Capital Gold Group – Current Economic News

Bloomberg.com
By Cordell Eddings and Tom Keene
February 14, 2012

The U.S. has been “overmedicated” by public policy and should consider the government’s 1920’s response to recession, said James Grant, editor of Grant’s Interest Rate Observer.

Responding to a severe economic downturn from 1920 to 1921, theFederal Reserve increased interest rates and the national budget was balanced, moves that kept the painful recession short, New York-based Grant said. In contrast, he said U.S. policy makers are prolonging the pain of the so-called Great Recession by intervening in markets and running unprecedented federal budget deficits.

“The Fed is not content to let interest rates find their levels, they must repress them, and they are not content to let housing prices find their levels, they seek to intervene to prop them up,” Grant said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “The results of all this intervention is not to cure what ails us, but prolongs the symptoms of what distresses us.”

In January, the Fed extended its pledge to keep the target rate for overnight loan between banks near zero, as more than two years of economic growth have failed to push unemployment below 8.3 percent.

“Economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014,” the Federal Open Market Committee said in a statement on Jan. 25.

Bernanke’s Tolerance

The decision bolstered speculation that Fed Chairman Ben S. Bernanke will tolerate faster gains in consumer prices. The Fed set an annual inflation target of 2 percent and policy makers suggested they may conduct a third round of bond purchases under a policy known as quantitative easing.

“What is discouraging about the Great Recession is that it seems not to end,” Grant said. “The historical comparison is useful to invite us all to consider the present day orthodoxy and if it is possible that it is wrong. I think that it might be wrong.”

The U.S. Treasury should begin to issue longer-dated bonds backed by gold and investors should also buy gold as it is “something substantial,” Grant said. The bond bull market of the past 30 years has made investors complacent to the risk of owning bonds, he said.

Bloomberg.com
By Ben Livesey and Cordell Eddings
February 14, 2012

Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal and said it may strip France and the U.K. of their top Aaa ratings, citing Europe’s debt crisis.

Spain was downgraded to A3 from A1 yesterday, Italy to A3 from A2 and Portugal to Ba3 from Ba2, all with negative outlooks. Slovakia, Slovenia and Malta also had their ratings lowered.

“Policy makers have made steps forward but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody’s in London. “What will guide long-term ratings is the clarity and the performance of policy makers and the macro picture.”

The euro reversed losses after a report showed German investor confidence rose more than economists forecast in February. Moody’s decision highlighted the risk that the European debt crisis will deepen even as the region’s finance ministers prepare to meet tomorrow to discuss a second aid package for Greece, following the country’s approval of austerity measures.

AAA Ratings

Still, recent rating reductions have done little to deter investors, who poured money into the government bonds of nations such as Franceand Austria even after the countries lost their AAA ratings at Standard & Poor’s last month. U.S. Treasuries returned three times as much as AAA corporate bonds since the world’s biggest economy was cut by one rank in August.

“The ratings agencies are kind of behind the curve,” said Shen Jianguang, chief economist for Greater China at Mizuho Securities Asia Ltd., who previously worked for the International Monetary Fund. “The risks have actually been falling in Europe. There may be worries that countries cutting fiscal spending may drag on their economic growth, but the concerns aren’t new and the downgrade should have minimal impact on market sentiment.”

The Stoxx Europe 600 Index rose 0.3 percent at 12 p.m. in Frankfurt, reversing earlier losses. The euro appreciated 0.2 percent, trading at $1.3205.

“The uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework,” and the resources that will be made available to deal with the crisis, are among the main drivers of Moody’s action, the ratings company said.

‘Weak Prospects’

Moody’s yesterday also lowered its outlook on Austria’s Aaa rating to negative. Malta’s rating was downgraded to A3 from A2, and Slovakia and Slovenia were both downgraded to A2 from A1. All three were given negative outlooks. In a statement earlier today, the ratings company affirmed its top Aaa rating for the European Financial Stability Facility.

Moody’s said Europe’s “increasingly weak macroeconomic prospects” threaten the “implementation of domestic austerity programs and the structural reforms that are needed to promote competitiveness.” It said market confidence “is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.”

ECB Injection

Investors have ignored credit rating companies’ concerns about Europe and focused instead on steps taken by policy makers to end the crisis. While Standard & Poor’s on Jan. 13 cut the credit rating of nine euro-region states, yields on most governments bonds continued to edge lower since the European Central Bank on Dec. 21 allotted a record 489 billion euros ($643 billion) in three-year loans to banks.

Yields on Italian 10-year bonds have dropped more than 1 percentage point since ECB’s injection, while French 10-year yields have declined 20 basis points in that period.

In the U.K., Chancellor of the Exchequer George Osborne said his fiscal consolidation program is the only thing stopping Britain from an immediate downgrade.

“This is proof that, in the current global situation, Britain cannot waver from dealing with its debts,” Osborne said in an e-mailed statement released by the Treasury in London yesterday.

The spending cuts that helped the U.K. preserve its AAA credit rating at Standard & Poor’s last year and bolstered the pound have weighed on the currency this year as investors lose confidence that Prime MinisterDavid Cameron will revive economic growth. Sterling had its worst January since 2008 against a basket of nine developed-market peers, falling 0.6 percent, after a 3.1 percent advance in the second half of 2011, according to data compiled by Bloomberg.

‘Relatively Weak’

The National Institute for Economic and Social Research forecasts the U.K. economy will shrink 0.1 percent this year and grow 2.3 percent in 2013, compared with previous projections in October for growth of 0.8 percent and 2.6 percent.

“The U.K.’s fiscal trends are relatively weak among top- rated countries, mainly because of the U.K.’s relatively high pre-crisis structural deficit and recent prolonged economic weakness,” Michael Saunders, chief European economist at Citigroup Inc. in London, wrote in an e-mailed note. “A negative outlook statement typically indicates there is about a one in three chance of a ratings downgrade in the next 18 months.”

Brussels Meeting

French Finance Minister Francois Baroin said the country’s AAA rating was maintained by Moody’s because of “the size of its economy” and its “increased productivity.”

Baroin’s comments were included in an e-mailed statement from the Finance Ministry after Moody’s downgraded the rating outlook to negative.

Germany and the European Commission yesterday welcomed Greek approval of the austerity steps demanded for a financial lifeline, suggesting euro finance chiefs will pull Greece back from the brink when they meet tomorrow.

The Greek parliament’s backing “is a crucial step forward toward the adoption of the second program,” EU Economic and Monetary Affairs Commissioner Olli Rehn told reporters in Brussels. “I’m confident that the other conditions, including for instance the identification of the concrete measures of 325 million euros, will be completed by the next meeting” of finance ministers.

Euro-area finance chiefs will convene in Brussels for their second extraordinary meeting on Greece in a week. Frustrated after two years of missed budget targets, ministers declined to ratify the 130 billion-euro package in a special session on Feb. 9, demanding that Greek officials put their verbal commitments into law.

“It’s important for now to complete this program,” German Chancellor Angela Merkel said in Berlin. “The finance ministers will meet again on Wednesday to undertake the work on this, but there can’t and there won’t be any changes to the program.”

Yahoo! Finance
February 13, 2012
By: Matt Nesto

Yahoo! Finance

By Matt Nesto

February 13, 2012

The President of the United States delivered a $3.8 trillion Federal budget proposal today that for the fourth year in a row outspends the nation’s projected tax receipts by at least 25%. Although the projected deficit for fiscal year 2013 is “down” to $900 billion from $1.4 trillion a year ago, this election year package of tax increases and spending cuts is being attacked from all sides.

Even before the ink had dried, Republicans were calling it a “completely political document,” while White House aides fired back, arguing that now is not the time for austerity.

Jeff Kleintop, chief market strategist at LPL Financial calls it the toughest collection of tax hikes and spending cuts since 1947. “This is brutal,” he says of the President’s plan, “this is a blunt instrument being directed at the economy.”

In fact, without big changes (that are widely seen as politically unlikely this year) Kleintop says the estimated impact of a $500 billion or 3.5% hit to the economy could push the country back into recession next year.

Highlights of the plan (or lowlights, depending on your point of view) include the expiration of the so-called Bush tax cuts, as well as the stratification of the capital gains tax, that would reduce or eliminate it for lower income households, while raising it for those who earn more than a million dollars a year, taking it from 15% to as much as 39.6% – the proposed new top bracket for ordinary income.

While a majority of the reductions were mandatory and predetermined by both last year’s budget agreement and the failed negotiations of the “Super Committee,” defense spending is set to take some of the largest hits, at nearly $500 billion over the next decade.

What is clear is that even if fairly rosy economic goals are met, Americans shouldn’t expect to see a balanced budget at least for another decade, and probably even longer. With interest payments and entitlement spending currently accounting for 64% of federal spending, that leaves a small slice of the pie that can even actually be targeted for belt tightening.

“We’re a bit worried about the outlook for profits and the economy as we look out 12 months from now ,” Kleintop says, adding that other than an extension of the payroll tax cuts that are currently pending, Congress will be unable and/or unwilling to avert this looming hit to the economy during an all-important election year.

Do you think the need to balance the budget and pay down the debt is more important than keeping the economy from slipping back in to recession?

The Washington Times
By Dave Boyer
February 13, 2012

Unveiling a $3.8 trillion election-year federal budget loaded with deficits, tax increases and hundreds of billions of dollars in new stimulus spending, President Obama said Monday his plan will “restore an economy where everybody gets a fair shot.”

“The economy is growing stronger, the recovery is speeding up,” Mr. Obama said at Northern Virginia Community College in Annandale, Va., where he also proposed a new job-training program. “We can’t cut back on those things that are important for us to grow.”

Setting the tone for the fall campaign, Mr. Obama is inviting another clash with congressional Republicans by calling for short-term spending to create jobs with proposals that GOP lawmakers have already rejected. He would spend $50 billion immediately on transportation infrastructure, $30 billion to modernize schools, and $30 billion to hire teachers and first-responders.

The president said one of the first budget proposals Congress must enact is an extension of the payroll tax holiday for about 160 million workers, which is set to expire at the end of this month.

“The last thing we need is for Washington to stand in the way of America’s comeback,” Mr. Obama said. “Preventing a tax hike on the middle class is only the beginning.”

His budget — which calls for a total of $350 billion in short-term stimulus spending, a $475 billion highway program and $1.5 trillion in tax increases on wealthier Americans — is intended to highlight the differences between the two parties as Mr. Obama seeks reelection. It would impose a new 30 percent minimum tax on those earning $1 million or more.

Mr. Obama also proposes to raise taxes on investment income for families earning more than $250,000. He would tax dividends as ordinary income, raising the top tax rate from 15 percent to 39.6 percent. Taxes on capital gains for the top income bracket would rise from 15 percent to 20 percent.

The president said families earning more than $250,000 per year don’t need more tax breaks, but the country needs the money from tax hikes to pay for essential programs for the middle class.

“The budget we’re releasing today is a reflection of shared responsibility,” Mr. Obama said. “Do we want to keep these tax breaks for wealthy Americans, or do we want to do everything else? We don’t envy the wealthy, but we do expect everybody to do their fair share. We look out for each other. We pull each other up. That’s who we are.”

Republicans immediately attacked the president for loading his budget with what they called gimmicks and for failing to tackle the nation’s $15.3 trillion total debt.

“The president offered a partisan, election-year budget that ratchets up spending while ignoring the biggest drivers of our debt and calls for massive tax increases on hardworking families and small businesses,” said House Majority Leader Eric Cantor, Virginia Republican. “The president’s budget will make our economy worse today, and result in debt, doubt and decline in the coming years.”

House Budget Committee Chairman Paul Ryan, Wisconsin Republican, said the president has “punted again” on deficit reduction and that House Republicans won’t go along with his budget.

“This is a plan for America drowning in debt,” Mr. Ryan said. “It’s a political plan for the president’s reelection. We’re not going to do that.”

Former Massachusetts Gov. Mitt Romney, the frontrunner for the Republican presidential nomination, said the budget proposal “won’t take any meaningful steps toward solving our entitlement crisis.”

“The president has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors,” Mr. Romney said in a statement.

The president’s budget request for fiscal 2013 anticipates borrowing a total of $901 billion, which would be the first time since Mr. Obama took office that the deficit falls below $1 trillion. But the spending plan pegs the deficit for the current fiscal year at $1.33 trillion, nearly the same level it was three years after the president promised to cut it in half by the end of 2012.

Administration officials say the budget will reduce the deficit $4 trillion over the next 10 years through a mix of tax increases, caps on spending and savings in other areas.

“I’m proposing some difficult cuts that, frankly, I wouldn’t ordinarily make,” the president said. He said the reducing the deficit in the long term will allow his administration to boost the economy right now.

But Republicans say the budget also relies on an accounting trick to count hundreds of billions in savings tied to the drawdown of the war in Iraq. Rather than apply all of the $850 billion of presumed savings to deficit reduction, Mr. Obama intends to spend half of it on infrastructure projects to create jobs.

Sen. Jeff Sessions, Alabama Republican and ranking member of the Budget Committee, said Mr. Obama’s 10-year plan would add $11.2 trillion to the national debt, compared with $11.5 trillion under currently enacted spending laws.

“It’s a tax-and-spend budget, virtually identical to the path we were already on,” Mr. Sessions said. “Where is the $4 trillion in deficit reduction?”

The budget calls for a 10-year, $60 billion “financial crisis responsibility fee” on the nation’s biggest banks aimed at recovering the costs of the financial bailout and helping homeowners facing foreclosure. It would raise $41 billion over 10 years by eliminating tax breaks for oil, gas and coal companies.

The president spoke at the community college Monday to highlight his plan to spend $8 billion to create a fund to promote job training for high-growth industries.

The Street
By Alix Steel
February 9, 2012

NEW YORK (TheStreet ) — Gold prices were popping higher after Greece secured a debt deal and as the Bank of England pumped more money into the system.

Gold for April delivery was up $19.60 at $1,750.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,755.50 and as low as $1,728.30 an ounce while the spot price was adding $16, according to Kitco’s gold index.

Silver prices were 58 cents higher at $34.28 an ounce while the U.S. dollar index was 0.26% lower at $78.49.

Gold prices popped on the news that Greece has secured a debt deal, which would implement austerity measures and secure its second bailout of 130 billion euros. Gold were volatile on the news initially popping, then giving back gains then moving firmly higher. Once gold crossed the $1,750 its also possible that buy stops were triggered where traders buy gold at this predetermined price.

The question still remains — is this enough to save Greece or will the country have to leave the euro. The country still has to come to a bond swap deal with private bondholders and the European Central Bank to help its debt load.

On the one hand, if Greece is forced to leave the euro the currency could rally, “it’s like trimming the cancer off,” says Phil Streible, senior commodities broker at RJO Futures, and would most likely support gold. Although if risk appetite returns in full force, gold might be forgotten as a safe haven asset. If Greece leaves the euro and all hell breaks loose and the euro plummets, gold could sink along with it at least in the short term. Mario Draghi, head of the ECB, already said in a press conference today that the economic outlook remains “uncertain” and “downside risks remain.”

Also supporting gold was the news that the Bank of England added to its quantitative easing program by 50 billion pounds bringing the total to 325 billion pounds. The central bank left interested rates unchanged at 0.5% while the European Central Bank left its rate at 1%. Gold prices rose slowly after the news, but many experts had been expecting a bigger pop in the price with central banks unabashedly pumping money into the system.

“The reality is is that it’s all about the euro,” says Streible, “with the fragile state all of Europe is in right now, any sign of quantitative easing, or QE, is probably too little at this point … more types of stimulus plans means more spending cuts are soon to follow.” More stimulus can trigger a rush into gold as a hard asset, an alternative to the paper currency being devalued, but austerity measures bring in the deflation worry, where gold tends to selloff initially.

Rick Trotman, senior research analyst at MLV & Co., thinks that gold prices will do fine this year. “I don’t expect a blockbuster year but ending the year between $1,700-$1,800 an ounce is realistic.” Trotman does think that if Greece secures its second bailout and nails down a debt deal it would really depend on how good or bad that deal is. “If everyone is really happy with it, gold could trade down,” he says, “but if it looks good then Portugal will decide to step up to the plate as well hoping to get a really good deal and gold would trade up on that.”

Trotman also says gold will start looking to the U.S. presidential elections in November. Trotman suggests that if the polls keep leaning towards President Obama that that would be good for gold as “Democrats would spend a lot of money,” as the dollar is devalued gold rises in response. “A Republican President would be bad for the price of gold,” asserts Trotman.

James Steel, analyst at HSBC in a recent 2012 gold outlook report says that it’s not just the U.S. going through an election cycle. “The political process will result in the election or selection of a hose of leaders in countries that represent more than 50% of the world’s GDP.” The political upheaval ranges from the U.S. to France to Egypt to Russia. “Uncertainty about changes in government may boost safe-haven demand for gold, in our view.”

Another wild card playing out for gold Thursday was the news that inflation in China rose to a three month high at 4.5%. The higher reading is good for gold as it might push consumers into buying the precious metal as a safer place to invest as real interest rates are a negative 1%. However, the higher reading might also confirm the central bank’s reluctance to lower interest rates, to firmly commit to a loose monetary policy.

China has been pushing its banks to lend more into order to avoid a hard landing, or strong slowing of growth. M2 supply in the country, cash in circulation plus savings, checking and any travelers checks, grew 13.6% at the end of 2011 to 85.16 trillion yuan. This trend will need to continue to support strong gold buying. The country imported 427 tons of gold in 2011 and consumed 787 tons.

Gold mining stocks were rallying Thursday. Barrick Gold was up more than 1% at $49.64 while Newmont Mining was 0.64% higher at $61.90.

Other gold stocks, Goldcorp and Yamana Gold were trading higher at $47.63 and $16.676 respectively.

Kitco News Commentary
By Jim Willie CB
February 9, 10:26 a.m. EST

The interminable extension by the US Federal Reserve on the 0% rate into 2014 represents history in the making, making pure heresy in monetary policy. Worse, it forces foreign central banks to adopt the same destructive policy in the Competing Currency War. Accommodation on interest rates must be temporary, but is made a fixture. The financial system is irreparably broken, the symptom being endless financial crisis. The risk trade is coming back, whose corollary message is to back up the truck to buy GOLD. Many are the messages behind the 0%. Other nations like Japan have been criticized for its adoption. But when the United States is the adoptive parent custodian, it is supposedly all good. Stimulus is a ruse, as destruction of working capital is the constant refrain in a tragic opera. The unintended consequences abound, but mostly not perceived or comprehended well. Few even in the financial community are aware of the powerful leverage mechanisms that enforce the artificially low interest rate. Introduce the Interest Rate Swap contract, upon which heavy reliance is the norm. While Europe is embroiled in austerity, the United States is besieged by central bank apologies for failure disguised less and less with each passing month and each dismissed speech.

The solution is Gold & Silver investments, as all things paper will lose value either from erosion or theft in fraud. The MFGlobal case is far from finished. We have seen this Madoff movie before, but few recognize its sequel starring Jon Corzine and similar supporting cast. The protection is with Gold & Silver, in physical form. The next wave will feature the Gold investors painted as financial terrorists. Refer to the New York Times article with FBI contributors. This is highly disturbing to anyone who holds the Constitution as sacred.

HIDDEN MESSAGE OF PERENNIAL 0% RATE

The 0% official Fed Funds rate has been almost three full years in entrenched policy, when originally promised as temporary. No exit strategy here. Greenspan once stated that it should never be held fixed so low for more than six to nine months. He implied the system would be broken otherwise, subjected to pressures that would distort the valuation mechanisms beyond repair. My view is that extending 0% as monetary policy into year 2014, five years of accommodation, is a gross admission of failure. Bernanke constantly apologizes for stimulus having failed, for an economy unable to recover. The main effect of 0% policy is sustenance of the surprising weakness, draining capital from the system, and improperly pricing the debt which is at high risk. The reality is that the USEconomy is stuck in harsh deep recession of minus 3% to minus 5% GDP. The reality is that the USGovt debt burden is stuck in fast escalation at well over $1 trillion annually, while demand for the debt securities is vanishing. The heavy hidden reliance upon monetary inflation devices for USTBond demand has become a fixture in the financial landscape. Its marquee banner reads failure.

SYSTEMATIC DESTRUCTION OF CAPITAL

The fixture of 0% as monetary policy carries with it an admission that money is worthless. No directive by the flailing discredited US central bank could say it better. Money has no cost because it is not worth anything, being paper in basis and backed by no collateral. The latest travesty is the upcoming dissolution of Fannie Mae itself. What miracle they might conjure up to make its rotten ramparts and acidic paper and corrupt core go away. Fannie will be buried at sea (of liquidity). The cast of economists cannot comprehend the heavy cost of 0% in the widespread systematic destruction of capital. Marginal business units shut down, turn off the equipment, lay off the workers. The costs rise from the rising price of commodities. The material costs rise from basic hyper monetary inflation, due to the unilateral USFed paper factory output. The essence of retired capital and its broad capital destruction is a foreign concept to economists. They still believe the USEconomy will enjoy the benefits of continued 0% stimulus. How wrong, how backwards, how tragic!! The 0% policy destroys capital and furthers the deterioration process.

UNINTENDED CONSEQUENCES

A repeated message since so important. Focus on suppressed long-term interest rates and their damaging consequences. The US leaders boast of benefits from ultra-low interest rates. Suppressing the 10-year bond yield has dire consequences. Some but not all of them appear unintended. The power centers want unlimited easy money for sure. But in doing so, they permit some horrendous developments like feeding a cancer.

1. Savers are given nothing in interest yield, slowing the economy with asset erosion
2. Banks hold home inventory, making housing market clearance impossible
3. Big banks continue their USTreasury Bond carry trade schemes instead of business capital formation
4. Investment banks are encouraged to continue speculation, rather than to invest in business formation that create jobs
5. The USFed further expansion of its balance sheet to buy toxic assets, as rot sets in
6. The USGovt is not discouraged from deficit reduction, sure to lead to systemic failure
7. The free money helps to conceal in vast turnover the toxic paper held under the USGovt roof, as in Fannie Mae, and other fraudulent mills such as MFGlobal lookalikes in the sovereign debt securities and their related derivatives.

ALTERNATE NEMESIS TO AUSTERITY

The Europeans are dealing with austerity measures in government budgets. The sovereign debt securities remain a constant problem, although in recent weeks the bond yields have come down to manageable levels, like below 6% in Italy and Spain. Few economists and bank analysts seems to realize that austerity plans put in place result in lower economic activity, more job cuts, fewer large scale projects, and thus higher deficits down the road. The austerity plans are Poison Pills, one and all, designed perhaps to enable installation of unelected Goldman Sachs technocrats in prime minister posts. The Greek situation is testimony, as budget cuts, asset sales, and massive amputations have resulted in worse fiscal deficits. So bring on more of the same!! The plague in the United States is of an opposite type. The budgets are unrestrained, notwithstanding the charades. The integrity is lost while foreign creditors have jumped ship. Instead, the urgent calls within the hollowed (not hallowed) Untied States are for continued 0% policy in order to make the mammoth gargantuan debts and fraudulent toxic paper coverup more cost-free. What incredible opposites exist in Europe and the North America!! The US controls the global reserve currency, having turned its printing press into a well-oiled national shrine. In no way does the USEconomy have the advantages that Japan boasts, like export trade surpluses, a diverse industrial base, and a nationalist fervor that abhors outsourcing. Japan forced JGBond investment by the unions, and the USGovt will do something similar with private pension funds.

ULTIMATE JET ASSIST FOR GOLD

Back in 2003, the gold community made it well-known that the negative real rate of interest was the underlying jet asset kick starter ignition system for the Gold bull market. Take the baseline interest rate, subtract the baseline price inflation rate, and arrive at the real rate of interest. At 2% or 3% for long-term interest rates, at 8% or 10% for accurate honestly measured price inflation, the real rate of interest is calculated in the minus 5% to minus 7% range. Investment in commodity resources, especially Gold & Silver, is the best protection and smartest reaction to the negative real cost of money. The USEconomy is mired in quicksand amidst vast capital destruction. The actual Gross Domestic Product is in a chronic recession of minus 3% to minus 5% for four years running. That explains the absent job growth. Take the payroll tax withholding series to see the steady decline in national income, not easily masked.

GOLD & SILVER READY TO SOAR

Check out the obvious reversal pattern on the Gold chart in full view. It has a 200-point potential rise, which would take the Gold price to 1950. All solutions discussed are bogus and founded in funny money output, new debt, toxic bond redemption, and cost-free recapitalization of banks. No more liberated gold bullion like from Libya via mercenary wars on the horizon. Its 144 metric gold tonnes proved useful to the London and Wall Street Boyz. Syria ain’t got no gold to release. When the 1750 defended flank is overrun, the rise in the Gold price will be rapid. It will capture global attention again. Gold is real money, easily noticed during a time when sovereign debt has turned toxic.

Check out the obvious reversal pattern on the Silver chart in full view. It has a 7-point potential rise, which would take the Silver price to 42 per ounce. The large gap between 32 and 40 has been filled halfway, the next half to be filled in the following several weeks, possibly very quickly. When the 35 defended flank is overrun, the rise in the Silver price will be rapid, more rapid than Gold since the gap will offer little resistance. The rise will capture global attention again. Silver is not just an industrial metal. It has outperformed Dr Copper easily.

Kitco News
By Jim Wyckoff
February 9, 2012, 9:29 a.m. EST

(Kitco News) -Comex gold futures rallied and moved to a fresh daily high Thursday morning following news reports that the Greek government and its private sector had finally reached an agreement to restructure debt that would then allow that country to receive more bailout funds from the European Union. The news injected more risk appetite into the market place as the U.S. dollar index weakened, the Euro currency rallied and crude oil prices also rallied. Gold and silver prices, in turn, pushed higher. Gold and silver bulls continue to enjoy the overall near-term technical advantage on the charts. April gold last traded up $20.70 at $1,752.00 an ounce.

The Street
By Alix Steel
February 7, 2012

NEW YORK (TheStreet ) — Gold prices were rising Tuesday, shaking off a two day decline left the metal down 2%.

Gold for April delivery was up $8.91 at $1,733.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,735 and as low as $1,712.60 an ounce while the spot price was adding $12, according to Kitco’s gold index.

Silver prices were 5 cents lower at $33.70 an ounce while the U.S. dollar index was down 0.37% at $78.80.

Gold prices were finally making their way higher Tuesday, helped by a stronger euro and weaker dollar. Gold had been digesting the big 5.5% move they had after the Federal Reserve announced low interest rates until the end of 2014. “I think the breakout we saw a couple of weeks ago is still holding up,” says Stan Dash, vice president of applied technical analysis at TradeStation, who is monitoring $1,709 an ounce as a key support level. A close under $1,709 would signify a more dramatic selloff, “then I think you have to be more serious about a retest of $1,675 an ounce.”

During the week after the Fed announced it would keep rates low for longer, speculative long positions on the Comex increased by 24,000 contracts. On the one hand it means traders are starting to rebuild long positions and will continue to do so if prices hold up. However, those traders could also contribute to any selloff if they have tight sell stops — which is a predetermined selling level initiated in order to protect profits – they could have dumped their positions over the last few trading days accelerating the recent selloff.

Gold was seeming to take in stride the news that China only imported 38 tons of gold from Hong Kong in December, down 62% from November. This means that the country was not enticed by lower prices ahead of its New Year festival. On the flip side, China still wound up importing 427 tons of gold in 2011 and consuming 787 tons, which includes the 360 tons the country produced on its own.

“Chinese gold imports from Hong Kong tripled from 2010,” says Mark O’Byrne, executive director at GoldCore, a bullion dealer. “There continues to be suspicions of Chinese official sector gold bullion buying.” Frank Holmes, U.S. Global Investors CEO and chief investmentofficer, also says not to make too big a deal over the headline number.

“October and November import figures were much higher than usual and the December figures reflect a reversion to the mean,” Holmes. “On the year, gold imports from Hong Kong were up over 250 percent from 2010, that doesn’t sound like a slowdown in demand.”

According to HSBC, dealers in China said that jewelry demand grew 10%-20% during the lunar New Year, steeply down from the 30% growth rate in 2010. “The weak consumer demandis seen as a byproduct of uncertainty over global growth,” wrote James Steel, analyst at HSBC, in a recent note.

Holmes, on the flip side, said figures were stronger than that “the Beijing Municipal Commission of Commerce reported last week that sales of precious metals jumped nearly 50% from the same time last year during China’s week-long New Year’s holiday in January.”

With the International Monetary Fund warning of slower Chinese growth this year, Chinese gold demand remains a dicey support for higher gold prices. If China’s trade surplus narrows, the government could possible crack down on gold imports as a way to curb the inequity. “Barring any changes to China’s monetary policy, renewed eurozone weakness may impact China’s growth, which may curb demand for gold jewelry,” says Steel. ‘Barring any changes’ is the key part of that statement, however, as any signs of significant growth slowing could trigger monetary easing, which is good for gold as people look for a safe place to store wealth.

Unfortunately for gold it seems like it’s short term fate will be tied to the euro. Greece was able to raise 812.5 million euros over 6 months at slightly lower yields but to slightly lower demand. The euro was tentatively positive on the news as well as on hopes that the Greek government could agree on austerity measures needed to secure a second bailout. The modest optimism, despite a 24-hour strike in the country protesting 15,000 jobs cuts, was helping to stem gold’s losses.

With the economic data light Tuesday, gold will also be checking in with Fed Chairman, Ben Bernanke, as he testifies to the Senate Banking Committee. Any signs that the Fed might revise their economic forecasts upward could mean a rate hike earlier than the end of 2014.

“If the Fed would start raising rates that would be a very negative sign for gold,” says Adrian Day, president of Day Asset Management. In fact, Day calls it his game changer for higher gold prices. “What matters is if rates are positive or negative and it matters the direction.”

Day thinks the Fed would needs to see more months of solid job growth before taking action. Deutsche Banksays if the unemployment rates dips to 7.6% the Fed might reverse its policy. Day does think that there is less incentive to loosen monetary policy anymore based on positive U.S. economic data, which is another reason why gold prices have been moderating. Despite the two day selloff, the SPDR Gold Shares

has not shed any gold and still holds $1,277 tons.

Gold mining stocks were struggling Tuesday. Barrick Gold was down slightly at $49.14 while Newmont Mining was 0.85% lower at $60.37.

Other gold stocks, Goldcorp and Yamana Gold were trading lower at $47.29 and $16.74, respectively. Yamana was downgraded from buy to hold at Dahlman Rose.

CNN Money
By Cyrus Sanati
February 6, 2012

To form a strong fiscal union and return confidence to the euro, eurozone members must be willing to give up some degree of control of their national budgets to a central European authority.

FORTUNE — The European Central Bank has thrown cold water on the sovereign debt crisis by injecting billions of euros into the banking system, but the embers of the crisis are still smoldering. S&P says the eurozone has a 40% chance of entering a severe recession this year, with the economy projected to shrink by as much as 2%. Unless comprehensive reform creates a much tighter fiscal union, uncertainty will continue to cast a dark cloud over Europe’s economic future.

It may seem as if Europe is out of the woods. Bond yields for Italian, Spanish and French debt have come off their record highs from last year, allowing the countries to issue more debt at lower interest rates. Greece has received some much needed breathing room and has been able to negotiate massive haircuts on its debt with its private creditors, many of which are hedge funds and investment banks here on Wall Street. And most importantly, European banks are no longer facing an imminent liquidity event, sparing the continent of a Lehman-like shock to its financial sector.

The root of all this easing comes from the European Central Bank’s decision in December to flood the eurozone banking system with cheap cash. The ECB’s long-term refinancing offering (LTRO) saw nearly half a trillion euros injected into the banking system in one major slug. A second LTRO auction is scheduled for the end of the month, which is anticipated to be as large as the December auction.

With the ECB riding to the banking sector’s rescue and the U.S. Federal Reserve guaranteeing the banks access to cheap dollar funding, the crisis seems to have stabilized. There’s no longer fear that a short-term liquidity event will cripple one of France’s major banks, which rely heavily on cheap cash from the private sector to facilitate their lucrative and risky trading operations. Italian and Spanish banks, which buy up a lot of their respective nation’s sovereign debt, now have plenty of cash on hand to participate in bond auctions, sending yields down to pre-crisis levels.

But despite all the progress, the eurozone is still in deep trouble. The ECB’s actions, while helpful and sorely needed, are only a temporary fix for this seemingly never-ending crisis. While the bond market vigilantes may have backed off their attacks on the big European economies, they are still at work in the background, pushing up bond yields for eurozone members on the far periphery.

Portugal Problem

Last week, banks required massive upfront payments to buy credit protection (credit default swaps) on Portuguese debt. The CDS news, coupled with some sour economic news, sent yields on 10-year Portuguese bonds to a record high of nearly 18%. There is now talk that Portugal, like Greece, will need a second bailout to make its upcoming interest payments. It seems that the ECB couldn’t justify lending enough money to the Portuguese banking sector to keep the country afloat. Such a scenario could eventually face Spain and Italy and we could be right back where we started.

There is no easy solution to ending this crisis, which is now entering its third, grueling year. The ECB’s actions were necessary to contain the crisis, but aren’t sufficient to put an end to it. Eurozone members must now work to bring back confidence to the single currency. A call for the formation of a fiscal union among eurozone members seems to be the first logical step to buttress the crumbling single currency’s reputation. But in order to form a strong fiscal union — one that would instill real confidence back in the euro — individual eurozone members must be willing to give up some degree of control of their national budgets to a central European authority.

The European sovereign debt crisis has proved that it is difficult, if not impossible, to have a monetary union without a fiscal union. The founders of the euro chose to put in place rules to limit members from engaging in profligate spending, as opposed to centralizing fiscal policy, because it was politically expedient. Those rules proved to be totally ineffective in controlling member behavior. The main fiscal rule that limited members from running budget deficits equivalent to no more than 3% of their GDP was broken by almost all members at some point in the last 10 years, including Germany.

Greek Fix?

Last week, a leaked draft German government document proposed that an EU commission be formed to oversee Greece’s fiscal decisions as a precondition to receiving their second 130 billion euro bailout. The commission would basically take over Greek fiscal policy to ensure that the nation stays within the bounds of its prescribed budgetary agreements made with the eurozone. It was the first test of a true fiscal union.

The Greeks went ballistic. The Greek education minister called the document “sick,” while another said it was an unacceptable attack on the nation’s sovereignty. But what the German draft document implies is the beginning of a true fiscal union. Greece felt insulted because it was singled out. For this to work, all the members must be willing to submit their budgets to a central authority with the power to basically say “no, you can’t afford that.” This loss of sovereignty should be expected once a government turns over its monetary policy over to a central authority.

For now, the Europeans have moved collectively to form a pan-European fiscal pact over a true union. This pact would force governments to pay fines to the EU if they exceeded certain debt limits. The European Court of Justice would be put in charge of overseeing the rules.

The pact doesn’t seem strong enough to stabilize the euro crisis. For starters, the legality of the pact is in question as it calls on existing EU institutions to sanction members, something that most EU scholars believe would eventually require a treaty change by all 27 members of the EU, not just the 17 members of the eurozone.

Great Britain vetoed a treaty change in December, so it may be best for just the eurozone members to get together and create a whole new institution to enforce a true fiscal union. A fiscal pact that moves to cap spending based on some arbitrary number won’t cut it, either. Tax and spending decisions should ultimately be harmonized to ensure proper redistribution of resources. That would ensure that the entire eurozone economy moves together as one cohesive unit. This would then allow the ECB, the eurozone’s centralized monetary institution, to set interest rates that would be in the best interest of all members.

For now, European leaders don’t seem to have the political will to make such a bold move. Giving up budgetary control would be a major surrender of power for member states, which may be too much to ask at this early stage in the euro’s history. It may take decades before Europe is ready to take such a leap forward in its integration. But without a true fiscal union soon, the euro may not outlive the time it takes the politicians get their act together.

MarketWatch
February 3, 2012
By Myra Saefong

Silver has given a stellar performance so far this year, but it’s not likely to outperform gold for the rest of 2012.

At last check, silver futures prices has climbed around 19% year to date, while gold has added 11%.

Renewed concerns about the euro zone will probably drive further gains in the price of silver, from around $34 an ounce to around $42 in 2013, said Ross Strachan, commodities economist at Capital Economics, said in a note issued Friday.

Recovery in the global economy will likely disappoint, he said. So, “the main support for silver prices will therefore have to come from investment demand. This should remain strong and indeed strengthen further, driven by a renewed escalation of the crisis in the euro zone.”

But Strachan expects silver will still underperform gold because of its “greater dependence on industrial demand and because its increased price volatility makes it less attractive as a safe haven.”