result of this contagion would be a flight to safety. Current market trends would likely magnify. Specifically, the US dollar would continue to rise, Treasuries would gain, and all risk assets would fall. It should be noted that while Gold managed to outperform in 2008, it still fell during the worst of the crisis.

Daily Dish: Metals Trade Lower in Afternoon

Thursday, 26 May 2011 4:00 AM

Gold and silver futures were slightly lower in afternoon trading today,
despite continuing weakness in the dollar and negative economic outlook in the
U.S.

Gold for August delivery was down $5.80 (0.4%) to $1,522.20 an ounce on the
Comex division of the New York Mercantile Exchange. Gold for June delivery was
trading at $1,521 an ounce.

Despite gains earlier this week, silver was also lower today, losing 50
cents (1.3%) to $27.15 an ounce. Though gold is lower, support for the yellow
metal is still firm. With euro-zone debt still foremost in the public’s eyes,
and weaker currencies taking up attention, gold is seen as a steady safe-haven
alternative to turbulent monetary investments.

Table: Silver Eagle Annual Sales 2000-2011

Friday, 27 May 2011 4:00 AM

Demand for Silver Eagles has been so high that the US Mint stated on May 26^th that the San Francisco Mint will join the West Point Mint in producing the coins.

Gainesville Coins felt it would be informative for customers to see the following table of annual Silver Eagle Sales.

Year	Annual Sales
2000	9,839,132
2001	9,748,109
2002	11,186,368
2003	9,242,839
2004	9,684,356
2005	9,707,688
2006	12,235,572
2007	10,471,128
2008	21,817,736
2009	30,459,000
2010	34,662,500
2011 – Through April	15,248,000

As can be seen, there was a significant jump in American Eagle sales following the 2008 financial crisis, and every year since demand has risen. If the current level of sales holds, 2011 would see American Eagle sales easily topping 40,000,000.

We hope you find this information useful.

Real Drama or Just Play Acting

Friday, 27 May 2011 4:00 AM

Greek Politicians Refuse to Agree on Additional Austerity

The drama on whether the next disbursement of Greek aid will be released on schedule continues to captivate financial markets. On Friday, Socialist hopes for a bi-partisan agreement for additional budget balancing measures were rebuffed by the opposition. The opposition is now insisting that the entire aid package be re-negotiated.

On the surface, the now clear political rift between Greece’s ruling Socialists and opposition further raise the possibility that next month’s 12 billion EUR disbursement may not be forthcoming.

On Thursday, Luxembourg Prime Minister Jean-Claude Juncker seemed to add to the uncertainty, raising the possibility that the IMF portion of aid would not be released due to the absence of a “12 month guarantee of solvency.”

However, given the general consensus that any delay in disbursement would cause Greece to formally default on its obligations, particularly since Greece has publicly admitted to as much, it still seems inevitable that the June disbursement will ultimately occur.

Action in financial markets over the last two days certainly suggests that the disbursement is being priced in. Equities, commodities and the EUR have all been rebounding, while the US dollar and Treasuries have fallen. In other words the “risk-on” trade has been in effect these last two days despite the increasingly conflicting statements of the parties involved in the Greek drama.

One thing is certain however, regardless of how the June disbursement plays out, the final act of this Greek drama has yet to be written.

U.S. Mint Expands Silver Eagle Production on Record Demand for Silver Bullion Coins

Friday, 27 May 2011 4:00 AM

Demand for U.S. Silver Eagles continues to show no signs of abating. Sales through April were a record 15,248,000, putting 2011 sales on track to reach 45,000,000. This would compare with 2010’s record sales of 34,662,500. For comparison purposes, annual sales between 2005 and 2007 barely topped 10,000,000.

Because of this explosive demand, the U.S. Mint on May 26^th, released a statement saying American Eagle Silver Bullion Coins will now also be minted at its San Francisco Facility. They are currently minted at only is facility at West Point.

Since the coins do not have a mint mark, the coins will be identical. However, for collectors of precious metals, this development is certainly interesting.

Interested readers can find the full U.S. Mint press release here: Click Here

Daily Dish: Gold, Oil Settle Higher to Close the Week

Friday, 27 May 2011 4:00 AM
Dismal Data Day

Tuesday, 31 May 2011 4:00 AM

U.S. stocks are well off opening highs following this morning’s generally dismal economic data. Commodities remain mostly higher, with the notable exception of Gold futures which are marginally lower at $1,535.00 down $2.30. Silver and energy futures remain solidly higher.

The Case-Shiller Home Price Index came in worse than expected with a negative 0.6% reading for March. Seasonally adjusted the index was down 0.1%. Home price declines have now extended for nine months following the brief span of home price gains in 2010 when the home buyer’s tax credit briefly lifted the market from its tailspin. While a very slight silver lining can be found in the declining rate of price declines month over month, the negative implications from current house market trends are many.

First, more homeowners will have become underwater on their mortgage – owing more in mortgage debt than their home is worth. Second, municipalities that depend on property tax revenue for their budget will continue to feel the strain of lower home prices. Third, the banking sector will likely not see any relief from ongoing credit losses from real estate. Finally, the negative drag that housing has had on the overall economy will persist, with employment trends in construction and other real-estate related sectors remaining a significant drag on the economy.

The Chicago Purchasing Manager’s Index for May came in at a much weaker than expected 56.6. This follows last month’s read of 67.6, and the market consensus of 63.0. Alarmingly, new orders and backlog orders both fell sharply, while inventories rose. Input costs remained at high levels. The report mirrors the many manufacturing surveys released over the past few weeks, and suggests that the current economic soft patch is widespread.

The Conference Board’s Consumer Confidence Index for May came in at 60.8, below the prior 65.4 and well below the consensus of 66.5. The survey has now plunged to a six month low, and most ominously, the weakest component of the index was expectations. The rise in the cost of fuel and food is clearly crimping the budgets of American households.

Collectively, the data refocuses the market’s attention on Wednesday ADP employment report, and Friday’s Payroll report. Without job growth and wage gains, it is unclear how data days like today won’t become the norm.

Daily Dish: Gold Finishes Lower, Other Metals Rise

Tuesday, 31 May 2011 4:00 AM

Gold
futures ended flat today, supported by a weaker dollar but suppressed by lower
interest in safe-haven buying. Gold for August delivery lost 50 cents to
settle at $1,536.80 an ounce on the Comex division of the New York Mercantile
Exchange.

Silver
and other metals usually associated with industrial activity rose. Silver for
July delivery added 42 cents (1.1%) to $38.27 an ounce, July platinum
added $29 (1.6%) to $1,829 an ounce, and palladium for September
delivery gained $20.10 to $782 an ounce. Copper was largely unchanged from last
week’s levels, at $4.18 a pound.

The
dollar index dropped to 74.644 from 74.941 in Asian trading on Monday. Despite
recent fluctuation, the dollar has gained 2.4% over the course of
May. U.S. markets were closed yesterday in observance of Memorial
Day.

Shanghai Futures Exchange and Shanghai Gold Exchange to Temporarily Raise Margin Requirements

Tuesday, 31 May 2011 4:00 AM

On Monday, May 30th, the Shanghai Futures Exchange and Shanghai Gold Exchange announced that they would raise the margin requirements on a range of commodities, including Gold and Silver.

The reason given was to “avoid excessive volatility around the Dragon Boat holiday on June 6^th.”

The announced margin increases would take place on June 2^nd and most would be reversed on June 6^th, with several commodities actually seeing lower margin requirements following June 6^th. The margins on both Gold and Silver would both revert back to the level seen before June 2^nd.

Given the modest increase in margin and the planned reversal of the increase, the news has caused barely a ripple in precious metals prices. After showing some early weakness, gold has now joined silver in positive territory in early trade on Tuesday, May 31, 2011.

Full Reuters Article: Link

In a related Reuters Article, daily trading of Shanghai silver forward contracts has surged in May. Daily trading volume stood at 973,344.5 kilograms (31 million ounces), compared with an average of 151,965.9 kilograms in 2010.

Full Reuters Article: Link

Poor Economic Data Take Their Toll – Previewing Friday’s Employment Report

Wednesday, 1 Jun 2011 4:00 AM

Having seemingly defied gravity for the last three days, U.S. equity markets have resumed their downtrend, and are now poised to post their fifth straight weekly decline. The list of poor economic releases has been steady, including weak initial claims data, home prices, manufacturing surveys, confidence surveys, and today’s weaker than expected private payroll data from ADP. The brief spell of euphoria that Greece’s debt crisis isn’t in immediate danger of escalating has now become totally eclipsed by the clear signs that an already weakening U.S. economy is getting worse.

Since jobs are the fuel that drive economic activity, a preview of Friday’s May employment report seems in order. According to Bloomberg, the current consensus estimate is calling for nonfarm payrolls to rise 190,000, below last month’s 244,000 print. Private sector employment is expected to rise 210,000 from last month’s 268,000. The unemployment rate is expected to dip lower to 8.9% from 9.0%.

Given the severity of today’s weaker than expected ADP data, it would be no surprise to see Friday’s employment data to also come in weaker than expected. In fact, nearly all economic estimates over the past four weeks have been above the actual read, so a miss on Friday would be par for the course. The market’s reaction to a significant miss would likely mean additional declines for risk assets. A sell-off in equities and industrial commodities would be likely, and safe havens like gold, U.S. Treasuries, and the U.S. dollar would likely see support.

It should be noted that last month’s employment report did manage to defy the skeptics and surprise on the upside. Given the steady stream of poor economic statistics of late, a similar upside beat seems highly unlikely.

Daily Dish: Dollar, Metals Drop in Afternoon Trade

Thursday, 2 Jun 2011 4:00 AM

Low Silver Inventories at the COMEX

Thursday, 2 Jun 2011 4:00 AM

The CME group is the world’s largest derivatives
exchange. Everything from equity index
futures to energy futures, to precious metals futures are traded there. While a portion of the derivatives traded are
for purely speculative purposes, a large part of the CME’s business revolves
around commercial activity. For example
oil refineries that need a constant supply of oil will use oil futures
contracts to lock in prices and take deliveries from suppliers. The CME’s rules ensure that suppliers and
consumers of each energy contract perform on their obligations.

An interesting development in the silver futures market has
been an ever shrinking level of inventory available to meet delivery. Like other commodity futures contracts, silver
futures contracts expire every month. Holders of these contracts can either sell the
contract prior to expiration, or opt to take delivery of physical silver. Each contract specifies the amount of silver
to be delivered (5,000 troy oz), and the quality the silver must meet (.999
fineness). Most silver futures contract
holders don’t take delivery, but those that do take delivery from a COMEX
approved depository. However, silver
inventories at COMEX, the division of the CME responsible for physical delivery
of silver on silver futures contracts continue to hit multi-year lows.

While it is generally assumed that COMEX inventories will be
sufficient to meet physical delivery requirements, simple math comparing
available inventory to outstanding contracts highlights the very real
possibility that a spike in demand for physical delivery could easily exceed
available COMEX inventory.

In the 1990s silver stockpiles at the COMEX were over 100
million ounces. However, the CME is
showing that registered silver inventories have now dropped to just 29,631,268
ounces. By looking at a historical chart
of COMEX inventories, it is clear that a downward trend began during the
financial crisis of 2008. The data
implies that an increasing number of futures contract holders are opting to
take delivery upon expiration.

Total open interest on July 2011 silver futures contracts was 58,872
as of June 2^nd, 2011. This
represents nearly 300 million ounces of silver if all contracts opted for
delivery. Total open interest for all active
silver futures contracts is just over 120,000 contracts.

The very low level of silver inventory at the COMEX raises a
number of questions. The CME’s unusual
decision to raise silver margin requirements by 84% tops the list. Officially, the CME states the increase in
silver margin requirements was due to silver’s rising volatility. However, many commodities have had strong
runs over the past year, so singling out silver seems unusual. It is hard therefore, to not speculate that
the CME’s decision had something to do with the ever declining levels of
inventory at COMEX.

It is impossible to know exactly how the low level of inventory at COMEX
is impacting silver pricing, but Gainesville Coins feels it is something buyers
of precious metals should be aware of.

We were made aware of this development from the following
article on Zerohedge.com: Link

Daily Dish: Gold Gains Against Disappointing Economic Data

Wednesday, 1 Jun 2011 4:00 AM

Gold
futures were able to close the day in positive territory on Wednesday. As of
late afternoon, gold for August delivery was up $6.40 (0.5$) to $1,543.20 an
ounce on the Comex division of the New York Mercantile Exchange. Gold futures
fluctuated between small gains and losses earlier in the trading session, but
ultimately, a weaker dollar, sharply dropping U.S. stocks, and less than
encouraging economic data (particularly in the housing and employment sectors)
helped push gold forward. The yellow metal has been trading high as buyers seek
out alternate investments to U.S. currency.

Other
metals did not follow gold’s upward trend. Silver for July delivery lost 61
cents (1.6%) to $37.69 an ounce, copper for July delivery declined 7 cents
(1.7%) to $4.11 a pound, platinum for July delivery was down $10.10 (0.6%) to
$1,823.90 an ounce, and palladium for September delivery lost $1.90 (0.2%) to
$779.10 an ounce.

Greece
continues to maintain public attention, as it struggles to keep its head above
financial water. Moody’s Investors Service downgraded Greece’s sovereign rating
today, and assigned a negative ratings outlook to the country. Many fear that
Greece will be defaulting in the near future. Other European countries are also
struggling against rising debt, and turmoil continues in the Middle East as we
push through the halfway point for the week.

The Birth/Death Adjustment to the Monthly Payroll Statistics

Friday, 3 Jun 2011 4:00 AM

In an effort to better reflect actual hiring trends in the
economy, the Bureau of Labor Statistics (BLS), uses what is known as the
Birth/Death Model to adjust monthly employment statistics. This model estimates employment gains from
start-up companies – births – that would not yet be included in the statistical
sample, while excluding employment losses from companies going out of business –
deaths. This adjustment can have a dramatic impact on
reported payroll numbers.

During spring months the Birth/Death adjustment has a
positive impact on reported payroll data, the presumption being that most new
business begin operations during this time.
For the month of May, the adjustment added 206,000 jobs to the reported payroll
number. In other words, without the
adjustment, the actual non-farm payroll number would have been negative
152,000. Of course, this adjustment
works both ways. January’s payroll gains
were reduced by 339,000 by the birth/death adjustment. In other words, without the adjustment the payroll
gain in January would have been 407,000, instead of the 68,000 reported.

Why This Matters

While the Birth/Death model adds to payrolls in some months
and subtracts from payrolls in others, over time, the impact of the model is a
net addition of jobs. Presumably, this reflects
the general growth in population. From
April of 2010 to May of 2011, the Birth/Death model has added a total of
808,000 jobs. In other words, about
62,000 jobs are added on average to each reported monthly payroll report.

There is a fair amount of controversy regarding the birth/death
adjustment. The skeptics say that the
net impact of the adjustment is to overinflate actual employment statistics,
and thereby mask the economy’s true health.

While the validity of the birth/death adjustment will no
doubt remain a subject of heated debate, Gainesville Coins feel that it is
important to point out that the monthly payroll figures provided by the BLS do
have an underlying upside bias due to the birth/death adjustment. 808,000
jobs over 13 months is not insignificant.

Greece Muddles Through, for Now

Friday, 3 Jun 2011 4:00 AM

It appears the EU, IMF, and the ECB have come
to terms on providing Greece with the funds needed to avoid default. News of the agreement has been welcomed by
the markets, with stocks paring some of their earlier losses on the weaker than
expected May jobs data.

Greece’s problems are by no means over however. Over the next few weeks, details of the plan
are to be hammered out, and the next disbursement of aid to Greece is expected
in July. Details on expanding the
current aid package to accommodate Greece’s larger than expected fiscal
shortfalls, and due to the country’s generally agreed inability to re-enter
public markets next year, will be examined closely by markets.

The plan will ultimately entail reduced government spending,
higher taxes, and accelerated sales of government assets. Whether or not current EU forecasts
adequately incorporates the likely negative economic effects of the additional
austerity measures remains to be seen.
It is certainly obvious now that Greece’s first aid package was overly
optimistic.

The dollar has reversed earlier gains to trade lower against
the EUR, while Treasuries have eased off their best levels. Yields on Greek government securities have
fallen sharply across the yield curve as markets breathe a sigh of relief. The yield on Greek 10 year debt remains above
16% however.

The major U.S. stock market averages have cut their opening
losses by half. Commodities have also
reversed earlier losses. Gold continues
to maintain its gains, with gold futures up $11.00 to trade at $1,543.70. Silver futures are now unchanged at
$36.155. Copper has reversed direction
and is now up $0.042 to trade at $4.1265 per lb. Oil remains lower, but well off their session
lows with WTI futures down just $0.23 to trade at $100.17.

Full text of EU Commission, ECB, and IMF fourth review
mission to Greece: LINK

Peru Markets Plunge as Leftist Humala Wins, Copper Reverses to Trade Higher

Monday, 6 Jun 2011 4:00 AM

Ollanta Humala,
has emerged victorious in Peru’s Presidential election runoff. Fears that Humala will make good on earlier
pledges of increasing the state’s role in the economy have sent investors
scrambling for the exits. The Lima
General Index has fallen over 10 percent while the local currency, the sol fell
,and yields on Peruvian government bonds soared. Although Humula has recently moved toward more centrist positions regarding governments’ proper role in the economy, fears persist over his political leanings and reported ties with Venezuelan President Hugo Chavez and Bolivian President Evo Morales.

U.S. traded copper mining heavyweight Southern Copper
Corporation (SCCO) is down $3.52 to trade at $31.20, off over 10%. The Peruvian company has been in a steady
decline since January when it reached its 52 week high of $50.35. While the recent string of weak growth
indicators have hit the entire mining sector, SCCO and Peruvian stocks in
general have been on the defensive as prospects of a Humala Presidential win
grew.

Like Bolivia’s Morales, and Venezuela’s Chavez, confiscation
of mining assets from the private sector by a Humala government is a serious
fear. It is generally assumed that any
such action would dry up investment funds into the sector, constraining future
supply. Copper, which had opened weaker,
has now edged into positive territory to trade at $4.14, up $0.0055. Gold and silver are maintaining their
pre-open gains. This is despite weakness
in the energy market, with crude oil hovering just above session lows. WTI crude futures are down $1.30 to trade at
$98.92.

Last month, Bolivian President Morales was reportedly
considering the re-negotiation of contracts with a number of listed mining
companies, possibly including the nationalization of some mining assets. The news sent shares of firms with mining
assets in Bolivia sharply lower. While
Morales appears to have backed off from any immediate move, concerns over the
possible confiscation of private property remains.

Both Peru and Bolivia contain a number of mining development
projects whose future look more uncertain under current administrations. The cost to finance any such project will, at
the very least, be more expensive in order to compensate for the added political
risk. While there will likely be no
disruption to the supply of precious and industrial metals from the region short-term,
longer-term, supply growth estimates will need to be ratcheted back.

Peru was the 5^th largest gold producer in 2006*
at 203,268 kilograms, the 3^rd largest copper producer in 2008** at
1,107,789 tons, and 2^nd largest silver producer in 2010*** at 116.1
million ounces.

*British Geological Survey

**United States Geological Survey Mineral Resources Program

***World Silver Survey 2011

Daily Dish: Metals Fluctuate, April’s Job Levels Disappoint

Tuesday, 7 Jun 2011 4:00 AM

Gold remains largely unchanged, dipping slightly in afternoon trading. Gold
for August delivery lost $3.20 (0.2%) to $1,544 an ounce on the Comex division
of the New York Mercantile Exchange. Earlier levels were as high as $1,551.40
an ounce, gold’s best price since early May.

The euro’s strengthening today has pushed the dollar down, which in turn has
helped other metals rise in late afternoon. Silver for July fluctuated
throughout the day, finally rising to 26 cents (0.7%) to $37.05 an ounce.
Earlier it had risen by as much as 1%. Copper for July delivery added 1 cent
(0.2%) to $4.15 a pound, while platinum and palladium rose to even higher
levels than gold and copper. Palladium closed its September contract at $809.50
an ounce, and platinum’s July delivery closed $9.50 up, to $1,830.70 an ounce.

Data were disappointing for April’s job market, according to a
recently-released government study. In March, there were 4.07 million open
positions, while in April there were 3.97 million.

Comex Silver Inventories Drop to a New Low

Tuesday, 7 Jun 2011 4:00 AM

The amount of physical silver at COMEX warehouses available
to make delivery on future contracts opting for delivery continues to
shrink. Gainesville Coins feels that the
ever shrinking level of registered silver inventory represents a noteworthy
aspect of the silver market. The CME’s recent
decision to increase margin requirements 5 times, or by about 85%, for silver
futures contracts, combined with this historic low in inventory bears watching.

We first wrote about this ongoing development on June 2,
2011. Interested readers can find the
article here: LINK

Current “registered” inventory stands at 28,773,375 ounces,
a 2.9% drop from the 29,636,513 yesterday.
Registered inventory represent the silver available to meet delivery
demands. The current front month July silver
futures contract has an open interest of just under 55,000 contracts. This represents nearly 275,000,000
ounces. If just 10% of these contracts
opted for delivery upon expiration, COMEX inventories would be essentially
exhausted.

The decline in COMEX inventories has been an ongoing,
multi-year development. If an actual
physical shortage were to occur, the implications for silver pricing in the
spot market would clearly be positive since demand for physical would rise as
COMEX bought to meet delivery demands.
Over the last six months, signs of the shortage in physical silver has
been periodically seen in futures pricing.
Specifically, the futures market had been in what is known as
backwardation – near month futures contract pricing for silver has been higher
than longer dated futures contracts.

Readers
should not consider this as investment advice.

Daily Dish: Gold Begins Week Higher

Monday, 6 Jun 2011 4:00 AM

As worries continue over the slow global recovery, gold is climbing higher
today. Weaker than anticipated data for the U.S. job market pushed the yellow
metals higher last week. Today, gold for August delivery was last up $12.10
(0.8%), to $1,554.70 an ounce on the Comex division of the New York
Mercantile Exchange. Silver was also supported by economic fears, and was up 93
cents (2.6%) to $37.11 an ounce.

Other metals were also performing higher. Platinum for July delivery added
$2.30 (0.1%) to $1,826 an ounce, and palladium for September delivery added
$10.50 (1.3%) to $796.05 an ounce.

Daily Dish: Safe-Haven Appeal of Gold Carries into Weekend

Friday, 3 Jun 2011 4:00 AM

Gold
maintained its upward momentum in Friday’s trading, as data showed U.S.
employers adding the smallest number of jobs since September. The job market
has been discouraging overall, giving the precious metal, acting as a
safe-haven alternative to U.S. currency, a gain of 0.3% for the week. Gold for
August delivery rose $9.70 (0.6%) to $1,542.40 an ounce on the Comex division
of the New York Mercantile Exchange. OPEC Defies the Optimists and Keeps Output Unchanged

Wednesday, 8 Jun 2011 4:00 AM

Iran and Venezuela led the dissenters at today’s OPEC
meeting, causing the cartel to decide on no change in its oil output. Oil prices jumped on the news with WTI crude futures
prices reversing opening losses to trade at $100.55, up $1.46 per barrel. The reversal in oil prices helped the major
stock averages pare some of their initial losses, but stocks and most
commodities remain in the red.

The clear signs that economic growth is stalling had led
some to believe that an OPEC output hike was possible. Recent comments from Saudi Arabia reinforced
these views. But OPEC dissenters, led by
Iran and Venezuela, argued that the uncertainty in the global economic outlook
justified no change in output. It should
be no surprise that Iran and Venezuela are very happy with $100+ oil, and are
less concerned over signs that developed economies may be slowing.

The loss of Libya’s 1.4 million barrels of output, and
rising levels of violence in Yemen raise the specter of ongoing shortfalls in
OPEC’s production output levels. OPEC
accounts for approximately 40% of world oil supply.

OPEC agreed to reassess the situation in 3 months time.

Daily Dish: Metals Close Out Week Lower

Friday, 10 Jun 2011 4:00 AM

In an about-face from yesterday, crude oil prices dropped, helping the
dollar gain strength, and causing gold to lose strength, closing at its lowest
level since May 26th. Crude oil futures settled 2.6% lower than yesterday, down
to under $100 a barrel at a close of $99.29 a barrel.

Gold for August delivery reacted to renewed optimism in the economy by
falling $13.50 (0.9%) to a new level of $1,529.20 an ounce on the Comex
division of the New York Mercantile Exchange.

Silver for July delivery lost $1.10 (2.9%) to $36.33 an ounce. Despite today’s dip, silver
still ended the week with a 0.4% gain. Copper for July delivery was down again
Friday, losing 5 cents (1.3%) to $4.06 a pound. Copper has lost 1.7% this week
overall. Platinum for July delivery lost $11.70 (0.6%) to $1,833 an
ounce, still managing a 0.5% weekly gain. And palladium for September delivery
dropped by 80 cents (0.1%) to close at $817.30 an ounce, showing a gain of 4.1%
overall for the week.

renewed
fears over Greece’s economy. U.S. stocks are down for the 6th straight week.

Why the Level of Registered Silver Inventory at COMEX Bears Watching

Friday, 10 Jun 2011 4:00 AM

The fall of registered silver inventories at COMEX naturally
raises questions on whether a physical supply shortage is possible. The low level of registered inventory at the
COMEX has garnered the interest of many market commentators. An examination of monthly delivery notices
from the CME will hopefully shed some light on how serious the current level of
registered silver inventories at the COMEX is.

Link to CME year to date delivery notices: LINK

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As of 6/9/2011, the total registered silver inventory at
COMEX was 28,697,092 ounces. At the
close of trading of 6/9/2011, open interest in the July Silver futures contract
was 47,701. Each contract represents
5,000 ounces so the total open interest represents 238,505,000 ounces. The bulk of these contracts represent
speculative interest or hedging activity that will not result in actual
delivery taking place. But as the year
to date delivery notices show, a percentage of these contracts will take
delivery. It is worth noting the spike in March, with 8,740,000 ounces delivered.

If registered silver inventories at the COMEX continue to
fall, the possibility that this would have an impact on the silver market
increases.

Gainesville Coins feels that until registered inventories at
the COMEX turns higher, the ongoing fall in inventories is worth paying
attention to.

The following shows the path of registered silver
inventories: LINK

Daily Dish: Gold Gains Momentum on European Central Bank’s Decision

Thursday, 9 Jun 2011 4:00 AM

Attention on Europe’s inflation concerns pushed gold ahead in Thursday’s
trading, ending its 2-day losing streak. Gold for August delivery was up $4
(0.3%) to $1,542.70 an ounce on the Comex division of the New York Mercantile
Exchange. The European Central Bank (ECB) met to decide how to proceed with its
monetary policy, and left interest rates unchanged at 1.25%. However, President
Jean-Claude Trichet has hinted at the possibility of further rate hikes coming
at the next meeting, in July. After the results of the meeting were publicized,
the euro lost ground against the dollar, down 0.5%.

Gold was further bolstered by rising crude oil prices. Crude for July
delivery added $1.19 on thursday, a jump of 1.2% for a close of $101.93 a
barrel on the New York Mercantile Exchange. Higher oil prices increase public
fears of inflation hikes.

Other metals were performing well in late Thursday trading. Silver
outperformed gold, with July delivery adding 80 cents (2.2%) to $37.42 an
ounce. Palladium for September delivery was up $12.40 (1.5%) to a close of
$818.10, and platinum for July delivery added $13.50 (0.7%) to $1,844.70 an
ounce.

Daily Dish: Dollar Index Rises, Bernanke’s Speech Makes Waves

Wednesday, 8 Jun 2011 4:00 AM

The U.S. dollar index has climbed higher today, most recently at 73.899, up
from 73.528 in late afternoon levels yesterday. Gold was heading downwards in
response, as a higher dollar index turned investors away from the yellow
metal.Gold for August delivery was down $5.20 (0.4%) to $1,538.80 an ounce on
the Comex division of the New York Mercantile Exchange.

In his speech yesterday, Bernanke voiced support for U.S. currency, agreeing
that economic recovery is slow, but also predicting an upturn in the economy
towards the second half of the year. This positive plug for the dollar has
diminished gold’s appeal today. Analysts say that gold’s dip today does not
signify future lows, however; overall, a weaker economy should support gold
buying.

Furthermore, Bernanke’s speech has caused a major debate, as many accuse him
of trying to mitigate his role, and the role of the Fed, in the current market
crisis.

Silver was lower in early afternoon trade, losing 44 cents (1.2%) to $36.61
an ounce. Copper was
losing 5 cents to $4.10 a pound, palladium for September delivery was
dipping $2.70 to $806.80 an ounce, and platinum for July delivery was last down
$1.90 to $1,828.80 an ounce.

Daily Dish: Metals Dip in Early Afternoon Trade

Monday, 13 Jun 2011 4:00 AM

The weaker U.S. economic outlook is pushing commodities and metals down
today. Data released on Friday of last week indicated that the U.S. is having a
hard time keeping up its slow and steady recovery pace, and the dollar has lost
ground in response. Oil was losing 3%, and gasoline prices have been down by as
much as 30 cents in some areas.

Gold for August delivery was dropping $3.70 (0.2%) to $1,525.50 an ounce on
the Comex division of the New York Mercantile Exchange. Other metals have been
following gold down this afternoon; silver for July dipped by 95 cents (2.6%)
to $35.38 an ounce, and copper for July delivery lost 2 cents (0.5%) to $4.04 a
pound.

Overseas, investors were feeling more optimistic about Greece’s inflation
woes, which has added strength to the euro. The dollar index was last measured
at 74.679, down from
Friday’s level of 74.801.

Further market action will be measured against China’s anticipated update on
everything from consumer prices to production. Some analysts expect growth in
China’s wealthy middle class to carry gold to new high levels in the future.

Daily Dish: Gold and Silver Recover Ground on Weaker Dollar

Tuesday, 14 Jun 2011 4:00 AM

The dollar turned lower Tuesday, giving gold a greater consumer appeal. Gold
for August delivery added $8.80 (0.6%) to $1,524.40 an ounce on the Comex.
Silver began the day a little unsteady, but picked up the pace in afternoon
trade, gaining 67 cents (1.9%) to $35.41 an ounce.

Chinese data recently released shows positivity in the economy there, adding
value to copper and other base metals. Copper for July delivery added 12 cents
(3.%) to $4.16 a pound. The dollar index, aiding metals by its own loss, was
last at 74.332, down from yesterday’s level of 74.501. The automotive industry
has not been performing well, and this has dragged palladium and platinum down.
Palladium for
September dropped 1% to $792.75 an ounce, and platinum for July delivery
declined 0.7% to $1,794.90 an ounce.

Despite discouraging economic data coming in recently, consumers may be
heading for some relief. Wholesale food prices have been dropping, according to
recent studies, and lower gasoline prices are holding steady. The future
remains uncertain, however, and disappointing automobile sales continue to
underline the economy’s slow recovery.

Standard Chartered Bank Predicting Big Gains for Gold Prices

Tuesday, 14 Jun 2011 4:00 AM

Research analysts at Standard Chartered Bank are predicting
a very strong outlook for gold prices in a just released industry report. Specifically, the report focuses on three
main points.

1.
Central
Banks are now net purchasers of Gold.

2.
Supply growth will be extremely limited, with a
base case growth estimate of 3.6%.

3.
Rising household income in China and India

As Gainesville Coins has highlighted in the following piece –
Snapshot of Central Bank Gold Reserves – Standard Chartered points out that
Central Bank gold selling, which peaked at 674 tons in 2005, have now reversed,
with Central Banks buying 129 tons in the first quarter of 2011. Annualized this represents 517 tons. This represents a key change in the supply
and demand dynamics for the gold market.

Specifically, the report points out that China currently has
just 1.8% of its foreign currency reserves in Gold bullion. “If China were to bring this percentage
in-line with the global average of 11%, it would have to buy 6,000 tons of
gold, or more than 2 years of global production.”

Second, Standard Chartered points out the extremely low
level of growth in supply expected over the coming years. Highlighting this fact, Standard Chartered
identifies only 7 gold mines capable of adding more than 500,000 oz. of gold
production between 2011 and 2015.

Finally, the report shows a very compelling correlation
between rising household income in China and India to the price of gold. The rising level of demand this represents,
combined with Central Bank buying and weak production growth puts gold prices,
according to the analysts, on a continued upward trajectory.

On a final note, the report does highlight the ongoing
deterioration of U.S. fiscal policy and record U.S. debt levels as being a
support for the more stably perceived value of gold.

The conclusions of the report state that the factors
outlined “can potentially drive the gold price to US $5,000/oz.”

An interesting read. The themes brought up in this report are similar to other bullish scenarios for gold prices put forth by the investment banking community. Gainesville Coins feel it noteworthy to highlight some of the current thinking among these analysts.

LINK

European Central Banks Now Net Buyers of Gold

Thursday, 16 Jun 2011 4:00 AM

European Central
Banks Now Net Buyers of Gold

As Gainesville Coins has pointed out, Central Banks are now
net buyers of gold – (A Snapshot of Central Bank Gold Reserves). While
Central Bank buying has primarily involved China, India, and Russia, European
Central Banks have joined the list of net purchasers in 2011. An article from Gold Core provides a solid summary of current market
conditions, its impact on gold prices, and the addition of European Central
Banks to the list of Central Banks seeking to add to their gold reserves.

Some of the key points are:

“The increasing talk of a “Lehman moment” in Europe is due
to real concerns that a sovereign default could lead to contagion and a new global
credit crisis which could send shock waves through markets and see risk assets
come under pressure. “

“Euro gold is less than 1% from a new record nominal high
(when converted from Deutsche mark) against the euro.”

“Central banks have already bought 129 metric tons in 2011
through April, exceeding last year’s total of 90 tons. This represents a
sizeable 43% increase in demand when compared with the first four months of
2010.”

“Indeed, it is a very important development that Eurozone
central banks have become net buyers of gold in 2011. This is the first time
that this has happened since the inception of the euro in 1999.”

The article points out that while the Eurozone central banks
have not been significant purchasers of gold to date, the more noteworthy
aspect of this development is the loss of supply from Eurozone central bank
selling.

As pointed out in the Standard Chartered research report we
highlighted – LINK - supply constraints will represent a key factor in the future of gold price
dynamics.

A Bullish Opinion for Silver

Friday, 17 Jun 2011 4:00 AM

Gainesvillecoins.com came across this interesting piece on
Seeking Alpha – The Case for
Silver – written by Prieur du Plessis, one of Seeking Alpha’s many
contributors.

Plessis’ article delves into a number of factors affecting
the price of silver, and concludes with a recommendation to buy silver. Gainesville Coins is pleased to provide a
highlight of some of the key arguments.

The most compelling aspect of the article is a historical
graph showing the correlation of China’s manufacturing purchasing manager’s
index and the price of silver. The chart
annualizes the average trend for the years between 2005-2007, and 2010 for both
China’s PMI and silver, and there is indeed a strong visual correlation. However, Plessis does not quantify the
correlation, and the odd selection of years used raises some questions. Specifically, what happened to 2008 and 2009
data – perhaps Plessis threw this data out as outliers due to the financial
crisis? If true, it would seem that such
an explanation should have been included.
As it is, only four years of data is included in the sample, not a very
large sample size.

However, if one were to accept the chart at face value, the
seasonality of China’s PMI and silver prices would suggest that both PMI and silver
prices typically see a drop-off in the summer months, with a noticeable pick-up
starting in August.

Another compelling argument made by Plessis is the overall
growth in China’s silver fabrication demand.
As any silver investor likely knows, silver’s industrial usage is the
primary component of silver demand. The
growth in Chinese demand has closely matched the country’s economic expansion –
this year projected at about 9.6%.
Meanwhile, on the supply side, Plessis points out that China’s mining
supply has increased by a much more modest 4% per year. Extrapolating into the future, by 2015, China
will face a net shortfall of 66 million ounces per year. (excluding scrap
recovery and investment demand)

Plessis points out that as of 2007, China had become a net
importer of silver, and currently China is a net importer of around 11% of
total world supply.

A third compelling argument made by Plessis is a historical
look between open interest in silver futures contracts, and silver prices. There is indeed a visual correlation, but
Plessis doesn’t quantify it. However, it
would appear that as open interest rises, silver prices follow with a slight
lag, and conversely.

The other main point made by Plessis seems a bit
spurious. He compares silver price
action following the Kobe earthquake with the more recent Tohoku earthquake,
but the chart provided isn’t really compelling.
Once again, Plessis doesn’t quantify the correlation.

An interesting piece which has some compelling arguments,
and some less compelling arguments.

The Frank-Dodd Bill Does NOT Impact Retail Investors Ability to Own Gold or Silver

Thursday, 23 Jun 2011 4:00 AM

Gainesville Coins has been receiving a number of inquiries
regarding the impact of the Frank-Dodd financial overhaul bill on the silver
and gold market. Specifically, we have
been asked whether the legislation has any similarity to the U.S. government’s
actions in 1933 that removed gold coins from circulation and made it illegal
for U.S. citizens to own gold. The
Frank-Dodd legislation DOES NOT impact the individual investor’s ability to own
gold and silver.

The impact of the Frank Dodd legislation on the precious
metals market is to restrict the ability of brokerages from providing investors
the ability to trade in over the counter (OTC) futures, including gold and silver
futures.

There are two venues to trade derivatives, including futures
– The over the counter derivatives market, and exchange traded derivatives
market. Over the counter derivatives are
traded off an exchange. For precious
metals investors, the CME is the main exchange for gold and silver derivatives,
including futures and option. The
legislation only impacts those trades that DO NOT occur on an exchange. Futures and options that trade on an exchange
are not affected.

In an OTC futures transaction, the buyer and seller enter
into an agreement to buy or sell gold at a predetermined price, quantity, and
date. Like exchange traded derivative
contracts, margin requirements are set to ensure that both parties will perform
on their obligation to either buy or sell.
However, unlike exchange traded futures, these transactions are not
centrally cleared. This means that a
failure to perform by one side of the transaction could result in economic harm
to the other side of the transaction. This
is known as counterparty risk. Futures
traded on an exchange, like the CME, do not subject either party to
counterparty risk, and this is the reason for the changes being made through
the Frank-Dodd legislation.

During the financial crisis of 2008, OTC derivatives,
specifically OTC derivatives tied to BBB tranches of subprime mortgages caused
a near total financial meltdown when AIG was unable to perform on its
obligation. AIG had written hundreds of
billions of dollars in OTC credit default swaps on BBB tranches of subprime
mortgage securitization. When these
securities went down on the housing market implosion, AIG did not have sufficient
cash to pay the buyers of this insurance.
This is one of the main reasons for the Dodd-Frank Legislation. Because these derivative contracts were over –the-counter,
and not centrally cleared, AIG’s failure to perform on its obligation raised
the possibility of a cascade of financial failures. The Federal Government was ultimately forced
to intervene to stop the financial contagion.
Removing the risk of counterparty failure, and thus moving much of OTC
derivatives market onto an exchange, is one of the key drivers behind this
legislation.

With all that said, hopefully with some clarity, Gainesville
Coins would like to re-iterate that there IS NO IMPACT on individual’s ability
to own gold or silver. The only impact
is on the ability of an individual to buy gold and silver in the OTC
market. There is no change to gold and
silver futures traded on an exchange.

Finally, it should be noted that there are exceptions to
this legislation. For example, if you
can qualify as a Qualified Eligible Participant (QEP), you are exempt from this
legislation. For example, to qualify as a QEP, you would need to show a net
worth of $1 million in assets. Also if
you can prove that you can satisfy the obligations created by an OTC futures transaction within 28
days, you would also be exempt. It is up
to each brokerage house to determine whether an individual investor qualifies
under these exemptions. As a final note, the Frank-Dodd legislation only impacts leveraged or margined OTC transactions. These changes go into effect on July 15th, 2011.

Gainesville Coins hopes you find this explanation
helpful. If you have any further
questions, or need any clarifications, please feel free to let us know.

A Positive Overview on the Gold and Silver Market

Wednesday, 29 Jun 2011 4:00 AM

The Screaming Fundamentals For Owning Gold and
Silver

This report by Chris Martenson, an independent investor,
provides an interesting overview of the gold and silver market. The report contains a number of interesting
factoids as relates to the current investing environment. For example, data from the World Gold Council, research from Standard
Chartered, data from the Silver Institute,
and monetary supply growth data from the Federal Reserve
highlight many of the demand and supply factors that will likely play a role in
the price action of gold and silver going forward.

Gainesville Coins came across the article at ZeroHedge.com,
and it can also be found on Chris
Martenson’s website.

A number of the points that Mr. Martenson brings up are
factors we have previously highlighted, including Central Banks now being net
buyers of gold, the limited supply growth for both gold and silver highlighted
by the World Gold Council, and the Silver Institute, and the rapid increase in
money supply resulting from Federal Government deficit spending and the Federal
Reserve monetary easing.

Legislative Initiative to Eliminate Capital Gains Taxes for Gold and Silver Coins

Wednesday, 29 Jun 2011 4:00 AM

Gainesville Coins has become aware of an interesting development
that would make owning gold and silver coins ever more attractive as a store of
value. The Salt Lake Tribune reported on
Monday, that Utah Senator Mike Lee, along with Senator Jim DeMint of South
Carolina and Senator Rand Paul of Kentucky, are to introduce legislation that
would eliminate federal capital gains taxes for gold and silver coins.

Utah’s state legislature passed a similar measure in May,
making gold and silver legal tender and removing any state capital gains tax
for silver and gold.

The full article: Lee:
Gold, silver should be treated like currency

Update of Registered Silver Inventory at COMEX

Friday, 1 Jul 2011 4:00 AM

Update of Registered
Silver Inventory at COMEX

Two weeks have passed since our last update on registered
silver inventories at COMEX warehouses. During the interim Greece has managed to captivate
the world with another financial contagion induced stock market scare, and economic
data the world over has continued to paint a fairly bleak picture of economic
growth prospects. Precious metals prices
during this time have traded within a fairly tight range, with silver generally
holding between $32 and $35 per oz, while gold prices have traded largely
between $1,500 and $1,550 per oz.

It should be no surprise that as of 6/30/2011, registered
silver inventories at the COMEX have fallen yet again to 28,090,714 ounces from
the 28,697,092 we reported on June 10^th. As usual the low level of registered silver
inventories is apparently having little impact on silver prices which remain
locked in the aforementioned range.
However, as we had pointed out last time, this low inventory level continues to make new 12 year lows.

With silver demand for industrial and investment purposes
expected to remain steady going forward, and no dramatic changes in supply
expected, the low level of registered silver inventory to satisfy futures
contracts that opt for physical delivery remains a factor worth paying
attention to going forward.

If recent history is any guide, it would appear that the
value of silver is impacted more by margin level requirements by the CME, and
less by any shortage or excess of physical supply to meet futures’ delivery demand.

The following chart from Bloomberg shows the path of registered
silver inventories: LINK

For Gainesville Coins readers that wish to read more on this
topic, the following article by fund manager Eric Sprott may prove
interesting: LINK

Market Update: European Debt Fears Resurface on Portugal Downgrade

Monday, 6 Jun 2011 4:00 AM

Europe’s debt problems have again re-ignited risk aversion
following Moody’s decision yesterday to downgrade Portugal’s sovereign credit
rating to junk. Portugal, which was the
third European country to receive a bailout, was downgraded four notches to ba2
from Baa1 on concerns that like Greece, the country would be unable to access
capital markets. Yields on Portuguese
debt have surged as a result, as did yields on other European sovereign debt
perceived as weak credits. Beyond
Greece, Portugal, and Ireland, whom have received bailouts, Belgium, Spain and
Italy are also perceived to be at risk.
The machinations over how to structure private sector creditor
participation for Greece’s second bailout also continue. The proposals are now changing daily, and the
only thing clear from the ongoing discussions is that uncertainty remains. Overnight, China’s central bank raised
interest rates 0.25% in its ongoing effort to tame high levels of inflation –
the third such increase in 2011. Along
with repeated increases in bank reserve requirements, Chinese authorities have
failed to reign in inflation which hit 5.5% in May.

U.S. stock index futures are showing a negative bias heading
into the open as investors reassess last week’s quarter end surge. The relief that Greece would avoid default in
the near-term has been replaced by fear of the broader state of European finances. China’s rate move adds to the uncertainty as
repeated attempts to slow the world’s second largest economy raise concerns
overall on global economic growth.

Commodities are mostly lower this morning. Precious metals are somewhat outperforming,
holding mostly flat in early trade. Gold
futures are up $1.70 to trade at $1,514.40 per oz., building slightly on yesterday’s
surge which saw gold prices rise the most in over five weeks. Silver futures are holding flat,
down $0.10 at $35.375 per oz.

Among industrial commodities, copper futures are down $0.033
to trade at $4.3145 per lb. Copper has
been on a significant run, having risen from under $4.00 per lb in mid-July. WTI crude futures are lower on all the
negative news, down $0.73 to trade at $96.16.

The economic calendar today includes the ISM
non-manufacturing index for June at 10:00am.
Bloomberg is reporting the current consensus estimate at 54.0 following
the prior month’s 54.6. Earlier the
Challenger Job cut report showed layoff’s remained subdued at 41,432, but did
rise from the prior month’s read of 37,135.
At its peak in January of 2009, the index had exceeded 235,000. The news is a positive, but focus remains on
the more significant ADP employment report tomorrow at 8:15am, and Friday’s
non-farm payroll report at 8:30am.

As might be expected both the USD and Treasuries are broadly
higher. The 10 year Treasury is
currently yielding 3.09%.

Interest in Gold and Silver Could Rise ahead of July 22nd 2011 – The Actual Debt Ceiling Deadline

Thursday, 7 Jul 2011 4:00 AM

The clock is ticking, and the U.S. Federal Government is
moving closer to defaulting on its $14.3 trillion debt. The Obama administration has outlined July 22^nd
as the latest a debt ceiling deal can be reached in order to be legislated by Congress and
enacted by Treasury before the August 2^nd deadline Treasury
Secretary Geithner has stated as the final day it can manage to skirt default
via “creative” accounting. This has
predominantly meant taking money from the Social Security General Fund and the
Civil Service Retirement and Disability Fund in exchange of an IOU. To
maintain government operations without breaching the debt ceiling, Treasury has
effectively raided these accounts of $120 billion which ultimately must be paid
back.

If and when the debt ceiling is raised, debt sales by the
U.S. government will be elevated as Treasury fills the gap created by its
inability to issue the debt needed to fund the federal budget deficit between
June 1^st and August 2^nd.
Treasury securities are expected to be pressured by the increase in
supply and the absence of Federal Reserve buying now that quantitative easing
is behind us.

There are a number of reasons why the approaching July 22^nd
deadline will be a factor for gold and silver prices. First, a principal driver of precious metals
demand over the past decade has been general concern over the rate of money
printing by the Federal Government. With
a projected budget deficit of $1.6 trillion this year, and expectations of $1
trillion plus deficits for the foreseeable future, debt to GDP for the U.S. is
rapidly approaching 100%. By comparison Greece,
which is now paying the price for its over-borrowing will have debt to GDP of
156% by year end. Italy, which is
rapidly finding itself in the crosshairs of bond vigilantes has debt to GDP of
around 120%. The U.S., with its current slow rate of employment and wage
growth, $1 trillion plus annual deficits, and an estimated $100 trillion in
unfunded liabilities – principally Medicare and Medicaid – is currently on a
fiscal path that is clearly unsustainable. U.S. GDP forecasts for 2011 is around $15.1 trillion. At current deficit spending rates, the U.S. will breach the 100% debt to GDP level sometime in 2012.

Any increase in Treasury yields caused by the increased
supply post August 2^nd would be a serious concern for the second
main source of U.S. dollar money printing – The Federal Reserve. Fed Chairman Ben Bernanke has gone to extreme
lengths to keep borrowing costs low, hoping to re-ignite economic growth, and
ease pressures on overleveraged consumers.
The end result has been the expansion of the Fed’s balance sheet to $2.6
trillion. This chart from the St. Louis Fed shows the rapid growth in money supply since the 2008 financial
crisis. If Treasury yields rise to a level which imperils the already weak U.S. economic recovery, expectations of another round of quantitative easing will rise implying a weaker USD, and stronger demand for hard assets like gold and silver.

While there can be no certainty over what gold and silver
prices will do as July 22nd approaches, the factors that have been driving
interest in precious metals will be put in high relief as the deadline
nears. Gainesville Coins feels that the
next two weeks will certainly prove interesting for financial markets in
general, and precious metals in particular.

The Birth/Death Adjustment to the Monthly Payroll Statistics – June

Friday, 8 Jul 2011 4:00 AM
While this morning’s release of the June non-farm payroll report is
unambiguously dismal, it is worth highlighting the positive effect of
the Birth/Death adjustment on the June numbers. As Gainesville Coins has previously pointed out, the Bureau of Labor Statistics birth/death adjustment
has had a significant, positive impact on the monthly payroll reports
over the last fourteen months to the tune of 939,000 jobs. This month’s
adjustment amounts to 131,000 jobs added. Without the adjustment, the
actual headline non-farm payroll number would have been negative 113,000 jobs for June, not the positive 18,000 reported.

The
merits of the birth/death adjustment – which in the nutshell estimates
jobs created by new business less jobs lost from closing businesses -
will remain a subject of debate.

However, as our previous article
on the subject pointed out, this adjustment is highly seasonal. In the
second half of the year, the birth death adjustment will be flat to
negative. With no clear catalyst to re-ignite global economic growth,
any job growth in the month’s ahead may prove to be hard to realize.
Without the positive influence of the birth/death adjustment over the
next six months, negative job growth, along with higher unemployment,
and lower wages would not be surprising.

Expect speculation to
begin on when the next round of Federal Reserve monetary easing is to
start. Given the fact that quantitative easing part deux (QE2) was
announced at last August’s Central Bank conclave in Jackson Hole, CO,
the possibility of a repeat announcement for QE3, or some derivative of
it this August continues to grow. This morning’s jump in gold and
silver prices following the June payroll data, was in part a response to the increased probability of more
monetary stimulus from the Fed.

A Playbook if Europe Sparks a Global Crisis

Tuesday, 12 Jul 2011 4:00 AM

With the European debt crisis moving from
the periphery – Portugal, Ireland, Greece
- to the core of Europe – Italy and Spain – the question of what happens if the
crisis sparks a complete financial meltdown becomes increasingly relevant. Obviously there are few examples of what a
sovereign debt default on the scale now evolving in Europe will mean for
financial markets, but thankfully, the recent mortgage meltdown in the U.S. in
2008 provides some insight to how financial markets, and policy makers, will
respond.

Perhaps the most significant lesson from the 2008 financial
crisis was the interconnectedness of global financial markets. It should be remembered that then Treasury
Secretary Hank Paulson and Federal Reserve Chairman Bernanke both announced in
2007 and early 2008 that the subprime crisis was “contained.” Nothing could have been farther from the
truth. The repackaging of toxic mortgage
debt had been liberally sprinkled globally, with notable concentrations in such
hapless countries like Iceland and Ireland.
In addition, a relatively unknown financial market innovation called the
credit default swap (CDS) was about to make its worldwide debut. Essentially credit default swaps are
insurance on the performance of a bond.
In this case, it was insurance on debt comprised of toxic mortgage
securities, or debt packaged with toxic mortgage securities. The amount of CDS written, and its
concentration, were facts unknowable to all but a select few trading desks that
made a market in these ticking time bombs.
The end result of these two risks – bad mortgage bonds and CDS contracts
on these bonds, was a global financial rout that led to the demise of Lehman
Brothers, the bailout of AIG, the conservatorship of Fannie Mae and Freddie
Mac, the distressed sale of Merrill Lynch and Countrywide Financial to Bank of
America, the distressed sale of Wachovia to Wells Fargo, and the distressed sale
of Bear Stearns and Washington Mutual to JP Morgan – not to mention the bank
failures in Europe.

In this current crisis, the two risks are similar – bad European
sovereign debt and CDS contracts on this debt.
Just as the U.S. financial system had heavy concentrations of mortgage
debt, the European financial system has a heavy concentration of European
sovereign debt. Like CDS contracts on
toxic mortgage debt securities, there is an outsized outstanding amount of CDS
contracts on certain European sovereign bonds – in this case Italy. However, before sighing in relief that this
is a European problem, the interconnectedness of global financial markets means
the U.S. financial system is not immune.
In particular, it has been widely reported that money market funds, in a
search for yield, have become major investors in short-term European bank
debt. Also, like in 2008, it is unknown which
proprietary U.S. trading desks have a heavy concentration of CDS. Finally, institutional U.S. fixed income portfolios, including insurance companies and pension funds, will also have some holding of European sovereign debt.

Risk assets will fall

If a full-fledged crisis were to develop, all risk assets
would fall as Europe’s financial system imploded. The fear of another global
recession, or worse, would lead to a flight to safety. The prime beneficiaries would by the US
dollar and US Treasuries, the Japanese Yen, and perhaps the Swiss franc. This is what was seen in 2008.

At this point it is worth highlighting the fact that during
the worst of the crisis in the autumn of 2008, even gold prices fell, briefly
breaching under $800 per ounce as investors scrambled to raise cash. Silver did even worse, reacting more as an
industrial metal, and less like a precious metal, silver prices dove to under
$10 per ounce. However silver’s high
leading into 2008 was far below its recent range of between $33 and $35.

Policy Response to
Stem Crisis – Opportunity?

The predictable policy response from governments the world
over would likely be massive amounts of monetary and fiscal stimulus, and a bailout of the European banking system, just like
happened in 2008. Quantitative easing,
or the purchase of government bonds by central banks, would probably accelerate
amid massive amounts of fiscal spending by governments to counter the slump in
economic activity.

It is at this point that concerns over fiat currency money
printing, and record low interest rates, will spur investors to assets that
will protect their purchasing power.
Gainesville Coins would therefore not be surprised to see interest in
precious metals, particularly gold and silver, pick up at this point. While an initial crisis induced sell-off in
gold and silver would be unsurprising, the end result would likely be an interesting opportunity if the worst case scenario were to come to pass.

June 21-22 FOMC Minutes Indicate Fed Could be Open to QE3 – Gold and Silver Jump

Tuesday, 12 Jul 2011 4:00 AM
Stocks and commodities have jumped following the 2:00 pm release of the June 21-22 Federal Reserve Open Market Committee (FOMC) meeting minutes. The release of the Fed’s last FOMC meeting minutes indicated that the Fed is open to the idea of additional monetary easing if “economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run.”

The obvious takeaway is that this is the first sign that another round of quantitative easing could be on its way. With last Friday’s release of the anemic June non-farm payroll report, the Fed’s FOMC minutes take on greater significance.

Stocks which had been holding near unchanged prior to the release immediately spiked to session highs. Gains remain modest, but are a far cry from pre-market declines which had seen U.S. stock index futures trading down 1.8%. European sovereign debt concerns had see all financial market solidly lower overnight. A successful auction of 1 year Italian bonds, and speculation that the ECB could have been buying distressed Euro area sovereign securities led to a modest pre-market recovery. All three major averages are currently up by less than .5%.

Commodities have been tracking stocks, with industrial commodities now at session highs. Copper futures and WTI crude futures had been slightly higher before the FOMC release, but both have spiked higher. Copper futures are now up $0.0325 to trade at $4.40 per lb. WTI crude futures have gained $2.25 to trade at $97.30.

Precious metal commodities are the star performers following the FOMC release. Gold futures are now up $23.10 to trade at $1,572.30 while silver has pared earlier declines to trade up $0.66 at $36.36.

The USD has weakened, with the EUR actually higher against the greenback now. Treasuries continue to hold solid gains, with the 10 year Treasury yield at 2.91%.

European debt concerns seem like a distant memory - for the moment.

There are two upcoming venues in which Federal Reserve Chairman Bernanke could announce additional monetary easing measures. The first is the semi-annual Humphrey-Hawkins Congressional testimony on July 13th-14th. The second is the upcoming Central Bankers conclave in Jackson Hole Co., scheduled for August.

Say it isn’t so – Moody’s Downgrades Ireland to Junk

Tuesday, 12 Jul 2011 4:00 AM
In a day filled with twists and turns, Moody’s announced that it had downgraded Ireland’s sovereign debt rating to Ba1 from Baa3. Ireland, which was the second country to receive a EU-IMF bailout has been hobbled by its banking sector which had loaded up on bad assets leading up to the 2008 U.S.-led financial market meltdown. Ireland had its own version of the U.S. property market bubble, which crashed in just as spectacular fashion. As a result, the Irish government bailed out several of its major banks, as well as guaranteeing the senior debt of said banks. The jump in total indebtedness, along with a sharp increase in budget deficits and rising yields eventually forced Ireland to turn to the EU-IMF for funding.

The news caused the earlier euphoria that another round of monetary easing was possible following the 2:00pm release of the FOMC minutes to dissipate into the close. Stocks closed at session lows, with all three major averages in the red. The Nasdaq composite was the laggard, closing down .77%.

Commodities managed to maintain a positive tone, with gold and silver notably outperforming. Gold futures are currently up $19.60 to trade at $1,568.80, while silver futures are up $0.427 to trade at $36.1125 per oz.

Today’s downgrade follows Moody’s July 6th decision to cut Portugal’s credit rating to junk. That move sparked the current evolution of the European debt crisis to encompass Italy and Spain. Recent comments from EU politicians criticizing Moody’s July 6th downgrade, and threatening to take some sort of action, has evidently had no impact.

A Simple Reason Why Interest in Precious Metals Will Continue

Wednesday, 13 Jul 2011 4:00 AM
Courtesy of Zerohedge.com is this chart of the IMF’s projection of U.S. debt to GDP compared to the Congressional Budget Office’s projections.

As Gainesville Coins has previously pointed out, U.S. debt to GDP is on track to breach 100% sometime next year. For comparison purposes, Italy, which is now firmly embroiled in the European sovereign debt crisis, has debt to GDP of 120%. Greece is expected to have debt to GDP of 156% by year end. Unfortunately for Greece, recently released data shows that actual debt to GDP may end up being significantly worse as tax revenues lag and expenditures exceed forecasts.

At some point, the growth in U.S. debt relative to GDP will become an issue. According to the IMF’s projection, it won’t be long until debt ceiling increases will be required in ever more frequent intervals or ever larger amounts, or ever more frequent AND ever larger amounts.

Of course, some could point to Japan, which has the highest debt to GDP in the developed world, topping 200% debt to GDP. However, the key difference here is that Japan has a high domestic savings rate and a sizable current account surplus. The U.S. has a relatively low domestic savings rate and has a sizable, and growing, current account deficit.

As if on que, after the close today, Moody’s has put the U.S. AAA debt rating on creditwatch stating “Moody’s considers the probability of a default on
interest payments to be low but no longer to be de minimis. An actual default,
regardless of duration, would fundamentally alter Moody’s assessment of the
timeliness of future payments, and a Aaa rating would likely no longer be
appropriate.”

In honor of the tragic comedy that is the upcoming July 22nd debt ceiling deadline, Gainesville Coins is proud to provide you the following history of U.S. debt ceiling increases.

February 2010 – $14.294 trillion
December 2009 – $12.394 trillion
February 2009 – $12.104 trillion
October 2008 – $11.315 trillion
July 2008 – $10.615 trillion
September 2007 – $9.815 trillion
March 2006 – $8.965 trillion
November 2004 – $8.184
May 2003 – $7.384 trillion
June 2002 – $6.4 trillion
August 1997 – $5.95 trillion
March 1996 – $5.5 trillion
August 1993 – $4.9 trillion
April 1993 – $4.37 trillion
November 1990 – $4.145 trillion
October 1990 – $3.23 trillion
November 1989 – $3.1227 trillion
August 1989 – $2.87 trillion
September 1987 – $2.8 trillion
August 1987 – $2.352 trillion
July 1987 – $2.32 trillion
October 1986 – $2.3 trillion
August 1986 – $2.111 trillion
December 1985 – $2.0787 trillion
November 1985 – $1.9038 trillion
October 1984 – $1.8238 trillion
July 1984 – $1.573 trillion
May 1984 – $1.52 trillion
November 1983 – $1.49 trillion
May 1983 – $1.389 trillion
September 1982 – $1.2902
June 1982 – $1.1431 trillion
September 1981 – 1.0798 trillion
September 1981 – $999.8 billion
February 1981 – $985 billion
December 1980 – $935.1 billion
June 1980 – $925 billion
September 1979 – $879 billion
April 1979 – $830 billion
August 1978 – $798 billion
October 1977 – $752 billion
June 1976 – $700 billion
March 1976 – $627 billion
November 1975 – $595 billion
February 1975 – $577 billion
June 1974 – $495 billion
December 1973 – $475.7 billion
October 1972 – $465 billion
March 1972 – $450 billion
March 1971 – $430 billion
June 1970 – $395 billion
April 1969 – $377 billion
June 1967 – $358 billion
March 1967 – $336 billion
June 1966 – $330 billion
June 1965 – $328 billion
June 1964 – $324 billion
November 1963 – $315 billion
May 1963 – $309 billion
July 1962 – $308 billion
March 1962 – $300 billion
June 1961 – $298 billion
June 1960 – $293 billion
June 1959 – $295 billion
September 1958 – $288 billion
February 1958 – $280 billion
July 1956 – $278 billion
August 1954 – $281 billion
June 1946 – $275 billion
April 1945 – $300 billion
June 1944 – $260 billion
April 1943 – $210 billion
March 1942 – $125 billion
February 1941 – $65 billion
June 1940 – $49 billion
December 1939 – $45 billion
December 1919 – $43 billion

What Will it Take for QE3 by the Federal Reserve?

Thursday, 14 Jul 2011 4:00 AM

It is now clear from the recently released minutes of the
June 21^st FOMC meeting and Fed Chairman Bernanke’s Humphrey Hawkins
testimony before Congress that another round of quantitative easing is being
contemplated at the nation’s central bank.
Although the merits of asset purchases by the Federal Reserve remains
debatable, it has become a safe assumption that the Fed will not sit idly by if
economic growth stalls and threats of deflation emerge.

From the June FOMC meeting minutes is the following statement
– “a few members noted that, depending on how economic conditions evolve, the
Committee might have to consider providing additional monetary policy stimulus,
especially if economic growth remained too slow to meaningfully reduce the
unemployment rate in the medium run.”

From the prepared testimony of the Humphrey-Hawkins
testimony is the following statement – “the possibility remains that the recent
economic weakness may prove more persistent than expected and that deflationary
risks might reemerge, implying a need for additional policy support. Even with the federal funds rate close to
zero, we have a number of ways in which we could act to ease financial
conditions further… Another approach would be to initiate more securities
purchases or to increase the average maturity of our holdings.”

Market reaction to both these statements was quick and
sharp, with risk assets jumping and the USD and Treasuries retreating. Commodities were among the best performers
with gold futures for August closing just short of the $1,600 per oz level and
silver testing the $40 per oz level for the first time since its sharp pullback
in May. Significantly, silver managed to
breach $38.60 per oz. which had been resistance since May.

Perhaps recognizing the detrimental impact from these
suggestive QE3 comments, Chairman Bernanke, on the second day of Q&A at the
Humphrey-Hawkins testimony stated that there was no near-term intention to
initiate another round of asset purchases.
Predictably, the USD rose and stocks and commodities fell.

With all that said, it seems a helpful exercise to outline
the possible circumstances that would need to be in place before the Federal
Reserve embarked on another round of quantitative easing.

1. Economic Conditions Would Need to Deteriorate: Current forecasts continue to see a
pick-up in second half GDP. In fact the
Federal Reserve continues to forecast full-year GDP of 2.7% – 2.9%. Given that second quarter GDP is likely to be
worse than the first quarter’s 1.9%, this would imply an acceleration in the
second half to 3.5%+. This seems
extremely optimistic – particularly given the anemic jobs picture painted by
the June non-farm payroll report where a scant 18,000 jobs were created and
unemployment ticked up to 9.2%.

2. Deflation Would Need to Emerge: Inflation for the first 5 months of 2011 has
been above 4%, clearly not deflationary and well below the sub 2% that would
indicate a risk of deflation. While
commodities have declined since May, they have rebounded strongly since the
last week of June. Copper, for instance,
is now a mere $0.16 per lb below its April high of $4.56 per lb. WTI crude,
which had been as low as $90 per barrel in late June is now closer to $100 than
$90 per barrel. Since the market knows
that deflation is a key ingredient before QE3, a sell-off in both would be
required. Indeed, both copper and oil
fell following Bernanke’s comments stating that QE3 was not imminent.

Collectively, the requirements for another round of quantitative easing add up to a significant selloff in risk assets, including stocks and commodities. Going forward, perhaps market focus will shift from tea leave reading of Fed comments, and back to the more fundamental factors like economic data and potential economic effects from a financial meltdown due to a European sovereign debt default. Recent developments on these two fronts indicate that it could be just a matter of time before the Fed does indeed initiate another round of quantitative easing.

On the economic data front, the U.S. has seen a sharp pullback in manufacturing, flat retail sales, and an anemic employment picture during the second quarter. As Gainesville Coins has pointed out, without wage growth and job gains, there will be no second half economic rebound.

Europe, on the other hand, continues to stagger to a messy endgame. With Italy having joined Portugal, Ireland and Greece in the penalty box, it is becoming increasingly uncertain how a default of any or all of these highly indebted countries will be averted.

As Gainesville Coins has pointed out in A Playbook if Europe Sparks a Global Crisis, a full blown crisis in the event of a European debt default would likely cause a severe economic contraction and a corresponding sell-off in all risk assets, including gold and silver. However, this would likely usher in a unique opportunity. It would certainly raise the expectation for QE3 AND significant fiscal stimulus. However, even without Europe falling into the abyss, recent economic releases suggest that the global economy is on the verge of stalling once more, and this would be clearly deflationary.

“Silver Prices” Topping Google Trends

Monday, 18 Jul 2011 4:00 AM
Indicating a resurgence in interest for silver, the top trending search on Google is “silver prices.” This distinguished place of honor puts the precious metal ahead of other trending Google searches such as no. 3 “Casey Anthony,” and no. 4 “Ivanka Trump.” While there shouldn’t be too much read into this fact, silver has been on a strong run over the last seven trading days. As Gainesville Coins previously noted, $38.60 had been resistance since silver’s sharp fall from $49.5 per oz in early May, and silver is now solidly above that level, currently trading at $40.255 per oz. Meanwhile, gold continues its 10-day advance, up another $15.50 today to trade at $1,605.60.

At this point, one needs to wonder if the CME is preparing to nuke the silver market with another series of margin hikes. In May, the CME raised margin requirement for silver futures 5 times, or 84%. Officials at the CME said the rationale for the rate hikes were to reduce volatility. Gainesville Coins remains a bit mystified by this statement, since it would appear that silver’s volatility was caused by the CME’s decision to raise margin requirements by 84%. Now with silver above the $40 per oz. level, it seems only natural to speculate on what the CME will do to “stem the volatility.”

It should be noted that the CME did not change margin requirements for gold futures, while margin for a range of crude oil related contracts was only raised by 25%. Finally, in an absolute head scratcher, margin rates for stock index futures were actually lowered.

Of course the dual debt crisis in Europe and the U.S., combined with the ever-present global economy watch, will likely determine the actual direction of silver and gold going forward. July 21 will see an important EU ministers meeting, while July 22 is the U.S. debt ceiling deadline. Both debt-related crisis remain largely unresolved, and as Gainesville Coins has pointed out, this is likely to keep interest in precious metals elevated.

The fact that “silver prices,” is topping Google Trends is an interesting anecdotal aspect to the ongoing global concerns driving investor interest towards buying silver and gold.

Does a Debt Ceiling Increase Mean the End of the Run in Gold and Silver?

Wednesday, 20 Jul 2011 4:00 AM

Yesterday’s reversal in gold and silver prices coincided
with news of the $3.7 trillion deficit and debt reduction plan of the “Gang of
Six,” senators, and President Obama’s endorsement of the plan. It is the market’s current hope that this
legislation will be combined with a $2.4 trillion debt ceiling increase by the
July 22^nd deadline President Obama has stated as the last day an
agreement can be reached, legislated, and implemented by the August 2^nd
deadline when Treasury will no longer have the flexibility to ensure full
government financing.

Gold, which had been on a 10-day run which saw it hit a new
all time high above $1,600 per oz, as well as silver, which had been on a 5-day
run through the $40 per oz level, both retreated amid a surge in equities,
Treasuries, and industrial commodities.
The declines have extended to this morning amid cautious optimism that
the EU debt crisis, another driver of the precious metals sector, may see some
sort of resolution at tomorrow’s EU ministers’ meeting.

However, both a debt ceiling increase and a resolution to
the ongoing EU debt crisis entail vast amounts of money printing going forward –
the very reason that interest in precious metals has been so high in recent
years. Bloomberg.com had an interesting chart on the correlation of debt ceiling increases and the price of gold in the
following article – Gold to Extend Record Rally if U.S. Increases Debt Limit. As can be seen, debt ceiling increases have
gone hand in hand with the rise in gold prices.
While silver’s recent history has been more of an industrial metal, and
less as a precious metal, the same rationale driving gold has at least some
spillover effects for silver. The
Bloomberg chart should be seen as relevant for both gold and silver.

While a successful resolution to the debt ceiling impasse
could lead to a pullback in gold and silver, the increase in the U.S. debt
ceiling by $2.4 trillion has historically been bullish for precious
metals. Additionally, the EU debt crisis
solution at this point revolves around using the 440 EUR European Financial
Stability Facility to fund Europe’s ailing, debt-burdened countries and
banks. The end result is significant
borrowing that will increase the EUR money supply. Just as increases in U.S. money supply has
been historically bullish for precious metals, the increase in EUR money supply
is no different.

The factors driving interest in gold and silver have not
changed, and the recent pullback comes on the heels of a strong run for both
metals. While it is impossible to know
with certainty, the increase in money supply represented by a debt ceiling
increase and the EU’s debt contagion containment efforts, have historically represented bullish
factors for gold and silver prices.

EU Bailout Draft Statement

Thursday, 21 Jul 2011 4:00 AM
The importance of containing the EU sovereign debt crisis before it spreads to Italy and Spain cannot be overstated. With Greece, Portugal, and Ireland continuing to struggle, getting ahead of the ongoing crisis was the goal at today’s EU meeting. With that in mind, Gainesville Coins is providing the full EU Bailout Draft Statement.

Since the beginning of the sovereign debt crisis in the euro area,
important measures to stabilize the euro area, reform the rules and
develop new stabilization tools have been taken. The recovery in the
euro area is well on track and the euro is based on sound economic
fundamentals. But the challenges at hand have shown the need for more
far reaching measures. We reaffirm our commitment to the euro and to do
whatever is needed to ensure the financial stability of the euro area as
a whole. We also reaffirm our determination to reinforce convergence,
competitiveness and governance of the euro area.

Today, we agreed on the following measures:

Greece
1.
We welcome the measures undertaken by the Greek government to stabilize
public finances and reform the economy as well as the new package of
measures recently adopted by the Greek Parliament. These are
unprecedented, but necessary efforts to bring the Greek economy back on a
sustainable growth path.

2.    We agree to support a new program
for Greece and to provide an additional amount of up to [xx] euros.
This program will be designed, notably through lower interest rates and
extended maturities, to decisively improve the debt sustainability and
refinancing profile of Greece. We call on the IMF to contribute to the
financing of the new Greek program in line with current practices.

3.
We have decided to lengthen the maturity of the EFSF loans to Greece to
the maximum extent possible from the current 7.5 years to a minimum of
15 years. In this context, we will ensure adequate post program
monitoring. We will provide EFSF loans at lending rates equivalent to
those of the Balance of Payment facility (currently approx. 3.5 percent)
without going below the EFSF funding cost. This will be accompanied by a
mechanism which ensures appropriate incentives to implement the
program, including through collateral arrangements where appropriate.

4.
We call for a comprehensive strategy for growth and investment in
Greece. Structural funds should be re-allocated for competitiveness and
growth under a European “Marshall Plan”. Member States and the
Commission will mobilize all resources necessary in order to provide
exceptional technical assistance to help Greece implement its reforms.

5.
Greece is in a uniquely grave situation in the Euro area. This is the
reason why it requires an exceptional solution. The financial sector has
indicated its willingness to support Greece on a voluntary basis
through a menu of options (bond exchange, roll-over, and buyback) at
lending conditions comparable to public support with credit enhancement.

6.
All other Euro countries solemnly reaffirm their inflexible
determination to honor fully their own individual sovereign signature
and all their commitments to sustainable fiscal conditions and
structural reforms. The Euro area Heads of Statesor Government fully
support this determination as the credibility of all their sovereign
signatures is a decisive element for ensuring financial stability in the
Euro area as a whole.

Stabilization tools:

7.    To
improve the effectiveness of the EFSF and address contagion, we agree to
increase the flexibility of the EFSF, allowing it to:

    – intervene on the basis of a precautionary program, with adequate conditionality;

    – finance recapitalization of financial institutions through loans to governments including in non program countries;


- intervene in the secondary markets on the basis of an ECB analysis
recognizing the existence of exceptional circumstances and a unanimous
decision of the EFSF Member States.

Fiscal consolidation and growth in the euro area:

8.
We welcome the progress made on the implementation of the programs in
Ireland and Portugal and reiterate our strong commitment to the success
of these programs. The EFSF lending conditions we agreed upon for Greece
will be applied also for Portugal and Ireland. In this context, we note
Ireland’s willingness to participate constructively in the discussions
on the Consolidated Common Tax Base draft directive (CCTB) and in the
structured discussions on tax policy issues in the framework of the
Euro+ pact framework.

9.    All euro area Member States will
adhere strictly to the agreed fiscal targets, improve competitiveness
and address macro-economic imbalances. Deficits in all countries except
those under a program will be brought below 3 percent by 2013 at the
latest. In this context, we welcome the budgetary package recently
presented by the Italian government which will enable it to bring the
deficit below 3 percent in 2012 and to achieve balance budget in 2014.
We also welcome the ambitious reforms undertaken by Spain in the fiscal,
financial and structural area. As a follow up to the results of bank
stress tests, Member States will provide backstops to banks as
appropriate.

10.    We will implement the recommendations adopted
in June for reforms that will enhance our growth. We invite the
Commission to enhance the synergies between loan programs and EU funds
in all countries under EU/IMF assistance. We support all efforts to
improve their capacity to absorb EU funds in order to stimulate growth
andemployment.

Economic governance:

11.    We look forward
to the rapid finalization of the legislative package on the
strengthening of the stability and growth pact and the new macroeconomic
surveillance. Euro area members will do their utmost to help reaching
agreement with the EP on voting rules in the preventive arm of the Pact.

12.
We commit to introduce legally binding national fiscal frameworks as
foreseen in the fiscal frameworks directive by the end of 2012.

13.
We agree that reliance on external credits ratings in the EU regulatory
framework should be reduced, and look forward to the Commission
proposals in this respect.

14.    We invite the President of the
European Council, in close consultation with the President of the
Eurogroup, to make concrete proposals by October on how to better
organize crisis management in the euro area and improve working methods.

We call on the Eurogroup to implement expeditiously and as a matter of priority the decisions taken today.

AAA Ratings and a Strong Dollar Policy – Reality or Fiction

Friday, 22 Jul 2011 4:00 AM

Since as far back as the Clinton administration, a successive
line of U.S. Treasury Secretaries have maintained that the U.S. has a strong
dollar policy. It was then Treasury
Secretary Robert Rubin, former head of Goldman Sachs that started this now
familiar refrain when asked about the seemingly never ending erosion in value
of the U.S. dollar in relation to its international peers. This political stance was unchanged under
President Bush with both Treasury Secretaries, including Hank Paulson – another
former head of Goldman Sachs – repeating this same tired line, even as the U.S.
dollar continued to slide in value versus its peers. Now, under President Obama, the question of
whether the U.S. supports a strong dollar policy looks almost laughable as the
Federal Government inches ever closer to a default on its 14.3 trillion dollar
debt.

Over the last few month’s all three major credit rating
agencies – Moody’s, Fitch, and S&P – have put the U.S. AAA credit rating on
review for a possible downgrade, and it seems highly likely that regardless
of the outcome of the debt ceiling debate, the current trajectory of U.S.
deficits will result in a downgrade from at least one, if not all credit rating
agencies in the near term. This
represents a huge disconnect with the stated policy of current and prior
administrations and reality.

As Gainesville Coins has pointed out, at current deficit
levels, U.S. debt to GDP is set to exceed 100% sometime next year. If unfunded liabilities are added to official
U.S. debt, current debt to GDP already exceeds 100%. Indeed, present value estimates of unfunded
liabilities, primarily Medicare and Medicaid, range around $60 trillion. To put that into perspective, U.S. GDP in
2012 is currently forecast at $15.1 trillion.
Current debt reduction talks in connection with the debt ceiling
increase range between $3 trillion and $4 trillion. Simple arithmetic suggests that even if the
political will is found to cut the debt at the high end of current talks, deficits
will remain a large and debilitating factor on government finances for the foreseeable
future.

So how should the public view the line from our Treasury
Secretary that the “U.S. supports a strong dollar policy?” If this were really the case, the U.S. would
certainly not be on the verge of losing its AAA credit rating. If there were conviction in a strong dollar
policy, Treasury Secretaries under a Democratic President would be more willing
to pare back entitlement programs.
Conversely, under Republic Presidents, there would be more willingness
to increase tax revenues as a way to regain control over the country’s
finances. Instead, the U.S. hears from
the Treasury Secretary that the “U.S. supports a strong dollar policy,” while policy
gridlock has led the U.S. to a point where it will lose its vaunted credit
rating, and where the dollar plumbs new lows against a basket of its peers.

Meanwhile, WTI crude futures are hovering just below $100
per barrel and gold prices just recently hit a new high of $1,609.50 per oz.
Not to mention the high historical price of a range of commodities ranging from
wheat, corn and cotton to copper and silver. Gainesville Coins looks forward to the
next time Treasury Secretary Tim Geithner is asked whether or not the U.S.
supports a strong dollar policy, particularly after the U.S. credit rating is downgraded to below AAA. It seems likely that this would usher in new era of U.S. dollar weakness amid ongoing interest in more stable currencies such as the Canadian Dollar, the Swiss Franc, the Australian Dollar, among others. It would also likely mean continued interest in any number of commodities, including gold and silver.

What Does the Treasury’s Cash Balance Look Like Post August 2nd

Tuesday, 26 Jul 2011 4:00 AM
The debt ceiling quandary remains the market’s primary focus. Both the Senate and House are moving forward with separate plans to increase the debt ceiling, but neither bill has much chance of becoming law without major modifications.

Several commentators have suggested that Treasury could maintain funding past the August 2nd deadline, in large part thanks to higher than expected tax revenue. The following table from Stone McCarthy shows the projected Treasury cash balance on a daily basis from August 2nd to August 15th.

As can be seen, the situation would hit critical by August 15th.

The following graph from reuters shows cash outflows in a graph.

The seriousness of the current debt ceiling impasse is highlighted by these two similar data sets.

Precious metals investing has seen a strong run in the midst of the ongoing debt drama as the USD continues to fall against its international peers on a daily
basis. While Treasuries continue to indicate little real concern, Treasury yields have been edging higher of late, with the 10-year
Treasury again hitting the 3% level. Add in the possibility of a credit rating downgrade of the U.S. AAA rating, and the recent level of interest in gold and silver seems fairly easy to understand.

It should be noted that even with a successful resolution of the current debt ceiling impasse, there will remain a high probability of a U.S. credit rating downgrade given the size of the debt and future projected deficits.

Copper Nearing Record Highs as Labor Strikes and a Weak USD Lift Prices

Thursday, 28 Jul 2011 4:00 AM

Amid all the hand wringing over the U.S. debt ceiling and
European sovereign debt crisis, copper prices have seen a steady rise since mid
June, and are now re-approaching their all-time high of $4.56 per lb hit in
mid-April. A strike at BHP’s Escondida
Mine in Chile, the world’s largest, is now entering its seventh day. According to a report from Reuters, annual
production at Escondida is 1.1 million tons representing 6.8% of total
worldwide demand. The current stoppage
is causing a loss of 3,000 tons per day, exacerbating what many analysts see as
already tight demand and supply picture. Labor disruptions have also hit Codelco, Chile’s
largest copper mining company. While the
strike at Codelco only lasted one day, the current strike at BHP’s Escondida is
raising worries that labor unrest could spread to other mines.

The second factor helping copper prices has been the
accelerated rate of decline in the U.S. dollar amid the debt ceiling
impasse. The US dollar index, which
measures the performance of the USD against a basket of currencies, came close
to making a new all time low, falling to as low as 73.44 on Tuesday. To put that into perspective, the index
started the year at 80, and was as high as 88.70 in June of 2010. Given the state of the Federal government’s
finances, it would appear that even with a resolution to the debt ceiling
impasse, the USD is likely to continue to exhibit weakness amid the U.S.’s
$14.3 trillion debt load and expectations of large U.S. deficits.

Copper prices are currently at $4.47 per lb, up over 12%
from its mid-June lows which saw prices briefly below $4.00 per lb. The rise in prices has come despite an
increasing number of signs that growth among developed economies is slowing,
and as many developing economies have been putting on the monetary brakes to
counter uncomfortably high rates of inflation.

The rise in copper prices has largely gone unnoticed as gold’s recent run to new records – $1,631.20 on Wednesday – has grabbed most of the commodity related headlines. However, copper’s recent strong performance is worth noting. While the labor situation in Chile will likely prove to be short lived, the factors driving USD weakness are likely to prove longer lasting. Combined with ongoing expectations of tight supply conditions, copper prices could remain well-supported despite weakening growth trends in developed and developing economies. An escalation of the strike at Escondida, and a possible spread of labor related disruptions to other mines could see copper prices rally well past its mid-April high.

Copper is Becoming More than an Industrial Metal

Weak Q2 GDP Has Positive Implications for Precious Metals

Friday, 29 Jul 2011 4:00 AM

Today’s weak 2^nd Quarter GDP release has several
important fiscal and monetary implications worth exploring. Second quarter U.S. GDP rose a much worse
than expected 1.3%, and follows a huge downward revision in the Q1 to 0.4% from
the previously reported 1.9%. The consensus
analyst estimate had forecast Q2 GDP at 1.9%. Gold has hit a new all-time high in the wake of the news, with gold futures hitting $1,637.50. Silver also benefited, rising above the $40 per oz. level to trade as high as $40.43 per oz.

The factors behind the weak GDP release are not surprising as
high fuel and food costs, as well as anemic employment growth, held down
consumer spending. Consumer spending accounts for 70% of U.S. GDP. Spending by Federal, State, and Local governments continued to fall as government officials
contend with high social spending costs and declining revenue. The only bright spot was business investment.

The obvious first question to ask is whether the U.S. is
heading back into recession. Given
initial reads of 3^rd quarter economic data points, the signs are
certainly flashing yellow. The June
non-farm payroll report showed that weak employment conditions were present
late into the second quarter, and a stream of manufacturing surveys and consumer sentiment indexes which capture
third quarter conditions have indicated that current weak economic conditions
represent more than an “economic soft patch.”

Fiscal Policy
Implications

The implication for federal, state and local governments
is higher than expected budget deficits going forward. Higher spending for social welfare including
unemployment insurance, and lower tax revenues will exacerbate the already
worrisome financial position of government at all levels. The prospect for higher budget deficits mean
faster than expected growth of the Federal government’s already sizable $14.3
trillion debt, and further belt-tightening by State and Local government. This is clearly a U.S.
dollar negative. Conversely, a weak USD
has been historically a positive for precious metals, including gold and
silver.

Monetary Policy
Implications

As Gainesville Coins has previously pointed out, current
Federal Reserve forecasts of full year 2011 GDP growth of 2.5%-2.7% is highly
optimistic, and likely to be revised sharply lower in the weeks ahead. Prior to this morning’s release the Fed’s
forecast would imply growth of second half GDP of at least 3.5% to reach 2.5%-2.7%
full year GDP growth. With 1^st
quarter GDP having been revised to a mere 0.4% from 1.9%, second half GDP would
need to rise to 4% to realistically have full year GDP of 2.5%-2.7%.

Market reaction to the poor 2^nd quarter GDP data,
and the sharp downward revision to 1^st quarter numbers has led to a
predictable sell-off in risk assets. In
particular, industrial commodities are solidly lower as it has become clear
that growth in the world’s largest economy is flagging. If industrial commodities were to weaken
sufficiently, the prospect of another round of Quantitative Easing by the
Federal Reserve will increase proportionally.
The two-conditions for QE3 remain lackluster economic growth, and a
threat of deflation. Another round of
quantitative easing would be another clear U.S. dollar negative. Once again, a weak USD has been historically
positive for precious metals, including gold and silver.

Market Outlook: Gold and Silver Could Remain Supported

The market for precious metals has seen a strong run amid
the ongoing U.S. debt ceiling impasse, the European sovereign debt crisis, and
poor global economic data. This last
point has been punctuated by today’s dismal GDP data. Insofar as the negative correlation between
precious metals and the U.S. dollar continues, these factors imply ongoing
interest in precious metals as the US dollar continues to be negatively impacted
by an enfeebled U.S. economy, the actions of politicians in Washington and
Central bankers the world over, particularly the U.S.’s own Federal Reserve.

On a final note, one wonders what Q2 GDP will ultimately be given the near 80% revision in the first quarter’s GDP numbers. This sad fact certainly helps one understand why Economics is called the “dismal science.”

The following chart from market-ticker.com provides a clear view of GDP and the corresponding Federal deficit. U.S. dollar weakness seems pretty easy to understand.

Correlation Between Debt Ceiling Increases and the Price of Gold – Is Gold’s Next Stop $1,950?

Monday, 1 Aug 2011 4:00 AM
Gainesville Coins has previously highlighted this chart we first saw on Bloomberg that shows the uncanny correlation between the price of gold and prior increases in the debt ceiling. The research behind the chart comes from analysts at Korea Investments.

Zerohedge.com has just published their updated version of this chart with the addition of the soon to be legislated $2.5 trillion debt ceiling increase. The purpose being to estimate the next stop for gold prices based on the historic relationship seen between the price of gold and debt ceiling increases. Zerohedge.com states very nicely that:

“A simple correlation rule of thumb allows us to predict that gold will
be at $1,950 by the end of the year if it simply retains it close
correlation to the debt ceiling. Should Bernanke announce that he will
additionally need to monetize some or all of this incremental debt
amount, we anticipate that gold will be well over $2,000 by the end of
the year, courtesy of yet another round of accelerated dollar
debasement, which also means that real gains in US stocks will be
negated courtesy of the devaluation of the currency in which they are
priced.”

Full Zerohedge.com article

Pimco’s Bill Gross: Debt Ceiling Legislation Makes No Real Impact on Deficits

Tuesday, 2 Aug 2011 4:00 AM
PIMCO’s Bill Gross is arguably the world’s most successful fixed income
investor. His Total Return Fund has consistently outperformed its peer
group, year in year out. Being one of the largest investors in U.S.
Treasuries, his views on the current state of U.S. finances bears
watching. For those of you who might be unaware, Mr. Gross is skeptical,
if not actually bearish, on Treasuries, and has been steadily
diversifying away from them over the last few years. Today, he came out
with a few comments on the significance of the debt ceiling
legislation’s deficit cutting proposals. His final analysis is the
“U.S. is a debt man walking.”

Of particular concern to Mr. Gross
is the $66 Trillion – with a capital T – present value of the U.S.
unfunded liabilities. The table below breaks down this massive U.S.
obligation.

Just
as relevant is his comments on the spending cuts attached to the debt
ceiling legislation. He notes that according to the Office of
Management and Budget, the spending cuts total a less than overwhelming
0.5% of future deficits. To put that into perspective, the 2011 budget
deficit is currently on track to hit $1.5 trillion, just over 10% of GDP. This means cuts of
the less than $75 billion a year. He writes “Nothing in the
Congressional compromise reached over the weekend makes a significant
dent in our $1.5 trillion deficit.”

As many Americans have come
to realize, the choices facing the U.S. in managing this debt will
likely require a mix of unpalatable decisions. Mr. Gross succinctly
summarizes these in the following missive:

“Aside from outright default, there are numerous ways a government can
reduce its future liabilities. They include balancing the budget,
unexpected inflation, currency depreciation and financial repression.”

Balancing the budget is obviously the best answer, but as Mr. Gross points out, current deficit estimates of 7%-8% of GDP in 2012 and 2013 rely on U.S. growth estimates of 3%+. Given recent economic data, including the 1.3% Q2 GDP, and downwardly revised 0.4% in Q1 GDP, this growth estimates look laughable. Initial reads of Q3 numbers have been poor, and current estimates of 2.5%-3% are likely to be slashed in the days and weeks ahead. Friday’s July Payroll report will be a key indicator of Q3 GDP.

That leaves the other 3 ways the U.S. can reduce if future liabilities: unexpected inflation, currency depreciation, and financial repression. The implications of any combination of these three are not pleasant.

The
U.S. political establishment has managed to keep the world riveted with
the potential threat of a default. In the end, the U.S. credit card
limit has been expanded by $2.5 trillion while promises to cut spending
amount to 0.5% of future deficits. One might be forgiven for being
highly cynical of the back-slapping from both Democrats and Republicans
as they congratulate each other on a “job well done.”

Full Pimco Article

Chart of the Day: Gold and Silver Versus the U.S. Dollar

Wednesday, 3 Aug 2011 4:00 AM
Investors in the precious metals space are no doubt aware that the U.S. dollar has been on a steady decline versus its peers over the last several decades. The Dollar Index, which tracks the USD against 6 other currencies, including the Japanese Yen and Swiss franc, recently came within a hairs breadth of making a new all-time low on July 26th, during the worst of the debt ceiling hysteria, at 73.45. The all-time low for the index was hit in March of 2008 at 70.698, just before the mortgage meltdown of 2008. On May 2nd of this year it hit 72.72 its low since 2008. Over the last few days the US dollar has made a modest rebound to 74.3. Unfortunately, this is still close to its all-time low, and compares unfavorably with its level at the start of the year of 80.

Goldcore.com today published a fairly comprehensive overview of the precious metals market. Included in its analysis was the following chart from Bloomberg. It shows the negative correlation of the US dollar with the performance of gold and silver since 2000.

As can be seen, the dollar’s depreciation has corresponded with the rise in gold and silver. There are many factors which have been weighing on the dollar, but they can all largely be summarized as fiscal factors or monetary factors. For instance, today’s near magical recovery in U.S. equities corresponded with a Wall Street Journal report with former Vice Chairman of the Federal Reserve, Donald Kohn who indicated the Fed would certainly consider another round of quantitative easing if the U.S. economy continued to flag, and threats of deflation became pronounced. Another round of quantitative easing would represent hundreds of billions of dollars of money printing by the Federal Reserve to buy Treasuries in an effort to drive already record low Treasury yields even lower. For those that might not remember, QE2 was a $600 billion dollar affair.

Additionally, the recently passed debt ceiling legislation has increased the Federal Government’s credit card limit by a cool $2.4 trillion. It should be no surprise that rising national debt levels correspond with a weaker national currency. One need only ask Greece, Ireland, and Portugal. Unfortunately for them, their participation in the EUR has prevented their currencies to weaken in response to their sky-high debt levels. The EUR however, has indeed been under pressure. The common refrain in financial markets regarding the EUR and the USD is that they are in a race to the bottom.

Meanwhile, current budget deficit forecasts for the U.S. of 7%-8% in 2012 and 2013 rely on a 3% GDP forecast. With the U.S. on the brink of entering a recession now, it seems highly likely that the 3% GDP forecast for 2012 and 2013 will be drastically cut in the weeks and months to come. Combined with the end of fiscal stimulus, and some fiscal contraction thanks to the very modest deficit reduction measures in the debt ceiling legislation, U.S. budget deficits are likely to be closer to the current run-rate of 10% for the foreseeable future.

Collectively, monetary and fiscal policy outlooks for the U.S. suggests that weak US dollar trends will persist. This would bode well for silver and gold if the historical correlation between the USD and precious metals continues to hold. Two notable upcoming events that will likely impact both the fiscal and monetary outlook of the U.S. include Friday’s non-farm payroll report for July, and the August 9th FOMC meeting. A worse than expected payroll report would certainly be dollar negative, as would any hint of QE3 on August 9th.

Are the Wheels Coming Off the Global Financial System?

Thursday, 4 Aug 2011 4:00 AM
With fears of a double-dip recession in the U.S. and the possibility of Italy and Spain being engulfed in the European debt crisis, investors are clearly in sell mode. Today, the selling hit one of the few standouts, precious metals. Both gold and silver saw a huge midday reversal that saw both end solidly in the red. Conversely, Treasuries saw its recent rally extend even further, with the 10 year Treasury yield now at a stunning 2.49%. As has been the case historically, the USD saw its status as the ultimate safe haven during times of crisis surge today, with the USD up against all its peers save the Swiss franc. The obvious question amid all the turmoil is where are we headed.

In our previous piece “A Playbook if Europe Sparks a Global Crisis,” we outlined how the European debt crisis could evolve, and how this could effect the precious metals market. Nothing has changed to alter the analysis in the piece, and it could provide some context for those trying to make sense of recent market action.

Latest News on the European Debt Crisis

Friday, 5 Aug 2011 4:00 AM
Reuters – Italy brings forward budget plan as crisis mounts

“Prime Minister Silvio Berlusconi pledged on Friday to bring forward austerity measures and bring Italy’s budget into balance by 2013, a year ahead of the original plan, in a bid to stem rising turmoil on world markets.”

QUICK ANALYSIS: While it is certainly welcome news that Italy is attempting to get its fiscal house in order, the size of Italy’s debt obligations, estimated at $2.28 trillion, will ultimately require GDP growth. Italy’s economy has been stagnant as has Italian wage growth. This combined with the current concerns over growth in the world economy, particularly in the U.S., and now accelerated fiscal austerity measures in Italy, there is a high degree of skepticism that Italy will be able to sustain its debt which is at 120% of GDP.

Reuters - Italy pledges reform for ECB support, stems market rout

“Italy has buckled to world pressure in a bid to halt a market rout endangering the global economy, pledging to speed up austerity measures and social reforms in return for European Central Bank help with funding.”

QUICK ANALYSIS: News that the ECB would purchase Italian bonds on the open market was clearly a relief for financial markets. The news sparked a strong surge of buying that lifted equities from another near freefall. Given the inadequate size of the EFSF at 440 billion EUR, and its inability to act until its new powers are ratified by EU member nations, the ECB is the only institution that can meaningfully address the rising yields on Italian and Spanish government bonds. It should be noted that Portugal, Ireland, and Greece were forced to seek shelter from capital markets when their respective 10-year Treasury yield hit 7%. Current yields on the 10-year Italian and Spanish government debt are above 6%.

Gainesville Coins Maintains Full Service Following U.S. Debt Downgrade, Even as Competitors Shut Out Customers

Monday, 8 Aug 2011 4:00 AM

Trading in gold and silver ends at 5:00pm Friday and
re-opens 6:00 pm Sunday. During the
interim, precious metals dealers that buy and sell precious metals open
themselves to market risk. Generally,
market volatility between the market’s close on Friday and re-open on Sunday is
sufficiently random that a loss on an un-hedged position one weekend, will be
offset by a gain in another weekend. Like
most large precious metals dealers, Gainesville Coins prides itself for
maintaining operations 24 hours a day 7 days a week. This commitment to our customers has been
unwavering since our company first began in 2000.

This past Friday, Standard & Poor’s downgraded the AAA
credit rating of the U.S. to AA+. Immediately
following the news, Gainesville Coins saw a surge of buying interest in gold
and silver. The activity strongly suggested
that Monday could see a spike in gold and silver prices. Despite the high probability that the market
would open higher on Monday, Gainesville Coins chose to remain open, and
provide the precious metals market with an active bid-ask. Many other precious metals dealers, who were
no doubt aware of the spike in gold and silver demand, chose to abandon their
customers by suspending operations in order to protect their bottom line.

During past periods of extreme market volatility, Gainesville
Coins has always maintained full operations even as our competitors pulled
their bid-ask. It is our view that the
good weekends and bad weekends will balance out, and see our competitors
attempt to take advantage of situations like this past weekend indicative of
their lack of commitment to their customers.
Buyers of gold and silver should therefore treat with skepticism the
claim from certain precious metals dealers who say they are open 24 hours a
day, seven days a week. Gainesville
Coins is committed to providing precious metal investors with the best and most
reliable service, period. Our decision
to continue to provide market liquidity this past weekend is testament to that commitment.

Loss of AAA Significant, but Real Market Threat Remains Europe

Monday, 8 Aug 2011 4:00 AM

The significance of the U.S. losing its AAA credit rating
from Standard & Poor’s represents a clarion call to Washington that fiscal
irresponsibility does have consequences.
However, both Moody’s and Fitch recently affirmed the U.S. AAA rating,
and barring any sudden change in finances, current rating levels from the three
credit rating agencies should remain unchanged in the near-term.

The next step for S&P is to reduce the rating of all
municipalities and financial institutions whose current rating is AAA, and
which will now be downgraded because of S&P’s rule that no municipality or
financial institution can be rated above a country’s sovereign credit
rating. This means there are scores of municipalities
and insurance companies and banks that will be downgraded, probably as soon as
today to AA+, the sovereign ceiling. The
shock of this mass downgrade will no doubt top headlines near-term, but
following this action, news on the ratings front should melt into the
background. The more serious clear and
present danger remains the possibility of Italy and Spain being engulfed in the
ongoing European debt crisis.

Today’s intervention by the ECB drove yields on Italian and
Spanish debt sharply lower. Prior to the
intervention, yields for the 10-year debt of both countries topped 6%. Following the ECB’s purchase, Bloomberg is
reporting that Italian 10-year debt fell to 5.39% while Spanish 10-year debt
fell to 5.3%. The significance of these
rates sits with the interest expense both countries will be faced with as they
attempt to cover budget deficits and roll-over maturing debt. When 10-year yields of Irish, Portuguese, and
Italian debt breached 7%, the governments of all three countries were forced to
seek a bailout, and shelter from capital markets.

Today’s joint statement from German Prime Minster Merkel and
French Prime Minister Sarkozy was a non-event.
Their attempt to talk up budget austerity measures of both Italy and
Spain will hardly dissuade nervous investors to increase their aversion to
European sovereign debt, and to anything having to do with Europe’s financial
institutions that are chock-full of such debt.

With ratification of the EFSF not expected till at least
late September, it falls on the European Central Bank to hold things
together. Italy’s debt totals 2.6
trillion EUR. Given this, the ECB could
be required to spend well over 1 trillion EUR in bond buying. This represents money printing on a
near-Federal Reserve scale – no small feat. Furthermore, as is obvious to most, at 440 million EUR, the EFSF is too small to deal with either Italy or Spain.

While this is going on, continued market volatility will
increase the risk that the global economy is heading for a serious
slowdown. The evidence to date indicates
that the U.S. is operating at stall speed, and it would not take much to push
the economy back into recession. This
obviously has negative implications for major manufacturing exporting nation
such as China, Japan, Germany, and South Korea.
This in turn would have negative consequences for major commodity
exporters such as Canada, Australia, Brazil, and Russia.

The downgrade of the U.S. AAA rating by S&P is serious,
and is clearly weighing on investor sentiment today. However, following the accompanying downgrade
of those borrowers that are impacted by the sovereign ceiling, market focus
will return to Europe and the very real threat that the situation in Italy and
Spain will deteriorate, threatening an implosion of the European banking sector
and pushing the global economy back into recession.

AAA Ratings and a Strong Dollar Policy – Reality or Fiction

A Playbook if Europe Sparks a Global Crisis

Three Changes in Fed FOMC Statement and Market Reactions

Tuesday, 9 Aug 2011 4:00 AM
The Federal Reserve did not change monetary policy but the accompanying statement had three important changes. First, the Fed changed its statement on “extended period” of accommodative policy to provide a specific date of “mid-2013.” Second, the Fed acknowledged that economic activity was weaker than its baseline forecast, though highlighting that this was still likely due to temporary factors such as supply disruptions from the Japanese earthquake and now falling commodities. Third the Fed said it had reviewed available policy options in the wake of weak economic conditions.

The biggest market impact was seen in the Treasury market. The change to “mid-2013″ for accommodative policy provides some certainty for Treasury bulls who know that the Fed is not going to pull the punchbowl for nearly two years. The 10-year yield fell as low as 2.10%, briefly re-approaching levels last seen in 2008. Treasuries sold off in the last minutes, with the 10-year yield ending the day at 2.26%. The second and third change imply that the possibility of additional monetary policy measures is higher now, and that the Fed is actively considering implementing some measure of additional monetary easing. Whether this means QE3 or some other attempt to juice the U.S. economy is unknown, but once again, it suggests that the Fed will be doing more if conditions don’t improve.

Stocks Rally as Treasury Yields Fall

Some commentators are noting that since valuation models incorporate Treasury yields to discount future cash flows, the ongoing fall in Treasury yields is leading to buying in stocks and corporate bonds as present value calculations on anything with a cash payment, be it a dividend or coupon payment, is more attractive as Treasury yields fall. This would certainly help explain the explosive rally in risk assets in the last few minutes of today’s session.

Whether or not today’s stock market recovery was anything more than a dead cat bounce remains to be seen. A sustainable equity market recovery will likely require a significant improvement in economic conditions, or the possibility of improving economic conditions if the Fed were to embark on another round of monetary easing. Finally, it should be noted that while the ECB has managed to drive Italian and Spanish 10-year yields to around 5% from over 6% 2 days ago, it is still way too premature to declare an end to Europe’s troubles.

Gold and Silver Diverge

Trading in gold and silver was volatile following the Fed’s decision. Gold managed to close at a new record high, but well-off the session’s best levels. Silver made several unsuccessful attempts to move higher before ending the day near session lows.

Full Text of FOMC Statment

Reuters: U.S. Mint halts sales of gold collector coins

Wednesday, 10 Aug 2011 4:00 AM

* Suspension comes as gold prices reach record level

* Affects numismatic collector coins, not bullion coins

By Jane Sutton

MIAMI, Aug 9 (Reuters) – A spike in gold prices prompted
the U.S. Mint to suspend the online sale of gold collector
coins on Tuesday for the first time in recent memory, a mint
spokesman said.

The move affects only the gold numismatic products sold to
collectors and not the gold bullion coins sold to investors,
Mint spokesman Mike White said from Washington.

Full Article

Reuters: 40 years on from gold standard, bugs crow

Thursday, 11 Aug 2011 4:00 AM

Aug 11 (Reuters) – Gold, and only gold, will be our salvation when the value of companies,
banks, countries and even money itself melts away. Gold, not shifting currencies, is the foundation of wealth and security. Gold is back, for good.

This is the song of the “gold bugs” – the fervent fans of
the precious metal who have clung to its investment value for
three generations and now glow in the reflected lustre of a
record price approaching $2,000 for just one ounce.

Monday will mark the 40th anniversary of the United States’
abandonment of the gold standard. But gold bugs kept the faith
– even when prices stayed under $500 for nearly 25 years after
their 1981 peak.

Full Article

CME Increases Gold Margin Requirments – Gold Retreats

Thursday, 11 Aug 2011 4:00 AM
The CME has struck again, announcing yesterday that it would raise initial and maintenance margin requirements for gold futures contracts. The speculative margin requirement for a new position in Comex 100 gold
futures will rise to $7,425 from $6,075, or to $5,500 from $4,500 for
existing “current maintenance” margins. The increase in margin requirements decreases the level of leverage that can be employed when taking a position in gold. The move negatively impacts speculative interest in gold.

The announcement has hit gold prices today following the yellow metals torrid run which had seen gold futures hit a high of $1,817.60 late Wednesday. For precious metals investors, the move will no doubt bring back memories of the series of silver margin hikes in May which saw silver prices plunge from just under $50 per troy oz to the low $30s. What was so unusual about the hikes in silver margin requirements was the fact that the 84% increase in margin requirements was done in 5 steps. Usually, when the CME decides to raise margin on a futures contract, it is done once, and is generally significantly less than the 80% plus increase that silver margin requirements were raised.

The CME justified its hike in silver margin requirements by saying that it was acting in order to address the heightened level of volatility in the silver futures market. Many would argue that the CME caused the volatility in silver prices this past May.

Whether or not the CME’s decision to raise margin requirements for gold will be its last, or the first in a series of hikes remains to be seen. If history is any guide, the CME would not be expected to further increase margin requirements. Unfortunately, the outlier example of silver leaves the possibility of further margin increases for gold open.

Gold futures prices hit a recent low of $1753.00 per troy ounce before rebounding mildly to $17.62.60. Silver futures prices are down $0.842 to trade at $38.46 per troy ounce.

Barring any further margin changes by the CME, market direction for precious metals, including gold and silver, will likely be dictated by the ongoing European debt crisis, economic data, and any changes in monetary policy. However, fear that the CME could further raise margin requirements for gold, like it did for silver, will likely keep the gold market jittery near-term.

Next Week’s Heavy Economic Calendar Will Shape Economic Expectations

Thursday, 11 Aug 2011 4:00 AM
The direction of the U.S. economy remains a huge question for financial markets. Data since May has pointed to a serious deceleration of economic activity, and the FOMC statement on 8/10 showed that the Fed has belatedly come to the same conclusion. First quarter GDP was 0.4% and second quarter GDP was 1.3%. Next week’s economic numbers will include a number of additional data points for the third quarter. While the Fed has done some heavy lifting to ensure the USD remains weak for as far as the eye can see, confirmation that the U.S. may indeed be heading into recession will further add to the U.S. dollar’s woes. With this in mind, a preview of next week’s releases seems in order. Of course, Europe has the potential of relegating economic data into the background as the never-ending Euro sovereign debt crisis inexorably encroaches on Italy, Spain, and now possibly France.

Monday: The Empire State Manufacturing index is due out at 8:30am. Having hit a high of 21.7 in April’s release, the July read was a -3.8. A negative number indicates a contraction in manufacturing. If the August index comes in negative, it would be the third straight negative number. The implication is clear – Not only is manufacturing in the NY region contracting, it is not temporary.

Tuesday: Housing Starts and Building Permits for July is due at at 8:30am. The housing market remains a significant drag on the U.S. economy.

Industrial Production and Capacity Utilization for July is due out at 9:15am. Industrial production numbers have consistently been weaker than expected, and foreshadowed the poor second quarter GDP print. June saw a tepid 0.2% risen in industrial production with capacity utilization of 76.7, below the peak of 77.4 hit in April.

Wednesday: Producer Price Index for July is due out at 8:30am. Inflation has been averaging above a 4% annual rate for 2011. The recent falls in commodity prices is expected to moderate this level. June saw a 0.4% fall in PPI, but a 0.3% rise ex-food and energy. Another round of quantitative easing by the Federal Reserve would require clear signs of deflation. A fall in PPI in July would increase the likelihood that the Fed would embark on additional monetary easing.

Thursday: Consumer Price Index for July is due out at 8:30am. Like PPI, a fall in CPI is a pre-requisite for QE3. CPI fell 0.2% in June and rose 0.3% ex-food and energy. Once again, the decline in commodities, particularly oil, is expected to push CPI lower.

Initial Claims for unemployment is due out at 8:30am. Claims remain uncomfortably high, and the release on 8/11 showed claims of 395k, still at the 400k level. Without a robust employment picture, expectations of a rebound in second half GDP will clearly not be realized.

The Philly Fed Manufacturing Index is due out at 10:00am. The index has been hovering around the flat line the past three months, having hit a peak of 43.4 in March. The July number was a positive 3.2, indicating that manufacturing in the mid-atlantic region was virtually stalled. Another reading near zero or below would clearly raise alarms that the U.S. was entering another recession.

Existing Home Sales for July is due out at 10:00am. Existing home sales have been slowly but steadily falling since February. Given the glut of properties foreclosed, or in the foreclosure process, the implications for the general economy and the banking sector are significant if existing home sales continue to contract. June saw existing home sales at a 4.77 million annual rate.

Whether or not the U.S. is heading into recession remains a large question in the minds of many. Next week’s data will clearly clarify the state of the U.S. economy. The data will have implications for monetary policy, federal, state, and local budgets, and third quarter equity earnings. All markets, including gold and silver, will be keenly analyzing next week’s numbers.

The Wisdom of QE3 – Bad for U.S. Economy, Good for Gold and Silver?

Friday, 12 Aug 2011 4:00 AM
Concerns over the global economy and European sovereign debt has seen stocks fall into, or near, bear market territory defined by a 20% drop. The decline in stocks has seen a corresponding decline in a range of commodities. Since July WTI crude futures have fallen from $100 per barrel, to $86 per barrel today. Copper futures have fallen from just under $4.50 per oz. to $4.04 per lb today. Combined with the sub-par growth of U.S. GDP, the conditions laid out by Federal Reserve Chairman Bernanke for additional monetary easing measures are now in place. Specifically, Bernanke and the Fed have said that a weak economy and the threat of deflation could warrant additional monetary easing.

Exactly one year ago, the Fed was faced with a near identical situation. In response to the deteriorating global conditions, the Federal Reserve made the decision to embark on their second round of quantitative easing, now known as QE2. This entailed a $600 billion bond buying exercise of Treasuries. The theory behind the move is that the resulting decrease in Treasury yields would spur economic activity. Unfortunately, it is arguable that the only thing the Fed spurred was inflation. The program which ended at the end of the second quarter produced 2011 Q1 GDP of 0.4% and Q2 GDP of 1.3%. Meanwhile, commodities of all stripes rose to post 2008 highs with WTI crude rising to well over $100 and copper futures reaching $4.56 per lb. Unemployment at the end of QE2 was a dismal 9.2%.

Since the end of QE2, economic data has been notably weak, punctuated by today’s August consumer sentiment data of 54.9, the worst since May of 1980. However, the upside of the poor economic data has been a sharp pullback of energy prices and other industrial commodities. In a normal recession, this sort of price action is the natural offsetting action that lays the groundwork for the next economic upswing. The Fed’s repeated meddling has disrupted this process, keeping everything from gasoline to house prices artificially inflated.

One could argue that the Fed should stop its money printing exercises, and not embark on another round of quantitative easing. The recent drop in energy prices will likely do more for cash strapped Americans than anything the Fed or Washington could do.

Unfortunately, Bernanke has shown he is a man of action. August 26th sees the annual Jackson Hole Central Banker conclave which saw the initiation of QE2 one year ago. Given recent statements from Bernanke and the Fed, it would appear that the odds of some new form of monetary easing at this year’s gathering has increased. This includes the August 9th FOMC which stated that committee members had discussed additional monetary measures.

The implication for precious metals investors, including gold and silver, are clear. Another round of monetary easing would be dollar negative. Insofar as the negative correlation between the USD and gold and silver holds, another round of monetary meddling would have positive implications for precious metals. Conversely, with Treasury yields at or near record lows, it is debatable whether any such move by the Fed will have any positive result on the economy beyond driving oil prices back above $100 per barrel.

Reuters: Rush to Gold Shakes Staid French Market

Friday, 12 Aug 2011 4:00 AM

* Paris brokers see wave of newcomers

* Public drawn by fear of financial crisis, soaring prices

* Gold rally also fuels internet trade, jeweller robberies

By Mehdi-Nicolas El Moueffak and Marion Douet

PARIS, Aug 12 (Reuters) – A surge in prices to all-time
highs has galvanised the French retail gold market, for long a
dusty corner beloved of coin investors, drawing in ordinery
punters but also the unwelcome attention of armed robbers.

In a week in which market jitters about debt risks hit
France and its banking sector, growing demand was apparent on
rue Vivienne, close to the old Paris stock exchange and home to
Paris’ gold brokers where shops reported a wave of new
customers.

Full Article

40-Year Anniversary of U.S. Exit from Gold Standard – See Nixon’s Announcement

Monday, 15 Aug 2011 4:00 AM
Its 40 years to the day that the U.S. left the gold standard and entered the world of fiat currency. Since then, the price of gold has increased 50 fold and the USD has tumbled in value against all peer’s, save perhaps the currency of Zimbabwe, Argentina, Belarus, and any other country unfortunate enough to experience hyperinflation since 1971.

On August 15th, 1971, gold was $35.00 per troy oz. Today, August 15th, 2011, spot gold is trading at $1,739.40 per troy oz.

Gainesville Coins is happy to provide the following link of then President Nixon’s speech taking the U.S. off the gold standard.

Of interest is the analysis and justification given by Nixon for taking the U.S. off the gold standard. In the speech, Nixon rails “money speculators” He then goes on to say the removal of the US dollar from the gold standard is not a devaluation. Curiously, he states that while it is possible that buying goods and services when abroad or imported may become more expensive, buying goods and services that are produced in the U.S. will not be affected. I guess President Nixon forgot that the in a global economy, even domestically manufactured goods will be impacted by the value of the USD, most clearly in the impact a declining USD would have on industrial commodities. According to Nixon, a rise in the cost of traveling abroad, buying imported goods, and of domestically produced products with any imported component IS NOT a devaluation. Hmmmm. To help put things into perspective, the cost of a gallon of gasoline in 1971 was $0.36-$0.40 per gallon.

Nixon ends his speech by imposing an import tax to address the U.S. trade imbalance. Once again, this would further increase the cost of imported goods. But according to President Nixon, the removal of the U.S. from the gold standard did not represent a devaluation.

The flaw of this logic 40-years ago is pretty clear to see today. With the U.S. continuing to run large, and growing trade deficits, combined with Federal budget deficits of $1 trillion or more for the foreseeable future, the future direction of the USD doesn’t seem to be that unclear either. Insofar as huge trade deficits and budget deficits cause a nation’s currency to devalue relative to peers who run smaller trade deficits and smaller budget deficits, the future of the USD would be expected to maintain its current downward trajectory.

Perhaps Nixon should have recognized that the bad “money speculators” were merely anticipating the future based on the fact that the U.S. was running a large and unsustainable trade deficit, along with a sizable Federal budget deficit.

Interest in precious metals, including gold and silver, is likely to continue in the face of these cold facts.

Why is Ron Paul the “13th Floor” Among Republican Candidates: Jon Stewart Explains

Tuesday, 16 Aug 2011 4:00 AM
Its curious that the Republican candidate who virtually tied with Michele Bachmann at the Iowa Straw Poll has been completely omitted from mention by any of the main stream press. Given the implications that the next President of the United States will have on the future of U.S. debt and deficits, ignoring Ron Paul, whose views on fiscal sanity and the Federal Reserve stand in sharp contrast to all other contenders, seem inexplicable.

Thankfully, Jon Stewart on the Daily Show did a marvelous job pointing out the ludicrous nature in which the major news networks assiduously avoid the barest mention of Ron Paul, and his virtual tie in the Iowa Straw Poll. Bachmann – 4,823 votes, Paul – 4,671 votes.

So sit back, and enjoy a good laugh as we all witness “fair and balanced” journalism at its best.

Watch Video: Indecision 2012 – Corn Polled Edition – Ron Paul & the Top Tier

For precious metals investors, it may be worthwhile to know that Ron Paul advocates a return to a gold standard. For those that missed it, watch President Nixon’s announcement to America which took the U.S. off the gold standard August 15, 1971.

40-Year Anniversary of U.S. Exit from Gold Standard – See Nixon’s Announcement

Chart of the Day: Philly Fed Index versus Non Farm Payroll Report – Courtesy of Zerohedge.com

Thursday, 18 Aug 2011 4:00 AM
The question of where the U.S. economy is heading is always among the foremost issue for investors. While some could argue that the data over the last week has been mixed, most would agree that the data since May has been weak, and point to a growing probability of a double-dip recession. The collapse in today’s release of the August Philly Fed index to -30.7 is a
shocker. The consensus forecast was for a 4.0 read following the prior
month’s 3.2. Combined with Monday’s release of the Empire State manufacturing survey, and this week’s inflation data, the data point to a clear contraction in U.S. manufacturing amid higher levels of inflation.

Zerohedge.com has published the following chart comparing the Philadelphia Manufacturing survey with the all important non-farm payrolls data going back to 1996.

As can be clearly seen, there is a strong correlation between the two, making zerohedge.com’s title for its piece “The Scariest Chart Ever: Philly Fed Versus Non-Farm Payrolls,” very apt. Though zerohedge doesn’t include any text with its piece, the one line it does write is “-700k non-farm print coming?.”

Given the historical correlation between the two data series, such a print certainly would seem to be in the cards. Any negative print in non-farm payrolls would be a shocker. A negative number ranging anywhere close to -700,000 jobs would put the nail in the coffin for the debate on whether the U.S. was falling back into recession.

It should be remembered that official GDP forecasts for the U.S. have been steadily slashed by analysts on Wall Street, as well as by the Federal Reserve. While the official line remains that the U.S. is not heading into another recession, it would appear that those bold pronouncements could prove to be, as usual, highly optimistic – not to mention wrong.

The implications of another U.S. recession are many, including increased Federal budget deficits, a rise in deflation risks, a fall in risk assets – including stocks, and a growing likelihood that the Federal Reserve, in its infinite wisdom, would find it necessary to do something. This something would most likely be QE3, or said simply, another money printing exercise in the near trillion dollar range. With the 10-year yield pretty much at a historic low of 2%, it is questionable that the Fed’s money printing exercise would do anything more than create inflation, and therefore a stagflationary environment.

While it is impossible to know how gold and silver would fare if the U.S. did fall into recession, it is clear that the factors driving interest in precious metals will remain prominently displayed.

Central Bank Buying in First Half 2011 Exceeds 2010 Total – Highlights of Q2 WGC Gold Digest

Thursday, 18 Aug 2011 4:00 AM
The World Gold Council (WGC) is an association “whose 22 members comprise the
world’s leading gold mining companies, representing approximately 60% of
global corporate gold production.” The WGC’s aim is to further develop the market for gold. For instance, they are the sponsors to the hugely successful, and popular gold exchange traded fund GLD. One of the strengths of the WGC is the research they provide on the gold industry. Every quarter, the WGC produces a Gold Investment Digest that provides an excellent overview of gold market dynamics for the quarter. With all this in mind, Gainesville Coins felt that highlighting a number of key points from the report would be informative. For those that wish to read the full report, a link is provided at the end of the article – although you will have to register to access it.

Perhaps the most significant fact from the second quarter report was the acceleration of central bank buying. In the second quarter, central banks added more gold to their reserves than they had in all of 2010. Mexico led the central bank buying, adding 100 tons of gold, and raising its holdings from a paltry 6 tons to 106 tons. According to figures compiled by the WGC, Mexico now ranks as the 32nd largest holder of gold. Other notable buyers included Russia, which purchased 41.8 tons to raise its total to 830 tons. Thailand added 9.3 tons. The significant takeaway is that central banks, that had for decades been net sellers of 400-500 tons a year, are accelerating the rate at which they are accumulating gold. For those wishing a more in-depth view of the history of central bank gold reserves, see our prior piece - A Snapshot of Central Bank Gold Reserves.

The following is an updated table of the top 20 official gold reserves from IMF data:

	Country	Tons
1	United States	8,133.5
2	Germany	3,401.0

3	IMF	2,814.0
4	Italy	2,451.8
5	France	2,435.4
6	China	1,054.1
7	Switzerland	1,040.1
8	Russia	830.5
9	Japan	765.2
10	Netherlands	612.5
11	India	557.7
12	ECB	502.1
13	Taiwan	423.6

14	Portugal	382.5

15	Venezuela	365.8
16	Saudi Arabia	322.9
17	United Kingdom	310.3
18	Lebanon	286.8
19	Spain	281.6
20	Austria	280.0

According to the WGC report, ETF demand remained robust – “By the end of the quarter, ETFs had added 45.6 tons (2.2%) – the largest gain since Q2 2010 – bringing their collective holdings to 2,155.3 tons of gold worth $104.3 billion.”

Full Gold Investment Digest, Second Quarter 2011

You will have to register to gain access, but for those interested in an excellent research resource, it is well worth it.

Venezuela’s Decision to Repatriate 211 tons of Gold Held Overseas Could Impact Gold Prices

Thursday, 18 Aug 2011 4:00 AM
News that Venezuela is
planning to nationalize its gold mining industry and repatriate much of
its gold reserves held abroad is feeding into the positive
sentiment for precious metals this morning. According to the World Gold
Council, Venezuela has the 15th largest gold reserves at 365 tons, and
of that, 211 tons are held abroad. The WSJ reported that “The
Bank of England recently received a request from the
Venezuelan government about transferring the 99 tons of gold Venezuela
holds in the bank back to Venezuela.” By comparison, the U.S. has 8,135.5 tons of gold reserves.

The news of course raises the
question if a physical shortage could soon develop. Bloomberg is
reporting that Chavez stated that “JP Morgan, Barclays, Standard
Chartered, and Bank of Nova Scotia also hold Venezuelan gold, the
president said.” According to the CME, as of 8/16/2011 JPM registered
gold inventory was a little over 10 tons. This represents gold
available to satisfy gold futures contracts wishing to take physical
delivery, and not otherwise pledged. A significant decrease in JPM’s
gold reserves would raise questions of a potential physical gold
shortage. While the other banks mentioned by Chavez aren’t CME gold depositories, a decrease in their respective gold holdings will, at the least add to concerns of a physical supply shortage. In addition to its repatriationg of gold reserves, Venezuela is planning to move its cash reserves
held abroad to non-western financial centers in Brazil, Russia, and
China. The moves are a clear shot across the bow to Western
governments.

Visit Gainesville Coins at Chicago ANA (American Numismatic Association) – Rosemont, Ill., Aug 16 to 20

Tuesday, 16 Aug 2011 4:00 AM

If you are in the Chicago Area, Come Visit the Gainesville Coins Booth at the ANA World’s Fair of Money in Rosemont, Ill., Aug. 16 to 20.

All eyes on Chicago for ANA

Gold record promotes optimism

By Steve Roach-Coin World Staff | Aug. 08, 2011 8:00 a.m.

Article first published in 2011-08-22, Market Updates section of Coin World

The American Numismatic Association World’s Fair of Money in Rosemont,
Ill., Aug. 16 to 20, is shaping up to be a monster show, fueled by
record gold prices, major auctions that could bring more than $60
million and a packed floor of dealers ready to spend money to rebuild
inventories.

On Aug. 3, gold hit $1,675 an ounce during the day’s trading — an all
time record high — and silver reached almost $42 an ounce. While silver
still has room to go to reach the nearly $50 an ounce where it traded
several months ago, remember that at this time last year it was trading
for $18.42 an ounce.

ANA Executive Director Larry Shepherd has predicted that the show,
pre-show and auctions — along with a record-setting 220,000 square-foot
bourse (more than double last year’s show in Boston) — will be a grand
event in the ANA’s history.

Dealers are hopeful that collectors from around the world will make the
trip to the Chicago suburb of Rosemont, and that the ANA’s marketing
will target a public willing to sell their coins and cash in on their
gold, perhaps sparked by the mainstream news attention that the Langbord
1933 Saint-Gaudens gold double eagle trial generated.

Full Article

Gold to Silver Ratio: Where We Are Today

Friday, 19 Aug 2011 4:00 AM

One of the most common ways to measure the relative value of silver has been by looking at the price ratio of a troy ounce of gold to a troy ounce of silver. Currently this ratio is 44.9 ($1,824.55/$40.64). The average for the gold silver ratio over the last 10 years is around 58.

Below is a chart from goldprice.org that tracks the gold/silver ratio over the last 6 months. As can be seen, the increase in the ratio corresponds with the CME’s decision in May to raise margin for silver futures contracts by 84%, and which caused silver prices to fall from just under $50 per troy ounce to around $32 per troy ounce.

From the 6 month chart, it would appear that the ratio could potentially be set to narrow, which would imply relative outperformance of the price silver relative to the price of gold going foward. However, a look at the 2 year gold silver ratio chart shows that silver has dramatically outperformed gold in that period.

From August of 2010 to May of 2011, the price of silver rose from around $18 per troy ounce to just over $49 per troy ounce. This represents a 172% return in just under 9 months. Prior to this run, as can be seen, the gold silver ratio was an extremely high 67. During this same period, the price of gold rose from $1,200 per troy ounce to $1,500 per troy ounce representing a much smaller, but still respectable 25% return.

This final chart takes a longer 10 year look at the gold-silver ratio.

It is notable to point out that, having fallen from a high of 80 to 50 between 2000 and early 2008, the gold silver ratio spiked above 80 during the financial crisis of 2008. The recession that came in the wake of the U.S. mortgage meltdown caused silver prices to plunge, briefly falling below $10 per troy ounce. Gold prices also wobbled during this time as investors globally struggled to raised cash. However, gold prices proved much more resilient and much less volatile.

All three charts can be interpreted differently. The 6 month chart suggests that the gold silver ratio is set to decline following the CME induced sell-off in silver. The two year chart suggests that gold-silver chart could be set to rise given the huge relative outperformance of silver over gold. Finally the 10-year chart suggest that downward trend in the gold silver ratio could be set to continue following the upheaval during the 2008 financial market meltdown.

While there is no definitive way to interpret the action of the gold silver ratio, it is useful to understand where we’ve been. The market for both gold and silver has transformed signficantly during the past decade. Increasing demand for physical gold, the rise of gold ETFs and the re-emergence of signficant central bank buying for gold has led to a resurgence in investment demand for gold. Meanwhile, increasing demand for physical silver, the rise of silver ETFs, and increasing industrial demand for silver has seen a similar increase in demand for silver. What this all means for the gold silver ratio remains to be seen.

For those that may be wondering, the gold silver ratio reached a low of 14.01 in 1980 when the Hunt’s brothers made an attempt to corner the global silver market.

Bloomberg: Gold Set for Longest Weekly Rally Since 2007

Friday, 19 Aug 2011 4:00 AM

Gold rose to a record above $1,880 an ounce in New York, poised for the longest run of weekly gains since April 2007, as escalating concern that the global economy is slowing drove equities lower.

The metal is set for a seventh weekly advance as worse- than-expected U.S. economic data and Europe’s debt crisis boost speculation that growth will falter. The MSCI All-Country World Index of equities fell as much as 1.7 percent, heading for the fourth straight weekly drop, after Morgan Stanley cut forecasts for global growth.

Full Article

August 26th: Jackson Hole and QE3 – China Not to Attend

Friday, 19 Aug 2011 4:00 AM

Perhaps the most signficant upcoming event for financial markets outside the August non-farm employment report due on September 2nd, is the August 26th Jackson Hole meeting of Central Bankers. With clear signs of economic fragility in the U.S., and the ongoing threat the European debt crisis poses on European banks, and therefore the global financial system, odds continue to rise that the Federal Reserve will embark on Quantitative Easing part 3.

We bring this up because in a reuters article today, China, the single largest foreign holder of U.S. debt has decided not to attend this years annual conference of central bankers. While China’s absence is a not new phenomena – reuters notes that no Chinese central bank figure attended last year’s meeting as well - it is possible to read into China’s decision by noting that at last year’s meeting, Bernanke announced his intention to launch QE2. Having a Chinese central bank figure available for questions would have been awkward, to say the least. No doubt, China would have been immediately concerned over the negative implications that QE2 would have on the USD, and as an extension, on their Treasury holdings. In the end, Bernanke’s decision to spend $600 billion to purchase Treasuries was a money printing excercise that raised the level of inflation, and produced virtually no economic growth.

If Bernanke were to announce QE3 this year, the same awkward possibility would exist if a Chinese central bank figure were available for questions. It doesn’t seem beyond the realm of possibility that China is merely anticipating the next multi-hundred billion dollar money printing excercise by the Federal Reserve.

While this analysis is certainly somewhat spurious, tea leave reading on the when, where, and how for the next quantitative easing program will assuradly be on the rise leading into the August 26th gathering.

For precious metals investors, including gold and silver, another round of quantitative easing would have clear positive implications insofar as excessive money printing creates inflationary pressures, and the negative relationship between precious metals and the US dollar continues to hold.

Expect more speculation over QE3 in the days ahead, particularly whenever a poor economic data point is released, or as Europe’s ongoing debt crisis hits another peak.

Russia’s Central Bank Adds to Gold Reserves in Q3 – 8,450 Troy Ounces Per Day

Monday, 22 Aug 2011 4:00 AM

Russian Prime Minister, and former President, Vladimir Putin recently called the U.S. a “parasite” for abusing the reserve currency status of the US dollar by running enormous budget deficits. Because of sizable oil exports, Russia has accumulated one of the largest positions in U.S. Treasuries alongside China and Japan. The sizable budget deficits and debts of the U.S., along with chronic trade deficits has caused a steady erosion of the dollar’s value. In response, Russia has become one of the most active purchasers of gold.

From figures released by the Central Bank of Russia today, the country now has 839.7 tons of gold. This represents a 9.2 ton increase since the end of the second quarter according to IMF figures compiled by the World Gold Council. In other words, Russia has purchased, on average, 8,450 troy ounces every business day of the third quarter to today. The total value of Russia’s gold reserves based on a price of $1,890 per troy ounce is $51 billion. According to the World Gold Council, Russia’s gold reserves rank eighth among all nations.

As Gainesville Coins has previously pointed out, the re-emergence of central bank buying of gold is one of the most significant factors underpinning the gold market today. Having averaged sales of 400-500 tons per year for decades, central banks became net purchasers of gold in 2010. As the World Gold Council points out in its Gold Investment Digest Q2 2011, “central banks around the world continued to increase their gold holdings. On a net basis, in the first half of 2011, central banks bought more gold than during the whole of 2010.”

Some of the recent increases in central bank holdings include:

1. Mexico added 100 tons of gold to its reserves in the second quarter of 2011 to 106 tons.

2. Russia added 41.8 tons of gold to its reserves in the first half of 2011.

3. Thailand added 9.3 tons of gold to its reserves in the first quarter and 17 tons in the second quarter of 2011.

4. South Korea added 25 tons of gold to its reserves through the end of July 2011

While central bank buying has accelerated markedly over the last two years, gold as a percentage of total reserves remains extremely small. For Russia, gold represents just under 10% of total reserves. For South Korea, the number is miniscule, with gold representing just 0.79% of total reserves.

Russia is clearly showing that it is putting its money where its mouth is. Furthermore, many commentators believe that Vladimir Putin will seek Russia’s Presidency once current President Medvedev’s term ends. If Vladimir Putin is again elected President of Russia, ongoing central bank purchases of gold will almost assuradely continue, if not accelerate. Today’s announcement that Russia has continued to purchase gold at a 8,450 troy ounce per business day rate in the third quarter is clearly a positive for gold market bulls.

Reuters: Shanghai Gold Exchange Lifts Margins for Gold Forwards

Tuesday, 23 Aug 2011 4:00 AM

* SGE lifts trading margins for gold forwards to 12 pct

* Daily trading limits lifted to 9 pct, from 7 pct

* SGE says monitoring silver, may act to limit volatility (Adds details, background)

SHANGHAI, Aug 23 (Reuters) – The Shanghai Gold Exchange (SGE) said on Tuesday that it will raise trading margins on three gold spot-deferred contracts to 12 percent from 11 percent from Aug. 26 to limit trading risks following recent wild price swings.

It would also widen daily trading limits for those contracts to 9 percent, up from 7 percent, the SGE said on its website. The contracts to be affected include Au(T+D) , Au(T+N1) and Au(T+N2) .

The SGE said it was closely eyeing silver contract price movements and would consider raising trading margins, transaction fees or costs of rolling over forward contracts should volatility persist.

This is the second time the SGE has raised collateral requirements on gold forward contracts this year — both times took place in August — as international gold prices hit a series of news highs over the past few weeks, boosted by a flight to safety on worries over stalling U.S. recovery and crippling sovereign debt in the euro zone.

The SGE’s move also comes just two weeks after CME Group Inc upped margins on its gold futures by a whopping 22 percent on Aug. 11 — the biggest rise since Feb 2010, reflecting growing concern among exchanges around the world that the metal’s bull-run could be spurring traders to take excessive risks.

Spot gold soared to an all-time high above $1,910 on Tuesday, on course for its biggest monthly rise in 29 years, as persistent worries about global economic growth burnished bullion’s safe-haven appeal.

Full Article

German Minister Suggests Gold or Stakes in State Industry as Collateral for Future EU Bailouts

Tuesday, 23 Aug 2011 4:00 AM

In a reuters article, German Labor Minister Ursula von Der Leyen, said that future euro zone bailout payments should be “covered by collateral such as gold reserves or stakes in state industry.” This is interesting because while Federal Reserve Chairman Ben Bernanke maintains that gold is an “artifact” and not money, nations the world over are seeking to increase their holding of, or claims on gold.

As Gainesville Coins noted yesterday, official sector purchases of gold is surging in 2011. If second half purchases match the first half, official sector purchases are set to come in around 400 tons. Purchases to date total 202.3 tons – Mexico 100 tons, Russia 51 tons, Thailand 26.3 tons, South Korea 25 tons.

Von der Leyen’s statements come on the heels of Finland’s demand for collateral in exchange for its contribution to Greece’s second bailout package. The approval of the second bailout and the expanded EFSF are expected to go to member nation parliaments late September. It was reported today that Germany is to vote on the EFSF on September 23rd.

Given the fragile state of financial market confidence, it would appear unlikely that demands for collateral from bailout nations will be included in the upcoming vote for Greece’s second bailout. However, if a future bailout were to be required for Italy and Spain, the inclusion of collateral in exchange for a bailout would likely be discussed. This is very significant since Italy has the fourth highest gold reserves at 2,451.8 tons. Spain is a distant 19th at 281.6 tons. France, who has begun to be lumped into the same group as Italy and Spain, has the fifth highest gold reserves at 2,435.5 tons.

The fact that a high ranking German official is eyeing gold collateral in return for eurozone bailouts could represent a notable change in the official view of gold. One wonders if Ben Bernanke might be reconsidering his assertion that gold is not money, buy merely an “artifact.”

CME: Comex Gold Futures Margin Requirment Raised 27%

Wednesday, 24 Aug 2011 4:00 AM

NEW YORK (Dow Jones)–Exchange operator CME Group Inc. (CME) raised collateral requirements for trading gold futures for the second time this month Wednesday as gold prices climb to fresh records.

CME said gold margins will be raised 27% effective close of trading Thursday, in an email announcement after trading closed Wednesday.

Speculative investors in the benchmark 100-troy-ounce gold contract now must put up $9,450 to open a position and maintain $7,000 of that to keep the position overnight.

The increase comes as gold prices plunged over $100 and traded below $1,800 for the first time in three days.

Gold for December delivery, the most actively traded contract, settled down $ 104.00, or 5.6%, at $1,757.30 a troy ounce on the Comex division of the New York Mercantile Exchange.

CME last raised margins on Aug. 11, spooking gold investors with a 22% hike. That day, gold prices slipped 1.8% as investors pared gold positions. But gold quickly shook off those losses, soaring a total 17.6% to an intraday record of $ 1,917.90 this month.

CBO Projects Sharp Decrease in U.S. Deficits – Realistic or Pie in the Sky

Wednesday, 24 Aug 2011 4:00 AM

The CBO just released its updated budget and economic outlook for the U.S. The item grabbing the most headlines is the projected reduction of total deficits between 2012-2021 from $6.7 trillion to $3.5 trillion. A reduction in the cumulative deficit of nearly 50% would have profound implications for financial markets, including precious metals. Since one of the primary drivers of gold and silver has been their inverse relationship to the US dollar, a reduction in budget deficits would have negative implications for both metals.

The CBO cites two factors for the reduction in their deficit estimate. The first is the recently passed $2.1 trillion Budget Control Act. The CBO attributes 2/3rds of the $3.2 trillion deficit reduction to this law. $900 billion of these cuts come from binding caps on annual appropriation bills. The remaining $1.2 trillion comes from unspecified deficit reduction measures to be implemented by a 12 member deficit reduction ”super-committee.” If the committee fails to agree on cuts, federal spending will automatically be reduced by $1.2 trillion over 10 years. Half the cuts would come from discretionary programs, with the other half coming from defense spending.

The second factor the CBO cites are changes to their economic outlook and technical revisions. Since $1.1 trillion in deficit reduction comes from this source, a closer examination would seem to be in order. The first item that raises eyebrows is the CBO’s GDP projections. Their 2011 projection is 2.3%. Since the 2011 Q1 GDP was 0.4%, and Q2 GDP was 1.3%, a full year forecast of 2.3% would imply a second half acceleration of GDP to at least 3%. Given the economic data seen to date, this is clearly not realistic. Further, the CBO is projecting GDP of 3.6% between 2013-2016. It is unclear how the CBO decided on this figure, and barring another housing bubble, it is extremely unlikely the U.S. will have growth anywhere near this level. If the CBO’s projections proved to be too high, this would obviously negatively impact the CBO’s deficit reduction estimates.

Another notable items in CBOs forecast include the reduction in the unemployment rate to 5.3% between 2013-2016. Once again, without another housing bubble, it seems hard to see how the CBO can justify this sharp decline in unemployment. If unemployment were to remain above the CBO’s projection, the clear implication would be higher deficits since tax revenue would be lower and welfare payments would be higher.

Finally, the CBO is projecting an increase in federal revenues to 20.2% of GDP in 2014 and 20.9% of GDP in 2021. Current federal revenues are 16.8% of GDP, and as zerohedge.com points out “over the past 40 years, federal revenues have averaged 18.0% of GDP.” How the CBO can justify this increase is difficult to fathom. Once again, it suggests the CBO’s deficit reduction projections will prove highly optimistic.

The CBO’s track record in forecasting has been far from good, and today’s budget and economic outlook would appear to contain numerous questionable assumptions. In addition, with the next political election cycle rapidly approaching, momentum for additional fiscal stimulus has already begun. While the recently passed budget control act will clearly lower future deficits, it does not prevent politicians from enacting more fiscal stimulus to help their re-election chances. Furthermore, if the “super committee” fails to agree on $1.2 trillion in deficit reduction measures, it would seem highly possible that Congress could decide to change the law rather than having a mandatory $600 billion cut for both discretionary spending and defense spending.

Regardless, budget deficits and rising total debt remain a reality for the United States for as far as the eye can see. Given the liklihood of downward revisions to the CBOs economic projections, changes to the Budget Control Act, and the possibility of future fiscal stimulus, actual and projected deficits and debt will likely be revised higher going forward.

Are There More Gold and Silver Margin Hikes on the Way?

Thursday, 25 Aug 2011 4:00 AM

The CME has now raised margin requirements for gold twice in the space of two weeks. The first increase was 22%, effective August 11th, and the second was 27% effective August 25th. Collectively the two margin hikes have increased the initial margin requirement for the 100 troy oz gold future contract from $6,075 to $9,450, or 55%. The increases do not yet match the CME’s 84% margin increase in silver which occured in a series of 5 margin increases, and which sparked a rout in silver prices from just under $50 per troy oz to just under $32 per troy oz. With that in mind, it could be just a matter of time before the next CME gold margin hike. Today, Interactive Brokers sent out the following message:

“To HKMEX,NYMEX,NYSELIFFE traders:

Thu Aug 25 13:54:57 2011 EST

As a result of the continued volatile trading environment, please be advised that exchange margins and/or house margins are likely to increase overnight and over the next couple of days, particularly in the metals. For exchange specific increases, please visit the respective websites. IB will also be increasing the gold derivatives margin. Please monitor any affected holdings closely and manage your risk accordingly.”

Interactive Brokers last sent out a similar message on 8/19/2011, just 5 days ahead of yesterday’s announcement from the CME. Given Interactive Brokers prescient call less than a week ago, precious metals investors should take note of today’s message of another likely increase in gold margin requirements.

Additionally, it is notable that Tuesday’s announcement from the Shanghai Gold Exchange that it would be raising margin requirments for gold forwards was the second such margin increase for the month. Furthermore, the press release announcing the measure included the following passage:

“The SGE said it was closely eyeing silver contract price movements and would consider raising trading margins, transaction fees or costs of rolling over forward contracts should volatility persist.”

While there is no current expectation that the CME will raise silver margin requirments further, the SGE is clearly eyeing the silver market, and it would seem highly likely that a silver margin increase will be forthcoming from the SGE.

The negative price action that has accompanied these announcements will likely keep the market for gold and silver somewhat on edge near-term.

What Did Bernanke Say

Friday, 26 Aug 2011 4:00 AM

Economy

Bernanke still maintains that a substantial reason for the sub-par growth of the U.S. economy is due to temporary factors. These include the Japanese earthquake and tsunami, the “temporary” spike in commodity prices, uncertainty over European sovereign debt, the ratings downgrade of the U.S. credit rating, and the messy debt ceiling increase.

Bernanke goes on to acknowledge that the severity of the financial crisis of 2008 and the attending housing market collapse have “acted to slow the natural recovery process.”

Bernanke Stands Ready

Bernanke said that the upcoming September 20th FOMC meeting will be extended from 1 day to two days in order to allow a full discussion. In addition, he reiterated comments from the August 9th FOMC where he stated that the “Federal Reserve has a range of tools that could be used to provide additional monetary stimulus.” These include encouraging bank lending by elimiting the interest the Fed pays on bank reserves held at the Fed, extending the duration of the Fed’s portfolio of Treasury and MBS assets, and additional buying of Treasuries on the open market.

Bernanke Recommends

Bernanke made it clear that government action has a clear role to play in getting the U.S. economy at full employment.

1. A more active housing policy.

2. Action on K-12 eduction which “poorly serves a substantial portion of our population.”

3. Putting U.S. fiscal policy on a sustainable path.

4. A better decision making process for fiscal decisions. This is obvious an allusion to the damaging debt ceiling battle which will is projected to repeat in 2013.

So stay tuned for September 20th, the next FOMC, when the market will no doubt be salivating for some sign of more monetary easing.

Meanwhile, the market will continue to eye the deteriorating situation in Europe and economic data. The most significant of these will be next Friday’s August non-farm payroll report.

BusinessWeek: Gold Coins: The Mystery of the Double Eagle

Monday, 29 Aug 2011 4:00 AM

Bloomberg BusinessWeek. By Susan Berfield, August 26th, 2011

How did a Philadelphia family get hold of $40 million in gold coins, and why has the Secret Service been chasing them for 70 years?

U.S. Mint/AP Photo

This coin is worth $7.6 million

The most valuable coin in the world sits in the lobby of the Federal Reserve Bank of New York in lower Manhattan. It’s Exhibit 18E, secured in a bulletproof glass case with an alarm system and an armed guard nearby. The 1933 Double Eagle, considered one of the rarest and most beautiful coins in America, has a face value of $20—and a market value of $7.6 million. It was among the last batch of gold coins ever minted by the U.S. government. The coins were never issued; most of the nearly 500,000 cast were melted down to bullion in 1937.

Most, but not all. Some of the coins slipped out of the Philadelphia Mint before then. No one knows for sure exactly how they got out or even how many got out. The U.S. Secret Service, responsible for protecting the nation’s currency, has been pursuing them for nearly 70 years, through 13 Administrations and 12 different directors. The investigation has spanned three continents and involved some of the most famous coin collectors in the world, a confidential informant, a playboy king, and a sting operation at the Waldorf Astoria in Manhattan. It has inspired two novels, two nonfiction books, and a television documentary. And much of it has centered around a coin dealer, dead since 1990, whose shop is still open in South Philadelphia, run by his 82-year-old daughter.

“The 1933 Double Eagle is one of the most intriguing coins of all time,” says Jay Brahin, an investment adviser who has been collecting coins since he was a kid in Philadelphia. “It’s a freak. The coins shouldn’t have been minted, but they were. They weren’t meant to circulate, but some did. And why has the government pursued them so arduously? That’s one of the mysteries.”

Full Article

The Week Ahead – All About Jobs

Monday, 29 Aug 2011 4:00 AM

Bloomberg BusinessWeek: By Susan Berfield August 26, 2011.

Following the revision of second quarter GDP to 1.0% from 1.3%, first half U.S. GDP growth was a mediocre 0.7%. Among the primary factors hindering the performance of the U.S. economy is the weak labor market. With unemployment at 9.1%, the U.S. economy is operating well below full capacity. Until strong job growth emerges, economic forecasts will remain lackluster, and the threat of the U.S. economy experiencing a double-dip recession remains high. This Friday will see the release of the August non-farm payroll report, and if current analyst expectations are borne out, economic forecasts will likely be further lowered.

Bloomberg is reporting the current consensus analyst estimate at just 67,000 jobs created in the month of August. This follows the tepid 117,000 created in July. There is no change expected in the unemployment rate at 9.1%.

A jobs report in-line with current expectations would be a clear disappointment. 67k jobs is well below the 200k-250k most analysts believe is necessary to meaningfully reduce the unemployment rate.

It is worth noting that the birth death adjustment is highly positive in August, with last year’s August adjustment coming in at 91k. The birth death adjustment estimates jobs created from new companies (births) less jobs loss from company closures (deaths). Generally, the birth death adjustment is similar year over year, and given the size of last year’s adjustment, it wouldn’t be surprising to see a positive beat to Friday’s estimate of 67k if the adjustment is close to last August’s 91,000 positive adjustment.

There are two other notable employment related releases due out this week. Wednesday sees the release of the ADP employment report for July. Bloomberg is reporting the consensus estimate at 110,000 following July’s 114,000. Thursday will see the weekly initial jobless claims data. Bloomberg is reporting the consensus estimate at 407,000 following the prior week’s 417,000.

Jobs and the Gold and Silver Market

While the gold and silver market have spent the last week gyrating wildly in response to successive margin increases by the CME and the Shanghai Gold Exchange, as well as profit taking following strong runs in both metals, Friday’s jobs report does have U.S. dollar implications that will affect the market for gold and silver. A weak employment report will add to the body of evidence pointing to a possible recession. This would imply wider federal deficits, and therefore a weaker dollar. Insofar as the U.S. dollar remains negatively correlated with gold and silver prices, a weaker than expected employment report would have positive implications for precious metals.

Additionally, the Fed has repeatedly indicated that it has a number of tools available to counter a slumping U.S. economy. While Ben Bernanke refrained from making any policy initiative this past Friday, the Septermber 20th FOMC meeting will garner plenty of speculation if economic data remains sub-par. This Friday’s employment report will figure heavily into third quarter economic forecasts, and future monetary policy. Were the Friday’s number to meaningfully increase the possibility of a double-dip recession, expectations of further monetary easing would rise proportionally. This would have negative dollar implications that would again support precious metals prices.

Record Gold Prices Sparks New Wave of Chinese Buying

Tuesday, 30 Aug 2011 4:00 AM

Analysis: Record prices spawn new wave of China gold bugs

(Reuters) August 29th – Record gold prices, rather than denting China’s enthusiasm for bullion, have emboldened investors to plough more money into gold bars and riskier bullion-based derivatives.

August is traditionally a slow month for Chinese jewelers, but many shops in Shanghai visited by Reuters reported surprisingly solid gold sales over the last few weeks, with shoppers unfazed by gold’s stellar price gains over the past few months.

“The surge in prices has sparked another gold-buying craze. The 50 gram and 100 gram gold bars were selling like hot cakes,” said Ms. Liu, a store manager at Shanghai’s major jeweler Lao Feng Xiang Co Ltd, who said gold sales this month were up at least 30 percent from a year ago.

The attitude of Chinese consumers — expected to soon overtake Indians as the world’s top buyers of gold — will be an important influence on longer-term trends.

Demand from the world’s most populous country, which is adding hundreds of thousands of people to the ranks of affluent and middle-income consumers every year, implies that the long-term price floor for gold is set for a steady increase.

Buying on Dips

Full Article

Fed Minutes Indicate QE3 Highly Likely – News Buoys Gold and Silver

Tuesday, 30 Aug 2011 4:00 AM

The release of the August 9th Fed minutes show the Fed has virtually decided to embark on the next round of quantitative easing. Given the extremely weak economic data before and after the last FOMC, this should not be too surprising. While some commentators could point to the higher than expected retail sales and personal consumption data – the only better than expected data to be released since August 9th - the gains represented in these spending indicators both point to elevated fuel prices and not any underlying strength among consumers. The implications for gold, silver, and stocks has been clear to see as all three have risen in the wake of the release.

Among the highlights:

1. Revised data for 2008 through 2010 from the Bureau of Economic Analysis indicated that the recent recession was deeper than previously thought and the level of GDP had not yet attained its pre-recession peak by the second quarter of 2011.

2. The staff raised slightly its projection for inflation during the second half of this year, as the upward pressure on consumer prices from earlier increases in import and commodity prices was expected to persist a little longer than previously anticipated.

3. Participants noted a detioration in labor market conditions, slower household spending, a drop in consumer and business confidence, and continued weakness in the housing sector.

Bottomline: The underlying strength of the economic recovery remained uncertain amid higher than expected rates of inflation.

Monetary Easing Measures Discussed

1. Some participants noted that additional asset purchases could be used to provide more accommodation by lowering longer-term interest rates.

2. Others suggested that increasing the average maturity of the System’s portfolio–perhaps by selling securities with relatively short remaining maturities and purchasing securities with relatively long remaining maturities–could have a similar effect on longer-term interest rates. Such an approach would not boost the size of the Federal Reserve’s balance sheet and the quantity of reserve balances.

3. A few participants noted that a reduction in the interest rate paid on excess reserve balances could also be helpful in easing financial conditions.

Implications

While some Fed members urged caution stating that any of the above would likely not ”promote a faster economic recovery” but rather “would risk boosting inflation without providing a significant gain in output or employment,” it is clear that if economic conditions were to continue deteriorating, the Fed will embark on additional monetary easing.

While not publicly stated at the time, the minutes show that the extension of the September 20th FOMC to two days was made at this time. It can now be inferred that the “fuller discussion” Ben Bernanke alluded to at Jackson Hole, means discussion on what manner of additional monetary easing should be tried.

With each day bringing forth more evidence of economic weakness, it is clear that Bernanke is going to live up to his reputation of being a man of action. September 20th-21st seems far away however, since market’s have shown the capacity of violent moves in extremely short time frames.

It is notable that following the release, gold and silver both rose while equities made new daily highs. The move in equities is particularly interesting given the extremely dismal consumer confidence number’s released this morning.

Barrring a miraculous recovery in economic conditions between now and September 20th-21st, more money printing by the Fed now looks extremely likely. Expect interest in gold and silver to remain elevated.

Can Risk Assets Continue to Rally in the Face of Poor Economic Data

Thursday, 1 Sep 2011 4:00 AM

Since last Friday’s speech by Ben Bernanke at Jackson Hole, risk assets have seen an impressive levitation. In the days following the Fed Chairman’s speech, two voting members of the FOMC, Evans and Lockhart, have stated the need for additional monetary stimulus, and that the Federal Reserve has the means and the will to further attempt their resuscitation of a faltering U.S. economy. Tuesday’s release of the August 9th FOMC minutes merely added to the now near consensus that the Federal Reserve will embark on additional stimulus measures. However, the next FOMC is 3 weeks away, and in the interim, risk assets will likely find nothing more than an ongoing stream of weak economic data.

Despite today’s jump in stocks on the better than expected ISM manufacturing data, it is worth pointing out that the data has once again shown a decrease in U.S. manufacturing activity. Combined with today’s poor manufacturing surveys released in China, South Korea, Taiwan – three of Asia’s exporting powerhouses – and the corresponding decline in Europe’s PMI, the signs of a potential double-dip recession continue to flash ever brighter.

The following chart, courtesy of Zerohedge.com shows an alarming decline in expectations for corporate earnings.

The chart is ominous to say the least, and suggest that equity market optimism could be highly misplaced.

Where do Precious Metals Stand

The recent gyrations in the gold market appear to have subsided for the moment. Despite the sharp pullback for gold prices in the last days of August, gains for the month still total 12%. This impressive run for gold came in the wake of a global sell off in equities that has only now turned thanks to the “free market principles” of the Federal Reserve, or rather, their ongoing determination to print their way to prosperity. Silver prices mirrored gold, and also finished the month of August with a near 8% advance.

It would appear that if economic data continues to disappoint, risk assets, including equities will find a sustained advance difficult to maintain. This in turn would clearly bolster the Fed’s case that “something must be done.” Barring any further margin increases by the CME and the SGE, this scenario could pave the way for a bullish outlook for precious metals heading into the September 20th-21st FOMC.

Other Factors

Lest anyone forget the clearly problematic situation in Europe, it is important to note that Italian and Spanish bond yields have been rising since the ECB’s last intervention. Today’s Spanish bond auction, with a bid to cover of just 1.75 compared to the 2.58 seen at the last auction, show that investors do not want sovereign debt that now relies on the ECB for price support. The bailout facility known as the EFSF remains in pseudo-limbo as it now must be ratified by all member EU countries. Whether or not it actually becomes the law of the land remains highly uncertain. Meanwhile, the ECB will be left holding the bag, funding a substantial number of Europe’s banks, and single-handily keeping the Eurozone’s financial system afloat.

Fiscal Headwinds will Weigh Heavily

Budget austerity is now the reality in much of the developed world. China is also putting on the brakes in the from of multiple interest rate hikes and bank reserve requirement increases. Collectively, the headwinds for the global economy are significant. Hopes of future monetary easing by the Federal Reserve will need to be mighty indeed to offset the reduction in fiscal spending by much of the global economy’s largest governments.

So stay tuned. It certainly seems that the confluence of factors leading into year end will make market action, at the very least, volatile.

Are Gold and Silver Breaking Out?

Friday, 2 Sep 2011 4:00 AM

Gold and silver are posting stellar gains on a day which might be more aptly named un-labor day. The August non-farm payroll data has shown that the U.S. economy is laboring to create jobs. A net ZERO jobs were created in August, well below expectations, and more importantly well below the 200k-250k most economists view as neccessary to meaningfully move the unemployment rate lower. Surprisingly, the unemployment rate was unchanged at 9.1%. Many economists and market commentators feel this number is due to increase significantly if the jobs situation remains on current trendlines.

Predictably, risk assets sold off sharply on the news. Equties which had been rallying on vague notions that monetary easing was on the way, have now realized that while another round of easing will be helpful, it will take time to impact the generally deteriorating U.S. economy. Furthermore, the next likely date for the Fed to initiate more monetary easing is September 20th-21st, nearly three weeks away. In the interim, the markets will likely have to deal with a steady stream of dissappointing economic data. While this might be bad news for equities and corporate bonds, it has been positive for safe haven assets, including gold and silver.

Precious metals had seen a serious bout of market volatility over the last two weeks as profit taking and reaction to margin increases by the CME and SGE have interrupted the strong year to date performance of gold and silver. Both metals have shown a strong negative correlation to the equity markets of late, and this has been put in high relief today. Spot silver prices are now comfortably above the $40 per troy ounce level and the $38.80 per troy ounce that had served as a resistence point since late May. Spot gold prices are now reapproaching their all time high hit less than two weeks ago of $1,917.90 per troy ounce.

The very real possibility of future monetary easing by the Federal Reserve has put the U.S. dollar under pressure. While gold and silver has shown a strong negative correlation with equities, the negative correlation with the U.S. dollar has been more pronounced. Expectations that upcoming economic releases will continue to point to an underperforming U.S. economy will continue to weigh on the U.S. dollar. This in turn would be positive for precious metals, insofar as the negative correlation with the US dollar holds.

Today’s strong performance by gold and silver suggests that both metals have digested the recent margin increases by the CME and the SGE, and are poised to respond to more fundamental factors. These fundamentals can be summarized as economic, monetary and fiscal. A weakening economy will continue to depress the U.S. dollar. The possibility of more monetary easing will also depress the U.S. dollar. With Obama scheduled to provide the outline for more stimulus next week, expectations of further fiscal easing will also depress the U.S. dollar. Barring any unexpected action on margin by the CME and the SGE, it would appear that the current upward move in silver and gold could represent a break-out for both.

Zerohedge.com: Wikileaks Discloses the Reason(s) Behind China’s Shadow Gold Buying Spree

Tuesday, 6 Sep 2011 4:00 AM

By Tyler Durden 9/3/2011

Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar’s reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China’s perspective is that “suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.” Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold…

From Wikileaks:

3. CHINA’S GOLD RESERVES

“China increases its gold reserves in order to kill two birds with one stone”

”The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): “According to China’s National Foreign Exchanges Administration China ‘s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.”

FULL ARTICLE

Shanghai Gold Exchange Raises Gold and Silver Margin on 9/5/2011 – Effective 9/9/2011

Wednesday, 7 Sep 2011 4:00 AM
The wild swings in gold and silver prices are no doubt causing a bit of vertigo among precious metals investors. Among the many factors impacting price action for both metals include another margin increase for both silver and gold by the Shanghai Gold Exchange (SGE) announced on 9/5/2011. Specifically, the SGE raised margin for gold and silver contracts that go effect on Friday 9/9/2011. Margin for gold will be raised to 13% from 12% while margin for silver will be raised to 16% from 15%.

Increases in margin for gold by either the Chicago Mercantile Exchange (CME) or SGE, has been accompanied by significant prices swings. This time has been no different. It is hard to attribute the recent swings in the price of precious metals specifically to the margin increase beyond noting that previous margin increases have been accompanied by volatile price action for both gold and silver. It bears repeating that the CME’s decision to raise silver requirements by 84% in a series of 5 margin increases was accompanied by a sharp plunge in silver prices from just under $50 per oz to under $35 per troy ounce. While the SGE also targetted silver in this round of increases, gold margin has been the target of both the SGE and CME of late.

Once again, it remains to be seen if this is the last of the margin increases by the SGE or the CME. As Gainesville Coins has previously noted, it would be extremely helpful if margin increases were done based on some sort of predictable formula - presumbly based on a percentage of margin to average price over the last 20 trading days, for example. Without such rules, the surprise effect of each margin increase is an unwelcome development because if there’s one thing market’s hate, its uncertainty.

Nonetheless, it would appear unlikely that the CME or SGE would condescend to provide some rules based predictability to these margin changes. Therefore, it would not be surprising that any future margin changes would be accompanied by heightened levels of volatility in their wake.

It should be noted that the multiple major headlines of late have no doubt also influenced action in precious metals. These include the decision by the Swiss National Bank to join the growing currency wars by stating its determination to keep the EUR/CHF exchange rate above 1.20. Other notable headlines include the dismal employment rate this past Friday and the clearly growing funding problems among European banks.

Conflicting Comments from Federal Chairman Bernanke and Former Fed Official Poole – Where is Inflation Heading

Thursday, 8 Sep 2011 4:00 AM

It was an interesting day for those trying to figure out exactly where Federal Reserve Chairman Bernanke and Co. is taking the country through their ultra-loose monetary policy. Today Bernanke spoke at the Economic Club of Minnesota and made his usual comments regarding inflation, and what the Fed can do to support the U.S. economy.

Specifically, Bernanke said “The Federal Reserve will do all it can to help restore high rates of growth and employment in a context of price stability.” Nothing new here as the world awaits the upcoming FOMC on September 20-21st. While Bernanke didn’t commit today to additional monetary easing at the September meeting, his comments clearly indicate he is ready to act.

This is where it gets interesting, because in a Bloomberg inflation conference, former St. Louis Fed official Poole raised the following concern over current Fed policy saying that there is a risk of an “astonishing rise in inflation.” Meanwhile, Bernanke gave his usual comment over his view of inflation, stating “We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy.” Who to believe.

The sad fact remains that since the Fed has embarked on its easy money policy, inflation rates have been much higher than the 2% the Federal Reserve officially states as their stated goal. It is worth noting that while the Fed continually harps on the threat of deflation, its policies over the last few years has led to inflation that averaged 3.6% in the last 12 months. You don’t need to be a math major to see this is substantially above 2% – 80% above to be exact. More worrisome, food prices rose 4.2% while energy prices rose a near staggering 19%.

Given the near certainty with which the Fed is likely to embark on another round of quantitative easing, combined with the fact that inflation is already, arguably, running hot, former Fed official Poole’s comments that there is a risk of an “astonishing rise of inflation” seems well worth noting. Bernake’s own flaccid comments regarding inflation appear somewhat hollow.

On a final note, it bears highlighting another of Poole’s comments regarding Bernanke’s monetary policy philosophy. Specifically, Poole states that as regards to current Fed policy, “Bernanke paid too much attention to equity prices.” While equity market prices are clearly important for the economy, the notion that this is being heavily weighted in Bernanke’s calculations is discomforting on many levels. For instance, if true, it would suggest that Bernanke is refusing to let equity prices fall to fair value. In other words, the notion of free market principles seem to mean less to the robust functioning of the U.S. economy than having an artificially inflated equity market.

The notion of such centrally planned activities will no doubt be repulsive for most Americans who would associate such machinations with such failed economies as the former U.S.S.R.

Some Records are Better Left Unbroken – 10-Year Treasury Yield Falls to Record 1.89% as Greece Teeters

Friday, 9 Sep 2011 4:00 AM

As Europe sparks yet another bout of severe market anxiety, the yield on the 10-year Treasury has hit a new all-time low of 1.89%. This is hardly cause for celebration however as it indicates that the market is scrambling to de-risk. The implications of this move further suggest that future economic performance will be sub par, and that Europe’s ongoing problems could yet again be reaching crisis point.

Unfortunately, the world has been here before, and everytime it looked as if the market was about to have another “Lehman Moment,” policy makers have managed to pull another rabbit out of the hat. While this time around could be no different, there are a couple of notable developments that could make this latest flare-up a pre-curser to a geniune crisis.

Economic Indicators are Nearly Universally Negative

With the third quarter nearly in the books, it is now clear that the rosy projections by policy makers the world over have proven to be dead wrong. U.S. economic growth was virtually stagnant in the second quarter, and data since has shown a steep fall in manufacturing, consumer confidence, and employment trends. Data from China to Europe have shown that this slowdown is global in nature. The last time the European debt crisis sparked a new series of records in Treasuries, the official line still maintained that second half U.S. GDP would be 3% or higher.

European Bank Funding Showing Clear Signs of Stress

It is now clear, without a doubt, that the European banking sector is increasingly dependent on life support. U.S. money markets have pulled back sharply from lending to European financial institutions, while deposits held by the ECB have swelled as banks have increasingly shied away from lending to each other. This has been accompanied by sharp falls in share prices of Europe’s overleveraged banks as investors nervously eye the substanital level of problem sovereign debt these entities hold. Many commentators believe that the European banking system requires substantial additional capital. Curiously, this is contrary to the second European bank stress test that said that Europe’s banks needed a scant 3.5 billion EUR in additional capital.

Greece Economy and Fiscal Position Continue to Deteriorate

Like every other time Greece has flared as a clear and present danger, economic data and fiscal deficit statistics have been much worse than those projected. This time is no different as Greece’s economy shrinks quarter after quarter, and as the coutry’s fiscal deficit climbs ever higher. Second quarter GDP contracted 7.3% following a 8.1% drop in the first. The government is unlikely to meet its target of a 7.6% fiscal deficit following the 10.5% in 2010.

Greek Sovereign Debt Prices Plumb New Lows

Not surprisingly, Greek sovereign bonds are making new all-time lows today. Bloomberg is reporting that the yield on the Greek 2-year note is now 57.08%, “a euro-era record. Credit-default swaps insuring Greek sovereign bonds jumped 701 basis points to a record 3,727, according to CMA.” One could go on listing the record yields in Greek bonds, but it is hoped the reader gets the idea.

Will it Be Different??

Investors the world over have been in this situation before. Each time Greece seemed poised to cause a cascade of bank failures in Europe if a default forced a mark-to-market event has been met with some slight of hand trick that had postponed what many see as an inevitable crisis due to Greece’s unsustainable economic and fiscal situation.

Perhaps telling, the ECB has been the latest magician keeping the lid on the increasingly parlous state of European banking, intervening directly to hold down Spanish and Italian sovereign yields, but today saw the resignation of Germany’s top official at the ECB, Juegen Stark, the central bank’s chief economist. The resignation strongly suggests that internal strife within the ECB is rising over how best to handle the current situation.

Meanwhile, precious metals continue to show relative outperformance. Spot gold prices are a mere $50 from a record hit earlier today. Silver prices continue to recover from their mid May swoon, and are eyeing the $40 per troy ounce level that has been a formidable resistance level.

The world will have to stay tuned and see if we are finally upon the European’s version of a “Lehman Moment.”

Census Bureau Data Paints Grim Picture – U.S. Poverty Climbs to 17-Year High

Tuesday, 13 Sep 2011 4:00 AM

While the gaggle of economic Phds at the Federal Reserve continue to forecast an acceleration in U.S. economic growth, the Census Bureau has come out with some very sobering data as regards to U.S. poverty rates. Specificaly, U.S. poverty has climbed to a 17 year high in 2010, with 15.1% of the U.S. population living in poverty, up from 14.3% in 2009. Equally disturbing, the median household income declined 2.3% in 2010 to $50,499 from from $49,445 in 2009. The increase in the poverty rate was the third annual increase, and occured despite a 3% rise in GDP in 2010

Among the other stats released by the census bureau include a rise in Americans without health insurance to 16.3% of the population, or 49.9 million from 49 million in 2009.

Given these statistics, it is a wonder how the officials at the Federal Reserve maintain their hopeful economic forecasts. For those that might not remember, The Fed’s official forecast for second half 2011 GDP was over 3%. Those forecasts look ridiculous at the moment, and some forecasters are already predicting a third quarter GDP print of 0%. This would following the 1% 2nd Qtr GDP and the 0.4% 1st Qtr GDP. Given the likely DOA status of President Obama’s $447 billion fiscal stimulus, and the growing danger of Europe sparking another banking crisis, there is little on the horizon to suggest that these dismal data points will be reversing any day soon.

The world continues to await the September 20th-21st FOMC, and today’s Census Bureau data gives added impetus for the Fed to try and juice the U.S. economy with some more easy money policies. However, given the record low in Treasury rates already, it is unclear if the Fed will do anything more than boost inflation. As recent inflation data has shown, including today’s import and export prices, inflation remains well above the Fed’s 2% target, averaging 3.6% over the last twelve months. With median income falling, it seems highly unlikely that the average American will be happy to pay even more for gasoline and food. Unfortunately, this seems likely to be the primary result if the Fed were to do another round of monetary easing.

For precious metals investors, today’s data from the Census Bureau raises the possibility of additional monetary and fiscal stimulus from those “in charge.” The predictable reaction to either, or both, would likely be further downward pressure on the U.S. dollar. As Gainesville Coins has stated before, insofar as gold and silver maintain their negative correlation with the U.S. dollar another fiscal stimulus package or monetary stimulus program would be a positive for gold and silver prices.

Europe Liquidity and Solvency Facts, Not Fiction

Tuesday, 13 Sep 2011 4:00 AM

Zerohedge.com: Usage of ECB Deposit Facility Goes Parabolic, Sovereign CDS Wider Across the Board

Amid all the rumors swirling in markets today and yesterday, including yesterday’s FT article that China was in talks with Italy regarding possible investments, and today’s equally vaccuous rumor reported by Bloomberg that Russia may use its reserves to buy common euro-area bonds, there are a number of cold hard facts that should raise serious alarm bells. Zerohedge.com has an article of just facts that should be of interest in anyone wishing to view some of the disturbing developments happening in Europe. The article contains a number of illuminating charts and tables worth highlighting.

First is a chart of ECB deposit facility ussage. Basically it shows the rising levels of deposits held at the ECB as European banks eschew lending to one another.

Its rarely a good sign when anything goes parabolic, and the chart above shows that interbank lending among European banks is being bypassed as solvency concerns rise on sovereign debt holdings. As has been pointed out before, European banks have all seen steep falls in share price of late, with many trading at levels last seen in the wake of Lehman Brothers collapse in the Fall of 2008.

This second chart shows the steady rise in 3 month Libor. As was seen in 2008, the rise in Libor, which is the rate at which banks borrow from one another is indicative of rising funding stress. The steady rise in Libor suggests a growing liquidity problem.

Finally, zerohedge.com goes on with a table of credit default spreads for European sovereign debt. As has been common of late, CDS spreads continue to rise across Europe. So while equity markets gyrate wildly on whatever rumor happens to pass the tape, underlying credit indicators continue to show a growing solvency problem and a growing liquidity problem in Europe.

Germany    87.5    +1.75
France    197    +7.75
Greece    Irrellevant
Ireland    907.5    -5
Belgium    292.25    -2.75
Denmark    133    +3
Norway    49.25    +0.25
Spain    430    0
Sweden    59    +2.25
Holland    97.5    +3.5
Portugal    1230    +15
Austria    155    +3
Finland    80    +2.5
Italy    512    +6.5
UK    86    +3.25

Investors in precious metals are no doubt feeling the whiplash from the extreme volatility all financial markets have been experiencing of late. However, regardless if you invest in gold and silver, or stocks, or bonds, it is important to see past the many flying rumors and see the facts underlying the current situation. Until CDS spreads begin to narrow, Libor begins to fall, and ECB depostis begin to shrink, the facts are saying that Europe’s problems are getting worse, not better.

Related Articles: Europe’s funding problems are finally appearing in main stream news outlets.

NY Times: Wary Investors Start to Shun European Banks

Update: Silver Eagle Annual Sales 2000-2011 YTD – 2011 Set for Annual Record

Wednesday, 14 Sep 2011 4:00 AM

Since our last update of 2011 American Silver Eagle sales, silver prices have been on a roller coaster. In the wake of the CME’s decision to raise margin requirements for silver futures contracts by 84%, silver prices fell from just under $50 per troy ounce to just over $30 per troy ounce. The last few weeks have seen a rise in silver prices to the $40 per troy ounce level. Meanwhile, demand for Silver Eagles has continued unabated and 2011 is on track for a record breaking year. The US Mint’s August Silver Eagle sales were 50% higher than 2010 levels at 3,679,500 versus 3,100,000. In fact, August 2011 was the fourth highest monthly sales of American Silver Eagles ever. The best month for American Silver Eagle sales remains January of 2011 when 6,422,000 coins sold. At current sales levels, 2011 annual sales is set to top 40 million Silver Eagles sold, trouncing the 2010 record of 36.4 million.

It is worth highlighting that demand for American Silver Eagles has been so high that the US Mint stated on May 26^th that the San Francisco Mint will join the West Point Mint in producing the coins.

The following table of annual Silver Eagle Sales shows a clear acceleration in American Silver Eagle demand starting during the financial crisis in 2008.

Year	Annual Sales
2000	9,839,132
2001	9,748,109
2002	11,186,368
2003	9,242,839
2004	9,684,356
2005	9,707,688
2006	12,235,572
2007	10,471,128
2008	21,817,736
2009	30,459,000
2010	34,662,500
2011 – Through August	28,947,500

The sale of American Silver Eagles is only one part of total annual silver demand. At Gainesville Coins, sales of silver overall has been, and will likely remain, highly correlated to the sales trend of American Silver Eagles. Indeed, demand for the Perth Mint’s Lunar Series Silver Dragons has been near frenzied. Demand for Canada’s Silver Maple Leaf has also been notably brisk.

Gainesville Coins will provide additional updates of Silver Eagle sales going forward. Given the highly uncertain macro environment, current sales trends are expected to hold. It will certainly be interesting to see how American Silver Eagle sales in particular, and silver demand in general, will be impacted by the ongoing sovereign debt issues in Europe, the clear signs of economic weakness globally, and the possibility of more monetary and fiscal stimulus from policy makers in the U.S.

We hope you find this information illuminating.

EU Considering U.S. Like TALF to Support Sovereign Debt Market – Stock Futures Tick Up

Thursday, 15 Sep 2011 4:00 AM

For those paying really close attention to markets afterhours, one would have noticed a bit of a jump in S&P index futures following a Reuters report that European officials are considering a program used by the U.S. to jumpstart stalled credit markets in 2008. Specifically, U.S. Treasury Secretary Geithner suggested the Europeans employ a TALF like program to buy distressed sovereign bonds. In 2008, TALF (Term Asset-Backed Securities (ABS) Loan Facility) enabled the New York Fed, where Timothy Geithner was President, to purchase $200 billion in ABS with the Treasury offering $20 billion in credit protection.

Presumably, the Europeans would use the EUR 440 billion EFSF to provide credit guarantees to the ECB who would then greatly expand its already sizable purchases of sovereign debt. The only difference in future ECB sovereign debt purchases would be the credit guarantee provided by European taxpayers. One of the criticisms of ECB sovereign bond buying is the credit risk it is taking on its books.

While the EFSF is not expected to be passed by all relevant national governments till late September, there are no specific hurdles toward passage. Any hint that a EU legislature were contemplating not passing the EFSF enabling legislation would be a serious negative in Europe’s fight to contain the sovereign debt crisis.

Whether a TALF like program will make much difference to Europe’s troubles remains to be seen. At this point, it seemed as if the ECB was already prepared to refinance all of Italy’s and Spains needs. Nonetheless, equity markets are taking any comment regarding Europe as positive, and have reacted to this latest news in predictable fashion. While economic data has been universally poor, equities continue to operate as if this mattered not a whit.

Just like today’s news that the ECB and other central banks were to reintroduce three-month dollar liquidity operations in the fourth quarter caused a sharp rally in beleaguered European banks, this latest news of a possible TALF for Europe will no doubt receive additional stock market applause.

Precious metal prices have been under pressure over the last few days as tensions seem to be easing in Europe. However, the quid pro quo for all the official action by central banks is likely to be additional austerity for over-indebted nations. This will weigh further on the global economy which is already operating at what is now being called “stall” speed. Meanwhile, central banks around the world will continue printing money at a extremely rapid clip. For instance, by some estimates, the ECB is purchasing more government debt per month than the Fed did during its quantitative easing programs. Whether gold and silver prices will remain challenged in this environment remains to be seen.

Chart of the Day: University of Michigan Consumer Expectations Fall to Low Last Hit in May 1980

Friday, 16 Sep 2011 4:00 AM

With equity markets attempting to push ever higher despite poor economic data and fears of a European bank blowout, today saw the release of the September Univeristy of Michican Consumer Sentiment index. While sentiment improved modestly to 57.8 from 55.7, and above the consensus estimate of 56.0, the data is hardly worth cheering about. The following chart from Bloomberg shows the steady drop in the index over the last few months, highlighting the headwinds risk assets, including equities face.

However, if one were to drill down into the data, a more disturbing picture emerges. Specfically, consumer expectations have now fallen to the lowest level since 1980. Zerohedge.com provides the following chart from Bloomberg.

With consumer expectations now having fallen below the lows seen in the depths of what is being called the “Great Recession” of 2008-2009, it is clear that something is amiss. While equity markets were in the process of plunging the last time UofM consumer expectations were this low, this time around, stocks have managed to pare a bulk of the losses seen since the lows hit in early August.

Since consumer sentiment changes generally lead changes in consumer spending, and therefore GDP, today’s drop in consumer expectations highlights the likely dismal GDP print for the U.S. in third quarter. It is almost assured that this weakness will translate into equity earnings, and fourth quarter earnings estimates. However, equity markets appear to not notice that the U.S. economy could well be operating at below “stall” speed.

Precious metals are attempting to find a floor after having fallen fairly steadily over the last few days. Gold prices have managed to retake the $1,800 level, while silver is again over the $40 per ounce level. If and when risk assets realize that current GDP and earnings estimates are overly optimistic, the risk-off trade could come to the fore. If recent relationships hold, gold and silver could find themselves supported.

What do Former U.K. Prime Minister Gordon Brown and Fromer Head of the IMF Dominique Strauss Kahn Have to Say About Greece?

Monday, 19 Sep 2011 4:00 AM

It is always interesting to see how the “official” line changes when officials leave office. The near universal ”official” line from European capitals and the IMF continue to maintain that the Europe sovereign debt problems will not cause a fundamental change in the Euro currency. Over the last few days, former U.K. Prime Minister Gordon Brown and former head of the IMF, Dominique Strauss Kahn have stated a much more bleak assessment.

Gordon Brown who was the U.K. Prime Minister through the 2008 financial crisis made some choice remarks three days ago, stating that Europe’s “fast-escalating crisis is now more dangerous than the Lehman Brothers disaster three years ago, threatening to tip the West into a 1930s-style slump unless global leaders work together to take dramatic action.” Speaking before a World Economic Forum in Dalian China, Mr. Brown further states “The Euro can’t survive in its present form and will have to be reformed drastically.”

Well, isn’t this a bit different from the “official” line. As recently as last week, German Chancellor Merkel and French Prime Minister Sarkozy rejected the notion of a Greek insolvency and Greece being booted from the Eurozone. All this while yields on Greek sovereign debt sit at, or near record highs. The yield on the 2-year Greek note is currently at 60%, while the yield on the 10-year Greek bond is at 22.8%. The bond market is basically saying that Greek is bound to default.

Meanwhile, recently exonerated former IMF head Kahn said what the bond market is already saying – “Greece is unable to pay its debt and its creditors will have to take losses on the debt they hold. One can rest assured that Kahn’s replacement, Christine Lagarde has made no such similar comments as the “official” line continues to maintain that Greece will somehow not default. Lagarde did mention at Jackson Hole a few weeks back that European banks were undercapitalized to the tune of 200 billion EUR, and which corresponds to many forecasts outside the ”official sector.” However, she quickly backpeddled from her statement, doing what those in authority have grown accustomed to doing – papering over or pushing back the realities of the situation.

The fact remains that Greece’s economy continues to shrink and its budget deficit and debt continue to build. Debt to GDP is a staggering 168%. With GDP forecast to fall by 5.5% in 2011 and 2.5% in 2012, targets of reaching a 3 billion EUR primary budget surplus by 2013 look exceedingly optimistic. However, even with a 3 billion EUR primary surplus in 2013, Greece’s debt load would exceed 350 billion EUR. As some have described the sovereign European debt problem, Greece is the poster child for a sub-prime borrower.

Amid all the near death experiences for Greece, financial markets, including gold and silver, have been on a roller coaster. It would appear that the end result, when it comes, will be some sort of default by the weaker European sovereign credits. Whether or not this current Greek fear flare-up will be the final one remains to be seen. However, listening to the disparity between the views of those in the “official” sector, and those that have recently departed should raise alarm bells in even the most optimistic of market watchers.

Swiss Party Pushing Constitional Amendment to Stop Its Central Bank from Selling Gold Reserves

Tuesday, 20 Sep 2011 4:00 AM

As Gainesville Coins has pointed out in the past, one of the biggest changes in the supply/demand picture for gold over the last 3 years has been central banks turning from net sellers of gold into net buyers. Based on data from the World Gold Council, central bank buying is set to reach between 400-500 tons based on current trends. The significance of this trend can’t be overstated as central banks had for decades been net sellers of gold to the tune of 400-500 tons per year. The biggest purchasers of gold to date include Russia, South Korea, Mexico, and Thailand. A constitutional initiative by one of Switzerland’s political parties suggests that Switzerland could soon be added to this list.

Swiss Newspaper NZZ reported today that the SVP party wants a constitutional amendment to prevent the Swiss National Bank (SNB) from selling any more of Switzerland’s remaining gold reserves. The SVP says that the SNB has sold 1,500 tons over the last ten years based on the advice of “experts” who described gold reserves as “superfluous.” The article from NZZ is appropriately titled “Save the Swiss gold.”

Included in the initiative is a provision that would obligate the SNB to keep 20% of its assets in gold. According to its 2010 annual report the SNB had 1,000 tons of gold comprising 16% of their assets. Based on the 2010 numbers, the SNB could be required to buy up to 200 tons of gold to meet the 20% requirement. This would clearly represent a significant source of demand for gold.

The rationale behind the SVP party’s move is summarized in the following quote “Back to sound, to real, visible and tangible values oriented monetary policy.”

The SVP’s gold initiative will require 100,000 signatures by March 20th, 2013 to proceed.

The Swiss have recently attempted to halt the rise in their currency by pegging it to the EUR. This has raised fears that the Swiss could be taking on future currency losses as they buy the EUR. Economic data out today showed that exports in August fell 4.1%, highlighting the impact of the strong Swiss on the country’s economy.

As a side note, Switzerland is home to two of the most well known private precious metal refiners. These are the PAMP and Credit Suisse refiners. Both refiners are well known in the gold bullion market.

Bloomberg: Bullion Vaults Run Out of Space on Gold Rally

Wednesday, 21 Sep 2011 4:00 AM

Often overlooked in gold’s rally has been some of the practical aspects of investing in gold, namely storage. Bloomberg has an interesting piece on the vault space shortage and the current effort to expand or build new vault facilities. A typical cost for storing gold in a vault could be as much as 1% of the market value of gold and silver stored. The charge covers storage, insurance and related documentation.

The article reports that Barclay’s is building a new vault, Brink’s Co and Deutsche Bank AG are adding more space, and the Perth Mint may expand for the first time since 2003.

The Bloomberg piece has a number of interesting facts, but one that seems worth repeating is a statistic from the World Gold Council that all the gold ever mined would fit into a 69 foot cube. This would represent 168,300 tons.

Bloomberg: Bullion Vaults Run Out of Space on Gold Rally

by, Chanyapom Chanjaroen, Nicholas Larkin and Debarati Roy

Deep in the 7.4-acre Singapore FreePort next to Changi International Airport’s runways is the bullion vault of Swiss Precious Metals, behind seven-metric-ton steel doors built to survive a plane crash or earthquake.

The rooms are almost full after demand rose fivefold in the year since the Geneva-based company opened the facility. The firm plans an extension, and relocated Chief Executive Officer Jean-Francois Pages to Singapore last month to cope with the surge of investors willing to pay as much as 1 percent of the value of their holdings each year to keep them secure.

“The European debt crisis and its impact on the solvency of European financial players are driving European customers to find refuge in tangible values like physical gold and other precious metals,” Pages said. Demand “is totally compatible with the current financial and political global turmoil.”

Full Article

Greek Funding Needs Appear to be Snowballing

Tuesday, 27 Sep 2011 4:00 AM

Amid all the hope that somehow Europe is going to figure out how to contain its ongoing sovereign debt crisis, austerity measure after austerity measure in Greece has led to a predictable outcome – a greater than expected budget gap as the economy contracts and tax revenues falter.

The Financial Times is reporting that “officials estimate Athens’ funding needs over the next three years have grown beyond the $172 billion forecast this summer. The scale of the shortfall will be determined by international lenders over the next few weeks.”

The news makes the July 21st second Greek bailout insufficient. Given the enormous difficulties already seen in getting the second bailout passed, expanding its size to incorporate Greece’s death spiral seems like a tall order.

While Europe tries to figure out how to contain the crisis, the crisis’ flash point continues to spiral out of control. Year end debt to GDP estimates are now approaching 180% and these will almost assuradely be revised higher in the coming days and weeks.

For most observers, and most Greek citizens, this debt load will have to be cut, eventually. A survey done in Greece showed that well over 50% of Greeks forecast a default on the debt. Given Greek debt yields, it is clear that the bond market has long since come to this conclusion. The yield on Greek 10 year debt is over 22% while the yield on two year debt is over 60%.

The Republican’s 13th Floor, Ron Paul, Gives Extended Inteverview on Daily Show with Jon Stewart

Wednesday, 28 Sep 2011 4:00 AM

While the media “establishment” continues to assiduously avoid the barest mention of Ron Paul’s Presidential campaign, Jon Stewart held an extended interview with the man who, among other things, is notable for his position on the Federal Reserve and fiat currencies. Specfically, Ron Paul sees the Fed’s monetary policies as a direct contributing factor to the U.S. dollar’s seemingly endless decline since it abandoned its ties to gold in the 1970s under President Nixon. For those investing in precious metals, or interested in precious metals, hearing out Ron Paul seems worthwhile, to say the least.

The main message of the September 26th interview is a redefinition of what freedom means. Candidate Ron Paul believes the effort of the Federal government to legislate every aspect of our lives is something that needs to be rolled back in a serious way.

Ron Paul currently polls around 15%, but still receives the cold shoulder from the mainstream media. Ron Paul essentially tied for first in the Iowa straw poll, and handily won the Californian straw poll. He has been elected numerous times to public office as a House or Representative member. The claims that he is unelectable are, to put it bluntly, ridiculous.

Full Interview

Can the Housing Market Rot Be Cured Through Government Policy?

Thursday, 29 Sep 2011 4:00 AM

Over the last month, Fed Chairman Bernanke has been vocal in his assertion that monetary policy alone cannot cure the nation’s ills. With unemployment hovering at 9%, concerns over another recession, and an anemic housing market, the Fed’s massive effort to achieve its dual mandate of economic growth with contained inflation appears to be failing. Last night, Bernanke repeated his call for more action from government. Among the areas he has focused on was housing, saying that a more robust Federal response is needed to end the housing market slump.

However, the question needs to be asked whether anything can be done for the housing market except having prices fall to a level where demand meaningfully picks up. Many would argue that the Fed’s drive to lower interest rates have certainly made homes more affordable, but only if you finance the purchase. Otherwise, a rational all-cash buyer would likely see current home prices as completely over-priced.

The median home price is currently around $175,000, while the current 30-year mortgage rate is around 4.25%. A buyer who finances 80% would find the monthly mortgage payments at a near-record low of $871.66. However, the flipside is the potential loss of the 20% downpayment if house prices were to decline. Because of the housing market implosion, nearly 1 in 6 homeowners are currently “underwater,” owing more on their mortgage than their house is worth.

Over the last few months, housing market statistics have fallen across the board. Despite the Fed’s exceptional efforts, the downturn in housing has resumed following a brief uplift as the world economy basked in the glow of unprecedented monetary and fiscal stimulus in late 2008 and 2009. With Europe, the U.S., and China all pursuing fiscal austerity, Bernanke’s call for the Federal Government to have a more active housing market policy strategy seems out of place.

Let the Free Market Work

Rather than attempt some more market distorting policy, it would seem the best way to end the downturn in housing is to let the housing market find its bottom. It can be easily argued that all the Federal Reserve and the Federal Government has done is delay the housing market’s bottom. Indeed, it is possible that housing would have long since found a bottom without all the interference and artificial stimulus that doesn’t change the fact that housing had been in a multi-year bubble.

What Bernanke expects from the Federal Government remains unclear. However, a rationale buyer, eyeing the current economic climate would see that house prices are not exactly cheap. The potential of capital loss by financing a house is a real deterrant for home buyers. No-one would want to buy a home today, only to find that he or she has lost their downpayment, and is underwater on their mortgage tomorrow.

Unfortunately, Ben Bernanke has shown his belief that deflation, as evidenced in the ongoing decline in housing prices, is something that can be fought with the printing press. He refuses to believe that anything can be over-priced, rather believing that by loosening monetary policy enough, he can make any price rise. While Bernanke may wish for more Federal action on the housing front, it is clear that he will act unilaterally if economic conditions don’t improve.

For precious metals investors, the clear signs of deflation in housing should be noted. Bernanke has vowed to do what it takes to prevent deflation from taking hold, and gold and silver investors are no doubt aware that this means more monetary easing. It remains to be seen if Bernanke’s philosophy on how economic growth and fair market prices are determined can be managed from his ivory tower.

Chart of The Day: Its Official S&P 500 Enters Bear Market

Tuesday, 4 Oct 2011 4:00 AM

The S&P 500 is now officially in bear market territory, down just over 20% from the 1,370 high hit early May. What is surprising about the S&P 500′s fall into bear market territory is the fact that virtually every other global equity market index had already entered bear market territory weeks, if not months, ago. The question now of course is whether this bear market has legs.

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We first saw this Bloomberg chart on Zerohedge.com

FT Reports Europe Contemplating Another Bank Stress Test – Why Bother?

Wednesday, 5 Oct 2011 4:00 AM

Among the many rumors swirling around Europe’s never ending sovereign debt crisis, the FT just reported that EU officials are contemplating yet ANOTHER bank stress test. The complete uselessness of the second bank stress test makes one wonder why European officials are bothering with this excercise. It is clear that the EU’s conception of a bank stress test is nothing more than a whitewash. Among the more ridiculous aspects of the second bank stress test was the 20% haircut applied to banks’ Greek debt holding – this when Greek debt at the time was trading at 50% of face value. Needless to say, the second bank stress test was roundly panned as worthless.

From the FT article “European Union finance ministers have asked the bloc’s leading bank regulator to test the strength of Europe’s banks on the assumption of a big writedown on Greek sovereign debt. The move, a tacit admission that the European Banking Authority’s two previous rounds of bank stress tests were not sufficiently robust, came as Angela Merkel, the German chancellor, said she was prepared to recapitalise her country’s banks if necessary. She suggested she wanted to discuss joint EU-wide bank support efforts at an EU summit in two weeks.”

The sad fact is, a “big” writedown on Greek sovereign debt misses the possibility of an even BIGGER writedown on Italian sovereign debt. One can rest assured, that the EU bank examiners will likely remain behind the curve, and conveniently omit this aspect of the market’s concern. If that were the case, the third round of bank stress tests would be another futile excercise in the many futile gestures done by Europeans to get on top of a rapidly deteriorating situation.

Investors of all stripes are no doubt frustrated by the lack of clarity in Europe. With Belgium lender Dexia now having bit the dust (Somehow Dexia passed the second bank stress test), it is clear that the well known fact that European financial institutions are undercapitalized, and need a few hundred billion in additional capital, needs to be addressed by Europeans. Unfortunately, until banks are credibly capitalized, all markets, including the market for gold and silver, will likely remain abnormally volatile.

Silver Eagle Sales in September Soar to 4,460,500 Coins Sold – Second Highest Monthly Total Ever

Wednesday, 5 Oct 2011 4:00 AM

The September sales numbers for American Silver Eagles are out, and demand continues to be brisk for the U.S. Mint’s silver bullion coins. A total of 4,460,500 silver eagles were sold in the month, the best September total ever, and the second best monthly sales total on record. January 2011 remains the monthly record holder with 6,422,000 silver eagles sold. September’s sales were nearly 1 million coins more than August’s 3,534,500, and indicate that investors were buyers of silver as the price dropped from $40 per ounce to $30 per troy ounce in the latter half of the month.

Year to date sales of Silver Eagles is now just 1.2 million shy of the record 34.66 million sold in 2010. It seem virtually assured that this number will be eclipsed in October.

It is worth highlighting that demand for American Silver Eagles has been so high that the US Mint stated on May 26^th that the San Francisco Mint will join the West Point Mint in producing the coins.

The following table of annual Silver Eagle Sales shows a clear acceleration in American Silver Eagle demand starting during the financial crisis in 2008.

Year	Annual Sales
2000	9,839,132
2001	9,748,109
2002	11,186,368
2003	9,242,839
2004	9,684,356
2005	9,707,688
2006	12,235,572
2007	10,471,128
2008	21,817,736
2009	30,459,000
2010	34,662,500
2011 – Through September	33,412,500

With the EU Putting Together a Bank Recapitalization Plan, Where are We Now

Friday, 7 Oct 2011 4:00 AM

At the start of the week, financial markets around the globe appeared headed for another 2008-like plunge. The Fed’s decision to embark on Operation Twist on September 23rd did little to ease concerns that Europe was heading toward calamity. Gold and Silver reacted just as bad, and with the CME and SGE both announcing margin increases on September 25th and September 27th respectively, both metals suffered a fall that easily outpaced stocks. However, things were about to change with Tuesday’s FT news article indicating that the EU was preparing to shore up European bank capital levels in the wake of the failure of Belgium lender Dexia. There are as yet no firm details of what this plan will entail, but market’s are clearly relieved that EU leaders are taking steps to shore up banks ahead of any further deterioration in the ongoing sovereign debt crisis.

Where Does this Leave Us

The decision to shore up bank capital before a default by Greece is a smart move. The fear that a default by Greece would lead to a banking crisis like 2008 had been driving the fear trade into overdrive. However, with no details on the plan, it is too early to sound the “all clear.” Along with news of the bank recap plan, EU leaders have called for the third bank stress test to determine capital needs. However, initial indications seem to imply that the bank stress test would only incorporate a Greek default, with a potential loss on Greek sovereign debt of 50%. As is obvious to anyone following the situation in Europe, Italy and Spain loom large as potential defaulters, and not including the losses they would represent to bank balance sheets would make the third bank stress test just as much a mockery as Europe’s fist and second bank stress test. For those that might not be aware, Dexia passed the second bank stress test.

Differences in Policy Response Today Compared to 2008

It is important to point out several important differences between policy responses today and in 2008. Recognizing the trouble European banks are encountering in bank funding is something policy makers have taken pains to address before they reach crisis point. In the wake of the Lehman collapse in 2008, the Federal Reserve provided dollar liquidity lines to central banks the world over. This time around, the Fed has already put in place dollar liquidity swap lines. The ECB meanwhile is providing near unlimited liquidity to banks as European banks find access to funding increasingly scarce. This was highlighted by yesterday’s decision by the ECB to provide ultra-cheap 1-year funding to Europe’s banks. The ECB also committed to buying 40 billion EUR of “covered bonds” to ease liquidity.

While all these measures provide some relief that the near total collapse of the global financial system seen in 2008 will not be repeated, it does not change the concern that weak sovereigns are at risk of default.

The Firewall May Not Be Robust Enough

All the actions to date do not create a firewall that is impervious to the possibility of contagion were Greece to default. The negative economic implications from such an event will no doubt put further pressure on the European economy that is already operating near stall speed. The possibility that Italy and Spain will become engulfed in a crisis situation would bring the current bank problems to another level. Even with a credible bank recapitalization plan, the EU could find that bank capital needs greatly exceed what is now being contemplated.

Artificial Support by ECB Continue to Mask Italy and Spain Problems

The ECB has now become the buyer of last resort for troubled Italy and Spain. It is highly probable that without the ECB buying, both Italy and Spain would have required a bailout. With signs that the global economy is on a downtrend, and fiscal austerity in Europe, the US, and China expected to provide further headwinds, the outlook for Itally or Spain regaining bond market confidence looks slim to non-existent in 2012.

G-20 on November 4th

At this point, the EU’s bank recapitalization plans are expected to be formulated before the G-20 meeting on November 4th. Expect any tidbit on the plan to cause a sharp market reaction. Spefically, the market will eye whether the bank recapitalization plans is large enough to contain a default be Greece and Italy. Meanwhile, the investing world will continue to eye economic data to determine whether weak sovereign credits in Europe have any chance of getting their fiscal house in order.

Gold and Silver Market, Along with Other Commodities, Await October 18th CFTC Ruling on Position Limits

Monday, 10 Oct 2011 4:00 AM

Among the many provision in the Dodd-Frank Act, one that could have a significant impact on gold, silver, and all commodities are those provisions that would limit excessive speculation by putting into place position limits. Bloomberg reports that the CFTC “after delaying consideration in September, delayed a final vote on the regulations until an October 18th Washington meeting, Steve Adamske, the agency’s spokesman said on September 27th.”

Bloomberg reports that the CFTC has come under pressure from lawmakers to complete the speculation rule, originally proposed in January.

Among the lawmakers, Senator Levin said “Until this proposed rule is adopted and effective position limits are put in place, the American economy will continue to be vulnerable to excessive speculation and the violent price swings it can cause, and American business and consumers will continue to be at risk,” Levin said in a March 28 letter to the CFTC.

During an CFTC hearing in January of 2010, it was reported that one trader held 23% of all open silver futures positions. Presumably, this high concentration of silver exposure will not be possible if position limits are put into place.

Hedge Fund Losses Impact Precious Metals Prices

Monday, 10 Oct 2011 4:00 AM

Though it is hard to quantify exactly, the recent declines in gold has been partly attributed to hedge funds who have been selling the yellow metal to offset losses elsewhere. With memories of 2008 looming large in the minds of all investors, specifically the gold and silver declines that accompanied the market’s freefall post Lehman, the current environment has many similarities worth noting. It has recently been reported that a number of hedge funds that were heavily invested in gold are down substantially for the year due to their exposure to equities and other commodities. These declines have gotten worse due to the sharp fall of gold and silver over the last three weeks. With the situation in Europe remaining fluid, and the global economy in a fragile state, fears the investor redemptions could force some of these funds to sell more of their holdings hangs over all markets.

Among the largest hedge funds hit by the recent decline in gold is John Paulson who made a name for himself, and billions in profit, by winning big during the mortgage meltdown of 2008. Earlier this year, Paulson was estimated to have over $38 billion in assets under management. The Wall Street Journal reported today that Paulson Funds Hit Hard by Recent Gold Selloff. The article points out that investors “must decide by October 31 whether to ask for their funds to be returned from the Advantage funds by the end of the year, investors say.” Paulson’s Advantage fund is down 32% this year while Paulson’s Advantage Plus fund is down 47%. Paulson, who remains bullish on equities and gold, is at risk of selling his precious metals holdings if his funds are hit with significant redemption requests.

Another notable hedge fund who has been named as a threat to forced gold liquidation is Toronto-based Salinda Capital. Zerohedge.com reports that the fund is down 37.2% in September and 49.4% YTD. The fund which focuses on gold and energy increased its gold and energy holding during September when the market for both took a nose dive. While no mention is made of the fund’s redemption policy, investors suffering this scale of losses are apt to pull funds out.

While precious metals have shown some stability over the last few sessions, a surge of investor redemptions to hedge funds with a concentration in precious metals could prove to be a formidable headwind. It would appear that alot depends on whether the Europeans can get a handle on the ongoing sovereign debt crisis which has been clearly driving investors of all stripes into cash. If the European debt crisis were to morph into an all out financial panic, it would be likely that precious metals, including gold and silver would be hit as well. The sizable declines among some well-known hedge funds already raises the risk that forced selling due to investor redemptions could further depress what had been a strong year for gold and silver before mid-September.

Zerohedge.com: Dollar Printing Uses 9.7 Tons of Ink Per Day, and Other Fast Facts About the US Dollar

Thursday, 13 Oct 2011 4:00 AM

Courtesy of Zerohedge.com 10/13/2011

Just like goldbugs know the serial number of every single gold bar held (allegedly) in the GLD by heart, so the Federal Reserve carries a soft place in its corrupt, evil heart for fiat and the assorted trivia surrounding it. For example did you know that the Bureau of Engraving and Printing has two facilities, one in Washington, D.C. and the other in Fort Worth, Texas. Together they use approximately 9.7 tons of ink per day. So while paper money may or may not a disappearing species, here are, courtesy of the Federal Reserve, some “fun” facts about the US Dollar that readers may not be aware of as they make funeral arrangements for the endlessly dilutable combination of 75% cotton/25% linen.

From the Federal Reserve’s indoctrination segment.

1. The Bureau of Engraving and Printing produces 26 million notes a day, with a face value of approximately $907 million.
2. Over 90 percent of U.S. currency is Federal Reserve notes.
3. A stack of currency one-mile high would contain more than 14.5 million notes.
4. Currency is actually fabric composed of 25 percent linen and 75 percent cotton. Currency paper has tiny red and blue synthetic fibers of various lengths evenly distributed through out the paper.
5. The $2 bill first originated on June 25, 1776, when the Continental Congress authorized issuance of the $2 denominations in “bills of credit for the defense of America.”
6. The first dollar coin was issued in 1782.
7. The dollar was officially adopted as our nation’s unit of currency in 1785.
8. The largest bill ever printed by the Bureau of Engraving and Printing was the $100,000 gold certificate.
9. The U.S. Secret Service was created during the Civil War to fight counterfeiting.
10. The motto “In God We Trust” did not appear on paper currency until 1963.
11. The Bureau of Engraving and Printing has two facilities, one in Washington, D.C. and the other in Fort Worth, Texas. Together they use approximately 9.7 tons of ink per day.
12. The approximate weight of a bill is one gram. Since there are 454 grams in one pound, there are 454 notes in one pound.
13. The largest note produced today is the $100 bill.
14. It costs approximately 6.4 cents per note to produce U.S. currency.
15. About 45 percent of the notes printed each year are $1, and 95 percent are used as replacement notes.
16. About 4,000 double folds (forward and backward) are required before a note will tear.
17. The average life of a Federal Reserve note depends upon its denomination:
$1 bill – 21 months
$5 bill – 16 months
$10 bill – 18 months
$20 bill – 2 years
$50 bill – 4.5 years
$100 bill – 7.5 years

Solid Synopsis of EU Crisis Now – Bloomberg: Lehman Catastrophic Moment Invoked as EU Seeks Crisis End

Friday, 14 Oct 2011 4:00 AM

Financial markets continue to be buffetted by the ever-changing threat from Europe’s sovereign debt crisis. Gold and silver investors have not been immune, with both metals sharply off their highs amid financial market volatility and margin rate increases by the CME and SGE. Since last Tuesday, there has been a wave of investor optimism that Europe is working on plans to finally contain the crisis. Bloomberg has an excellent synopsis of the many factors affecting the crisis, steps being taken to address market concerns, and the threat to the global economy Europe’s mess represents. Gainesville Coins feels the article is worth the time to read.

Bloomberg 10/14/2011:

“Cascading default, bank runs and catastrophic risk” lie ahead for the world economy unless Europe resolves its festering debt crisis, Timothy F Geithner told global finance chiefs on the morning of Sept. 24.

The U.S. Treasury secretary spoke from experience and lessons learned. Three years ago, he was president of the Federal Reserve Bank of New York and working to shore up a financial system in the chaos following the collapse of Lehman Brothers. His warning last month at a meeting of the International Monetary Fund in Washington was the third in three weekends after he jetted to conferences in France and Poland to appeal directly to Europe’s policy makers for action.

After New York-based Lehman filed for bankruptcy on Sept. 15, 2008, financial institutions lost or wrote off almost $1 trillion; the Standard & Poor’s 500 Index fell 40 percent in six months; and the world slumped into the deepest recession since World War II. The global economy still hasn’t recovered and has been close to stalling anew for the past several months.

Europe’s nightmare scenario would mean fresh financial disaster, according to Nobel laureate economist Robert Mundell. In the worst case, authorities fail to prevent Greece from defaulting on 356 billion euros ($489 billion) and investors react by triggering insolvencies as far as Spain and Italy. Such a firestorm would devastate bank balance sheets, rock markets, derail economic growth and threaten to splinter the 17-nation euro area. The European Central Bank would probably have to lead the response as the Fed did in 2008.

Full Article

Is the China Real Estate Market a Bubble Poised to Burst

Monday, 17 Oct 2011 4:00 AM

While the European sovereign debt crisis has dominated financial headlines for seemingly ever, another part of the world could be set on joining the West in having a debt disaster. Specifically, China experienced its first monthly decline in real estate prices last month. The possibility that China’s real estate market is a bubble set for collapse should be a worry on the minds of all investors. China’s voracious growth over the last decade has fueled a surge in commodity demand that has no doubt eased the pain for the global economy following the bursting of the U.S. housing market bubble. Indeed, while most of the world fell into recession post 2008, China escaped recession.

However, China’s growth has come with serious problems, namely inflation and ever-rising property prices. Over the last few quarters, Chinese policy makers have taken a number of steps to get ahead of both issues, including multiple increases in bank reserve requirements, hikes in lending rates, and increasing restrictions on property buying in an effort to cool unwanted speculative interest. Combined with an uncertain global economic environment, it would appear these measures are now taking hold, with house prices in China having now crested and land transactions plummeting. According to a report from Bloomberg, land transactions fell 14% in August as compared to July.

If China were to suffer from a massive deflation in house prices, the doomsday warnings of many China shorts would become realized. It was certainly notable that Chinese policy makers decided to invest state funds in Chinese financial institutions on October 10th. This move sparked an explosive rally in the Chinese banking sector which had, to that point, been substantially underperforming the broader Chinese market on just these concerns. While China bulls argue that there are fundamental differences between China’s real estate market and the U.S. subprime induced bubble, others remain highly skeptical. For instance, while current regulations require 40% down on a purchase, it is unclear whether unofficial channels for loans are being used to circumvent this requirement.

Were the Chinese real estate market tip into a sustained downtrend, many of the same problems facing Europe and the U.S. would appear on China’s doorstep. Banks would be severely challenged as loan losses spiked and as real estate lending activity collapsed. For the broader global economy, a serious economic downturn in China would cast a huge shadow over the already struggling global economy. It would be almost assured that a raft of commodities would decline sharply from lumber to steel to copper. In addition, the current wrangling over China’s currency would reach a new dimension as a downturn in China would most likely result in a spike in the USD. The current trade deficit would no doubt worsen, causing further grief to the West’s high level of unemployed.

In the end, this one data point of China’s real estate market could prove a major turning point in economic history. In 2010, it is estimated that property construction drove more than half of China’s economic growth. For those that wish to do the math, the average cost of real estate in China is about $1,000 U.S. per square meter. This number compares with the cost of housing in the U.S. at the height of the real estate bubble. With China’s median per capita income magnitudes less than the U.S., it is hard to fathom how this isn’t just another real estate bubble in the very beginning stages of bursting.

Once again, like the European sovereign debt crisis, it would seem likely that the initial response to a full blown crisis would be a rush to cash. As policy makers the world over rushed to stem the economic downturn sure to result, an interesting opportunity could open for investors. Since the solution to another economic downturn would be ever greater amounts of money printing, any downturn in gold and silver could be seen as a unique buying opportunity. At least this can by hypothosized by past policy maker responses to severe economic downturns. Unfortunately, the ideal time to buy will likely be masked by near total uncertainty as has happend in 2008 and currently with the European debt crisis. For the steadfast gold and silver buyer, keeping an eye on the possibility of another epic debt crisis, this time in China, bears close watching.

BusinessWeek: Yuan Gold Trading in Hong Kong on “Triple Demand” – China Positioning CNY as Reserve Currency

Monday, 17 Oct 2011 4:00 AM

BusinessWeek 10/17/2011

Hong Kong, the world’s third-largest gold trading centre, has become the world’s first place to offer gold trading in yuan, further positioning the yuan or renminbi as a potential global reserve currency.

Hong Kong’s Chinese Gold & Silver Exchange Society, a century old bullion bourse, has introduced gold trading quoted in Chinese yuan, making it more convenient for Chinese people and high net worth individuals (HNWs) holding yuan to invest in the precious metal and opening a new way to hedge. The move comes amid the continuing push by Chinese authorities for a more international role for its currency and as an alternate reserve currency to the embattled dollar and euro.

With gold now traded in yuan, it is only a matter of time before oil is traded in yuan thereby positioning the yuan as ‘petro yuan’ and a rival to the petrodollar’s status as the global reserve currency. The move reinforces Hong Kong’s status as an offshore hub for the Chinese currency and as a rival to New York, London and other cities as a global financial capital. The Chinese Gold & Silver Exchange said that the service, dubbed “Renminbi Kilobar Gold,” is targeting retail and institutional investors. The product is among the latest offerings designed to tap the fast-growing pool of yuan deposits within Hong Kong banking system. “By attracting both local and international investors, the Renminbi Kilobar Gold is a significant step towards internationalizing the renminbi,” said Haywood Cheung, president of CGSE.

Full Article

Are European Leaders Prepping Markets for Disappointment – Gold and Silver Investors Seek Answers

Tuesday, 18 Oct 2011 4:00 AM

Just a few days ago, it had been thought that EU leaders would unveil a miraculous fix to all of Europe’s very significant debt woes by October 23rd. Indeed risk assets of all stripes had seen one of the more explosive rallies to date over a 9 day span as hope became reality. Of course, markets had been hoping for an extremely tall order. If the plan were to alleviate all of the markets’ concerns it would need to include:

1. A comprehensive bank recapitalization plan to the tune of $200 billion.

2. An effective way to leverage the 440 billion EUR EFSF.

3. A writedown of Greek debt of 50%-60%. Crucially, the writedown needs to be voluntary in order not to trigger a default event that would have potentially large, and unknown repercussions throughout the global financial system.

The reality is the political will to accomplish the above just does not exist. In numerous reports over the last two days, it is clear that Germany and France have major differences on how to proceed. As stated in a Reuters news report today, the process is moving “millimeter by millimeter.” Yesterday, news reports highlighted comments from German Finance Minister Schauble who said that a solution to the crisis would drag on through the end of the year. Collectively, these are comments that a market with A.D.D. does not want to hear.

Predictably, the market has seen an uptick in volatility, with stocks faltering and the USD strengthening versus the EUR. Gold and silver have not been immune to the swings, with both selling off sharply from a one week high today. The real question for next Monday is – What can realistically be expected from the EU leaders’ meeting?

At this point, nothing can be taken for granted. Reports indicate that France is balking at further private sector haircuts beyond the 21% agreed to in July. Germany is pushing for a haircut of 50%-60%. What can be inferred from this disparity is that German banks are much better prepared at a Greek sovereign debt writedown that France. This possibility makes the question of how and when to recapitalize the banking system difficult to answer. The only realistic achievement possible by next Monday would appear to be a plan to leverage the EFSF.

Unfortunately, by leaving 2 of the 3 market wishes unfufilled, volatility will likely become the order of the day, again. Expect disappointment next Monday to lead to risk aversion with the predictable gains in the USD and US Treasuries, and corresponding declines in virtually everything else. In this environment, gold and silver could find themselves pressured as a rising dollar weighed on both. Additionally, the resulting concerns over the global economy that would surely follow an incomplete EU crisis response would certainly weigh on silver.

Bloomberg: Coins to Credit Cards, a Short History of Money

Wednesday, 26 Oct 2011 4:00 AM

Bloomberg, Neil MacGregor 10/25/2011

We’ve all grown so accustomed to using little round pieces of metal to buy things, it’s easy to forget that coins arrived quite late in the history of the world. For more than 2,000 years, states ran complex economies and international-trading networks without a coin to hand.

The Egyptians, for example, used a sophisticated system that measured value against standard weights of copper and gold. But as new states and new ways of organizing trade emerged about 3,000 years ago, coinage began to make an appearance. Paper money would not arrive for another couple of millenniums and credit cards, not until the 20th century.

Here are four landmark objects in the history of currency:

Gold Coin of Croesus

“As rich as Croesus.” How many people who use this familiar phrase ever pause to think about the original King Croesus? He was the ruler of Lydia, in what is now western Turkey, and these are some of the original gold coins that made him so rich.

They were minted in about 550 B.C. and came in various sizes, from about the scale of a modern British 1 penny piece or a U.S. nickel, right down to something hardly bigger than a lentil.

In a fascinating coincidence, at almost the same time in history, the Chinese also started using uniform metal pieces in very much the same way that we use coins — though the early Chinese versions were miniature spades and knives.

The need for money, as we understand it, grows when you go beyond dealing with friends and neighbors whom you can generally trust to return any labor, food or goods in kind, and begin dealing with strangers you may never see again and can’t necessarily trust. That is, when you’re trading in a cosmopolitan city like Sardis.

Before the first Lydian coins, payments were made mostly in precious metal — effectively just lumps of gold and silver. The shapes didn’t really matter, only how much they weighed and how pure they were. But this was a slow system because, in their natural state, gold and silver are often found mixed with each other and with less-valuable metals. Checking a metal’s purity was a tedious task, likely to hold up every business transaction.

The Lydian state solved this problem by minting coins of pure gold and silver, of consistent weights that would have absolutely reliable value.

The stamp used to indicate weight on Croesus’s coins was a lion, and as the size — and therefore the value — of the coin decreased, ever-smaller parts of the lion’s anatomy were used. The smallest coin shows only a paw. Because people could trust Croesus’s coins, they were used far beyond the boundaries of Lydia, giving the king a new kind of influence: financial power.

Ming Banknote

The whole modern-banking system of paper and credit is built on a simple act of faith that occurred in China seven centuries ago: Someone printed a value on a piece of paper and asked everyone else to agree that the paper was actually worth what it said it was.

Full Article

The European House of Cards Still Stands – Gold and Silver Benefits

Thursday, 27 Oct 2011 4:00 AM

The big fear that the European debt crisis could cause a repeat of the financial carnage seen in 2008 post Lehman’s bankruptcy and AIG’s bailout has seemingly been averted. For weeks, the market has waited to see how Greek debt would be adjusted, and whether such an adjustment would trigger a “credit event” that would shoot shockwaves through the global financial system. Today the world is sighing in relief that a 50% haircut on Greek debt has been agreed to, and that the ISDA has ruled that this cut is “voluntary.” Combined with news that European banks will set forth recapitalization plans of around $100 billion by mid-December, and that the EFSF has been leveraged to $1.4 trillion, has eased market concerns that the European banking system was set to implode.

For all investors, this news is a welcome relief. Gold and silver investors who held through this turbulance have been rewarded with a welcome upsurge in the price of both metals. Unfortunately, silver remains well off its high hit in May of just under $50 per troy ounce, and gold remains $200 below its all-time high of just over $1,900 per troy ounce. However, with the threat of a panic selling situation off the table, the outlook for gold and silver can now move back to more fundamental issues.

Silver Investors Still Need to Eye Recession Concerns

The fundamental outlook of silver depends on the health of the global economy, and the growing interest in silver as a store of value. It is still to early too say with any degree of certainty that the global economy is not heading for another recession. Today saw U.S. GDP in the third quarter come in at a relatively strong 2.5%. However, recent data the world over continue to point to an uncertain economic picture. With most European countries tightening their fiscal belts, and the same occuring in the U.S., the headwinds to growth from reduced fiscal spending will be difficult to overcome. Offsetting, investment demand for silver as a monetary substitute continues to grow. Indicative of this trend has been the record-setting sales of U.S. mint silver eagles this year.

Gold Price Movements Likely Depends on U.S. Dollar

The primary driver of gold will likely be its ongoing negative correlation with the U.S. dollar. While the congressional ”Super Committe,” tasked with cutting the U.S. budget deficit by $3 trillion as part of the Budget Austerity Act passed earlier this year, scrambles to come up with anything that will pass a fractured Congress, the U.S. continues to spend approximately $4 billion a day more than it takes in. In fact, the U.S. debt to GDP is expected to hit 100% by the end of this month. Given the fact that Italy is facing the wrath of bond vigilantes with a debt to GDP of 120%, the U.S. is clearly seeing a prologue to its future.

With the worst threat of the European debt crisis, seemingly past, the US dollar’s safe haven status will likely recede. Going forward, greater attention will be paid to the U.S.’s sizable fiscal deficits and trade deficits. The negative implication for the US dollar from these twin economic imbalances are unmistakable, and insofar as gold maintains its negative correlation with the USD, gold future price action seems promising.

Europe Issues Not Yet Finished and China Concerns Await

Today’s announcements from Europe are clearly welcome, but the worst case scenario can’t be completley written off. There is still a possibility that Italy will require a bailout. Any such eventuality will again raise concerns of Italy requiring a reduction in its debt that would again be “voluntary” and not trigger a “credit event.” Furthermore, while Greece’s fiscal position will undoubtably be aided by the reduction in its debt burden, the country continues to reel from a stagnating economy and ever sterner fiscal austerity measures. There is not yet certainty that Greece has turned the corner. If conditions materially worsen, Greece could yet require further reductions in its debt burden that would once again need to be “voluntary” and not trigger a “credit event.”

China continues to lurk in the background with a potential property asset price bubble. Authorities in China continue to combat the real estate surge and high levels of inflation, and there is no guarantee that a hard landing will be avoided. Like the U.S. in 2008, and Europe today, a full blown crisis in China could lead to a high level in volatility for gold and silver.

In the end, the volatility markets have experienced over the last few weeks point to an inherently unstable global financial system. The house of cards that is Europe continues to stand, with the help of a little glue and tape. While the world remains faced with numerous challenges, most pale in comparison to another full-fledged global banking sector meltdown. For now, investors should welcome some calm seas where factors other than such arcane financial tidbits such as CDS and ISDA can be focused upon.

ECB Remains the Only Sure Backstop for Now – Expect the ECB Printing Press to Hit High Gear

Friday, 28 Oct 2011 4:00 AM

The speed with which skepticism has returned to markets following yesterday’s big EU news makes it neccesary to point out some notable developments that indicate a still, very unstable, global financial sysetm.

M1 Data in Europe, Particularly Portugal, Flashing Red

Topping the list, the U.K. Telegraph pointed out today that Portugal’s money supply numbers have taken a sharp dip in the past month. “M1 deposits have fallen at an annualized rate of 21% over the past six months, buckling violently in September.” M1 data, wish represents cash and current accounts is an excellent indicator of an economy’s future direction, and Portugal’s data strongly suggests a severe economic downturn ahead.

The article shows that M1 numbers for Spain are beginning to flash red, while Ireland and Italy have moved into negative territory after briefly being positive in August.

It is no secret that economic data out of Europe have all been flashing warning signs as the sovereign debt crisis impacts consumer and business sentiment.

Worthlessness of Credit Default Swaps (CDS) Driving Bonds Lower?

With details of the EFSF still largely absent, it will rest on the ECB to be the backstop for Europe for the time being. However, Germany has been clear in its resistence to this idea. While this may be the case, as the situation in Euroland continues to worsen, it would appear likely that the only actor with the flexibility and firepower to deal with the crisis is the ECB. Today saw Italian bond yields jump over 6%, moving close to the highs seen right before the ECB was forced to begin buying Italian government bonds to forestall a possible Italian bailout.

With Greece having applicable debt cut by 50% while not triggering a “credit event” that would make CDS payments, the entire rationale for credit default swaps has been called into question. Financial institutions that may have felt themselves hedged against Italian and Spanish debt, for example, are no doubt rethinking whether they are hedged at all. If either country’s debt were to suffer a similar fate to Greece, any financial institution with CDS contracts would see no benefits, rather they would suffer an unrecoverable loss. The unintended consequence to the inability to hedge a sovereign debt position could be prompting a wholescale sell-off in at-risk sovereign debt, including Italian sovereign debt.

The perverse consequence of Thursday EU Greek debt writedown could be an accelerated collapse of both Italy and Spain. It is too early to say for certain, but with Italian bond yields now above 6% again, and the EFSF not yet operational, only the ECB can step in and stop the rot.

How Do EU Leaders Really Feel?

It seems worthwhile to provide some color to what European leaders are really thinking today.

Silvio Berlusconi, Prime Minister of Italy, today called the Euro currency a “strange” currency. He added that outside of Germany, Italy was the strongest country in the EU – clearly a shot at France.

Nicolas Sarkozy, Prime Minister of France, today said that admitting Greece into the single currency was a mistake, citing the fudged economic and budget numbers Greece used to meet membership criteria.

Debt to Cure Debt Not Likely a Good Answer

As we have pointed out before, the current European situation strongly suggests that the global financial system is inherently unstable. It is worth pointing out again the collapsing M1 data out of EU nations, and Portugal in particular.

For investors in precious metals, the solidity of investing in an asset that isn’t subject to the manipulation of a printing press will remain an important lure. It is clear that Europe is moving strongly in the direction of more debt to cure a debt problem. Since it seems highly probable that the ECB, then the EFSF will begin unleashing their respective money printing machines, investment in gold and silver will, at the very least, remain in the forefront of the minds of savers the world over.

Mine Web: India’s Gold and Silver Imports Jump 80% to $31.1 billion Over Six Months

Friday, 28 Oct 2011 4:00 AM

It would be appear that Indian investors are increasing their well-known enthusiasm for gold and silver. According to the following article from Mine Web, India saw a surge in gold and silver imports over the last six months. Perhaps western investors should take a page from the propensity of Indians to stock up on physical gold and silver coins and bars.

Mine Web, Mumbai 10/21/2011

Volatility in share markets in India have seen investors switching over to less risky assets like bonds and mutual funds, with a flood of money also pouring into precious metals.

Investors in India appear to be moving out of cash and into gold and silver. As poorly performing equities hit valuations, analysts and traders insist there is an acceleration in the investing community to asset switch into precious metals.

Both the precious metals, gold and silver, recovered sharply in the domestic market on Friday, on fresh buying by stockists and jewellers here. While the yellow metal surged $7.49 to $538.47 for 10 grams, silver rose by around $7.99 to $1051 per kilo.

Traders said revival of buying by stockists and jewellers at existing lower levels was meant to meet seasonal demand and the festival of lights coming up next week, while reports of a firming trend in the Asian region had mainly pushed up both gold and silver prices.

The Indian government recently released its export figures. According to the data released by the government for April to September, imports of gold and silver rose by a whopping 80% to $31.1 billion during six months.

India’s exports maintained their growth momentum in September 2011, rising by 36.3% year on year to $ 24.8 billion, though there was a `deceleration’ due to uncertainty in the US and Europe, commerce secretary Rahul Khullar was quoted by newswires as saying. Even as India’s exports grew at an impressive pace, it has raised hopes of crossing the $300 billion mark for the whole year.

Full Article

Could the Rise in Italian Bond Yields be Caused by Greece’s “Voluntary” 50% Haircut?

Monday, 31 Oct 2011 4:00 AM

The over the counter derivatives market continues to bedevil the world as Europe sees its hastily cobbled plans to contain the sovereign debt crisis fail to assure investors that the worst has past. Last Friday, just one day after the EU’s latest plan was unvelied, saw Italian 10-year bond yields jump over the 6% level, and the rot has continued into today. Among the largest fears hitting markets before Thursday announcement was that Greece’s debt would be further cut beyond the 21% agreed to in July, and that such a haircut would trigger credit default swaps (CDS) that would morph the crisis into a full-scale global financial system meltdown. It seemed that this had been avoided when EU leaders gave banks an ultimatum – either accept a 50% haircut voluntarily, or prepare for a default by Greece. The banks accepted. However, in doing so, the EU and banks may have laid the seeds of a contagion of the sovereign debt crisis to Italy.

In the day following the agreement to cut Greek debt by 50%, the International Swap Dealers Association (ISDA) announced that the move was “voluntary” and would not trigger credit default swaps. This has led to many commentators observing that such a decision makes the entire sovereign CDS market suspect. For instance, a bank which had thought it insulated from Italian sovereign risk by hedging their holdings with CDS would now find, with horror, that they in fact could face a forced haircut in their Italian holdings that wouldn’t trigger their insurance policies. It is impossible to say with any degree of accuracy, but this likely develpment helps explain the sell-off in Italian bonds in the wake of Thursday announcement.

If the sell-off in Italian debt, and other at risk sovereign debt accelerates, it would seem almost impossible for the ECB not to extend its bond buying efforts to contain sovereign yields. The perverse consequence of Greek having its debt “voluntarily” restructured as to preclude a CDS “credit event” is to have a market acceleration of the contagion to Italy, Spain, and other at risk sovereigns.

The CDS market and over the counter derivatives remain an opaque world that most average individuals have no conception of. Among the main thrusts of the Dodd-Frank financial overhaul law was to bring light to the OTC derivatives market. By some estimates, OTC derivatives amount to over $400 trillion. They are not centrally cleared which means that a failure of one counterparty could bring down the entire global financial system, as almost happened when AIG and Lehman Brothers stumbled in 2008.

It is nice to know that since authorities seem to appreciate the danger of a “credit event” triggering CDS, they have set themselves on the path of making sure such an event never takes place. Any holder of European sovereign bonds now has one option to reduce their exposure – SELL SELL SELL.

For precious metal investors, the implications of these events are not definative, but if policy makers are consistent, some assumptions can be made of the future risks to the market. IF CDS contracts are never triggered, a full-scale banking crisis resulting from OTC CDS sovereign bond derivatives is not as probable. This makes the possibility of a 2008 market calamity less likely. Unfortunately, policy makers can be inconsistent, and the concentrations of OTC position could be such that a 2008 market crash can’t be absolutely ruled out. Precious metal investors are no doubt aware of the drop in gold and silver in the wake of Lehman and AIG, and are fearful of a repeat. Given the likelihood the a CDS induced market plunge is less likely given what we have seen so far, a major deterrant to gold and silver is somewhat reduced. Unfortunately, the severity of what is happening in Europe and the possibility of a Chinese hard landing makes the outlook for all markets uncertain.

FOMC Today Means QE3 Watch – Expect Volatility for Gold and Silver

Wednesday, 2 Nov 2011 4:00 AM

Third quarter U.S. GDP may have been 2.5%, but this is hardly confirmation that the U.S. is heading for sustained economic growth. With U.S. unemployment over 9%, Europe in a ditch, and China showing signs of slowing, there are serious headwinds ahead. While today’s FOMC meeting is not expected to generate any major changes in policy, there is a possibility that another round of buying buying, also known as quantitative easing, could be in the cards. What’s more likely however is language in the FOMC statement that indicates a clear predisposition to embark on QE3 sooner rather than later.

Any results from today’s FOMC meeting will be announced at 12:30. Be prepared for immediate volatility regardless of what the Fed does. This has been a common feature of FOMC meetings, but any indication of QE3, or an actually decision to implement it now would almost assuredly cause a huge rally in risk assets, with a corresponding drop in the U.S. dollar. Several Fed members have indicated their willingness to further drive rates lower by buying hundreds of billions of mortgage backed securities on the open market.

Adding to this week’s excitement is tomorrow’s ECB monetary policy meeting. This is the first meeting with new head Mario Draghi. It is well known that the ECB was not very willing to buy the sovereign debt of Italy and Spain, and given the severity of the ongoing crisis, it will be interesting to see how Draghi pushes future ECB policy. Any indication that he is more willing to do the European equivalent of U.S. quantitative easing would ease concerns that Italy and Spain will require a bailout. At present, yields on Italian 10-year bonds are above 6%, and are near the level at which the ECB was reluctantly forced to intervene to drive Italian yields lower. Of secondary importance will be whether the ECB decides to lower its target interest rate. With Europe’s economy clearly slowing, the room to cut rates has been growing.

For gold and silver buyers, the decision of the Fed and the ECB will definitely impact the direction of both precious metals. Expect volatility over the next 24 hours.

Of course, the FOMC and ECB meetings will quickly be followed by the G-20 Summit on November 3-4 and the October payroll data on Friday. All markets, including gold and silver, have much to look forward to.

Bloomberg: Top Gold Forecasters See Bullion Rallying to Record by March: Commodities

Wednesday, 2 Nov 2011 4:00 AM

Bloomberg, Debarati Roy

The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe’s debt crisis is unresolved.

Futures traded in New York may rise 12 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters. Two declined to give forecasts.

Holdings in exchange-traded products backed by bullion rose the most in three months in October, and the most-widely held option gives owners the right to buy gold at $2,000 by Nov. 22. Demand for the metal accelerated since May as slowing growth and mounting concern that European leaders will fail to contain the region’s debt crisis caused $7.5 trillion to be erased from the value of global equities.

“There is a loss of trust in the entire financial system and urgent need for safe-haven investment,” said Ronald Stoeferle at Erste Group Bank AG in Vienna, the second most- accurate forecaster in the past three months. “The environment for gold is just perfect.”

ETP holdings expanded 1 percent to 2,271.2 metric tons last month, a pile now valued at $126.6 billion and greater than the reserves of all but four central banks, data compiled by Bloomberg show. Bullion bought for investment accounted for 38 percent of total demand in 2010, compared with about 4 percent a decade earlier, the London-based World Gold Council estimates.

Paulson Buys Gold

Paulson & Co., founded by John Paulson, remains the largest shareholder in the SPDR Gold Trust, the biggest ETP backed by gold, according to an Aug. 15 filing with the U.S. Securities and Exchange Commission. Paulson, who made $15 billion betting against subprime mortgages, bought the 31.5 million shares in the first three months of 2009. Their value increased to $5.3 billion from $2.84 billion since then.

Gold has risen 22 percent this year, beating the 2.2 percent advance in the Standard & Poor’s GSCI gauge of 24 commodities, the 9.3 percent decline in the MSCI All-Country World Index of equities and the 8.8 percent return on Treasuries calculated by Bank of America Corp. indexes. The metal has appreciated more than sixfold in its 11-year run of annual gains.

Prices climbed 6.3 percent in October, rebounding from the bear market in September after dropping more than 20 percent from the record $1,923.70 reached Sept. 6. Bullion for December delivery traded at $1,734 today.

Full Article

Gainesville Coins is offering the1 oz PAMP gold bar at as lows as $24 over spot, the 10 oz NTR silver bar at as low as $0.75 over spot, and the 2012 1 oz Kookaburra silver coin at as low as $5.00 over spot.

EUR Pulsl Ahead of USD in the Race to Bottom – Gold and Silver Benefits

Thursday, 3 Nov 2011 4:00 AM

It has been a long running refrain that the USD and the EUR are in a race to the bottom. Both Europe and the U.S. are suffering from high levels of debt amid a slow growth environment. To deal with this problem, both have greatly eased monetary policy and embarked on quantitative easing to juice the economy. This easy money policy has been a big factor in the ongoing support for precious metals, including gold and silver. Going forward, policy makers in both the U.S. and the ECB are expected to continue their efforts to support flagging economies. These actions have led many to describe the world today as being in a series of currency wars.

Today saw the ECB cut its benchmark lending rate from 1.5% to 1.25%. The ECB’s new head, Mario Draghi, has certainly made his mark early. The implications of this unexpected move is that the ECB is seen as more likely to provide the support needed to keep Italian and Spanish yields below the threshold that would require a bailout. With the EFSF details still unclear, the ECB is the only organization that could take up the role of European savior. The clear easy money stance of the Draghi ECB has clearly put the EUR ahead of the USD in the race to the bottom.

Yesterday Chairman Bernanke and the Fed could have made their move to the bottom, but decided inside to remain in cruise control. Despite any new measures, there is no doubt that the Fed already has its foot hard on the pedal with its Operation Twist and zero interest rate fed funds rate. However, in the wings awaits QE3 which will surely be a dollar negative.

It is noteworthy that both Draghi and Bernanke said the outlook for their respective charges is worse than previously expected. Draghi warned that Europe would likely experience recession in the fourth quarter while Bernanke downgraded its forecast of the U.S. economy in 2012 to around 2.5% from 3.5%. This slow growth environment provides relief from inflation pressures and allows the possibility of QE3 by the Fed and Italian and Spanish debt buying by the ECB.

With the two safe-haven currencies, the JPY and CHF being artificially suppressed by their respective governments, gold and silver remain among the few safe-havens not subject to government manipulation. It would seem a fair assessment to say that the outlook for both metals is at the very least, supported. Meanwhile, the world will continue to watch the USD and EUR race for the bottom.

Has Italy’s Finances Entered a Death Spiral?

Friday, 4 Nov 2011 4:00 AM

With Portugal, Italy, Ireland, and Greece all having received bailouts after the yield on their respective 10-year debt reached 7%, the question of whether Italy will be next to join them is clearly appropriate. Italy’s 10-year yield is currently at 6.35%, having risen steadily over the last few months despite the ECB’s decision to buy Italian debt in an effort to contain the sovereign debt crisis. With over $2 trillion in debt, a bailout Italy would dwarf all previous bailouts, and stretch the imagination of all but the most optimstic that the EU has the resources to contain such a possibility.

Italy has implemented several austerity measures to bring the budget to a primary surplus. Unfortunately, these attempts haven’t convinced the market, and according to estimates by Daiwa Securities, the rise in rates have added $4 billion in interest expense. In other words, budget austerity measures are being offset by higher interest rates. With over $450 billion in refinancing needs over the coming year, Italy will have to dramatically increase its austerity measures if rising interest expenses isn’t to sink its efforts to reach a primary surplus.

European Recession and Berlusconi’s Weak Position

The two factors that make Italy’s situation even more difficult is the clear signs of recession in the Euro zone, and Prime Minister’s Berlusconi’s apparent inability to get anything done. It is very obvious at this point the Europe is entering, or already in, recession. Topping the recent list of poor economic data was today’s news that October factory orders in Germany fell by 4.3%. Germany had been then engine of growth for Europe, and with its export driven economy now showing serious cracks, countriess like Italy will find it even more difficult raise revenues and curtail spending.

Meanwhile, Silvio Berlusconi’s grip on power has never looked so weak. He has repeatedly failed to get his fractious coalition to agree on the significant measures that are need to get Italy’s flagging finances in order. In recent days, there has been a growing chorus of calls that he should step down. With the political situation in Italy so fragile, it would seem no real austerity measures will be in the offing.

The Only Solution?

Many remain convinced that the only real hope for Italy is unlimited buying of Italian government bonds by the ECB. However, like his predecessor, Mario Draghi was clear yesterday that this was not the role of the ECB. He further stated that the ECB’s buying was temporary, and only awaited the full implementation of the EFSF before they were terminated. Unfortunately, the EFSF remains underfunded, and earlier this week the fund was forced to pull a $3 billion offering, citing market conditions. With the EFSF in limbo, and the ECB unwilling to shoulder the load, Italy looks set to join the other PIIGS in bailout.

The implication of an Italian bailout to the gold and silver market are unclear. Like prior periods of severe market panic, the initial response could be a rush to cash. However, since the likely reaction by policy makers would be a flood of monetary stimulus and government spending, the initial sell-off could prove to be an interesting opportunity.

One thing is clear – until Italian government yields reverse course and being moving lower, Italy can be viewed as being in a death spiral. Without a major policy change from the ECB, there is likely nothing that will change the Italy’s trajectory into bailout.

FT: China’s September Gold Imports Jumps Sixfold

Monday, 7 Nov 2011 5:00 AM

FT, 11/7/2011, Leslie Hook, Robert Cookson

http://www.ft.com/cms/s/0/2dca01d8-093d-11e1-a20c-00144feabdc0.html#ixzz1d3D5NsCk

While gold prices have gyrated wildly since September, reaching as high as $1,923.70 and as low as $1,580, buyers in China have remained committed to buying the yellow metal. The article above from the Financial Times provides an excellent overview of the surge in buying since September, noting that 56.9 tons were imported that month, a sixfold increase from 2010.

In fact, the article notes that monthly gold imports for most of 2010 and this year averaged about “10 tons, but buying jumped in July, August and September. In the three-month period, China imported from Hong Kong about 140 tons, more than the roughly 120 tons for the whole 2010.”

It is well known that China has been battling inflation that topped 6% over the last few months, and the interest in gold as a hedge is readily apparent.

For those readers that wish to access the above link, please note that you must be registered with FT. However, free registration will provide you access to 10 free articles a month.

Italian Bond Yields hit 6.68% – Italy in the Danger Zone, Expect Volatility

Monday, 7 Nov 2011 5:00 AM

Earlier today, Italian bond yields rose to as high as 6.68%, putting Italy front and center as the next potential domino to fall in Europe’s ongoing sovereign debt crisis. While the 10 year yield fell back to end the day at 6.45%, it should be no surprise that Italy’s fate hangs by a thread given that Portugal, Ireland, and Greece were all forced to seek shelter from bond markets when their respective 10-year yield hit 7%. At that rate, the cost of refinancing debt, and funding a budget deficit becomes so prohibitive that a bailout that shields the country from public markets is necessary to prevent a complete financial meltdown.

Today we learned that despite all protestations to the contrary, ECB bond buying by new head Mario Draghi accelerated to hit a total of 188 billion EUR. The fact that Italian rates continue to rise in the face of greater ECB buying suggests the end may be nearing for Italy’s effort to avoid a bailout. Unfortunately, with the EFSF’s firepower still largely in limbo, the ECB remains the only institution with the wherewithal to support Italy.

The next few days will determine with Silvio Berlusconi has the parliamentary mandate needed to push through reforms and austerity needed to regain market confidence. Until then expect markets to remain on tenderhooks.

For gold and silver investors, the recent correlation with stocks has again been broken. Since early September, this correlation has been unusually present barring a few exceptions. Unlike many recent days, today’s stock market losses has not seen a corresponding decline in precious metals. In fact, both gold and silver are sharply higher despite the risks in Italy and Europe.

It should be noted that the risk of a bailout in Italy would likely cause a serious scare in the OTC derivatives market that could imperil the global financial system. If such an event were to occur, the possibility of a wholesale rush to cash cannot be ruled out. At this point, only two possibilities exist to avoid a bailout. The first is the ECB stepping up its buying of Italian bonds to a level that drives Italian leads back below 6%. The second is Italian lawmakers passing the measures needed to regain market confidence.

Gold-Silver Ratio at 51.12 Well Above the 1 Year Average of 43

Tuesday, 8 Nov 2011 5:00 AM

Gold and silver have recovered smartly since their plunge in late September and early October. However, prior to their respective fall which saw gold plunge from over $1,900 to just under $1,600, and silver fall from the low $40s to just under $30, the gold-silver ratio had been in the mid 40s. With silver’s underperformance relative to gold, this ratio expanded to 54, but this has been slowly moving lower since, and currently stands at 51.14. With a modest degree of stability in financial markets, the question now is whether the gold-silver ratio is set to move lower toward the average over the last 12 months. This would mean a gold-silver ratio between 42-44.

The following chart is the one-year gold-silver ratio.

As can be seen, since the May decision by the CME to raise silver margin rates, the gold-silver ratio has been in an uptrend. With the latest CME margin rate hike now well digested, and European hysteria taking a breather, it would appear that the gold-silver ratio is showing a downward bias. If this trend were to continue, the outlook for silver would be one of outperformance.

While many factors will affect the future direction of the gold-silver ratio, it is perhaps notable that many precious metal observers believe that the real gold-silver ratio should be 16, which is the ratio of gold to silver in nature. In fact, this is exactly where the gold-silver ratio held for much of the past millenium. The chart below shows that prior to 1900, the gold-silver ratio was pretty steady right at 16.

Charts like this are no doubt heartening to silver investors who would love to see the day when the gold-silver ratio returned to 16. Some quick math based on today’s gold close of $1,789 would translate into an ounce of silver changing hands at $111.85 per troy ounce. From today’s close of $35.00, this would represent a cool 319% return.

The European Titanic Looks Set to Go Under

Wednesday, 9 Nov 2011 5:00 AM

The situation in Italy has reached a crisis point. With yields now above 7% - the rate at which Portugal, Ireland, and Greece were forced to seek a bailout – Italy is in danger of collapsing under its 1.9 trillion EUR, or $2.6 trillion, debt load.

Like James Cameron’s movie the Titanic, one could say that Europe’s current situation resembles the scene when the Titanic’s hull has cracked in half, and the stern has risen several stories into the sky. We all know what happens next. The ship is still taking on water, and with Italian yields over 7%, the water intake is at such a rate that nothing but superman could bail it out. Tomorrow Italy will attempt to tap the market for 5 billion EUR in one year debt. The rate Italy is charged will be a good gauge of the water intake of the European Titanic.

Unlike the movie, a superman – rather a super organization – does exist that could bail Italy out; namely the ECB. Mario Draghi, who is Italian, has shown that he is more willing to take an active role in saving Europe. Since he has taken the helm, he has unexpectedly reduced the benchmark interest rate to 1.25% from 1.50%, and stepped up purchase of Italian sovereign bonds. However, to reverse the current situation, he would need to increase bond buying by several orders of magnitude. Since the alternative is a collapse in Italian finances, this possibility cannot be ruled out.

Going back to the Titanic analogy, today’s market decline is akin to the start of the Titanic’s swift decent into the cold, dark, North Atlantic. In other words, time is short if anything is to be done. As might be expected, financial stocks are leading the move lower. The possibility that major banks and insurers are set to implode is very real at this point. One need only remember the speed with which MF Global and Belgium’s Dexia unraveled to realize that in today’s highly leveraged global financial system, a loss of market confidence can quickly lead to a firms demise.

Gold and silver are outperforming, but both are lower. Taking the Titanic analogy a bit further, one can imagine gold to be Rose and silver to be Jack. Both are lying across the railing, looking at the uprushing sea. Rose survives, but just barely. While Jack does succomb, his memory lives on in Rose. So, in a sense, he too survives. If the Titanic/Europe does go under, the impact on silver will surely be more severe than on gold. It would be almost assured that the globe would suffer a sharp economic contraction. Silver’s greater industrial demand characteristics would likely lead to an underperformance.

The next few days will be nailbiters. So grab your popcorn.

Bloomberg: Gold Traders Most Bullish Since ’04 on Debt Crisis

Friday, 11 Nov 2011 5:00 AM

Bloomberg, Nicholoas Larkin

Gold traders and analysts are the most bullish in at least seven years as investors accumulate metal at the fastest pace since August to protect their wealth from a widening European debt crisis.

Twenty-one of 22 surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the third consecutive increase and the highest proportion in data going back to April 2004. Holdings in exchange-traded products backed by gold rose 27.5 metric tons this week, within 1 percent of the record set almost three months ago, data compiled by Bloomberg show.

The gold survey has forecast prices accurately in 223 of 387 weeks, or 58 percent of the time.

Full Article

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Ron Paul: ” It Is Estimated that US Banks Have Over a Trillion Dollars Tied Up At-Risk With German And French Banks”

Monday, 14 Nov 2011 5:00 AM

Ron Paul 11/14/2911

European Debt Crisis Threatens the Dollar

The global economic situation is becoming more dire every day. Approximately half of all US banks have significant exposure to the debt crisis in Europe. Much more dangerous for the US taxpayer is the dollar’s status as reserve currency for the world, and the US Federal Reserve’s status as the lender of last resort. As we’ve learned in recent disclosures, this has not only benefitted companies like AIG, the auto industry and various US banks, but multiple foreign central banks as they have run into trouble. Nothing has been solved, however, by offering up the productivity of Americans as a sacrificial lamb. Greece is set to be the first domino to fall in the string of European economies at risk. Rather than learning from Greece’s terrible example of an over-consuming public sector and drowning private sector, what is more likely from our politicians is an eventual bailout of European investors.

The US has a relatively small exposure to overwhelmed Greek banks, but much larger economies in Europe are set to follow and that will have serious implications for US banks. Greece is technically small enough to bail out. Italy is not. Germany is not. France is not. It is estimated that US banks have over a trillion dollars tied up in at-risk German and French banks. Because the urge to paper over the debt with more credit is so strong, the collapse of the Euro is imminent. Will the Fed be held responsible if the Euro brings the US dollar down with it?

The most disingenuous aspect of the narrative about the European sovereign debt crisis is that entire economies will collapse if more resources are not bilked from productive people around the world. This is untrue. Tough times are coming for the banks, to be sure, but free people always find a way back to prosperity if the politicians leave them alone. Communities within Greece are coming together and forming barter systems because they know the Euro is becoming unstable. Greeks are learning how to engage in commerce with each other, without the use of fiat currency controlled by central banks. In other words, they are rediscovering what money really is, and they are trading with each other in ways that cannot be controlled, manipulated, squandered, inflated away and generally ruined by corrupt bankers and the politicians that enable them. Farmers will still grow food, mechanics will still fix cars, people will still make things and exchange them with each other. No banker, no politician can stop that by destroying one medium of exchange. People will find or create another medium of exchange.

Unfortunately when politicians try to monopolize currency with legal tender laws, the people find it harder and harder to survive the inflation and taxation to which they are subjected. Bankers should take their dreaded haircut rather than making innocent people pay for their mistakes. The losses should be limited and liquidated, rather than perpetuated and rewarded. This is the only way we can recover.

Government debt is often considered rock solid because it is backed by a government’s ability to forcibly extract interest payments out of the public. The public is increasingly unwilling to be bilked to make bankers whole. The riots and the violence in Greece should tell us something about the sustainability of this system.

If we continue to bail out banks and bankers so they can continue to lose money, if we cavalierly put this burden on the taxpayer, it is all too predictable what will happen here.

end.

Note from Gainesville Coins: It is clear that the mainstream press continues to ignore Ron Paul’s very existence. However, he has repeatedly shown a perspective on the danger’s of debt and using monetary policy to fund government spending that contrasts sharply with any other Republican candidate.

It can only be hoped that Ron Paul’s campaign will receive greater attention in the crucial months ahead.

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Super Committee not so Super – Focus on Precious Metals Likely to Intensify in Face of Congressional Ineptitude

Monday, 14 Nov 2011 5:00 AM

There are 10 days before the congressional super committee tasked with $1.2 trillion in deficit reduction over the next decade is set to hit its first deadline. Created as part of the 2011 Budget Stability Act, the job of the bipartisan committee is still far from complete as partisan bickering prevent any real progress. No surprise, Democrats are demanding revenue increases while Republicans are refusing any increase in taxes. Really?

With the level of partisan politics seemingly rising with the addition of highly inflexible tea-party Republicans, the ability of Congress to get anything done continues to decline. Without any propensity to compromise, the possibility that the super committee gets nothing done is high. The consequences would be unpleasant. The Budget Stability Act mandates automatic cuts of $1.2 trillion to discretionary programs, including the military, if no propsals are put forth.

Since it would be politically unacceptable to Republicans to reduce military spending, and since across the board cuts in discretionary programs would be unacceptable to Democrats, it would appear that some sort of compromise should be found. The next ten days will show America how dysfunctional its government is.

For precious metal investors, cutting $1.2 trillion over 10 years is laughable. In 2011, the Federal deficit was $1.3 trillion – more than the $1.2 trillion lawmakers are trying to cut over 10 years. In fact, 2011′s deficit was virtually identical to 2010. Furthermore, with GDP forecasts for 2012 being slashed of late, the possibility of another $1 trillion-plus deficit cannot be ruled out. With Europe clearly heading into recession, the headwinds to government finances are clear.

What does this mean for gold and silver investors? Well, one would say that the USD is bound to weakend in the face of this uncontrolled spending. Even if the super committee were to agree to a series of deficit reduction measures, the size of the deficit is ludicrous. As has been well documented, the negative correlation between the USD and gold and silver remains a dominant theme.

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Is China’s FX regime “Responsible?”

Monday, 14 Nov 2011 5:00 AM

It is a firmly held maxim that economic imbalances over the long run must correct. China’s rapid economic ascent has been driven by an export-led economy that has used a fixed, now managed, exchange rate to become the world’s second largest economy. There has been much talk on whether China’s currency policy is manipulated, and what, if anything, should be done about it. With much of the developed world having run substantial trade deficits with China over the past two decades, the latest war of words over China’s FX policy deserves examination.

Current forecasts see China’s full year 2011 trade surplus at $160 billion, down from 2010′s $183 billion. China’s large trade surplus has seen an ongoing migration of manufacturing from developed economies to China. With average labor costs a fraction of that in Europe and the U.S., the hollowing out of developed economies has been long written about.

In a free market economy, this ongoing imbalance would be addressed through the currency market. Specifically, one would expect to see a rise in the reminibi, and a decline in the USD. While this has been the trend, the speed at which this adjustment has been occuring has been artificially retarded by China’s policy chiefs. The obvious result has been a steep rise in inflation in China. The past month has seen inflation rates fall below 6%, but at 5.5%, they remain high. A stronger reminibi would go a long way in suppressing inflation.

This weekend saw the war of words between U.S. and Chinese leaders reach a new high. President Obama said that China needs to “grow up” and accelerate its currency’s appreciation. China’s Hu retorted by saying that China had a “responsible” fx policy, and that America’s problems are homemade.

Certainly, some of America’s ills are homegrown. A ludicrous housing policy fueled a debt bubble that continues to weigh on the economy. Outrageous spending by Congress has made U.S. budgetary figures as laughable as those of Greece. However, this does not change the fact that China’s FX policy is completely divorced from market forces.

For precious metal investors, the ins and outs of fx policy may not seem important, but the fact is China has become one of the largest buyers of gold. With China suppressing its currency, inflation has become a real issue for the country’s savers. A recent FT article notes that in July, August, and September, China imported from Hong Kong about 140 tons of gold, more than all of 2010. Meanwhile, the rationale for U.S. investors to invest in gold remain clear. With a budget deficit close to 10%, debt to gdp at 100%, and no confidence that out-of-control social spending by Congress is set to end, the devaluation of the USD is set to go on.

China’s FX policy can clearly be seen as not responsible. While the country has reaped the benefit of its artifically low rates, it continues to refuse to recipricate. The ongoing deterioration in manufacturing in developed economies is thus likely to continue. The end result will be a weaker global economic environment than would have developed if China had a more responsible fx policy. For example, there is no doubt that the long beleaguered textile industry in southern Europe could benefit from a stronger reminibi.

“Unelectable” Ron Paul is in a Dead Heat in Iowa – Will Mass Media Have an Epiphany

Tuesday, 15 Nov 2011 5:00 AM

Since the very start of the 2012 Presidential campaign, one assertion has been religously followed by the mainstream media – Ron Paul is Unelectable. However, a Bloomberg News poll show that this is pure and utter hogwash. Among Iowans likely to attend the January 3rd Republican caucuses, Ron Paul was virtually tied with Herman Cain, polling 19%, vesus Cains’ 20%. Mitt Romney, long held as the “favorite” came in third at 18%, while Newt Gingrich came in at a solid 4th with 17%.

Investors in gold and silver are no doubt well aware of Ron Paul’s view on the Federal Reserve and the accelerated devaluation of the dollar over the last few decades. Ron Paul has repeatedly warned that the uncontrolled spending by Congress and money printing by the Federal Reserve neccesitates a return to “hard” money policies. This would mean backing U.S. currency with gold and/or silver. The ramifications of such a policy is certainly not lost on gold and silver investors who eye the Fed’s $2.6 trillion balance sheet with justified skepticism. Administration protestations of support of a “strong dollar policy” likewise engender skepticism by many Americans who have seen the price of a gallon of gasoline surge from $0.30 per gallon in 1971 to $3.75 today. 1971 was the year that President Nixon removed the USD from all ties with gold.

Despite the very obvious effort by mainstream media to ignore the very existence of Ron Paul, his campaign steadily builds support. More and more Americans are clearly appreciative of his integrity and vision. Unlike the rapidly plummeting former media darling, Rick Perry, Ron Paul is very familiar with the different Federal departments that are now so bloated and so far exceed the original Federal Charter envisioned by the Founding Fathers as to be Frankensteinish. Unlike Rick Perry or Herman Cain, Ron Paul, as a long-time House of Representative, knows the inner workings of the Federal Government, and has been vocal in his opposition to its ceaseless growth.

Remember when Michelle Bachman “won” the Iowa straw poll in August? Ron Paul statistically tied her, but no mention was given to Ron Paul’s performance. This time around the stakes are much more serious. A good showing on January 3rd will likely propel Ron Paul into the limelight. Given the clear weaknesses in the other Republican contenders, Ron Paul’s ascendency will be no surprise to us at Gainesville Coins.

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Break out the Champagne US DEBT TOPS $15 TRILLION

Wednesday, 16 Nov 2011 5:00 AM

It might not really be something to celebrate, but it is well worth noting that total public debt outstanding has hit a staggering $15,033,607,255,920.32. This is basically 100% of 2011 GDP. For all those who may be unaware, debt to GDP in Italy is 120%, not so far off from the U.S. Furthermore, Italy is actually expected to hit a primary surplus by 2013. This is hardly the case for the U.S. where current defcit estimtates by the CBO is $973 billion in 2012 and $510 billion in 2013. This would represent 6.4% of GDP in 2012 and 3.4% in 2013. One should remember that these estimates depend on CBO growth forecasts that are highly optimistic. The CBO estimates 2012 GDP growth of 2.7% and 3.6% GDP growth in 2013-2016. Given the clear recessionary signs in Europe, and the clear property market downturn in China, these projections may prove to be pie in the sky.

For gold and silver investors, the never expanding debt of the Federal Government has been a primary driver in the U.S. dollar’s demise. One need only wonder who will be in the crosshairs of the bond vigilantes when the final chapter in Europe is in the books. Obviously, the U.S., with its ever growing debt-burden is a likely target. However, even without bond vigilantes, the trajectory of the U.S. dollar since the U.S. abandoned all times to the gold standard in 1971 has been clearly one of devaluation.

There is no doubt that the total outstanding public debt of the U.S. Federal Government will hit more nasty milestones going forward. $15 trillion is a nice round number to point out for public digestion. Investors in silver and gold are surely eyeing the very strong correlation with the USD’s devaluation and the value of gold and silver.

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The Catalyst that Could Trigger Another Bout of Financial Market Instability

Wednesday, 16 Nov 2011 5:00 AM

Much to the surprise of many investors, October of 2011 was one of the best month’s for stocks in over 14 years. Stocks rose over 10% as investors chose to disregard the implications of Europe’s sovereign debt crisis, and rather drew comfort from political developments in Greece and Italy that has now seen the resignation of Papandreau and Berlusconi in favor of “technocrats.” The convulated rationale for the market’s advance is that technocrats will be able to force through the reforms and austerity required to get Italy and Greece on the right path. However, the fact remains that with Italian interest rates at 7%, and Greece’s economic numbers continuing to miss, a change at the top has done little to change the facts on the ground.

Investors in gold and silver are no doubt watching these devlopments with as close an eye as stock and bond market investors. October was a good month for both, with silver rising over 16% and gold adding just under 10%.

Since the start of November, market action has seemingly plateaued. While European concerns remain acute, financial markets have not sold off. It is curious that an increase in Italian bond yields to over 7%, a rise in Spanish yields to over 6%, and a sharp widening in yields between France and Germany has not caused equities to sell-off. The question for all financial market participants is – What will be the catalyst that drives market action.

November did see one bout of heightened market volatility that gold and silver investors are no doubt very familiar with – margin increases. On November 9th LCH Clearnet raised margin requirements on Italian government debt. This promptly led to one of the sharpest financial markets drops of the year. The volatility helped cement the departure of Silvio Berlusconi as Italian yields soared above the crucial 7% level.

The clear catalyst for future market volatility is therefore additional margin increases on European government bonds. In fact, today saw rumors of the possibility of an increase in Spanish government bond yields. While these rumors have proved unfounded up till now, with Spanish yields rising toward 7%, there is no reason to believe that an increase in margin won’t be forthcoming.

Investors in gold and silver are no doubt very aware of the impact that margin increases can have. Both metals have suffered several margin increases this year, and each instance has been accompanied by extremely high volatility. Generally, these increases also corresponded with a sharp drop in the price of both metals.

Any future increase in margin on European sovereign debt will have the same impact as that seen on precious metals, namely greater volatility. The increased cost of carrying a position in government bonds will likely lead to liquidation in positions that will roil financial markets.

Investors are forewarned to pay attention to any news regarding margin increases on European sovereign debt. With most markets stalled out in the face of an imminent European recession and a clear downtrend in Chinese real estate prices, a drop in risk assets cannot be dismissed. U.S. equities are currently basking in some better than expected economic news. However, the overseas picture is so gloomy that it can be argued that events overseas are not being sufficiently reflected in prices.

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Gold Demand Trend Q3 Highlights from World Gold Council

Friday, 18 Nov 2011 5:00 AM

The World Gold Council’s quarterly update on gold demand trends is out, and a number of aspects of the report are worth highlighting.

- Third quarter gold demand increased 6% year over year to 1,053.9 tons.

- Gold investment demand increased 33% year over year to 468.1 tons. “With the exception of India, Japan, and the U.S, all markets recorded an increase in demand for gold bars and coins.

- Total supply of gold increased 2% year over year to 1,034.4 tons. Mine production increased by 5% to 746.2 tons.

- Central bank buying totalled 148.4 tons. Central bank selling used to be a major component of gold supply. This is obviously no longer the case as central banks worldwide diversify their reserves into gold. Among major central bank purchasers – Russia added 15 tons, Bolivia added 14 tons, Thailand added 25 tons.

It is worth noting that demand for gold for Jewellery was down 10% year over year, while industrial demand was flat.

The fourth quarter is already proving to be volatile for precious metals, but underlying demand and supply trends are likely to continue. Namely, it would appear that investment demand for gold will likely remain robust, while demand from jewelers and industry will remain subdued. Supply is expected to remain constrained.

With the European sovereign debt crisis remaining a flash point for financial markets and the global economy, the status of gold as a safe haven will surely be put to the test. It is heartening to see that central banks continue to move in a big way into gold bullion. Interested readers should go to the World Gold Council’s homepage to read more of their excellent research, including the entire third quarter gold demand trends.

Silver investors need not feel completely left out. The correlation between silver and gold is positive, though with the outlook for the global economy decidedly iffy, silver could underperform. The gold-silver ratio had averaged around 40 for much of the year, but has recently widened out to over 50.

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Choosing how to store precious metals remains one of the most important considerations for precious metal investors. Many storage options available today do not offer full segregation of client assets, but rather offer what is known as allocated storage. Under allocated storage, similar bars and coins will be pooled. Clients of such a scheme will be at risk that the pooled assets will not be correctly accounted for. For instance, when MF Global went bankrupt in 2011, not only did $1.3 billion of client assets go missing, but there were multiple instances where ownership of gold and silver assets was in dispute. Furthermore, under allocated storage a client that wishes to take possession of their gold and silver will not receive the exact bars and coins that were initially deposited.

With full segregation of client assets at Gainesville Coins Storage, clients can rest assured that the assets stored will be exactly what they receive upon delivery. Furthermore, unlike many vault and depository options, Gainesville Coins Storage is wholly separate from the financial system.

Comprehensive Insurance

Currently, many investors in physical gold and silver choose home storage or a safety deposit box at their local bank. The level of insurance coverage provided by Gainesville Coins Storage provides a level of protection unmatched by either. With Gainesville Storage, you are fully protected against physical loss, damage, and theft.

Ease of Access

Having access to your gold and silver is fast and easy with Gainesville Coins Storage. Upon written notification, a client can have his precious metals available for pick-up at our showroom during normal business hours in one hour, or have them shipped to you that same day. Most, if not all other vaults and depositories cannot match this level of access.

Instant Liquidity

With just a phone call, you can liquidate or add to your gold and silver holdings held in Gainesville Storage. Cash raised by selling precious metals can be held on account, mailed to you via a business check, or wired to an account. The ease with which assets can be sold, and the flexibility this provides precious metals investors cannot be matched by most vaults and depositories.

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Gainesville Storage is a Powerful Alternative for ETFs

Gainesville Storage affords precious metals investors all the benefits of buying physical gold and silver, without many of the perceived drawbacks that continue to surround precious metal ETFs. By using Gainesville Storage, precious metal investors have a comparable level of liquidity, the satisfaction of owning physical gold and silver, but without the risks of allocated storage, and the clear ties ETF inventories have to the broader financial system.

Low Cost

Cost of storage is an important consideration, and Gainesville Coins Storage provides industry leading prices. Storage fees are as low as $60 per annum, or $5 per month, for assets under $9,200. Precious metals storage fees for assets above $9,200 will range from 65 basis points to 42 basis points per annum depending on amount stored.

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Precious metal investors are encouraged to go to Gainesvillecoins.com, and review Gainesville Coins Storage. We are confident that when you evaluate the many storage options available today, Gainesville Coins Storage will stand above the rest in providing a level of benefits unmatched by any alternative.

U.S. Treasury Again Jumping Through Hoops to Avoid Debt Ceiling Breach

Tuesday, 17 Jan 2012 5:00 AM

It must be a bit of a surprise that all the bad news out of Europe has seen the EUR-USD rise, lifiting commodities and stocks in the process. Conventional wisdom would have held that mass ratings downgrades, particularly of France and Austria from AAA, would have led to more EUR weakness. Perhaps the answer lies in the U.S. government about to again breach the debt ceiling. If there were ever a reason to feel bearish on the USD, its the inexorable rise in U.S. overall debt.

Today, Treasury Secretary Geithner announced the now familiar gyrations the U.S. Treasury must employ to avoid breaching the debt ceiling. This includes the suspension of payments to the Social Security pension fund. According to Geithner, the debt limit will be increased on 1/27/2012, unless blocked.

The repeat of this summer’s debt ceiling circus is certainly a good reason for the EUR-USD to be moving higher. As S&P pointed out when it downgraded the U.S. credit rating from AAA to AA+, political will for a comprehensive debt and budget overhaul to get U.S. Federal debt on sustainable footing is clearly lacking.

So while Greece private sector debt holders are about to take a 68% haircut, and expectations of an outright default by Greece on March 20th grows, the EUR is rising against the arguably more dysfunctional USD.

Precious metals have certainly benefitted over the last month, having hit a near-term bottom in December. Both metals are up sharply from their worst levels at the end of 2011, and today saw both rise solidly on the back of the weaker USD.

As was pointed out the last time the debt ceiling became a critical issue, get ready for the political circus out of D.C. as the January 27th debt limit increase draws nearer.

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Reuters: Gold may hit $2000, end long bull-run says GFMS

Tuesday, 17 Jan 2012 5:00 AM

(Reuters by Jan Harvey) – Gold may reach a record high above $2,000 an ounce in late 2012 or early 2013, but the precious metal is nearing the end of a decade-long run that has lifted prices by more than 600 percent, metals consultancy GFMS said on Tuesday.

Gold has been a top-performing asset since 2001 as portfolio diversification, concerns over sovereign risk and rock-bottom interest rates helped lift prices from a low near $250 an ounce in 2001 to a peak above $1,920 in September 2011.

It is likely to surpass that level in the final quarter of 2012 or the first three months of next year, GFMS said, potentially breaking through the $2,000 an ounce level.

“A combination of factors will ensure that sufficient demand from investors and to a lesser extent official sector institutions comes into the market for it to clear at higher levels,” the company said in the second update to its Gold Survey 2011.

“Concern over nearly all currencies’ long-term value remains acute, and this includes the U.S. dollar, which to a large extent has found favor simply as the ‘least bad’ option, especially in light of growing fears over the break-up of the euro zone.”

However, a normalization of the broader financial landscape in the next few years is likely to take some of the wind out of gold’s sails.

“The report does acknowledge that the gold market is nearing the closing stages of its decade-long bull run and that, once the macroeconomic backdrop changes and investment in gold fades – probably some time next year – a secular retreat in the price will unfurl,” said GFMS, which is owned by Thomson Reuters.

For the first half, the company forecasts gold prices will average $1,640 an ounce, close to current levels. A rising dollar and increased risk aversion, which in recent months has pressured gold, could curb price gains in the short term.

In the second half, it sees prices at an average of $1,840 an ounce.

JEWELLERS, CENTRAL BANKS

GFMS expects jewelry demand to soften by 3.1 percent in the first six months of 2012 to 1,027 tonnes, in line with a 2.2 percent decline in overall demand to 2,199 tonnes.

Most of this decline will likely be due to softer demand from India, still the world’s biggest bullion buyer. The gold market is moving into a less auspicious year, GFMS said, and rupee weakness has tended to negate dollar gold’s declines.

China and Turkey are set to be the main drivers of jewelry demand, and the former may overtake India as the world’s biggest gold consumer in the first six months of the year. Last year total Chinese gold demand reached 850 tonnes, GFMS said.

“In terms of calendar year 2011, India was ahead, but … it does seem as though China, in terms of our data for the first half, may just tip ahead,” Philip Newman, research director for precious metals at Thomson Reuters GFMS, said.

Official sector purchases, which are estimated to have leapt to their highest levels since 1964 last year, are seen dipping by some 7 percent to 190 tonnes in the first half, still an historically elevated level.

GFMS said last year central banks increased their gold lending to commercial banks, which used the metal to raise U.S. dollars, apparently for the first time since 2000.

“We think this is probably the case as the decline in ‘traditional’ lending by the official sector would have been exceeded by growth in volume of very short-dated lending to commercial banks for dollar swaps purposes,” said GFMS chairman Philip Klapwijk. “Potentially this may also have occurred in 2010 too, but (it is) hard to tell.

Physical bar sales are expected to rise another 1.4 percent in the first half after surging by more than a third last year to 1,194 tonnes. Demand for gold bars was particularly strong in German-speaking Europe last year as the debt crisis bit.

“Not all areas of investment are expected to be buoyant,” GFMS warned, however. “Official coin and bar investment might continue to grow a fraction, but the implied (investment) figure should swing to net disinvestment … as a result of euro zone travails, dollar strength and constrained liquidity.”

World investment is expected to decline by some 250 tonnes in the first half of 2012 from the final six months of last year, to 680 tonnes. Gold’s largest handicap is likely to be the strengthening dollar, GFMS said.

On the supply side of the market, mine output is expected to rise 3.2 percent in the first half of the year, although most new supply will come from existing, rather than new, projects.

Gold scrap supply is seen dipping 3.1 percent, however, as most available material will already have hit the market after a prolonged period of gold price strength. New sellers may also be put off by expectations of higher prices, it added.

“Although the fundamentals call for far lower gold prices in the long term to achieve balance, the market’s shorter term foundations are not as shaky as might be supposed,” GFMS said.

Tracking the Many Headed Euro Sovereign Debt Crisis Monster – Dates to Watch For

Monday, 23 Jan 2012 5:00 AM

In a day dominated by headlines from Europe, it seems like a useful excercise to summarize some of the key points of where we are now, and dates to watch for. To begin with, despite the bailout packages granted to the PIG, Portugal, Ireland, and Spain, the basic insolvency problem remains unsolved. What each of these packages has done is provide additional liquidity to what many argure are countries in need of debt restructuring.

1. Greece and Private Creditors – Day by Day

Currently Greece and its private creditors are at the crossroads. The second Greek bailout package envisioned a debt haircut of 50%, but this has been increased to at least 60%. However, even if and when this is agreed to, Greek debt-to-GDP is still expected to be around 120%. With Greece’s economy in a downward spiral, and budget deficit forecast to top 10% in 2012, few believe that even a best case scenario where private creditors accept a 60% writedown will create a solvent Greece.

Negotitations between Greece and private creditors have been dragging on weeks. There does seem to be some more urgency in recent headlines as a looming March 20th bond payment will likely result in default without an agreement.

Expect this aspect of the Euro Crisis to remain a flash point in the days ahead.

For those that wish to get a better feel of the complexity involved in the current negotiations, and why many feel that an eventual deal could spell massive unintended consequences for the sovereign bond market, read Zerohedge’s Subordination 101: A Walk Thru For Sovereign Bond Markets in a Post-Greek Default World. Be sure you have a spare hour if you want to read the whole analysis.

2. The Second LTRO – ECB Set to Pour Hundreds of Billions More into Euro Banks

It can now be said that the ECB’s Long Term Refinancing Operation (LTRO) has provided much needed liquidity to European banks who were fearful of lending to each other, and at risk of having a massive liquidity crisis as they sought to roll-over hundreds of billions of EUR in borrowing. A total 489 billion EUR of funds were taken up by Euro banks, nearly double the estimate ahead of the operation.

While the initial reaction could be described at “shock” at the sheer scale of demand, in the end, the EUR-USD has voted, and is now again above the 1.30 level, having fallen below 1.27 in the days immediately following the the first LTRO.

Now, markets are eagerly anticipating the second round of LTRO, and expectations this time around range from 600 billion EUR to 1 trillion EUR. While the ECB may not be directly financing EUR area governments, by providing this massive amount of lending to the area’s banks, there is no doubt that some of these funds are slopping over. Indeed, since the LTRO has a 3 year term, there has been a notable reduction in similar maturity sovereign bond yields.

The next LTRO operation is due to begin on February 29th. Expect the global financial system to salivate ahead of this next round of cheap and abundant money from the ECB.

Commodity Rallies – Gold and Silver Basking in the Money Printing

Despite the Greek troubles, gold and silver have moved with most commodities to the upside. It seems reasonable to assumet that at some point, and despite the clear danger from Europe’s bigger basket cases, massive injections of liquidity will have a positve impact on all prices. The LTRO is indeed a massive injection of liquidity. In this case, silver has had a massive start to 2012, rising 20%, and 8% just in the last week. Gold prices are up a more modest 7% YTD, but this represents nearly 100 dollars. With the second LTRO just a month away, furhter upside from a global financial system awash in what will be at least an additional 1 trillion in EUR from both LTROs, would not be completely suprising.

Precious metal investors should keep an eye on the ongoing developments in Europe, particularly Greece, Portugal, and Italy. The upcoming LTRO is certainly the biggest event on the horizon, barring a messy end to the current Greek negotiations with private creditors.

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So Much For A Progressive Tax System – Mitt Romey Paid 13.9% Tax on $21.6 Million in 2010

Tuesday, 24 Jan 2012 5:00 AM

Republican hopeful Mitt Romney had stated that he would release his tax returns once he won the Republican nomination. After seeing his campaign falter on the decision not to disclose the taxes he paid, it was revealed today that Mitt paid just 13.9% on $21.6 million in earnings in 2010. This revelation makes it clear that for many Americans, the U.S. has a very regressive tax system, where the poor pay a higher percentage than the more well to do.

Progressive Tax System Has Been Eroded Over Time

This has been a bone of contention with Warren Buffett, the richest American. In a televised interveiw today, he railed the current tax code by stating “I do fault a law that allows him and me earning enormous sums to pay overall federal taxes at a rate that’s about half what the average person in my office pays.”

Upcoming Florida Primary – Will Floridians Care?

Florida’s Republican Primary is on January 31st, and it will be interesting if these revelations about Mitt’s taxes will impact his chances. Romney did win the New Hampshire Primary, but lost to Santorum in Iowa, and Newt Gingrich in South Carolina. Meanwhile, Ron Paul has had solid performances in all three contests. What is clear is that there is no front-runner in the race for the Republican nomination.

The revelations over Mitt’s remarkably low tax rate may not go over so well with Floridians who are still feeling the effects of housing’s boom and bust, and with a state wide unemployment rate that exceeds the national average. Mitt Romney’s background in private equity may seem a bit foreign to the average Floridian. While he has touted that job creating benefits of private equity, there are clear examples in Mitt’s work history that show that Bain Capital engaged in a slash and burn strategy, basically loading up companies with debt and walking with the cash. A great way to make money, and with the tax system as regressive at its been in years, highly profitable when one’s personal tax rate is just 13.9%.

With Many of America’s Wealthiest Paying Half the National Average, Will the Debt Ever Come Down

It isn’t a stretch to suppose that according to Republicans like Mitt, the solution to U.S. debt woes is to further cut the top tax rate, so extremely wealthy Americans like himself will create more jobs. With U.S. unemployment lagging all prior post-recession periods by a wide margin, and currently just shy of 9%, it seems this philosophy is bankrupt. Indeed, not only has unemployment remained elevated with people like Mitt paying a paltry 15% or less, but the Federal debt has continued to mushroom, now at a mere $15.131 trillion.

Surely the solution to this problem is to slash the rate paid by the wealthiest to zero. Meanwhile, the rapidly shrinking middle class of America will finally disappear.

Ron Paul is the Only Candidate That Has a Realistic Solution to Debt Woes

Ron Paul solution is the only one that makes any sense, and that is to dramtically shrink the Federal Government. Despite the denigration of his candidacy by the mainstream media, Ron Paul posted solid results in all three contests to date. It is not beyond the realm of possibility that Ron Paul’s campaign could gain the momentum it needs to bring real change to Washington D.C.

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With Europe in Turmoil, why is the Euro Holding Steady?

Tuesday, 22 Nov 2011 5:00 AM

The problems facing Europe have been well documented and simplify to overleveraged governments losing market confidence, and European banks reeling from weak capital levels, a faltering economy, and rising losses from sovereign debt holdings. Many casual observers of the current situation would conclude that this dire situation would be reflected in the EUR. However, despite the clear stresses in Europe, the EUR-USD continues to defy the bears, holding well above its 52 week low of 1.29 at 1.35. The reason for this counter-intuitive action appear to lie in the large repatriation flows by European banks and other European financial institutions as funding costs soar, and as they attempt to delever.

In other words, as the cost of funding in overseas markets has soared, European financial institutions have sold assets this funding supported, and repatriated funds back. This selling has been further prompted as European financials attempt to shore up capital which is increasingly threatened from declining sovereign bond prices. A reuters article on this phenomenom notes that ”net portfolio inflows to the euro’s 17 member countries in the 12 months to September were a whopping 335 billion euros.” The signficance of this rests with the clear selling of European exposure by non-European financials. The reuters article adds “U.S. mutual fund data shows 10 straight weeks of outflows.”

A continuation of this trend is expected to keep the euro currency supported near term. The reuters article notes “Overall, economists reckon Europe’s banks could ditch up to 3 trillion euros of so-called risk-weighted assets or loans over the next year or so.” Eurozone banks hold more than $6 trillion in assets outside the block.

With European banks in full retreat, the EUR could remain supported by repatriation funds for the time being. However, it is worth noting that there will come a point in time that these flows will be insufficient to outweigh the exodus by non-European financials from the Eurozone. If this were to occur, the long-awaited fall in the EUR could be severe. For the time being, the counter-intuitive strength of the EUR is expected to remain a signficant feature to Europe’s sovereign debt crisis.

For gold and silver investors, the signficance of the EUR-USD rate shouldn’t be discounted. Recently, both metals have shown a positive correlation to risk assets, and thus have generally moved lower as the USD has strengthened, and moved higher as the USD fell against the EUR. In the event that EUR repatriation inflows become overwhelmed by outflows, a continuation of this correlation could see gold and silver under serious pressure as the EUR-USD plunges.

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Greece Trying For a Bigger Private Sector Writedown of 75% – Will CDS be Triggered?

Friday, 25 Nov 2011 5:00 AM

Among the many disturbing developments that are hammering investor sentiment of late was news today that Greece is pushing for a further writedown in debt held by the private sector to 75% from the 50% that had been agreed. The signficance of this tidbit comes from the renewed possibility that Credit Default Swaps (CDS) written on Greek sovereign debt could be triggered. While the total amount of CDS on Greek debt is reportedly small, the counterparty risk such an event brings up is exactly what EU policy makers had hoped to avoid when they negotiated the initial 50% private sector haircut.

The Reuters article notes that “there are 206 billion euros of Greek government bonds in private sector hands – banks, insitutional investors and hedge funds – and a 50% reduction would reduce Greece’s debt burden by some 100 billion euros.” A 75% reduction would reduce Greece’s debt burden by some 154 billion euros.

The possibility that private sector Greek bondholders could experience such a large loss will no doubt heighten the flight out of other at-risk European sovereign bonds.

An unfortunate side effect to the Greek writedown is the similar treatment that other countries are eyeing for themselves. It has been reported that Ireland has been exploring a reduction in the amount it owes.

For precious metal investors, this particular development is just another in a string of bad news impacting all financial markets. The possibility that Greece’s attempt to further reduce its debt will cause an increase in investor’s exodus out of Eurozone related financial paper means that recent USD strength is likely to persist. It is worth noting that after a month of defying expectations, the EUR-USD is apparently crumbling, down from 1.35 to just over 1.32 this week alone. This has clearly weighed on precious metal prices.

Its a Fact – U.S. Financial Markets are an UNFAIR Playing Field

Monday, 28 Nov 2011 5:00 AM

In a disturbing, but most illuminating piece, Bloomberg has revealed the extent of lending given to big banks during the mortgage meltdown of 2008. The signficance of this data is not just in the sheer scale of support, but the fact that the Fed and big banks HID the data from public view. In fact, it took a two-year legal battle by Bloomberg to have the information released as the Fed fought to keep the data hidden from public consumption.

Ultimately, the Supreme Court declined to hear the Fed’s last appeal.

Capital markets in a free-market economy require equal access to information to function correctly. The Federal Reserve and big banks actions during this period should be cause for the complete condemnation of both. While the broad investing public tried to navigate 2008, the big banks were secretly being supplied with what would turn to be a total of $7.77 trillion in loans and guarantees. Had this been public knowledge, it would have affected every investment decision made at that time. What ultimately happened however was the big banks reaping record trading profits while taking advantage of their monetary and informational advantage supplied by the Fed.

Some of the outrages include:

Morgan Stanley (MS) took “$107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s deliquent mortgages.”

BanK of America (BAC) CEO Kenneth Lewis wrote on November 26th, 2008 that he headed “one of the strongest and most stable major banks in the world.” This while owing the central bank $86 billion that day.

JP Morgan (JPM) CEO Jamie Dimon told shareholders on 3/26/2010 that the bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” As the article notes “He didn’t say that the bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion 2/26/2009, came more than a year after the program’s creation.”

Why is all this important? Because it shows that the Federal Reserve is ready to help big banks make billions in trading profits while the broader investor public is left out to hang. Many investors saw their investment portfolios decimated by the turmoil in 2008. There can be NO DOUBT, that their investment performance would have been different had there been public knowledge that the Fed had, at its peak, provided $7.7 trillion in loans and guarantees to the big banks.

For those that want to understand how today’s financial system really works, the Bloomberg piece is a must read. Secret Fed Loans Undisclosed to Congress Gave Banks $13 Billion in Income.

Bloomberg’s perserverance to get this data released deserves acknowledgement and thanks.

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Some Animals are More Equal than Others – Pigs at Goldman Take Care of Their Own

Tuesday, 29 Nov 2011 5:00 AM

After yesterday’s stunning revelations by Bloomberg of the Fed’s $7.7 trillion of loans and guarantees as of March 2009, today Bloomberg reports that then Treasury Secretary Henry Paulson informed a select group of hedge fund managers of the coming demise of Fannie Mae and Freedie Mac 7 WEEKS before they were taken over by the U.S. government. In How Paulson Gave Hedge Funds Advance Word, it is made clear that making money in U.S. financial markets is really easy if you can get advance word on the coming demise of the two-largest housing sector players. One can be sure that the small investor, who was whipped by volatility during this time, would have found this information highly useful. Alas, they are not one of the Goldman connected pigs who are clearly more equal than the rest of us.

Orson Well’s classic, The Animal Farm, is clearly a perfect analogy to the current U.S. financial system. How this blatant dissemination of material non-public information can be justified to a number of the wealthiest hedge-fund managers in the U.S. is beyond inexplicable. Just as it would have been worthwhile to know that as of March 2009, when the S&P made its infamous bottom at 666, that the Fed had shovelled $7.7 trillion in loans and guarantees to the financial system, it would certainly would have been nice to know that the GSE’s were about to go belly up 7 weeks in advance.

March 2009 marked the beginning of an epic rally for U.S. stocks. However, only the bankers knew that they were chock-full of cash thanks to the secret loans and guarantees provided by the Federal Reserve. The not so-equal small investor had no idea.

These revelations should lead to prosecutions, if only all animals were equal. While none of the hedge fund managers listed in the Bloomberg article were likely dumb enough to directly short the GSE’s on Mr. Paulson tip, they would not have been prevented from shorting other mortgage filled losers like Washington Mutual, Wachovia, and Countrywide Financial.

The majority of those informed by Hank Paulson were Goldman Sachs alumni, so at least we can rest assured that the pigs at Goldman Sachs know how to take care of their own.

Ron Paul Statement on the Fed’s Bailout of Europe

Wednesday, 30 Nov 2011 5:00 AM

From Ron Paul

Statement on the Fed’s Continued Euro Bailout

The Fed’s latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed. Under current law Congress cannot examine these types of agreements. Those who would argue that auditing the Fed or these agreements with central banks harms the Fed’s independence should reevaluate the Fed’s supposed independence when the Fed bails out Europe so soon after President Obama promised US assistance in resolving the Euro crisis.

Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the European financial crisis. Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance. Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars. These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing.

The Fed is behaving much as it did during the 2008 financial crisis, only this time instead of bailing out politically well-connected too-big-to-fail firms it is bailing out profligate government spending. Citizens the world over deserve better than this. They deserve sound money that cannot be manipulated and created out of thin air by central planners who promise printed prosperity. Fiat money caused this European crisis and the financial crisis before it. More fiat money is not the cure. The global fiat currency system has proven itself a failure, we need real monetary reform. We need sound money.

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Mining Weekly: Coeur Would Mull Holding Silver Over Cash, Says CEO

Thursday, 1 Dec 2011 5:00 AM

By Matthew Hill

TORONTO (miningweekly.com) – Idaho-based Coeur d’Alene Mines would at a future point consider holding some of its reserves in silver, as an alternative to keeping all of its money in the bank, CEO Mitchell Krebs told Mining Weekly Online on Wednesday.

The silver and gold miner will increase production “modestly” next year over 2011’s output, it added.

Sprott Asset Management CEO Eric Sprott and David Baker in a letter titled ‘Silver Producers: A Call to Action‘, the day before, floated the idea that, instead of selling all their product for cash to put in the bank, miners should retain some of their reserves in the precious metal.

The argument is that currencies in the Western world are losing value as soaring debts force governments to debase their money. Sprott has also said he believes the financial system faces a solvency crisis, and may not be a safe place to keep money.

Asked to comment on the idea, Krebs was not dismissive.

“It would provide additional leverage to investors. If we are bullish on silver and gold as companies, one of the underlying themes there is the weakening US dollar, in our case,” he said in an interview in Toronto.

“It’s an idea that’s consistent with why we feel good about silver and gold prices.”

However, Krebs, who took over as CEO of the TSX- and NYSE-listed company in July, said Coeur would first have to build up what he called a “sufficient cash cushion” before it would consider holding some of it in precious metals. The firm ended the September quarter with $208-million in the bank.

He said the miner would be in the position to consider such moves, as well as paying a dividend, in the latter part of 2012.

Coeur was one of the 17 silver producers that Sprott called upon to store their reserves in silver rather than in the bank.

One of Sprott’s beliefs is that gold and silver have become de facto currencies, and a real store of value in a world where governments will have to ease monetary policies and print more cash to pay off debts.

That is why many investors believe precious metals will continue to climb in price.

Gold has risen for the past 11 years to trade at $1 747/oz on Wednesday, after hitting an all-time high above $1 900/oz in September.

Silver prices have shot up from less than $5/oz to the current $32.73/oz over the same time period.

Krebs said he believed prices would continue to climb.

“Getting silver into the $40s next year, if it pushes $50/oz I wouldn’t be surprised at all,” he said, adding that the volatile nature of the metal’s price meant that he likewise would not be surprised if it dipped “in the mid-$20s for some period of time”.

PRODUCTION

Coeur, the biggest primary silver producer in the US, expects to produce 19.5-million ounces of the metal this year, along with 220 000 oz of gold.

Krebs said the miner had not yet given production guidance for 2012, but that output would rise “modestly”, as expansion projects added ounces.

The company built a new heap leach pad at its Rochester operation in Nevada, which would contribute to production next year.

At the Kensington mine in Alaska, which began producing last year, 2012 output would likely match this year’s 85 000 oz of gold, as Coeur sacrifices some production in the first half of the year to address problems at the mine.

The measures include advancing underground development, commented Krebs.

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Bloomberg: Bank of Korea Says it Boosted Gold Holdings in Foreign Exchange Reserves

Friday, 2 Dec 2011 5:00 AM

Bloomberg. By Sungwoo Park and Eunkyung Seo

The Bank of Korea, which controls the world’s eighth-biggest foreign exchange reserves, boosted gold holdings for the second time this year as investors sought safer assets amid Europe’s debt crisis.

The central bank bought 15 metric tons last month, boosting holdings to 54.4 tons, which is equivalent to 0.7 percent of its total reserves, Lee Jung, head of the investment strategy team at the bank’s Reserve Management Group, told reporters in Seoul.

Central banks are expanding reserves for the first time in a generation as the precious metal is in the 11th year of a bull market. Purchases of as much as 450 tons in 2011 may be repeated next year as Asian nations and emerging economies diversify their reserves, UBS AG said Nov. 30.

“They want to diversify,” Gavin Wendt, the founder and senior resource analyst at Sydney-based Mine Life Pty., said by phone today. Investors and “central banks are pretty nervous about all currencies, not just the U.S. dollar.”

Gold has risen about 23 percent this year, reaching an all- time high of $1,921.15 an ounce on Sept. 6 and beating equities, treasuries and other commodities. The U.S. dollar, which typically moves inversely to bullion, is down about 1 percent this year against a basket of six major currencies.

‘Portfolio’

“We’re buying gold to improve profitability against risks,” the Korean bank’s Lee said. “This is part of our mid- and long-term strategy to diversify our portfolio and enhance efficiency of asset management.”

The Bank of Korea purchased 25 tons over a one-month period from June to July, the first purchases in more than a decade, joining other emerging-market countries in expanding gold holdings to guard against volatile currency movements and to diversify portfolios.

The World Gold Council said central bank purchases in the third quarter jumped more than sixfold to 148.4 tons and forecast buying for the year would reach as much as 450 tons. Russia, Kazakhstan, Colombia, Belarus and Mexico added a combined 25.7 tons of gold to reserves in October, according to data on the International Monetary Fund’s website.

Holdings in exchange-traded products reached a record 2,356 tons on Nov. 30 and were at 2,355.5 tons yesterday, according to Bloomberg data compiled from 10 providers.

South Korea’s foreign-exchange reserves fell by $2.35 billion from October to $308.6 billion at the end of November as the euro weakened against the dollar, the central bank said in a statement today.

Rumor of the Day: S&P to Put all 17 EU Nations on Creditwatch for Possible Downgrade(s)

Monday, 5 Dec 2011 5:00 AM

The situation in Europe continues to drag on, and while there were no notably bad headlines over the weekend, there were no notable good headlines either. Stocks again opened higher, with the Dow at one point rising over 200 points. Market talk that S&P will soon place all EU member nations on creditwatch for possible downgrade caused early optimism to quickly fade. Stocks and commodities all retreated from the session’s best levels, and the USD and Treasuries both moved off their worst levels.

The implication of an S&P creditwatch announcement would be to further pressure the rates at which indebted European sovereigns could borrow at. In addition, the creditwatch would raise questions on whether the EFSF and ESM would lose their AAA status as well. The immediate reaction in markets would likely be a widening of spreads in all 17 EU nations, and downward pressure on the EUR-USD.

The imminent risks facing the global financial system remain the same, and revolve around the possible financial market contagion if Italy or Spain’s sovereign bonds were to deteriorate to such an extent they either or both required a bailout. Europe’s undercapitalized banking sector would be at risk of imploding as a bailout of Italy in particular would likely result in talk of a private sector haircut. This would give rise to fears of a “credit event” that would trigger billions of credit default swaps written on Italian sovereign bonds.

The next attempt to soothe investor anxieties will occur later this week when EU heads of state are again slated to meet to further bolster their defenses against a deterioration in EU market conditions. However, current reports indicate that all that is being discussed for this upcoming meeting are treaty modifications that will toughen up fiscal rules for member nations. How this is expected to defuse anything is confusing at best. More concrete positives are talk that EU central banks could lend money to the IMF which would bolster the IMF’s financial firepower. However, given that Italy has 1.9 trillion EUR in debt, and requires 400 billion EUR in financing need in the next 12 months, the amount that would need to be advanced to satisfy market concerns would likely top 300 billion EUR.

For precious metal investors, the current situation is highly uncertain. Recent market action for gold and silver has seen a marked positive correlation with the EUR-USD rate. Given the universally bearish outlook for the EU’s economic prospects, and the clearly outperforming economic data releases out of the U.S., it would appear likely that the EUR-USD will have to move lower. If recent correlations hold, this would mean downward pressure on gold and silver. Barring any more unexpected, behind the scene moves like seen last Wednesday, the headlines coming from the EU will likely be bearish for EUR-USD. It seems reasonable to expect this to be an ongoing headwind for the precious metals market.

At the end of the day, the market continues to search for the turning point in the European crisis. Unfortunately, this entire process continues to look more like a marathon, and less like a sprint. Unlike 2008 when financial sector stress culminated with the collapse of Lehman Brothers and the bailout of AIG, a similar like event is not a sure thing. The market for precious metals made a bottom in the wake of this seminal event, and hopes for a similar catalyst for a market bottom could be misplaced. However, the possibility that the EU situation could degenerate into a messy end remain high. The speed with which Belgium financial firm Dexia, and U.S. based MF Global unravelled highlight the speed with which a systemically important financial institution could crumble. A mass creditwatch announcement by S&P would certainly add to the general level of anxiety.

The waters remain shark infested.

Japan Entices Bond Buyers with Gold and Silver Coins

Tuesday, 6 Dec 2011 5:00 AM

One of the primary arguments for holding gold and silver as a monetary substitute rather than the fiat currencies in mainstream use today is the unlimited money printing by governments. In Japan, the world’s most indebted developed economy, debt to GDP is staggering at over 200%. Japan’s current annual budget commits nearly 50% of spending on just servicing debt. How Japan’s currency and bond market has not yet faced the wrath of bond vigilantes has been a topic in financial circles for decades. The notable feature that separates Japan from other countries with large debt burdens has been its ongoing trade surplus. However, many still speculate that it will be only a matter of time before Japanese finances succomb to a European-like meltdown.

In a very interesting development, Japan is using gold and silver coins to entice buyers of its bonds. Bloomberg reports that “investors who buy 10 million yen ($129,000) of reconstruction bonds with a 0.05% return, and keep it for three years, will receive a gold commerative coin weighing 15.6 grams (0.55 ounces).” Obvioiusly a 0.05% return is miniscule, but the 15.6 grams of gold is worth about $948 dollars.

The article adds that “Silver coins weighing 31.1 grams, or 1 troy ounce, valued at 1,000 yen will be distributed to those who own more than 1 million yen of the bonds, the government said. The coins will be offered for debt going on sale in March. “

Combining paper from arguably the government with the most flagrant abuse of its fiat currency printing with gold and silver is novel. It further suggests that perhaps perceived demand for Japanese government debt could be waning, and that such inducements are needed to keep Japanese borrowing costs near zero. If Japanese yields were ever to encounter a sustained increase, the debt servicing cost would quickly swamp Japan’s tax base. All investors should keep on eye on Japanese debt yields going forward. This latest development of gold and silver inducements to buy such debt has consequential implications.

Read the full article

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ECB Watch Begins – Will They Ease Monetary Conditions – Yes, But By How Much

Wednesday, 7 Dec 2011 5:00 AM

The markets are rife with speculation on what the ECB will do at tomorrow’s policy meeting. The ECB’s new head, Mario Draghi has already demonstrated an activist streak, cutting the bank’s benchmark rate by 25 basis points at his first meeting. Currently, the market is expecting rates to be cut by another 25 basis points to 1%. However, there are a number of other possible measures that could be announced at tomorrow’s meeting. These could prove to be just as important as any rate cut since it is widely believed that Europe’s financial system is increasingly finding it difficult to obtain funding.

Just like 2008, the shadow banking system is showing its inherent weakness. In traditional banking, loans are funded by a banks deposit base. The shadow banking system relies on interbank lending and other short-term money market access to fund loans and assets. With banks in Europe increasingly at risk due to the ongoing sovereign debt crisis, short-term funding sources have been drying up. This has led to record amounts of cash parked at the ECB, and required the ECB in turn to increase its lending to the financial sector.

According to news reports, ECB officials are considering loosening collateral criteria so that instiutions have more access to cheap ECB cash. The ECB is also expected offer long-term loans at reduced rates in order to keep the flow of credit active. The magnitude of any such decision by the ECB will directly impact fears among investors that the liquidity crisis hitting European banks will cause a sharp contraction in the Eurozone’s economy.

For precious metal markets, any such move will directly impact inflation expectations, and therefore demand for gold and silver. If the ECB decided to cut interest rates, increase allowable collateral, and provide significant amounts of long cost, longer-term funding to the banks, inflation expectations would clearly rise, benefitting the perceived value of hard assets.

Waiting in the wings is the next EU summit scheduled to start on December 8th. While expectations for this meeting aren’t particularly satisfying, the addition of strict fiscal enforcement procedures could have a very important side effect. Namely, the ECB could justify a marked step-up in its bond buying program. If this were to occur, the hopes of many market participants would be realized as ECB buying in size is seen as the only way to reverse the ongoing rot in Italy and Spain. Notably, yields in Italy re-crossed the 6% level today, snapping a rally which saw yields fall from over 8%, to just under 6%.

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MF Global’s Missing Money and Jon Corzine’s Feebleness

Thursday, 8 Dec 2011 5:00 AM

MF Global’s demise raises serious questions over the entire global financial system. Unbeknownst to anyone examing MF Global’s financials, the firm had used $1.2 billion of client funds to take a massively leveraged bet on non-AAA rated European sovereign debt. The details of how this happened are coming to light, and the implications are frightening. Specifically, by using something called hypothecation, banks are able to use client funds to fund positions in their name. These transactions add massively to the global finacial systems leverage, and as MF Global shows, puts hapless clients at risk for loss. What is outrageous however, is that in prepared testimony to Congress, now disgraced ex-CEO Jon Corzine is expected to say he does not know what happened to client assets, and why the accounts have not been reconciled.

What is “hypothecate.”

As briefly described above, a firm can ”borrow” client assets to enter a repurchase agreement in which it sells assets to get cash now, with the promise of repurchasing the assets at a future date. “The borrower retains ownership of the collateral but is “hypothetically” controlled” by the creditor.” In a very timely piece that is a must read, Reuters has provided an excellent overview of this little heard financing technique: MF Global and the great Wall St re-hypothecation scandal. Key to MF Global is that before borrowing funds through a repurchase agreement, the firm borrowed the assets from its own clients.

Among the disturbing facts the Reuters article highlights is that “Prior to Lehman Borthers collapse, the IMF calculated that U.S. banks were receiving $4 trillion worth of funding by re-hypothecation, much of which was sourced from the U.K.” The IMF notes that with assets being re-hypothecated, the orignal collateral being used “may have been as little as $1 trillion.” It is important to note the regulation arbitrage going on here as U.K. rules has no statutory limit on the amount that can be re-hypothecated. In the U.S. there is a 140% limit – still ridiculous.

Jon Corzine – Idiot or Liar?

According to the following AP article – Don’t know where firm’s missing money is – Jon Corzine’s prepared testimony to an upcoming Congressional hearing, alleges ignorance on where client funds are. This is OUTRAGEOUS. How the CEO of the firm, who pushed the drive into non AAA rated European debt, did not know that the funding of this position rested on hypothecation is utterly not credible. As the Reuters article points out, in each MF Global client agreement is the following -

“7. Consent To Loan Or PledgeYou hereby grant us the right, in accordance with Applicable Law, to borrow, pledge, repledge, transfer, hypothecate, rehypothecate,loan, or invest any of the Collateral, including, without limitation, utilizing the Collateral to purchase or sell securities pursuant to repurchase agreements [repos] or reverse repurchase agreements with any party, in each case without notice to you, and we shall have no obligation to retain a like amount of similar Collateral in our possession and control.”

Furthermore, as former CEO of Goldman Sachs, these arrangements would have to have been familiar.

Clamping Down on Hypothecating Risks Liquidity Crisis

It seems likely that in the wake of MF Global, and disclosures on how this disaster transpired, stricter regulations on how client funds can be used, and the amount of leverage that can be employed will be forthcoming. On Tuesday the CFTC began this process, voting 5-0 for a rule that will prevent futures brokers from lending customer funds to other parts of their business through repurchase agreements. It also prohibits using client funds to invest in sovereign debt.

However, similar restrictions are needed in free-wheeling London where hypothecating limits do not exist. Given the serious liquidity strains already present for global financial institutions, there’s no guarantee that such restrictions will be quickly forthcoming as regulators are sure to know how shaky the debt house of cards is. An announcement of similar restrictions in the U.K. should raise alarm bells that when implemented, liquidity strains will quickly become magnified.

In a “Hypothecated” World, Who Owns Physical Gold and Silver

Friday, 9 Dec 2011 5:00 AM

The implications of the MF Global collapse continues to reverberate, with news appearing today that ownership of a MF Global client’s physical gold and silver bars, which was almost certainly ”hypothecated,” are now in dispute.

As we pointed out yesterday in MF Global’s Missing Money and Jon Corzine’s Feebleness, the $1.2 billion lost in client assets occured when MF Global borrowed client assets to fund its own proprietary position. To do this, the firm “hypothecated,” or borrowed client assets and effected a repurchase agreeement whereby it sold these assets for cash, with the promise of buying them back at a later date. What is key here however, is that the bank that lent the funds to MF Global, which is secured by borrowed client assets, “holds a right to take possession of the property if the borrower should default.”

In Bloomberg today, this has indeed taken place, and a MF Global client finds his ownership rights to several gold and silver bars in dispute. In an article titled HSBC Sues MF Global Brokerage Over 20 Bars of Gold, Silver on Desposit, HSBC has sued MF Global’s trustee to establish ownership of gold and silver bars worth about $850,000.

Serious Implications

Any investor with a futures account with a brokerage seeking to take delivery of an asset, in this case gold and silver, should treat this latest MF Global news with the utmost seriousness. The possibility that gold and silver an investor thought he owned, could have been “hypothecated,” and now have disputed ownership rights undermines the basic trust needed for today’s modern financial system. Furthermore, there is no way to be sure that gold and silver bullion allocated to one of the precious metals ETF’s could actually have been “hypothecated,” and really belong to someone else. In other words, gold and silver bars could have been borrowed from a brokerage’s client, used or “hypothecated” with any counterparty, and then used by the counterparty to satisfy a third party. For example, satisying puchases by a gold or silver ETF. The question thus becomes – who owns the gold.

It would appear that “hypothecating” client assets is the realization of the wildest dreams of Alchemy. With it, the bankers have managed to create assets out of thin air. As was pointed out in our article yesterday, according to the IMF, “hypothecating” had managed to create $4 trillion worth of funding on assets of as little as $1 trillion.

Whether MF Global has taught anyone anything about the dangers of using client assets for a brokerages own purposes remains to be seen. As we pointed out, the CFTC is moving to reign in this practice, but until the U.K. does the same, nothing will really have changed. One thing is clear, $4 trillion in funding is signficant. Any diminuation of this source of funding will further exacerbate the liquidity problems seen in the global financial system. On the one hand, a diminuation of “hypothecating” could squeeze the supply of physical commodities, while on the other hand, reduce the available funding for a range of paper assets, like government bonds, mortgages, and asset backed securities.

While “hypothecating” assets was unknown to most, if not all, but the few actually engaged in such practices till MF Global’s bankruptcy, it will hopefully come under more forceful public scrutiny now. Unfortunately, the precarious state of the global financial system today likely means that no major change in rules or regulations will be enacted. Of course, if politicians were to act with principal, the practice of “hypothecating” should be eliminated. A clients assets should be segregated and untouched. This seems like common sense, but in the modern global financial system, common sense seems to have taken a vacation.

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Tidal Wave of Financing Needs to Hit Europe in 2012

Monday, 12 Dec 2011 5:00 AM

With the new year nearly upon us, it is worth pointing out that there is an avalanche of refinancing needs due to hit the European continent in the first half of 2012. Investors looking ahead to 2012 should consider how this mountain of debt will impact market dynamics going forward.

According to data compiled by Bloomberg in: Banks Vie With Nations to Sate $2 Trillioin Need: Euro Credit, European banks and sovereigns have over EUR 1.2 trillion in refinancing needs in the first six-months of 2012. With yields on a range of bank and sovereign credits having steadily crept higher, the lack of cheap funding is a clear and present danger for the European Union. To put this into context, the ECB has purchased just EUR 207 billion euros of sovereign bonds since May of 2010 as part if its SMP program.

Last week’s decision by the ECB to reduce reserve requirments to 1% from 2%, to provide 3-year funding for banks, and to increase the types of collateral it is willing to accept in repurchase agreements are all clearly aimed at easing the coming financing needs of the continent’s banks. Highlighting the risks European banks face were reports from the credit rating agencies that warned of the decreased access to cheap funding being experienced in Europe.

Where is the EUR-USD Headed

Holding true to form, today is showing that the correlation of risk assets to the USD is holding firm. This has been a prime driver of stocks and commodities, including precious metals. With investors of all stripes fleeing the Eurozone debt market, expectations for EUR weakness going through 2012 is high. It shouldn’t be surprising that investors who are set to receive their principal back from euro-area sovereigns and banks will hesitate re-investing their cash into these institutions. Rather, it is likely that the bias will be toward taking money completely out of the eurozone. If this were to occur, the EUR-USD could see ongoing weakness.

Economic data of late is also contributing to weakness in the EUR-USD. Data from the U.S. continue to point to relative outperformance relative to Europe. This is particularly true when U.S. data is compared to Europe ex-Germany.

If the EUR-USD continues to deteriorate, it seems reasonable to assume that this will pressure precious metals and risk assets. The next 6 1/2 months will no doubt be difficult for financial markets as Europe attempts to refinance an upcoming mound of debt.

On a final note, in March 2009, the U.S. Federal Reserve embarked on QE1 when the EUR-USD was at 1.31. Today with the EUR at 1.321, the need to do “something” is slowly reaching a key level. After the QE1 announcement, the EUR-USD surged to 1.35, and led to one of the largest rallies for gold, silver and stocks in recent memory. While fundamentals suggest ongoing EUR-USD weakness, another policy decision akin to the Fed’s QE1 announcement, cannot be categorically ruled out.

Public Policy Polling: Paul closes in on Gingrich

Tuesday, 13 Dec 2011 5:00 AM

Paul closes in on Gingrich

There has been some major movement in the Republican Presidential race in Iowa over the last week, with what was a 9 point lead for Newt Gingrich now all the way down to a single point. Gingrich is at 22% to 21% for Paul with Mitt Romney at 16%, Michele Bachmann at 11%, Rick Perry at 9%, Rick Santorum at 8%, Jon Huntsman at 5%, and Gary Johnson at 1%.

Gingrich has dropped 5 points in the last week and he’s also seen a significant decline in his favorability numbers. Last week he was at +31 (62/31) and he’s now dropped 19 points to +12 (52/40). The attacks on him appear to be taking a heavy toll- his support with Tea Party voters has declined from 35% to 24%.

Paul meanwhile has seen a big increase in his popularity from +14 (52/38) to +30 (61/31). There are a lot of parallels between Paul’s strength in Iowa and Barack Obama’s in 2008- he’s doing well with new voters, young voters, and non-Republican voters:

-59% of likely voters participated in the 2008 Republican caucus and they support Gingrich 26-18. But among the 41% of likely voters who are ‘new’ for 2012 Paul leads Gingrich 25-17 with Romney at 16%. Paul is doing a good job of bringing out folks who haven’t done this before.

-He’s also very strong with young voters. Among likely caucus goers under 45 Paul is up 30-16 on Gingrich. With those over 45, Gingrich leads him 26-15 with Romney at 17%.

-Among Republicans Gingrich leads Paul 25-17. But with voters who identify as Democrats or independents, 21% of the electorate in a year with no action on the Democratic side, Paul leads Gingrich 34-14 with Romney at 17%.

Young voters, independents, and folks who haven’t voted in caucuses before is an unusual coalition for a Republican candidate…the big question is whether these folks will really come out and vote…if they do, we could be in for a big upset.

Paul’s supporters are considerably more committed to him than Gingrich’s are. 77% of current Paul voters say they’re definitely going to vote for him, compared to only 54% for Gingrich. Romney has much more solid support than Gingrich as well, 67% of his voters saying they’re with him for the long haul. Among only voters who say their mind’s totally made up, 29% support Paul to 21% for Gingrich, 18% for Romney, and 11% for Bachmann.

Romney’s staying right in place. He was at 16% last week and he’s at 16% this week. His net favorability was a +4 spread last week and it’s a +4 spread this week. Gingrich’s support is declining in Iowa but Romney’s not gaining, just as he failed to gain when Cain and Perry and Bachmann collapsed before. One statistic that really jumps out- only 44% of Romney’s supporters from 2008 say they plan to vote for him again. If he was even just retaining all his support from last time around he’d be in the lead.

Like Romney, there’s been little change in Michele Bachmann’s standing over the last week. Her favorability was +21 (56/35). Now it’s +18 (55/37). She’s gone from 13% support to 11%.

Rick Perry generated a ton of attention in the last week with his ad decrying the repeal of ‘Don’t Ask, Don’t Tell’ and the ‘War on Christmas,’ but it hasn’t done much for his poll standing. He was at 9% and he’s still at 9%. His favorability numbers are under water with 43% of likely voters viewing him favorably to 47% with a negative opinion. The only Republican who’s less well regarded is Jon Huntsman. Only 41% of Iowa Republicans even oppose gays serving in the military to 28% who support it and 31% unsure…and Perry’s only tied for fourth even with those who are opposed, behind Gingrich, Bachmann, and Paul.

Other Notes:

-52% of likely voters claim to have watched the debate in Des Moines on Saturday night. Although I’m skeptical that many really watched, it does speak to how influential the debates have been in this race.

-Republicans continue to think Gingrich is the most electable candidate. 30% think it’s him to 21% for Romney, and 14% for Paul with no one else in double digits.

-Here’s a finding that helps explain why Mitt Romney’s struggling so much: 31% of voters have a favorable opinion of the Republican establishment and an equal 31% have an unfavorable one with 38% unsure. When Romney rolls out endorsement after endorsement, to a lot of voters that’s actually coming across as a negative thing. With those anti-establishment voters Paul’s at 34% to 18% for Gingrich, 12% for Santorum, and only 10% for Romney.

-39% of voters think that Mitt Romney has stronger values to 18% for Newt Gingrich. 43% aren’t sure and that’s pretty telling.

-Finally we threw in a Tim Tebow favorability question for part of the field period. He comes out at a net +35 (48/13), making him more popular than any of the actual candidates. Maybe in 2024…

Our next weekly Iowa poll with be out on Monday the 19th.

Last 2011 FOMC Meeting Today – QE3 Possibility Will Keep Market On Toes Till 2:15

Tuesday, 13 Dec 2011 5:00 AM

Ben Bernanke and co. are conducting their final policy meeting of the year, and its expected to be a yawner. However, with Ben, one can never be completely off guard.

Despite having done nothing in the previous meeting, monetary policy remains extremely easy. The Fed continues to maintain a zero interest rate policy, also known as ZIRP, and has embarked on operation twist – the selling of short-dated securities and buying of longer-dated securities in its $2.65 trillion portfolio. This current meeting is expected to provide some updates on Fed communications and nothing more. However, there is always the possibility that the Fed could embark on QE3.

Given the clear headwinds emanating from Europe, China, and some of the larger emerging markets, Fed policy makers are likely to remain concerned that the U.S. economy is susceptible to another downturn. In the Fed’s last policy statement, this risk was highlighted and this clearly unnerved markets. Europe’s latest attempt to staunch its implosion does little to address market concerns that further turbulance out of Europe is inevitable. As we pointed out, Europe has a mountain of financing needs in the first half of 2012. Whether there is ample liquidity to mop up Europe’s needs will be the key question going forward.

In the U.S., economic data has been surprisingly resilient. However, the numbers can hardly be described as vigorous. Given the fact that the Fed understands that deflationary winds from Europe are significant and likely to be growing, that Ben Bernanke is apt to do more than less, and that the impact of another round of QE3 will have maximum impact today since it is completely unexpected, a policy move by the Fed can never be ruled out. Nonetheless, most market watchers expect any QE3 to start in the first half of 2012 and have been preceded by soft U.S. economic data.

The market impact of another round of bond buying would be an immediate drop in the USD and a surge in stocks and commodities, including gold and silver. While it seems ridiculous that the market is hostage to the decision making of a small group of unelected bankers, so it is that the market will remain on tenderhooks till the 2:15 announcement. Whatever the Fed decides, expect some volatility this afternoon. It should be noted that gold and silver have already had an interesting day, with both metals showing wide swings around the unchanged line.

Bloomberg: Bernanke Signals Fed Ready to Ease on EU Risk

Wednesday, 14 Dec 2011 5:00 AM

Federal Reserve Chairman Ben Bernanke signaled he’s concerned Europe’s crisis will hobble a 2 1/2-year U.S. expansion that may need another boost from the central bank.

The Fed’s policy-setting panel, which met in Washington yesterday, said the economy “has been expanding moderately,” compared with the Nov. 2 assessment that growth “strengthened somewhat.” At the same time, the central bank added a reference to “apparent slowing in global growth,” and said that “strains in global financial markets continue to pose significant downside risks to the economic outlook.”

Bernanke and his colleagues may be considering more measures to aid growth and improve public understanding of Fed policy, which could be unveiled as soon as their next meeting taking place Jan. 25-26, said Julia Coronado, chief North America economist at BNP Paribas. The Fed reiterated that it expects joblessness to drop “only gradually.”

“They still see downside risks, so I still think they’re tilted toward easing,” said Coronado, a former Fed researcher who is based in New York. She said she expects a new round of asset purchases in the second quarter, or as soon as the January or March meetings should the economy deteriorate faster.

The “recent strength in data” allows Fed officials to “be a little more patient than they otherwise might be,” Coronado said.

Consumer Confidence

Improvement in some U.S. statistics suggests growth may be accelerating. The index of leading economic indicators rose 0.9 percent in October, the most since February. A consumer confidence index from the Conference Board rose in November to the highest since July. Manufacturing expanded in November at the fastest pace in five months, according to the Institute for Supply Management’s factory index.

The Federal Open Market Committee, in its statement yesterday after a one-day meeting, reiterated that interest rates would stay near zero through at least mid-2013 and maintained its $400 billion portfolio shift toward longer-term Treasuries, the September action dubbed Operation Twist. Chicago Fed President Charles Evans dissented for the second straight meeting, preferring additional easing.

Policy makers acknowledged “some improvement in overall labor market conditions” after the unemployment rate unexpectedly fell by 0.4 percentage point in November to 8.6 percent. That level is still “elevated,” while business fixed investment “appears to be increasing less rapidly” and the housing market “remains depressed,” the FOMC said.

Dollar Strengthens

Stocks fell, Treasuries gained and the dollar strengthened against the euro as the Fed dashed some investors’ expectations for additional easing yesterday. The Standard & Poor’s 500 Index dropped 0.9 percent to 1,225.73. Yields on 10-year U.S. government bonds declined to 1.97 percent from 2.01 percent, while the dollar rose 1.1 percent to $1.3037 per euro.

Bernanke, at the prior FOMC meeting Nov. 1-2, asked a subcommittee on communications to consider a statement about the Fed’s longer-run goals and strategy, minutes of the gathering showed. The subcommittee is also examining how to include FOMC policy makers’ own expectations for monetary policy along with their forecasts of the economy.

“They probably hammered out the final details” yesterday of a communications overhaul to be unveiled at the January meeting, Coronado said. Officials will probably publish their forecasts for the federal funds rate and specify circumstances in the labor market and U.S. growth that would warrant tighter monetary policy, she said.

Two-Day Meeting

Bernanke, who turned 58 yesterday, gives his next press scheduled press conference Jan. 26, following a two-day FOMC meeting.

Keith Hombre, chief economist and investment strategist at Nuveen Asset Management, said he is forecasting a slowdown in growth next year that makes a third round of bond-buying a “distinct possibility.”

Right now, “it’s probably premature to be pushing even further for more accommodation, given that you could make a case that there’s been some response by the economy to the steps that have been taken,” said Hembre, whose company is based in Minneapolis and oversees about $207 billion.

Fed officials may be betting that they won’t need to ease further should their foreign-currency swap lines providing cheap loans to overseas banks help alleviate the crisis in Europe, said Hembre, a former Fed researcher.

Three-month loans to the European Central Bank from the Fed surged last week to $50.7 billion from $400 million after the Fed, ECB and four other central banks lowered borrowing costs by a half-percentage point in a coordinated action.

Inclined to Ease

Europe’s turmoil and the rotation onto the FOMC next month of policy makers who may be more inclined to ease make the odds of a third round of asset purchases before July more than 50 percent, said Tom Luster, a portfolio manager at Eaton Vance Corp. in Boston.

“It would seem to me that at a minimum you have a pretty significant recession in Europe, which is likely to affect us directly,” said Luster, who oversees $6.2 billion as director of investment-grade fixed income.

Philadelphia Fed President Charles Plosser, Dallas Fed President Richard Fisher and Narayana Kocherlakota of the Minneapolis Fed, who all dissented from the August and September decisions to ease policy, don’t have FOMC votes next year, along with Evans.

In their place will be Cleveland Fed President Sandra Pianalto, Atlanta’s Dennis Lockhart, San Francisco’s John Williams and Jeffrey Lacker of the Richmond Fed. Lacker is the only official with a history of dissents. Williams is voting for the first time.

Tad Rivelle, who oversees about $67 billion as head of fixed-income investments at Los Angeles-based TCW Group Inc., put it this way: “Does the U.S. economy have enough momentum to keep stumbling forward, or will the problems from across the pond restrain us?” he said on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays.

What is Driving Gold and Silver Lower – The Quick Answer US Dollar Strength

Thursday, 15 Dec 2011 5:00 AM

For precious metal investors, the last few days have been difficult to say the least. Both gold and silver have fallen through important support, and are now at levels not seen since early this year. Year to date, both gold and silver remain up, but if current trends continue both could end in the red by year end. The question of what is driving this sharp downturn is worth examing.

US Dollar Strength

Since the U.S. dollar abandoned all ties with gold in 1971, the greenback has experienced a steady decline against the currencies of other nations. The cause of this fall in value has been typically attributed to the U.S.’s twin deficits – a large and growing trade deficit, and a large and growing fiscal deficit. The relationship of precious metals and the USD has been inverse, and it is typical to hear that gold and the USD have a strong negative correlation.

In times of crisis, the USD assumes the mantle of the ultimate safe haven. Despite the dysfuction in Washington D.C., and the ever hollowing out of the U.S. manufacturing base, the U.S. remains the world’s lone “super power.” In other words, despite all its faults, the U.S. is still seen as the largest and most stable country on the planet. Like 2008, 2011 finds the global economy in the grips of a potential financial calamity caused by the possibility of a break-up of the European single currency, the EUR. As this crisis has progressively worsened, the pressure to seek a safe-haven has increased, causing the USD to strengthen against its peers. Like 2008, investors fled to the safety of the USD and US Treasuries. Disappointment with the latest EU Summit has seen the EUR-USD to fall from 1.35 to 1.30 in a little more than a week while the yield on the 10-year Treasury has fallen below 2%.

European Outlook Remains Dim

Europe’s current situation is far from stable, and there are many reasons to believe that the situation will get worse.

European banks and sovereigns have over EUR 1.2 trillion in refinancing needs in the first six-months of 2012. Since European’s debt concerns first surfaced in 2010, and even before then, investors have been pulling money away from the Eurozone. This trend has been accelerating of late, and with a mountain of financing needs in 2012, the situation is not expected to improve. This will continue to pressure the EUR against the USD, and put downward pressure on commodities including gold and silver.

It should not be a surprise that Europe’s crisis is leading to a weakening in its economy. European politicians have been scrambling to reduce fiscal spending to allay market concerns over budgets and deficits. Budget cuts are among the factors weakening Europe’s economy. Meanwhile, European financial institutions, which are struggling under sovereign bond losses, the weakening economy, and a general loss of access to cheap interbank funding, are on the margin cutting back lending to consumers and businesses. The end result of thse factors is further downward pressure on the EUR-USD exchange rate. This is not likely to change for the forseeable future.

China and Emerging Markets Weakening

Despite all the bluster in China that it can manage a soft landing in its economy, it remains to be seen that such an outcome will be manageable. Chinese real estate prices have finally plateaued, and are clearly on the start of a downtrend. With the average home price in China 13x the average income, it is clear, without a doubt, that Chinese real estate prices are sky high. In addition, property investment remains a major driver of commodity demand and China’s overall economic growth. A serious downturn in the property market in China would heighten the recessionary risk emanating from Europe.

Other emerging markets are feeling the heat, with economic data from India to Brazil showing worrying signs.

The end result of the overseas economic weakness has been, and will continue to be a flight of investors to the relative safety of the USD and US Treasuries.

Things That Will Change the Situation

1. The possibility that the European Central Bank (ECB) will agressively monetize the sovereign debt of Italy and Spain. While such an action will not solve Europe’s long-term problems, short-term, this would alleviate market concerns that Italy will be unable to finance its debt. The safe-haven flows to the USD would likely reverse causing an explosive move to the upside in risk assets and commodities, including gold and silver.

2. The Fed is expected to embark on QE3 if U.S. economic conditions begin to flag. While recent economic data has been relatively strong, especially when compared to Europe, the U.S. recovery is far from assured. Ben Bernanke is expected to enact QE3 if U.S. data begins to falter, and deflation becomes a serious threat. This woul cause the USD to immediately fall, wich a corresponding move to the upside in risk assets and commodities, including gold and silver.

Downside Events That are Upcoming

1. Expect the major credit rating agencies to begin downgrading many of the European sovereign ratings and bank ratings in the weeks and months ahead. This will keep pressure on the EUR-USD, causing headwinds for stocks and commodities, including gold and silver.

2. Expect margin increases on any number of future contracts. Given the rising level of volatility in all markets, it would appear likely that margin increases on all types of future contracts will be forthcoming. Margin increases decrease the availability of cash in the global financial system, and will likely heighten concerns of the stability of funding for the global financial system.

3. Europe’s large funding needs in the months ahead mean that every upcoming attempt to tap the bond market by sovereigns and financial institutions will be a potential flash point for further volatility. Any sign that markets are pulling back funding would heighten market concerns, driving investors to the relative safety of the USD and U.S. Treasuries.

Other Notable Concerns Adding to USD Safe Haven Flows

The fall of MF Global and Belgium’s Dexia have several implications worth remembering. First, MF Global’s downfall brought to light an aspect of the shadow banking system that the big banks certainly would have preferred was left in the dark, namely hypothecating. The use of client assets to fund proprietary positions is a source of financial leverage most investors no doubt had no knowledge of. It is likely that in the wake of MF Global’s bankruptcy, this cheap funding source will be restricted by regulators or concerned clients, or both. This will further exacerbate liquidity concerns.

Meanwhile Dexia, which had passed the EU’s bank stress tests, went under nonetheless. There are any number of European financial institutions that are currently subject to talk of being undercapitalized. These include Germany’s Commerzbank, Austria’s Erste Bank, France’s Credit Agricole, and the U.K.’s Royal Bank of Scotland.

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Precious Metals Benefit as Fed Decides to Keep Rates at Zero – Gold and Silver Gain over 10% in 2012

Thursday, 26 Jan 2012 5:00 AM

The Federal Reserve continues to try and inflate the U.S. economy with its unprecedented easy money policies. Yesterday’s FOMC decision to maintain its Zero Interest Rate Policy (ZIRP) through LATE 2014 provides certainty to investors that the Fed aims to apply steady downward pressure on the USD for the forseeable future. As has been noted in the past, Europe and the U.S. currencies are currently in a race to the bottom, and for the moment, the Fed has helped push the USD into the lead. Indeed the EUR-USD rate continues to rebound from the lows hit in December, rising above the 1.30 level. Predictably, investors of all stripes are viewing the Fed’s move as a signal to look for USD alternatives. Among the biggest winners are gold and silver.

Gold has now climbed to a seven week high, while silver is now comfortably in the $30 per troy ounce leve. Both metals are outperforming all other asset classes thus far in 2012, with both metals sporting 10% gains. The attractiveness of precious metals as an alternative to the USD has jumped since the Fed has now virtually guaranteed that savings held at a bank will yield a negative return. Inflation over the last 12 months has averaged just over 2%, although the Fed prefers to look at inflation ex-food and energy, which has been 1.7%. Either way you look at it, savers have seen their purchasing power eroded by the Fed’s policies.

Fed’s Press Release Indicates Willingness to Do Even More to Weaken USD

The FOMC press release also indicated that “The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a contest of price stability.” A loose interpretation of this statement can be construed to indicate that the Fed is setting the stage for another round of bond buying since “Strains in global financial markets continue to pose significant downside risks to the economic outlook.”

Expect any economic weakness in the U.S., or indeed even just a failure of the U.S. employment rate to fall significantly, to raise the calls for more Fed action.

Next Major Monetary Event in the EUR-USD Race to the Bottom

The ECB is expected to hit the markets with up to 1 trillion EUR in cheap 1% bank financing in its next Long Term Refinancing Operation (LTRO) on February 29th. The first LTRO shoved 489 billion EUR into European banks. The printing of another 500 billion to 1 trillion of EUR will clearly weigh on the EUR. While market reaction was initially mixed, the wake of the first LTRO saw markets reach a near-term bottom in December, with gold and silver clearly benefitting from the unprecedented money printing by the central bank across the Atlantic.

Search for Monetary Substitute Likely to Continue to Support Gold and Silver

One of the primary reasons investors are flocking to precious metals is the negative interest rates now seen in the U.S. and Europe. The cost of holding precious metals is diminished with inflation outpacing the return available on cash savings, increasing the attractiveness of precious metals including gold and silver.

While yesterday’s FOMC decision was somewhat surprising, it does continue the history of Bernanke’s Fed to aggresively try and inflate the U.S. out of its debt woes.

Bloomberg: Silver Powering 20 Million Homes as Glut Subsides: Commodities

Tuesday, 31 Jan 2012 5:00 AM

Bloomberg, by Nicholas Larkin

Record industrial demand for silver and resurging investor interest is diminishing a supply surplus, driving the metal used in everything from solar panels to batteries into its best start to a year in almost three decades.

Manufacturers will use 15,415 metric tons, 2.5 percent more than in 2011 and reducing the glut by 41 percent to 3,297 tons, Barclay Capitalestimates. Investors may buy 2,000 tons through exchange-traded products, after selling 1,300 tons last year, Morgan Stanley predicts. Prices will average $37.50 an ounce in the fourth quarter, 11 percent more than now, the median estimate in a Bloomberg survey of 13 analysts shows.

The metal rallied 25 percent since closing at an 11-month low in December, entering a bull market on mounting confidence that another global recession will be avoided even as the World Bank and IMF cut their growth forecasts. Prices had plunged 44 percent in eight months, making it the most volatile of any metal tracked by Bloomberg, as expansion slowed from Europe to China, crimping demand for commodities.

“Silver got hammered and now we’re into a phase where it will do quite well,” said Dan Smith, an analyst at Standard Chartered Plc in London, and the second-most accurate price forecaster tracked by Bloomberg Rankings in the past eight quarters. “Appeal comes from its widespread use in both industry and investment. I think it’s relatively cheap.”

Standard & Poor’s

The commodity advanced 22 percent since Dec. 31 to $33.8575, the best start to a year since 1983. The S&P GSCI Total Return Index of 24 commodities rose 3.1 percent and the MSCI (MXWD) All-Country World Index of equities 5.7 percent. Treasuries returned 0.3 percent, a Bank of America Corp. index shows.

This year’s anticipated gains in silver will mean record profit for Coeur d’Alene Mines Corp. (CDE) and Fresnillo Plc (FRES), analyst estimates compiled by Bloomberg show.

Economies may still pose the biggest threat to the rally. The IMF cut its 2012 forecast on Jan. 24 to 3.3 percent from 4 percent and warned that Europe’s debt crisis threatened to derail the world economy. The World Bank reduced its estimate by the most in three years on Jan. 18, to 2.5 percent from 3.6 percent. Global industrial production will expand 2.3 percent, from 4.9 percent in 2011, Macquarie Group Ltd. predicts.

The 0.5 percent contraction in the 17-nation euro region seen by the IMF may curb demand for imported goods. Chinese exports rose 13.4 percent in December from a year earlier, the slowest pace since February, according to customs data. The nation imported 235 tons of silver in December, 36 percent less than the average over the past two years, the data show.

Industrial Demand

“In the face of weak industrial demand, the short-term investment argument is not entirely convincing,” said David Jollie, an analyst at Mitsui & Co. Precious Metals Inc. in London and the most accurate forecaster in the London Bullion Market Association’s 2011 price survey. “It’s much more difficult to get people to invest for the long term in times of economic uncertainty.”

For now, speculators are getting more bullish. Hedge funds and other money managers more than doubled wagers on higher prices this year, Commodity Futures Trading Commission data show. They held 16,034 futures and options in the week ended Jan. 24, the most since mid-September. The most widely held option gives the owners the right to buy silver at $40 by June, data from the Comex in New York show. The three biggest holdings are all call options at 18 percent or more above prices today.

Investors added 196 tons to their ETP holdings this month, taking the total to 17,492 tons valued at $19.04 billion, within 7 percent of the record reached in April, according to data compiled by Bloomberg. They also bought 6.082 million ounces (189 tons) of American Eagle silver coins, the most in a year, data on the U.S. Mint’s website shows.

Kodachrome Film

Those sales are whittling away the supply glut as industrial consumption strengthens. Global solar-panel installations increased capacity by 70 percent last year, creating enough generating power to supply about 20 million homes, according to the European Photovoltaic Industry Association. The metal is also used in electrical conductors, wood preservatives and alloys, compensating for a slump in photographic film demand.

Eastman Kodak Co. (EK), based in Rochester, New York, said in 2009 it would stop making Kodachrome film after more than seven decades and on Jan. 19 filed for bankruptcy. Demand for silver from photographic-film makers slid at least 66 percent in the past decade, the Washington-based Silver Institute estimates.

Gold Ratio

Silver may still be cheap relative to gold, with a price ratio of 51.5, down from 57.4 in December. It averaged 32.4 in 1980, when silver reached a record $50.35 in New York trading. Nelson and William Hunt of Dallas were convicted eight years later of conspiracy for attempting to manipulate prices and were ordered to pay $130 million.

In inflation-adjusted terms, that peak would be equal to $138.31 as of last year, according to a calculator from the Federal Reserve Bank of Minneapolis.

Crystalline silicon solar panels use as much as 0.12 grams of silver per watt, and as much as 40 grams go into a 32-inch plasma television, according to VM Group, a London-based research company. Electronic-equipment manufacturing will expand 5 percent this year, according to Los Altos, California-based researcher Henderson Ventures in a December report.

Coeur d’Alene, which gets about 69 percent of its revenue from silver, will report profit of $241.50 million this year, compared with an estimated $120.25 million in 2011, according to the mean of four analysts’ estimates compiled by Bloomberg. Shares of the Idaho-based company gained 18 percent since the start of January.

Most Accurate Forecaster

Fresnillo will report net income of $988.7 million this year, compared with an estimated $945 million in 2011, the mean of six estimates shows. Shares of the Mexico City-based company jumped 16 percent in London this year.

“Silver is a hybrid,” said Bart Malek, the head of commodity strategy at TD Securities Inc. in Toronto and the most accurate forecaster tracked by Bloomberg Rankings in the past eight quarters. “It benefits from being precious. Later on in the year we’re going to see a bit of a recovery in industrial demand.”

A Strong Start for Gold and Silver in January – Gold Gains 11.2%, Silver Gains 20.17%

Wednesday, 1 Feb 2012 5:00 AM

The end of 2011 was a letdown for many precious investors as both gold and silver ended the year well off their respective yearly highs. 2012 has seen these memories overshadowed by a stellar start for precious metals, with gold and silver trouncing all other asset classes.

	1/2/2012	1/31/2012	Avg	Gain
Gold	$ 1,567.40	$ 1,744.00	$ 1,656.12	11.20%

Silver	$ 27.96	$ 33.60	$ 30.76	20.17%

Gold Seeking to Extend a 11-Year Run

Gold’s 10.28% advance in 2011 masked a very poor end to the year. From its highs of $1,920 per troy ounce in September of 2011, gold limped into the year end with a 18.43% decline. Nonetheless, gold extended its winning ways to 11 straight years, and with gold’s strong start to 2012, extending this streak to 12 years looks like its in the cards. In fact, January’s 11.20% run has more than halved the fourth quarter decline, and many market forecasters are predicting another run at the $2,000 per troy ounce level sometime in 2012.

Silver Easily Outpaces Gold to Start 2012

Silver lived up to its reputation of being a more volatile precious metal in 2011, with silver investors enduring dramatic volatility. Silver had started 2011 with a flourish, rising 55% and reaching a multi-year high of just under $48 per troy ounce on May 1st before suffering some dramatic plunges in the wake of two series of CME margin rate hikes, and escalating fears over the global economy.

January of 2012 has seen silver sprint 20.17% higher, easily recovering from 2011′s declines, and outpacing virtually all other asset classes and commodities. Whether 2012 represents a break-out for silver, or perhaps a repeat of 2011 remains to be seen. There is no doubt that if silver continues to advance at this rate, fears that the CME will step in with another series of margin increases will be sure to follow.

What are the Factors Driving Precious Metal Demand in 2012

While providing a definitive answer to this question is impossible, there is no shortage of opinions on this topic. Among the most compelling has been the actions of central banks. Both Europe’s ECB, and the U.S.’s Federal Reserve have undertaken a series of monetary operations to ease tensions within the global financial system, and spur general economic activity.

On December 8th, 2011, the ECB’s provided European banks with 489 billion EUR of much needed liquidity. This operation, known as long term refinancing operation (LTRO) coincided with the end of gold and silver’s downturn in 2011.

On January 1st, 2012, the Federal Reserve extended its Zero Interest Rate Policy (ZIRP) from mid-2013 to at least late 2014. The Fed also laid the groundwork for another round of quantitative easing, or QE3. Both gold and silver immediately rose following this announcement.

Fun Silver Fact – 2011 U.S. Mint Silver Eagle Sales Hit Record

A good gauge of investor demand for silver are the U.S. Mint’s annual silver eagle sales numbers. Despite a drop-off in November and December, 2011 was easily a new record as just under 40 million silver eagles were sold, or 39,868,500. The prior record was 2010′s 34,662,500 silver eagle coins sold.

Gold and Silver Hit on Positive Spin from Friday’s Payroll Report, However Report Includes a Disturbing Trend That is USD Negative

Monday, 6 Feb 2012 5:00 AM

The basic thesis following Friday’s better than expected January payroll report is that an improving jobs picture will translate into higher tax revenues for the Federal government, reducing future deficits and the overall level of debt. However, overlooked by most market pundits is the clear drop in the Labor Force Participation Rate (LFPR). A 1.2 million drop in the labor force was the primary driver for the fall in the unemployment rate to 8.3% from 8.5%. This is hardly good news since the U.S. clearly needs an expanding labor force AND lower unemployment if deficits and overall debt is to contract. A closer look will reveal that the USD strength the initially followed Friday’s release is misplaced, and the ongoing decline in the LFPR makes U.S. deficits and debt a much larger burden to overcome.

Why the LFPR Matters

A rising LFPR rate increases the number of potential wage earners, raising the potential tax revenues for Federal, State, and Local governments. Forecasts for LFPR therefore play a key role in budgetary projections. With January’s 1.2 million drop in the labor force, it is clear that future forecasts of potential tax revenue, assuming a rebound in hiring, will continue their decade long trend of being ratched lower. This occurs anytime the LFPR moves lower. For the U.S., the fact is that the LFPR has been in steady decline since January 2000, falling from just over 67%, to a multi-decade low of just under 64%.

The following chart, courtesy of Zero Hedge, shows this disturbing trend clearly:

January’s Jump in Labor Force Drop Outs Largest EVER

What is notable about the latest drop in the LFPR is that it is the largest fall in Labor Force ever. Whether this means that the long known rise in the long-term unemployed is being followed by these individuals just giving up entirely is certainly the main question. What this means for future deficits and debt is also very clear; basically the U.S.’s budgetary woes will be more difficult to overcome as the Labor Force Participation Rate fall stunts the growth of the U.S. Labor Force.

The following chart, courtesy of Zero Hedge, shows the anomolous January jump:

Decline in LFPR is NOT USD POSITIVE

The ongoing fall in the LFPR decreases the potential tax revenues available to fund the U.S.’s large ongoing deficits and overall debt. If the fall in the LFPR continues at the current rate, already dismal deficit and debt forecasts will need to be adjusted higher to accomodate that fall-off. While it is easy to focus on headline Non-farm Payroll numbers like the 243,000 jobs created in January, and the headline fall in the unemployment rate to 8.3% from 8.5%, the change in the LFPR is equally significant.

The USD strength in the wake of Friday’s payroll report makes sense, if one doesn’t factor in the sharp drop in the LFPR. However, the ongoing drop in the LFPR makes future deficits a problem, and ultimately will hinder U.S. efforts to ever get on top of its $15 trillion plus debt load – and growing.

Before popping the champagne celebrating a turn in the U.S. jobs picture, understanding what is driving the fall in the unemployment rate is sobering, to say the least, and should, in the long run be extremely USD negative. Insofar as the negative correlation between the USD and gold and silver persists going forward, the drop in the LFPR is ultimately positive for precious metals.

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CME Cuts Gold, Silver, Platinum And Copper Margins – Could be Positive for Metals

Thursday, 9 Feb 2012 5:00 AM

In a very surprising move, after the close today the CME announced that it has lowered the margin requirement for gold, silver platinum and copper. 2011 saw multiple instances where the CME raised margin requirements, the most significant for silver which saw two series of margin rate increases during 2011 that coincided with sharp plunges in silver’s price. Whether this about face will lead to a rise in silver, gold, platinum, and copper remains to be seen, but making entering a futures contract less expensive could lead to price gains. It can certainly be said that margin increases were accompanied by price declines in 2011.

Initial margin requirements and maintenance margin requirements were lowered by 12% for gold, and 13% for silver. It should be noted that the magnitude of these margin cuts don’t match last year’s increases.

It could be an interesting day for precious metals tomorrow.

However, it can be argued that these unexpected changes in the amount of cash required to take a position in the futures market creates unneccessary uncertainty. As any investor knows, uncertainty is always unwanted. It bear repeating that the CME should be required to provide a standardized process that helps investors understand when margin changes could be forthcoming, and their likely amount. This shot out of the blue may be beneficial for precious metals prices, but it leaves questions on how the CME manages the markets in its purview.

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Will Reducing Greece’s Debt to GDP from 160% to 120% Make Any Difference?

Thursday, 9 Feb 2012 5:00 AM

In today’s chart of the day, we present an overview of Greece’s dire fiscal condition in the wake of the so-called accord by Greek politicians for another round of austerity. The following chart provided by Germany’s Der Spiegel shows the futility that two-years of austerity measures have had in reducing Greece’s debt burden to sustainable levels.

It doesn’t take a genius to see that Greece’s debt problem has been skyrocketing, and this increase hasn’t been materially slowed despite two-years of austerity measures. The bottom of the chart highlights Greece’s economic tumble, with GDP clearly falling at an accelerating rate in 2011.

The latest Greek accord is set to make Greece’s economy even more troubled as the minimum wage is set to be cut 22%, pensions are to be cut by 300 million EUR, and 15,000 government workers are set to lose their job. With Greece’s unemployment rate already above 20%, these measures are set to further depress the Greek economy.

Illustrative of Greece’s economic freefall, tax revenues in the first month of January are down 6%-7% year over year.

Current Debt Reduction Plan is Not Enough

Private creditors are poised to take a 70% loss on their Greek securities if and when negotiations are finalized. However, this would only take Greek debt-to-GDP down to 120% by reducing the country’s total debt burden by 100 billion EUR. It is clear that if Greece is to have a sustainable debt burden, public sector bond holders need to take an equivalent loss. This means the ECB will need to step up to the plate and also take a massive haircut. While this could diminish confidence in Europe’s Central Bank, without such a move, it is highly unlikely that Greece won’t need another bailout further down the line.

Upcoming ECB LTRO and Possible Fed QE3 will Likely Matter More for Gold and Silver

The only positive thing that can be said about Greece today is that it is likely that a Greek, Lehman like moment has likely again been pushed back by at least a few months. What is more important for precious metals however will likely be the upcoming second Long Term Refinancing Operation (LTRO) by the ECB. In the first go-around, the ECB provided 489 billion EUR of liquidity for a liquidity-starved European banking system. The move largely coincided with the bottom in the fourth quarter downturn in both gold and silver. Since their respective bottom in mid-December, both metals have outperformed other asset classes amid a general rise in the EUR-USD exchange rate.

The second LTRO is scheduled for February 29th, and current expectations see a take-up exceeding the first operation. It is hard to see how this amount of liquidity won’t find its way into the precious metals market.

Similarly, any sign that European troubles, or weakness out of Asia is hitting the still fragile U.S. economy will immediately raise hopes for another round of bond buying by Ben Bernanke and the Federal Reserve. This too would have a positive impact on precious metals as lower rates increase the attractiveness of gold and silver.

While the Greek situation is important, anticipation for the second LTRO and any hint of another quantitative easing program by the Fed will likely be a more significant factor for gold and silver prices in the days and weeks ahead.

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Reuters: Analysis: More euro zone banks risk money markets freeze

Friday, 16 Dec 2011 5:00 AM

Reuters: Marius Zaharia, London

Even the safest euro zone banks could start queuing up at the European Central Bank for cash in the next few months as their massive exposure to government debt freezes them out of money markets.

The pressure pushing banks’ short-term funding costs higher could escalate quickly if the value of their sovereign debt holdings, which have already fallen sharply, take another hit when euro zone governments begin the tough task of refinancing huge amounts of borrowing early next year.

With no solution to the euro zone debt crisis in sight, interbank market players say they are reducing credit lines to an ever increasing number of banks.

“It is utter madness … When we see big names paying 300 basis points over overnight rates for dollars you know something is wrong,” said the head of money markets at a bank in London, who asked not to be named.

“Credit lines have already been reduced, we are seeing the big names paying through the nose for cash from corporates as wholesale is pretty much dead. The focus now is for the core banks to raise cash through the retail/corporate space. Central banks may be called upon.”

Most banks based in the euro zone’s most indebted states are effectively shut out of the money markets and banks in France — seen as the weakest of the bloc’s triple-A-rated core sovereigns — are already being forced out one by one, traders said. Stress is also exacerbated by end-year liquidity needs.

French banks’ borrowing from the ECB topped 100 billion euros in the maintenance period ending November 8, compared to 87 billion euros the month before. French banks are more exposed than any those of any other euro zone country to Italian, Spanish and Greek debt, with holdings in excess of 600 billion euros, according to Bank for International Settlements data.

Nikolaos Panigirtzoglou, European head of global asset allocation and alternative investments at JPMorgan, expects a pickup in Austrian banks’ take-up of ECB cash in the coming months if no solution to the crisis is found.

He said funding strains for banks could seep deeper into the core as bond redemptions and interest payments in Italy, which has to pay some 100 billion euros between January and April, draw nearer.

“For now in the expanded periphery we have Belgium and France, but it could go further,” Panigirtzoglou said.

Citing “increased challenges” in financial markets, Fitch Ratings downgraded Goldman Sachs, Deutsche Bank and five other large banks based in Europe on Thursday.

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Euro 2012 supply and redemption schedules r.reuters.com/gev45s

Country-by-country bank exposure: r.reuters.com/vyj98r

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In such an environment liquidity is at a premium. Some investors are even taking money out of banks and paying to keep it in short-term German or Dutch government paper, which is trading with negative yields.

“The worst case scenario (a euro zone break-up) was pretty much ridiculous a year ago but it is now becoming more and more possible, to say the least,” Juan Valencia, credit analyst at Societe Generale, said.

“People have already started to prepare for it, they are hoarding a lot of cash.”

FREEZE

Of the contributors to daily Libor rates, French banks BNP Paribas, Credit Agricole and Societe Generale say they pay the most for three-month dollars, around 0.6 percent. But dollar rates have recently been on the rise for other core country banks as well.

Those costs are still sharply lower than levels close to 5 percent seen during the crunch triggered by the Lehman Brothers collapse in 2008 because the world’s central banks have emergency liquidity measures in place this time.

To avoid stress levels reaching those seen three years ago, the ECB plans to pump unlimited three-year liquidity into the banking system on Wednesday.

Analysts say banks are more likely to use the money to pay their own debts rather than for the so-called carry trades, in which they would borrow at 1 percent from the ECB and buy Italian and Spanish debt yielding 6-7 percent.

That will leave the sovereign crisis unresolved and banks, although kept alive by the ECB, will still face funding strains.

“It is not a sustainable solution. What we need is the sovereign crisis to end … If a sovereign gets shut out of the market, it is pretty much game over,” said SG’s Valencia.

He estimates banks face about 320 billion euros in senior and government guaranteed debt redemptions next year. By comparison, they had issued just 12 billion euros of debt in the past six months, he said.

Valencia recommends investors in credit markets avoid financial institutions. Those who cannot, because financials are part of their investment indexes, should only invest in “national champions”, he said.

“You have to be extremely selective … if you have to stay with some financials you have to stay with the best.”

Bloomberg: China Debts Dwarf Official Data With Too-Big-To-Finish Alarm

Sunday, 18 Dec 2011 5:00 AM

By Michael Forsythe, Henry Sanderson. With assistance from Stephanie Tong, Zhang Dingmin, Ying Tian and Kevin Hamlin.

A copy of Manhattan, complete with Rockefeller and Lincoln centers and what passes for the Hudson River, is under construction an hour’s train ride from Beijing. And like New York City in the 1970s, it may need a bailout.

Debt accumulated by companies financing local governments such as Tianjin, home to the New York lookalike project, is rising, a survey of Chinese-language bond prospectuses issued this year indicates. It also suggests the total owed by all such entities likely dwarfs the count by China’s national auditor and figures disclosed by banks.

Bloomberg News tallied the debt disclosed by all 231 local government financing companies that sold bonds, notes or commercial paper through Dec. 10 this year. The total amounted to 3.96 trillion yuan ($622 billion), mostly in bank loans, more than the current size of the European bailout fund.

There are 6,576 of such entities across China, according to a June count by the National Audit Office, which put their total debt at 4.97 trillion yuan. That means the 231 borrowers studied by Bloomberg have alone amassed more than three-quarters of the overall debt.

The fact so few of the companies have accumulated that much debt suggests a bigger problem, says Fraser Howie, the Singapore-based managing director of CLSA Asia-Pacific Markets who has written two books on China’s financial system.

“You should be more worried than you think,” he said of Bloomberg’s findings. “Certainly more worried than the banks will tell you.

“You know how this story ends — badly,” he said.

Repayment Doubts

The findings suggest China is failing to curb borrowing that one central bank official has said will slow growth in the world’s second-largest economy if not controlled. With prices dropping in China’s real estate market, economists warn that local authorities won’t be able to repay their debt because of poor cash flow and falling revenue from land sales they rely on for much of their income.

Provinces and cities are going deeper into the red to finish projects, from the Manhattan on the east coast, to highways in northwestern Gansu and a stadium fronted by Olympic rings in Hunan, central China. Many were started as part of China’s stimulus program to beat the 2009 world recession. The financing companies accounted for almost half of the 10.7 trillion yuan in all local government debt tallied by the official audit.

The 231 borrowers whose public filings were reviewed by Bloomberg raised a combined 354.1 billion yuan by selling securities this year. They have credit lines from banks of at least 2.3 trillion yuan that have yet to be drawn down, the documents show.

Rising Lending

Bank lending continues to rise, Bloomberg found, even after China’s banking regulator repeatedly warned banks to control risks associated with it and speed up repayment.

Forty-seven of the 56 local financing companies that issued prospectuses from Oct. 1 through Dec. 10 said their debt load had increased this year. The combined debt of those issuers rose 10 percent from the end of 2010.

What’s more, adding up lending by bank also raises the question as to whether China’s lenders are understating their exposure to local government debt. Only 113 of the local government borrowers disclosed such a breakdown; and yet this small group appears to account for an outsized portion of what the banks have said is their overall lending.

Data Disparities

For example, China Construction Bank Corp, the world’s second-biggest bank by market value, has lending to those 113 local government borrowers of 250 billion yuan. That’s 43 percent of the 580 billion yuan the bank said it had extended in loans to all such borrowers at the end of June.

The bank has untapped lines of credit to the vehicles of a further 341 billion yuan.

Disparities like this suggest lenders may have bigger risks than they’ve disclosed publicly, says Charlene Chu, a banking analyst at Fitch Ratings Ltd. in Beijing.

China Construction Bank said it stood by its total for loans to local governments and that cash flow from them was “good.” Nonperforming loans to such companies amounted to 6.5 billion yuan, or 1.11 percent of the total, and the lender had set aside provisions of more than three times that, it added in an e-mailed response to questions.

The prospectuses offer a rare window into borrowing by the local government financing vehicles. The issuers disclose total debt and often details of their loans and lines of credit from banks and trust companies. The data are not consistent, with some reporting total debt as of the end of 2009 and some as recently as Sept. 30 this year.

(For an explanation of Bloomberg’s methodology click here.)

‘Too Big to Complete’

Local authorities, who shoulder most of the infrastructure spending in China, have to keep borrowing to complete projects so they can generate cash flow needed to start paying debt back, said Vincent Chan, head of China research at Credit Suisse Group AG.

Yao Wei, an economist at Societe Generali (GLE) SA in Hong Kong, says another 7 trillion yuan of debt will be needed to finish projects in the government’s five-year plan through 2015.

“At some point the central government will realize this is too big to complete,” said Yao. Banks will need to be recapitalized as bad loan rates rise, she said. At least 1.4 trillion yuan of soured debt was taken off banks’ books after China’s last lending crisis which began in 1998.

Senior Chinese banking officials themselves have been raising alarm bells. Xie Duo, director general of financial markets at the People’s Bank of China, told a Nov. 23 Beijing conference that local governments depend too heavily on bank borrowing and failure to solve the problem will hurt economic growth. China’s banking regulator in November asked lenders to control the risks associated with the vehicles and said that slumping land sales mean some projects may run out of funding.

Loans Invested

Loans to local government companies aren’t a problem because the projects will generate returns, even if not immediately, said Huang Jifa, deputy general manager for investment banking at Industrial and Commercial Bank of China Ltd, the country’s biggest lender.

“The money that Chinese local governments have borrowed is not like the money people borrowed in Europe or Greece,” Huang said in a Nov. 24 interview. “The Chinese government’s borrowed money is all invested. Many projects will have returns.”

The bank says it had extended 931 billion yuan of such loans as of June 30. Outstanding local government financing vehicle-loans at the end of the third quarter declined from the first half, an ICBC spokesman said. He wouldn’t comment further.

Construction Boom

A building boom by thousands of local governments became the backbone of the country’s stimulus program started in November 2008 — on borrowed money. The financing companies were created starting in the 1990s and enabled provinces, cities, counties and townships to bypass rules barring most of them from directly selling bonds.

Projects undertaken include a stadium, which resembles Beijing’s iconic Bird’s Nest Olympic venue, in Jinan, the capital of eastern China’s Shandong province; and a superhighway in the country’s second-poorest province of Yunnan that stretches into the foothills of the Himalayas, where there are no cities of more than 1 million people.

In Tianjin, about 160 kilometers (99 miles) southeast of Beijing, a sea of hundreds of construction cranes stretches along both sides of the river at an oxbow that gives the Yujiapu financial district its Manhattan-like shape, testimony to the scale of China’s ambitions. Downriver are the ruins of centuries-old forts stormed by British and French troops during the Second Opium War in 1860.

Thousands Evicted

To build Yujiapu, Tianjin officials are piling onto borrowing that is already at least almost half a trillion yuan – -equivalent to half the annual per capita income of the city’s 13 million people. More than 5,000 people were moved out of the area starting in 2008 to make way for the project, among the millions nationwide evicted from homes to make way for China’s urbanization projects.

The planned 15.2 million square meters (164 million square feet) of office space by 2020 in Yujiapu and across the Hai River in Xiangluo Wan, or Conch Bay, is more than one-third of the 450 million square feet in Manhattan.

One of the companies building Yujiapu — Tianjin Binhai New Area Construction & Investment Group Co. — sold 10 billion yuan in bonds in November. It earmarked 1 billion yuan from the sale to fund the construction of the district’s transport hub, which includes a high-speed rail line that will cut the time to Beijing to 45 minutes. In the first half of the year its debt, mostly from banks, rose 11.9 percent from the end of 2010 to 71 billion yuan, according to the prospectus.

More Loans Needed

More borrowing is needed, Tianjin Vice Mayor Cui Jindu said Sept. 16. New loans to the city’s financing vehicles may slump by as much as 140 billion yuan in 2011 from last year’s level as lenders curb risks and boost support to small and medium-sized businesses, he said.

“If the banks don’t give us any new loans, there will be problems,” Cui said, saying some projects in the city may not get completed. Tianjin had “no problem” repaying loans this year, having to that date paid off 33 billion yuan of the 39.5 billion yuan in principal due this year, he said. Another 60 billion yuan is due in 2012, Cui added.

Some 14 of 122 planned buildings are under construction in Yujiapu, as are all 48 skyscrapers in Conch Bay, said Xu Fei, vice-chairwoman of the office of the Tianjin Binhai New Area CBD Commission, as she stood in front of a brightly lit model of the future city.

Rockefeller Center

They include a 588 meter-high tower, taller than the 541 meter-high 1 World Trade Center currently under construction in the real Manhattan, being built with the help of the Rockefeller family’s Rose Rock Group. Steven Rockefeller Jr. attended a Dec. 16 groundbreaking event for the project, which includes the skyscraper inspired by the Rockefeller Center in New York, Zhao Jia, an outside spokeswoman for Rose Rock, said. The Lincoln Center is advising on the construction of a performing arts center.

Yujiapu’s resemblance to the Big Apple extends to its rising debt that analysts like Howie say is unsustainable. New York was near bankruptcy in 1975 after a succession of overspending administrations, before then-President Gerald Ford agreed to lend it $2.3 billion.

“In many of these projects, like the mini-Manhattan, it’s never going to make money,” Howie said. “Maybe the government can write a check from somewhere else. But that means education gets affected, health gets affected. There’s a cost somewhere else, because they’re wasting all these resources.”

Bond Sale

Tianjin Infrastructure Construction and Investment Group Co., another state-owned builder working on Yujiapu, is the most heavily indebted local government financing vehicle in China to disclose its finances in bond prospectuses this year with 291 billion yuan in debt. It sold 3 billion yuan of bonds in April.

An official with Tianjin’s foreign affairs office said no one was available to answer questions about whether the city’s financing vehicles had sufficient cash flow to service their debts.

The true level of local government debt nationwide is hard to ascertain because the borrowing vehicles are mostly opaque. There’s even disagreement over how many exist. The People’s Bank of China, the country’s central bank, said in a June 1 report there were more than 10,000. In a separate study, China’s banking regulator tallied 9,828 as of the end of Nov. 2010, according to an unpublished report cited by the 21st Century Business Herald in March.

‘Lending Binge’

“It’s very likely that senior government leaders have no way of knowing which numbers provide the best picture of the evolving lending binge China’s banks seem to be on,” said Carl Walter, who retired as chief operating officer in China for JP Morgan Chase (JPM) earlier this year and is co-author with Howie of “Red Capitalism,” an analysis of China’s banking system.

The audit office said in an e-mailed response to questions that it counted debt that local governments have responsibility to repay, that they have guaranteed, or other debts that they may be liable for. People’s Bank of China didn’t answer faxed questions. An official with the China Banking Regulatory Commission said to use the audit office’s figures.

The number of loans going bad will rise because of the borrowers’ poor cash flow, according to a November report from London-based HSBC Plc. Around 68 percent of 184 local financing companies that have sold bonds analyzed by HSBC had a return on capital lower than 5 percent, the benchmark lending rate last year, compared with 37 percent for all 499 corporate issuers it studied, the report said.

Loan Mismatch

“One of the problems with the local government financing vehicle loans issued in 2009 was there was a mismatch between the duration of the assets and the duration of the liabilities,” said Michael Werner, a banking analyst at Sanford C. Bernstein & Co. in Hong Kong. “If you’re building a railroad or a highway, it takes several years and you’re not going to get direct revenues.”

Take Gansu Provincial Highway Aviation Tourism Investment Group Co. The company builds roads across the arid province, including a 3.4 billion-yuan, 235-kilomter stretch of high-speed expressway along the ancient Silk Road to Jiayuguan, at the westernmost pass of the Great Wall of China.

Its total debt surged 29 percent in the first nine months to 15 percent of the province’s gross domestic product last year. The company’s entire 2010 operational cash flow was 3.04 billion yuan, while it had 55.9 billion yuan in bank borrowing reported at the end of September. The revenue wouldn’t cover interest payments at China’s standard lending rate of 6.56 percent, let alone paying down principal.

Interest Rolled Over

Fortunately for Gansu Highway, it doesn’t have to. Almost half of its outstanding loan principal and interest due this year — 24.1 billion yuan — is being rolled over into its outstanding bank debt, and the company plans to repeat that exercise every year until at least 2019 when it is forecast to owe lenders 148.9 billion yuan, according to a chart in the prospectus it issued for a 2 billion-yuan bond sale last month.

Gansu Highway’s situation encapsulates the problem of local government borrowers, which often have minimal or no plans to repay debt aside from borrowing more money, says Fitch’s Chu.

“In the past, Chinese banks could carry borrowers like this indefinitely,” she said. “But today they don’t have the large cash reserves they used to to do this. I don’t see how all of this doesn’t turn into a major problem at some point.”

Lei Wanming, the deputy Communist Party secretary for the Lanzhou-based company, said Gansu Highway had no problem covering interest and principal payments.

“You can’t look at look at Gansu roads just from an economic perspective,” he said, citing the benefits they will bring to poorer regions and its role in helping to eventually connect China and Europe with high-speed expressways.

Municipal Bond Trial

China’s government has taken steps in the past four months to help local governments as their debt comes due. It has urged them to sell assets and allowed a pilot program for cities including Shanghai and Shenzhen to issue bonds directly for the first time under Communist rule, reducing their borrowing costs.

Standard & Poor’s upgraded Bank of China and China Construction Bank on Nov. 30, saying there was a “very high” likelihood of lenders getting government help in the event of financial distress. The new ratings are higher than most of their largest U.S. rivals including Bank of America Corp. and Goldman Sachs Group Inc.

Slumping Bank Shares

Even so, shares in the four biggest commercial banks in China — China Construction, ICBC, Bank of China and Agricultural Bank of China Ltd — have tumbled an average 23 percent this year in Hong Kong. The banks have loans to the 113 local government borrowers that disclosed such information of 832 billion yuan, Bloomberg found. That’s almost one third of the combined 2.57 trillion yuan in loans extended to all such financing vehicles that they declared as of June 30.

The banks had another 1.19 trillion yuan in unused lines of credit to those companies.

Bank of China President Xiao Gang, speaking at the Asia Pacific Economic Cooperation summit on Nov. 12 in Honolulu, said that most of his bank’s lines of credit to local government financing vehicles were conditional, and only a minority of them were irrevocable. Agricultural Bank said in an e-mailed response to questions that its loans were mainly to cash-producing infrastructure and qualified port and highway companies.

Property Price Risk

Local governments’ reliance on land sales for revenue means a drop in property prices may expose weaknesses in the borrowing, Huang of ICBC said.

“The real problem is the real estate market cannot fall, the price can’t go down,” he said. “If the property market really falls, the local government financing vehicle problems will really come out. Not only will they have problems, but the banks will have problems.”

There are signs the market is already declining, with residential property prices falling in November from the previous month in 49 cities of the 70 measured, the worst performance this year. The cities of Guangzhou in the south and Wuhan in central China canceled land sales in the last three months.

Tianjin, which isn’t among the cities piloting municipal bonds, was reliant on land sales for 41 percent of its income in 2009, according to China Index Academy, a Beijing real-estate research firm.

That doesn’t bother Xu Hongzhi, the chief accountant for Tianjin Binhai Construction, which is building Yujiapu’s transport hub. He said that the company can pay its debts because the area’s economy is growing at 10 percent a year.

“There is no risk,” he said

AP: In near-bankrupt Greece, crisis spurs gold fever

Thursday, 22 Dec 2011 5:00 AM

The new gold rush: Amid austerity, Greeks with shovels follow myths of long-lost treasure

By Costas Kantouris

GREVENA, Greece (AP) — Not all Greek myths are ancient.

In rural towns and villages, where millennia-old pottery shards and broken classical masonry are sometimes found, shepherds and farmers have similar tales to tell.

They cite the buried golden sow with its seven golden piglets (which made a poor farmer rich), the coin hoards guarded by dragons from the times of Alexander the Great or the Byzantine emperors, the gold plunder squirreled away by long-dead Turkish pashas or fleeing Nazi officers. All it takes, they say, is a lucky thrust of a shovel.

Legends like that have taken on a new life in debt-crippled Greece.

As two years of austerity take a harsh toll — with shrinking salaries, rising taxes and record unemployment for many — more and more Greeks are finding solace in tales of buried riches, mostly from the past two centuries of the Mediterranean nation’s turbulent history.

“It used to be just a couple of groups of people who all knew each other, now everybody has got worked up,” self-described amateur gold hunter George told The Associated Press. “They bring maps, pass on tips, but as usual nobody finds anything. The crisis has spurred many people to seek a windfall.”

He asked not to be further identified as what he does is illegal.

The 40-year-old said at least 10 attempts have been made to dig up buried gold over the past few months around Grevena, a farm town of 10,000 in western Macedonia, some 400 kilometers (250 miles) northwest of Athens, the capital. The region saw heavy fighting between occupying German troops and resistance fighters during World War II.

“They even dug through a huge rock mass, believing they would find buried sovereigns parachuted in by the British to the resistance fighting the Germans,” he said.

A 49-foot (15-meter) tunnel into a hill just outside Grevena, which still contained a pick and a mask, testifies to the fruitless efforts of five men arrested by police a few days ago.

Authorities said the men, all in their 40s, used farm and construction tools, a generator and hand carts to dig the tunnel, whose entrance they camouflaged with an old rug.

“They said an old man showed them the spot, claiming there was treasure there, but did not specify exactly what they were seeking,” Grevena police chief Theophilos Soultis told the AP.

Even in central Thessaloniki, Greece’s second-largest city, urban legend has it that construction work on the site of an old Turkish house unearthed chests of gold coins — prompting truckers driving its soil away to a landfill to sieve through their loads first.

Their labor was to no avail.

Maps of purported treasure spots sell for thousands of euros (dollars) — but more often than not they are artificially weathered fakes.

One of these maps inspired seven people to sink a 36-foot (11-meter) well into the ground near an abandoned quarry at Pentalofo, 16 miles (25 kilometers) north of Thessaloniki. Despite taking the precaution of working only after dark, they were arrested and face up to five years in prison if convicted of carrying out an illegal excavation.

“We get lots of people searching in our area, because the Germans worked the quarry during the war and many believe they left gold behind,” said local deputy mayor Giorgos Lazaridis who oversaw work to fill in the hole.

“There are lots of rumors, some say that gold sovereigns have been found, but nothing can be confirmed,” he said, adding that one group obtained a legal permit to dig years ago but found nothing.

A similar project is under way in the hills of Varvara, in the Halkidiki peninsula 70 miles (110 kilometers) east of Thessaloniki. After two false starts, the treasure hunters launched operations again, working off a new tip.

“They’re looking for gold that is supposed to be enough to pay off Greece’s national debt” of more than euro350 billion ($457 billion), said municipal official Stergios Goutsios, who is monitoring the dig. “They claim it weighs tons and was hidden by a band fighting the Turks in 1860-70, when they were trapped in an ambush.”

Such legitimate hunts, which require a slew of official permits, have been carried out all over Greece in recent years, overseen by state archaeologists and police.

“Anyone who thinks they have information on buried treasure has the right to look for it, provided they obey the law,” said Giorgos Dimitrainas, an assistant professor of law at the University of Thrace. “Their share of the finds is determined by ministerial decision.”

But Greek law contains pitfalls for the unwary, even in the vary rare cases when they strike it rich. In 2003, legitimate treasure seekers unearthed thousands of ancient coins buried near the town of Pella, some 60 miles (100 kilometers) west of Thessaloniki. State officials ruled however that the group had no claim on the treasure as their permit stipulated that they could look for gold, not antiquities.

For Greece’s treasure seekers, even that should not be a sufficient deterrent.

“People who look for gold are maniacs, they never give up until they find something,” said another self-described former treasure hunter, 34-year-old Panagiotis. “It’s like gambling.”

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Italian Bond Yields top 7% Again, No All Clear Yet

Friday, 23 Dec 2011 5:00 AM

Following the $647,000,000,000 lent to European banks by the ECB and the passage of a $42,900,000,000 austerity package by the Italian government, one might suppose that pressure on Italian government bonds would ease. Such an assumption is proving to be dead wrong with the yield on the 10-year Italian government bond rising above 7% once again. A sustained rise in yields above the 7% level will progressively increase the pressure on Italy to seek a bailout via the as yet to be funded EFSF and/or the IMF.

Market reaction to this unwelcome development has not been severe, yet, but the EUR-USD has moved lower since an earlier push higher to just under 1.31. Predictably, USD strength is translating to relative weakness in precious metals. Both silver and gold have moved well off session highs, although both are holding just north of unchanged for the moment.

Without a sustained drop in Italian bond yields, the European sovereign debt crisis is far from over. It should be noted that of the $647 billion lent by the ECB, over $100 billion has merely been deposited with the ECB. This signals that European banks are continuing to just hoard cash with the ECB. Total deposits at the ECB now total a startling $451.1 billion.

Gold and Silver Limping Into the New Year

Monday, 26 Dec 2011 5:00 AM

The shine on precious metals has dulled as 2011 comes to a close, but gold remains on track for yet another up year. Silver is lagging gold, currently poised to end 2011 with a very modest loss. This compares with a 0.5% gain for the S&P 500 – essentially unchanged. These numbers do not, however, portray the high level of volatility financial markets have experienced during the year.

Gold began 2011 at $1,420.00 per troy ounce.

Silver began 2011 at $30.91 per troy ounce.

As of 12/26/2011, gold sits at $1,607.96 per troy ounce, up 13.24% year to date. Silver is at $29.32 per troy ounce, down 5.14% year to date. As any follower of precious metals is no doubt aware, these year to date numbers have been accompanied by some wild swings as margin increases, European sovereign debt concerns, and general uncertainty over the global economy had investors running every which way.

From their Highs

The high for gold futures was hit in September at $1,920.30 per troy ounce.

The high for silver futures was hit on April 29th at $47.94 per troy ounce.

Gold is currently 16.27% below its September high. Silver is currently 38.85% below its April high.

It should be remembered that both silver and gold futures were hit by a series of margin increases during 2011. This added to the volatility of both metals during the year. In May of 2011, the CME hiked silver margin requirements by 84% in a series of 5 margin increases. In the wake of these increases, silver dropped from just under $50 to trade in the low $30′s.

In August, the CME turned its sight to gold. With gold prices in August rapidly approaching the $1,900 level, on August 10th, the CME raised gold margin requirements by 22%. Gold prices briefly paused following the decision before again heading higher. On August 24th, the CME struck again, raising margin requirements another 27%. This was followed by the Shanghai gold exchange which raised margin requirments on both gold and silver on 9/9/2011. Not surprisingly, these margin increases coincided with the highs for gold for the year.

While both future exchanges justify their margin increases as addressing increasing volatility in silver and gold, it is interesting to note that the margin increases were followed by an increase in volatility and the reversal of uptrends into downtrends.

USD Strength Hampering Gold and Silver’s Allure

There has been much written about the European debt crisis and its evolving impact on the global economic environomnet. It is worth repeating that the EUR-USD has become perhaps the most watched indicator of overall market direction. The negative correlation between the USD and precious metals continues to be a strong predictor for precious metal performance. As the European crisis continues to drag on, USD strength has clearly weighed on the recent performance of both gold and silver.

It is important to point out that general market risk aversion has seen not only USD strength, but notably, strength in other traditional safe-havens. The JPY is set to end the year up 4% against a basket of its peers. This performance would have likely been matched by the other perceived currency safe haven the CHF, had the Swiss not decided to stem any further appreciation by pegging the CHF to the EUR. Meanwhile, the yield on the benchmark 10-year Treasury remains close to historic lows, currently at 2%. Unlike gold and silver however, these safe-havens did not experience multiple futures margin increases during 2011.

Questions for 2012

The economic outlook heading into the new year remains as murky as ever. Despite the many efforts of governments and central bankers, deflation continues to be a very real possibility going forward. If the sovereign debt crisis were to lead to bank failures in Europe, there is a high probability that another serious recession would occur. Furthermore, with China clearly in the grips of a property market downturn, deflationary concerns are now also emanating from the world’s second largest economy.

As always, the actions of central bankers will be key in the year ahead. While U.S. economic data has been better than expected heading into 2012, headwinds from Europe and China remain formidable. Any sign that deflationary threats are imperiling the U.S. economy will bring Ben Bernanke and QE3 into play. Ben knows that the U.S. needs inflation if it is to deal with the massive leverage of governments and the global financial system.

The Price Outlook for Gold and Silver

Whether or not the global economy experiences deflation or inflation will determine the direction of all markets. In the case of gold and silver, this question is particularly acute given the strong negative correlation of both to the USD.

Current price ranges for gold in 2012 are as low as $1,300 per troy ounce to over $2,000. Silver price ranges are equally wide from as low as the teens to over $50 per troy ounce. It should be noted that the gold-silver ratio heading into the new year is at a lofty 55.

At the end of the day, everything will depend on decisions by economic policy makers who will ultimately decide whether or not to try and inflate the global economy out of any malaise.

Abandoning Gold Helped Dollar Gain Preeminence (Part 2)

Monday, 26 Mar 2012 4:00 AM

Bloomberg, by Simon Johnson and James Kwak

The birth of the U.S. was paid for by both a debauched paper currency and large debts that it soon defaulted on. When Alexander Hamilton became Treasury Secretary in 1789, his job was not just restoring the country’s credit by restructuring the debt and imposing new taxes; he also had to clean up the mess that was money in the early U.S.

Hamilton proposed to base the monetary system on both gold and silver. Gold had advantages, including greater stability, he argued, but it would be disruptive to withdraw the large amounts of silver that were already in use. He proposed “ten dollar and one dollar gold pieces, one dollar and ten cent silver pieces, and one cent and one-half cent copper pieces,” and the Mint Act of 1792 largely followed his recommendations. As gold and silver were both widely recognized bases for money at the time, this was relatively uncontroversial.

This “bimetallic” standard meant that the dollar was defined as either a specific amount of silver or a specific amount of gold. In 1834, Congress set the ratio between the two at 16-to-1, although the market value of gold was slightly lower than 16 times the market value of silver. The California gold rush of the 1840s reduced the relative price of gold further, which meant that the U.S. was effectively on the gold standard.

Not Enough Coins

Although bank notes were convertible to specie (gold or silver coins) on demand, banks did not generally keep enough coins in their vaults to redeem all their notes at the same time. In 1832, for example, the Second Bank of the United States held only $7 million in specie, but $21.4 million of its notes were in circulation, while depositors had another $22.8 million in their accounts. Most other banks operated along similar lines. In effect, even though the currency of the U.S. was firmly based on gold and silver, the money supply depended on the amount of risk that private commercial banks wanted to take.

This meant, however, that banks were susceptible to financial panics, especially in the lightly regulated environment of early 19th-century America. When depositors or note holders worry about a bank’s ability to pay them in hard money, they race to the teller’s window to get their money out before anyone else, which can cause even a healthy bank to collapse. Bank failures were common in early America, with major panics in 1819, 1837, 1857, 1860 and 1861.

The U.S. went off the gold standard during the financial chaos of the Civil War, following the examples of the U.K., Germany, France and many other countries. But in 1879, the country returned to the gold peg. Because the value of most things rises and falls with demand and supply, the real value of the dollar fluctuated depending on economic growth (which increases demand for money) and discoveries of gold (which increase the supply of money). When the world economy grew faster than gold discoveries, gold became more valuable relative to other goods. Because the dollar was tied to gold, overall prices fell.

Falling prices in the late 19th century made it harder for people — particularly farmers with mortgages — to pay off their debts (since the amount of the debt was fixed in nominal terms). The gold standard and the lack of a central bank meant there was no way to increase the money supply to prevent deflation.

Proponents of “free silver,” led by William Jennings Bryan, argued that restoring silver to equal status with gold would expand the money supply, causing inflation and making debts easier to repay. But Bryan lost the crucial 1896 presidential election to William McKinley, who favored “sound money,” and in 1900 the Gold Standard Act reaffirmed the gold- only standard.

Fixed Exchange Rates

As international trade increased in the late 19th and early 20th centuries, the gold standard also became the backbone of the international monetary system. Since major countries fixed the value of their currencies relative to gold, their exchange rates were fixed relative to each other, as well. If a country’s imports exceeded its exports, its currency would accumulate in the hands of its trading partners, who could then redeem it for gold — draining the importers’ national treasuries of gold. Losing gold would reduce the money supply, lowering domestic prices and wages; this would reduce imports and increase exports until the trade deficit was eliminated, stopping the gold outflow.

In October 1929, the U.S. stock market collapsed, quickly followed by markets around the world. A credit bubble that had grown in the 1920s imploded rapidly, leaving households and businesses scrambling to pay off their debts. Banks began to fail. The Federal Reserve, then less than two decades old, did relatively little to stop the bleeding. The gold standard limited its ability to expand the money supply and increase the flow of credit. But President Herbert Hoover had near-religious faith in the gold standard and saw no need to deviate from past practice.

Initially, as the American economy contracted, gold flowed from other countries to the U.S. To stop these outflows, central banks raised interest rates, effectively importing the economic slowdown to their own countries. Monetary tightening that began in Germany and the U.S. spread as countries engaged in competitive deflation, creating a vicious cycle.

Central banks raced to convert their holdings of foreign currency into gold, reducing the global money supply. High demand for gold increased its price relative to other goods. And since the price of gold (in dollars) was fixed, the price of everything else (in dollars) had to fall, making deflation even worse.

Clinging to Gold

In 1931, unable to stop gold from draining out of its reserves, the U.K. abandoned the gold standard. In the U.S., by contrast, Hoover and Treasury Secretary Andrew Mellon clung to it. The Federal Reserve even raised interest rates in the midst of the Depression. Franklin D. Roosevelt avoided making a commitment one way or the other before taking office in 1933, but many investors expected the U.S. to devalue the dollar against gold. Since they expected dollars to fall in value, they exchanged them for gold and other currencies — reducing American gold reserves.

When Roosevelt took office on March 4, 1933, the U.S. was in the grip of a financial panic. With banks facing huge demands for cash from depositors, most states had already declared bank holidays or severely restricted withdrawals, and the financial system was barely working. Roosevelt immediately declared a bank holiday beginning on March 6 and also ordered banks not to export gold.

He quickly pushed through the Emergency Banking Act, which allowed the Treasury Department to demand that all gold in private hands (coin, bullion or certificates) be exchanged for a non-gold form of currency — a power he exercised on April 5, effectively suspending convertibility.

As devaluation fears grew, the value of the dollar began to fall relative to foreign currencies. So Roosevelt expanded the prohibition on gold exports. At the time, many contracts — including those governing some Treasury bonds — contained gold indexation clauses, which specified that the lender could demand repayment in gold as a form of protection against inflation. On June 5, Congress abrogated all such clauses, eliminating the ability of creditors to demand gold instead of dollars. This was arguably an act of default, since the U.S. broke an explicit promise to its creditors — the only default since Alexandar Hamilton restructured the debt in 1790.

Surprisingly, going off gold and abrogating gold indexation clauses did not destroy the government’s credit. The market reaction was almost nonexistent. The convertibility of paper into metal had been suspended often enough under the gold standard that the abrogation of the gold indexation clauses was not in itself grounds for panic. Most importantly, going off the gold standard and devaluing the dollar almost certainly helped the American economy overcome deflationary pressures and begin to recover from the depths of the Great Depression.

Falling Dollar

The gold standard was blamed for exacerbating the worst economic crisis of the industrial age. In January 1934, Roosevelt officially reset the value of the dollar against gold at $35 per ounce — a fall in the dollar’s value from $20.67 per ounce, where it had been since 1834. Some of Roosevelt’s advisers were worried about going off gold; budget director Lewis Douglas famously remarked, “This is the end of Western civilization.”

It wasn’t. Instead, the dollar would replace gold as the backbone of world trade. One of the most important events in modern economic history, the United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire in July 1944, would see to that.

Rebuilding war-torn Europe and preventing another Great Depression were the primary goals of American delegates — Henry Morgenthau, the Treasury secretary under Roosevelt, and Henry Dexter White, an academic who had joined the Treasury Department in 1934 — along with almost everyone else at the conference. The central question they faced was what kind of money the world would use for international transactions.

Ultimately, the solution was to use dollars as a global reserve currency, since dollars could be created by the Federal Reserve in response to increasing demand. Countries could accumulate and hold dollars as the basis for their money supply rather than competing with each other for scarce gold reserves.

British economist John Maynard Keynes, however, had a competing vision. At the conference, he argued for, among other things, the creation of an international currency for central banks, known as “bancor,” which would be managed by a new international organization. Keynes wanted nothing to do with gold, which he famously called a “barbarous relic,” but he also didn’t want the dollar to be the world’s reserve currency, in part because he was wary of American monetary dominance.

Keynes and the British, however, had to give way to White and the Americans on most points. No international monetary system could succeed without the support of the U.S., which had the largest gold reserves and the dollars that other countries would need to import American goods. Other nations were reassured by the fact that the dollar would again be convertible into gold, which in principle gave them a way to switch out of dollars should the U.S. abuse its control over the reserve currency.

The dollar was built on gold but outgrew its early foundations. Its global dominance was made possible by fiscal prudence and monetary conservatism. How long would this combination last?

Take Advantage

In light of the above, and in consideration that gold and silver are NOT “barbaric relics,” as expoused by Keynes, Gainesville Coins is offering silver bullion investers the 1992 Australian Kookaburra 1 oz Silver Coin at as lows as $5.00 over spot. Gainesville Coins is having a special on fractional American Gold Eagle Coins. Buy the 1/2 oz Gold Eagle at as low as 6.25% over spot. Buy the 1/4 oz Gold Eagle at as low as 8.5% over spot.

Bloomberg: Gold Down As China Tightens Controls

Tuesday, 27 Dec 2011 5:00 AM

A series of headlines on Chinese gold trading controls from Bloomberg are worth noting.

-China to increase management of gold trading, PBOC says.

-China gold trading restricted to Shanghai Exchanges, PBOC says.

-China orders unauthorized gold trading platforms to stop: PBOC.

-PBOC asks Shanghai gold, futures exchanges to boost management.

It is not clear from the bullet points how extensive an issue off-exchange trading of gold had been, but it would appear that Chinese authorities are determined to keep firm control of all gold trading.

China remains a big question mark going into 2012. Economic growth is clearly slowing, in part due to the slowdown in Europe, and as Chinese authorities have ramped up measures to bring down property prices.

Chinese stocks fell to a two-year low today on signs that profits among industrial companies are falling. Bloomberg is also reporting a jump in interbank borrowing costs.

Chinese gold demand has become a significant demand driver for the precious metals market. Although the Chinese currency recently hit a new all-time high against the USD, the clear weakening of China’s economy could see this reverse. This could enhance the attractiveness of gold as a store of value going forward.

Bloomberg: Gold Posts Longest Slump Since 2009

Wednesday, 28 Dec 2011 5:00 AM

By Debarati Roy and Maria Kolesnikova

Gold fell, capping the longest slump since October 2009, and silver tumbled to a three-month low as Europe’s deepening debt crisis drove commodities and stocks lower.

The euro dropped to an 11-month low against the dollar as lending to financial institutions sent the European Central Bank’s balance sheet to a record high. The Standard & Poor’s GSCI index of 24 raw materials and the MSCI World Index of equities were poised for the biggest declines in two weeks. Platinum approached the lowest since November 2009, and palladium dropped almost 3 percent.

The ECB said lending to euro-area banks jumped 214 billion euros ($276.9 billion) to 879 billion in the week ended Dec. 23, bolstering credit to the economy during the fiscal turmoil. Gold has slumped 19 percent from a record $1,923.70 an ounce on Sept. 6, partly on sales to cover losses in other markets. About $10 trillion has been erased from global equities (MXWD) since May.

“What’s going on in Europe is very worrying,” James Dailey, who manages $215 million at TEAM Financial Management LLC in Harrisburg, Pennsylvania, said in an e-mail. “The dollar’s strength is working against all commodities, including gold.”

Gold futures for February delivery declined 2 percent to settle at $1,564.10 at 1:47 p.m. on the Comex in New York. The price dropped for the fifth straight session, the longest slide since October 2009. The commodity headed for the first quarterly slump since September 2008.

Silver futures for March delivery fell 5.2 percent to $27.234 an ounce on the Comex. Earlier, the price touched $27.10, the lowest since Sept. 26. The metal has plummeted 45 percent from a 31-year high of $49.845 on April 25.

India, China

Gold imports by India, the biggest consumer, may drop as much as 50 percent this month after the rupee plunged, according to the Bombay Bullion Association. China restricted gold trading in spot and futures contracts to the Shanghai Gold Exchange and the Shanghai Futures Exchange to crack down on illegal buying and selling of commodities.

“Concerns were raised over the sustainability of demand out of China and India,” Marc Ground, an analyst at Standard Bank Plc, said in a report.

Platinum futures for April delivery declined 3.2 percent to $1,392.40 an ounce on the New York Mercantile Exchange. Earlier, the price touched $1,388.60. On Dec. 15, the metal declined to $1,376, the lowest since Nov. 13, 2009.

‘No Surprise’

Palladium futures for March delivery slumped 2.9 percent to $647.15 an ounce on Nymex, the biggest drop since Dec. 14.

This year, gold has advanced 10 percent, heading for the 11th straight annual gain, on demand for an alternative investment amid slumping equities.

“Gold has been one of the best performers this year, so it comes as no surprise that we are seeing some end-of-year profit- taking,” said Ronald Stoeferle, a commodity analyst at Erste Group Bank AG in Vienna.

Before today, the MSCI equity index dropped 7.5 percent this year.

Bloomberg: Gold Jumps to One-Week High As Iran’s First Nuclear Rod Spurs Haven Demand

Monday, 2 Jan 2012 5:00 AM

By Swansy Afonso

Gold climbed to the highest level in a week in thin holiday trading on reports that Iran produced its first nuclear fuel rod, spurring investors to buy the precious metal as a haven.

The bullion for immediate delivery gained as much as 3.2 percent to $1,613.40 an ounce, the highest level since Dec. 26, and was at $1,567.07 at 5:47 p.m. in Mumbai. Silver for cash delivery was little changed at $27.8625 an ounce.

A domestically made rod was inserted into the core of Tehran’s atomic research reactor after performance tests, the Iranian Students News Agency reported today, citing the country’s atomic energy agency. The Tehran reactor produces radioisotopes for cancer treatment, according to Mehr news agency. Nuclear fuel rods contain pellets of enriched uranium that provide fuel for nuclear power plants.

Full Article

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Bloomberg: Did Psychopaths Take Over Wall Street?

Tuesday, 3 Jan 2012 5:00 AM

By William Cohan, 1/2/2012

It took a relatively obscure former British academic to propagate a theory of the financial crisis that would confirm what many people suspected all along: The “corporate psychopaths” at the helm of our financial institutions are to blame.

Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”

As a result, Boddy argues in a recent issue of the Journal of Business Ethics such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”

How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.”

Stable Environment

Until the last third of the 20th century, he writes, companies were mostly stable and slow to change. Lifetime employment was a reasonable expectation and people rose through the ranks.

This stable environment meant corporate psychopaths “would be noticeable and identifiable as undesirable managers because of their selfish egotistical personalities and other ethical defects.”

For Wall Street — a rapidly changing and highly dynamic corporate environment if there ever was one, especially when the firms transformed themselves from private partnerships into public companies with quarterly reporting requirements — the trouble started when these charmers made their way to corner offices of important financial institutions.

Then, according to Boddy’s “Corporate Psychopaths Theory of the Global Financial Crisis,” these men were “able to influence the moral climate of the whole organization” to wield “considerable power.”

They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.”

Boddy doesn’t name names, but the type of personality he describes is recognizable to all from the financial crisis.

He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”

‘Reasoning Aptitudes’

In closing his short essay, Boddy recognizes that the theory is relatively untested and would benefit from “further development and research” into the “personalities and moral reasoning aptitudes of the leaders” of the companies that got into serious trouble in the financial crisis.

In an e-mail correspondence with me, he said his article has been warmly received and has been downloaded 9,440 times in the past 90 days. “Apparently this is a lot for an academic article and it is more than the next four most-downloaded papers combined,” he wrote.

He also has a prescription for how to prevent psychopaths from getting into positions of power on Wall Street and elsewhere.

“Anyone who makes decisions that affect significant numbers of other people, concerning issues of corporate social responsibility or toxic waste, for example, or concerning mass financial markets or mass employment, should be screened to make sure that they are, at the very least, not psychopaths and at most are actually people who care about others,” he wrote.

Makes sense to me.

(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. The opinions expressed are his own.)

Gainesville Coins’ Take

Like other observers of the events leading up to 2008 and beyond, the manner in which Wall Street has conducted itself has led many to see a rigged fiat money game. Indeed, it is the disgust with which many savers now view the entire global financial system that has been a primary driver of the rising interest in precious metals. With this in mind, Gainesville Coins is pleased to offer the 2012 Silver Eagle monster box at as low as $2.89 over spot. For gold buyers, take advantage of the 2012 1oz American Gold Eagle at as low as $69.00 over spot.

A Game Plan for QE3, Courtesy of Societe General – Gold Could be the Asset to Buy

Friday, 6 Jan 2012 5:00 AM

Among the forecasts for 2012, perhaps the most significant event speculated on is another round of quantitative easing by the Federal Reserve. In order to justify such a move, the current stream of better than expected U.S. economic data would need to turn decidedly sour, threatening another global recession and deflation. As has been repeated ad nauseum, Europe and China are both generating significant headwinds to the global economy. If and when these headwinds begin to impact the U.S., QE3 will be the answer from the Federal Reserve.

Analysts at French bank, Societe General, have produced a number of charts worth reviewing. Given the clear impact the Federal Reserve’s multi-trillion bond buying excercises have had to date, another such excercise would certainly be a major determinant to market direction.

The following from SocGen outlines the upcoming sequence ahead of QE3.

Weak Q1 12 GDP and softening inflation pushes the Fed to another round of monetary easing, in 2 steps:

In January, the Fed pledges to keep real rates at 0% until unemployment falls below 7.5% or inflation moves above 3%,

In March, the announcement of another round of QE, concentrated on MBS purchases (c. $600bn over 6 to 8 months)

The following chart is very illuminating, and for precious metal investors, QE3 would appear to bode well for gold and silver prices.

Unfortunately, before QE3 can commence, Ben Bernanke and the Fed will need the cover of a potentially nasty deflationary economic environment. With the U.S. economy appearing to operate in a universe apart from the rest of the globe, there is no possibility today of any QE3 action. If the U.S. economy does begin to succomb to the overseas headwinds, expect some volatility for all markets, including gold and silver. However, the end result will likely be some fantastic opportunities for precious metals before the Fed does embark on QE3. If SocGen’s forecast proves correct, QE3 will be a boon for precious metals as U.S. dollar debasement kicks into high gear.

Take advantage of Gainesville Coins’ offer on the 2012 Silver Eagle monster box at as low as $2.49 over spot. For gold bullion buyers, take advantage of the 2012 1oz American Gold Eagle at as low as $69.00 over spot.

The Federal Reserve is a Profit Making Center for U.S. Treasury – Its Not Too Hard When You Can Print Money at Will

Tuesday, 10 Jan 2012 5:00 AM

The Federal Reserve has bent over backwords in order to meet its twin mandate of low inflation and maximum employment. Since the mortgage meltdown of 2008, the Fed has expanded its balance sheet to a staggering $2.92 trillion dollars. By purchasing U.S. Treasuries and mortgage securities, the Fed has driven interest rates to historic lows. Nonetheless housing remains in a quagmire, with over 25% of all existing home owners underwater, and home prices are still not expected to bottom till sometime this year (calling housing market bottoms has been fraught with error, and with a huge shadow inventory of unsold homes, could continue their downtrend into 2013). Meanwhile, while unemployment has been coming down, it remains high at 8.5%.

Question 1. Has the Fed achieved maximum employment?

Answer. No. Unemployment at 8.5% and a still falling housing market does not equate with meeting the Fed’s first mandate.

According to the Bureau of Labor Statistics, inflation as measured by the consumer price index increased 3.4% over the last 12 months.

Question 2. Is inflation low?

Answer. No. It is arguable that inflation is not exactly low at 3.4%, but not exactly high either.

While the Fed has yet to achieve its twin mandate, what it has clearly achieved is staggering profits from its enormous balance sheet. While the average hedge fund lost 10% in 2011, and stock investors pulled money out of stock funds virtually every week in 2011 for a sum total of $148 billion for all of 2011, the Fed managed to book $79.3 billion in profit. Not bad for a bunch of public servants. These funds will be handed over to the U.S. Treasury to cover the near $1 trillion deficit in 2011. A drop in the bucket to be sure, but for the many investors in the U.S., both retail and institutional, it must no doubt seem unfair that the Fed can make turning a profit in the market look so easy.

It must be nice when your funding cost is 0%, and your buying ability is unlimited. The Fed’s jaw-dropping activities should remind all investors that we hardly operate in a free-market economy, but a centrally-planned market where a small group of unelected central bankers can make the capital markets a farce.

Spain and Italy to Tap Bond Market Later This Week – A Test for Europe

Monday, 9 Jan 2012 5:00 AM

The outlook for financial markets in 2012 is as murky as ever. There is no shortage of factors clouding the horizon, ranging from China’s property market downturn, the U.S. Presidential election, Europe’s sovereign debt crisis, and the possibility of QE3 by the Fed.

This week will see the first real test for Europe as both Italy and Spain are due to tap the bond market later this week. Worryingly, the yield on the Italian 10-year bond has again topped 7%, the rate at which Portugal, Ireland, and Greece were forced to seek shelter from high market rates, and accept a bailout. This despite the ECB’s ongoing support for Italian debt via its SMP program, and a mountain of three-year lending to European banks via its LTRO. As has been widely noted, much of this funding has apparently recycled its way back to the ECB as deposits there now top $600 billion. Interestingly, LTRO funding costs are 1%, while deposits at the ECB pay 0.25%, earning banks a negative net interest margin.

Economic data out of Europe all paint a worrying picture, and despite the U.S. managing to post surprisingly positive data, ongoing austerity measures in Europe makes any turn around very unlikely. Fourth quarter earnings season is likely to highlight this disconnect, with Dutch electronics giant Royal Philips Electronics NV warning today that Q4 profits were worse than expected due to a weak European market.

Rating agencies continue to wait in the wings, and it is fair to say that the market expects a slew of European downgrades in the coming months. Today, Fitch Ratings warned that “a number of euro countries, including Italy, could see their credit ratings downgraded by the end of this month.” It should be noted that Hungary has already seen its credit rating slashed by all three credit rating agencies to junk.

What this all means for precious metal investors remains a key question. Gold finished 2011 with its 11th annual gain, rising 10% for the year. However, the gains did not come without some significant volatility as gold closed 2011 well off its high of just over $1,900.00 per troy ounce at $1,567.40. Silver had a bad 2011, ending the year down 10% at $27.96 per troy ounce.

As usual, the most important market determinant for gold and silver will likely be the USD. Despite all expectations, the EUR-USD did not completely breakdown in 2011, but the fourth quarter saw a string of multiple weekly losses to end the year. 2012 has started off poorly for the EUR, with the EUR-USD currently at 1.277. If things in Europe begin to go downhill, it is safe to assume that the EUR-USD will resume its downward trajectory. This would be a serious headwind for both gold and silver.

Amid all this, Greece’s ongoing problems cannot be overlooked. Currently, the country is scrambling to fufill the terms of its latest bailout agreement. Any unravelling of this accord could cause another bout of extreme market volatility. Particular focus should be given to the ongoing negotiations between Greece and private creditors over the 50% writedown in principal. Current talk indicate a desire by Greece to increase the haircut to 60%.

When Can An All Clear be Given?

Getting one’s mind around the mess that is Europe is a daunting task. However, some things to watch for include:

1. A sustained reduction in the amount of deposits held at the ECB, currently over $610 billion.

2. A sustained move of Italian bond yields below 7%.

3. A stable ratings outlook for Europe. This clearly won’t be anytime soon.

4. Confirmation that Greece has met its obligations as relates to its latest bailout.

With all the uncertainty, the question of what the U.S. Federal Reserve will do remains a powerful market factor for 2012. It is clear that markets are now conditioned to see any market deterioration in the U.S. economy as reason for another money printing excercise by the Fed. If and when the Fed decides to embark on QE3, the USD debasement will again be front and center, no matter what is happening in Europe. This would likely mark a very powerful catalyst for higher gold and silver prices.

Of course the first step is to see how Italy and Spain will fare in their upcoming debt auctions. Expect things to remain frustratingly opaque for the time being.

Bloomberg: China’s Gold Imports From Hong Kong Climb to Record on Investment Demand

Thursday, 12 Jan 2012 5:00 AM

By Glensys Sim and Feiwen Rong, 1/11/12

China’s gold imports from Hong Kong surged to a record as consumers bought the metal before the Lunar New Year this month and investors sought to hedge against financial turmoil. Bullion rallied to a four-week high.

Mainland China bought 102,779 kilograms from Hong Kong in November, up from 86,299 kilograms in October, according to the Census and Statistics Department of the Hong Kong government. China doesn’t publish gold trade data.

Demand for gold is climbing in China as investors seek to protect their wealth against slumping property prices and equity markets amid an inflation rate above 4 percent. The nation overtook India in the third quarter as the largest gold jewelry market, according to the World Gold Council. The country is also the biggest producer. Bullion rose as much as 0.9 percent to $1,647.45 an ounce today, the highest since Dec. 13.

“China’s appetite for gold is very strong and growing,” said Tao Jinfeng, chief investment consultant at Haitong Futures Co., China’s largest brokerage by registered capital. “The few months before the Lunar New Year is typically the peak demand period for Chinese people.” The weeklong holiday begins Jan. 23.

Imports were profitable as prices in Hong Kong mostly traded at a discount to those in China in November. Gold for immediate delivery of 99.99 percent purity on the Shanghai Gold Exchange averaged 356.05 yuan a gram ($1,753 an ounce) in November, compared with an average of 434.68 Hong Kong dollars (353 yuan) at the Chinese Gold & Silver Exchange Society.

“There is always the possibility that some purchases were made by the central bank,” said Tao, rated the fourth-best China gold analyst in a Futures Daily and Securities Times poll.

Gold Reserves

The People’s Bank of China last made known its gold reserves more than two years ago, announcing that it held 33.89 million ounces, or 1,054 tons, as of June 30, 2009. Officials at the central bank weren’t immediately available to comment.

China’s holdings are the world’s fifth-largest by country, according to World Gold Council data. Central banks and government institutions bought 142 tons in 2010, International Monetary Fund data show.

As incomes rise, Chinese investors are looking for alternative investments as the Shanghai Composite Index tumbled 33 percent since 2009, making it the worst performer among the world’s 15 biggest markets, while home prices fell for a fourth month in December after curbs that included higher down-payment and mortgage requirements. Per-capita disposable income for households in towns and cities rose 14 percent to 16,301 yuan in the first three quarters of 2011.

Gold climbed 10 percent last year, rallying for an 11th year, as central banks joined investors in buying bullion to diversify assets. South Korea, Thailand, Turkey, and Russia were among those who added gold to reserves in 2011.

Bullion for immediate-delivery in London, which reached a record $1,921.15 an ounce on Sept. 6, traded at $1,645.25 an ounce by 5:32 p.m. Singapore time today.

February 29th 2012 is a day to watch – The second LTRO could be a positive catalyst for Gold and Silver

Wednesday, 15 Feb 2012 5:00 AM

One of the most powerful factors affecting the direction of precious metals has been the bond buying by central banks the world over. While the ECB has officially stated its opposition to enacting a sizable bond buying purchase program akin to the programs seen in Japan, the U.K., and the United States, its Securities Market Programme (SMP) has been a significant tool in Europe’s fight to contain the sovereign debt crisis. While this program still totals less the 500 billion EUR, it is exactly the type of quantitative easing that has been seen in Japan, the U.K., and the U.S. Nonetheless, the ECB can claim that it is not monetizing the debt of member nations (though it clearly is), since the scale of its operations are dwarfed by its peers.

What has arguably been more significant for the fortunes of at-risk European sovereigns was December 21, 2011′s Long-Term-Refinancing-Operation (LTRO). This operation provided unlimited 3-year funding for European banks, and banks ultimately took a total of 489 billion EUR of funding from the ECB, well above the amount that had been forecast. European banks and sovereigns, facing a mountain of refinancing needs in 2012, desperately needed this sort of funding. The first LTRO coincided with a bottoming in risk assets and precious metals, and the start of one of the best starts for both in over a decade. Why is all this important? Because on February 29th, 2012, the ECB is scheduled to do its second LTRO, and current expectations see an even larger amount of funds lent out to European banks.

There can be little doubt as February 29th approaches, comparisons to what happened after the first LTRO will appear with ever greater frequency. It is hard to see how such a large money printing excercise won’t ultimately impact all markets, including those for gold and silver.

Other Recent Central Bank Monetary Expansion Announcements

On February 13th, the Bank of Japan (BoJ) announced that it would expand its bond buying operation by 10 trillion yen, equivelant to $130 billion USD. This is not a trivial amount as evidenced by the decline in the value of the JPY versus the USD since the announcement. Significantly, the BoJ also announced its intention to target a 1% inflation target.

On February 9th, the Bank of England (BoE) announced that it would expand its bond buying operation by 50 billion pounds, equivelant to $79 billion USD. Once again this is not a trivial amount as again evidenced by the decline in the value of the GBP verus the USD since the announcement.

The ongoing desire by central banks to lower interest rates, thereby reducing the relative attractiveness of their currency is almost universally seen as beneficial for precious metals, including gold and silver. These recent announcements come ahead of what will likely be an outsized monetary exapansion by the ECB come February 29th, 2012.

Current ECB Balance Sheet Set to Soar – Will Rival U.S. Federal Reserve

Since the 2008 mortgage meltdown, the balance sheet of Western central banks have exploded, corresponding well with the rise in precious metals, including gold and silver. The latest monetary expansion decision by the U.K. and Japan will expand the balance sheet of both respective central banks. However, the upcoming second LTRO by the ECB, will lift the ECB’s balance sheet to rival the U.S. Federal Reserve.

Currently the ECB’s total balance sheet exceeds 2.5 trillion EUR, rising over $1 trillion EUR since 2008.

Comparatively, the Federal Reserve balance sheet now totals just over 2.8 trillion US dollars. This compares to under $900 billion in 2008. Said another way, the Fed’s balance sheet has expanded by just under $2 trillion dollars since 2008.

One thing that has been abundantly clear for precious metals investors is that a weaker USD has been negatively correlated with gold prices. With all major world central banks engaged in very similar monetary easing endeavors, precious metals will likely remain well supported, extending the ongoing, multi-year rally for both gold and silver.

2/29/2012 will be ECB’s day, but the Federal Reserve may not be far behind with QE3

While the next day to watch is clearly the 2/29/2012 second LTRO by the ECB, it should be noted that today’s release of the latest FOMC minute meeting clearly showed that Fed members are considering additional bond purchases, or QE3, to further support the U.S. recovery.

However, first things first. As February 29th draws nearer, expect expectations of another gigantic monetary expansion to provide ongoing support for the gold and silver market. Visions that the Fed might quickly follow suit shouldn’t be overlooked however. Expectations of ever easier monetary policy by the world’s central bank are likely to remain for the forseeable future, providing support for precious metal prices.

Ever Wonder How Silver is Mined – Watch the Following Discovery Channel Piece – Making Silver Dore Bars

Thursday, 16 Feb 2012 5:00 AM

Most precious metal investors likely have no idea on the actual mining process for gold and silver. The following Discovery Channel, How its Made, segment gives an excellent step by step look at silver mining. Silver Mining/Making Dore Bar - Discovery Channel.

Obviously, Silver Dealer’s like Gainesville Coins sell silver bars after they have been further refined to a .999 level of purity. Watching the mining process before this final stage is certainly interesting.

People that watch this video may not realise that the gold-silver ratio in nature is 16. Watching the actual mining process for silver shows the extra effort required to mine gold. Hopefully the Discovery Channel will do a similar segment for Gold Mining.

As Long as We’re Talking Silver Bars, Take Advantage of Excellent Pricing on 100 oz Silver Bars

The 100 ounce Sunshine Mint Bar at as low as $0.79 over spot.

The 100 ounce NTR Bar at as low as $0.65 over spot.

Gainesville Coins Launches Improved Web Site for Gold and Silver Investors

Monday, 20 Feb 2012 5:00 AM

Gainesville Coins is pleased to announce the roll-out of its new website at Gainesvillecoins.com. As one of the world’s largest precious metal dealers, Gainesville Coins is committed to providing gold and silver bullion investors the best, one-stop shop for precious metals investing. This means providing investors low premiums over spot and unmatched customer service. The new website helps achieve this goal by providing a streamlined customer experience with numerous enhancements and additional features including an updated precious metal IRA section, easier product comparison, a new learning center, expanded market news, and more.

To mark the launch of the new site, Gainesville Coins is offering silver bullion investors the highly anticipated 2012 1 oz Silver Canadian Moose at as low as $2.89 over spot. The Canadian Moose silver coin is the next release in the highly popular Canadian Wildlife Series.

Gainesville Coins is offering gold bullion investors the 1 oz South African Gold Krugerrand at as low as $26.99 over spot. The Krugerrand gold coin is arguably the best known gold bullion coin today.

The launch of the new Gainesville Coins website follows the recent, successful introduction of Gainesville Coins Storage, a secure, private, and affordable storage solution that provides physical gold and silver investors with liquidity comparable to paper, gold and silver ETFs.

Bloomberg: Gold Bulls Expand as Billionaire Paulson Says Buy

Monday, 20 Feb 2012 5:00 AM

By Nicholas Larkin

Gold traders are getting more bullish after billionaire hedge-fund manager John Paulson told investors it’s time to buy the metal as protection against inflation caused by government spending.

Twelve of 22 surveyed by Bloomberg expect prices to gain next week and five were neutral. Paulson & Co. is already the biggest investor in the SPDR Gold Trust, the largest exchange- traded product backed by bullion, with a stake valued at $2.9 billion, a Securities and Exchange Commission filing Feb. 14 showed. Investors have 2,389.7 metric tons in ETPs, within 0.2 percent of the record reached in December and more than all but four central banks, according to data compiled by Bloomberg.

Speculators in U.S. gold futures are now their most bullish since September after the Bank of England and Bank of Japan said they will buy more assets and the Federal Reserve said it was considering purchasing more bonds. Central banks are also expanding their bullion reserves, adding 439.7 tons last year, the most in almost five decades. They may buy a similar amount in 2012, the London-based World Gold Council said yesterday.

“The appalling state of fiscal finances of most industrial nations does lead to concerns about the possibility of inflation,” said Mark O’Byrne, executive director of Dublin- based GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. “Gold is a crucial diversification given the various risks out there.”

Bank of America

Gold rose 9.9 percent to $1,722.20 an ounce this year on the Comex in New York. The Standard & Poor’s GSCI gauge of 24 commodities gained 6.6 percent and MSCI All-Country World Index (MXWD) of equities climbed 9.7 percent. Treasuries lost 0.5 percent, a Bank of America Corp. index (MXWD) shows.

Hedge Funds and other money managers boosted wagers on higher prices by 57 percent since mid-January. They raised their net-long position by 8.6 percent to 173,172 futures and options in the week ended Feb. 7, the highest level since mid-September, Commodity Futures Trading Commission data show.

Central banks are keeping interest rates at or near record lows and expanding stimulus measures to spur growth that the International Monetary Fund predicted on Jan. 24 will be 3.3 percent this year, down from a previous forecast of 4 percent. Greece is seeking more aid on top of the 110 billion euros ($145 billion) awarded in 2010 and Moody’s Investors Service cut the ratings of six European nations on Feb. 13.

‘Build a Position’

“By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold,” New-York based Paulson said in a letter to investors obtained by Bloomberg. Armel Leslie, a spokesman for Paulson, declined to comment.

The 56-year-old manager’s SPDR Gold Trust holdings fell 15 percent in the fourth quarter as his $23 billion hedge fund company had its worst-ever year. His Advantage Plus Fund lost 51 percent in 2011, and the firm said in a third-quarter letter that financial services companies were the “primary drag.” Paulson became a billionaire in 2007 by betting against the U.S. subprime mortgage market. Gold rose 10 percent last year in New York trading, an 11th consecutive annual gain.

Europe’s deepening debt crisis may spur some investors to retreat to cash. Bullion dropped 3.4 percent in the three months through December, the first quarterly decline since 2008, as the value of global equities slumped more than $10 trillion from the May peak, data compiled by Bloomberg show.

Debt Crisis

“Despite the strong start to global markets this year, the underlying sentiment is still one of fear,” said Chris Weafer, the chief strategist at Troika Dialog, an investment bank in Moscow. “Until the euro zone debt crisis is put to bed, all assets, even gold, are in the risk category.”

Investors should avoid gold because its uses are limited and it lacks the potential of farmland or companies to produce new wealth, Warren Buffet, the billionaire chairman of Berkshire Hathaway Inc., wrote in an adaptation of his annual letter to shareholders that appeared on Fortune magazine’s website on Feb. 9.

Vinik Asset Management LP, Tudor Investment Corp. and SAC Capital Advisors LP sold shares in the SPDR Gold Trust in the fourth quarter, filings showed this week. George Soros, the billionaire founder of Soros Fund Management LLC, raised his stake to 85,450 shares from 48,350.

Record investment drove gold demand to 4,067.1 tons last year, the most since 1997, the World Gold Council estimates.

Nine of 24 traders and analysts surveyed by Bloomberg expect copper to climb next week and seven were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose 7.4 percent to $8,161.50 a ton this year after declining 21 percent last year.

ICE Futures

Ten of 14 people surveyed expect raw-sugar prices to drop next week. The commodity is up 1.8 percent this year at 23.72 cents a pound on ICE Futures U.S. in New York.

Eleven of 21 people surveyed anticipate lower corn prices next week, while 12 of 22 said soybeans will advance. Corn fell 0.3 percent to $6.4475 a bushel this year as soybeans rose 5.7 percent to $12.77 a bushel.

“By initiating further rounds of quantitative easing, central banks should be one of the supporting factors for commodity prices,” said Daniel Bressman, an analyst at Commerzbank AG in Frankfurt. “The high uncertainty and growing risk aversion among market players surrounding the Greek debt saga should depress any meaningful price increases.”

Precious Metal Miners’ Reporting Season Underway – Results are Strong so Far

Tuesday, 21 Feb 2012 5:00 AM

Precious metal prices may have taken a tumble in the fourth quarter, but fourth quarter and full year results for precious metal miners are coming in strong. Furthermore, with the strong start for precious metals in 2012, with an over 20% rise in silver, and over 11% rise in gold, first quarter 2012 results look set to extend the strong run for precious metal miners.

The next few days will see the bulk of precious metal miners reporting.

Hecla Mining (HL) reported fourth quarter earnings of $0.07 compared to a loss of $0.05 in the year ago period. HL reported record revenues for 2011 of $477.6 million. Full year net income was $0.54 per share, a significant rise from the $0.14 in 2010.

For 2102, HL reiterated its silver production estimate of 7 million ounces. Shares of HL were up nearly 10%, or $0.46 at $5.48 per share.

Shares of HL are up nearly 10% following its earnings release, up $0.48 at $5.51 per share. However, HL is trading well off its 52-week high $11.08, as investors sold shares after a series of accidents at its 3 million ounce Lucky Strike mine, and due to built-up sand and concrete material led to the mine’s closure. The mine is expected to re-open in 2013.

Stillwater Mining Company (SWC) reported fourth quarter earnings of $0.21 compared to $0.16 in the year ago period. SWC reported revenues for 2011 of $906 million. Full year net income was $1.30 per share or $144.3 million.

Shares of SWC were up solidly following its earnings release, up $1.05 at $14.51 per share. Like many other precious metal miners, SWC is well off its 52-week high of $25.90. The fourth quarter sell-off in precious metals coincided with its drop.

Stillwater Mining Company mines and refines mostly platinum and palladium

Upcoming Earnings

2/22/2012:

Novagold Resources Inc (NG) is still in the development stage, and is expected to report a small fourth quarter loss. The company is expected to post negative earnings through at least 2012. Shares of NG were up $0.32 at $8.75. Its 52-week range is $5.93-$8.78.

Pan America Silver Corp (PAAS) has a consensus analyst fourth quarter estimate of $0.53. Shares of PAAS were up $0.65 at $24.61. Its 52-week range is $19.93-$43.06.

2/23/2012:

Coeur d Alene Mines Copr (CDE) has a conensus analyst fourth quarter estimate of $0.40. Shares of CDE were up $1.12 at $28.98. Its 52-week range is $19.30-$37.59.

Alamos Gold Inc (AGI.TO) has a consensus analyst fourth quarter estimate of $0.22. Shares of AGI.TO are up $1.41 at $20.05. Its 52-week range is $13.26-$21.00.

IAMGOLD Corp (IMG.TO) has a consensus analyst fourth quarter estimate of $0.33. Shares of IMG.TO were up $0.52 at $16.78. Its 52-week range is $15.07-$17.20.

Take Advantage:

Gainesville Coins is offering the 100 oz Sunshine Mint Silver Bar at as low as $0.79 over spot.

Gold bullion buyers will want to consider the 1 oz Krugerrand Gold Coin at as low as $26.99 over spot.

Reuters: Iran to accept payment in gold from trading partners

Tuesday, 28 Feb 2012 5:00 AM

By Tim Pearce

TEHRAN, Feb 28 (Reuters) – Iran will take payment from its trading partners in gold instead of dollars, the Iranian state news agency IRNA quoted the central bank governor as saying on Tuesday.

Iranian financial institutions have been hit by sanctions imposed by the United States and the European Union in an effort to force Tehran to halt its nuclear programme. Significant difficulties in making dollar payments to Iranian banks have forced Iran’s trading partners to look for alternative ways to settle transactions, including direct barter deals.

“In its trade transactions with other countries, Iran does not limit itself to the U.S. dollar, and the country can pay using its own currency,” central bank governor Mahmoud Bahmani was quoted as saying. “If a country should so choose, it can pay in gold and we would accept that without any reservation.”

The sanctions include a phased ban on importing oil from Iran, which EU member states are to implement by July. China and India, two of the largest consumers of Iranian oil, have said they will continue imports, but Japan and Korea have announced cuts to quotas following pressure from the United States. As a result the value of Iran’s rial has plummeted, pushing the price of goods sharply higher across the country.

Western countries believe Tehran is trying to establish a nuclear weapons capability, and the United States and Israel have not ruled out military action against it. The Islamic

Republic says its nuclear ambitions are peaceful and that it will hit back if targeted.

(Reporting by Hashem Kalantari; Writing by Marcus George;

Editing by Tim Pearce)

NYT: Why I Am Leaving Goldman Sachs

Wednesday, 14 Mar 2012 4:00 AM

Many investors in precious metals have lost a degree of trust and faith in the modern global financial system. Following events in 2008 and the unprecedented bailouts during the U.S. mortgage meltdown, faith in U.S. banks plummeted. Since then there have been numerous lawsuits and SEC actions that have brought to light the lack of integrity and the sheer greed that has come to be associated with U.S. banks.

In an op-ed piece today, Greg Smith, a 12 year Goldman Sachs employee wrote a scathing account of the current state of what is commonly thought of as the best U.S. investment bank. Below are some of the more choice excerpts:

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

The full Op-Ed

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Is Keynesian Economics Flawed? Austrian Economics Examined

Monday, 9 Apr 2012 4:00 AM

Modern economic theory is rooted in what is commonly referred to as Keynesian economics. A major distinguishing factor of Keynesian economics is rooted in the idea that economic systems can be modeled and analyzed. Another branch of economics, The Austrian School of Economics, views the idea of modeling the economy as suspect, arguing that the basis of all economics is the individual whose decisions ultimately can’t be modeled. The idea that current economic theory and practice is fundamentally flawed, and leading to an inevitable calamity is worth exploring. With this in mind, the following is a brief examination of how Keynesians and Austrian adherents would analyze the current global economic situation.

A central distinction between the Austrian School of Economic thought and Keynesian Economics is the purpose of monetary policy. Monetary policy under the Austrian School would seek to minimize changes to the value of money, thereby reducing the level of uncertainty that exists when two economic parties make an exchange. Since the basis of all economic analysis under the Austrian school is the individual and his choices, an active monetary policy by a central bank is akin to socialism, or central planning. The attempt to centrally plan the money supply distorts the market pricing mechanism for interest rates, and impacts individual views of the stability of money’s value.

For example, the current orthodox response of central banks to counter an economic slump and rising unemployment is to follow Keynesian policies and ease monetary policy. According to the Austrian School, while this may indeed provide a brief lift to economic activity and reduce unemployment, the long-run impact will inevitably be a more severe economic downturn. The reasoning behind this assertion is that a central bank induced increase in the money supply leads to “malinvestment” because interest rates or the cost of money is artificially lowered. Capital decisions that would not have taken place otherwise are now deemed to be economically sound. Eventually, this accumulation of malinvestment would lead to a bigger bust.

1. What is the goal of government stimulus intervention?

The current goal of government stimulus intervention is to prevent a deflationary economic environment following the bursting of the housing bubble in 2008. By “priming the pump” the government is seeking to create a virtuous cycle of strong economic growth, falling unemployment, and higher tax revenues leading to federal budget sustainability.

2. What is the downside?

The downside of government stimulus is that the necessary adjustment that is required following years of malinvestment is merely forestalled. In other words, the fiscal stimulus by government is pouring funds into unproductive areas (malinvestment), while artificially low interest rates is promoting capital investment that would not otherwise have taken place (malinvestment). It can be easily argued that house prices in the U.S. remain artificially elevated given the easy money policy of the Federal Reserve, and the deficit spending of the Federal Government.

Other downsides include

a.

substantial increases in federal debt.

b.

a financial system that has become increasingly reliant on central bank monetary easing.

c.

elevated levels of inflation.

3. Who pays for it in the long run?

People pay for it in the long run through higher tax burdens or a debased currency.

4. What will likely happen to the economy if they can’t pay for it?

If financial markets begin to believe that debt levels are too large to finance, fixed income investors will seek to protect themselves by refusing to fund the offending country’s debt and deficits. Individuals and business will look to protect their local currency purchasing power and wealth by shifting their savings into other stores of value. Collectively, these actions will cause interest rates to rise while the value of the local currency relative to other currencies will fall.

The likely end result would be a massive devaluation of the local currency, and a severe contraction in economic activity.

Take Advantage

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Austrian Economics vs Fed’s Attempt to Revive Housing

Thursday, 12 Apr 2012 4:00 AM

The field of Economics is full of rules of thumb that have been developed from past historical relationships. One of the most basic is that lower interest rates can create an economic recovery by spurring consumers to borrow and spend. Since the ascendancy of Keynesian economics, this and federal deficit spending have been the “go to” monetary and fiscal policies to counter any economic downturn. However, the current recession is defying the old rules of thumb as mind-boggling fiscal deficits and record low interest rates fail to translate into a sustainable recovery. The question du jour is “What’s going on?”

As Gainesville Coins recently pointed out in “Is Keynesian Economic Flawed? Austrian Economics Examined” there could be a fundamental flaw with modern economic theory in that it accepts the notion that individual actions can be modeled. This idea is rejected by the Austrian School of Economics which sees individual tastes and decisions as too random to be modeled.

This basic distinction between Keynesian economics and the Austrian School of Economics certainly helps explain why the U.S. housing market continues to decline despite record monetary easing and fiscal policy spending. Some basic extrapolation is required to explain why potential homeowners remain on the sidelines. However, one thing is clear, the basic rule of thumb that decreasing mortgage rates will lift the housing market is broken.

Individuals Have Permanently Altered Their Views on Home Ownership

It has been a commonly held belief that home ownership was part of the “American Dream.” Since the depths of the Great Depression in the 1930’s, this notion has rewarded home owners as real estate prices rose year after year. Unfortunately, the housing bubble that burst in 2008 was preceded by some of the most extreme year over year gains in home prices ever. Backing this rise was a mountain of easy to obtain mortgage financing.

Four years have passed since the bubble burst. During this time, trillions of dollars in housing related debt have been written off, and over 25% of all mortgage holders owe more on their mortgage than their home is worth. This has series implications for housing, the banking sector, and the broader economy.

Home owners who owe more than their property is worth have lower geographic mobility.
Further declines in home prices will increase pressure on bank balance sheets.
The lack of any housing recovery impedes any economic growth.

Potential home owners see the current housing situation, and realize that despite the rising affordability of owning a house, the outlook for housing remains dim. The possibility of purchasing a home with 20% down and 80% financing is no longer a sure bet to accumulate wealth, and given the exceptional measures by the Federal Reserve, could be a losing proposition if the Fed is wrong, and their rule of thumb proves ineffective.

Fed Actions Could Have Forever Forestalled a Sustainable Housing Recovery Indefinitely

Austrian economic thought would have seen the Federal Reserve’s response to the housing collapse as counter-productive (indeed, under Austrian economics, the housing market bubble likely would never had occurred). Instead of stepping in to prevent an inevitable correction, Austrian economic thought would have seen it necessary to let the many years of “malinvestment” to work itself out of the system. Had a true housing market bottom been found, those economic actors with the foresight to avoid the meltdown would be well placed to invest in housing. Unfortunately, the Federal Reserve would like the world to gloss over the massive “malinvestment” represented by the housing bubble. As the Austrian School of Economics points out, individuals can change their mind, and they clearly have with regards to housing, something the Federal Reserve and other Keynesian adherents don’t appreciate.

Some points that Keynesian “rule of thumbers” might not realize is that:

Potential homeowners see the wave of foreclosures that have yet to hit the market and refuse to purchase.
Potential homeowners understand that home affordability is currently artificially inflated thanks to monetary and fiscal policy.
Perhaps less quantifiable, it is likely that the average potential homeowner is discouraged from taking a $100,000 – $150,000 mortgage as aversion to debt has increased in the wake of the 2008 meltdown.

From a Precious Metals Perspective

When looking at the current housing market, precious metal investors are no doubt shaking their head at the extraordinary measures being taken to prevent any further fall in the housing market. While the Federal Reserve continues to maintain that their monetary policy over the years had nothing to do with the housing bubble, they are clearly working hard to keep property prices elevated well above where they would be in a true “free market.”

The possibility that the Federal Reserve and the Federal Government will continue to rely on Keynesian economic theory to counter any economic blip is clearly a motivation for many to purchase “safe” hard assets, like gold and silver, that will stand up to the never ending money printing by officials in government. This strategy has worked well as gold has risen from just under $800 per ounce in the depths of the 2008 sell-off, to over $1,600 today. Silver has performed even better, rising from just under $10 per troy ounce in 2008, to over $32.00 per troy ounce today.

Take Advantage

Precious metals are seen as a hedge against easy monetary policy and government deficits and debt. Gainesville Coins is offering the 100 oz Silver Bar from Ohio Precious Metals at as low as $0.89 over spot silver. Gold bullion investors can purchase the 1 oz PAMP Suisse/Credit Suisse gold bar at as low as $21.99 over spot gold.

Gainesville Coins Now An Approved Distributor For The Royal Mint

Monday, 23 Apr 2012 4:00 AM

Lutz, FL (PRWEB) April 23, 2012

Gainesville Coins is pleased to announce that it is now an approved distributor of the Royal Mint of the United Kingdom, one of the largest and well-known mints in the precious metals industry. As an official distributor, Gainesville Coins will be able to provide gold and silver investors with a wider range of precious metal products at industry leading prices.

The Royal Mint began operating in 886 and is currently responsible for producing all U.K. coinage. It is also the world’s leading export mint, providing coins and blanks for over 60 overseas countries. Among the many highlights in its history, The Royal Mint is the creator of one of the most well-known gold coins in modern history, the British gold sovereign. Another notable highlight is that Sir Isaac Newton, considered by many as the most influential scientist and mathematician to have lived, was Master of the Mint in the late 17th and early 18th centuries.

Gainesville Coins’ status as an official distributor of the Royal Mint will result in more exciting gold and silver bullion coins on offer. Among the products to be made available will be the Royal Mint’s 1 oz Gold Britannia and the 1 oz Silver Britannia, as well as numerous commemorative gold and silver coins. Among the more notable upcoming commemorative coins will be gold and silver coins celebrating the upcoming London Olympic and Paralympic Games and The Queen’s Diamond Jubilee celebrations.

Gainesville Coins is committed to being the first choice for precious metal investors. Today’s announcement with the Royal Mint will expand the number of gold and silver bullion choices available at Gainesville Coins, all at industry leading prices.

Did You Know

The U.S. Morgan Silver Dollar was designed by George Morgan who received his job with the U.S. Mint based on a recommendation from the Deputy Master of the Royal Mint in 1876. George Morgan would eventually become the Chief Engraver of the U.S. Mint.

Interesting Market Disconnect – Silver Down, Silver Miners Up

Wednesday, 25 Apr 2012 4:00 AM

Early on Wednesday session, we noted that the correlation between silver and silver miners has broken down for the moment. Generally, the two move in tandem, as might be expected. However, even at the worst levels of the day following the FOMC policy announcement, silver miners continued to trade in the green.

Before the FOMC announcement, spot silver was down $0.38 at $30.50 per troy ounce.

Pan American Silver Corp (PAAS) is up $0.11 at $18.58.

Silver Wheaton Corp (SLW) is up $0.25 at $28.71.

Coeur d”Alene Mines (CDE) is up $0.25 at $21.20.

Silvercorp Metals Inc (SVM) is up $0.08 at $6.40.

It certainly was interesting to see silver prices rebound from sharp early losses to end the day essentially unchanged. This is not to say that a marvelous new market indicator has been discovered, but every once in a while, a market disconnect suggest a head fake. Unfortunately, there is no way to know if the next disconnect will mean a fall for the miners rather than silver.

Silver and silver miners have begun the second quarter in ugly fashion, with both posting losses following a strong first quarter. Perhaps today’s disconnect suggests a turning of the tide. Only time will tell.

Take Advantage

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Will They? Won’t They? – Reading the FOMC Tea Leaves

Wednesday, 25 Apr 2012 4:00 AM

Since the collapse of the mortgage bubble in 2008, the Fed has gone a long way into uncharted territory. The Federal Reserve’s balance sheet has swelled from under $1 trillion to over $3 trillion as “normal” monetary measures such as reducing the Fed Funds rate and Discount rate were insufficient to keep the U.S. economy aloft. Like Japan, the U.S. has taken the unorthodox step of purchasing U.S. government securities in enormous quantities to push interest rates across the yield curve lower.

Today the Fed concludes its latest monetary policy meeting and the market awaits any indication that the Fed will continue on its monetary inflation push. Economic data globally has been weak, driven by falling real estate prices in China, and austerity measures across Europe. Given the clear and present danger to the U.S. economic recovery, highlighted by the dramatic 4.2% drop in March durable goods orders, a move by the Fed would appear to have justification save two uncomfortable facts – high oil prices, and equity market strength.

The last time the Fed embarked on quantitative easing in November of 2010, WTI crude oil was priced in the mid-$70s per barrel. Today, WTI crude futures are over $100, currently at just under $105 per barrel. With the average price of gasoline in the U.S. just under $4.00 per gallon, any indication by the Fed that it is to ease policy would likely cause gas prices to surge, undermining its oft-stated claim that inflation was contained, and offsetting any benefit from lower rates.

Equity markets leading up to QE2 were nearly 15% below current levels. The equity market is hardly suggesting any dire economic downturns, and the equity markets are traditionally considered a forward economic indicator.

Precious metals would generally benefit from more monetary policy easing on rising inflation expectations. The Fed is currently terrified of the prospect of deflation since the overall level of indebtedness among local, state, and federal governments, as well as individuals who have been deleveraging since 2008 would become an intractable problem in a deflationary environment. Falling income and earnings would make rising debt levels more difficult to service. The solution is to assure an inflationary environment.

As a final note, readers should remember that Fed Chairman Ben Bernanke is a “man of action.” Even a mild downturn in the U.S. economy would be hard to reverse, and this could shape his thinking towards being proactive sooner. The obvious question however is with the benchmark 10-year yield already at a near historical low of 2%, what exactly will more monetary easing accomplish. Regardless, all eyes will remain fixated on today’s Fed announcement and policy statement.

Take Advantage

Central Banks Still Adding Gold to Reserves in 2012

Thursday, 26 Apr 2012 4:00 AM

Central bank buying of gold continues in 2012. IMF data shows that a number of central banks added to their gold reserves in March, including Mexico, Turkey, and Russia. In 2011, the World Gold Council reports that central banks bought a staggering 439.7 tons of gold. Interestingly, this amount nearly matches the 502.1 tons held by the ECB or the 557.7 tons held by India, the number 1 importer of gold.

Topping the list of purchasers for March was Mexico who added 16.8 tons of gold. Other notable purchases include Turkey at 11.5 tons, Kazakhstan at 4.3 tons, and Ukraine at 1.2 tons.

Between 1989 and 2007, central banks were net sellers of between 400-500 tons of gold a year. Sadly for the fortunes of the citizenship of the countries selling, the sales were done when gold traded below $400 per oz. One could safely surmise that cental banks have been awful stewards of their nation’s treasure by selling low and buying high. However, with the massive amount of liquidity injections by central banks post-2008, central bank buying is clearly understandable. Confidence in paper currencies ranging from the USD, EUR, and JPY has cracks, to say the least.

The World Gold Council is projecting central bank demand for gold to be similar to 2011 levels. Central bank buying has been concentrated among countries whose gold reserves are a low percentage of overall reserves. For instance, Mexico was among the largest purchasers of gold in 2011, and that trend has continued in 2012. However, gold remains a low 3.9% of total Mexican reserves.

Take Advantage

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WSJ – Gold Shakes Off $1.24 Billion ‘Fat Finger’

Tuesday, 1 May 2012 4:00 AM

By Tatyana Shumsky, published 4/30/2012

Gold futures ended nearly unchanged Monday, after a large early-morning sell order roiled traders and slashed prices by almost $15.

The CME Group Inc.’s Comex division recorded an unusually large transaction of 7,500 gold futures during one minute of trading at 8:31 a.m. EDT. The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 a troy ounce. The overall transaction was worth more than $1.24 billion.

Gold traders buzzed with speculation that the transaction was an input error — a so-called “fat finger” trade.

“Or a Gold Finger as it might be known in the bullion market,” traders at Citi joked in a note to clients.

One indicator that the transaction was a mistake was its size. At 750,000 troy ounces, such large trades are rarely conducted amid very thin trading volumes. Monday trading was expected to be quiet as market participants in China and Japan are out on holiday and many European traders are preparing for a holidays there.

“No one who has the account size and the money to trade thousands of gold contracts would do it in one transaction, that’s just stupid,” said one trader. The collateral required to purchase 7,500 contracts is about $75.9 million in cash that the trader would have deposited with his broker.

Moreover, the likely mistake is symptomatic of the shift to electronic trading. Computer trading systems are vulnerable to input errors, as they do not question the order before executing the transaction. By contrast, when most order flow would pass through the Comex floor where human traders processed the deals, potential errors stood higher chances of being intercepted, traders said.

“You would definitely verify [a trade this big] before you executed it,” said one Comex floor broker.

Still, not everyone agreed Monday’s slip in gold was caused by a keystroke error. Chuck Retzky, director of futures sales for Mizuho Securities USA, said that silver prices suffered a similar leg down at the same time as gold, tumbling 35 cents to $30.805 a troy ounce, but other markets like Treasurys, currencies and stocks were unperturbed.

“To do it both in gold and silver tells me that it wasn’t a trade done in error,” Retzky said. He added that the sale could have been caused by a trader looking to cut back holdings on the last trading day of April, as fund managers often time purchases and sales for particular reporting periods.

Meanwhile, gold prices spent much of Monday shaking off the early-morning losses and finished the day nearly unchanged at $1,664.20 a troy ounce.

Gold Standard for All, From Nuts to Paul Krugman

Thursday, 3 May 2012 4:00 AM

Bloomberg 5/2/2012, Amity Shlaes

Nut cases. That’s what they are. And if you take an interest in them, you are a nut case, too.

That’s the consensus among credentialed economists who describe advocates of a return to the monetary regime known as the gold standard. In fact, the economic pack will marginalize you as a weirdo faster than you can say “Jacques Rueff,” if you even raise the topic of monetary policy in relation to gold.

About Amity Shlaes

Amity Shlaes is a senior fellow in economic history at the Council on Foreign Relations and the author of the best-sellers “The Forgotten Man: A New History of the Great Depression” and “The Greedy Hand: Why Taxes Drive Americans Crazy.”

More about Amity Shlaes

An example of such marginalizing appears in a recent issue of the Atlantic magazine. Author Adam Ozimek lists four rules upon which economists overwhelmingly agree. Right away, that puts readers on guard; they don’t want to be the only one to disagree with eminences.

The first rule Ozimek offers is that free trade benefits economies. So obvious. That makes the penalty for disagreement higher. Then you read down to the final principle: “The gold standard is a terrible idea.” By putting the proposition in such strong terms, the author raises the penalty for disagreeing. If you don’t subscribe to this view, you risk both being classed as the kind of genuine nut case who believes in protectionism, and enduring the disdain of other economists — “all economists,” as the Atlantic headline writer summarized it.

But “all economists” is not the same as “all economies.” The record of gold’s performance in all economies over the past century is not all “terrible.” Especially not in relation to areas that concern us today: growth, inflation or the frequency of bank crises. The problem here may lie not with the gold bugs but with those who work so hard to isolate them.

Gold’s Real Record

Conveniently enough, the gold record happens to have been assembled recently by a highly credentialed team at the Bank of England. In a December 2011 bank report, the authors Oliver Bush, Katie Farrant and Michelle Wright review three eras: the period of a traditional gold standard (1870-1913); the period of a gold-standard variant, the Bretton Woods gold-exchange standard (1948 to 1972); and a period of flexible exchange rates (1972-2008).

The report then looks at annual real growth per capita worldwide, over many nations. Such growth, they find, was stronger in the recent non-gold-standard modern period, averaging an annual increase of 1.8 percent per capita, than in the classical gold-standard period before 1913, when real per- capita gross domestic product increased 1.3 percent annually. Give a point to the gold disdainers.

But the authors also find that in the gold exchange standard years of 1948 to 1972 the world averaged annual per- capita growth of 2.8 percent, higher than the recent gold-free era. The gold exchange standard is a variant of the gold standard. That outcome doesn’t tell you we must go back to the gold exchange standard yesterday. But it does suggest that figuring out how the standard worked might prove a worthy, or at least not a ridiculous, endeavor.

Gold shone in other ways. In a gold-standard regime, money is backed by gold, so it’s impossible, or at least more difficult, for governments to inflate. Naturally the gold standard and Bretton Woods years therefore enjoyed lower rates of inflation compared with the most recent era. The gold standard endures a reputation for causing more banking crises than other monetary regimes. The Bank of England paper suggests gold stabilizes banks: The incidence of banking crises in the non-gold-standard period is higher than the incidence in the two gold periods.

“Overall the gold standard appeared to perform reasonably well against its financial stability and allocative efficiency objectives,” wrote Bush, Farrant and Wright.

Stable Markets

Markets and countries enjoyed relative stability in gold- standard years, and capital in those years flowed to worthy growth-generating projects. The main sacrifice in gold regimes that the authors identify is that governments lose authority to micromanage domestic economies. But given governments’ records, that may not be such a bad thing, either.

It all suggests that contempt for old gold hands such as Congressman Ron Paul of Texas might not be warranted. And that it might be interesting to peruse the numerous gold-related currency plans outside the door of the academic salon. Plenty of people, many former bankers, think it is time to pass laws returning the U.S. to some version, strong or weak, of the gold standard.

The Cynical Take on China’s PMI Index

Wednesday, 2 May 2012 4:00 AM

Economic data since the end of the first quarter has shown a marked deceleration across all economies. The reasons for the slowdown are not too hard to pinpoint, and include a downturn in the Chinese property market and fiscal austerity in Europe. It was revealed ths week that the U.K. and Spain have officially re-entered recession, or the dreaded double-dip, and many are forecasting much of Europe to be in recession before long. In China, measures to cool a red-hot property market are taking their toll, with property prices and property investment falling.

Amid these themes, interested parties parse the daily stream of economic numbers to understand where economies are heading. It is not uncommon for data to show conflicting signals, as evidenced this week by the much better than expected Chicago PMI index, only to be followed the next day by a worse than expected ISM manufacturing index. In China, two different sources provide purchasing manager indexes, and over the last few month’s, these indices have diverged to a record. Obviously, one of the indexes is wrong.

Next month will see the next release of these numbers, and it would not be surprising to see the inevitable return to correlation between China’s official data, and HSBC’s PMI.

As can be seen, the official Chinese PMI index has a history of over-estimating Chinese PMI relative to the HSBC PMI index. It is also clear that both, over-time do track each other. However, at important turning points, the officialy Chinese PMI is always erring to the upside. The cynical take on this divergence is that there is a concerted effort by Chinese statisticians to delay reality as long as is possible. Perhaps this time is different, and the HSBC PMI index is too pessimistic. However, judging from prior data, it would appear that the official Chinese PMI data is due for a sharp downward correction.

Indian Government Backs Down on Gold Excise Tax

Monday, 7 May 2012 4:00 AM

India decision to back down on an excise tax on gold jewellery could revitailze gold demand from India. In March of this year, India announced that it would increase import levies on gold, and impose an excise tax on gold jewellery. The moves caused an uproar in India’s jewellery industry and led to a nationwide strike by gold merchants. The government was quick to promise that it would review the measures in May, and with the recent decision to formally remove the excise tax, Indian gold demand is expected to recover.

While there are a multitude of factors impacting the gold market, the size of India’s gold market should not be underestimated. The following chart clearly shows India’s relative size in the gold market.

It should be noted that China has been rapidly growing as a source of gold demand, and is expected to oupace India in 2012. With the decision to reverse the excise tax however, India could yet maintain its top spot.

It seems unlikely that this change alone will reverse the relative stagnation in precious metal prices since late in the first quarter, but it certainly won’t hurt. More important will be the ongoing crisis in Europe, the general state of the global economy, and any decision by global central bankers to further ease monetary policy.

Take Advantage

Gainesville Coins is offering the 1 oz Gold PAMP/Credit Suisse gold bar at as low as $24.99 over spot. Gainesville Coins is offering the 100 oz Johnson Matthey Silver Bars at as low as $0.55 over spot.

Daily Dish: Gold and European Worries are Both Higher on Tuesday

Tuesday, 24 May 2011 4:00 AM
A weakening U.S. currency and further worries over euro-zone debt helped gold climb higher Tuesday. Gold for June delivery was up $8 (0.5%) to $1,523.30 an ounce on the Comex division of the New York Mercantile Exchange. Instability in the euro, dollar, and other global currencies has pushed investors towards a paperless safe-haven asset, and gold in particular is continuing to profit from market anxiety. The dollar index traded at 75.986, a dip from yesterday’s 76.125 level.

Investors are less enthused about silver – a slightly more volatile metal – this week. Despite some concern, however, silver for July delivery headed up 94 cents (2.7%) to $35.83 an ounce today.

Other metals followed gold and silver’s lead: copper for July delivery went up 2 cents (0.4%) to $4 a pound, July platinum added $6.10 (0.4%) to $1,762 an ounce, and June palladium gained $5.10 (0.7%) to $736.90 an ounce. Two new coins are seeing releases this month through the U.S. Mint: The 2011 American Buffalo Gold Proof Coin was released on May 19, 2011, and the Mint will be releasing the 2011 American Eagle Platinum Proof Coin this coming Thursday, May 26, 2011. The release of the American Eagle is part of the continuing release of the Proof Platinum Eagle series which debuted in 1997.

Utah Makes Gold and Silver Legal Currency

Tuesday, 24 May 2011 4:00 AM

The headlines is impressive, and for gold and silver
enthusiasts, long overdue. However, the
move is largely symbolic, with the only concrete impact being the elimination
of the state capital gains tax on the sale of gold and silver coins.

The law’s symbolic value is the message Utah legislators are
sending to the Federal government.
Essentially they are attempting to refocus Washington’s attention on
soaring debt levels, now over $14.5 trillion, and ongoing budget deficits,
around 10% per year, which is causing the money supply to rise ever
higher. The law is also aimed at the
Federal Reserve and its ultra-loose monetary policy. Notably, since 2008 this has included
quantitative easing, or the purchase of Treasury securities on the open market
in an effort to spur credit creation via lower interest rates. The impact of this action has been another
source of ever rising money supply.

Utah is leading a growing number of states that seem to have
growing concerns over the U.S. dollar.
Minnesota, North Carolina, Idaho, and at least nine other states have
drafted similar bills. Unlike the
Federal government, state and local governments are required to balance their
annual budgets. Washington’s proliferate
spending is clearly making many Americans increasingly wary.

The full Associated Press release can be read on the
following link: Click Here.

Daily Dish: Gold Benefits from Increased Euro-Zone Worries

Monday, 23 May 2011 4:00 AM
As anxiety rises over Europe’s sovereign debt, gold has profited, despite a stronger dollar. Gold for June delivery was up $6.50 today (0.4%) to $1,515.40 an ounce on the Comex division of the New York Mercantile Exchange. Silver was fluctuating between gains and losses, and last weighed in 18 cents down (0.5%), for a new level of $34.90 an ounce.

The U.S. dollar was gaining ground, trading at 76.195 – an increase from Friday’s close of 75.444 in North American trading. This new gain against the euro has only underlined Europe’s debt crises, causing gold to be seen as more appealing. U.S. stocks and other commodities were pushed lower at the start of the weak, reacting to negative macro data, nationally and internationally.

The latest data from China confirms worries that global economic recovery is slowing. This has affected industrial metals traditionally used for construction. Copper for July delivery was down 13 cents (3.4%) to $3.98 a pound; platinum for July delivery lost $11.40 (0.6%) to $1,758 an ounce, and palladium for June delivery dipped $7 (0.9%) to $728.70 an ounce.

Though not very apparent at gas pumps, oil has settled 2.4% lower, to $97.70 a barrel on the Comex.

A Snapshot of Central Bank Gold Reserves

Monday, 23 May 2011 4:00 AM
A Snapshot of Cetral Bank Gold Reserves

Perhaps the largest variable in the supply and demand picture for gold are the world’s central banks. According to the World Gold Council, as of the end of the first quarter of 2011, central banks of the world held about 18% of all above ground gold. Given the large size of central bank holdings, and the small number of owners this represents, decisions by central bankers on whether to add or subtract from their gold reserves can have a material impact on gold market dynamics.

A Brief History

According to the World Gold Council, central banks were net sellers of gold from 1989 to 2007, selling an average of 400-500 tons per year. These sales heavily weighed on gold prices, with prices hitting multi-year lows between 1999 and 2002 in what has become known in gold circles as the “Brown Bottom.” In 1999, Gordon Brown, then head of the U.K. central bank, decided to sell 395 tons of the 715 tons held by the Bank of England. The sale was completed in a series of 17 auctions between 1999 and 2002, and prices realized ranged between $256 and $296 per oz., a far cry from this morning’s price of $1,500 per oz.

While these prices were the absolute low for gold prices in recent history, it was not until the financial crisis of 2008 that central
bank gold activity, and consequently gold prices, began to see a significant change. Specifically, the massive stimulus spending by the Federal Government, and the dramatic easing of Federal Reserve monetary policy in late 2008 correspondent with a sharp drop-off in central bank gold sales. Following nearly a decade of selling 400-500 tons per year, in 2008 this halved to around 200-250 tons. By 2009 central bank sales dropped to just 30 tons, and in 2010, central banks became net buyers for the first time in 21 years. This trend has continued in 2011, with the central banks of China and Russia topping the buyer’s list as both countries further diversify their sizable dollar foreign currency reserves.

The following is a table of the largest official Central Bank gold reserves as of the first quarter 2011.

Top Official Gold Holdings	Tons Held
1. United States	8,133.5
2. Germany	3,401.0
3. IMF	2,814.0
4. Italy	2,451.8
5. France	2,435.4
6. China	1,054.1
7. Switzerland	1,040.1
8. Russia	792.3
9. Japan	765.2
10. Netherlands	612.5
11. India	557.7
12. ECB	502.1
Source: World Gold Council

Conclusions

The change in central bank gold activity has corresponded with gold’s steady climb from $700 per oz in November of 2008, during the worst of the financial crisis of 2008, to its current price of $1,500 per oz. Reasons for this change in attitude by central banks range from basic diversification, to concerns over Federal Reserve monetary policy and the U.S. government’s fiscal outlook. Indeed, since 2008, the Federal Reserve and the Federal government have collectively added $6 trillion to M3, the broadest measure of money supply. Given the still uncertain global economic outlook, central banks are expected to continue their net purchases. For precious metals investors, this represents a huge sea change, and provides strong underlying support for gold prices going forward.

Daily Dish: Gold Ends the Week on a Positive Note

Friday, 20 May 2011 4:00 AM
Gold was up more than 1% in early afternoon trading. Despite a stronger dollar, gold made gains on anxiety surrounding euro-zone debt. Gold for June delivery was up $20.70 (1.4%) to $1,513 an ounce on the Comex division of the New York Mercantile Exchange. This close is gold’s highest since May 10th. Silver for July delivery was also gaining ground, adding 35 cents (0.8%) to $35.22 an ounce.

The dollar index today was up to 75.415, an increase from yesterday’ level of 75.106. Although a strong U.S. currency generally pushes precious metals lower, the increasing worry over how to handle the dropping euro and rising eurozone debt has caused those holding the euro as currency to buy up safe-haven investments.

In other metals, copper for July delivery added 8 cents to $4.14 a pound, and platinum for July delivery lost $7.10 to $1,776.10 an ounce.

Crude oil was gaining ground today as more buyers took advantage of lower market prices. Crude for June added 51 cents to $98.95 a barrel on the New York Mercantile Exchange.

Copper is becoming more than an Industrial Metal

Thursday, 19 May 2011 4:00 AM
Copper is becoming more than an Industrial Metal

At Gainesville Coins, we have been experiencing a growing level of interest for copper coins and bars. We surmise that this is likely in response to both the extremely strong performance in the more traditional precious metal investments of Gold and Silver, and the ongoing concerns regarding the global economy and inflation. While it is likely that copper will continue to be considered primarily an industrial metal, we believe that the recent increase in demand for copper as a precious metals investment alternative will continue. With this in mind, Gainesville Coins is providing our customers this overview of copper and the copper market.

Recent Price History

Copper, like most commodities currently sit fairly close to their post 2008 crisis highs. Since the start of May, the entire commodity sector has seen a market correction. Current copper prices are just north of $4.00 per lb, off $0.60 or around 12% from the high of $4.57 per lb hit in February of 2011. This compares to the $3.42 per pound averaged in 2010 and the $1.28 per lb low hit on 12/28/2008 during the worst of the financial crisis of 2008. To put this in perspective, the average range seen for copper between early 2006 and early 2008, before the financial crisis, was between $3.00 per lb and $3.50 per lb. Before 2006, copper prices were well below $2.00 per lb, and before 2003, were below $1.00 per lb. So even with the 12% correction seen these last few months, copper prices remain well ahead of the average seen before the financial crisis hit, and over four times the prices seen before 2003.

What’s Driving Demand

The primary driver for copper price increases over the last few years has been the explosive economic growth among emerging market nations. This has primarily centered around what has become popularly known as the BRIC countries, or Brazil, Russia, India and China. It is worth noting that while most of the developed world had slipped into recession by the first quarter of 2009, the GDP of both China and India never slipped into negative territory. Russia and Brazil, both of whom are heavily reliant on commodity exports to developed economies, both fell into recession in 2009.

Like most developing economies, initial development is based on a growing export sector. Eventually, this gives way to a more balanced economy, split more evenly between domestic consumption and exports. For instance, after years of explosive export led growth, China’s growing middle class has become a large and rapidly growing force in China’s economy. To meet their growing aspirations, infrastructure development, ranging from electrical transmission lines, new housing developments, to cars and appliances, are being built. This is where copper demand comes in, because each of the examples provided has a significant copper component. With expectations that emerging market economies will continue to enjoy robust growth, particularly the BRIC nations, demand for copper is expected to remain strong. Meanwhile, despite the less than stellar rates of growth among developed nations, growth in much of the developed economies remains positive.

Investment demand for copper has been growing, but is still dwarfed by the metal’s industrial demand. We at Gainesville Coins would not be surprised to see copper’s investment demand continue to grow. While this may not be a big factor short-term, medium-term to longer-term, investment demand could become a significant factor in the demand picture for copper.

The Supply Side

On the supply side, one hears varying estimates on whether copper supply will be able to meet demand. There is no firm consensus among analysts and economists. What is known however, is that following the 2008 financial crisis, copper mining companies slashed output in response to the sharply lower level of demand seen in developed economies. As developed economies recovered through fiscal stimulus and monetary easing, copper demand has steadily risen. Since copper prices today are actually higher than the levels seen pre-crisis, it could be inferred that supplies have begun to tighten.

Compared to silver or gold, copper is relatively plentiful, and the rebound in prices has certainly made exploration and development of new copper prospects much more economical for the mining industry. Given the current state of copper pricing, growing investment demand, and expectations for BRIC led global economic growth in the years ahead, copper as an investment alternative is certainly worth consideration.

Daily Dish: Gold and Silver Settle Lower on Economic Data

Thursday, 19 May 2011 4:00 AM
Gold and silver both settled lower on Thursday, despite some fluctuation in earlier trading. Gold for June delivery lost $3.40 (0.2%) to $1,492.40 an ounce on the Comex division of the New York Mercantile Exchange. Silver for July delivery was down 17 cents (0.5%) to $34.93 a ounce. Silver traded higher for the earlier part of the floor session but ultimately lost some of yesterday’s gains because of discouraging macroeconomic reports.

Initial jobless claims were lower than expected, and retailers reported higher than expected earnings, pushing U.S. stocks into positive territory for the second day in a row.

Oil settled lower today, down 1.7% to $98.44 a barrel. Its downward dip is mostly based on disappointing economic data recently released.

Daily Dish: Selloff Eases, Metals Regain Ground, IMF Addresses Greece

Wednesday, 18 May 2011 4:00 AM
In a positive change from yesterday, the commodities selloff has eased, and gold and silver are regaining some lost ground. Gold for June delivery was up $15.20 (1%) to $1,494.60 an ounce on the Comex division of the New York Mercantile Exchange. Yesterday the yellow metal was down $10.60, its lowest level since April 14. Silver for July delivery was also up today, adding $1.44 (4.3%) to $34.93 an ounce. Yesterday’s close saw silver down to its lowest level since February 25.

The dollar index has been fluctuating in trading: early on in the session it was declining, while later levels measured U.S. currency up to 75.456- a gain on yesterday’s level of 75.441. Uncertainty remains over where the dollar is headed, though some analysts expect that it will not see strong gains again in the near future.

Other metals were also turning positive today. Copper for July delivery was adding 10 cents (2.4%) to $4.10 a pound; platinum for July delivery was adding $7.90 to $1,768.90 an ounce, and palladium for June delivery was up by $17.95 to $732.20 an ounce.

The automotive industry continues to impact the state of metals (particularly those used for industry), and companies in Japan are still trying to restart or improve their production. Crude oil has risen above $100 today, after reports that inventories have not changed, despite expectations of an increase, and on news that gasoline stockpiles have not risen as much as expected. Light, sweet crude for June delivery has added $3.56 (3.7%) to $100.48 a barrel on the New York Mercantile Exchange.

The International Monetary Fund (IMF) made headlines today after warning Greece that the country’s current set of financial reforms will not be sufficient to adequately combat its rising deficit. Despite this notice, however, European markets are not overly worried, after seeing a 0.5% rally in benchmark equity indices for Germany, France, and the U.K. The Euro is also rising by 0.2% today to a new level of 1.4265 against the U.S. dollar.

Precious Metals as an Inflation Hedge

Wednesday, 18 May 2011 4:00 AM
Inflation is defined as a general rise in the cost of goods and services over a period of time. Historically, it has been called the “silent tax” since the existence of inflation isn’t something that has been legislated by Congress, but its effect is exactly the same as a tax. Inflation reduces the level of purchasing power enjoyed from current savings and income.

For instance, the cost of a gallon of gasoline currently hovers around $4.00 per gallon and is over $1.00 per gallon more than 2010’s average. This rise in energy costs has been accompanied by a sharp rise in a range of commodities ranging from grain products to base metals. The major commodity indexes, which track similar baskets of all commodities, all hit post crisis highs on May 2nd, and have been the major force driving the relatively rapid rise in inflation rates seen year over year. As anyone who fills the gas tank or buys groceries will tell you, the cost of the basics have gone higher. Had this increase in general prices been accompanied by wage increases, or high rates of return on investments, most Americans wouldn’t be too concerned. But as each monthly employment report has shown, wage growth has been fairly stagnant over the past two years. Meanwhile, risk-free rates of return remain near historic lows.

Our government defines inflation in several ways. The two most common are the consumer price index (CPI), and the Gross Domestic Product (GDP)price deflator which accompanies the government’s quarterly GDP releases. Both of these figures have risen to post crisis highs, and currently show that inflation has risen to just under 4% year over year. While the sharp pullback seen in commodities since the start of May 2011 will dampen prices going forward, it is unclear at what level current inflation rates will stabilize at.

Why This Matters

With interest rates holding near record lows, the rate of return on risk free investments do not fully offset the loss of purchasing power caused by the current level of inflation. Treasury securities, CDs, savings accounts, and money market funds currently yield well below the current rate of inflation. Investors in such alternatives face the trade-off between the return of principal and the loss of purchasing power caused by inflation. Investors who wish to outpace the rate of inflation, and preserve the purchasing power of their savings are faced with much riskier options. Municipal or corporate debt securities expose the buyer to potential default risk while ongoing equity market volatility continues to make stock market returns, at best, a guessing game.

For many investors, precious metals specifically, and commodities in general, have become the alternative of choice in this low-return investing landscape. Unlike paper currencies, the supply of precious metals cannot be created from thin air. Deficit spending, and the now infamous quantitative easing by the Federal Reserve has created over $5 trillion additional dollars that did not exist prior to the 2008 financial crisis. While these actions have brought U.S. economic growth into positive territory, it has also come with sharp increases in commodity prices and inflation.

Despite recent economic growth, the pace of economic expansion remains well below what one would expect at this point in the cycle. Because of this, expectations remain for an extended period of accommodative monetary policy, with many asking when, and not if, Federal Reserve Chairman Bernanke will embark on another round of quantitative easing. Meanwhile, the Federal Government, which hit its self-imposed debt ceiling on May 1, 2011, is not expected to do much near term to address its persistent budget deficits. The consequences of ultra loose monetary policy by the Federal Reserve, and near 10% yearly deficits by the Federal governments is likely to be persistent weakness in the U.S. dollar, or stated another way, higher inflation.

Prospective precious metals investors should remember that the goal of the Federal Reserve is to maintain a rate of inflation of around 2%. It is their belief that a little inflation is good for the economy. Indeed, given the overleveraged state of the mortgage market, with Zillow.com recently estimating that 28% of U.S. homeowners are underwater on their mortgages, the federal government, and many state and local governments, a period of high inflation can be perceived as the best policy choice. Unfortunately for savers, this is not such good news, particularly when the risk free rate of return remains close to zero. Meanwhile, while Congress and the President haggle over needed deficit spending cuts , it is clear that both parties accept the need for ongoing near-term budget deficits. Putting the fiscal brakes on now would endanger an already weak recovery. So while the Treasury Secretary may repeat the oft-stated line that the U.S. supports a strong dollar policy, the actions of the Federal Government have certainly painted a different picture.

Through all this, precious metals, particularly gold, have performed remarkably well. Silver has been more volatile than gold, but returns on both have easily outpaced the rate of inflation. With the outlook on money printing by the Federal Government and the Federal Reserve remaining high, precious metals investing will remain on many investors radar screen as a way to preserve wealth from the effects of inflation.

Buying Physical or a Paper ETF

Wednesday, 18 May 2011 4:00 AM
Buying Physical or a Paper ETF

There has been an ongoing debate on whether investors should feel indifferent between paper silver and gold, best represented by the hugely popular SLV and GLD ETFs, versus holding physical gold and silver itself. At Gainesville Coins, we have always had concerns regarding these paper proxies. Below we outline our three main concerns.

Like any company’s stock or bond, risk factors for SLV and GLD are listed in their respective offering documents. The biggest red flag that owner’s of SLV or GLD should be aware of is the possibility of liquidity risk. For example, in the event that financial markets experience a bout of extraordinary market volatility, as seen in the autumn of 2008, the liquidity of SLV and GLD shares could be negatively impacted. Holders of SLV and GLD could find themselves holding shares that traded at a discount to the value of the underlying precious metal.

Another risk to SLV and GLD is custodial risk, or as stated in the prospectus of both trusts, “the custodian is responsible to the trust for loss or damage to the trust’s silver only under limited circumstances.” This means that if it can’t be proven that the custodian acted with negligence, fraud, in willful default of its obligations, or due to a breach of the custodian’s representation and warranties in the custodian agreement, losses incurred by shareholders in these ETFs would not be recoverable in the event the custodian failed to perform. For example if the custodian, or sub-custodian of either SLV or GLD were to discover that the grade of their precious metals holding were inferior to that which was required by the prospectus, or worse, if there were somehow a loss of physical inventory, holders of SLV and GLD would bear the loss unless the above circumstances were adjudicated in the trust’s favor. Additionally, in the event of a worst-case-scenario, such as a terrorist attack, natural disaster, or a nuclear war, investors in theses trust would not be covered for any custodial losses resulting from such events. Since a fair number of precious metal investors would include these possibilities as reasons for their investment, these ETF’s would clearly be unsuited to any investor with similar sentiments.

The final risk worth pointing out is regulatory risk, and relates to how the trusts were set up. Since these trusts are not registered as investment companies under the Investment Company Act of 1940, they are not subject to regulation by the Securities and Exchange Commission. Since they do not hold or trade commodity futures, they are not regulated by the Commodity Futures Trading Commission. This basically means the level of protection an investor would normally associate with either the SEC or CFTC is not required for shareholders of SLV or GLD. For instance, because SLV is not regulated by the CFTC, holders of such shares, “do not receive the disclosure document and certified annual report required to be delivered by a commodity pool operator.”

For those that wonder why this might be a concern, innovation in U.S. financial markets saw a sharp rise in largely unregulated financial products leading up to the financial crisis in 2008. For example, while subprime loans have long been a feature in U.S. banking, it is hard to see how the sub-prime market would have been able to capture nearly 40% of the mortgage market by 2007 without the ability of the big banks to hedge that risk through the use of unregulated credit default swaps. Whenever there is an unregulated innovation that skirts pre-existing regulatory safeguards, investors would be well-advised to know they are operating in an arena with less safeguards and disclosures.

Daily Dish: Commodities Selloff Continues

Tuesday, 17 May 2011 4:00 AM
Gold and silver futures continue to decline today, as the dollar gains ground and a selloff of other commodities carries on. Gold for June delivery was last down $7.80 (0.5%) to $1,482.80 an ounce on the Comex division of the New York Mercantile Exchange. Silver for July delivery was last recorded 35 cents lower (1.1%) to $33.75 an ounce. Some investors speculate that prices may trade as low as $30 an ounce.

Currently, gold has been gaining ground as eurozone debt pushes investors towards alternative funds, and losing ground as the dollar pulls ahead. The dollar index is currently up 0.2% to 75.721. Current levels for metals and commodities remain unstable, however, and the state of world markets, as well as U.S. currency, housing and consumer trends, industrial output, and oil supply, will remain large factors moving forward.

Platinum for July delivery was losing $3.50 (0.2%) to $1,756.30 an ounce, and June palladium was down 75 cents (0.1%) to $712.60 an ounce. Spot prices (live on Gainesvillecoins.com) indicate that gold is declining slightly, while platinum, palladium, and silver are on the rise.

As the dollar rises on eurozone anxiety, crude oil is being pushed lower. Oil was earlier recorded down $1.30 (1.4%) to $96.03 a barrel on the New York Mercantile Exchange.

Daily Dish: Oil Dips, Metals Climb to Start the New Week

Monday, 16 May 2011 4:00 AM
Gold futures were starting stronger this morning, as a weaker U.S. dollar and lower oil prices (under $100) helped increase interest in the yellow metal. Gold is enjoying a welcome upward turn versus Friday’s drop of over $13 an ounce. gold for June delivery was up $8 to $1,501.6 an ounce on the Comex division of the New York Mercantile Exchange. Earlier lows were around $1,486.

Silver was also adding to gains: July delivery was up 13.7 cents to $35.15 an ounce. Earlier lows registered around $34. Silver shares continue to rise and fall in reaction to global tension and selling pressure. Copper for July delivery saw an increase of 1 cent to $3.99 a pound, and platinum for July delivery added $1 to $1,770.30 an ounce. June palladium climbed $10.40 to $716.85 an ounce.

Ongoing debt issues and inflation concerns in the Eurozone are continuing to rock the world’s financial markets this week; conflict and tension has alternately driven up the price of oil and metals, and pushed it lower, while the U.S. dollar continues to fluctuate. The dollar index was last trading at 75.431, a dip from late Friday’s level of 75.761.

Daily Dish: Gold Retreats Below $1,500

Friday, 13 May 2011 4:00 AM
Gold futures are at their lowest level all week, as fears continue over Greece’s debt problems. Gold for June delivery declined $13.20 (0.9%) to $1,493.60 an ounce on the Comex division of the New York Mercantile Exchange. This marks its lowest settlement since May 6. Despite losses, gold is still holding onto a weekly gain of 0.1%.

Silver followed gold’s downward trend, with July’s contract losing 22 cents (0.6%) to $35.01 an ounce. Overall this week, silver has dipped 0.8%. Platinum followed suit, with July delivery losing $1.70 to $1,769.30 an ounce, a total loss of 1% this week. Palladium for June delivery was also lower, losing $10.40 (1.5%) to $706.45 an ounce. Palladium has dipped 1.4% this week.

Copper appears to be the outlier, as demand for the metal in China is remains high. July delivery rose 1 cent (0.3%) to a new level of $3.98 a pound, showing no large increases or decreases this week. Oil also staged a last-minute come-back. Crude oil prices for Jue delivery were up 68 cents (0.7%) to $99.65 a barrel on the New York Mercantile Exchange. Overall this week, crude oil has gained 2.5%.

The U.S. dollar, which has been rather weak during the month so far, has been turning higher recently. Its last dollar index level was at 75.764, an increase from yesterday’s level of 75.199. This new strength has pushed the euro down and taken some interest away from precious metals, which are generally seen as a safe haven against weaker U.S. currency.

Daily Dish: Silver Still Declining on Dollar’s Strength

Thursday, 12 May 2011 4:00 AM
Today’s Daily Dish is taken from Barrons.com – to read the website’s full update on financial markets today, follow this link. Enjoy!

Silver Keeps Tumbling, Down 5% As Dollar Finds Renewed Strength

Murray Coleman

With the U.S. dollar index rising to its highest level in three weeks…and concern about sovereign debt issues weakening euro zone growth, silver and gold futures are trading down on Thursday.
Silver for July delivery, the most active contract, is sliding by $2.02 to $33.49 an ounce on the Comex. That’s some 5.7% lower than yesterday’s settlement on the contract, but an improvement over earlier electronic trading when it fell more than 7%. Silver began shaving some of its losses after the Labor Department said that initial jobless claims fell 44,000 to a seasonally adjusted 434,000 in the week ended May 7. That was slightly more than what analysts had expected.

Meanwhile, gold contracts for June delivery are down $13.30 to $1,488.1 an ounce, off 0.9% from Wednesday’s settlement. The contract had been trading lower by more than 1% before the jobless claims numbers came out.

Other economic readings so far this morning showed that U.S. retail sales posted their smallest gain in nine months in April… The U.S. dollar index is up 0.13% at 75.42 and the PowerShares U.S. Dollar Index Bullish (UUP) is pointing up by 0.1%.

Daily Dish: Protests in Greece, Strength in U.S. Dollar Push Metals Down

Wednesday, 11 May 2011 4:00 AM
The dollar was gaining strength today, pushing metals down. The dollar index was last measured at 74.983 in North American trade, a rise from yesterday’s level of 74.700. Gold for June delivery lost $15.50 (1%) to $1,501.70 an ounce on the Comex division of the New York Mercantile Exchange. Silver for July was down $2.59 (6.7%) to around $35.90 an ounce in early afternoon trading. The latest updates show that, with a settlement quickly approaching, silver is down 8.6%.

Other metals were also having difficulty overcoming the dollar’s strength. Copper for July delivery has dropped 10 cents (2.6%) to $3.94 a pound.

Government studies showed a higher-than-expected increase for oil supplies, which has caused a 4.3% dip in crude oil. Earlier prices showed oil at $99.55 a barrel on the New York Mercantile Exchange.

Protests continue in Greece today, as government officials consider 76 billion euros ($109 billion) of planned expenditure reductions and asset sales. Greece is struggling against rising debt, which is affecting the state of other world financial markets this week. Greek unions protesters kept flights grounded, ferries docked, and hospitals and schools shut down today to protest Prime Minister George Papandreou’s decision to allow further spending cuts.

Daily Dish: Gold and Silver Level Out, Oil Climbs

Tuesday, 10 May 2011 4:00 AM
Gold and silver are continuing to recover today, while investors worry about Greece’s debt problems and the possibility of debt restructuring in that country. U.S. debt is also taking center stage as congress continues to debate the best course of action. Gold for June delivery was last up by about $13.70 (0.9%) to $1,516.90 an ounce. Silver for July delivery was up by $1.37 (3.7%) to $38.49 an ounce.

The oil trading market has been fluctuating today. Flooding along the Mississippi River has caused worry among investors, who fear that oil refinery operations in that area may be hindered as a result. Crude oil for June delivery was last up 45 cents to $103 a barrel. Oil futures have been as high as $103.666 and as low as $100.12 so far today – Monday saw a gain of 5.5%. Gasoline prices are also spiking as a result, with June gasoline seeing a 6.84 cent raise (2.1%) to a new high of $3.35 a gallon.

Numismatic collectors and investors were pleased to see U.S. Mint silver products featuring four proof sets reemerge last Thursday. Further good news was found in the knowledge that their prices remain unchanged, despite several weeks of absence.

Daily Dish: Precious Metals Back on Track

Monday, 9 May 2011 4:00 AM
Precious metals were marching towards recovery today, led by silver. Gold was back up to $1500 an ounce, ending at $1503.20 an ounce, following silver’s 6% gain. Silver futures for July delivery were last seen up $2.25 (6.4%) to $37.54 an ounce on the Comex division of the New York Mercantile Exchange. Overnight highs were at $37.98. Platinum for July delivery was up $8.60 to $1,795 an ounce, and June palladium was up $14.50 to a new level of $730.80 an ounce. Copper for July deliver saw a 6.3 cent increase to settle around $4.04 a pound.

The dollar gained some strength over the weekend, but precious metals may still have seen some support from political turmoil overseas – particularly in Syria and Bahrain, and in Egypt, where sectarian fighting worsened over the weekend.

Standard & Poor has downgraded Greece’s credit rating, causing a drop in the euro and a small gain for treasurys.

Daily Dish: Precious Metals Find Some Stability, U.S. Stocks Climb

Friday, 6 May 2011 4:00 AM
Silver and gold prices are stabilizing today, as oil turns lower. Gold futures were adding nearly 1%, with June futures rising $13.70 to $1,494.80 an ounce on the Comex division of the New York Mercantile Exchange. Gold’s positive progress is the opposite of yesterday’s close, when it lost 2.2% for its largest one-day percentage drop since mid-March.

Silver futures were fluctuating between gains and losses, but were last settling stronger. July delivery was up 1 cent to $36.25 an ounce. This is a direct opposite of silver’s poor performance yesterday, when it lost $3.15 (8%) to earn its biggest one-day percentage drop since the beginning of December, 2008. Its plunge was largely due to the increase in margins that caused a sharp selloff of the metal.

Precious metals have been taking advantage of political turmoil and fears of rising inflation to climb high, though many analysts speculate that this climb is now over.

Crude oil is also a little lower today, recently dropping below $100 a barrel – last levels for June delivery were $99.47 a barrel. U.S. Stocks have been rallying, increasing their levels after the government reported a much better than expected report of employment numbers.

Daily Dish: Precious Metals Selloff Continues, U.S. Mint Releases Total Sales Through End of April

Thursday, 5 May 2011 4:00 AM
Gold and silver futures were both dipping in trading today, extending their selloff in the wake of the latest increase in trading requirements for silver. Money required to put up to trade silver has been raised, and these higher margins are making it harder for some investors to participate in the market. Silver for July delivery was down $2.90 (7.3%) to $36.46 an ounce on the Comex division of the New York Mercantile Exchange. Silver has gained 60% up to this point in 2011, but with its recent drop of 25% on Friday its yearly gains are now at 18%. Gold for June delivery lost $29.20 (1.9%) to settle at $1,4186.40 an ounce. Wednesday’s percentage dip was the yellow metal’s largest one-day loss since mid-March.

Other metals have also been losing some ground; copper lost 12 cents per pound yesterday in New York trade.

U.S. currency remains weaker than in the recent past, but today added some strength: the dollar index was up to 73.639, compared to yesterday’s 73.095. Weekly applications for unemployment rose to their highest level since August, serving only to further underscore the weakness of the labor market. Crude oil responded to precious metals’ selloff and jobless claims by dropping 5%. Crude oil futures for June delivery were dipping $5.86 (5.3%) to a new level of $103.44 a barrel on the New York Mercantile Exchange

The United States Mint has released data indicating that through the end of April it has now sold 16,375,000 ounces of silver and 466,000 ounces of gold through its bullion coin programs.

Daily Dish: Precious Metals Futures Down, Mexico Buys Up Gold

Wednesday, 4 May 2011 4:00 AM
Silver and gold futures were dipping today, as reports came in that George Soros and John Burbank (both high-profile investors) had sold the precious metals. Silver for July delivery was down $1.32 (3%) to $41.24 an ounce on the Comex division of the New York Mercantile Exchange. Silver has lost 15% since Friday. Gold for June delivery was also down on Wednesday, dropping $1.20 to $1,539.10 an ounce on the Comex division of the New York Mercantile Exchange. Other metals were losing ground today, most notably, copper’s July delivery levels were declining 8 cents (2%) to $4.17 a pound. Despite the most recent drop for gold, however, Goldman Sachs maintains its positive opinion of the yellow metal, and analysts point out that gold is still one of the company’s preferred commodities. Demand for the precious metal is still ongoing, especially with world currencies fluctuating and widespread fears of inflation.

Support for gold’s rise has also come from news that Mexico’s central bank bought up almost 100 metric tons of gold during February and March. It previously had just 6.9 tons (up until January 2011), and then increased its holdings to 93.3 tons of bullion over the ensuing months. Analysts point to this as the most recent reinforcement of the idea that other emerging markets are steadily increasing their gold reserves in order to diversity their assets. Mexico is not alone in its gold-buying increase; Russia has acquired 18.8 tons and Thailand has increased its holdings by 9.3 tons.

Mexico’s peso is trading at strong levels against the dollar; U.S currency is currently at its lowest level vs. the euro since 2009. China, Japan, and South Korea are all rumored to be looking to their own currencies to settle trades, rather than relying on the dollar.

Daily Dish: Gold Futures Turn Lower, Oil Remains Volatile

Tuesday, 3 May 2011 4:00 AM
Gold futures were down 1.1% today, alongside silver’s selloff and a stronger U.S. dollar. Gold for June delivery was down $16.70 an ounce to a new level of $1,540.40 an ounce on the Comex Division of the New York Mercantile Exchange. Silver for July delivery was down 9.7% at last reading.

Analysts are warning that insecurities will continue for oil. The death of bin Laden has only pushed the Middle East into further turmoil, and the price of oil may be driven up as a result. Some analysts warn that if oil sees a 20% increase, it could cause a double-dip and further economic stress.

The dollar index was trading up from Monday: new levels were at 73.074, versus yesterday’s close of 73.054.

As reported by CoinNews, the collector Hot Springs National Park 5 Ounce Silver Uncirculated Coin may sell out before the Mint is scheduled to lift its one per coin household limit on Thursday. Last Thursday the Mint placed the coins on sale and had 27,000 available. By that night 19,000 had been sold, and as of yesterday afternoon only 2,000 were left.

Daily Dish: Precious Metals Drop on Weaker Dollar and News of Bin Laden’s Death

Monday, 2 May 2011 4:00 AM
Silver prices are down today, in contrast to gold’s midday recovery. Silver for July delivery was down $2.04 (4.3%) to $46.24 an ounce on the Comex division of the New York Mercantile Exchange. Earlier levels were as low as $42.20 (a 13% dip). Silver has been falling since the initial margin requirements for silver increased from $12.852 to $14.513 per silver futures contract. Since the metal did not make it to a new record level of over $50 an ounce at the end of last week, its prospects have weakened slightly.

Gold was initially down on news that Osama bin Ladin had been killed in a U.S.-led operation in Pakistan, but it recovered in afternoon trading as the dollar weakened. Gold for June delivery was up $7.10 (0.4%) to $1,563.4 an ounce. Earlier levels were down to $1,540.30 an ounce.

Crude oil was turning higher today, pulling strength from a weaker dollar. Crude for June delivery was up 49 cents (0.4%) to $114.38 a barrel on the New York Mercantile Exchange. Last week’s close was oil’s highest since September of 2008.

President Obama addressed the nation late Sunday night and confirmed that after a ten-year U.S. military-led manhunt, Osama bin Ladin had been killed. U.S. forces had been keeping a compound in Abbottabad, Pakistan, under surveillance for a number of months in the hopes of catching the terrorist there. President Obama advised those abroad that retaliation could be forthcoming, and that they should use caution as they traveled and lived outside of the U.S.’s borders. The President added that bin Ladin’s demise “should be welcomed by all who believe in peace and human dignity.”

Daily Dish: Gold Settles at Record

Friday, 29 Apr 2011 4:00 AM
Gold futures have climbed to over $25 an ounce today, as the U.S. dollar pushed buyers towards steadier investments. Gold for June delivery was last up $25.20 (1.7%) to a new level of $1,556.40 an ounce on the Comex division of the New York Mercantile Exchange. Overall this week, gold has gained 3.5%, and it has climbed 8.1% over the course of the month.

Silver is also performing high; July delivery was up 98.9 cents (2.1%) to $48.53 an ounce. Overall silver has gained 5.4% this week, and added 28% over the course of the month. Investors worry that silver’s spike may cause the metal to fall in coming weeks, but it is too soon to say how it will play out in the markets.

Climbing alongside precious metals against the dollar’s decline, oil was also adding to gains today: prices were last tracking at $113 a barrel.

The U.S. Mint recently began selling the debuting issue of its America the Beautiful Five Ounce Silver Uncirculated Coins series. Hot Springs 5 Oz Silver Uncirculated Coin were released yesterday at noon for the price of $279.95. A sell out is already looming, however, with demand so strong that just nine hours after its debut, the mint had already sold over 19,000 orders for the coin over both both the internet and by phone. Time is running out, as total mintage is only 27,000.

Daily Dish: Gold Still at Record Highs, Silver Climbing

Thursday, 28 Apr 2011 4:00 AM
A weaker dollar and an increase in jobless claims has helped gold extend its reach into record territory again today. Gold for June delivery was up $9.50 (0.6%) to $1,525.40 an ounce on the Comex division of the New York Mercantile Exchange. Silver is nearing $50; its earlier trading levels were as high as $49.35 an ounce, though most recently it was up $2.24 (4.8%) to $48.21 an ounce. There is some concern that silver may dip to around $41 in the future, if it cannot hold onto its record $50 or higher.

The dollar index dropped to 73.206 from 73.284 late Wednesday, as Federal chief Bernanke announced that interest rates will remain at their original levels, with the target rate unchanged at near 0%.

Gold in particular was also helped by Standard & Poor’s announcement that it may downgrade Japan’s sovereign-credit rating, which has put the yen under pressure alongside the dollar.

Daily Dish: Federal Reserve Keeps Historically Low Interest Rates, Precious Metals Steady

Wednesday, 27 Apr 2011 4:00 AM
The Federal Reserve today announced its decision to keep interest rates at historically low levels, with a target range of 0% to 0.25%. It also said it will end its bond-buying program of $600 billion at the end of June, as planned. The economic outlook is still less than positive; economists forecast a growth rate of about 1.7% this quarter – half the rate of the previous quarter.

Gold has been responding to the Fed’s decision by adding to earlier gains. Gold for June delivery was last up $6.90 to $1,510.30 an ounce on the Comex. Tuesday saw gold’s first low close in nine sessions. Silver for May delivery was adding 55 cents to $45.60 an ounce after climbing 20 cents higher just before the Fed’s announcement.

Crude oil and U.S. currency have also been gaining some strength; the dollar index was last up to 73.872, a gain from yesterday’s level of 73.789.

Continued interest in silver has caused a jump in sale of Morgan dollars, as well as other coins. It is still too early to say how much longer precious metals will continue to dominate world markets, and speculation abounds. Investors and collectors are still looking to gold and silver as a solid investment this month, and the U.S. Mint has already had to put a hold on the sale of several items due to overwhelming demand for its products.

Daily Dish: Precious Metals Still Below Record, Oil Hangs Onto High End of Prices

Tuesday, 26 Apr 2011 4:00 AM
Following a series of strong records, precious metals are declining slightly this week, with gold dipping below $1500. Losses are partly due to a climb in consumer confidence, and are also owing to the fact that the U.S. stock market is benefitting from more positive earning reports. Gold for June delivery was falling $9.20 (0.6%) to $1,499.90 an ounce on the Comex division of the New York Mercantile Exchange. Monday’s close for gold was at a record $1,509.10, a sixth consecutive high and its eighth straight day of gains.

Silver for May delivery was last down $2.22 (4.7%) to $44.93 an ounce, a dip from Monday’s close of $47.149 an ounce.

Investors and strategists disagree on gold and silver’s exact trajectory, though most agree that the outlook for the precious metals remains positive overall.

In other metals news, copper for May delivery was up 2.6 cents to a new level of $4.33 a pound, and platinum for July delivery was down $18.10 to $1,810 an ounce. June palladium was also dipping, losing $5.65 to $755.15 an ounce.

Oil has been making small gains and losses today in anticipation of Wednesday’s Federal Reserve statement policy, as well as in response to mixed data about the U.S.’s economic outlook. Crude oil for June delivery was last recorded down 26 cents (0.2%) to $112.06 a barrel on the New York Mercantile Exchange. Oil prices were further effected by an overnight power outage in Texas City, which cost refinery production about 800,000 barrels of U.S. refining capacity.

The dollar is still performing at weaker levels, and housing data continues to show decreasing house sales value.

Daily Dish: Precious Metals Back Down from Record Highs

Monday, 25 Apr 2011 4:00 AM
Gold and silver have backed down from last week’s record high levels, though they are still holding onto gains going into afternoon trading. Silver for May delivery was up 93 cents (2%) to $47.02 an ounce on the Comex division of the New York Mercantile Exchange. It had risen to a high of $49.82 in overnight trading. Gold for June delivery was adding $3.50 (0.2%) to $1,507.60 an ounce. Earlier levels were as high as $1,519.20, an intraday record.

Precious metals were aided in gains by the continuing dip in the value of U.S. currency. The dollar index was last recorded down to 74.098, compared with its previous level of 74.126 in last Thursday’s late-day trading.

Anticipation is building as the U.S. Federal Reserve’s report comes up; the announcement of a monetary policy decision is expected.

Crude, meanwhile, are losing ground today, to trade below $112 a barrel. Crude oil for June delivery was last down 62 cents (0.6%) to $111.67 a barrel on the New York Mercantile Exchange. Earlier levels were as high as $113.48 a barrel. As drivers in the U.S. continue to worry about the rising cost of gasoline, violence continues in the Middle East and North Africa. Some expect a long civil war in Libya, while government forces recently opened fire on protesters in Yemen.

Daily Dish: Gold and Silver Still Up, Debt Worries Increase

Friday, 22 Apr 2011 4:00 AM
For the third consecutive week, gold is advancing on a weaker dollar. Debt concerns and the dipping status of U.S. currency against other world currencies increased the yellow metal’s already-high appeal as a safe-haven investment. Silver is following close behind, up to its highest level in 31 years. Gold for immediate delivery rose about 1.4% this week, and touched a record level of $1,509.60 an ounce yesterday on the Comex division of the New York Mercantile Exchange. Silver for immediate delivery was up 2.1%, bringing its total gains to 11% this week. This is silver’s fifth week in a row of advances, and its highest weekly gain since February 18.

Investors are speculating that oil will continue to rise through the end of May. April has seen a 4% gain, and March recorded a 10% rise. Based on similar patterns observed in past years, it is likely that gold will not take a break from its increases until June. Particularly important is the summer traveling season; oil consumption increases significantly during those warm vacationing months, and investors and suppliers spend the spring trying to discern how high consumer spending will be.

The New York Mercantile Exchange is closed today in observance of Good Friday, and other world markets will be quiet during the Easter holiday weekend.

Daily Dish: Gold Tops $1,500, Dollar at 16-Month Low

Thursday, 21 Apr 2011 4:00 AM
Momentum-buying may be the driving force behind gold’s intraday record highs today. Gold for June delivery was last adding $8.50 (0.6%) to $1,508.10 an ounce on the Comex division of the New York Mercantile Exchange. Early afternoon trading saw an even higher record of $1,509.60 an ounce. So far this week, the precious metal has risen 1.5%, a gain of $22 since last Friday.

Silver has also been on the rise today, climbing more than 4% to trade above $46 an ounce. Analysts are waiting to see if silver will hit a record set in January of 1980, when it closed around $50 an ounce.

Copper for May delivery was up 6 cents (1.3%) to $4.39 a pound, while the dollar was last recorded at 73.967, down from 74.384 late yesterday. The dollar is currently at a 16-month low versus the British pound and the euro. This is the euro’s biggest gain on the dollar since January.

Investors are keeping a close eye on major stock and bond markets, since markets around the world will be closed tomorrow, in observance of Good Friday.

Daily Dish: Gold, Silver, Palladium Rise

Wednesday, 20 Apr 2011 4:00 AM
Gold futures are up above $1500 an ounce today on hedge appeal. The dollar is still dropping sharply, and investors are looking to build up safe-haven assets against U.S. and European debt woes, as well as in response to S&P’s recent outlook cut on the U.S. sovereign rating. Gold for June delivery was last up $6.60 (0.4%) to $1,501.60 an ounce on the Comex division of the New York Mercantile Exchange. Earlier recorded levels for gold were as high as $1,506.20 an ounce.

Silver was rallying to higher levels, with May delivery up 75 cents (1.7%) to $44.67 an ounce – a thirty-one year high. Copper for May delivery was gaining 7 cents (1.6%) to $4.30 a pound, and platinum for July delivery was up $35.40 (2%) to $1,806.70 an ounce. June palladium was also rising, with June contract up $25.90 (3.5%) to $757 an ounce.

Crude oil is now above $111 a barrel, after weekly inventories showed that there has been an unexpected decline in supply. Crude for June delivery is so far up $2.98 (2.8%) to $111.28 a barrel. If oil holds onto these levels, it will be its highest close since April 8th.

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