Gold News

Gold Demand Drops

Posted on March 21, 2012 by Angela Stern

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The currency markets were fairly calm yesterday, with the dollar pretty much unchanged from the levels I reported in yesterday’s Pfennig. There really wasn’t much new information to push the dollar one way or the other, and the news scrolling on the currency trading screens mainly rehashed concerns over China’s slowdown.

As I reported yesterday, a couple of the big raw material suppliers to China warned the markets that they were reducing their projections of demand as China’s economy slows. This had an especially dramatic impact on the currencies of commodity exporters such as Australia, Canada and Brazil. Concerns over China also spilled over to the high-yielding currencies such as the New Zealand dollar (NZD) and South African rand (ZAR), as traders worried global growth would slow. But the initial sell-off of these commodity-based currencies reversed later in the day, and this reversal continued overnight, bringing all of them back to levels they were trading at before the Chinese growth worries hit the markets.

The euro (EUR) traded lower yesterday morning, losing against both the U.S. dollar and pound sterling (GBP) as data showed European economic growth is continuing to slow. The German statistics office said producer prices climbed just 0.4% in February, compared with a 0.6% rise the month before. The median estimate from analysts taken by Bloomberg predicted a 0.5% increase, so the drop was greater than expected. The European economies are struggling to stay in a growth mode, and economists are almost unanimous in their opinion that Europe will slip back into a recession later this year…

Read more: Gold Demand Drops as Indian Jewelers Close in Protest

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The Federal Reserve’s Explicit Goal: Devalue the Dollar 33%

Posted on February 24, 2012 by Angela Stern

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The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.

An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.

But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.

The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of Americans’ hard earned savings over the next 4 years.

Why target an annual 2 percent decline in the dollar’s value instead of price stability? Here is the Fed’s answer:

“The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve’s mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public’s ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would be associated with an elevated probability of falling into deflation, which means prices and perhaps wages, on average, are falling — a phenomenon associated with very weak economic conditions. Having at least a small level of inflation makes it less likely that the economy will experience harmful deflation if economic conditions weaken. The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.”

In other words, a gradual destruction of the dollar’s value is the best the FOMC can do.

Here’s why: First, the Fed believes that manipulation of interest rates and the value of the dollar can reduce unemployment rates.

The results of the past 40 years say the opposite.

The Fed’s finger prints in the form of monetary manipulation are all over the dozen financial crises and spikes in unemployment we have experienced since abandoning the gold standard in 1971. The financial crisis of 2008, caused in no small part by the Fed’s efforts to stimulate the economy by keeping interest rates too low for, as it turned out, way too long is but the latest example of the Fed failing to fulfill its mandate to achieve either price stability or full employment…

Read more: The Federal Reserve’s Explicit Goal: Devalue the Dollar 33%

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Execs Think Gold Price Will Hit Record in 2012

Posted on January 25, 2012 by Angela Stern

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By JCK Staff

A recent survey of gold mining executives by PricewaterhouseCoopers found that a majority think the price of gold will continue to rise in 2012.

According to the accounting firm’s 2012 Gold Price Report, some 80 percent of gold mining executives queried expect the price of gold to increase throughout the year. Only 6 percent foresaw a decline.

A majority expect the price to peak at $2,000 an ounce, which would be a record. At press time, it was trading at $1,664 an ounce, though at one point last year it hit $1,900.

The highest prediction was $2,500, the survey said; the lowest, $1,350.

The survey questioned 40 executives, whose companies represent 26.5 million ounces of gold mined in 2011.

Read more: http://bit.ly/wglErW

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How Central Bankers Attempt to “Cure” Insolvency

Posted on January 11, 2012 by Angela Stern

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Like trying to patch a nuclear reactor with scotch tape and chewing gum, the central banks of the world’s leading economies are trying to Spackle over cracks in the global monetary system with a variety of desperate tactics and measures.

Unfortunately, hiding the cracks does nothing to strengthen the underlying infrastructure. To the contrary, hiding the cracks dupes individuals into believing all is well, even as the monetary system is crumbling around them.

Many European governments, for example, are spending much more money than they can possibly confiscate through taxation. These guys are broke… plain and simple. But so is the United States, based on any intellectually honest assessment of the facts.

According to the US Treasury’s own data, the US ended 2011 with total debt of $15.2 trillion, which means the US debt-to-GDP is now more than 100%! Move over Greece! Make way for Uncle Sam.

Bankrupt governments usually default…at least they used to. In the modern era of faith-based currencies and Ivy League educated central bankers, bailouts and shell games are the cogs and wheels that drive the global monetary machinery. But this machinery does not actually power anything…other than a massive fraud. It merely sputters along, chugging out massive plumes of toxic theories and misguided manipulations.

And whenever a central bank cannot provide direct, overt assistance to a specific insolvent investment bank or government, not to worry, a central bank can still provide indirect, covert assistance.

The recently announced “backdoor bailout” of European financial institutions illustrates the point. The European Central Bank (ECB) cannot directly bail out the insolvent governments of Greece, Italy, Spain, Portugal, et al. Meanwhile, the US Federal Reserve cannot directly rescue Europe’s insolvent banks.

Read more: How Central Bankers Attempt to “Cure” Insolvency

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It Begins: Markets Await News from the Eurozone Summit

Posted on December 9, 2011 by Angela Stern

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Well, the start of the Eurozone Summit has begun, and it’s what the markets have been waiting for all week. There’s some news out already regarding their plan that, if, the Eurozone leaders are able to pull a rabbit out of their hat, then this could turn to a Fantastico Friday for the risk assets… But whether the risk assets have a Fantastico Friday or not, it’s not going to stop me from having one!

So… The European Central Bank (ECB) and its new president, did indeed cut rates yesterday, but did keep it to 25 Basis Points (1/4%). And what happened to the euro (EUR)? Well… It rallied… Albeit briefly… There’s so much to talk about here, so I’m going to jump right in with both feet… Are you ready to go?

It’s not a liquidity thing in the Eurozone, given that six central banks around the world coordinated to give loans in dollars to Eurozone banks last week. Add to that the ECB cutting interest rates, and the ECB announcing that they would make 3-year loans to banks, and lowered reserve ratios… It’s not a liquidity thing, folks… It’s a stability thing!

This morning, Eurozone leaders announced that they had added 200 billion euros to their EFSF (The European Financial Stability Fund), and that they had tightened anti-deficit rules… ECB President, Draghi, hailed the accord saying, “It’s a very good outcome for euro-area members and it’s going to be the basis for a good fiscal compact and more disciplined economic policy in euro-are countries.”

The agreement wasn’t agreeable with the UK and Sweden and the Czech Republic, but was agreeable by all the members of the euro… Remember, folks… The European Union contains 27 members, of which 17 belong to the euro… On a side-bar… Before greed, and someone or some entity showed the likes of Greece and Portugal how to hide debt, I used to tell people that the euro would have 25 members by 2015… That sure looks like a long shot now, eh?

The Eurozone as it currently stands has a GDP that equals that of the US, they both account for 20% of the Global GDP… And here’s where I lose it when the markets don’t treat the Eurozone members like “states”… Because that’s what they are… Now… So… when they talk about Greece, it’s like talking about Kentucky… Because on a percentage basis they both contribute the same to the whole entity of either the Eurozone, or the US…

But… Nevertheless, we carry on… And… The good news this morning is that the markets seem to, right now anyway, like the accord. But, I think there’s so much to do still, that the Eurozone leaders can’t stop here… They’ve put the carrot out there, now they have to figure out how to grab it before it goes bad…

With the selling of the euro going on yesterday mid-morning on, we also saw gold get taken to the woodshed. You know, I’m always saying that, to my simple way of thinking, gold should be going higher when things get to looking bleak in the Eurozone, because if the euro goes down in flames, the dollar will get hurt too, and what’s left? Gold… But, I finally figured out just what’s going on… Gold has become an offset to the dollar, like euros… So, if the dollar is seeing strength, not only is the euro at risk, but so too is gold…

The folks over at Zerohedge.com reported yesterday that central banks from the US and the UK sold gold, thus adding to gold’s woes yesterday… I have a problem with this news… If it’s true, and I have no reason to believe it isn’t, then central banks were manipulating the price of gold… No wonder the bullion banks — and everyone knows who I’m talking about — that regularly manipulate the price of gold, never get their hands slapped!

So… With the euro turning around this morning on the news of the accord, gold too is stronger… But all this euphoria in the currency could very well be shaken to the core later today… Remember, S&P gave a warning the other day, and I’m not sure right now, if this accord is enough to keep the wolf (S&P) at the door… We could see downgrades of the AAA Eurozone members later today… Or, maybe it’s too soon, and S&P will have to see what happens next…

Read more: It Begins: Markets Await News from the Eurozone Summit

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