By Pham-Duy Nguyen
May 12 (Bloomberg) -- Gold futures rose to a record for the second straight day as financial turmoil in Europe spurred demand for an alternative to currencies.
Gold priced in euros, British pounds and Swiss francs also rallied to all-time highs on concern that a plan to rescue Europe’s indebted nations will slow the region’s economic recovery and devalue the 16-nation common currency.
“Gold is expensive, but people in the euro zone are moving out of their currencies and forcing themselves into gold,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “There’s a lot of fear on the part of the Europeans that moves to mitigate their debt crisis will only lead to more problems. People want to be in the currency of last resort.”
On the Comex in New York, gold futures for June delivery rose $22.80, or 1.9 percent, to $1,243.10 an ounce. Earlier, the price reached $1,247.70, the highest ever.
The euro has dropped 12 percent against the dollar this year on concern that budget deficits in Greece, Spain and Portugal will escalate. Over the weekend, the European Union and the International Monetary Fund announced a rescue package of almost $1 trillion.
Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, have advanced 5.2 percent this year to a record.
“The whole bailout is quantitative easing across all of Europe,” said Michael Guido, the director of hedge-fund sales at Macquarie Bank Ltd. in New York, who expects gold to rise to $1,500 by the end of the year. “You’re seeing this big rush into gold ETFs, physical bars and coins out of Europe that’s supporting the thesis that gold is the default currency.”
Read Entire Article
Showing posts with label Gold. Show all posts
Showing posts with label Gold. Show all posts
Wednesday, May 12, 2010
Tuesday, May 11, 2010
The Gold Standard, A Case For Another Look
By Sean Fieler and Jeffrey Bell
The Wall Street Journal
Friday, May 7, 2010
Washington's elites are quietly preparing a post-election fiscal compromise that will fund much of President Barack Obama's domestic spending agenda with huge tax increases. They aim to create a value-added tax and will argue that there is no alternative even though doing so will leave the United States resembling the stagnant, bureaucratic nations of Western Europe.
But there is an alternative. The U.S. could return to a gold standard, a system that would not only prevent the government from running chronic budget deficits but would also curb attempts to manipulate the value of the dollar for political reasons.
The value of a gold standard was proven in the 19th century. Following the English parliament's passage of the Coinage Act in 1816, which created a gold standard in England in collaboration with the semi-private Bank of England, gold gradually displaced copper and silver to become the world's sole final currency. In doing so, gold established ground rules for international trade and integrated the world's economy. Countries that adopted the international gold standard prospered. This remarkably successful monetary system only blew apart with the outbreak of World War I in 1914.
Read Entire Article
The Wall Street Journal
Friday, May 7, 2010
Washington's elites are quietly preparing a post-election fiscal compromise that will fund much of President Barack Obama's domestic spending agenda with huge tax increases. They aim to create a value-added tax and will argue that there is no alternative even though doing so will leave the United States resembling the stagnant, bureaucratic nations of Western Europe.
But there is an alternative. The U.S. could return to a gold standard, a system that would not only prevent the government from running chronic budget deficits but would also curb attempts to manipulate the value of the dollar for political reasons.
The value of a gold standard was proven in the 19th century. Following the English parliament's passage of the Coinage Act in 1816, which created a gold standard in England in collaboration with the semi-private Bank of England, gold gradually displaced copper and silver to become the world's sole final currency. In doing so, gold established ground rules for international trade and integrated the world's economy. Countries that adopted the international gold standard prospered. This remarkably successful monetary system only blew apart with the outbreak of World War I in 1914.
Read Entire Article
Monday, May 10, 2010
Will Silver (And Gold) Prices Rise Now that the Feds Are Launching Criminal and Civil Investigations Into Manipulation of the Silver Market?
(George Washington Blog) The Feds are launching criminal and civil investigations into manipulation of the silver market by JP Morgan.
As the New York Post points out:
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.
JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.
Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.
The probes stem from testimony from whistleblower Andrew Maguire - a London metals trader formerly of Goldman Sachs - saying that gold and silver bullion markets are rigged that (and see this). One of his specific allegations is that JP Morgan has been fraudulently suppressing the price of silver.
Omnis' Jim Rickards, GATA's Adrian Douglas and others have also demonstrated that the big bullion dealers and ETFs don't have nearly as much as physical bullion as they claim.
This could cause a rise in the price of silver (and gold) if either one of the following occurs:
(1) The investigations cause the price suppression schemes to stop, as the price manipulators know that someone is watching. If the suppression stops, the prices will naturally rise.
or
(2) The investigations cause enough investors to lose confidence and demand physical delivery of silver (or gold). Because there is less physical metals than claimed (and more paper derivatives), enough demand for physical delivery would reveal the game of musical chairs for what it is, driving the price of physical metals higher.
Of course, if enough investors hear about the investigations, that alone could cause more people to buy silver (and gold), thus driving up prices.
As the New York Post points out:
Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.
JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.
Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.
The probes stem from testimony from whistleblower Andrew Maguire - a London metals trader formerly of Goldman Sachs - saying that gold and silver bullion markets are rigged that (and see this). One of his specific allegations is that JP Morgan has been fraudulently suppressing the price of silver.
Omnis' Jim Rickards, GATA's Adrian Douglas and others have also demonstrated that the big bullion dealers and ETFs don't have nearly as much as physical bullion as they claim.
This could cause a rise in the price of silver (and gold) if either one of the following occurs:
(1) The investigations cause the price suppression schemes to stop, as the price manipulators know that someone is watching. If the suppression stops, the prices will naturally rise.
or
(2) The investigations cause enough investors to lose confidence and demand physical delivery of silver (or gold). Because there is less physical metals than claimed (and more paper derivatives), enough demand for physical delivery would reveal the game of musical chairs for what it is, driving the price of physical metals higher.
Of course, if enough investors hear about the investigations, that alone could cause more people to buy silver (and gold), thus driving up prices.
Wednesday, May 5, 2010
Mystery Abounds With IMF's Latest Gold Sale
(GATA) - Another unexplained sale of gold by the International Monetary Fund turned up today in another Reuters story based on another statement from the World Gold Council.
This time the sale is said to have been 18.5 tonnes unloaded in March. Two weeks ago the WGC reported that the IMF had sold 5.6 tonnes in February. (See http://www.gata.org/node/8578.)
Once again the IMF apparently has issued no formal statement about the most recent sales, disclosure coming only because the WGC thumbed through the IMF's monthly International Financial Statistics report and mentioned it to a select reporter or two. (No press release about the sales seems to have been posted at the WGC's Internet site either.)
But then the IMF isn't talking much about its supposed gold lately, having refused last month to respond even cursorily to some pointed questions from Business Insider's Vince Veneziani (see http://www.gata.org/node/8583), questions that were similar to questions put to the IMF by GATA itself in April 2008 and evaded just as badly. (See http://www.gata.org/node/6242).
GATA knows of two investment houses that recently applied to the IMF to purchase some of its supposed gold and were refused, one of them being Sprott Asset Management in Toronto. (See http://www.gata.org/node/8511.) Since the money of those investment houses presumably is as good as anyone else's, since the IMF for years has been issuing dozens of statements about selling gold for every actual sale made, and since the IMF as recently as last November issued a detailed statement about its supposed sale of 200 tonnes to India (see http://www.gata.org/node/7971), the IMF's unusual silence about its two most recent sales invites suspicion and speculation about where the gold is going.
If it's not going to investment houses that want to buy it and if its destination cannot be disclosed lest the markets figure out what is happening, is the gold being used to plug holes in the increasingly leaky dike of Western central bank and bullion bank gold price suppression?
Is the gold being rationed to members of the London Bullion Market Association, whose impossibly short positions in gold and silver were disclosed over the last six months in reports by GATA board member Adrian Douglas (see http://www.gata.org/node/7908, http://www.gata.org/node/7911, and http://www.gata.org/node/8388) and then candidly confirmed by CPM Group founder Jeffrey M. Christian at the March 25 hearing of the U.S. Commodity Futures Trading Commission (see http://www.gata.org/node/8478)?
It's too bad that the World Gold Council, which reportedly has an annual budget above $60 million, doesn't press these questions after thumbing through those subtle IMF reports. But then it's too bad that the World Gold Council exists mainly to ensure that there never is a world gold council.
Today's Reuters story is appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
IMF Sold 18.5 Tonnes of Gold in March vs 5.6 Tonnes in February
From Reuters
via Yahoo News
Tuesday, May 4, 2010
http://asia.news.yahoo.com/rtrs/20100505/tbs-gold-imf-sale-7318940.html
NEW YORK -- The International Monetary Fund sold 18.5 tonnes of gold in March under the second phase of its gold sales program, industry group World Gold Council said on Tuesday.
The IMF's sales, which totaled 5.6 tonnes in February, are taking place under the umbrella of the third Central Bank Gold Agreement, which began in September 2009. Signatories of the CBGA are largely euro zone central banks, the largest gold holder of which is Germany.
Natalie Dempster, WGC's director of government affairs, said IMF released the data in its monthly International Financial Statistics publication.
Total sales under the pact, which limits signatories' gold sales to 400 tonnes a year, were just 7.2 tonnes to April 20.
The IMF began its planned sales of 403.3 tonnes of gold last year. It sold 200 tonnes to India and smaller amounts to Sri Lanka and Mauritius last year.
The price of gold gained almost 6 percent in April, its biggest one-month rise since November, as the credit ratings downgrades of Greece, Spain, and Portugal, sparked a flight to safety into the metal.
This time the sale is said to have been 18.5 tonnes unloaded in March. Two weeks ago the WGC reported that the IMF had sold 5.6 tonnes in February. (See http://www.gata.org/node/8578.)
Once again the IMF apparently has issued no formal statement about the most recent sales, disclosure coming only because the WGC thumbed through the IMF's monthly International Financial Statistics report and mentioned it to a select reporter or two. (No press release about the sales seems to have been posted at the WGC's Internet site either.)
But then the IMF isn't talking much about its supposed gold lately, having refused last month to respond even cursorily to some pointed questions from Business Insider's Vince Veneziani (see http://www.gata.org/node/8583), questions that were similar to questions put to the IMF by GATA itself in April 2008 and evaded just as badly. (See http://www.gata.org/node/6242).
GATA knows of two investment houses that recently applied to the IMF to purchase some of its supposed gold and were refused, one of them being Sprott Asset Management in Toronto. (See http://www.gata.org/node/8511.) Since the money of those investment houses presumably is as good as anyone else's, since the IMF for years has been issuing dozens of statements about selling gold for every actual sale made, and since the IMF as recently as last November issued a detailed statement about its supposed sale of 200 tonnes to India (see http://www.gata.org/node/7971), the IMF's unusual silence about its two most recent sales invites suspicion and speculation about where the gold is going.
If it's not going to investment houses that want to buy it and if its destination cannot be disclosed lest the markets figure out what is happening, is the gold being used to plug holes in the increasingly leaky dike of Western central bank and bullion bank gold price suppression?
Is the gold being rationed to members of the London Bullion Market Association, whose impossibly short positions in gold and silver were disclosed over the last six months in reports by GATA board member Adrian Douglas (see http://www.gata.org/node/7908, http://www.gata.org/node/7911, and http://www.gata.org/node/8388) and then candidly confirmed by CPM Group founder Jeffrey M. Christian at the March 25 hearing of the U.S. Commodity Futures Trading Commission (see http://www.gata.org/node/8478)?
It's too bad that the World Gold Council, which reportedly has an annual budget above $60 million, doesn't press these questions after thumbing through those subtle IMF reports. But then it's too bad that the World Gold Council exists mainly to ensure that there never is a world gold council.
Today's Reuters story is appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
IMF Sold 18.5 Tonnes of Gold in March vs 5.6 Tonnes in February
From Reuters
via Yahoo News
Tuesday, May 4, 2010
http://asia.news.yahoo.com/rtrs/20100505/tbs-gold-imf-sale-7318940.html
NEW YORK -- The International Monetary Fund sold 18.5 tonnes of gold in March under the second phase of its gold sales program, industry group World Gold Council said on Tuesday.
The IMF's sales, which totaled 5.6 tonnes in February, are taking place under the umbrella of the third Central Bank Gold Agreement, which began in September 2009. Signatories of the CBGA are largely euro zone central banks, the largest gold holder of which is Germany.
Natalie Dempster, WGC's director of government affairs, said IMF released the data in its monthly International Financial Statistics publication.
Total sales under the pact, which limits signatories' gold sales to 400 tonnes a year, were just 7.2 tonnes to April 20.
The IMF began its planned sales of 403.3 tonnes of gold last year. It sold 200 tonnes to India and smaller amounts to Sri Lanka and Mauritius last year.
The price of gold gained almost 6 percent in April, its biggest one-month rise since November, as the credit ratings downgrades of Greece, Spain, and Portugal, sparked a flight to safety into the metal.
Wednesday, April 28, 2010
Sprott: Gold Looks Better Than It Ever Has
By: Julie Crawshaw
(MoneyNews.com) Sprott Asset Management CEO Eric Sprott is very long on gold and not very optimistic about cyclical metals like copper.
“Gold looks better today than it ever did before,” Sprott says, because of ongoing sovereign debt concerns in Greece and other "PIIGS" nations — Portugal, Italy, Ireland, Greece and Spain — as well as easy monetary policies across the globe.
“Some of the smartest investors in the world” are bullish on gold, the Canadian hedge fund manager says.
Tuesday, Gold for June delivery jumped $8.20 to settle at $1,162.20 an ounce on the Comex division of the New York Mercantile Exchange.
Meanwhile, “I still have a deep, deep concern over leverage in the banking system,” Sprott said, noting the inability of governments who are spending vast amounts of money to generate much growth in GDP.
Read Entire Article
(MoneyNews.com) Sprott Asset Management CEO Eric Sprott is very long on gold and not very optimistic about cyclical metals like copper.
“Gold looks better today than it ever did before,” Sprott says, because of ongoing sovereign debt concerns in Greece and other "PIIGS" nations — Portugal, Italy, Ireland, Greece and Spain — as well as easy monetary policies across the globe.
“Some of the smartest investors in the world” are bullish on gold, the Canadian hedge fund manager says.
Tuesday, Gold for June delivery jumped $8.20 to settle at $1,162.20 an ounce on the Comex division of the New York Mercantile Exchange.
Meanwhile, “I still have a deep, deep concern over leverage in the banking system,” Sprott said, noting the inability of governments who are spending vast amounts of money to generate much growth in GDP.
Read Entire Article
Tuesday, April 20, 2010
Sprott's John Embry Discusses Gold Manipulation
Tyler Durden
ZeroHedge
"While on the subject of gold manipulation, last month I referred to the cartel's specific modus operandi on those days when its members choose to take gold lower. However, this is only one of their ploys.
Another page in their playbook relates to keeping enthusiasm in the gold sector as subdued as possible. Gold is seldom, if ever, allowed to rise more than two percent on a given day. If strong buying propels gold higher, massive selling inevitably appears when it has risen two percent and continues until gold is stopped dead in its tracks. The next day, to ensure that there is no follow-through fervor, any further upside is capped at a one percent gain.
Following that, gold is held in check until the long speculators who propelled the original rise lose patience. At that point, the cartel looks for an opportunity to clean them out. I realize this sounds pretty Machiavellian but I can only point to the trading patterns as confirmation." John Embry of Sprott Asset Management
Read Entire Report
ZeroHedge
"While on the subject of gold manipulation, last month I referred to the cartel's specific modus operandi on those days when its members choose to take gold lower. However, this is only one of their ploys.
Another page in their playbook relates to keeping enthusiasm in the gold sector as subdued as possible. Gold is seldom, if ever, allowed to rise more than two percent on a given day. If strong buying propels gold higher, massive selling inevitably appears when it has risen two percent and continues until gold is stopped dead in its tracks. The next day, to ensure that there is no follow-through fervor, any further upside is capped at a one percent gain.
Following that, gold is held in check until the long speculators who propelled the original rise lose patience. At that point, the cartel looks for an opportunity to clean them out. I realize this sounds pretty Machiavellian but I can only point to the trading patterns as confirmation." John Embry of Sprott Asset Management
Read Entire Report
Monday, April 12, 2010
Will Fraud Lift Gold Prices to $10,000/Ounce?
Geena Paul
CommodityOnline
April 6, 2010
After the sub-prime catastrophe in banking and realty sector, which led to the global recession in 2008-09, it is the turn of bullion markets now.
‘FRAUD’, that is the one word which comes to any investor’s mind when s/he reads about the Commodity Futures Trading Commission (CFTC) hearing on manipulations in bullion market by gold cartels.
So, the small and clean investors have been short-changed by big cartels during the past many years, especially during the recent boom time in bullion markets. Otherwise, how will you explain the biggest boom in paper gold (Exchange Traded Funds, ETFs) in the recent past with hardly any gold available in the market.
In fact, there is no gold left in this world if all the Gold ETFs ask for physical delivery. And, if that happens only god knows what will be the gold prices in the coming months — $10000 per ounce? Maybe, even more. Because, price of a commodity which is not available at all can go up to any level due to the sheer fact that it is not there in the market.
Read entire article
CommodityOnline
April 6, 2010
After the sub-prime catastrophe in banking and realty sector, which led to the global recession in 2008-09, it is the turn of bullion markets now.
‘FRAUD’, that is the one word which comes to any investor’s mind when s/he reads about the Commodity Futures Trading Commission (CFTC) hearing on manipulations in bullion market by gold cartels.
So, the small and clean investors have been short-changed by big cartels during the past many years, especially during the recent boom time in bullion markets. Otherwise, how will you explain the biggest boom in paper gold (Exchange Traded Funds, ETFs) in the recent past with hardly any gold available in the market.
In fact, there is no gold left in this world if all the Gold ETFs ask for physical delivery. And, if that happens only god knows what will be the gold prices in the coming months — $10000 per ounce? Maybe, even more. Because, price of a commodity which is not available at all can go up to any level due to the sheer fact that it is not there in the market.
Read entire article
Saturday, April 10, 2010
LTCM General Counsel On Debt Denial: "There Is Little Time To Avoid Catastrophe And Almost No Exit", Suggests Gold Price Of $5,500
Debt Denial, by James Rickards in The Daily Caller
The sovereign debt crisis has crossed a threshold. It’s no longer about economics. It’s about math and a complex system whose dynamics tell us there is little time to avoid catastrophe and almost no exit. Going forward, elections and policies will matter less as the debt plague takes hold and dictates hard outcomes.
It is the case that real debt cannot be repaid through any feasible combination of growth and taxes. We will soon arrive at the point where it cannot be rolled over. Debt includes contingent liabilities as well as bonds. In the U.S., this means social security, healthcare and housing obligations estimated at over $60 trillion. That does not include unfunded pension obligations of the states whose plans use fanciful 8% growth assumptions to limit contributions. Pension debt grows exponentially; a toxic brew of increased benefits, contribution shortfalls and anemic performance.
Even what we call money is debt. Paper money is a contract between citizen and government. As with any contract, it pays to read the fine print. Embossed on each U.S. bill is the phrase “Federal Reserve Note.” Give the Fed credit for full disclosure; these notes are liabilities. If the Fed’s mortgage assets were marked-to-market the Fed itself would be insolvent. In short, it’s all debt. Wealth is illusory if it involves a claim payable in dollars which are but a claim on an insolvent central bank backed only by its ability to print more debt. The situation is worse in the UK, Europe and Japan. The global financial system is a rope of sand.
If this system is illusory, how has it prospered over centuries? The answer is that for many years governments ran surpluses and at times had no debt at all. Growth was robust providing support to the tax base. Governments had the trust of bond markets to rollover maturing obligations. With some fits and starts, tangible wealth creation outpaced debt creation. And until recently paper money was backed by gold at fixed rates of exchange. Today all four legs of the table – surpluses, growth, trust and gold are gone or damaged.
There is no prospect for surpluses; nations hit the brink of disorder at the mere mention of 3% deficit-to-GDP ratios. Growth prospects are likewise dim given current policy. Obama grew spending on a feed-the-beast theory that forces taxes to rise to match spending. If Obama does not get his way, deficits will be ruinous. If he does get his way, taxes will stifle growth. You cannot tax your way to solvency in a world of low growth and compound interest.
As for market trust, go ask the Greeks. Each bond buyer has a critical threshold where he will not buy another bond. Picture bond buyers as theatre patrons. The image of someone yelling “fire” and patrons rushing out in a panic is familiar. More intriguing is the case in which just a few patrons rush out for no apparent reason. Do those remaining follow suit or stay seated? It depends on their individual thresholds. If high enough, everyone remains seated. But if some thresholds are low, those patrons leave too triggering other thresholds and so on until a cascade of exits empties the theatre.
In markets, the array of individual thresholds is immensely complex. The scale, interdependence and adaptability of market participants today are greater than ever. It would take very little to trigger a wholesale revulsion with sovereign debt.
What about gold? The view is that systems on a gold standard system cannot increase money supply as needed; of course, that’s the whole idea. Increasing money beyond the modest levels at which gold supply grows is the Keynesian remedy. But empirical evidence shows the so-called Keynesian multiplier is fractional and therefore a wealth destroyer. Another attack on gold is that there’s not enough of it to support money supply; but of course there’s always enough gold; it’s just a question of price.
The U.S. has never truly gone off the gold standard. The U.S. gold hoard today has a dollar value equal to about 20% of U.S. M1 money supply – a respectable ratio even in the heyday of the fractional gold standard. A gold price of $5,500 per ounce would comfortably support a broader U.S. money supply on a one-to-one ratio and maintain confidence in the dollar and U.S. sovereign debt.
Is there an exit? One path involves hyperinflation to destroy the real value of debt followed by redenomination and a new paper money game. The other path involves a gold backed currency at a non-deflationary price. This is a choice between denial and frank talk. Sound money leads to sound growth and the creation of real, not illusory, wealth.
James G. Rickards is a director of Omnis, Inc. and former general counsel of Long-Term Capital Management. Follow him at twitter.com/JamesGRickards.
The sovereign debt crisis has crossed a threshold. It’s no longer about economics. It’s about math and a complex system whose dynamics tell us there is little time to avoid catastrophe and almost no exit. Going forward, elections and policies will matter less as the debt plague takes hold and dictates hard outcomes.
It is the case that real debt cannot be repaid through any feasible combination of growth and taxes. We will soon arrive at the point where it cannot be rolled over. Debt includes contingent liabilities as well as bonds. In the U.S., this means social security, healthcare and housing obligations estimated at over $60 trillion. That does not include unfunded pension obligations of the states whose plans use fanciful 8% growth assumptions to limit contributions. Pension debt grows exponentially; a toxic brew of increased benefits, contribution shortfalls and anemic performance.
Even what we call money is debt. Paper money is a contract between citizen and government. As with any contract, it pays to read the fine print. Embossed on each U.S. bill is the phrase “Federal Reserve Note.” Give the Fed credit for full disclosure; these notes are liabilities. If the Fed’s mortgage assets were marked-to-market the Fed itself would be insolvent. In short, it’s all debt. Wealth is illusory if it involves a claim payable in dollars which are but a claim on an insolvent central bank backed only by its ability to print more debt. The situation is worse in the UK, Europe and Japan. The global financial system is a rope of sand.
If this system is illusory, how has it prospered over centuries? The answer is that for many years governments ran surpluses and at times had no debt at all. Growth was robust providing support to the tax base. Governments had the trust of bond markets to rollover maturing obligations. With some fits and starts, tangible wealth creation outpaced debt creation. And until recently paper money was backed by gold at fixed rates of exchange. Today all four legs of the table – surpluses, growth, trust and gold are gone or damaged.
There is no prospect for surpluses; nations hit the brink of disorder at the mere mention of 3% deficit-to-GDP ratios. Growth prospects are likewise dim given current policy. Obama grew spending on a feed-the-beast theory that forces taxes to rise to match spending. If Obama does not get his way, deficits will be ruinous. If he does get his way, taxes will stifle growth. You cannot tax your way to solvency in a world of low growth and compound interest.
As for market trust, go ask the Greeks. Each bond buyer has a critical threshold where he will not buy another bond. Picture bond buyers as theatre patrons. The image of someone yelling “fire” and patrons rushing out in a panic is familiar. More intriguing is the case in which just a few patrons rush out for no apparent reason. Do those remaining follow suit or stay seated? It depends on their individual thresholds. If high enough, everyone remains seated. But if some thresholds are low, those patrons leave too triggering other thresholds and so on until a cascade of exits empties the theatre.
In markets, the array of individual thresholds is immensely complex. The scale, interdependence and adaptability of market participants today are greater than ever. It would take very little to trigger a wholesale revulsion with sovereign debt.
What about gold? The view is that systems on a gold standard system cannot increase money supply as needed; of course, that’s the whole idea. Increasing money beyond the modest levels at which gold supply grows is the Keynesian remedy. But empirical evidence shows the so-called Keynesian multiplier is fractional and therefore a wealth destroyer. Another attack on gold is that there’s not enough of it to support money supply; but of course there’s always enough gold; it’s just a question of price.
The U.S. has never truly gone off the gold standard. The U.S. gold hoard today has a dollar value equal to about 20% of U.S. M1 money supply – a respectable ratio even in the heyday of the fractional gold standard. A gold price of $5,500 per ounce would comfortably support a broader U.S. money supply on a one-to-one ratio and maintain confidence in the dollar and U.S. sovereign debt.
Is there an exit? One path involves hyperinflation to destroy the real value of debt followed by redenomination and a new paper money game. The other path involves a gold backed currency at a non-deflationary price. This is a choice between denial and frank talk. Sound money leads to sound growth and the creation of real, not illusory, wealth.
James G. Rickards is a director of Omnis, Inc. and former general counsel of Long-Term Capital Management. Follow him at twitter.com/JamesGRickards.
Thursday, April 8, 2010
Inflation Warning Etched in Steel
Bill Fleckenstein
MSN Money
April 5, 2010
Pretend it’s 1933, as so many in the deflation camp think it is or soon will be (at least from the price-of-everything standpoint). If last Wednesday you reached for a copy of that day’s Financial Times, would you have expected to see the following headline — “Steel prices set to soar: Everyday goods will cost more” — in large print above the fold?
I don’t think so.
The newspaper went on to say: “Global steel prices are set to rise by up to a third, pushing up the cost of everyday goods from cars to domestic appliances, after miners and steelmakers yesterday agreed to a ground-breaking change in the iron ore price system.”
All along, as I’ve talked about money printing, I have said it was not possible to explain in advance which goods would climb in price (or when). I just knew that as the new money was put into circulation, prices would ultimately rise. Now they have, to some degree, for various items. Steel is a great example along with other base metals, oil, health care, insurance and taxes.
Read Entire Article
MSN Money
April 5, 2010
Pretend it’s 1933, as so many in the deflation camp think it is or soon will be (at least from the price-of-everything standpoint). If last Wednesday you reached for a copy of that day’s Financial Times, would you have expected to see the following headline — “Steel prices set to soar: Everyday goods will cost more” — in large print above the fold?
I don’t think so.
The newspaper went on to say: “Global steel prices are set to rise by up to a third, pushing up the cost of everyday goods from cars to domestic appliances, after miners and steelmakers yesterday agreed to a ground-breaking change in the iron ore price system.”
All along, as I’ve talked about money printing, I have said it was not possible to explain in advance which goods would climb in price (or when). I just knew that as the new money was put into circulation, prices would ultimately rise. Now they have, to some degree, for various items. Steel is a great example along with other base metals, oil, health care, insurance and taxes.
Read Entire Article
Wednesday, April 7, 2010
The Latest Gold Fraud Bombshell: Canada's Only Bullion Bank Gold Vault Is Practically Empty
Tyler Durden
ZeroHedge
Continuing on the trail of exposing what is rapidly becoming one of the largest frauds in commodity markets history is the most recent interview by Eric King with GATA's Adrian Douglas, Harvey Orgen (who recently testified before the CFTC hearing) and his son, Lenny, in which the two discuss their visit to the only bullion bank vault in Canada, that of ScotiaMocatta, located at 40 King Street West in Toronto, and find the vault is practically empty.
This is a relevant segue to a class action lawsuit filed against Morgan Stanley, which was settled out of court, in which it was alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store, yet even despite charging storage fees was not in actual possession of the bullion. It appears that this kind of lack of physical holdings by all who claim to have gold in storage, is pervasive as the actual gold globally is held primarily in paper or electronic form.
Lenny Organ who was the person to enter the vault of ScotiaMocatta, says "What shocked me was how little gold and silver they actually had." Lenny describes exactly how much (or little as the case may be) silver was available - roughly 60,000 ounces. As for gold - 210 400 oz bars, 4,000 maples, 500 eagles, 10 kilo bars, 10 one kilogram pieces of gold nugget form, which Adrian Douglas calculates as being $100 million worth, which is just one tenth of what the Royal Mint of Canada sold in 2008, or over $1 billion worth of gold. As Orgen concludes: "The game ends when the people who own all these paper obligations say enough and take physical delivery, and that's when the mess will occur."
Also note the interesting detour into what Stephan Spicer of the Central Fund Of Canada, said regarding his friend at a major bank, who wanted access to his 15,000 oz of silver, and had to wait 6-8 weeks for its to be flown in from Hong Kong.
It is funny that central bankers thought they could take the ponzi mentality of infinite dilution of all assets coupled with infinite debt issuance, as they have done to fiat money, and apply it to gold, in essence piling leverage upon leverage. They underestimated gold holders' willingness to be diluted into perpetuity - when the realization that gold owned is just 1% of what is physically deliverable, you will see the biggest bank run in history.
ZeroHedge
Continuing on the trail of exposing what is rapidly becoming one of the largest frauds in commodity markets history is the most recent interview by Eric King with GATA's Adrian Douglas, Harvey Orgen (who recently testified before the CFTC hearing) and his son, Lenny, in which the two discuss their visit to the only bullion bank vault in Canada, that of ScotiaMocatta, located at 40 King Street West in Toronto, and find the vault is practically empty.
This is a relevant segue to a class action lawsuit filed against Morgan Stanley, which was settled out of court, in which it was alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store, yet even despite charging storage fees was not in actual possession of the bullion. It appears that this kind of lack of physical holdings by all who claim to have gold in storage, is pervasive as the actual gold globally is held primarily in paper or electronic form.
Lenny Organ who was the person to enter the vault of ScotiaMocatta, says "What shocked me was how little gold and silver they actually had." Lenny describes exactly how much (or little as the case may be) silver was available - roughly 60,000 ounces. As for gold - 210 400 oz bars, 4,000 maples, 500 eagles, 10 kilo bars, 10 one kilogram pieces of gold nugget form, which Adrian Douglas calculates as being $100 million worth, which is just one tenth of what the Royal Mint of Canada sold in 2008, or over $1 billion worth of gold. As Orgen concludes: "The game ends when the people who own all these paper obligations say enough and take physical delivery, and that's when the mess will occur."
Also note the interesting detour into what Stephan Spicer of the Central Fund Of Canada, said regarding his friend at a major bank, who wanted access to his 15,000 oz of silver, and had to wait 6-8 weeks for its to be flown in from Hong Kong.
It is funny that central bankers thought they could take the ponzi mentality of infinite dilution of all assets coupled with infinite debt issuance, as they have done to fiat money, and apply it to gold, in essence piling leverage upon leverage. They underestimated gold holders' willingness to be diluted into perpetuity - when the realization that gold owned is just 1% of what is physically deliverable, you will see the biggest bank run in history.
Friday, April 2, 2010
Jim Grant Presents A Prospectus For The United States, Discusses The Death Penalty For US Coinage Debasers
Tyler Durden
ZeroHedge
Jim Grant joins Morgan Stanley (and contrary to Rosenberg's expectations) in anticipating US rates to rise promptly, primarily due to the world's negative "reappraisal of the US Treasury." This is not so much a debate on inflation or deflation, as it is a call on the (un)trustworthiness of the US as a lender. To that end, Grant has put together a Treasury prospectus (which we will post as soon as we procure it) which as Jim puts it "is a compendium of the salient facts about the Treasury as if it were an issuer that did not have a printing press... All you need to know about the credit risk of the US."
The first risk factor, via the GAO, "improper payments that should not have been paid by the Treasury totalled $98.7 billion, equivalent to 5% of Treasury outlays." Keep in mind the UST raised $333 billion in net debt in March, as we pointed out yesterday. Grant also discusses the Coinage Act of 1792, whose section 19 stipulates "that the penalty for anyone who would debase the coinage of the US, is death." By that logic, a firing squad may soon need to be sequestered to Washington. Grant's concludes that there is a "great suspension of disbelief in out US monetary system on behalf of the world over. One wonders when people will say no."
ZeroHedge
Jim Grant joins Morgan Stanley (and contrary to Rosenberg's expectations) in anticipating US rates to rise promptly, primarily due to the world's negative "reappraisal of the US Treasury." This is not so much a debate on inflation or deflation, as it is a call on the (un)trustworthiness of the US as a lender. To that end, Grant has put together a Treasury prospectus (which we will post as soon as we procure it) which as Jim puts it "is a compendium of the salient facts about the Treasury as if it were an issuer that did not have a printing press... All you need to know about the credit risk of the US."
The first risk factor, via the GAO, "improper payments that should not have been paid by the Treasury totalled $98.7 billion, equivalent to 5% of Treasury outlays." Keep in mind the UST raised $333 billion in net debt in March, as we pointed out yesterday. Grant also discusses the Coinage Act of 1792, whose section 19 stipulates "that the penalty for anyone who would debase the coinage of the US, is death." By that logic, a firing squad may soon need to be sequestered to Washington. Grant's concludes that there is a "great suspension of disbelief in out US monetary system on behalf of the world over. One wonders when people will say no."
Monday, March 29, 2010
WGC Releases China Gold Report - "A New World Of Opportunity" As PBoC Expected To Buy Gold, Chinese Gold Mines Become Depleted
Tyler Durden
ZeroHedge
The World Gold Council spares no praise for the imminent surge in demand in China.
"The World Gold Council (WGC) believes that gold consumption in China will continue to catch up with the rest of the world following the deregulation of the Chinese gold market in 2001. Demand from China’s two largest sectors (jewellery and investment) reached a combined total of 423 tonnes in 2009 but domestic mine supply contributed only 314 tonnes during the same year. This Shortfall creates a “snowball” effect as China’s gold industry may not be able to keep pace with the annual leap in domestic consumption despite rising to be the world’s largest gold producer since 2007. Although the country’s appetite for gold has grown, making China the second largest consumer in the world, demand in China per capita has a lot of catching up to do to equal that of Western economies. In jewellery, the Chinese per capita consumption is one of the lowest at 0.26gm when compared to countries with similar gold cultures. If gold were consumed at the same rate per capita as in India, Hong Kong or Saudi Arabia, annual Chinese demand could increase by at least 100 tonnes to as much as 4,000 tonnes in this sector alone. Nearterm inflationary expectations and rising income levels are likely to support the investment case for gold as an asset class, especially given that Chinese consumers are high savers and are looking to gold to protect their wealth."
Keep an eye out on what the PBoC will do if and when it finally decides to readjust its gold holdings.
"The People’s Bank of China (PBoC) is also playing an increasingly supportive role for gold on the demand side. PBoC’s gold holdings are currently at 1.6% of its US$2.4tn total reserves – a fraction by international standards. If PBoC decides to rebalance its books to its recent peak gold holding as a proportion of reserves of 2.2% in Q4 2002, WGC estimates it could account for a total incremental demand of 400 tonnes at the current gold price."
Will supply meet demand at current prices? Negatory ghost rider. Existing gold mines are expected to be exhausted in six years. Oops.
"WGC analysis shows that, structurally, supply growth in China could be challenging unless there is more funding directed to exploration. Assuming the US Geological Survey’s figures are correct, China may exhaust existing gold mines in just six years. Despite the strong Yuan, total production costs have also risen by more than 30% in the last six years due to higher input costs (such as energy and labour) and lower ore grades. The outlook for gold in China remains positive and WGC believes that the balance between demand and supply in the Chinese gold market will continue to be in disequilibrium. In the longer term, if China continues to grow at near to the current rate in economic and wealth terms, gold consumption in China will continue to expand and has the potential to double during the next decade."
Read Entire Article
ZeroHedge
The World Gold Council spares no praise for the imminent surge in demand in China.
"The World Gold Council (WGC) believes that gold consumption in China will continue to catch up with the rest of the world following the deregulation of the Chinese gold market in 2001. Demand from China’s two largest sectors (jewellery and investment) reached a combined total of 423 tonnes in 2009 but domestic mine supply contributed only 314 tonnes during the same year. This Shortfall creates a “snowball” effect as China’s gold industry may not be able to keep pace with the annual leap in domestic consumption despite rising to be the world’s largest gold producer since 2007. Although the country’s appetite for gold has grown, making China the second largest consumer in the world, demand in China per capita has a lot of catching up to do to equal that of Western economies. In jewellery, the Chinese per capita consumption is one of the lowest at 0.26gm when compared to countries with similar gold cultures. If gold were consumed at the same rate per capita as in India, Hong Kong or Saudi Arabia, annual Chinese demand could increase by at least 100 tonnes to as much as 4,000 tonnes in this sector alone. Nearterm inflationary expectations and rising income levels are likely to support the investment case for gold as an asset class, especially given that Chinese consumers are high savers and are looking to gold to protect their wealth."
Keep an eye out on what the PBoC will do if and when it finally decides to readjust its gold holdings.
"The People’s Bank of China (PBoC) is also playing an increasingly supportive role for gold on the demand side. PBoC’s gold holdings are currently at 1.6% of its US$2.4tn total reserves – a fraction by international standards. If PBoC decides to rebalance its books to its recent peak gold holding as a proportion of reserves of 2.2% in Q4 2002, WGC estimates it could account for a total incremental demand of 400 tonnes at the current gold price."
Will supply meet demand at current prices? Negatory ghost rider. Existing gold mines are expected to be exhausted in six years. Oops.
"WGC analysis shows that, structurally, supply growth in China could be challenging unless there is more funding directed to exploration. Assuming the US Geological Survey’s figures are correct, China may exhaust existing gold mines in just six years. Despite the strong Yuan, total production costs have also risen by more than 30% in the last six years due to higher input costs (such as energy and labour) and lower ore grades. The outlook for gold in China remains positive and WGC believes that the balance between demand and supply in the Chinese gold market will continue to be in disequilibrium. In the longer term, if China continues to grow at near to the current rate in economic and wealth terms, gold consumption in China will continue to expand and has the potential to double during the next decade."
Read Entire Article
Former Goldman Commodities Research Analyst Confirms LMBA OTC Gold Market Is "Paper Gold" Ponzi
Tyler Durden
ZeroHedge
When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market.
Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Department and now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."
Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs. Yet Christian confirms that the gold market is basically a ponzi: "in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is." And there you have it: as Douglas eloquently summarizes: "the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks" and concludes "Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.
For those of you who missed the CFTC hearing, here are two of the must-watch clips. In the first one, Adrian Douglas introduces the underlying concerns about the Ponzi nature of the LBMA hedging situation, in which a wholesale rush to "physical delivery" would result in a one hundred fold dilution of gold holdings, and a 99% result of unsecured creditor claims (good luck collecting on that particular bankruptcy). We also meet Jeffrey Christian, formerly of Goldman and currently of CPM, in which not only does the "expert" state that a bullion bank short is hedged by further shorting, but confirms Douglas' and GATA's previous claims that the "physical" market, as defined, is a joke, as the OTC market treats gold purely as a financial asset, essentially conforming to the precepts of fractional reserve banking. As Douglas notes "He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme."
ZeroHedge
When we put up a link to last week's CFTC hearing webcast little did we know that it would end up being the veritable (physical) gold mine (no pun intended) of information about what really transpires in the commodities market. First, we obtained direct evidence from Andrew Maguire (who may or may not have been the target of an attempt at "bodily harm" as reported yesterday) of extensive manipulation in the silver market.
Today, Adrian Douglas, director of GATA, adds to the mountain of evidence that the commodities market, and the CFTC, stand behind what is potentially the biggest market manipulation scheme in the history of capital markets (we are assuming for the time being that all allegations of the Fed manipulating the broader equity and credit markets are completely baseless). Using the testimony of a clueless Jeffrey Christian, formerly a staffer at the Commodities Research Group in the Goldman Sachs Investment Research Department and now head and founder of the CPM Group, Douglas confirms that the "LBMA trades over 100 times the amount of gold it actually has to back the trades."
Christian, who describes himself as "one of the world’s foremost authorities on the markets for precious metals" yet, in the words of Gary Gensler, said "that the bullion banks had large shorts to hedge themselves selling elsewhere- how do you short something to cover a sale, I didn’t quite follow that?" and proves that current and former Goldman bankers are some of the most arrogant people alive, assuming that everyone else is an idiot and will buy whatever explanation is presented just because the CV says Goldman Sachs. Yet Christian confirms that the gold market is basically a ponzi: "in the “physical market” as the market uses that term, there is much more metal than that…there is a hundred times what there is." And there you have it: as Douglas eloquently summarizes: "the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the REAL physical market. If someone asks for gold and there isn’t any the default would trigger the biggest “bank run” and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for REAL physical gold that can not be met from their own stocks" and concludes "Almost every day we hear of a new financial fraud that has been exposed. The gold and silver market fraud is likely to be bigger than all of them. Investors in their droves, who have purchased gold in good faith in “unallocated accounts”, are going to demand delivery of their metal. They will then discover that there is only one ounce for every one hundred ounces claimed. They will find out they are “unsecured creditors”.
For those of you who missed the CFTC hearing, here are two of the must-watch clips. In the first one, Adrian Douglas introduces the underlying concerns about the Ponzi nature of the LBMA hedging situation, in which a wholesale rush to "physical delivery" would result in a one hundred fold dilution of gold holdings, and a 99% result of unsecured creditor claims (good luck collecting on that particular bankruptcy). We also meet Jeffrey Christian, formerly of Goldman and currently of CPM, in which not only does the "expert" state that a bullion bank short is hedged by further shorting, but confirms Douglas' and GATA's previous claims that the "physical" market, as defined, is a joke, as the OTC market treats gold purely as a financial asset, essentially conforming to the precepts of fractional reserve banking. As Douglas notes "He confirms that the LBMA trades hundreds of times the real underlying physical. This is even a higher estimate than I have previously made! It is, as I asserted before the Commission, a giant Ponzi Scheme."
Thursday, March 18, 2010
Central Bank Gold Holdings Expand at Fastest Pace Since 1964
March 18 (Bloomberg) -- Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.
Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show
Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.
“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”
Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.
Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.
Read Entire Article
Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show
Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.
“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”
Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.
Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.
Read Entire Article
Monday, November 9, 2009
Why the Wisest Minds on WallStreet are Buying Gold
With the inexplicable recent reorientation by a traditionally very erudite, pragmatic and realistic Jim Grant (well, not that inexplicable) into what can only be described as pulling some serious wool over his readers' eyes, we decided to fall back to our other favorite newsletter writer: the inimitable Fred Hickey who writes The High-Tech Strategist. While we can not find enough praise for his work, it bears pointing out that whereas one may accuse Grant of selling out, such an accusation will be impossible of Mr. Hickey, who is a florid, objective and insightful as always, and maybe more so now than ever. His latest letter, Fighting the Fed, is a must read for all, and while we wish we had the copyright latitude to repost it in whole, we would like to at least share Fred's thoughts on gold (among many other things, some of which have made his readers serious money over the years).
Owning Gold Becomes More Respectable
When Paul Volcker employed his tough love solution by driving interest rates skyward nearly three decades ago, he squashed inflation and also squashed the gold bull market of the 70s, banishing the metal into a near 20-year bear market. Gold plunged from a peak of over $800 an ounce to well under $300 an ounce in 2000, right at the top of the 2000 stock market bubble. Gold has been propelled ever higher since by the Fed's extraordinarily easy money policies. At the bottom in 2000 there was absolutely no interest in holding gold (only internet stocks). It was a capitulative moment topped off by UK Treasury Chancellor Gordon Brown's decision to dump half (395 tons) of England's gold reserves at the rock-bottom average price of $275 an ounce. The only people left holding gold at that point were those derisively labeled as "gold bugs."
Thanks to the Fed, gold has been building up a head of steam ever since. Nevertheless, despite nine consecutive years, gold has remained disrespected and and under-owned, both by the public and by the professional money-managers. More recently, that has been changing. This past month I've read speeches from both billionaire John Paulson and David Einhorn, both of whom famously predicted (and capitalized spectacularly from) the collapse of the housing and credit bubbles. Both eloquently explained how they had never been gold bugs, yet both have made hold the core holding in their portfolios. This weekend the Wall Street Journal ran a full-pages story on how Paulson made billions from the recent financial market's crash. At the very end of the story, Paulson explained his new trade- betting against the dollar through billions of dollars of gold investments. Paulson stated: "Three or four years from now, people will ask why they didn't buy gold earlier."
Last week I also read legendary hedge fund manager (and billionaire) Paul Tudor Jones' third quarter letter to his hedge fund clients which included a detailed, 10-page appendix examining gold's current valuation. His conclusion: "In our opinion, the scope for increased investment demand over the coming years is much stronger than the potential from new supply. As a result, incremental new demand must buy gold from current holders. With a macro backdrop that suggests gold is undervalued, we doubt the transfer of gold from current holders to its new owners will occur at, or near, current prices."
These heavyweight endorsements of gold are making the rounds among the investment community. I've read them, and so have a lot of others. If I was a money manager underinvested in this category (that's nearly all of them), I know I'd have to begin to reconsider my stance on the precious metal. This process of discovery takes time, but the wheels are certainly in motion. The smartest of the smart money is now positioned in gold, awaiting sharply higher prices.
And some more:
When gold went over $1,000 recently a lot of gold owners expected a sell-off similar to what occurred in March 2008 and earlier this year. They moved to the sidelines expecting to buy back at lower prices. There were a litany of reasons the sellers used as excuses to lower their positions, including this one that I wrote about in last month's letter: "The last excuse to sell gold (and the bears have been flogging this for over a year now) was last month's formal endorsement by the IMF to sell 403.3 tons of gold. However, the gold is expected to be sold within the limits of the new Central Banks Gold Agreement which caps central banks' gold sales through September 2014. That assumes that the Chinese don't buy the whole 403 ton lot all at once, as I've heard they've offered to do."
As I write this it was just announced this morning that India had beat China to the punch, buying 200 metric tons in one fell swoop from the IMF. Bloomberg quoted Suresh Hundia, president of the Bombay Bullion Association today: The purchase is "not so much about India betting gold prices will increase but that the dollar will fall. They are looking to diversify their foreign exchange reserves."
The psychological barrier of $1,000 gold has been broken. That $1,000 number might as well be $100. There is no longer a limit to the upside. As you know, I've been waiting for the "crazy phase" part of the long, secular bull market to being. That's how secular bull markets work - eventually momentum takes over and there's a parabolic run to the top. It happened at the end of the last gold bull market. After rallying from about $250 an ounce to over $400 in September 1979, gold had some indigestion problems at that level and entered into a several week consolidation. Around Thanksgiving of 1979, gold was still trading at about $400 an ounce. By January 21, 1980 the price of gold had doubled to $850 an ounce. This was the blow-off top. The action was not unlike what we saw in tech stocks in 1999-early 2000.
I doubt that what we're seeing is the final blow off. I have no idea when it may come. It could be months or years from now. I just know that it hasn't yet occurred. In the meantime, prepare yourself for a lot more company (besides the smartest of the hedge fund managers) and more head-fakes. In the end, the public will come in en masse. They'll also be buying gold stocks with abandon. That is clearly not the case today.
October is typically a seasonally weak month for gold (November-February are usually very strong months) and the bears were out in force, expecting a selloff. Commodities "expert" Dennis Gartman harrumphed that requests for interviews from him about gold had reached "unprecedented levels." He warned "The public's and the media's attention to things such as gold always reaches a fever pitch and then falters... or collapses." Gartman has been consistently on the wrong side of this trade.
And in case it is not evident, here is the simple conclusion:
Gold is no longer being driven by jewelry demand, as in the recent past. It is investment demand that's wagging the yellow dog's tail. It's a loss of confidence in the U.S. dollar and U.S. government policies around the world that's driving gold to record levels. As it has been for thousands of years, gold is the safest store of wealth, not so much something to be fashioned into a necklace.
Not surprisingly, Fred, as increasingly more people, is long many, many gold stocks.
Read Entire Article
Owning Gold Becomes More Respectable
When Paul Volcker employed his tough love solution by driving interest rates skyward nearly three decades ago, he squashed inflation and also squashed the gold bull market of the 70s, banishing the metal into a near 20-year bear market. Gold plunged from a peak of over $800 an ounce to well under $300 an ounce in 2000, right at the top of the 2000 stock market bubble. Gold has been propelled ever higher since by the Fed's extraordinarily easy money policies. At the bottom in 2000 there was absolutely no interest in holding gold (only internet stocks). It was a capitulative moment topped off by UK Treasury Chancellor Gordon Brown's decision to dump half (395 tons) of England's gold reserves at the rock-bottom average price of $275 an ounce. The only people left holding gold at that point were those derisively labeled as "gold bugs."
Thanks to the Fed, gold has been building up a head of steam ever since. Nevertheless, despite nine consecutive years, gold has remained disrespected and and under-owned, both by the public and by the professional money-managers. More recently, that has been changing. This past month I've read speeches from both billionaire John Paulson and David Einhorn, both of whom famously predicted (and capitalized spectacularly from) the collapse of the housing and credit bubbles. Both eloquently explained how they had never been gold bugs, yet both have made hold the core holding in their portfolios. This weekend the Wall Street Journal ran a full-pages story on how Paulson made billions from the recent financial market's crash. At the very end of the story, Paulson explained his new trade- betting against the dollar through billions of dollars of gold investments. Paulson stated: "Three or four years from now, people will ask why they didn't buy gold earlier."
Last week I also read legendary hedge fund manager (and billionaire) Paul Tudor Jones' third quarter letter to his hedge fund clients which included a detailed, 10-page appendix examining gold's current valuation. His conclusion: "In our opinion, the scope for increased investment demand over the coming years is much stronger than the potential from new supply. As a result, incremental new demand must buy gold from current holders. With a macro backdrop that suggests gold is undervalued, we doubt the transfer of gold from current holders to its new owners will occur at, or near, current prices."
These heavyweight endorsements of gold are making the rounds among the investment community. I've read them, and so have a lot of others. If I was a money manager underinvested in this category (that's nearly all of them), I know I'd have to begin to reconsider my stance on the precious metal. This process of discovery takes time, but the wheels are certainly in motion. The smartest of the smart money is now positioned in gold, awaiting sharply higher prices.
And some more:
When gold went over $1,000 recently a lot of gold owners expected a sell-off similar to what occurred in March 2008 and earlier this year. They moved to the sidelines expecting to buy back at lower prices. There were a litany of reasons the sellers used as excuses to lower their positions, including this one that I wrote about in last month's letter: "The last excuse to sell gold (and the bears have been flogging this for over a year now) was last month's formal endorsement by the IMF to sell 403.3 tons of gold. However, the gold is expected to be sold within the limits of the new Central Banks Gold Agreement which caps central banks' gold sales through September 2014. That assumes that the Chinese don't buy the whole 403 ton lot all at once, as I've heard they've offered to do."
As I write this it was just announced this morning that India had beat China to the punch, buying 200 metric tons in one fell swoop from the IMF. Bloomberg quoted Suresh Hundia, president of the Bombay Bullion Association today: The purchase is "not so much about India betting gold prices will increase but that the dollar will fall. They are looking to diversify their foreign exchange reserves."
The psychological barrier of $1,000 gold has been broken. That $1,000 number might as well be $100. There is no longer a limit to the upside. As you know, I've been waiting for the "crazy phase" part of the long, secular bull market to being. That's how secular bull markets work - eventually momentum takes over and there's a parabolic run to the top. It happened at the end of the last gold bull market. After rallying from about $250 an ounce to over $400 in September 1979, gold had some indigestion problems at that level and entered into a several week consolidation. Around Thanksgiving of 1979, gold was still trading at about $400 an ounce. By January 21, 1980 the price of gold had doubled to $850 an ounce. This was the blow-off top. The action was not unlike what we saw in tech stocks in 1999-early 2000.
I doubt that what we're seeing is the final blow off. I have no idea when it may come. It could be months or years from now. I just know that it hasn't yet occurred. In the meantime, prepare yourself for a lot more company (besides the smartest of the hedge fund managers) and more head-fakes. In the end, the public will come in en masse. They'll also be buying gold stocks with abandon. That is clearly not the case today.
October is typically a seasonally weak month for gold (November-February are usually very strong months) and the bears were out in force, expecting a selloff. Commodities "expert" Dennis Gartman harrumphed that requests for interviews from him about gold had reached "unprecedented levels." He warned "The public's and the media's attention to things such as gold always reaches a fever pitch and then falters... or collapses." Gartman has been consistently on the wrong side of this trade.
And in case it is not evident, here is the simple conclusion:
Gold is no longer being driven by jewelry demand, as in the recent past. It is investment demand that's wagging the yellow dog's tail. It's a loss of confidence in the U.S. dollar and U.S. government policies around the world that's driving gold to record levels. As it has been for thousands of years, gold is the safest store of wealth, not so much something to be fashioned into a necklace.
Not surprisingly, Fred, as increasingly more people, is long many, many gold stocks.
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David Rosenberg: This Is How We Get To $2,750 Gold
(Zero Hedge)
• If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.
• If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.
• If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.
Another reason to be bullish on gold is the recurring trade spats. Indeed, this is good news for the commodity complex as security of supply resurfaces — see China Attacks U.S. in Fresh Trade Spat” on page 2 of the weekend FT. If it’s not Chinese-made tires fingered by an increasingly protectionist U.S.A. one day, it’s steel pipe the next. This latest anti-dumping measure by the United States is facing a severe rebuke, as per the press reports, in China.
In addition to these trade protectionist actions, there is also the matter of more stimulus measures being undertaken in a mid-term election year at a time when the Treasury is expanding its debt issuance to new records right across the maturity spectrum. All anyone needs to do is have a look at the article Congress’s Blank Check For Housing in the weekend WSJ — to see this happening at a time of 10% budget deficit-to-GDP ratios, had indeed become a bottom-less fiscal pit.
Since the USA will not default, not raise taxes nor cut spending, the only logical recourse will be to print vast sums of U.S. dollars to fund this surreal foray into deficit finance. In other words, reflate. As we keep on saying, under Dr. Bernanke’s tenure, the monetary base has risen twice as much as nominal GDP has and the two lines continue to diverge. At the same time, gold production peaked a decade ago. It’s all about scarcity of supply, and as Sri Lanka’s central bank just reminded us, and India before that, there are buyers with deep pockets lining up to diversify into bullion. Here are the ‘what if’ realities stack up:
• If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.
• If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.
• If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.
Now gold is in a secular bull market and by no means are we suggesting that everyone line up at the vaults right this second — for the time being, it is too much front page news and a crowded trade, so it won’t hurt to wait for a pullback and get in at better prices (as an example, see Inside the Global Gold Frenzy on the front page of the Sunday NYT business section).
You see, when Bob Farrell wrote “The 10 Market Rules to Remember” he made sure that they were interesting reading and in doing so, some people get a laugh out of Rule Number 9 (“When all the experts and forecasts agree, something else is going to happen”) and Rule Number 10 “Bull markets are more fun than bear markets”). Nevertheless, they are just as important as the other eight rules. The obvious reason why Rule 5 is important (“The public buys most at the top and least at the bottom”) is that it also captures the inverse relationship between sentiment and the position of the market (ie, bullish sentiment peaks when the market tops and turns down and bearish sentiment peaks when the market bottoms and turns up). All that “agreement” adds enormous credibility to conventional opinion, just when it is most important to envision and prepare for the contrary. Lately, (you) have been experiencing shock at the policy responses by the U.S. government relative to the credit crisis and economic slowdown. Policies that encourage increased indebtedness by households and businesses are combined with massive deficit spending and Federal Reserve balance sheet expansion and the latter particularly, has enormous inflationary implications while exerting downward pressure on the value of the U.S. dollar. The problem with this understanding is that most everyone agrees.
To wit: According to Consensus Inc., bulls on the U.S. dollar are currently at 28%. Bulls on Treasury bonds are currently at 59% after hitting a low of 21% in early June when rates peaked in this cycle. Bulls on gold are at 78%. Bulls on the stock market are at 74% and they haven’t been that high since October 2007. It has become a crowded trade, and something very contrary to the expected outcome is likely to occur, at least over the near term.
Walter Murphy, our favorite technical analyst, expects a substantial rally in the U.S. dollar and a decline in gold over the medium term, even if those moves are counter-trend. He thinks that the war is on inflation, but the battle is deflation and this is a bear market rally in stocks. We have said repeatedly that it seems too early to call for an economic expansion with so much unfinished business in the process of household balance sheet repair. And, keep in mind that the deflationary forces emanating from the household are much greater than the inflationary forces associated with government stimulus, at least so
Read Entire Article
• If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.
• If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.
• If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.
Another reason to be bullish on gold is the recurring trade spats. Indeed, this is good news for the commodity complex as security of supply resurfaces — see China Attacks U.S. in Fresh Trade Spat” on page 2 of the weekend FT. If it’s not Chinese-made tires fingered by an increasingly protectionist U.S.A. one day, it’s steel pipe the next. This latest anti-dumping measure by the United States is facing a severe rebuke, as per the press reports, in China.
In addition to these trade protectionist actions, there is also the matter of more stimulus measures being undertaken in a mid-term election year at a time when the Treasury is expanding its debt issuance to new records right across the maturity spectrum. All anyone needs to do is have a look at the article Congress’s Blank Check For Housing in the weekend WSJ — to see this happening at a time of 10% budget deficit-to-GDP ratios, had indeed become a bottom-less fiscal pit.
Since the USA will not default, not raise taxes nor cut spending, the only logical recourse will be to print vast sums of U.S. dollars to fund this surreal foray into deficit finance. In other words, reflate. As we keep on saying, under Dr. Bernanke’s tenure, the monetary base has risen twice as much as nominal GDP has and the two lines continue to diverge. At the same time, gold production peaked a decade ago. It’s all about scarcity of supply, and as Sri Lanka’s central bank just reminded us, and India before that, there are buyers with deep pockets lining up to diversify into bullion. Here are the ‘what if’ realities stack up:
• If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.
• If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.
• If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.
Now gold is in a secular bull market and by no means are we suggesting that everyone line up at the vaults right this second — for the time being, it is too much front page news and a crowded trade, so it won’t hurt to wait for a pullback and get in at better prices (as an example, see Inside the Global Gold Frenzy on the front page of the Sunday NYT business section).
You see, when Bob Farrell wrote “The 10 Market Rules to Remember” he made sure that they were interesting reading and in doing so, some people get a laugh out of Rule Number 9 (“When all the experts and forecasts agree, something else is going to happen”) and Rule Number 10 “Bull markets are more fun than bear markets”). Nevertheless, they are just as important as the other eight rules. The obvious reason why Rule 5 is important (“The public buys most at the top and least at the bottom”) is that it also captures the inverse relationship between sentiment and the position of the market (ie, bullish sentiment peaks when the market tops and turns down and bearish sentiment peaks when the market bottoms and turns up). All that “agreement” adds enormous credibility to conventional opinion, just when it is most important to envision and prepare for the contrary. Lately, (you) have been experiencing shock at the policy responses by the U.S. government relative to the credit crisis and economic slowdown. Policies that encourage increased indebtedness by households and businesses are combined with massive deficit spending and Federal Reserve balance sheet expansion and the latter particularly, has enormous inflationary implications while exerting downward pressure on the value of the U.S. dollar. The problem with this understanding is that most everyone agrees.
To wit: According to Consensus Inc., bulls on the U.S. dollar are currently at 28%. Bulls on Treasury bonds are currently at 59% after hitting a low of 21% in early June when rates peaked in this cycle. Bulls on gold are at 78%. Bulls on the stock market are at 74% and they haven’t been that high since October 2007. It has become a crowded trade, and something very contrary to the expected outcome is likely to occur, at least over the near term.
Walter Murphy, our favorite technical analyst, expects a substantial rally in the U.S. dollar and a decline in gold over the medium term, even if those moves are counter-trend. He thinks that the war is on inflation, but the battle is deflation and this is a bear market rally in stocks. We have said repeatedly that it seems too early to call for an economic expansion with so much unfinished business in the process of household balance sheet repair. And, keep in mind that the deflationary forces emanating from the household are much greater than the inflationary forces associated with government stimulus, at least so
Read Entire Article
Friday, November 6, 2009
Gold Jumps to Record Above $1,100 on U.S. Interest-Rate Outlook
(Bloomberg) -- Gold futures jumped to a record, topping $1,100 an ounce, on mounting speculation that low U.S. borrowing costs will drive down the dollar, boosting the appeal of the precious metal as an alternative investment.
The metal reached $1,101.90 in New York, heading for a ninth straight annual gain. The dollar is down 6.8 percent this year against a basket of six major currencies as the Federal Reserve keeps its benchmark interest rate at zero to 0.25 percent to revive economic growth.
“Until Washington stops exploding the deficit, the dollar will continue to weaken, and gold is going higher,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
Gold futures for December delivery rose $6.40, or 0.6 percent, to $1,095.70 on the Comex division of the New York Mercantile Exchange, climbing for the fifth straight day. The price has gained 24 percent this year.
The jobless rate and low inflation will keep the Fed from raising rates until 2011, John Brynjolfsson, the chief investment officer at hedge fund Armored Wolf LLC in Aliso Viejo, California, said in an interview on Bloomberg Television.
The unemployment rate in the U.S. reached a 26-year high of 10.2 percent in October, the Labor Department said today. Consumer costs rose 0.3 percent last month, according to the median forecast of economists surveyed by Bloomberg News.
President Barack Obama has increased the nation’s marketable debt to an unprecedented $7 trillion as the government borrows to fund spending programs intended to bolster the economy.
‘Massive Demand’
“There’s massive investment demand for gold,” said Christoph Eibl, a co-founder of Zug, Switzerland-based Tiberius Group, which manages $1.8 billion. “I see more liquidity pumped in to lift the economies from bad news.”
Seventeen of 23 traders, investors and analysts surveyed by Bloomberg, or 74 percent, said bullion will rise next week. Four forecast lower prices, and two were neutral.
This week, gold gained 5.3 percent, the most since April, after India said it purchased 200 metric tons of gold from the International Monetary Fund last month.
Other central banks may follow in a shift away from the dollar, analysts said.
Sri Lanka’s central bank, which has been purchasing gold for the past seven months, will continue buying the metal as a hedge against volatility in currency markets, Ajith Nivard Cabraal, the bank’s governor, said today. Cabraal, speaking in Colombo, declined to say how much had been bought.
Sri Lanka held 5.3 metric tons of gold as of September, according to World Gold Council data.
Read Entire Article
The metal reached $1,101.90 in New York, heading for a ninth straight annual gain. The dollar is down 6.8 percent this year against a basket of six major currencies as the Federal Reserve keeps its benchmark interest rate at zero to 0.25 percent to revive economic growth.
“Until Washington stops exploding the deficit, the dollar will continue to weaken, and gold is going higher,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.
Gold futures for December delivery rose $6.40, or 0.6 percent, to $1,095.70 on the Comex division of the New York Mercantile Exchange, climbing for the fifth straight day. The price has gained 24 percent this year.
The jobless rate and low inflation will keep the Fed from raising rates until 2011, John Brynjolfsson, the chief investment officer at hedge fund Armored Wolf LLC in Aliso Viejo, California, said in an interview on Bloomberg Television.
The unemployment rate in the U.S. reached a 26-year high of 10.2 percent in October, the Labor Department said today. Consumer costs rose 0.3 percent last month, according to the median forecast of economists surveyed by Bloomberg News.
President Barack Obama has increased the nation’s marketable debt to an unprecedented $7 trillion as the government borrows to fund spending programs intended to bolster the economy.
‘Massive Demand’
“There’s massive investment demand for gold,” said Christoph Eibl, a co-founder of Zug, Switzerland-based Tiberius Group, which manages $1.8 billion. “I see more liquidity pumped in to lift the economies from bad news.”
Seventeen of 23 traders, investors and analysts surveyed by Bloomberg, or 74 percent, said bullion will rise next week. Four forecast lower prices, and two were neutral.
This week, gold gained 5.3 percent, the most since April, after India said it purchased 200 metric tons of gold from the International Monetary Fund last month.
Other central banks may follow in a shift away from the dollar, analysts said.
Sri Lanka’s central bank, which has been purchasing gold for the past seven months, will continue buying the metal as a hedge against volatility in currency markets, Ajith Nivard Cabraal, the bank’s governor, said today. Cabraal, speaking in Colombo, declined to say how much had been bought.
Sri Lanka held 5.3 metric tons of gold as of September, according to World Gold Council data.
Read Entire Article
Thursday, November 5, 2009
Sri Lanka Central Bank Buying Gold to Diversify Reserves
(Reuters) - Sri Lanka's central bank has been buying gold for the past five or six months as it diversifies its reserves amid volatile markets, the bank's governor said in an interview on Thursday.
'We have been fairly strong accumulators of gold reserves over the past few months,' Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai.
'We haven't stopped yet,' he added, declining to quantify how much gold the central bank had bought or how much of the more than $4.8 billion of the country's reserves were in gold.
'Many countries are today diversifying. They are also looking at intrinsic value of their reserves, so gold would be a natural candidate for that kind of reserve accumulation,' he said.
(Reporting by Tony Munroe; Editing by Alistair Scrutton)
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'We have been fairly strong accumulators of gold reserves over the past few months,' Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai.
'We haven't stopped yet,' he added, declining to quantify how much gold the central bank had bought or how much of the more than $4.8 billion of the country's reserves were in gold.
'Many countries are today diversifying. They are also looking at intrinsic value of their reserves, so gold would be a natural candidate for that kind of reserve accumulation,' he said.
(Reporting by Tony Munroe; Editing by Alistair Scrutton)
Read Entire Article
Tuesday, November 3, 2009
India Buys IMF Gold to Boost Reserves as Dollar Drops
(Bloomberg) India, the world’s biggest gold consumer, bought 200 metric tons from the International Monetary Fund for $6.7 billion as central banks show increased interest in diversifying their holdings to protect against a slumping dollar.
Enter Remainder of Article Here
The transaction, equivalent to 8 percent of world annual mine production, was the IMF’s first such sale in nine years and propels India to the ninth-biggest government owner globally, according to figures from London-based research company GFMS Ltd. The country previously held 358 tons, the data show. The news was a “surprise because everybody was talking about China being the buyer,” said James Moore, an analyst at TheBullionDesk.com.
“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi. “Gold is a safe store of value compared to the U.S. dollar.”
Gold for immediate delivery rose 0.2 percent to $1,061.48 an ounce at 1:20 p.m. in London and was less than 1 percent below its record $1,070.80 an ounce reached Oct. 14. India purchased the gold at an average price of about $1,045 an ounce, according to an IMF official on a conference call.
IMF Finances
The IMF sale accounts for almost half the 403.3 tons that the Washington-based lender in September agreed to sell as part of a plan to shore up its finances and lend at reduced rates to low-income countries. Asian nations, which have amassed stockpiles of foreign currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets as the dollar loses value against other currencies.
“The most important thing is that people want gold even at these prices,” said Ghee Peh, head of mining research, with UBS AG in Hong Kong. “There’s good support for prices for now” from the IMF’s disposal of bullion, he said.
The transaction involved daily sales from Oct. 19 to Oct. 30 at market prices and is in the process of being settled, the IMF said in a statement yesterday.
The purchase didn’t signify any loss of confidence in the dollar, nor did it show that the metal’s appeal was increasing, India’s Finance Minister Pranab Mukherjee said.
Loans to Poor
Proceeds from the sales and other IMF resources as well as individual contributors would help pay for discounted interest rates on loans to low-income countries, the IMF said in July. It plans to grant as much as $17 billion in extra loans to poor nations through 2014. The 403.3 tons the IMF agreed to sell amount to 1/8 of its stockpile.
Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said in an interview in July that he was urging the government to diversify its foreign-exchange reserves and hold fewer dollars. China and Russia have also stepped up calls for a rethink of how global currency reserves are composed and managed.
“There seems to be consensus among the central banks that it’s better to cut down on currency holdings and diversify into assets like gold, which has upside potential,” Krishna Reddy, a precious metal analyst at Way2Wealth Commodities Pvt., said in Mumbai. “The Reserve Bank of India gold purchase is a clear reflection of this belief.”
More Sales
Russia, China or Brazil may buy the rest of the IMF gold for sale, said Moore from the TheBullionDesk.com.
China, the world’s biggest gold producer, has increased reserves of the metal by 76 percent to 1,054 tons since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.
The nation may purchase some of the 403.3 tons of gold being offered by the IMF, Market News International reported in September, citing two unidentified government officials.
“It’s more or less certain that government of India expects the U.S. dollar to weaken,” said Suresh Hundia, president of the Bombay Bullion Association Ltd., in an interview today. The purchase is “not so much about India betting gold prices will increase but that the dollar will fall. They are looking to diversify their foreign exchange reserves.”
India’s foreign-exchange reserves advanced $684 million to $285.5 billion in the week ended Oct. 23, the central bank said Oct. 30. That included foreign-currency assets of $268.3 billion, gold reserves of $10.3 billion and the special drawing rights with the IMF.
Off-Market Transactions
The lender has said it is ready to sell directly to central banks and later make transactions on the open market if necessary. The IMF official declined to say yesterday whether other central banks have expressed interest in purchases.
Given the “well-publicized concerns of many central banks over the level of their exposure to the U.S. dollar, further off-market transactions must be a clear possibility,” Aram Shishmanian, chief executive of the World Gold Council in London, said in a statement.
By: Thomas Kutty Abraham and Kim Kyoungwha
Read Entire Article
Enter Remainder of Article Here
The transaction, equivalent to 8 percent of world annual mine production, was the IMF’s first such sale in nine years and propels India to the ninth-biggest government owner globally, according to figures from London-based research company GFMS Ltd. The country previously held 358 tons, the data show. The news was a “surprise because everybody was talking about China being the buyer,” said James Moore, an analyst at TheBullionDesk.com.
“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi. “Gold is a safe store of value compared to the U.S. dollar.”
Gold for immediate delivery rose 0.2 percent to $1,061.48 an ounce at 1:20 p.m. in London and was less than 1 percent below its record $1,070.80 an ounce reached Oct. 14. India purchased the gold at an average price of about $1,045 an ounce, according to an IMF official on a conference call.
IMF Finances
The IMF sale accounts for almost half the 403.3 tons that the Washington-based lender in September agreed to sell as part of a plan to shore up its finances and lend at reduced rates to low-income countries. Asian nations, which have amassed stockpiles of foreign currency reserves since the 1998 financial crisis, have shown increased interest in diversifying out of U.S. assets as the dollar loses value against other currencies.
“The most important thing is that people want gold even at these prices,” said Ghee Peh, head of mining research, with UBS AG in Hong Kong. “There’s good support for prices for now” from the IMF’s disposal of bullion, he said.
The transaction involved daily sales from Oct. 19 to Oct. 30 at market prices and is in the process of being settled, the IMF said in a statement yesterday.
The purchase didn’t signify any loss of confidence in the dollar, nor did it show that the metal’s appeal was increasing, India’s Finance Minister Pranab Mukherjee said.
Loans to Poor
Proceeds from the sales and other IMF resources as well as individual contributors would help pay for discounted interest rates on loans to low-income countries, the IMF said in July. It plans to grant as much as $17 billion in extra loans to poor nations through 2014. The 403.3 tons the IMF agreed to sell amount to 1/8 of its stockpile.
Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said in an interview in July that he was urging the government to diversify its foreign-exchange reserves and hold fewer dollars. China and Russia have also stepped up calls for a rethink of how global currency reserves are composed and managed.
“There seems to be consensus among the central banks that it’s better to cut down on currency holdings and diversify into assets like gold, which has upside potential,” Krishna Reddy, a precious metal analyst at Way2Wealth Commodities Pvt., said in Mumbai. “The Reserve Bank of India gold purchase is a clear reflection of this belief.”
More Sales
Russia, China or Brazil may buy the rest of the IMF gold for sale, said Moore from the TheBullionDesk.com.
China, the world’s biggest gold producer, has increased reserves of the metal by 76 percent to 1,054 tons since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April.
The nation may purchase some of the 403.3 tons of gold being offered by the IMF, Market News International reported in September, citing two unidentified government officials.
“It’s more or less certain that government of India expects the U.S. dollar to weaken,” said Suresh Hundia, president of the Bombay Bullion Association Ltd., in an interview today. The purchase is “not so much about India betting gold prices will increase but that the dollar will fall. They are looking to diversify their foreign exchange reserves.”
India’s foreign-exchange reserves advanced $684 million to $285.5 billion in the week ended Oct. 23, the central bank said Oct. 30. That included foreign-currency assets of $268.3 billion, gold reserves of $10.3 billion and the special drawing rights with the IMF.
Off-Market Transactions
The lender has said it is ready to sell directly to central banks and later make transactions on the open market if necessary. The IMF official declined to say yesterday whether other central banks have expressed interest in purchases.
Given the “well-publicized concerns of many central banks over the level of their exposure to the U.S. dollar, further off-market transactions must be a clear possibility,” Aram Shishmanian, chief executive of the World Gold Council in London, said in a statement.
By: Thomas Kutty Abraham and Kim Kyoungwha
Read Entire Article
Thursday, October 29, 2009
Paul Tudor Jones Says Now Is Time, Place for Gold as an Asset
(Bloomberg) -- The time to hold gold is now as faster inflation and increased purchases through exchange-traded funds and by central banks boost demand amid stagnant mine output, Paul Tudor Jones’s Tudor Investment Corp. said.
"I have never been a gold bug,” Jones, whose company manages about $11.6 billion out of Greenwich, Connecticut, told investors in an Oct. 15 letter, a copy of which was obtained by Bloomberg News. “It is just an asset that, like everything else
in life, has its time and place. And now is that time.”
Gold futures gained 18 percent this year in New York and reached a record $1,072 an ounce on Oct. 14, on concern that near-zero interest rates and government spending will debase currencies and spur inflation. Fund manager John Paulson increased his bets on gold this year, while David Einhorn told clients of his $5 billion Greenlight Capital Inc. hedge fund in January he was buying gold for the first time.
The Federal Reserve has kept its target rate for overnight loans among banks between zero and 0.25 percent since December to help stimulate the economy. President Barack Obama increased the nation’s marketable debt to an unprecedented $7.01 trillion
as the government borrows to revive growth. The U.S. economy, the world’s biggest, expanded for the first time in more than a year in the third quarter, the Commerce Department said today.
“As one would expect, rising inflation suggests higher gold prices, especially when the Fed is perceived to be behind the curve,” according to the letter. “Gold appears to be cheap. In our view, gold’s value should increase as its scarcity relative to printed currencies increases.”
Patrick Clifford, an outside spokesman for Tudor in New York, confirmed the letter was sent to investors. Tudor’s Tudor BVI hedge fund gained 14.9 percent this year
through the third quarter, according to the letter. Tudor identified gold, emerging market equities denominated in local currencies and commodity related stocks as among the most likely assets to perform best.
As the metal’s price rallied to a record, so too have bullion holdings in exchange-traded funds. Assets in the SPDR Gold Trust, the biggest ETF backed by bullion, reached an all-time high 1,134 metric tons on June 1, and were at 1,104.43 tons as of yesterday, its Web site showed. Central banks were net buyers in the second quarter for the first time since at least 2000, according to the World Gold Council.
While metal exploration expenditure has increased, mine
production has been “stagnant” the past decade and new output
is “marginal” in terms of available supplies, according to the letter. “Any incremental demand for gold must be met through sales from current owners,” the company said in the letter. “They just aren’t making that much of it anymore.”
By Nicholas Larkin
Read Entire Article
"I have never been a gold bug,” Jones, whose company manages about $11.6 billion out of Greenwich, Connecticut, told investors in an Oct. 15 letter, a copy of which was obtained by Bloomberg News. “It is just an asset that, like everything else
in life, has its time and place. And now is that time.”
Gold futures gained 18 percent this year in New York and reached a record $1,072 an ounce on Oct. 14, on concern that near-zero interest rates and government spending will debase currencies and spur inflation. Fund manager John Paulson increased his bets on gold this year, while David Einhorn told clients of his $5 billion Greenlight Capital Inc. hedge fund in January he was buying gold for the first time.
The Federal Reserve has kept its target rate for overnight loans among banks between zero and 0.25 percent since December to help stimulate the economy. President Barack Obama increased the nation’s marketable debt to an unprecedented $7.01 trillion
as the government borrows to revive growth. The U.S. economy, the world’s biggest, expanded for the first time in more than a year in the third quarter, the Commerce Department said today.
“As one would expect, rising inflation suggests higher gold prices, especially when the Fed is perceived to be behind the curve,” according to the letter. “Gold appears to be cheap. In our view, gold’s value should increase as its scarcity relative to printed currencies increases.”
Patrick Clifford, an outside spokesman for Tudor in New York, confirmed the letter was sent to investors. Tudor’s Tudor BVI hedge fund gained 14.9 percent this year
through the third quarter, according to the letter. Tudor identified gold, emerging market equities denominated in local currencies and commodity related stocks as among the most likely assets to perform best.
As the metal’s price rallied to a record, so too have bullion holdings in exchange-traded funds. Assets in the SPDR Gold Trust, the biggest ETF backed by bullion, reached an all-time high 1,134 metric tons on June 1, and were at 1,104.43 tons as of yesterday, its Web site showed. Central banks were net buyers in the second quarter for the first time since at least 2000, according to the World Gold Council.
While metal exploration expenditure has increased, mine
production has been “stagnant” the past decade and new output
is “marginal” in terms of available supplies, according to the letter. “Any incremental demand for gold must be met through sales from current owners,” the company said in the letter. “They just aren’t making that much of it anymore.”
By Nicholas Larkin
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