China gold demand to double in the next decade
"The wise buy metals on price dips," says Pat Boone
BY David Bradshaw ~ Editor, Real Money Perspectives
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March 31, 2010 ~ ((M-F podcast)) ~ gold fraud alert!
Wednesday gold prices rallied near $1,115/oz. on bargain hunting and a weaker dollar amid downbeat jobs data. Gold last traded up $10.30 to $1,113.60/oz., silver rose $.20 to $17.48/oz.
* Both gold and silver gained ground in the first quarter. Silver prices lead the way gaining 4.6%, gold prices rose 1.6%. For the month silver rose 5.8% while gold fell .5%. Precious metals are building a strong base of support amid growing interest in gold as an alternative currency and silver as the most undervalued investment/industrial metal.
* "Gold looks set for its sixth quarterly advance and shows that gold's trend remains up and in a bull market. The macroeconomic conditions and the uncertain outlook of today should see gold continue to act as a safe haven for the foreseeable future. The gold:silver ratio continues to look very favorable for silver which might be on the verge of breaking out," reports GoldCore.
* "What doesn't kill gold, makes it stronger. After last week's stumble, gold bugs expect a renewed surge. Ian McAvity of the Deliberations letter periodically declares of gold that "they opened the trap door and no one jumped." Last week merited McAvity's comment. Sentiment indicators slumped, gold itself saw a six-week low -- but a strong rally Friday meant spot gold gained slightly on the week. Those gold observers who emphasize the condition of the physical market have turned snortingly bullish. And, significantly, inflation-oriented bugs are joining in too," reports Marketwatch.
* "China's gold demand is expected to double from current levels over the next decade due to jewelery consumption and investment needs, the World Gold Council said in report released on Monday. In jewelery, the Chinese per capita consumption is one of the lowest at 0.26 grams 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 tons or as much as 4,000 tons in the sector alone," reports Reuters.
* Precious metals ended last week flat after dipping to a 6-week low Wednesday, providing a good buying opportunity for long-term investors. Gold prices have held in a tight range near $1,100/oz., silver near $17/oz. despite a firmer dollar, which is based more on foreign currency weakness that strong fundamentals. Now that ObamaCare has been signed into law, Americans should expect higher health care costs and commodity prices for many years to come.
* "Today the dollar remains a giant among (fiat) currency midgets," said Rick Santelli on CNBC Friday. The DJIA's drive towards 11,000 seems to have been temporarily stalled as a late-session sell-off Thursday saw a triple-digit gain for the index largely evaporate," reports CNBC.
* The next gov't money grab?: "After 15 months of watching the Obama administration systematically usurp the free market, under the guise of stopping the worst financial crisis since the 1930s, Americans wonder 'what's next'? With the auto, mortgage, banking and now health care industries under government control, is anything still sacred? Their latest proposal is to take control of the retirement accounts of the American public. Thankfully, today there's still a window of opportunity to own 'private' gold," said Swiss America Chairman Craig R. Smith.
* Social Security Payout Exceeds Pay-In: "The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security. This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office," reports NYTimes.
* "The passage of the health care law shows that the US empire is declining because it illustrates the fact that people expect the state to take care of them," David Murrin, the co-founder of Emergent Asset Management hedge fund manager, told CNBC. "In their expansionary phase, empires force people to go out, seek risks and fend for themselves, Murrin said, reminding of the dismantling of the British empire after the war, when the National Health Service, which ensures universal health coverage in Britain, was created. "This (empire decline) is actually a dead-set course that societies get into and it will happen very quickly I'm afraid," he told "Squawk Box Europe."
* "The S&P 500 and Nasdaq ended slightly lower Thursday after comments from ECB President Trichet gave the dollar a boost. Trichet told a French TV network that Greece having to go to the IMF for aid was a 'very, very bad' thing and that the European Union isn't doing enough. Those comments sent the dollar soaring against the euro and commodity prices lower," reports CNBC.
* After rushing above $1,200/oz. in Dec. 2009, gold prices corrected back to $1,060/oz. on Feb. 4th. Since then, the world's ultimate currency and store of value is trending upward again. Rising inflation, political uncertainty and elevated currency/debt worries all support bullish sentiment. (see The Wisdom of Buying on Price Dips)
* "Gold is unique as an asset class as its value is influenced by many factors. And, like other asset classes, the price does not go up in a straight line. What amazes me is when gold goes through periods of consolidation certain analysts immediately denigrate it as an investment. Yes, there are going to be times when other forms of investments will out perform gold, but as the major trend in gold still remains firmly upwards, we must not allow these short-term periods to cloud our long-term judgment. While the primary trend for gold remains strongly intact and to the upside, the current period of consolidation between $1,140 and $1,100 is frustrating investors. But, it is important to be patient and even if gold dips to the $1,080 or even $1,045 level, do not be deterred," reports Mineweb.
* Central Banks buy gold as alternate currency: "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. Central banks, holding about 18% 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," reports Bloomberg.
* "The euro is unlikely to still exist as a currency over the longer term, the pound will fall substantially in the next few years and US Treasurys and some real estate in China are the world's two current bubbles, legendary investor Jim Rogers told CNBC. "Most currencies everywhere are very suspect. The Chinese renminbi may replace other currencies in 20 years," Rogers told "Worldwide Exchange."
* "The markets have created their own gold standard because of uncertainties regarding other asset classes. Money-printing is just another way for governments to silently default on their debt," Marc Faber, author of "The Gloom, Boom and Doom Report," told CNBC. * "Fed Renews Pledge To Keep Rates Low for a Long Time. The Federal Reserve will continue to keep interest rates near zero for an 'extended period' while pointing to increased momentum in the economy's recovery," reports CNBC. Stocks Higher After Fed Statement.
* U.S., U.K. Move Closer to Losing Rating: "The U.S. and the U.K. have moved 'substantially' closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. The governments of the two economies must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, " reports Bloomberg.
* "Keep in mind the pound sterling used to be the world's reserve currency. Could the U.S dollar, today's reserve currency, face the same fate as the pound -- in the ash can of fiat paper currencies over history. The average fiat currency lasts 39 years before collapsing. Interestingly, the U.S. abandoned the gold standard in 1971, 39 years ago," said Swiss America Chairman Craig R. Smith.
* "Currency devaluations are a very strong driving force behind gold prices. At €834 per ounce last week, euro gold has never traded higher. Once again we see gold appreciate as the currency devalues. And, as sterling and the Euro spiral downwards the US dollar has been the main beneficiary of a flight from these currencies. However, what is good about the US dollar? If history repeats itself, then we can expect further trouble with these fiat currencies which bodes well for gold," reports Mineweb.
* Gold's cross-currency strength: "Gold's rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal's broadening insurance appeal, as sovereign debt fears shift to the fore. With the world's leading currencies currently involved in what analysts refer to as an 'ugly competition', gold is gaining traction," reports Reuters
* "The links between the dollar and gold are likely to continue to weaken in coming months as major currencies continue to decline. 'We will see $1500 gold at some point in 2010 - with lots of ups and downs. there is a very good chance we will see $2000, even a good possibility of $3000 or higher over the next several years," said Jeff Nichols, MD, American Precious Metals Advisors to Mineweb.
* "Selling euros to buy dollars is sort of like exchanging your ticket on the Titanic for a ride on the Hindenburg. The answer is not to sell one sinking currency and jump on another. The only truly safe currencies are those that can act as a store of wealth. Investors should seek a safer harbor by owning commodities and precious metals," reports Forbes.
* "GoldCorp CEO Rob McEwen repeated his prediction that gold will hit $2,000/oz. by year-end and $5,000/oz. before the gold bull run is over. His views follow his assessment of the medium and longer term effects of the printing of huge amounts of money by Western Governments as part of their stimulus packages and the overall impact of this on the global economy. This is effectively making the money in one's personal bank accounts worth less and less and purchasing gold, and investing in gold stocks is the way to protect the value of one's wealth," reports Mineweb.
* "After the nearly 8% rise seen in the last month, gold was due a correction and profit taking was to be expected. Another factor contributing to the fall may be the unsubstantiated rumors of central bank selling and liquidations from gold exchange-traded funds and of long positions by hedge funds and banks on the COMEX," reports GoldCore.
* Gold: setting up for its next move to the upside?: "Expansionary monetary policies, exploding national debt and global currency devaluations, are creating a very favorable scenario for the price of gold. Gold needs to break out of this consolidation pattern that began in December 2009. A key short-term sign will be a break above $1,150/oz.," reports Mineweb.
Political & Economic Uncertainties
* What Change Looks Like: "The health care bill will not fix everything that ails our health care system, but it moves us decisively in the right direction," said President Barack Obama. "This is what change looks like. Lawmakers now march on with renewed confidence, energized by this victory on their behalf. It meant another stone firmly laid in the foundation of the American dream... Lawmakers answered the call of history," said Mr. Obama reports CBS.
* The Alinsky plan for America "If they pass this bill, then we the people are no longer 'we the people.' We are now 'we the ruled.' Our nation has been taken over by a band of thugs, and the truly sad part is 52% of you sent the thug to the position of power that will enslave all of us. It is straight out of the playbook, 'Rules for Radicals,' authored by Saul Alinsky. Mr. Obama has now deceived and manipulated an entire nation," writes Swiss America Chairman Craig R. Smith at WND.
* 20 Ways ObamaCare Will Take Away Our Freedoms -IBD: "The Democrats will pass the Senate health care bill with some reconciliation changes. Thus, it is t is worthwhile to take a comprehensive look at the freedoms we will lose. Of course, the bill is supposed to provide us with security. But it will result in skyrocketing insurance costs and physicians leaving the field in droves, making it harder to afford and find medical care. We may be about to live Benjamin Franklin’s adage, 'People willing to trade their freedom for temporary security deserve neither and will lose both,'" reports FreeRepublic.
* Majority of states seek secession from ObamaCare: "Idaho Gov. C.L. "Butch" Otter signed into law this month a measure requiring the Idaho state attorney general to sue the federal government over the health care bill. Similar legislation is pending in as many as 37 other states. Even after all the legislation is passed, the battle will continue. Republicans plan on making the health reform package a campaign issue in the upcoming midterm elections, and numerous state officials are already questioning the legality of the sweeping legislative overhaul," reports CBS.
* Social Security to start cashing Uncle Sam's IOUs: "For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year. Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more," reports AP.
* Is China spoiling for a showdown with America?: "The long-simmering clash between the world's two great powers is coming to a head, with dangerous implications for the international system. Within a month the US Treasury must rule whether China is a 'currency manipulator', triggering sanctions under US law," reports Telegraph.
* Leave yuan to us, China tells Obama: "The U.S. should not make a political issue out of the yuan, a Chinese central banker said on Friday, as the two countries lurched toward a potential bust-up over Beijing's currency regime. The latest rhetorical salvoes underlined how long-running friction caused by the yuan's de facto dollar peg could come to a head next month when President Obama's administration decides whether to brand China as a 'currency manipulator'," reports Reuters.
* "The government ran up the largest monthly deficit in history in February, keeping the flood of red ink on track to top last year's record for the full year. The February deficit totaled $220.9 billion, 14% higher than the previous record set in February of last year. The Obama administration is projecting that the deficit for the 2010 budget year will hit an all-time high of $1.56 trillion, surpassing last year's $1.4 trillion total," reports AP.
* "The global economy is entering a next 'supercycle' phase that will generate inflation necessary for recovery, a strategist and protege of noted economist Nouriel Roubini told CNBC. The supercycles feature periods of commodity booms followed by busts, and the US economy is on the verge of an inflationary period that will generate a sharp rise in prices," said Arun Motianey, director of fixed income strategy at Roubini's RBG Capital.
* "Sales at U.S. retailers rose unexpectedly in February, bolstering hopes of a sustainable economic recovery. Total retail sales rose 0.3% as consumers bought an array of goods from necessities to luxury items," reports CNBC. Consumer sentiment dips in March over job worries, sending stocks back near flatline.
* Why the Stock Rally Can't Be Sustained: "In our view the strong [stock market] rally off last year's March low is a contra-cyclical move within a secular bear market that started in March 2000. We have been undergoing a major credit crisis, followed by severe decline in income, a collapse in asset prices and record debt. The major drivers of previous economic recoveries in the post-war period have been housing and consumer spending that was spurred by easy credit conditions. Those drivers are just not working this time around. The S&P peaked on January 19th at 1150, declined to 1044 and now has bounced back to 1122. After the March 2009 low the index moved 62% in six and a half months, but only 4% in the last five and a half months. In our view this is all part of a topping formation that will be followed by a substantial decline in the period ahead," reports Comstock.
* End of the road for Obama?: "America is mired in unhappiness, all the worse for the height from which Obamania has fallen. The economy remains troublesome. There is growth – a good last quarter suggested an annual rate of as high as six per cent, but that figure is probably not reliable – and the latest unemployment figures, last Friday, showed a levelling off. Yet 15 million Americans, or 9.7 per cent of the workforce, have no job. Mr Obama benefited in his campaign from an idiotic level of idolatry, in which most of the media participated with an astonishing suspension of cynicism," reports Telegraph.
* You Can't Print More Gold: "Investors should buy some gold every month 'forever' or look to emerging market stocks rather than U.S. shares. Gold's quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar," said Marc Faber, editor of The Gloom, Boom & Doom Report, to CNBC.
* "The question investors have to ask themselves is whether it’s more likely the powers that be will do the right thing, raise rates, drain liquidity and force the world into a deeper recession before inflation gets out of control or will they continue to kick the can down the road making the problem bigger and bigger? Knowing human nature, my bet is that our elected officials will do whatever they have to do to avoid short term pain - even if it means compromising our future," reports John Townsend at GoldIRAs.
* Traders Seek The Next Weakest Link: "Athens agreed to raise taxes and cut spending this year, but analysts warned the moves might not be enough to avert a bailout for Greece or to contain the crisis shaking Europe and its common currency, the euro. 'There is a risk the market will focus on the next weakest link in the chain,' said Jim Caron at Morgan Stanley. The debt crisis in Europe threatens to tip the financial, as well as political, balance of power. With Germany and France the most likely rescuers, leaders in Berlin and Paris could end up dictating fiscal policy in Portugal, Ireland, Italy, Greece and Spain," reports NYTimes.
* Obama kisses U.S. privacy goodbye: "President Obama signed a one-year extension of the Patriot Act which expands the government's ability to monitor Americans in the name of national security. The Senate approved the measure, with privacy protections cast aside. Thrown away were restrictions and greater scrutiny on the government's authority to spy on Americans and seize their records," reports AP.
( see PRIVATE WEALTH: A thing of the past? - Special Report )
* Capital Gains & Coins in IRAs: "Three new Senate Bills seek to level the playing field for small investors in precious metals and rare coins," according to the Industry Council on Tangible Assets. Senate bills S. 1769 (Options for Investors through United States Certified Coins Act of 2009), S. 394 (Art and Collectibles Capital Gains Tax Treatment Parity Act), and S. 1367 (Fair Treatment for Precious Metals Investors Act). Please contact your Senator to express your support.
* Running on empty: "The fledgling economic recovery appears to be running out of gas. The recent run of economic data is most compelling. Just about all of them paint a picture of an economy slowing -- and sharply, at that. The best solution is to remove the uncertainties facing business such as regulations, costs for health care, energy and the environment, not to mention what their own tax rates will be," reports Marketwatch.
February: Metals Outshine Stocks Again
* Gold prices ended February up 3.4%, outpacing stocks again for the month and year, while silver prices rose 2%. In February precious metals successfully scaled a wall of economic worry and key technical resistance. While further consolidation is possible, solid fundamentals are pushing metals into their 10th consecutive year of growth.
* "The precious metal recently broke from its usual inverse relationship with the U.S. dollar to move more in sync with the climb in the greenback, showing off its prowess as a resilient world favorite. 'Gold moving up with the dollar is a sign of tremendous strength in gold,' said Sam Kirtley, CEO of SK Options Trading to Marketwatch.
* China will bid on IMF's gold: "China has confirmed its intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, a Russian news agency said. Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market," reports GATA.
* India potential buyer of IMF gold: "India’s central bank looks set to be a buyer again when the International Monetary Fund begins selling 191.3 tonnes of the precious metal amid volatility in major currencies. The uncertain outlook for two of the world’s major reserve currencies — the dollar and euro — provides a spur for central banks, including India’s, to buy gold. India’s gold holdings lag those of major economies despite a big purchase in October," reports DailyTimes.
* 'Buy farmland and gold,' advises Dr. Faber: "The world’s most powerful investors have been advised to buy farmland, stock up on gold and prepare for a 'dirty war' by Marc Faber, the notoriously bearish market pundit, who predicted the 1987 stock market crash. 'The next war will be a dirty war. What are you going to do when your mobile phone gets shut down or the internet stops working or the city water supplies get poisoned?,' he told fund managers, " reports Timesonline.
* "Investors have poured money into gold as a hedge against currencies' volatility due to fears about debt defaults in the euro zone, while the metal's steady rebound since falling below $1,100 also ignited technical buying. Dealers expected gold to eventually test January highs around $1,150," reports Reuters.
* "Gold experienced a major technical breakout in February. Now that gold prices have closed above $1,100/oz.; short, mid and long-term trends are all signaling BUY," said Swiss America Sr. Broker Jim Carrillo.
* Metals correction technically over: In February precious metals successfully scaled a wall of economic worry and bearishness. This is very bullish especially in the face of a stronger dollar (supported by a Fed rate hike) and news of a 191 ton sale of gold by the IMF. Rising wholesale inflation data and elevated currency and debt worries supported bullish sentiment.
* Credit Suisse analyst David Sneddon says the price of gold is poised to move sharply higher to 1,227/oz. "Gold priced in the 16-nation currency reached a record 826 euros today on concern debt-laden economies in the region will hamper recovery and amid speculation the European Central Bank will keep its benchmark lending rate at a record low," Bloomberg reports.
* "Gold will never be well received by the financial industry in general because it's the enemy to financial assets. And stock and bonds make the financial services industry go round and round. What bothers me to no end is an organization like GATA can’t be heard by the same media. The anti-gold crowd calls anyone who shows even the littlest love for it 'goldbugs' or worse. I call them perma-bears," reports Peter Grandwich at Agoracom.
* "Gold is benefiting firstly from its value as a defensive investment, and secondly from the marked improvement in the technical picture, which emerged at the start of the week," said Mitsubishi precious metals strategist Tom Kendall. Gold’s usual relationship with the US dollar has weakened as fears over the outlook for paper currencies in general lifted interest in bullion as an alternative asset, reports BusDay.