By Javier Blas in London

Published: March 10 2009 19:25 | Last updated: March 10 2009 19:25

Gold could surge to $2,500 a troy ounce in the next five years because the prospects of either deflation or inflation were “becoming more extreme”, UBS said on Tuesday. The Swiss bank told investors to overweight gold in their portfolios.

The Swiss bank’s warning is the most radical among mainstream institutions and comes as some hedge fund investors who made money last year by betting against investment banks are now buying gold as a way of betting against central banks.

“The current environment is one which can best be characterised as having a ‘low margin of error’ for central bankers, with the prospects for deflation or inflation becoming more ex­treme,” said Daniel Brebner, analyst at UBS in London.

A bet on gold is considered by some as essentially a bet against all paper currencies.

“Given the broad uncertainties in the current macro climate we believe investors should look to gold, given its historic tendency to act as a hedge,” the bank said.

The bullish forecast failed to lift gold prices, depressed on Tuesday by lacklustre jewellery demand, traditionally the backbone of gold consumption, some profit-taking and an early rebound in financial stocks.

Spot gold in London was $896.5 a troy ounce in late afternoon trading, down from the previous days’ closing quote in New York of $920.95 an ounce. Gold prices hit a high of $1,030.8 last March and last month traded briefly above $1,000.

UBS, one of the biggest bullion dealers in London and Zurich, said the downside risks to gold prices were limited to about $500 an ounce, or less than 50 per cent below the current price, while the potential upside was $2,500.

Hedge funds that bet last year against investment banks are now betting against their ability to wea­ther the crisis without triggering a jump of inflation or letting the economy fall into deflation. Gold bulls include David Einhorn, founder of the hedge fund Greenlight Capital, who last year came under the spotlight for short selling shares in Lehman Brothers. Others looking at gold include Eton Park and TPG-Axon, investors said.

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Reuters | Fri, 29 May 2009 12:46



Gold on Friday rallied through $970 an ounce for the first time since February in Europe as traders bought the metal as a hedge against weakness in the dollar.

Rising oil prices, reports of a pick-up in Middle Eastern demand, and firm buying in India, the world's biggest gold consumer, during the wedding season are also supporting prices, analysts said.

Spot gold was bid at $972.60 an ounce at 0923 GMT, against $958.80 an ounce late in New York on Thursday. "Forex is really the big driver of the market," said senior Commerzbank trader Michael Kempinski. "Oil, which is at its highest this year, is also supporting gold pretty well."

The dollar fell towards five-month lows against a basket of currencies on Friday as hopes the worst of the downturn has passed dented safe-haven buying of the unit, and amid worries over U.S. government debt levels. Its slip prompted investors to take refuge in gold, pushing prices up to three-month highs.

"In the near term, the dominant theme behind moves in gold appears to be moves in the U.S. dollar rather than inflation expectations - which declined yesterday after a recovery in the U.S. bond market," said UBS analyst John Reade in a note. "But a combination of a weaker dollar and rising inflation expectations would represent the perfect storm for gold," he added.

Oil prices, often seen as a key indicator of rising inflation, rallied to fresh six-month highs on Friday and are on track for their largest monthly percentage gain in more than ten years. 

INVESTMENT DEMAND

Silver prices tracked gold higher to a near ten-month peak of $15.54 an ounce, the metal's strongest level since August 8. Prices are benefiting from strong investment demand for the metal, with buying of silver-backed exchange-traded funds soaring since the beginning of 2009 and speculative net long positions on the COMEX futures exchange rising. While industrial and photographic demand for the metal is lacklustre, investors are buying the metal as a cheap proxy for gold. It too is being seen as a good portfolio diversifier to hedge against dollar weakness and inflation.

"This trend (for rising prices) is likely to persist as we head into the summer months and more `green shoots' offer additional support to silver's appeal as an industrial metal as well," said VTB Capital in a note. Among other precious metals, platinum was quoted at $1,162.50 an ounce against $1,139.50, having earlier touched a three-week high of $1,164, while palladium was at $234 against $234. ETF Securities said holdings of its platinum and palladium exchange-traded funds rose on Thursday, by just under 6,000 ounces and around 5,000 ounces respectively. Holdings of its three gold-backed ETFs also ticked up nearly 11,000 ounces to 7.477 million ounces, it added.

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Thu May 28, 2009 10:38am EDT

NEW YORK, May 28 (Reuters) - U.S. gold futures turned
higher on Thursday, supported by a combination of a weakened
dollar, inflation concerns and background support from
simmering geopolitical tensions.

 For the latest detailed report, click on [GOL/].

 GOLD

 * Gold for June delivery GCM9 up $4.10 at $957.40 an
ounce at 10:25 a.m. EDT (1425 GMT) on the COMEX division of the
New York Mercantile Exchange.

 * Ranged from $944 to $961.10.

 * Gold supported as the dollar fell against the euro, as
better-than-expected U.S. durable goods orders and weekly
jobless claims boosted risk appetite - forex traders. [USD/]

 * Inflation concerns also stirred buying into the yellow
metal after U.S. crude futures rose above $64 per barrel as
OPEC kept its output unchanged. [O/R]

 * Gold continued to look expensive relative to agricultural
commodities, and a high bullish consensus figure was worrisome
to gold bulls - Dennis Gartman, independent director and the
author of the daily "Gartman Letter."

 * Contract rollover to August futures continued at a good
pace ahead of first notice day of June contracts on Friday -
traders.

 * Heightened military alert for the Korean peninsula by the
United States and South Korea over a nuclear test by the North
boosted the safe-haven appeal in gold. [ID:nSEO333114]

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In its May 21, 2009 report to clients, the bank wrote:  “Gold has long been used as a hedge in times of heightened geopolitical instability, rising trade protectionism, 0% central bank target rates, and both inflation and deflation.

So, when we see headlines like this pop up on our Bloomberg – ‘Ahmadinejad Says Iran Successfully Tests Missile’ or ‘Arms Sent by US May Be Ending Up in Taliban Hands’ in yesterday’s New York Times, we believe it is important that we reiterate our view.

In the interim, we see that the dollar has been shaky in recent weeks, having dropped nearly 9% since early March, and that just bolsters our case for gold.”

5/21/09 Bank of America-Merrill Lynch, “Morning Market Tidbits”.

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By Chen Shiyin and Bernard Lo

May 27 (Bloomberg) -- The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”

Action Economics is predicting inflation of minus 0.4 percent in the U.S. this year, with prices increasing by 1.8 percent and 2 percent in 2010 and 2011, respectively, Cohen said.

Near Zero

The U.S.’s main interest rate may need to stay near zero for several years given the recession’s depth and forecasts that unemployment will reach 9 percent or higher, Glenn Rudebusch, associate director of research at the Federal Reserve Bank of San Francisco, said yesterday.

Members of the rate-setting Federal Open Market Committee have held the federal funds rate, the overnight lending rate between banks, in a range of zero to 0.25 percent since December to revive lending and end the worst recession in 50 years.

The global economy won’t return to the “prosperity” of 2006 and 2007 even as it rebounds from a recession, Faber said.

Equities in the U.S. won’t fall to new lows, helped by increased money supply, he said. Still, global stocks are “rather overbought” and are “not cheap,” Faber added.

Faber still favors Asian stocks relative to U.S. government bonds and said Japanese equities may outperform many other markets over a five-year period. “Of all the regions in the world, Asia is still the most attractive by far,” he said.

Gloom, Doom

Faber, the publisher of the Gloom, Boom & Doom report, said on April 7 stocks could fall as much as 10 percent before resuming gains. The Standard & Poor's 500 Index has since climbed 9 percent.

Faber, who said he’s adding to his gold investments, advised buying the precious metal at the start of its eight-year rally, when it traded for less than $300 an ounce. The metal topped $1,000 last year and traded at $949.85 an ounce at 12:50 p.m. Hong Kong time. He also told investors to bail out of U.S. stocks a week before the so-called Black Monday crash in 1987, according to his Web site.

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By Glenys Sim

May 26 (Bloomberg) -- Gold may target a record $1,250 an ounce as a continuation head-and-shoulders pattern may be forming within a longer-term trend, Standard Bank Group Ltd. said, citing trading patterns.

A break and close above $1,050.40 “provides warning that an important breakout” has occurred, Darran Grabham, the bank’s technical analyst, wrote in a note yesterday. A head-and- shoulders pattern is formed when a commodity makes three consecutive peaks, with the middle being the highest. It forms during a series of increases over time.

“The positive implications are substantial, with the minimum objective situated at $1,250,” Grabham wrote. “On the downside, gold weakness through $864 turns the outlook bearish, and the weaker trend could then continue towards $802.”

Gold for immediate delivery traded little changed at $957.29 an ounce at 8:09 a.m. Singapore time. The precious metal is down 7.4 percent from its record high of $1,032.70 on March 17, 2008.

In the near term, a negative bias is expected to dominate in the days ahead as the positive trend has faltered in the $960 to $966.70 area, Grabham wrote.

“A decline into the $940 to $935 zone is anticipated, with $935 regarded as an important support point over the next week or so,” he wrote. “We expect gold to enter a period of consolidation below $966.70, before a break higher occurs, setting up a test on $980.” So-called support levels are where buy orders are clustered.

“If $935 gives way -- delaying the next move higher -- the sell-off could continue to $925, with $915 representing another key near-term support level,” Grabham added. “Weakness through $915 negates the positive outlook, exposing the market to the $895 to $885 area.”

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By Matthew Benjamin

May 26 (Bloomberg) -- Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 and an economy that won’t grow much beyond 2 percent as a consequence of the lost confidence in consumer credit that shattered financial markets.

By this time next year, “the market will realize that potential growth for the U.S. is no longer 3 percent, but is 2 percent or under,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.

“We are transitioning to what we call at Pimco a new normal,” El-Erian said. Pimco, in Newport Beach, California, is the biggest bond fund manager with about $756 billion in assets.

The Standard & Poor's 500 Index must rise 41 percent to reach its last closing price before Sept. 15, when Lehman Brothers Holdings Inc. filed for bankruptcy, freezing credit markets. Since then, 10-year Treasury notes have climbed 4.6 percent. The disparity shows that stock investors aren’t convinced the economy and profits will grow fast enough to sustain a bigger advance.

The U.S. financial crisis and recession have produced lasting shifts in consumer spending and savings reminiscent of the 1950s that may crimp profits and productivity, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto and former chief North American economist at Bank of America Corp.

‘New Era’

“This is going to be a new era of frugality,” Rosenberg said. “This isn’t some flashy two- or three-quarter deal. This is a secular change in household attitudes."

The last time U.S. gross domestic product grew at an annual rate of under 2 percent over a decade was the 1930s, when it expanded at an average 1.3 percent. In the 30 years before the recession that began in December 2007, the average was 2.9 percent. Over the past 15 years, it was 3 percent.

In the first quarter, after contracting at a 6.3 percent annual rate in the previous three months, the economy shrank by 6.1 percent. It was the weakest six-month performance since the last quarter of 1957 and first quarter of 1958.

The coming decade may, in some ways, remind people of those years during President Dwight D. Eisenhower's administration, Rosenberg said.

The Cleavers

“Life wasn’t so bad for the Cleavers,” he said, referring to the family depicted in “Leave It to Beaver,” the television show that ran from 1957 through 1963. “They weren’t up to their eyeballs in debt and they weren’t a three-car family with a 5,000-square-foot McMansion.”

Behavior by newly ascetic U.S. consumers, whose spending drives more than two-thirds of the economy, will translate into “less return to capital and less-remarkable equity returns,” said Milton Ezrati, senior economist at Jersey City, New Jersey- based Lord Abbett & Co., which manages $70 billion. “The whole picture is muted.”

Barton Biggs, former chief global strategist for Morgan Stanley, sees the near future as brighter with a “powerful” comeback in equities because of government stimulus packages around the world, he said in an interview with Bloomberg Radio.

“The system has had an incredible adrenaline shot, so I think we’re going to have a pretty strong recovery,” said Biggs, who runs New York-based hedge fund Traxis Partners LP.

New Market

U.S. stocks are at the start of a new market that may spur an 88 percent advance in the Standard & Poor's 500 Index in the next two or three years, said Laszlo Birinyi, founder of Westport, Connecticut-based research and money-management firm Birinyi Associates Inc.

“We’re confident we are in a bull market,” Birinyi said in an interview with Bloomberg Television.

The S&P 500 has rebounded 31 percent since hitting a 12- year low in March. It remains about 43 percent below its October 2007 high, ending at 887 on May 22. Markets in the U.S. were closed yesterday for the Memorial Day holiday.

At Pimco, El-Erian expects that “markets will revert to a mean, but it will not look anything like that of recent years,” he wrote in his May Secular Outlook report. “The financial system will be de-levered, de-globalized and re-regulated.”

Worldwide, “there are insufficient demand buffers and fast-acting structural reforms to provide for a spontaneous and sustainable recovery in the global economy,” he wrote. “It will be a major shock to those that are trapped by an overly dominant ‘business-as-usual’ mentality.”

‘Very Low Growth’

Hewlett-Packard Co., the world’s largest personal-computer maker, is expecting growth in the U.S. to be slow, said Todd Bradley, head of the company’s PC unit.

“We will plan our cost model for very low growth,” he said.

Investors will have to get used to “a 5- to 7-percent return game, not a 15- to 20-percent return game,” said Mark MacQueen, partner and portfolio manager at Sage Advisory Services Ltd. in Austin, Texas, which oversees $7.5 billion.

“Things have changed,” MacQueen said. “Wall Street has changed; confidence in the United States has changed.”

A lasting effect of the recession may be a “markedly higher” natural rate of unemployment, said Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics. The natural rate is one that neither accelerates nor decelerates inflation.

“It was 5.5 percent,” Phelps said. “Maybe it will be 6.5 percent -- maybe 7 percent.”

Jobless Rate

The U.S. may report on June 5 that the jobless rate moved to 9.2 percent in May, the highest since 1983, from 8.9 percent in April, according to economists surveyed by Bloomberg. In the recession of 1981-1982, unemployment remained at 8.5 percent or higher for two years, beginning in December 1981. It didn’t move below 7 percent until 1986.

Now the rate may not go back under 8 percent until 2013, according to John Ryding, chief economist at RDQ Economics LLC in New York, and Conrad DeQuadros, the firm’s senior economist.

“This unemployment outlook is troubling for the ability of the banking system to make money on consumer loans and credit cards,” they wrote in a report on May 15.

The economy has shed 5.7 million jobs since January 2008, marking the biggest employment loss of any economic slump since the Great Depression.

Highest Debt on Record

Consumers are saddled with debt built up during the boom years. The total amount of U.S. consumer credit rose by an average of 4.9 percent a month at an annual rate from December 2006 to July 2008, according to data compiled by Bloomberg.

Yet it has declined in six of eight months since August 2008, according to data compiled by Bloomberg.

As a percentage of net worth, household debt -- including mortgages -- is at 27 percent, the highest on record, according Federal Reserve figures.

The personal savings rate, which averaged 0.9 percent from 2004 through 2007, has climbed to 4.2 percent. People are responding in part to a drop in their wealth, with house values down 27 percent since June 2006 after rising 63 percent the previous four years, according to national Case-Shiller data.

“That in itself will be a big slowdown in the economy if people are saving instead of consuming,” said Kenneth Volpert, who oversees $180 billion in taxable bonds for Vanguard Group in Malvern, Pennsylvania. The national savings rate could peak at 9 percent, he said.

Debt, Savings

Household debt was 11 percent of net worth at the end of 1959 and the savings rate was about 8 percent, according to Fed and Commerce Department data. The average size of a home built in 1960 was 1,200 square feet, according to Census figures. That grew to 2,521 square feet by 2007, with 24 percent of new homes larger than 3,000 square feet.

Now, smaller may be back as people seek to devote less of their incomes to mortgage payments, said Ara Hovnanian, CEO of Hovnanian Enterprises Inc., New Jersey’s largest homebuilder.

“For some number of years certainly after this correction you will see that conservatism translate into both the size of the homes and the finishes customers want,” Hovnanian said. That means “fewer European cabinets and appliances and fewer granite countertops.”

$200 Handbags

Shoppers will be restrained, which will result in the number of U.S. malls falling by at least a fifth and weak chains succumbing to bankruptcy, said retail analyst Patricia Edwards, founder of Storehouse Partners LLC in Bellevue, Washington.

In preparation, Coach Inc. has begun to “engineer” its collections so at least half its handbags fall into the $200 to $300 range, compared with 30 percent previously, meaning an average reduction in price of 10 percent to 15 percent, CEO Lew Frankfort said.

Long after the economic contraction has ended, “consumers will spend less on luxury goods than they did before the recession began,” Frankfort said at an April 28 investors’ conference. “We are adapting to what will be a new normal.”

Abercrombie & Fitch Co., a teen-apparel retailer that had avoided offering discounts and promotions, said May 15 it will begin reducing what it charges at its Hollister stores. Brinker International Inc., the owner of the Chili’s Grill & Bar chain, said April 21 that it updated its menus to reflect a focus on “lower price points.”

That’s not to say that debt-fueled shopping sprees, expensive restaurants and run-ups in house values and stock prices won’t ever make a comeback, said Ethan Harris, co-head of U.S. economics research at Barclays Capital in New York.

“Will there be at some time in the next 10 or 20 years another big bubble and collapse? Absolutely,” Harris said. “You can’t entirely change human nature.”

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By Moming Zhou, MarketWatch

May 22, 2009, 10:09 a.m. EST

NEW YORK (MarketWatch) -- Gold futures rose Friday for a fourth-straight session, briefly topping the $960-an-ounce mark for the first time in nearly two months as the U.S. dollar weakened against its major rivals on concerns over the U.S. credit rating.

Gold for June delivery rose to as high as $963.10 an ounce in early morning trading, topping $960 for the first time since March 19. It was last up $6.30, or 0.7%, to $957.50 on the Comex division of the New York Mercantile Exchange. The metal is set to end the week up nearly 3%.

The greenback fell Friday to the lowest level in four months against the euro as worries increased that the U.S. could lose its triple-A credit rating.

Standard & Poor's Ratings Service Thursday warned Britain that it may lose its triple-A rating, triggering a drop in U.K. bonds and sparking global fears about sovereign credit ratings. In the U.S., 10-year Treasury bonds fell below a crucial level.

A weaker greenback makes dollar-denominated commodities such as oil and gold less expensive to holders of other currencies. Those countries tend to bid up oil prices.

Some investors also buy gold as a hedge against a weaker dollar and inflation.

"The gold price is predominantly driven by the dollar weakness at the moment," said analysts led by Barbara Lambrecht at CommerzBank. "As long as the dollar remains on the back foot, gold should continue to rise."

In exchange-traded funds, holdings in the Gold SPDR Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 94.18, +0.33, +0.35%) , the biggest gold ETF, stood at 1,105.62 metric tons Thursday, unchanged for a seventh-straight session, according to latest data from the fund.

In other metals trading Friday, July copper rose 6.4 cents, or 3.1%, to $2.115 a pound.

July silver gained 28 cents, or 1.9%, to $14.725 an ounce. The June palladium contract rose 65 cents, or 0.3%, to $236.10 an ounce, while July platinum gained $2.40, or 0.2%, to $1,157.10 an ounce.

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May 21, 2009, 11:48 a.m. EST

NEW YORK (MarketWatch) -- Gold futures on Thursday flirted with two-month highs after another round of weak economic data added to bullion's appeal against riskier assets.

"Today's U.S. reports helped to confirm that the pace of economic decline is diminishing, but with modest headline disappointments for the Philly Fed and initial claims reports that signal a rocky road toward recovery through (the second quarter)," said analysts at Action Economics.

June gold was lately up $3.40, or 0.4%, at $940.80 an ounce. Copper for July delivery lost 0.078 cents, or 3.7%, to $2.027 a pound.

The U.S. index of leading economic indicators climbed 1% in April from a revised 98 in March. A measure of manufacturing activity in the Philadelphia region showed a contraction, but also pointed to a further diminishment of the downward trend.

The reports followed another reminder of the bleak state of the labor market. The Labor Department's count of continuing jobless claims hit a record high, nearing 6.7 million, in the week ending May 9. First-time claims fell by 12,000 to a seasonally adjusted 631,000 in the week ended May 16. Read Economic Report.

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By Peter Starck

Tue May 19, 2009 7:28pm IST

* Gold ATMs intended to whet appetite for physical gold

* Private investor inquiries doubling every six weeks

* Plan is for 500 gold ATMs in Germany, Switzerland, Austria

FRANKFURT, May 19 (Reuters) - Private investors should hold up to 15 percent of their wealth in physical gold, according to a German asset management company which plans to set up 500 "Gold-To-Go" ATMs in Germany, Switzerland and Austria this year.

A gold-dispensing automatic teller machine (ATM) was on display at Frankfurt's main railway station for a one-day marketing test on Tuesday.

A one-gram (0.0353 ounce) piece of gold, the size of a child's little fingernail and about as thin, cost 31 euros ($42.25) -- a 30 percent premium to the spot market price <XAU=>.

The flat rectangular piece, bearing the imprint of Belgian metals and speciality materials firm Umicore, came out of the cash-only ATM in a tin box, including a certificate of authenticity.

"This is more than a marketing gimmick," said Thomas Geissler, chief executive of TG-Gold-Super-Markt.de, the company planning to set up the 500 gold ATMs at a cost of 20,000 euros apiece.

"It is an appetizer for a strategic investment in precious metals. Gold is an asset everyone should have, between 5 and 15 percent of your liquid assets in physical gold," he told Reuters in an interview.

DEMAND

Private investor demand for gold is on the rise in Germany and elsewhere as a result of the financial markets crisis, which has made many investors wary of holding traditional assets such as equities, bonds or mutual funds investing in such securities.

"In absolute numbers, the demand for physical gold is still tiny in Germany," Geissler said. "But in relative terms, the growth is explosive, inquiries have been doubling every six weeks," Geissler said of the trend in recent months.

TG-Gold-Super-Mark.de's main precious metals business idea is based on online commerce.

The gold ATMs to be set up at central locations such as airports, railway stations and shopping malls are intended to gradually accustom people to the idea of investing in physical gold, Geissler said.

The ATMs will dispense 1-gram, 5-gram and 10-gram pieces of gold as well as Krugerrand gold coins. Each ATM can hold up to 1,500 pieces, he said.

The company's internet website (www.gold-super-mark.de), through which investors can purchase units between 1 gram and 1,000 grams, is updating precious metals prices every 10 minuntes.

The ATMs will be equipped with technology ensuring that the prices charged by the ATMs keep pace with those on the website.

TG-Gold-Super-Markt.de is a subsidiary of German online investment fund company INFOS GmbH founded in 1994. INFOS now manages 170 million euros worth of assets on behalf of about 5,000 customers.

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By Moming Zhou

By Claudia Carpenter

May 20 (Bloomberg) -- Gold purchases rose 38 percent in the first quarter, led by investment demand that exceeded usage by jewelers for the first time since at least 2004, according to the World Gold Council.

Global demand increased to 1,015.5 metric tons, from 733.9 tons a year earlier, the London-based council said today in a report based on figures from research company GFMS Ltd. Investment purchases more than tripled to 595.9 tons while jewelry demand fell 24 percent to 339.4 tons.

Gold rose to an 11-month high of $1,006.29 an ounce on Feb. 20 as governments spent trillions of dollars to fight recession, sparking speculation inflation will accelerate. In India, the world’s largest gold buyer last year, jewelry demand was the lowest in at least 20 years and net retail investment turned negative for the first time as holders sold metal for recycling, the council said. Chinese demand was six times that of India.

“In the current environment, investment demand is part of the diversification of assets in portfolios and therefore is less sensitive to price than jewelry demand,” said John Meyer, research director at Fairfax IS in London.

Investment demand for coins, bars and exchange-traded funds was the highest since at least 2004, when GFMS began tracking them, and “could well be” a record, GFMS senior metals analyst Philip Newman said. Jewelry demand had accounted for about two- thirds of gold demand in the past 30 years, he said.

Investment Flows

“Investment flows in the first quarter of this year were unprecedented and, based on an analysis of the past 30 years of the gold market, probably unsustainable in the long term,” UBS AG analyst John Reade wrote in an e-mail. Concerns about inflation and currencies “are likely to continue for the next year or so and this should keep investment flows strong, if not perhaps at the super-strong levels seen in the first quarter.”

The U.K. Royal Mint used 75 percent more gold in the first quarter than a year earlier and the U.S. Mint’s sales of 1-ounce American Eagle gold coins more than quadrupled in January.

Gold for immediate delivery climbed $2.98, or 0.3 percent, to $928.04 an ounce by 8:24 a.m. in London.

Total demand from India fell 83 percent to 17.7 tons, from 107.2 tons a year earlier. In Thailand, total usage was a negative 16.9 tons, compared with net demand of 2.1 tons a year earlier. Purchases in China rose 1.8 percent to 105.2 tons from 103.3 tons. In the U.S., demand rose 15 percent to 55.2 tons.

‘A Bigger Role’

“Certainly over the long run, you’re going to see China permanently taking a bigger role,” said Rozanna Wozniak, London-based investment manager at the council. “Across the world, there has been an increase in recycled gold sales, due to a combination of profit taking and distress selling due to difficult economic conditions.”

Demand in Germany for bars and coins expanded fivefold in the first quarter to 59 tons, according to the report.

“Throughout the western world, the safe-haven motive to buy gold was very strong due to economic uncertainty,” Wozniak said. “In Germany, it also appears to be motivated by inflation.”

Owners of gold sold a record 558 tons of metal back into the market, with net retail investment a negative 17 tons in India and 19.9 tons in Thailand, according to the report.

Gold mine production rose 2.9 percent to 560 tons from 544 tons. Central bank sales slumped 55 percent to 35 tons from 77 tons.

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LOS ANGELES, May 20 /PRNewswire/ -- In a recent interview in his syndicated radio talk show, The Gold Show, Jonathan Rose, the President and CEO of Capital Gold Group, Inc., one of the country's premier providers of physical gold assets, stated that the demand for physical gold as a hedge against losses in paper assets such as stocks and the US dollar is breaking records.

CGG reports that total demand for all types of gold - bullion, proof, and numismatic - have doubled year over year and continues to escalate as people realize the full impact of our economic condition. Gold is being viewed as a store of wealth, an essential part of every investment portfolio, and vital for the preservation and protection of one's assets in very uncertain economic times.

"People are reporting huge losses in the market, in their IRAs and 401ks, and are unhappy with low-yielding bank accounts. They realize these types of accounts will never reach their intended goal," Mr. Rose stated.

"They are also learning that shares in gold mining companies, gold ETFs, and shares of a gold mutual fund don't provide the safety and security of the tangible asset because they're still investing in paper gold. They never actually get to take physical possession of the metal," Mr. Rose said. "The safety and security of gold is in taking possession of it. You keep it in your hands, you put it somewhere safe, and you allow it protect the buying power of your money for the long-term."

As for those concerned about whether it is too late to enter the market, Mr. Rose was quoted as saying, "A lot of people wait to buy gold. Instead, people should buy gold and wait."

Considering gold's inverse relationship with the dollar, a shrinking US dollar bodes well for gold. The US Dollar Index has lost over 30% since 2001, and continues to decline, while gold has risen over 300%.

Mr. Rose believes that investors have a much better chance of recovering losses in the market by holding gold instead of stocks.

Mr. Rose quoted Louise Yamada, one of the top technical analysts in the business, who stated in a recent CNBC interview (March 2, 2009) that the destruction of wealth relative to the crash of 1929, when the market declined 49%, was really in the 3-4 years following 1930, after a secondary rally in the market, which she related to the rally of 2007 within an ongoing bear market.

"In 1930, when the crash support level of 1929 gave way, that was the decline was wiped out the wealth, and that's what we're worried about today," she said.

Jonathan Rose, CEO of Capital Gold Group, is a recognized commentator for worldwide gold markets, including the United States, Europe, China, India, Hong Kong, and Singapore. Capital Gold Group, Inc. has main offices in Los Angeles.

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06:06 GMT, Wednesday, 20 May 2009 07:06 UK

Demand for gold is soaring among investors, but hard-up consumers are shunning gold jewellery, figures from the World Gold Council show.

Total demand for gold hit 1,016 tonnes in the first three months of 2009, up 38% from a year ago. Demand for gold as an investment rose 248% to 596 tonnes.

Gold is often seen as a safer investment in times of turmoil, and a way to guard against future inflation.

But demand for gold jewellery fell 24%, the council said.

It added that consumer spending on non-essential items such as jewellery had been hit hard by the recession.

However, Chinese demand for gold jewellery increased by 3%.

"This reinforces the view that China's economy, although unquestionably suffering from a sharp deceleration, nonetheless remains resilient," the council said.

Industrial demand for gold, which is used in the production of electronics like laptops and mobile phones, fell by 31% from the first quarter of 2008.

The gold price has risen from about $700 an ounce in November last year to above $900 an ounce.

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NEW YORK, May 19 (Reuters) - New York gold futures rose on
Tuesday after the previous session's losses on a lower dollar
and as unexpectedly weaker U.S. housing data boosted bullion's
alternative investment appeal.

 GOLD

 * Gold for June delivery GCM9 up $5.40 at $927.10 an
ounce at 10:29 a.m. EDT (1429 GMT) on the COMEX division of the
New York Mercantile Exchange.

 * Ranged from $917.60 to $928.20.

 * Gold turned higher after data showed new U.S. housing
starts and permits unexpectedly fell to record lows in April,
denting hopes that stability in the housing market was
imminent. [ID:nN19408037]

 * Longer-term inflation worries will continue to shape
demand for gold in the investors' space, after U.S. and Europe
consumer prices data showed a slight rebound in prices - BNP
Paribas.

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Posted May 15, 2009 09:31am EDT by Aaron Task

"THE BAILOUT MONEY IS IN THE SEWER AND GONE"

"THE BANKS THAT ARE SUPPOSED TO BE DELEVERAGING, THEY'RE LEVERAGED 25 TO 1 AS WE SPEAK. . . NOW"

Thu May 14, 2009 2:30pm EDT
 

NEW YORK (Reuters) - Longtime technical analyst Robert Prechter, who forecast the 1987 stock market crash, predicted this week that U.S. equities may plunge to half their lows hit in March as a deflationary depression bites.

Oil and U.S. Treasury bonds are also locked in long term bear markets, while corporate bond prices will plunge precipitously by next year as broad economy, banking system and company earnings sustain more damage from a financial crisis that's akin to the Great Depression, he said.

The U.S. S&P 500 stock index's .SPX rebound by nearly 40 percent since it sagged to a 12-year closing low of 676 points on March 9 is not sustainable, Prechter said in an interview with Reuters.

"It's not the start of a new bull market," said Prechter, chief executive at research company Elliott Wave International in Gainesville, Georgia. "Our models are (showing) right now that it is a much bigger bear market than most people realize, something along the lines of 1929-1932," he told Reuters in a wide ranging interview. "It's a very rare event," he added.

"I think the next leg down will be at least as severe if not more severe than what we just experienced. So you want to stay on the side of safety," he said.

As in his 2002 book "Conquer the Crash," which warned of the dangers of a U.S. debt bubble and deflationary depression, Prechter continues to advocate safer cash proxies such as Treasury bills.

SEVEN MORE YEARS?

Riskier assets such as commodities, corporate bonds, and stocks which are currently anticipating that the severe global economic downturn may be bottoming, are likely to have short lived intense rallies, but within an inexorable long-term decline that may last another seven years, he said.

As banks continue to accumulate losses and corporate earnings fall, "the difficulties will probably last through about 2016," he said. "There will be plenty of rallies along the way."

Oil may rally further from current levels just below $60 per barrel but the upside will be capped at about $80 per barrel as the commodity is locked in a long-term bear market, he said.

In July, U.S. crude oil hit a record peak above $147 per barrel and was just above $57 per barrel around noon on Thursday.

"Deflation is coming, it's going to lead to a depression. We're not at the bottom yet," Prechter said. "I think we are going to have bouts of deflation separated by recoveries."

Prechter also painted a bleak picture for commodities like silver and is largely unenthusiastic about gold, believing the precious metal made a major peak when it rose above $1,000 last year.

While gold may have already topped at above $1,000 an ounce in March 2008, Treasury bond prices are likely to fall in a long term bear market, with huge government debt issuance being the main catalyst.

The benchmark U.S. 10-year Treasury note yield, which moves inversely to its price, hit a five-decade low of 2.04 percent in mid-December.

"People got very enamored with bonds and very enamored with gold and I don't like to be invested in markets that are over subscribed," Prechter said.

"The Treasury (Department) has taken on so much bad debt" at a time tax receipts are falling, that "there will be a slow, but very steady change in the way people will view the U.S. government," said Prechter. As a result, investors in Treasury notes and bonds will ultimately demand higher yields, he said.

The U.S. central bank will not be able to control the government bond market and prevent yields from rising, regardless of how much money the Fed uses to buy Treasuries, he added.

Next year, U.S. corporate bond prices will probably fall below their extreme price lows of December during the market panic of 2008 when investors fled riskier assets, he said.

"Corporates in terms of price have the big wave down coming. This has been a prequel," Prechter said.

"Many corporations who (now) say we can borrow more money and take more risks: those are the ones who will get in trouble," he said. "Many municipalities will default," he added.

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By Dan Levy

May 13 (Bloomberg) -- Foreclosure filings in the U.S. rose to a record for the second consecutive month in April as banks increased efforts to seize homes from delinquent borrowers.

A total of 342,038 properties received a default or auction notice or were seized last month, Realty Trac Inc. of Irvine, California, said today in a statement. One in 374 households got a filing, the highest monthly rate since the property data service began issuing such reports in 2005.

“What you’re seeing is the inevitable result of severe job losses,” Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said in an interview. “Until we stem the job losses, we can expect to see continuing foreclosures.”

Unemployment is hampering the housing market as property prices fall. The U.S. jobless rate rose to 8.9 percent, the highest in more than a quarter century, the Labor Department said May 9. Home prices fell the most on record in the first quarter to a median $169,000 amid sales of foreclosure properties, the National Association of Realtors said yesterday.

Foreclosure filings jumped 32 percent from the year-earlier period, RealtyTrac said. Filings were little changed from March as some states delayed seizures. Ten states accounted for three- quarters of all foreclosures in April, with California leading the nation.. . .

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LONDON — Gold firmed on Tuesday with a weaker dollar helping to prop up the metal's appeal as an alternative asset, but failure to push beyond recent five-week highs limited gains.

Spot gold stood at $918.30 (U.S.) per troy ounce by 0948 GMT compared with New York's notional close of $912.60.

Bullion found support as the U.S. currency retreated against a basket of major currencies – making dollar-priced gold cheaper for non-U.S. investors as investors latched on to the traditional dollar-gold inverse correlation.

Further residual support also came as world shares, measured by MSCI's all-country index, levelled off after hitting a six-month high on Monday. Oil prices also moved to a six-month high.

“Certainly the equity markets did back off on Monday and profit-taking is around. I think there are concerns about how long will the ‘green shoots' go on,” said Simon Weeks, director of precious metals sales at Scotia Mocatta in London.

“I wouldn't expect us to break out of the broader $885-930 range at the moment – in a thin market like this when the dollar is weak then people look for gold to move higher,” he added.

Analysts have said gold prices are trapped between opposing forces as its role as a hedge against economic uncertainty vies with perceptions from some quarters that the global economic downturn might be bottoming out.

“The market has lost appetite for safe-haven buying of gold recently because of the fact that the investment market situation has stabilized ... The (negative) correlation with the U.S. dollar has been stronger than before,” said Louis Lok, a dealer at Bank of China in Hong Kong.

U.S. gold futures for June delivery rose $5.60 to $919.00 after settling down $1.40 on Monday on the COMEX division of the New York Mercantile Exchange.

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,104.09 tonnes as of May 11, unchanged from the previous business day.

In other precious metals, silver stood at $14.20 an ounce from $13.91 late in New York on Monday, while platinum rose to 1,125.00 from $1,114.50 and palladium was at $233.00 from $233.50. . . .

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Marcus Grubb, Head of Investment for the World Gold Council, an organisation formed and funded by the world’s leading gold mining companies, has commented on the recent interest rate cut by the Bank of England:

“[The] cut in interest rates by the Bank of England to 0.5% and its decision to increase money supply in the banking system by £75 billion, will remind investors of the spectre of future inflation and its eroding effect on wealth. With interest rates now at the lowest level in 300 years, investors are searching to find instruments with which they can protect their portfolio from inflation’s pernicious effects. Gold tends to rise in value when paper money loses its worth, so for retail and institutional investors alike, gold’s ability to preserve wealth will become even more attractive.”

Grubb, on gold and inflation:

• “The value and purchasing power of paper currencies have declined over the years relative to gold, as most governments have decoupled their currencies from any real assets and many have suffered from high bouts of inflation

• “Gold is nobody’s liability - its value does not depend on someone’s ability to pay and it cannot be debased

• “Contrast gold with cash, bonds and equities whose value hangs on their issuers’ future ability to honour their obligations - and which can, in certain circumstances, become worthless.”

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By Dan Fitzpatrick and Damian Paletta

Regulators have told Bank of America Corp. that the company needs to take steps to address a roughly $34 billion capital shortfall based on results of the government's stress tests, according to people familiar with the situation.

The exact amount of the needed infusion couldn't be determined late Tuesday, and Bank of America officials either declined to comment or couldn't be reached.

Regulators began notifying the 19 financial companies subjected to the government tests of the results Tuesday.

An official announcement is expected after the close of U.S. stock-market trading Thursday.

At Bank of America, the government's findings are likely to set off a scramble over how to fill the capital hole at the nation's largest bank in assets.

The Charlotte, N.C., bank already has received $45 billion in capital from the federal government, some of it to help the bank cover losses stemming from its purchase of securities firm Merrill Lynch & Co. in January.

The amount of capital now needed by Bank of America could exceed what the bank can raise by selling assets or more shares to the public.

As a result, the bank may have no choice but to convert the government's preferred shares into common stock.

That would boost the company's capital to the level mandated by regulators but could also leave the U.S. government as one of Bank of America's largest shareholders.

In the process, the value of the stock held by existing shareholders likely would be sharply diluted.

The company's current stock-market value is about $70 billion.

If the U.S. government ends up with more common stock in Bank of America, it also could test the Obama administration's assertion that banks receiving "exceptional" assistance might face the removal of management or directors.

Government officials have always viewed Bank of America's predicament slightly differently than problems at other banks. The bank's troublesome acquisitions of Merrill and mortgage lender Countrywide Financial Corp. likely saved the government from expensive and messy cleanups that could have exacerbated the financial crisis last year.

Still, patience with Bank of America Chief Executive Kenneth Lewis has worn thin, at least with many shareholders, following the bank's steep losses and controversy over his handling of the Merrill deal.

Last week, Bank of America shareholders voted to strip Mr. Lewis of his duties as chairman. The company's board has shown no signs publicly that its support for Mr. Lewis is wavering.

The large capital hole at Bank of America is the latest sign that government officials are using the stress tests to send a stern message to struggling banks.

Bank of America executives objected to preliminary findings of the tests, in which the bank was told that it may need to raise more capital.

The final results suggest that the government wasn't willing to budge substantially from its initial results, despite Bank of America's response.

It isn't clear what Bank of America did to try to sway regulators from the preliminary findings, or whether executives still are trying to do so.

Bank of America has suggested privately that it views a government stake as its last option, and would pursue that scenario only after its other alternatives are exhausted. The bank already is hunting for a buyer for the First Republic banking unit, acquired as part of the Merrill purchase, and is considering selling asset-management unit Columbia Management. Sales of those two operations could generate about $4 billion, according to David Hendler, an analyst at CreditSights Inc.

Bank of America also has said that it could sell additional shares it owns in China Construction Bank to address any capital needs. A lockup provision on roughly a third of its stake in the Chinese bank is set to expire Thursday, and a sale could bring Bank of America roughly $8 billion. Executives have discussed the possibility of a new share offering if Bank of America's stock price climbs higher, according to people familiar with the situation.

Paul Miller, an analyst at Friedman, Billings, Ramsey & Co., estimated in a report Tuesday that Bank of America would need $46.7 billion to achieve a 4% common equity to total assets ratio.

The Federal Reserve began briefing the country's 19 largest banks on the results of the stress tests on Tuesday and plans to publish the results Thursday afternoon. The stress tests are a main component in the Obama administration's efforts to shore up confidence in the banking sector and attract private investors back to the banking sector.

The tests looked at the ability of each bank to withstand a worsening economic slump through next year, factoring in heavy loss rates in areas such as credit cards and commercial real-estate loans. Roughly 10 of the 19 banks, including Bank of America, are expected to need more capital, according to people familiar with the matter.

As recently as March and April, Mr. Lewis insisted that Bank of America didn't need any more capital. But when asked the question at last week's annual meeting, he was more circumspect. "We think we're fine, but it's now out of our hands," Mr. Lewis said.

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