Gold ends at six-month high on safe-haven buying

Holdings in the largest gold ETF have leaped 8% in one month to record high

By Moming Zhou, MarketWatch

Last update: 2:32 p.m. EST Jan. 30, 2009

NEW YORK (MarketWatch) -- Gold futures rose Friday, ending the week at their highest level in six months as investors sought the safety of the metal following government data that showed the U.S. economy contracted the most in 27 years during the fourth quarter.

Rising demand for the metal has pushed holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by gold, to a new record level.

Gold for February delivery closed up $22.20, or 2.4%, at $927.30 an ounce on the Comex division of the New York Mercantile Exchange, the loftiest closing level for a front-month contract since July.

The benchmark contract has risen 3.5% this week and 4.9% this month.

"Demand remains very high internationally for ETFs, gold certificates and bullion coins and bars," said Mark O'Byrne, executive director at Gold and Silver Investments. We've seen "continuing safe haven demand for gold" due to "sharp deterioration in the global economy."

Spurring the safe-haven moves into gold, the government reported that the nation's gross domestic product contracted at a 3.8% annualized rate in the fourth quarter. That shrinkage is the largest on record since the first quarter of 1982.

Most economists expected that GDP would shrink at a 5.5% annual rate.

However, the decline would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth. Excluding the inventory buildup, GDP contracted at a 5.1% pace. See Economic Report on GDP data.

In spot trading, the London afternoon gold-fixing price -- a benchmark for gold traded directly between big institutions -- stood at $919.50 an ounce Friday, up $27.25 from the previous day.

SPDR holdings

On Thursday alone, holdings in the SPDR gold fund rose 10.49 tons, or 1.3%, to reach the new high of 843.59 tons, according to latest data from the fund. SPDR gold holdings have jumped 63 tons, or 8%, in January.

The fund's gold holdings are now nearly 80 tons higher than official gold holdings in Japan, the world's seventh-largest official gold holder.

The SPDR Gold Trust .

In other economic news, U.S. employment costs rose at the slowest pace in at least 26 years in 2008, the Labor Department reported, a sign that rising unemployment has been keeping a lid on wages and benefits. See Economic Report on unemployment.

Also on the Nymex Friday, March copper rose 0.8% to $1.4685 a pound, while March silver rose 3.5% to $12.565 an ounce. March palladium gained 1.3% to $193.30 an ounce, while April platinum gained 1.7% to $991.30 an ounce.

Among gold miners, shares of Barrick Gold Corp. , the world's largest gold mining company, fell 1.8% to $37.88. Goldcorp Inc. gained 0.8% to $29.73, and South Africa's Gold Fields Ltd. lost 0.8% to $10.56.

In other equities, the Amex Gold Bugs Index , which tracks the share prices of major gold companies, rose 2.4% to 309.15.

The iShares Gold Trust ETF added 1.8% to $91.18, while the iShares Silver Trust ETF gained 1.5% to $12.44.

The Market Vectors-Gold Miners ETF rose 2% to $35.10.

Moming Zhou is a MarketWatch reporter based in New York.

2,000 year old gold coins found

The irony is that this gold was found near the town of Milton Keynes. Remember, it was John Maynard Keynes (no relation) the economist who's theories are to blame for the current financial fiasco. It is he who glibly stated "In the long run, we are all dead". It looks like he is the one who is dead and gold is still around as money after 2,000 years.

Boudicca's gold hoard unearthed
January 17, 2009
The Independent

The largest hoard of prehistoric gold coins in Britain in modern times has been discovered by a metal detectorist in East Anglia. The 824 gold staters, worth the modern equivalent of up to £1m when they were in circulation, were in a field near Wickham Market, Suffolk. Almost all the coins were minted by royal predecessors of Boudicca, the warrior queen of the Iceni tribe who revolted against Rome in AD 60.

The solid gold staters – each weighing just over five grams – were made between 40BC and AD 15, most of them in the final 35 years of that period. They were buried in a plain, wheel-thrown pottery vessel, possibly inside some sort of rectilinear religious compound, between 15 and AD 20. Although it has not yet been proved, it is likely that the hoard represented part of the accumulated wealth of an individual or community and that it was buried as a votive offering at a time of a political stress, drought or other natural disaster.

Although this is the first major Icenian gold coin hoard found, the tribe did have a tradition of making votive offerings of other gold objects. At one of their major religious centres, Snettisham in northern Norfolk, the tribe buried at least 30kg of gold and silver jewellery, mainly neck and arm torcs. Significantly, these were also buried within a rectilinear enclosure.

The new discovery is particularly important because it highlights the probable political, economic and religious importance of an area on the southern fringe of Icenian territory, near its border with the neighbouring Trinovantian tribal kingdom. The Wickham Market area of south-east Suffolk where the hoard was found seems to have been of great importance in Iron Age times. Within just a few miles of the find spot are two other important Iron Age sites. The larger was a vast, triple-ditched, quasi-urban centre where metal and textile manufacturers worked, with evidence of mysterious rituals, involving human skulls.

The second site was a probable market where dozens of Iron Age silver and silver-plated, mainly Icenian coins, have been found over the years.

"The [new] hoard is absolutely unique," said Ian Leins, the British Museum's curator of Iron Age coins. "It is the largest hoard of British Iron Age gold coins to be studied in its entirety."

The find is the most substantial Iron Age gold coin hoard discovered in Britain since 1849, when a farm worker unearthed between 800 and 2,000 gold staters in a field near Milton Keynes.

The latest coins themselves bear an assortment of motifs, most of which were derived ultimately from Macedonian coins minted by Alexander the Great's father, Philip II in the 4th century BC. Nearly all bear images of horses portrayed in a highly stylised Celtic manner, totally different from the motif's distant Macedonian precursor. But one motif – two crescent moons – which appears on almost half the coins are a purely Icenian numismatic device, possibly associated with the importance of the moon in Iron Age Druidic religion.

To protect the site, archaeologists from Suffolk County Council kept the discovery under wraps for months while they made secret excavations, funded by the British Museum. The area was thoroughly investigated using advanced metal detection equipment to ensure all the coins had been retrieved before the discovery was announced.

It was this excavation, directed by archaeologists John Newman and Jude Plouviez, that led to the discovery of Iron Age and Romano-British earthworks (potentially a sacred enclosure) near where the metal detectorist had found the gold coins.

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Merrill Lynch says rich turning to gold bars for safety

FYI:

Merrill Lynch says rich turning to gold bars for safety

Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.

By Ambrose Evans-Pritchard
Last Updated: 10:32AM GMT 09 Jan 2009
Telegraph

Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.

"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.

Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.



The metal should do well whatever happens. If deflation sets in and rocks the economic system it will serve as a safe-haven, but if massive monetary stimulus gains traction and sets off inflation once again it will also come into its own as a store of value. "It's win-win either way," said Mr Dugan.

He added that deflation may prove the greater risk in coming months. "It's very difficult to get the deflation psychology out of the human brain once prices start falling. People stop buying things because they think it will be cheaper if they wait."

Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate. "Don't start selling your government bonds," Mr Dugan said, dismissing talk of a bond bubble as misguided.

He warned that the eurozone was likely to come under strain this year as slump deepens. "There is going to be friction as governments in the south start talking politically about coming out of the euro.
I don't see the tensions in Greece as a one-off. It is a sign of social strain in countries that have lost competitiveness."

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All that Shimmers is Gold

Great Video regarding Gold:

All That Shimmers is Gold (click here to watch video)

The safe haven status of gold is starting to shine brighter and brighter, according to Jurg Kiener, CEO of Swiss Asia Capital. He explains his bullish outlook on the precious metal to CNBC's Oriel Morrison.

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Woes on Wall Street coincide with gold coin rush

Woes on Wall Street coincide with gold coin rush

By SANDY SHORE

DENVER (AP) — Investors who have forsaken shaky financial markets for the safety of gold must feel a little bit like prospectors.

As the worst recession in at least a generation spreads, so too does the clamor for gold bars and coins, assets less likely to go up on smoke like so many derivatives and asset-backed securities.

"I've never seen a case where demand was so high and supply was so short," said Chicago coin dealer Harlan Berk, who has been in the business 44 years.

Spikes in demand for gold coins this year appear to run parallel with the mounting woes on Wall Street.

In August, as the Federal Reserve pumped $62 billion into the U.S. banking system and rejected requests for mortgage finance giants Fannie Mae and Freddie Mac to take on more debt, sales of the popular American Eagle coin were suspended for a week.

The U.S. Mint was unable to get enough gold blanks from suppliers to match demand, Mint spokesman Michael White said.

In late September, when a massive bailout for the nation's biggest banks failed, sales of the American Buffalo coin were suspended until Nov. 3 because of shortages.

Yet even before the full extent of the financial crisis was known, investors had begun to load up on gold and other assets that could be held in the hand.

By early spring, investors were snapping up precious metals such as gold, silver and platinum, said Beth Deisher, editor of Coin World trade magazine.

Gold for April delivery shot up to a record of $1,033.90 an ounce on the New York Mercantile Exchange March 17. According to a report by the National Bureau of Economic Research released this month, that was just three months into the U.S. recession.

That correlation continued throughout the year as Wall Street institutions fell.

"People sensed there was something going on that they didn't quite understand," Deisher said.

In the third quarter, when the U.S. bailed out Fannie Mae and Freddie Mac, the Fed gathered the chiefs of major banks on Wall Street to plot a rescue, and Lehman Brothers descended into bankruptcy protection, gold sales went into high gear, said Natalie Dempster, head of the World Gold Council's North American investment unit.

U.S. demand for gold coins and small bars jumped 600 percent and international demand rose 121 percent, according to the council.

"The fact that gold is nobody else's liability was really an extremely important trait for investors in Q3 that were growing increasingly mistrustful of financial institutions in general," Dempster said.

To get gold as stocks began to fall, investors were willing to pay.

"You saw people paying premiums to get coins and small bars," Dempster said. "The refiners, et cetera, just wouldn't have been set up to produce that amount of gold, the same way as any other product."

Compounding the shortage somewhat, Deisher said, was a decision years ago to offshore some of the tasks that go into making U.S. gold coins.

Under the law, gold used in U.S. coins must be mined domestically. However, the government contracts with private companies to fabricate blank coins for striking with images such as the American Eagle. One of those companies is Gold Corp., owned by the government of Western Australia and operator of the Perth Mint.

Demand for gold coins continued to grow as economic news from Wall Street and Washington grew more ominous.

In early October, the Dow Jones industrial average closed below 10,000 points for the first time since 2004. At the same time, coin dealers saw demand a hit a peak, and bullion coins were fetching huge premiums, said Larry Shepherd, executive director of the American Numismatic Association.

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Nervy investors spur rush at Swiss gold refiners

Wed Dec 17, 2008 9:50am IST

By Arnd Wiegmann and Lisa Jucca

MENDRISIO/ZURICH, Switzerland (Reuters) - Sealed off by grey concrete walls and barbed wire, the workmen in protective glasses and steel-toed boots at this smelter cannot work fast enough to meet demand from the nervous rich for gold.

This refinery near Lake Lugano in the Alps is running day and night as people worried about recession rush to switch their assets into something that may hold its value.

"I have been in the gold business for 30 years and I have never experienced anything like this," said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world's three largest.

"Production has dramatically increased since the middle of the year. We cannot cope with demand," said Schnellman, wearing a gold watch on his wrist.

Spot gold hit a record $1,030.80 an ounce on March 17. It fell below $700 in late October, partly because investors sold their holdings to cover losses in equity and bond markets hit by the credit crisis, and is now around $830 an ounce.

The trigger for the price to rise again could come from a much weaker dollar, making gold cheaper for holders of other currencies, and a renewed aversion to paper assets as governments and central banks pump large amounts of cash into the economy, stoking inflation.

Smoke billows as the molten gold, like glowing butter, is poured. To cool it, the worker drops it into water. It hisses as it hits. Once hardened in moulds, the gold bars are embossed with the refinery's seal. Workers wearing white gloves stack them into boxes like domino pieces.

Though Switzerland is not a gold miner, it is home to some of the world's largest refineries, which process an estimated 40 percent of all newly mined gold.

Argor-Heraeus is part-owned by the Austrian Mint and a subsidiary of Germany's Commerzbank. Commercial and central banks are its chief customers and it says it processes some 350-400 tonnes of gold and 350 tonnes of silver per year.

Customers buying gold bars, which can weigh more than 10 kg each, have to wait roughly a month, taking into account the year-end holiday season.

For those buying coins or ingots, which can fit into the palm of a hand, the delay is six to eight weeks. A year ago, these small products could be had within a couple of days.

Worries about the banking system globally have boosted worldwide demand for physical gold, the Gold Council said.

"Many (people) are afraid of leaving their money in banks," said Sandra Conway, managing director at ATS Bullion in London, which sells bullion and gold coins to institutions and the retail market.

"It's difficult to quantify, but I would say our turnover over the last three months has certainly doubled compared to the previous three months," she said.

FULL CAPACITY

Other Swiss gold refiners also say business is booming.

"Since the summer we have experienced a sharp rise in demand for certain gold products. The one-kilo bar has become very popular," said Fiorenzo Arbini, in charge of health and safety at Pamp, another large Swiss refiner.

"People used to buy certificates, now they want physical gold."

Schnellmann said the Argor-Heraeus smelter is operating at full capacity, three eight-hour shifts a day. Conquering the backlog by hiring is difficult, because each candidate has to undergo a security check.

Gold refiners were established in Switzerland to supply the watch industry and, later, jewellery-makers in Italy.

Switzerland's largest banks stepped in to replace a void in gold trading while the London gold market was shut after World War Two and again during a brief closure in 1968.

The former Soviet Union, another top gold producer, chose Zurich banks to handle most of its gold sales in the 1970s and 1980s.

"Gold has an image of being the asset of last resort. This could be viewed as old-fashioned but this is how enough people with enough money to matter think," said Stephen Briggs, a metals strategist at RBS Global Banking & Markets.

GOLD TOUCH

India, China and the Middle East remain the biggest gold importers, particularly for jewellery. But demand for physical gold has exploded also in Europe, the Gold Council said.

In Switzerland, home to the world's largest private banking industry, demand for gold bars and coins shot up six-fold to 21 tonnes in the third quarter of 2008, more than in any other European country.

Retail investment in gold rose 121 percent in the third quarter of 2008, an important contributor to the overall increase in global demand, the Gold Council said.

In that period purchases of gold bars by retail investors, who often buy through commercial banks, rose nearly 60 percent, notably in Switzerland, Germany, and the United States.

There was a surge of interest among professional investors shortly after the collapse of Lehman Brothers in September.

Private bank Julius Baer in October launched a fund to invest exclusively in gold bars stored in highly secured vaults in Switzerland.

"The fascination with gold has been there since the beginning of civilisation," said Schnellmann. "It cannot be explained: you can't eat gold, you cannot build anything resistant with it and yet people want to hoard it."

(Additional reporting by Pratima Desai in London)\

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Gold rallies, surpasses platinum as dollar drops

Gold rallies, surpasses platinum as dollar drops

* Reuters, Thursday December 11 2008

* Gold trades above platinum for the first time since 1996
* Bullion hits record in sterling terms, says Reuters data
* Platinum, palladium markets eye automaker bailout debate

By Frank Tang and Jan Harvey
NEW YORK/LONDON, Dec 11 (Reuters)

- Gold rose to its highest level in nearly two months on Thursday, surpassing platinum for the first time in 12 years as investors bought it as a safe haven while the dollar tumbled and oil rallied.

Spot gold hit a high of $833.80 an ounce, the highest since Oct 16. It was last at $823.30 at 2:03 p.m. EST (1903 GMT), up 1.7 percent from Wednesday's close.

In New York morning trade, spot platinum traded around $824-825 an ounce, falling below gold, which traded around $828 an ounce.

"It means that platinum is a great buy. Gold is starting to move as a monetary asset," said Frank Holmes, CEO of U.S. Global Investors, which manages $2.3 billion of fund assets.
"As the economy starts to get traction, I think you will see platinum prices take off. As South Africa continues to have problems supplying platinum, I think that platinum is undervalued," Holmes said.

Spot platinum was last at $827.50 an ounce, up 0.7 percent from its previous finish of $822.

"There's going to be people playing this ratio between the two from a trading point of view," precious metals strategist Tom Kendall at Mitsubishi said.

"But in the big scheme of things I don't think there is much overlap between the two in terms of their actual use and physical demand," he said.

The dollar hit a six-week low against the euro, as improving credit conditions eased fears about the global credit crisis and investors sought higher-yielding currencies.

"With all the printing of money taking place in the U.S., the dollar, which has gone parabolic on the upside, is due for a correction, and gold is now responding to that," Holmes said.

INFLATION HEDGE

In sterling terms, gold rose to an all-time high of 559.18 pounds an ounce from 546.51 pounds an ounce late on Wednesday, according to Reuters data. The euro hit a record high against sterling.

Investors also bought gold as a hedge against oil-led inflation as OPEC sought more output cuts. U.S. crude futures ended more than 10 percent higher at $47.98 per barrel.

In the COMEX futures market, traders dismissed talk that gold rallied partly because tight physical supplies may have prompted the cash or near delivery price for bullion to rise above the price for forward delivery -- a situation known in the market as backwardation.

George Gero, vice president of RBC Capital Markets Global Futures, said physical deliveries out of the COMEX warehouses remained normal, indicating that gold's strength was driven by dollar weakness and inflation concerns.

Still, Jon Najarian, co-founder of optionMONSTER.com, said in a commentary that delivery of physical gold in futures could drive the gold market into backwardation, and traders could profit from the resulting spike in gold price.

U.S. gold futures for February delivery settled up $17.80, or 2.2 percent, to $826.60 an ounce on the COMEX division of the New York Mercantile Exchange.

Platinum and palladium traders awaited the outcome of the proposed U.S. automaker bailout. Carmakers account for more than half of annual global consumption of these metals.

Until more definite news on the bailout package emerges, the metals are likely to remain rangebound, analysts said.

Spot palladium was at $178.00, which was up 0.3 percent from Wednesday's late quote of $177.50. Spot silver was at $10.37, which was 1.6 percent higher than its Wednesday close if $10.21.

(With additional reporting by Doris Frankel and Humeyra Pamuk; Editing by David Gregorio)

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Gold shines on

They've got the story right with the exception of buying paper gold. Buy physical and take possession unless you trust the financial industry...

Gold shines on
Investor Daily: Don't let short-term trends fool you. The precious metal should continue to rise.
By Katie Benner, writer
Last Updated: December 9, 2008: 7:13 AM ET

NEW YORK (Fortune) -- Gold may have a special place in the hearts of many investors, but it has not been immune from the forces that have hammered commodities from aluminum to zinc this year - the rising dollar and drastic economic slowdown. Since hitting a record near $1,030 an ounce in March, the price of gold has fallen about 25% to $775 as of Monday. Even so, the precious metal should still shine for investors in 2009.

The case for gold begins with the fundamental weakness in the dollar. While investors have seen the dollar as a haven in the current economic crisis, that trend won't last, says Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors. That's because the vast amount of currency that the United States will have to print to fund TARP, potential auto industry aid and a massive U.S. government spending plan will create tremendous inflationary pressure and erode the value of the dollar.

Moreover, currencies all over the world are declining in value as countries slash interest rates to stave off even deeper economic recessions and the banking system struggles to deal with massive write-downs and illiquid assets. Europe and China are rolling out their own incentive and bailout plans, points out Jim Vail, a senior portfolio manager at ING. "Financial assets are under pressure and the global money supply is growing rapidly," says Vail. With few currencies holding up in value, he believes investors and sovereign nations will soon turn to gold as a preferred reserve currency.

Investors also want a liquid asset going into an uncertain economic environment. Over the past year, gold has been one of the few liquid assets that struggling money managers were able to sell to offset stock and bond losses. It pushed down the value of gold in the near term, but reinforced gold's reputation as safe and always valuable.

Finally, a shortage of gold will likely keep a floor under prices (currently bouncing between $700 and $800) and push them higher in the future. Mark Johnson, who manages the USAA Precious Metals and Minerals Fund, says gold production is flat and could even fall as mines close and no major new mines are opened. Gold production could drop by 5% a year for the next five years, Mark Cutifani, chief executive of South African mining company AngloGold Ashanti, told the trade publication Mining World. In an October interview Cutifani said that South Africa's production had dropped by 205 to 30% over the past five years and that the quality of gold at mines around the world is getting worse.

According to Sorrentino, the U.S. Mint ran through its annual gold supply marked for coins before the end of May. And Kitco, a popular Web site where investors can buy gold coins, says there is a delay in providing gold due to lack of supply.

If you buy the bullish case for gold, one efficient way to invest is via an exchange-traded-fund, or ETF, because ETF fees tend to be much lower than those of actively managed mutual funds. One popular choice is the SPDR Gold Shares ETF (GLD), which holds gold in a trust. It charges a 0.40% annual management fee and is trading at $76, near the mid-range of its 52-week range. Investors willing to pay a slightly higher 0.94% fee might consider the Permanent Portfolio fund (PRPFX). The goal of the fund is to preserve capital, making it a good choice for troubled times. The fund's assets are divided between precious metals and Swiss-franc bonds to guard against inflation, while also holding Treasuries to guard against deflation.

Looking for guidance in navigating these choppy markets? Let us know which topics you'd like us to cover and we'll try to address your questions in an upcoming Investor Daily. Please note: Fortune cannot give personalized advice on specific investments in your portfolio. To top of page
First Published: December 8, 2008: 5:08 PM ET

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Real Rates and Gold

Here is an excellent analysis that shows the bullish situation developing for gold...

Real Rates and Gold
by Adam Hamilton

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The definition of Liquidity

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Citigroup says gold could rise above $2,000 next year as world unravels

Citigroup would know...

Citigroup says gold could rise above $2,000 next year as world unravels

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.


By Ambrose Evans-Pritchard The Telegraph
Last Updated: 4:48PM GMT 26 Nov 2008

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

"They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

"The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

"Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.

"This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised."

"What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We're already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore," he said.

Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. "If true, this is a very material change," he said.

Mr Fitzpatrick said Britain had made a mistake selling off half its gold at the bottom of the market between 1999 to 2002. "People have started to question the value of government debt," he said.

Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009. Gold was trading yesterday at $812 an ounce. It is well off its all-time peak of $1,030 in February but has held up much better than other commodities over the last few months – reverting to is historical role as a safe-haven store of value and a de facto currency.

Gold has tripled in value over the last seven years, vastly outperforming Wall Street and European bourses.

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Gold around the world

Take a look at the following charts indicating gold's value in other currencies (click on link):

Gold Around the World

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The Man Who Called The Collapse

Like the Laws of Physics, you cannot alter Economic Law. Peter Schiff, a student of the Austrian School of Economic Theory, nailed it here:


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Mint suspends orders amid rush to buy bullion

Get some while you can...

Mint suspends orders amid rush to buy bullion

Article from: The Australian

FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.

With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.

As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

Perth Mint sales and marketing director Ron Currie said the unprecedented demand had forced the Mint to cease orders until January, with staff working seven days a week, 24-hour days, over three shifts to meet orders.

He said Europe was leading the demand, with Russia, Ukraine, Middle East and US all buying -- making up 80 per cent of its sales. One European client purchased 30,000 ounces for $33 million.

"We have never seen this before and are working right at capacity. And we are seeing it from clients in the shop buying one ounce, right up to 30,000 ounces from overseas clients," Mr Currie said.

Robert Jaggard, manager of bullion and rare coins dealer Jaggards, said business had picked up strongly and he expected it to increase further.

"All around the world there has been a heavy run on physical gold and there is a shortage of supply," he said.

Mr Jaggard, who has been dealing in gold for 40 years and is an agent for the Perth Mint, said some clients were buying up to $1million worth of gold, paying a premium above the spot price.

Late yesterday afternoon, spot gold in Sydney was trading at $US747.30 an ounce, up $US8.15 on Thursday's local close.

"Professional business people who have previously bought small amounts now want more gold because they are suffering in other markets," Mr Jaggard said.

At a conference this week in Munich, delegates were lined up 30-deep to purchase physical gold. And reports out of the Middle East suggested that there had been unprecedented gold buying in Saudi Arabia during the first half of November, with an estimated $US3.5 billion purchased in recent weeks.

The World Gold Council, releasing its global demand trends yesterday, said identifiable investment demand, which incorporates demand for gold through exchange-traded funds and bars and coins, was the biggest contributor to overall demand during the quarter. It was up to $US10.7 billion, double last year's levels.

The figures showed retail investment demand rose 121 per cent to 232 tonnes in the third quarter, with strong bar and coin buying reported in Swiss, German and US markets.

The quarter also witnessed widespread reports of gold shortages among bullion dealers across the globe, as investors searched for a haven. Overall, quarter three saw Europe reach an all-time record 51 tonnes of bar and coin buying. France became a net investor in gold for the first time since the early 1980s.

World Gold Council chief executive James Burton said gold's universal role as a store of value had shone through during the quarter, helping attract investors and consumers to all forms of gold ownership.

"The rise in demand for gold bars and coins has been impressive," he said.

Demand in India, the largest market for gold, recovered during the third quarter, encouraged by lower gold prices, a good monsoon and the onset of the festive season. At 250 tonnes, total consumer demand was 31 per cent higher than the same period last year. In value terms, demand hit the record quarterly sum of $US5 billion.

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Video: Ron Paul questions Bernanke

Video: Ron Paul Questions Bernanke this morning...



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Commodity money

From the Wall Street Journal:

To Prevent Bubbles, Restrain the Fed
Obama would be a fool to trust his economy to the discretion of central bankers.
By GERALD P. O'DRISCOLL JR.

On Nov. 14, 2008, the Dow Jones Industrial Average closed at 8497.31. On Nov. 13, 1998, the adjusted (for dividends and split) close was 8919.59. There has been great volatility, but no net capital accumulation as measured by the Dow in a decade. Other indexes, such as the Nasdaq, tell a similar story. Capital has been invested but as much value has been destroyed as created.

The U.S. cannot afford to have another lost decade. Or to see the dreams of another generation of Americans who had been told to take responsibility for their financial health by investing in the stock market dashed by failed monetary and fiscal polices.

Today, the most urgent task facing President-elect Barack Obama is stabilizing financial markets by instituting policies that foster economic growth and prevent the type of boom and bust cycle that has just wiped out a decade's worth of wealth accumulation.

Mr. Obama's task is made all the more difficult because there has been a perfect storm of bad policies and practices. Laudable goals, such as fostering more homeownership, went terribly awry. Financial services regulation has failed at its most basic task, protecting the soundness of the system. And a dysfunctional compensation system has given corporate managers incentives to take excessive risks with investors' money.

None of the policies and practices that are now widely criticized suddenly appeared in the past decade. But they were kindling for a financial firestorm that needed only an accelerant and a spark. Both were provided by a policy of easy money that came in response to the bursting of the dot-com bubble in 2000-01, the ensuing recession, and the Sept. 11 attacks.

At first Fed easing was in order. The central bank needed to counter the "irrational exuberance" of the dot-com bubble. And by May of 2000 the Fed had done that by raising the fed-funds target to 6.5%. That needed to come down when the bubble burst. Aggressive cutting brought it to 2% in November 2001.

The problem is the rate remained at 2% or less for three years (for a year it was at 1%). During most of this period, the real (inflation-adjusted) fed-funds rate was negative. People were being paid to borrow and they responded by often borrowing irresponsibly.

Consider subprime mortgages. In 2001, there was $190 billion worth of subprime loan originations -- 8.6% of total mortgage originations. In 2005, there was $625 billion worth of subprime originations -- 20% of the total. In the same period, the percentage of subprime mortgages securitized -- loans that were packaged and sold to investors -- rose from just about 50% to a little more than 81%. (These numbers all trailed off slightly in 2006.) The great easing in monetary policy ended (with a lag) when the Fed began raising rates in June 2004.

The subprime saga follows a familiar pattern. Easy credit begets a boom and then the inevitable tightening of credit bursts the bubble. What is not familiar is the scale of the devastation wrought in this boom-bust cycle.

Never before had financial markets evolved such a complex superstructure of interlinked securities, derivatives of all kinds, and special-purpose investment vehicles. Professor Gary Gorton of the Yale School of Management has best described that complexity in his paper "The Panic of 2007," published by the National Bureau of Economic Research. He makes clear that as this system evolved there was not a sufficient guard against systemic risk.

No president could want these events to repeat themselves on his watch. But they could be repeated.

The economy now confronts deflationary forces. If past is prologue the Fed will concentrate on those deflationary forces for too long and rekindle an asset boom of some kind. The fiscal "stimulus" being contemplated by Congress could be another economic accelerant. If both the fiscal and money stimulus efforts kick in just as market forces also kick in, we're likely to see another unsustainable boom that will be followed by a bust.

The incoming administration must think about that possibility because the timing of boom and bust cycles seems to be shortening. The next bust could come five or six years from now -- or about in the middle of an Obama second term. Should that happen, Mr. Obama would be unable to blame Republicans for the mess and would be tagged as the second coming of Jimmy Carter.

To avoid such a fate, Mr. Obama needs to stop the next asset bubble from being inflated by imposing a commodity standard on the Fed. A commodity standard (such as a gold standard) imposes discipline on a central bank because it forces it to acquire commodity reserves in order to increase the money supply. Today the government can inflate asset bubbles without paying a cost for it because the currency isn't linked to the price of a commodity.

With a commodity standard in place, the government would also have price signals that would alert it to the formation of a bubble. Why? Because the price of the commodity would be continuously traded in spot and futures markets. Excessive easing by the Fed would be signaled by rising prices for the commodity. In recent years, Fed officials have claimed that they cannot know when an asset bubble is developing. With a commodity standard in place, it would be clear to anyone watching spot markets whether a bubble is forming. What's more, if Fed officials ignored price signals, outflows of commodity reserves would force them to act against the bubble.

The point is not to deflate asset bubbles, but to avoid them in the first place. Imposing a commodity standard is a practical response to the repeated failures of central banks to maintain sound money and financial stability. What would be impractical is to believe that the next time central banks will get it right on their own.

Mr. O'Driscoll, a senior fellow at the Cato Institute, was formerly a vice president at the Federal Reserve Bank of Dallas.

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Iran switches reserves to gold

The march away from the dollar continues...

Iran switches reserves to gold: report
Sat Nov 15, 2008 3:14am EST

TEHRAN (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world's fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.

He gave no figures or other details.

Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.

Iranian officials in July denied reports Iranian banks were moving funds from Europe, with one report suggesting as much as $75 billion had been withdrawn and converted into gold or placed in Asian banks, because of a threat of tightening sanctions.

The International Monetary Fund said in August that if the price of Iranian crude fell to $75 a barrel, Iran would face a current account deficit in the medium term that would be tough to sustain due to Tehran's financial isolation.

On Friday, U.S. crude fell $1.20 at $57.04.

Gold futures ended more than 5 percent higher on Friday and bullion ended the week about $10 higher compared with its last Friday's close of $735.95 as investors covered short positions.

(Reporting by Zahra Hosseinian; Writing Fredrik Dahl; Editing by Jan Dahinten)

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Chinese Gold Rush could tip the scales

This could move the gold market in a big way.

Gold rush

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Benjamin Scent
The Standard

Friday, November 14, 2008

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."

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Gimme, gimme, gimme

Everyone wants a bail out from Uncle Sam. The line seems to be getting pretty long...too bad the government is going to destroy the currency (and the lives of millions) in the process. Go back and read our strategy if you want to survive this madness!

American Express gets bank-holding company nod

By Lisa Twaronite, MarketWatch
Last update: 6:58 p.m. EST Nov. 10, 2008

SAN FRANCISCO (MarketWatch) -- American Express Co. got approval from the Federal Reserve Board to form a bank-holding company, the central bank said late Monday.

In becoming a holding company, the credit-card giant would get access to the Federal Reserve's emergency-lending facilities, but also will be subject to greater scrutiny by regulators.

The U.S. central bank said that both American Express and its affiliate American Express Travel Related Services are approved to form bank-holding companies, as the Amex group converts its Salt Lake City -based American Express Centurion Bank into a full bank.

The Fed waived the normal 30-day waiting period on the application.

"In light of the unusual and exigent circumstances affecting the financial markets and all other facts and circumstances, the board has determined that emergency conditions exist that justify expeditious action on this proposal in accordance with the provisions of the [Bank Holding Company] Act and the board's regulations," the Fed said.

"The record indicates that consummation of the proposal would create a stronger and more diversified financial-services organization and would provide the current and future customers of Amex, Amex Travel and Amex Thrift with expanded financial products and services," the Fed wrote in its approval. "[B]ased on all the facts of record, the board has concluded that consummation of the proposal can reasonably be expected to produce public benefits that would outweigh any likely adverse effects."

American Express said last month that it would cut 10% of its staff, suspending management salary increases and instituting a hiring freeze, as well as take a pretax restructuring charge of up to $440 million against fourth-quarter results to cover layoff expenses.

Earlier in October, the company said that quarterly net income fell 24% as it set aside more money to cover bad loans. Net income came in at $815 million, or 70 cents a share, compared with $1.07 billion or 90 cents a share a year earlier. Income from continuing operations was $861 million, or 74 cents a share, in the latest quarter, Amex reported.

In September, Wall Street was transformed when investment banks Morgan Stanley and Goldman Sachs Group received Fed approval to convert to bank-holding companies.

Lisa Twaronite reports for MarketWatch from San Francisco.

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