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4.16.14 - Inflation On The Rise!

Gold prices slightly higher after Yellen speech. U.S. stocks rise on upbeat data, earnings reports. Gold last traded at $1,303 an ounce. Silver at $19.63 an ounce.

We are starting to see the early warning signs of an economic condition that hasn't been widely mentioned in some time: inflation.

After two months of sharp increases in food prices, grocers are starting to pass along their higher wholesale costs to consumers.

Food prices increased 0.4% after posting a similar jump in February, the Bureau of Labor Statistics said Tuesday. That's the largest monthly increase since September 2011. Beef, pork, poultry, eggs and milk have had the most dramatic price hikes as drought, a virus outbreak and rising exports have thinned U.S. supplies.

The higher food bills are squeezing households still struggling with meager wage gains and could crimp spending just as the recovery is expected to accelerate.

Both beef and pork prices have been reaching new all time highs on an almost daily basis. Prices for shrimp have hit a 14-year high due due to a disease that has hit the shrimp population.

Though the Labor Department and Federal Reserve keep telling us there is essentially no inflation, out here in the real world, the cost of living is rising.

On Tuesday we learned that even by skewed government statistics, inflation is starting to rise faster than officials and economists had suspected. Over the past three months, core CPI inflation is increasing about 1.8 percent on a yearly basis.

Should fears of inflation continue to build, gold investments are ideally suited to protect wealth. Gold has historically been renowned for its ability to provide an effective hedge against high inflation.

There are other factors expected to drive gold prices higher as well.

David Mazza, head of research at SPDR ETFs and SSGA Funds sees gold's role as a safe haven coming to the fore, at the same time paper assets become more volatile. This includes concerns on the geopolitical front.

Recent tensions in Ukraine, between Western nations and Russia, seem to be escalating and have maintained a strong fear sentiment in the marketplace, resulting in safe haven demand for gold. But this is not the only geopolitical difficultly investors could face this year. A new video shows what looks like the largest and most dangerous gathering of al Qaeda in years.

In the middle of the clip, the man known as al Qaeda's crown prince, Nasir al-Wuhayshi, appears brazenly out in the open, greeting followers in Yemen. Al-Wuhayshi, the No. 2 leader of Al Qaeda globally and the head of Al Qaeda in the Arabian Peninsula, has said he wants to attack the United States. With some fighters faces blurred, there is worry it signals a new round of plotting.

In economic news, the GDP figures from China show the lowest rate of growth in 24 years. This is a concern around the world as many economies are dependent on China as an engine for growth both on the supply side and the demand side. A slowdown in China could spread to other economies, which is bad news for the financial markets.

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4.15.14 - Gold Presents Major Buying Opportunity

Gold prices fall sharply on profit-taking and a stronger U.S. dollar. U.S. stocks end higher on upbeat earnings reports. Gold last traded at $1,300 an ounce. Silver at $19.49 an ounce.

As millions of Americans rush to meet tonight's deadline for filing their federal income taxes; gold has entered a correction, tensions continue to escalate in Ukraine and economic reports raise concerns about the health of the US economy.

The price of gold is off about 2% on technical-driven profit taking today after five days of consecutive gains. Despite the sell-off, there is evidence higher prices are in store.

Richard Ross, global technical strategist at Auerbach Grayson, says today's correction is providing a good buying opportunity, as the charts are doing something they haven't done in a while: flash a buy sign.

"There are some signs that make gold very attractive at these levels," said Ross. "I'm not a gold bug per se but I do like a nice chart and I think that's what we can see here with gold. It has a lot of things in its favor."

Pulling out his fundamentals hat, Ross also sees a weaker dollar, lower interest rates and volatility in the equity markets as tailwinds for bullion.

One of the recent bullish indicators for gold has been rising Chinese demand, making China the world's number one consumer of gold. According to the World Gold Council, that trend will continue over the next few years, with Chinese gold demand rising by another 20% by 2017.

Another factor that could potentially drive global investors to gold as a safe haven is the continuing tension in Ukraine. This tension ramped up yet again today as Russian Prime Minister Dmitry Medvedev said Ukraine was on the verge of civil war as the country launched a military operation against pro-Russian militants in the separatist East.

The government in Kiev is taking the battle to the restive East of the country after armed pro-Russian activists occupied administrative buildings in cities including Donetsk, a regional center of more than 900,000 about 62 miles from the Russian border. An attempt to head off the mounting insurgency may escalate tensions with Russia, which has 40,000 troops massed on Ukraine’s border after its annexation of Crimea last month.

In addition, a Russian fighter jet buzzed a US Navy destroyer in the Black Sea yesterday, making as many as 12 low-level passes over the ship in a clear effort at intimidation.

In more mundane economic news, new economic reports were released today which all show reasons to be concerned about the US economy:

• The Consumer Price Index (CPI) rose 0.2% in March, slightly higher than 0.1% economists had forecast. The Bureau of Labor Statistics said increases in the shelter and food costs accounted for most of the rise. Consumers are especially feeling the hike at the grocer where beef is at a record high and milk, and some vegetables, are also climbing in price.

In fact, beef prices are at their highest levels in 27 years and the drought in California is expected to drive fruit and vegetable prices up across the board anywhere from 14% for corn to 34% for lettuce in coming months.

• Confidence among home builders in the market for new, single-family homes remained in a holding pattern in April, ticking up just one point.

The National Association of Home Builders/Wells Fargo Housing Market Index rose to 47 from a downwardly revised reading of 46 the month before. The reading disappointed analysts who had expected it to rise to 49. A reading of more than 50 indicates more builders view market conditions as favorable than poor. In other words, more builders view market conditions as unfavorable or poor today than favorable.

• U.S. business inventories rose a bit less than expected as sales rebounded, suggesting a slow pace of restocking could weigh on economic growth. The Commerce Department reported that inventories increased 0.4 percent in February after rising by the same margin in January. Economists had forecast inventories increasing 0.5 percent in February.

Businesses accumulated too much stock in the second half of last year and are placing fewer orders with manufacturers while they work through the pile of unsold goods.

Add to these concerns; severe weather, the expiration of long-term unemployment benefits and food stamps cuts ... all of which add up to a gloomy forecast for growth.

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4.14.14 - Gold Jumps On Growing Tensions In Ukraine

Gold prices close higher on a sharp decline in equities as tensions grow in Ukraine. U.S. stocks boosted by stronger-than-expected retail sales and results from Citigroup Inc. Gold last traded at $1,327 an ounce. Silver at $20.01 an ounce.

Things are once again heating up between Russia and Ukraine, pushing gold to a 3-week high today.

Earlier, pro-Russian separatists in Ukraine ignored an ultimatum to leave occupied government buildings in eastern Ukraine while another group of rebels attacked a police headquarters as a threatened military offensive by government forces failed to materialize.

In addition to gold, palladium also rose--to a 2 1/2 year high--on fears that a new round of escalated sanctions will curb supplies of the metal, a key component in pollution control devices on automobiles and other engine-powered products. Much of the world's palladium comes from Russia.

Ukraine aside, there is reason to believe gold will rise in the near future due to a decidedly cloudy picture for the US dollar. There is a growing movement to dump U.S. dollars in global trade in favor of local currencies or even gold. Russia and China appear to be spearheading these efforts, with new bilateral trade deals that bypass the U.S. dollar. These developments are all very bearish for the U.S dollar.

Given the debt levels of the U.S. government, unprecedented money printing to bail out the banks and keeping the economy afloat over the past 5 years; it is tough to see a scenario in which the dollar strengthens in a sustained manner going forward.

Whether the dollar collapses suddenly or dies a slow death, you will want to have gold in your portfolio to protect your wealth.

Other markets are in precarious condition, particularly the US stock market.

Another horrific stock market crash is coming, and the next bust will be “unlike any other” we have seen.

That’s the message from Jeremy Grantham, co-founder and chief investment strategist of GMO, a Boston-based firm with $117 billion in assets under management.

Grantham pulls no punches when he discusses who he holds responsible for the coming financial carnage. In a recent interview with The New York Times, he calls Federal Reserve Chair Janet Yellen “ignorant” and said the Federal Reserve all but killed the economic recovery.

He also says that he isn’t putting his clients’ money into the market right now.

Grantham isn’t the only one worried about a market collapse.

“We have no right to be surprised by a severe and imminent stock market crash,” explains Mark Spitznagel, a hedge fund manager who is notorious for his hugely profitable billion-dollar bet on the 2008 crisis. “In fact, we must absolutely expect it."

Others seem to have already had advance notice that a fall was coming.

Insiders at some of the hottest private and publicly traded internet companies unloaded substantial personal stakes ahead of the recent decline in the tech sector.

The selling has stirred unease among some investors, who see the sales as opportunistic moves revealing a lack of confidence in their companies’ stock prices.

“Individuals selling before going public is always a bad sign,” said Mr Sebastian Thomas, a portfolio manager at Allianz Global Investors.

“It’s a yellow flag with regard to what’s really going on with the company,” said Mr Thomas. “It makes you worry what they are trying to sell to investors.”

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