BERLIN, Aug 22 (Reuters) - Germany's Bundesbank on Friday rejected calls that it should sell some of its gold reserves to help boost the slowing German economy, telling Reuters financial and political uncertainty make the reserves even more important than before.

"Gold sales are not a suitable way to sustainably consolidate the public accounts," the Bundesbank said after a query about trade union proposals that it sell gold to fund some of a 25 billion euro ($37 billion) economic stimulus package.

The Bundesbank is the world's second-largest holder of gold after the U.S. Federal Reserve, and has sold just 20 tonnes out of total reserves of over 3,000 tonnes in the past five years. [photo below is 1 tonne of gold]

These sales were to allow the German finance ministry to mint gold coins, unlike the much more active sales programmes of other central banks which wanted to shift their portfolios from gold to a more diverse array of assets.

To reduce volatility in the price of gold <XAU=>, 15 European central banks agreed in 2004 to limit gold sales to 500 tonnes a year over the next five years.

The Bundesbank is expected to make a formal statement about any gold sale plans around September, when the final year of the Central Bank Gold Agreement starts.

"The Bundesbank reaches decisions about the nature and size of reserves autonomously. The board of the Bundesbank decides every year afresh about changes in the level of its gold holdings," the central bank said.  

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

Are we at the end of the commodity bull market or does this battered sector offer an attractive buying opportunity?

That’s the question on the minds of everyone trying to navigate one of the most complex and volatile markets we’ve seen in years. The continuing economic slowdown (particularly at home and in other G-7 countries), combined with more than a year of bleak news from the financial sector, has left investors dazed and desperate.

The liquidity crisis has forced leveraged investors and companies to unload assets across the board to comply with new accounting rules like FAS 157 and FAS 140, and this has created a domino effect as investors panic. An estimated $15 billion was pulled out of U.S. stock funds in July, about four times more than in June. For the first seven months of 2008, those outflows totaled $52.4 billion, an all-time high.

July was also a very tough month for commodities and commodity stocks. The S&P Natural Resources Index fell off 15 percent, the worst monthly sell-off in the sector since August 1998, when the Russian currency crisis triggered the implosion of the hedge fund Long-Term Capital Management. Prices for the underlying commodities also suffered in July, with the Jefferies/CRB Index down 10.1 percent. This was just short of the worst monthly performance for this index since 1970.

The fundamentals for gold have not changed, and with negative real interest rates in the U.S., this is a good time to maintain exposure to gold investments. As you can clearly see from the chart below, July and August generally mark a low time for gold before prices climb with the arrival of the fall buying season, which is another reason to consider gold now.

The world is different from a decade ago. Back then, the world was experiencing a global currency crisis that started in Asia in 1997 and peaked in 1998 with Russia defaulting on its sovereign debt. This was the final blow that doomed Long-Term Capital Management.

China and other emerging economies have massive U.S. dollar surpluses, and these countries are committed to infrastructure spending. This week China’s government announced that it will focus more on sustainable growth than worry about inflation. This is significant.

Last month’s tumble for resources can be traced back to the latest troubles in the financial sector that started more than a year ago with the subprime mortgage collapse and were accelerated by the new accounting rules in late 2007. The intermarket relationship of assets get bundled together with a liquidity event, and the icing on the cake was the March 2008 collapse of the auction-rate securities market, which basically froze $300 billion in retail investor cash. This issue has yet to be resolved, and lawsuits are flying everywhere.

The market is now seeking liquidity in response to the recent moves by Merrill Lynch and others to sell mortgage-related assets at huge losses and the persistent rumors that more Bear Stearns-like failures are yet to come.

The regulatory actions in July to stop shorting of 19 financial stocks, including Merrill Lynch, was well-timed. These stocks have rallied 50 percent off their lows, and more importantly for Merrill, it was able to refinance its losses. Had the SEC not stepped in, packs of illegal short-sellers could have crushed Merrill’s stock, just as they did Bear Stearns.

While energy and resources felt the impact of July’s turmoil, it’s important to keep in mind that this performance did not reflect the sector’s solid fundamentals. Historically, oil dips in July before rallying from August through October, as illustrated in the seasonal chart below.

As the chart above illustrates, in July energy stocks (represented by the S&P 500 Energy Index) moved from two standard deviations above the mean to two standard deviations below the mean in just 20 trading days. We think this extreme pullback offers patient investors a window of opportunity.

Many market pundits have predicted the demise of high crude oil prices after a peak near $150 a barrel, but with numerous energy stocks already trading at levels not seen since crude was under $100, we maintain that much of this forecasted price adjustment is already reflected in energy stock valuations. It appears, based on valuation metrics, that oil stocks are priced as if oil were selling at $70 a barrel.

Moreover, unlike other bull markets where equities traded at challenging valuations, energy and resource stocks are historically cheap. Price-to-earnings ratios are well below the broader market, and these companies have tangible assets that are unaffected by mortgage write-downs.

Looking at crude oil fundamentals, we remain constructive given that despite very high prices for oil, OPEC production has been unable to eclipse peak production levels and spare capacity remains critically low relative to prior decades. Outside the OPEC cartel, countries such as Russia and Mexico have struggled to keep up with demand and are experiencing significant production declines. Meanwhile, costs continue to escalate as marginal supply is typically located in geopolitically sensitive areas or extracted from expensive unconventional resources.

A similar fundamental story holds for the metals and mining sector, where new discoveries and production are not adequate to keep up with strong global demand.

Lehman Brothers published an interesting research piece today on resource sector corrections between mid-2006 and early 2008. During that time, there were five significant corrections in the Dow Jones STOXX Basic Resource Index (SXPP) averaging 22 percent, and these corrections were followed by rallies averaging 29 percent. That trend appears to be holding for last month’s correction as well – after bottoming out on July 23, the SXPP rose 10 percent by month-end.

by Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors, Inc.

*****

Frank Holmes is CEO and chief investment officer at  U.S. Global Investors, a Texas-based investment adviser that specializes in natural resources, emerging markets and global infrastructure. 

Capital Gold Group, Dow Jones, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold demand, gold IRA, IRA gold, Lehman Brothers, OPEC, S & P Index, The Capital Gold Group

Gold rises 1 pct as investors take advantage of low prices

LONDON, Aug 6 (Reuters) - Gold rose 1 percent in Europe on Wednesday as investors took advantage of a three-day fall in prices to buy below the key $900 an ounce support level.

Platinum also recovered after a sharp dip, which saw the white metal shed more than 10 percent in three sessions, as Xstrata's $10 billion bid for Lonmin boosted confidence in the market and a strike began in major producer South Africa.

Gold rose to $883.80/884.80 an ounce at 1014 GMT from $876.35/877.95 late in New York on Tuesday.

"Clearly there is some opportunistic buying going on at the moment," said Daniel Hynes, metals strategist at Merrill Lynch.

"We have seen numerous times over the past six months that $900 an ounce is a key support level, and whenever gold has fallen below that it has recovered relatively quickly."

The dollar retreated from seven-week highs against the euro after the Federal Reserve intimated, after leaving interest rates on hold at 2 percent late Tuesday, that it is in no hurry to hike rates. [ID:nL6200473]

A softer dollar will ease downward pressure on gold, which is often bought as a hedge against weakness in the currency.

Gold slipped more than $20 an ounce on Wednesday as part of a broader sell-off of commodities, led by crude oil. There are signs that investment demand may be softening.

The largest gold-backed exchange traded fund, New York's SPDR Gold Trust GLD, said its gold holdings fell 15 tonnes or 2.3 percent on Tuesday to a one-month low of 659.31 tonnes.

The fund's gold holdings are now nearly 7 percent below their all-time peak above 700 tonnes on July 21.

PLATINUM REBOUNDS

Platinum prices rebounded, helped by Anglo-Swiss miner Xstrata's $10 billion bid for the world's third biggest platinum producer, Lonmin.

Platinum rose more than 3 percent, and palladium 5 percent, as traders saw the bid as a vote of confidence in the future of the platinum market.

"Platinum has been buoyed by interest in the sector (linked to) Xstrata's bid for Lonmin," said Commerzbank trader Rory McVeigh. "It shows a more positive view of the platinum situation in South Africa."

Meanwhile a one-day strike started in South Africa, source of four out of five ounces of the world's platinum.

Anglo Platinum, the world's top producer of the precious metal, said some of its mines and a smelter had been affected by the strike. 

Gold producers Harmony, Anglogold Ashanti and Gold Fields all said their production had been hit.

Daniel Hynes said the disruptions would normally have been much more supportive for platinum, but that the negative demand outlook from the automotive sector was capping any gains.

He added, however: "The strike, and Xstrata's bid for Lonmin this morning, does suggest that there are still a lot of people who think the platinum market has a lot better times ahead."

Spot platinum hit a high of $1,615.50 ounce before easing to trade at $1,611.00/1,631.00 against $1,563.00/1,583.00 late in New York on Tuesday.

Spot palladium rose to a session high of $371.00/385.00 an ounce from $346.00/354.00 in New York.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold demand, gold IRA, IRA gold, Merrill Lynch, silver, spot palladium, spot platinum, The Capital Gold Group

Commentary:  This is not meant as an endorsement of this type of behavior, but to demonstrate the liquidity of gold worldwide.

Fled

By MICHELE McPHEE and SCOTT MICHELS
Aug. 1, 2008

Clark Rockefeller bought $300,000 in gold coins that can be used anywhere in the world weeks before he allegedly kidnapped his seven-year-old daughter and left the country, the owner of a precious metals shop told ABCNews.com.

Rockefeller mother on air/The Boston Police Department has an arrest warrant for Clark Rockefeller...

Rockefeller mother on air/The Boston Police Department has an arrest warrant for Clark Rockefeller on custodial kidnapping, assault and battery and assault and battery with a dangerous weapon charges tied to the abduction of his 7-year-old daughter, Reigh.

(ABC/Boston Police Department )

Ken Murphy, 42, the owner of Boston Bouillon, said Rockefeller bought 300 American Eagle gold coins last month. The coins are worth $1000 each, Murphy said.

He said Rockefeller, who went by the name Clark Rock when he came into the office, one of many aliases Rockefeller has allegedly used, said he had recently won a patent lawsuit and was investing the proceeds in gold.

"You can use them anywhere," Murphy said of the gold coins. "They can be convertible into cash anywhere."

Murphy said Rockefeller carried the gold coins, which weighed almost 19 pounds, out of the store in a briefcase. Murphy said ther money was wired to him from a bank account under the name Clark Rock.

Earlier this week a Boston police official with knowledge of the case said Rockefeller told one acquaintance that he used "$300,000 in gold bars" to buy a boat. Police believe Rockefeller may have fled the country on a recently-bought yacht named "Serenity."

Acting on a tip from a police source, ABC News located Murphy on Friday.

The revelation about the gold coins comes as police on the island of Turks and Caicos said Rockefeller and his daughter, Reigh, were spotted buying supplies on the island. Police say Rockefeller abducted the girl during a supervised visit in Boston on Sunday.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

By Shobhana Chandra

Aug. 1 (Bloomberg) -- The U.S. unemployment rate rose to the highest level in more than four years as employers cut jobs again in July, increasing the threat of a deeper economic slowdown.

Payrolls fell by 51,000, less than forecast, the Labor Department said today in Washington. The jobless rate rose to 5.7 percent, from 5.5 percent the prior month. As recently as April, it was 5 percent. A separate report showed that manufacturing stagnated in July as companies were hit by rising raw-materials costs and slower spending.

``This is further evidence the economy is in a recession, probably a shallow recession,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, referring to rising joblessness. ``It will be a major drag on consumer spending.''

The last time the unemployment climbed so much in three months was at the end of the last U.S. recession in 2001. Payroll cuts combined with decreasing property values, stricter lending rules and near-record energy prices to send consumer confidence levels close to the weakest in 16 years in July.

Cutbacks at UAL Corp. and Starbucks Corp. signal firings are spreading beyond builders and manufacturers as raw-materials costs soar. General Motors Corp., which today announced a second- quarter loss of $15.5 billion, may eliminate about 5,000 U.S. jobs by year-end, people familiar with the plan said this week.

Payroll declines spanned transportation, retailing, manufacturing and temporary services industries, the Labor figures showed.

Treasuries, Stocks

Stocks dropped and Treasuries were little changed. The Standard & Poor's 500 Stock Index fell 0.7 percent at 10:21 a.m. in New York, to 1,258. Yields on benchmark 10-year notes were at 3.96 percent from 3.95 percent late yesterday.

The Institute for Supply Management's factory index fell to 50, a higher reading than forecast, from 50.2 in June, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between expansion and contraction. The Commerce Department reported construction spending dropped 0.4 percent in June.

Today's unemployment figures reinforce the case for the Federal Reserve to hold off on any interest-rate increase until next year, economists said.

The Fed's ``hands are tied, there is nothing they can do with regard to this,'' said Kathleen Stephansen, director of global economics at Credit Suisse Holdings USA Inc. in New York in an interview with Bloomberg Radio.

Revisions added 26,000 to payroll figures previously reported for May and June. Economists had projected payrolls would drop by 75,000 after a 62,000 decline the prior month, according to the median of 80 forecasts in a Bloomberg News survey. The jobless rate was forecast to rise to 5.6 percent.

Losses So Far

The July cuts bring the total drop in payrolls so far this year to 463,000.

Democratic presidential candidate Barack Obama plans to announce today an emergency economic plan that would impose a windfall profit tax on oil companies to pay for rebate checks of $1,000 to families and $500 to individuals. He also backs a $50 billion stimulus package, including funds for bridge and road maintenance, intended to save 1 million jobs.

Senator John McCain, the Republican candidate, criticized Obama for advocating higher taxes. ``There is no surer way to force jobs overseas than to raise taxes.''

The National Bureau of Economic Research, the official arbiter of U.S. contractions, tracks payrolls, sales, incomes, production and gross domestic product in making the recession call. The group defines downturns as a ``significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.

Recession Call

The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed yesterday. Some economists said this indicated the U.S. slipped into a recession late last year.

``The economy is limping along right around zero, slightly positive,'' said former St. Louis Fed President William Poole in a Bloomberg Television interview today.

Fed policy makers will probably keep their benchmark rate at 2 percent when they meet on Aug. 5, futures prices show.

More Americans filed initial claims for unemployment benefits last week than at any time in over five years, Labor reported yesterday. Consumer confidence surveys have indicated that Americans, growing more pessimistic about job prospects, may trim spending.

Starbucks Cuts

Starbucks, the world's largest chain of coffee shops, this week said it'll cut another 1,000 jobs as sales slump. The Seattle-based company on July 1 announced plans to eliminate as many as 12,000 positions worldwide.

Factory payrolls fell 35,000 after declining by the same amount in June. Economists had forecast a drop of 40,000. The decrease included a drop of 3,000 jobs in auto manufacturing and parts industries.

July announcements at airlines included 7,000 cuts at UAL's United Airlines, and 6,840 at American Airlines parent AMR Corp.

The protracted housing slump and resulting credit crisis were also reflected in today's report. Construction payrolls declined 22,000, the smallest drop since October, after decreasing 49,000. Payrolls at financial firms were unchanged after declining 13,000 the prior month.

Services Jobs

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 5,000 workers, the first decline since March. Retail payrolls decreased by 16,500 after a drop of 6,300.

Government jobs increased by 25,000, the 12th month of gains in public payrolls, after an increase of 43,000.

The average work week shrank to 33.6 hours from 33.7 hours. Average weekly hours worked by production workers were unchanged at 41, and overtime was also unchanged at 3.8 hours. That brought the average weekly earnings up by 22 cents to $606.82 in July.

Workers' average hourly wages rose 6 cents, or 0.3 percent, to $18.06, matching economists' forecasts.

Capital Gold Group, Federal Reserve, Standard & Poor's 500 Stock Index, gold group, U.S. Recession, U.S. Unemployment rate, The Capital Gold Group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

By Millie Munshi

July 31 (Bloomberg) -- Gold gained the most in three weeks after a report showed weaker-than-expected U.S. growth during the second quarter, sending the dollar tumbling and boosting the appeal of the metal as an alternative investment. Silver rose.

The economy grew at a 1.9 percent annualized rate, the Commerce Department said today, sending the dollar down as much as 0.8 percent against the euro. Gold, sometimes used as a safe- haven investment, rose to a record in March as the U.S. currency headed for record lows and the economic outlook dimmed.

The rise in the precious metal is ``certainly coming off the dollar after the GDP report,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``Gold looks very strong right now.''

Gold futures for December delivery rose $13.70, or 1.5 percent, to $926 an ounce at 10:48 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest gain for a most-active contract since July 11.

Economists were expecting the U.S. to grow at a 2.3 percent rate, according to the median of 79 estimates in a Bloomberg News survey. The dollar dropped to as low as $1.5688 per euro.

Gold, priced in dollars, generally moves in the opposite direction of the U.S. currency. The metal reached a record $1,033.90 an ounce in March as the dollar headed to an all-time low of $1.6038 per euro on July 15.

Haven Asset

The precious metal may be insulated from a slowing global economy as investors turn to gold as an alternative to the dollar and as a haven asset, Evan Smith, who helps manage $1.5 billion at U.S. Global Investors Inc. in San Antonio, said yesterday.

Prices may rally later this year, according to Barrick Gold Corp., the world's largest gold producer.

``Inflationary pressures'' will continue to drive gold higher, Barrick Chief Financial Officer Jamie Sokalsky said today on a conference call with investors. ``The outlook for gold continues to be very positive.''

Prices will be boosted by rising geopolitical tensions, continued concerns about the financial and credit crisis, and constraints on gold supply, Barrick said.

The surging cost of gold, which has more than doubled since 2003, has boosted profit for mining companies. Barrick said today second-quarter profit increased 22 percent amid soaring prices for bullion.

Silver Gains

Silver also advanced after China said it will remove an export rebate on the precious metal.

``It is likely that the abolition of the rebate will depress exports'' from the Asian country, analysts at Barclays said in a report today.

Silver futures for September delivery added 29.5 cents, or 1.7 percent, to $17.76 an ounce on the Comex. Silver has gained 17 percent this year before today.

China is the worlds' third-largest silver producer, according to Barclays. The country also removed an export rebate on zinc. The move comes as China steps up efforts to cut a record trade surplus.

Capital Gold Group, dollar decline, gold safe haven, precious metals, silver, U.S. growth, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold, The Capital Gold Group

Markets Still Helter Skelter, Seek Bottom

Was that the capitulation?

Many analysts believe the stock market won't shed its bear costume until it has one big cathartic selloff during which despair is at its fullest. Such moments have flagged bottoms in the past and set the stage for new bull markets.

Monday's stock selloff, followed by Merrill Lynch's Band-Aid-ripping CDO fire sale and Tuesday's rally, had that aroma. Then again, so did the Société Générale capitulation in January, when the market panicked due to a rogue French trader's mishap, the Bear Stearns capitulation in March and the Fannie Mae/Freddie Mac capitulation of mid-July.

A closely watched fear gauge, the Chicago Board Options Exchange's Volatility Index, jumped at each of those moments, hinting at capitulations. But it never hit levels associated with past market bottoms. At the end of previous bear markets, the VIX spiked to more than 35. It is now at 22. Maybe the market is still complacent about the risks that lie ahead. Or maybe it won't see the kind of capitulation analysts are counting on.

The VIX's history is too short to offer much confidence that every market bottom must be accompanied by a VIX above 35.

There are reasons to hope the end of this mess may be nearing. But banks are still faced with deteriorating credit quality, and the knock-on economic effects of tighter credit have only begun. The future path of the economy may trace something more like an L-shape than a V, meaning an easily spotted capitulation may never come.

"Will we see catharsis when everyone is waiting for it? It's doubtful the market will play along," said Wayne Kaufman, chief market analyst at John Thomas Financial.

Capital Gold Group, gold group, bear market, bull market, Fannie Mae, Freddie Mac, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold, Merrill Lynch, stock market, The Capital Gold Group

July 28 (Bloomberg) -- The U.S. budget deficit will widen to a record of about $490 billion next year, an administration official said, leaving a deep budget hole for the next president.

The projected deficit for the fiscal year that begins Oct. 1 is far higher than the $407 billion forecast by President George W. Bush in February. The official also confirmed a report in USA Today that the deficit this year will be less than the $410 billion estimated in February.

The bigger shortfall for fiscal 2009 may reflect dwindling tax receipts because of the U.S. economic slowdown, the cost of payments distributed under the $168 billion economic stimulus package and the cost of the wars in Iraq and Afghanistan.

``We've already seen a pretty sharp cooling in tax receipts, and it's just going to continue into next fiscal year,'' Stephen Stanley, chief economist at RBS Capital Markets, said in a telephone interview.

The deficit projection injects another element into the fight over future U.S. economic policy between Republican John McCain and Democrat Barack Obama, the presumptive presidential nominees of the major political parties. Both may find their economic proposals constricted by red ink when the next president is sworn in on Jan. 20, 2009.

Plans and Proposals

McCain will have a tougher case to make for extending all of Bush's tax cuts, which are projected to cost $4.2 trillion over 10 years, while Obama will confront the risk that his proposals for government programs will widen the budget gap.

White House press secretary Dana Perino refused to comment on the numbers, while adding that the administration said when the economic stimulus package passed in February that it might increase the deficit.

``That's the price we would pay'' for boosting the economy, she said at a briefing this morning. Asked if the administration still believes it's on a path to a balanced budget by 2012, she said, ``I believe so, yes.''

The White House budget office will release its mid-session review of the government's balance sheets at 1:30 p.m. today.

The shortfall reflects a deterioration of the budget over the past seven years. Bush inherited a budget surplus of $128 billion when he took office in 2001. The budget worsened almost immediately, because of recession, the Sept. 11 attacks, the beginning of the war in Afghanistan and, later, the war in Iraq that began in March 2003.

Deficit Record

Bush recorded his first deficit a year after being sworn in, and it widened to the current record of $413 billion in 2004.

Five months ago, the administration projected a shortfall of more than $400 billion this year and next, reflecting a struggling economy, and forecast a recovery to a $160 billion deficit in 2010, declining to $96 billion in 2011 and finally a $48 billion surplus in 2012.

The current projections may understate the deficit next year because the administration hasn't requested money to prosecute the wars for the full year, leaving that to the next president. Military operations in Iraq and Afghanistan now are costing about $10 billion to $12 billion a month.

The Bush administration and Congress also haven't dealt with the largest long-term fiscal problems: the growing costs of Medicare, Medicaid, and Social Security. Those three programs consumed an estimated 41 percent of the federal budget in 2007.

Economy Discussions

Obama was scheduled to confer today with his top economic advisers ``on America's pressing economic challenges,'' his campaign said. The Illinois senator was to meet with business and labor officials on oil, food and other commodities, topped with discussions with investor Warren Buffett, former Chairman of the Federal Reserve Paul Volcker, and former Treasury Secretary Robert Rubin, among others.

McCain, an Arizona senator, was scheduled to talk about the economy at town-hall meetings with voters in Nevada and Wisconsin.

Record gasoline prices, plunging home values and shrinking credit access have thrust the economy to center stage. The Labor Department this week may report a seventh straight month of job losses.

House Budget Committee Chairman John Spratt, Democrat of South Carolina, took the administration to task for a record deficit, citing news accounts.

Capital Gold Group, gold group,deficit record, economic stimulus, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold, The Capital Gold Group, U.S. budget deficit

Capital Gold Group, gold group, gold, gold bars, gold bull market, gold prices, gold news, gold coins, gold bullion, India gold demand, silver, The Capital Gold Group

Commentary:  ETF's add to global gold demand and allow investors to participate in the commodities market, but do not provide the safety and preservation of physical gold assets, nor do they add the additional portfolio diversification of a hard asset allocation in physical gold.

The Hong Kong Securities and Futures Commission has approved the city`s first gold ETF

Capital Gold Group, commodities, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold demand, gold ETF, gold IRA, IRA gold

The first thing people usually consider when buying gold is its price, but unfortunately, they are grabbing the wrong end of the stick. Price is of secondary importance. To explain why, one has to examine the reasons for buying and holding gold.

The motivation to buy gold is usually driven by the pursuit of some defensive financial strategy. For example, gold is a proven and time-tested inflation hedge, so people acquire gold if they believe inflation is likely to worsen. This defensive strategy aims to protect your purchasing power because with gold you hold sound money instead of some inflating national currency.

Another defensive motivation to acquire gold is its unique attribute of being money with no counterparty risk. This significance of this risk was highlighted by the bank-run at Northern Rock in the UK last year and more recently, Bear Stearns in the US. People withdrew their money from those banks because they recognized that their ‘money’ was only as good as the financial capability of those banks to make good on their promise. In contrast, gold is not dependent upon a promise because it is the only money that is a tangible asset, and not an I.O.U. of some financial institution.

Another reason people focus on the price of gold is because they consider it to be an investment, but it’s not. Investments generate rates of return because you put money at risk, for example, by lending it or buying equity in a company. If the investment is successful, you will generate a return, increasing your wealth. But gold doesn’t do this. Gold preserves wealth; it doesn’t increase it.

For example, one ounce of gold purchases approximately the same amount of crude oil today as it has at anytime over the past 60 years. Who would want an investment like that? Gold hasn’t generated any rate of return. It hasn’t given its holders the opportunity to buy more crude oil. But because you can still buy essentially the same amount of crude oil, an ounce of gold has done exceptionally well at protecting wealth by preserving purchasing power, which is what money is supposed to do.

Money is a temporary store of value where we place a portion of our wealth while we decide whether to spend, invest or save (hoard) it. So when we hoard gold, we are in fact saving money until that moment in time when we decide to spend or invest it, which brings me back to my basic point.

Does one question the price (i.e., purchasing power) of dollars before choosing to open a savings account? No, of course not. Savings represent the portion of one’s accumulated wealth held as liquidity (i.e., money) either for a rainy day, to accumulate before spending or investing it, or just to safeguard this portion of your wealth safely and securely. But an inflating dollar doesn’t achieve these aims. The dollar – and indeed every other national currency – has severe problems that undermine their usefulness. In contrast, protecting wealth is what gold does exceptionally well by preserving the purchasing power of one’s liquidity, not necessarily from day-to-day or week-to-week, but consistently and reliably over longer periods of time.

So instead of focusing on gold’s price when buying it, focus on what gold is, what it offers, and what it accomplishes for you. Gold is a form of savings that securely preserves that portion of your wealth that you choose to hold as sound money.

I recognize that it is difficult to view gold in this way and to give little regard to its price, particularly because we are so used to looking at prices of goods and services in terms of dollars and not gold. Also, we have been trained to think of gold as an investment instead of what it really is – money. But we can overcome these biases and incorrect conventional wisdoms.

One way to do that is to consider accumulating gold on a regularly monthly basis. In other words, save some money every month, but don’t save dollars, the purchasing power of which is being inflated away. Save sound money instead. Save gold.

When gold is viewed in this way, it is clear that even with the four-fold increase in the gold price since 2001, no one has ‘missed the boat’. Building savings by accumulating gold is always a good thing.

Putting the Gold Price in Perspective – follow-up

The above article generated some interesting questions from readers of “Information Line”. Here is one of those questions and my response.

Q. – "I read this with interest, but if I buy gold in 2008 at $1000 per ounce and now it’s 2010 and gold is $500 per ounce, why do I not feel good??? Of course, if you buy gold in 2000 at $280 per ounce and sell in 2008 at $1000 I know you feel good, but life does not always work that way!"

A. – You are looking at gold from the perspective of a trader. In other words, you assume that the only advantage to owning gold is to profit from its price swings. Gold is money, and there are also other important benefits that come from owning physical gold. These include:

1. No counterparty risk – When you own physical bullion, you own a tangible asset. Physical gold is money not dependent upon anyone’s promise, which is an attribute becoming increasingly important as the present financial crisis deepens. Ask anyone who had money in Northern Rock in the UK or Bear Stearns about their experience when those banks failed. Better yet, ask anyone who lived through the Great Depression to learn about the fear that arises when your wealth is reliant upon counterparty risk in a financial crisis.
   
   
2. Consistency in commodity purchasing power – If gold were to drop to $500 in 2010, the price of crude oil, wheat and other commodities will have also dropped. You would be able to buy gasoline at $2 per gallon again, and a loaf of bread at much less than today’s price. There is a close correlation between the price of basic commodities and gold. So the loss of purchasing power from a drop in gold’s price may be less than it seems at first glance.
   
   
3. Not reliant upon government decisions – The value of the dollar is dependent upon government politicians and bureaucrats. Therefore, the dollar has become a political tool, rather than what money is supposed to be, namely, a neutral tool useful in commerce available to one and all and unfettered by government interference. Government actions can undermine the usefulness of currency. Moreover, when you own dollars you are speculating that the government will not take any actions harmful to the currency. That’s not a good bet because experience has shown that governments eventually and inevitably totally destroy the currency under their management.
   
   
4. Assets outside the banking system – Gold provides diversification by enabling you to place a portion of your money outside of banks, and indeed, the entire monetary system of fiat currencies. Therefore, this portion of your wealth is removed from the threat of capital controls and other government imposed restrictions. This safety you receive from gold can be enhanced further when you store gold in countries outside of where you live and where there is no history of asset confiscation by government.

The above points explain why gold has value. Namely, it is useful in many different ways. But there is one last point worth mentioning.

While the future is unknowable and unpredictable, the probability of gold falling to $500 in 2010 is “slim to none”. The only way for gold to fall to that level would be for the purchasing power of the dollar to be significantly enhanced. In other words, instead of inflating the dollar, the US government would need to embark on a new monetary policy aimed at deflating the dollar, the result of which would be to enhance the dollar’s purchasing power, repeating the experience of the Great Depression. Monetary policy is aimed specifically at avoiding another deflationary Great Depression, so it is reasonable to expect that the dollar will continue to be inflated, meaning the price of gold will continue to rise.

by James Turk

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

FDIC, J.P. Morgan, Jamie Dimon, Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

By Jesse Westbrook

July 8 (Bloomberg) -- A U.S. Securities and Exchange Commission investigation into credit-rating companies found the firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds.

A 10-month review of Moody's Investors Service, Standard & Poor's and Fitch Ratings found instances in which analysts contributed to fee discussions and weighed the likelihood they would lose clients if they issued certain ratings, the Washington-based SEC said in a report released today. Employees also cast doubt on the quality of some ratings, the SEC said.

``We uncovered serious shortcomings at these firms,'' SEC Chairman Christopher Cox said today at a news conference. ``When there were not enough staff to do the job right, the firms sometimes cut corners.''

Pension and money-market funds bought AAA-rated securities backed by mortgages made to the riskiest borrowers because they offered higher returns than government bonds with the same ratings. In many cases, credit raters were paid by investment banks selling the bonds, prompting regulators and lawmakers to question their independence.

The SEC report details an e-mail in which an analyst at an unidentified credit-rating company refers to the market for collateralized debt obligations as a ``monster.''

``Let's hope we are all wealthy and retired by the time this house of cards falters,'' said the e-mail, which was sent Dec. 15, 2006, to another analyst at the same firm.

AAA rated securities, credit rating companies, Mody's Investors Service, mortgage bonds, Securities and Exchange Commission, Standard & Poor's, Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

Gold Futures Climb to two-and-a-half-month High

Gold revs its engine and squeals down the track

Prices were stuck in a $50 trading range until the Fed sent the dollar reeling

By Myra P. Saefong, MarketWatch

June 27, 2008

SAN FRANCISCO (MarketWatch) -- The U.S. Federal Reserve gave gold the fuel it needed to restart its engine and the precious metal has already driven through the trading range barrier it's been stuck in for the past month. 

Gold futures had been trapped in a $50 trading range between $860 and $910 an ounce on the New York Mercantile Exchange since May 28. It climbed past $920 in electronic trading Thursday evening as the U.S. dollar slumped in reaction to the Fed's failure to signal urgency to raise rates to curb inflation.

On Wednesday, the Fed decided to hold short-term interest rates steady at 2%, but sharpened its focus on inflation, saying that the risks posed to the economy by upward pressure on prices have increased.

"Gold broke decisively out of the trading range that had constrained it as investors came to realize that the Federal Reserve won't be able to begin a rate-hike campaign until 2009," said Brien Lundin, editor of Gold Newsletter.

The Fed's policy statement essentially acknowledged the "trick box" the central bank is in -- "facing growing inflationary pressures, but unable to raise rates while economic conditions are so weak and with a national election so near," he said.

That combined with growing expectations that the European central bank will begin its own rate hikes well before the Fed can act to create a bearish environment for the U.S. dollar which in turn, provided a very bullish outlook for gold, he said.

"People are finally coming out of the fog and realizing that we're in a world of hurt and people are plain scared," said Dale Doelling, chief market technician at Trends In Commodities.

"Stocks are in the toilet, the dollar is getting hammered, oil is going through the roof, food commodities are in the stratosphere [so] there's only one solution," he said. "Buy gold! Buy silver! Buy them because they're the only defense against what's happening in all the other markets."

Fed Muck

James Steel of HSBC says that record-high crude oil and dollar weakness are boosting gold prices. (June 27)

Fed Chairman Ben Bernanke is "caught between wilting growth and rising inflation," said Julian Phillips, an analyst at GoldForecaster.com. "With such toothless words against inflation, their rate-holding action told [everyone] that they can expect no interest rate support for the dollar in the foreseeable future." "This is positive for precious metals," he said.

Gold's value as a hedge against inflation -- especially as it pertains to a weakening dollar and rising oil prices -- helped lift prices for the metal to nearly $1,034 an ounce in mid-March, the highest futures price level ever recorded. 

And with ongoing concerns about inflation and a slowing economy, gold may be poised to return to record territory, analysts said.

"Inflation is a lot like toothpaste -- once it is out, it is very hard to get back into the tube," said David Beahm, a vice president at coin and precious metals retailer. And gold is a "tremendous hedge to both protect wealth during these inflationary periods and also generate positive investment returns when other asset classes decline in value."

The Fed's policy statement noted "two situations weighing on the economy: tight credit and the housing contraction -- that could be best addressed by an accommodative monetary stance," said Lundin. But at the same time, it noted just one, high energy prices that could be combated by a tighter monetary policy.

Crude prices climbed near a record $140 a barrel earlier this month and U.S. retail prices for regular gasoline stand near an all-time high above $4 a gallon.

"In short, they're damned if they do and damned if they don't," said Lundin. The Fed can only talk inflation down and talk the dollar up for now. "It won't be able to take any real, substantive action until after the fall elections."

Dollar Doom is Gold's Boom

Of course, at the root of the issue for gold is the dollar, Lundin said.

"Whatever developments drive the greenback will send gold in the opposite direction," he said.

The Fed can protect the U.S. dollar by sharply increasing rates, but that would sink the economy and make servicing our huge debt loads unmanageable, said Peter Spina, an analyst at GoldSeek.com. So the Fed "must keep rates low and keep liquidity in the system, which will ultimately lead to further debasement of the dollar's value," he said.

Protection for the dollar can really only come in the form of confidence or perception and then capital controls, he said.

Spina said he senses "increasing desperation" on the Fed's part and if the economy hasn't recovered as we enter 2009, "the confidence game could unwind quickly."

The Fed is "in a corner and the U.S. dollar is going to be a victim of their policies," Spina said. "It already has been punished harshly."  . . .

Capital Gold Group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold, gold demand, gold futures, HSBC, inflation hedge, New York Mercantile Exchange,U.S. Dollar, U.S. Federal Reserve

DOW LOWEST IN 21 MONTHS

Gold for August delivery settled at $32.80 to 915.10 an ounce on the New York Mercantile Exchange. The precious metal hit an all-time intraday high of more than $1,030 an ounce back in mid-March.

"Weakness in the dollar has helped propel gold sharply higher today," said James Steel, an HSBC metals analyst in New York.

In addition to the dollar's decline, gold was supported by a surge in the price of oil and signs that the credit crisis is alive and well on Wall Street.

"I think the bottom is rather limited, given the dollar and credit concerns, plus high oil prices," he said.

Dollar weakness The dollar lost ground against the euro Thursday after the U.S. government reported that the nation's economy grew at a sluggish rate of 1% during the first quarter.

The euro rose to buy $1.5736 in afternoon trading, up from $1.5667 late Wednesday.

The greenback's weakness also stems from the Federal Reserve's decision Wednesday to hold interest rates steady at 2% as the central bank struggles to deal with a flattening economy coupled with rising prices.

The Fed's decision "signaled that inflation in near term is still uncertain," Steel said. That can drive gold prices higher because many investors see precious metals as a hedge against inflation.

Oil jumps T

The dollar's decline helped boost oil prices Thursday. Reports that Libya may cut oil production and that an OPEC official said crude could hit $170 a barrel this summer gave crude prices additional support.

Light, sweet crude for August delivery rose $3.65 to $138.20 a barrel on the New York Mercantile Exchange. The price climbed as high as $138.95 - a $4.40 gain and within $1 of the all-time intraday high of $139.89 - earlier in the session.

"To some extent, the gold market takes its cues from oil," Steel said. When oil rallies, gold tends to follow suit because oil is such a large component of commodities indices, he said.

Stocks swoon

Wall Street was battered Thursday afternoon, with the Dow industrials hitting its lowest intraday level in 21 months. The selloff was prompted by downgrades in the financial sector, the resurgence of credit concerns and the fallout from disappointing quarterly reports in the tech sector.

Gold often rallies when the stock market is in decline. "It is a traditional safe haven in periods of financial stress," Steel said.

Stocks came under pressure after Goldman Sachs cut its ratings on U.S. investment banks to "neutral'' from "attractive" because of continued deterioration of the banking industry and the prospect of a lengthy recovery. It also added Citigroup to its "conviction sell'' list.

Meanwhile, the stock market is digesting corporate results released late Wednesday from tech leaders Oracle and Research In Motion.

Oracle (ORCL, Fortune 500) easily beat Wall Street expectations for its fiscal fourth quarter results but the software maker gave more conservative guidance that disappointed investors.

BlackBerry maker Research in Motion (RIMM) missed its target and guided down its profit forecast for the quarter.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

Shanghai Gold Exchange Approves Membership of ANZ Bank

By Ginger Ding
26 Jun 2008 at 08:42 AM GMT-04:00

"The gold trading approval strategically enhances ANZ's client servicing capacity and core bank status. This approval is a further step in ANZ's plan to become a leading foreign bank in China," Bulloch said.

According to ANZ's announcement, the SGE will only grant a total of five foreign banks membership at this stage. However, when reached by Interfax, Tong Gang, an official with SGE's press department, said there is no limit to the number of foreign banks that can be granted membership to the SGE, and that China will gradually open up its gold market.

HSBC Bank (China) Co. Ltd. (HSBC), Standard Chartered Bank (China) Ltd. and the Bank of Nova Scotia (Guangzhou Branch) became SGE members in February. They were able to trade gold on the SGE from June 5, 2008.

Aside from the above three banks, preliminary approvals to apply for SGE membership were granted to UBS AG and Societe Generale by the People's Bank of China (PBOC) last June. However, Tong told Interfax that neither UBS AG nor Societe Generale have applied for SGE membership yet.

ANZ is the only Australasian-based bank with both local and foreign currency commercial banking capabilities in China. It has fully-licensed foreign bank branches in Shanghai and Beijing.

In addition to its own branches, ANZ has a 19.9% stake in the Shanghai Rural Commercial Bank and a 20% stake in the Bank of Tianjin.

The SGE is the sole spot gold trading bourse in China. The most-traded AuT+D contracts on the SGE closed at RMB 195.82 ($28.51) per gram Tuesday, RMB 3.68 ($0.54) lower than the previous trading day.

Capital Gold Group, The Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

By Patrick Rial and Lynn Thomasson

June 24 (Bloomberg) -- Japanese stocks, Asian real estate and commodities are investors' best bets as faster inflation erodes returns in the rest of the world's markets, said investor Marc Faber, author of the Gloom, Boom & Doom Report.

``Demand for commodities and oil will not vanish.'' Faber said at a conference in Tokyo. ``The shift in demand that drove up commodity prices is not going to go away.''

Record prices for commodities have accelerated inflation around the world and lifted shares of raw material and energy producers. Oil more than doubled since the beginning of last year, while products including coal, rice and fertilizer also reached record highs in 2008.

Faber, who told investors to buy gold as the metal began a seven-year rally, predicted inflation may boost Japanese share prices and Asian property will benefit as more people gain access to mortgages.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

January 7, 2008

With more voices adding every day to the chorus predicting the world's biggest economy will go into a recession, diversifying away from U.S. stocks is a healthy strategy, analysts told CNBC on Monday.

Traditional defensive sectors are consumer staples and food. But apart from those, commodities, especially gold, are increasingly believed to be a safe bet.

The technology sector, which has been used as a refuge until not long ago, should be carefully assessed and stocks linked to the financial sector or consumers should be avoided, Alexis Dawance fund manager at Global-Cap SA, told "Worldwide Exchange."

But technology companies in the restructuring or outsourcing business are likely to fare well, added Dawance, who also said he was "pretty negative" on the U.S. economy.

His gloom is shared by other economists.

Change in Portfolio

"From what I have seen so far, I would still tend to be very cautious on U.S. equities," Professor David Costa, Dean at the Robert Kennedy College, told "Power Lunch Europe."

"I think this is an excellent time to change your portfolio in view of being a bit more defensive," Costa added.

A more defensive strategy would focus on commodities, agricultural staples such as wheat but also on gold, which is positively influenced by the current situation when "central banks are cutting rates and are probably buying gold," he said.

Gold prices, which reached a record high of $869.05 an ounce last week, surged 32 percent in 2007 and are around 4.5 percent up this year.

Gold Rush

The fall in the U.S. dollar, concerns about inflation and fears that the effects of the subprime crisis will spread to the overall world economy have all contributed to this rise.

But supply and demand factors also play an important role, Ross Norman, from TheBullionDesk.com, told "Power Lunch Europe."

Global mine production is falling, with output in South Africa, the world's largest gold producer, at its lowest since the thirties, Australia and Canada also declining, and only China rising, Norman said.

"On the supply side we are seeing peak gold, just as we're talking about peak oil production," he said. "The supply-demand fundamentals are very attractive, and this is driving institutional investors in." 

Copyright CNBC 

The Capital Gold Group, Capital Gold Group, gold, gold prices, safe haven, hedge, inflation hedge, recession, defensive investment, gold IRA, IRA gold, gold retirement plans

Bhutto’s Assassination Reminder of Global Instability - Investors turn to Gold AS Safe Haven

Killing of Bhutto Adds to Worries in Markets

by Robert Gavin, December 28, 2007

The assassination of Pakistani opposition leader Benazir Bhutto is adding to recession jitters already shaking investors in global financial and commodity markets.

With the US economy viewed as dangerously close to recession, many analysts say any new shocks, such as another surge in energy prices, could tip it over the edge.

Bhutto's killing in Pakistan yesterday is another reminder of global instability helping to send fuel prices higher and stocks sharply lower.

"People want to believe the economy is going to be OK," said Nigel Gault, US economist at Global Insight, a Waltham forecasting firm. "But any hint of bad news, and fear takes over very quickly."

The Dow Jones industrial average plunged nearly 200 points, or 1.4 percent, following Bhutto's death. Meanwhile, investors flocked to safe havens such as gold and government bonds.