Thursday, March 30, 2017

The Storm is Over…

August 31, 2011 by · Leave a Comment 

The Daily Reckoning

Irene was not so bad. She knocked down a few trees, flooded a few basements. But, in the end, she was a good girl who left quietly when her time came.

Traders, players, speculators and mid-night ramblers drifted back into Manhattan as soon as they could clear the fallen trees. They must have felt they had been spared for some great purpose. They must have looked to the heavens as clouds parted and rays of golden sunlight struck their uplifted faced. Whatever got into them, they rushed to the stock exchange and bought US stocks! The Dow rose 254 points.

If you believe the stock market, the storm is over…all is well…

But US GDP grew at only a 1% rate last quarter. That is a small number. Don’t look too carefully or it will disappear altogether. If you deflate the latest ‘growth’ number by the inflation rate published by the Bureau of Labor Statistics (actual year-to-year CPI-U is 3.6%) you get negative real growth. Recession, in other words.

And then, you have to wonder. Suppose you were to adjust that number for population? US population is growing at something just under a 1% rate. What you would see is that the average American is getting poorer (his share of GDP) at about 3% or 4% per year.

And then you are able to make sense of a lot of the other economic information that comes your way.

For example, a report out yesterday tells us that the personal savings rate in America keeps edging up — just as you’d expect. From next to zero, it has moved up over 5%. Households continue to cut back on spending…and increase savings. In the last quarter, they paid down $50 billion of debt. A drop in the bucket…but at least it was the right bucket. The Wall Street Journal:

In a marked shift from their borrow-and-spend behavior during the boom, US households are now by and large prioritizing saving and debt reduction. On Monday, the Commerce Department is to release July figures likely to show the personal saving rate, or proportion of after-tax monthly income unspent, in the 5% to 5.5% range…

We also learned that gasoline use is at a 9-year low. Labor Day weekend is less than a week away. But this year, forecasters believe more Americans are going to stay home. They can’t afford the cost of filling up the tank for a long road trip.

We hope this is true. We’re driving up to New York from Baltimore to attend a wedding. We don’t want to get stuck in a lot of traffic.

But it is sad to think that people can’t afford to visit friends and relatives because they don’t have the cash to pay for gasoline. Oh, for the good old days! We remember buying gasoline for 25 cents a gallon back in the early ’70s.

Sigh…but that was before Richard Nixon came up with the funny dollar we have today. Let’s see…suppose Nixon had done the right thing? Suppose he had honored America’s commitment to settle her debts in gold?

There would have been Hell to pay in the mid-’70s…but isn’t it better to pay Hell sooner rather than later? After all, the entire amount of foreign claims against the dollar at the time was something on the order of $50 billion. Now, it is around $4 trillion. Maybe more.

So, just for fun…let’s imagine what would have happened. Of course, there would have been this aforementioned period of wailing and gnashing of teeth. And then? And then, US producers would have had to get busy making and exporting products…while consumers would have been forced to curtail their reckless spending. America’s trade deficit would have remained under control…and the US would still have jobs in manufacturing. And it wouldn’t have debt equal to 370% of GDP.

But how much would people pay for a gallon of gasoline? Well, let’s see…let’s assume that gold has done a fair job as real money, of holding its purchasing power steady. Back in the early ’70s you could have bought 160 gallons of gas with a single ounce of gold. And today? At $1,800 an ounce, and gasoline at $4, you can buy 450 gallons. It’s as if the price of gasoline had fallen to about 10 cents a gallon!

Hmmm….go figure.

Either gasoline is too cheap. Or gold is too expensive. If we were a trader we’d short the latter and go long on the former.

And since we’re always just guessing, we’ll take a guess as to what this means…

Gasoline is weak because the economy is fundamentally weak. Gold is high because Richard Nixon destroyed the integrity of the dollar, the US economy, and the world’s monetary system. Each of these trends will have to play itself out. In the meantime, gasoline…and/or gold…may need a little adjustment. And the storm continues…

At least the feds aren’t cutting back. The private sector spent itself silly in the ’00s. Now it’s the feds’ turn.

With all the talk of ‘cuts’ and ‘budget reduction’ you might have the idea that the feds are putting the same screws to their budgets as everyone else. You might have thought, too, that much of recent government spending was temporary ‘stimulus’ spending, intended to kick the US economy in the derriere, in order to get it moving faster. That spending might have been expected to taper off as the emergency passed. If you thought that you would be as dumb as a voter. The 2011 budget is on target to hit an all-time high of $3.6 trillion, more than $100 billion up from last year. Total outlays are increasing at a breathtaking pace — up by a third in just four years.

And now that the debt ceiling has been cracked…the sky’s the limit.

Whee!

Bill Bonner
for The Daily Reckoning

The Storm is Over… originally appeared in the Daily Reckoning. The Daily Reckoning provides 400,000+ readers economic news, market analysis, and contrarian investment ideas. The 5 Best Ways to Invest in Gold was previously featured in the Daily Reckoning.

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How new Chinese gold exchange may defeat paper market

August 31, 2011 by · Leave a Comment 

GATA

4:45p ET Tuesday, August 30, 2011

Dear Friend of GATA and Gold:

Just after speaking at GATA’s Gold Rush 2011 conference in London this month, Cheviot Asset Management’s investment director, Ned Naylor-Leyland, was interviewed by GoldMoney founder James Turk about the details of the new Pan Asia Gold Exchange, which Naylor-Leyland believes may make the spot physical gold market dominant over the paper market ruled by price-suppressing investment banks. The interview is 16 minutes long and you can watch it at the GoldMoney Internet site here:

http://www.goldmoney.com/video/naylor-leyland-turk-interview.html?gmrefc…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

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To contribute to GATA, please visit:

http://www.gata.org/node/16

Fed to hasten currencies’ race to the bottom, Leeb tells King World News

August 31, 2011 by · Leave a Comment 

GATA

4:25p ET Tuesday, August 30, 2011

Dear Friend of GATA and Gold (and Silver):

Money manager and market analyst Stephen Leeb today tells King World News that the monetary metals are beginning to fly again in anticipation of more money creation by the Federal Reserve and other central banks in a race to devalue currencies. An excerpt from the interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/30_St…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

2012 Australian Koala Silver Coins Announced

August 31, 2011 by · Leave a Comment 

Investors and collectors looking to obtain 2012 Australian Koala Silver Coins need wait just two more months, according to The Perth Mint of Australia. The Mint has indicated that the highly popular 99.9% pure silver coins will be available beginning November 1, 2011 in four different sizes. The newest issues in the Koala silver coins series continue [...]

Gold Trades Near Daily High on Fed Governor Remarks, Weak U.S. Economic Data

August 31, 2011 by · Leave a Comment 

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Kitco News
By Jim Wyckoff
August 30, 2011, 10:13 a.m.

(Kitco News) – Comex December gold futures prices are trading sharply higher and near the daily high in mid-morning dealings Tuesday. Gold prices were trading modestly higher in the early going Tuesday, on weaker U.S. and European stock markets, but then prices popped sharply higher when Federal Reserve Board Governor Charles Evans said in an interview on CNBC that the Fed’s monetary policy should be aggressive toward the easing side and that he is very worried about upcoming U.S. economic growth. December gold futures prices popped sharply higher and hit a daily high of $1,835.00 an ounce on that news. Prices then backed off a bit but once again surged back to near the daily high when it was reported the the U.S. consumer confidence index came in well below trader expectations. December gold last traded up $36.50 at $1,828.10 an ounce.

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Gold Sales in India May Increase 25% During Festival Season, Jeweler Says

August 31, 2011 by · Leave a Comment 

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Bloomberg
By Pratik Parija and Swansy Afonso
Aug 29, 2011 10:42 PM PT

Gold demand in India, the biggest user, may surge 25 percent during the festival season this year as buyers expect prices to extend a record rally on haven demand, according to Rajesh Exports Ltd.

Purchases of gold jewelry, coins, bars and medallions may climb to 250 metric tons in the three months ending Nov. 30, compared with an estimated 200 tons in the same period a year earlier, said Rajesh Mehta, chairman of Rajesh Exports, India’s biggest jewelry maker.

Rising Indian demand may help extend a 26 percent rally in prices this year that’s made the precious metal the second-best performer on the Thomson Reuters/Jefferies CRB Index of 19 raw materials. Imports may reach a record 1,000 tons this year as investors seek a haven against inflation and volatility in stock markets, Prithviraj Kothari, president of the Bombay Bullion Association, said Aug. 20.

“In spite of the high prices, we have seen quite good demand,” Mehta said in a phone interview yesterday. “When people are buying jewelry, their motive is investment.”

Buying gold is considered auspicious during the religious festivals in India. The festival season this year starts with Eid this month and ends in October with Diwali, which is followed by the traditional wedding season.

Gold for immediate delivery climbed $6.05 or 0.3 percent, to $1,794.48 an ounce at 11:10 a.m. in Mumbai. It rose to a record $1,913.50 on Aug. 23. Bullion is heading for its 11th annual gain as Europe’s sovereign-debt crisis and concern that the U.S. economy may be slowing spur demand for a haven.

Record Demand

The October-delivery contract on the Multi Commodity Exchange of India Ltd. gained as much as 0.4 percent to 26,845 rupees ($583) per 10 grams today and traded at 26,796 rupees at 11:09 a.m. in Mumbai.

Indian consumption rose to a record 963.1 tons last year, driving imports to the highest level ever at 958 tons, according to the World Gold Council. Purchases surged 60 percent to 267 tons in the three months ended June 30, from a year earlier, the producer-funded council said on Aug. 18. Investment demand jumped 78 percent to 108.5 tons, the second-highest quarter on record, it said.

“Demand will go up because of the festival season and also people feel that prices may go higher,” Mehta said.

UBS AG’s physical gold sales to India on Aug. 22 were the most since May 10 and more than double the daily average volumes this year, the bank said in a report on Aug. 23.

‘Excellent Monsoon’

“The monsoon season so far has been good, and strong gold demand is expected for the upcoming festival season,” UBS analyst Edel Tully said in the report.

The rain-dependent agriculture sector makes up about 15 percent of the Indian economy and a bumper harvest boosts rural incomes, lifting sales from cars to televisions and gold. The nation’s 235 million farmers rely on the annual June-to- September monsoon to plant crops from wheat to rice. Rains were “normal” between June 1 and Aug. 28, according to the country’s weather forecaster.

“A lot of people are waiting for stability in prices before buying,” said Kunal Shah, head of commodity research at Nirmal Bang Commodities Pvt. “We have seen an excellent monsoon and I don’t see any reason for a drop in demand.”

Gold may reach $2,000 by the end of the year, according to the median forecast in a Bloomberg survey of 13 traders and analysts at a conference in Kovalam in South India on Aug. 20.

“Scrap sales surprisingly are not much even at these prices as investors hope prices will rise to much higher levels,” said Mehta.

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Gold Seeker Closing Report: Gold and Silver Gain About 2%

August 31, 2011 by · Leave a Comment 

Gold waffled near unchanged in Asia and London, but it then rose to as high as $1833.14 in New York and ended with a gain of 2.14%. Silver soared to as high as $41.62 and ended with a gain of 1.97%.

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Investor uncertainty over nationalisation justified − S Africa’s Nogxina

August 31, 2011 by · Leave a Comment 

Resources investors in Africa could have certainty regarding nationalisation in South Africa by July next year, Advocate Sandile Nogxina said on the sidelines of the Africa Downunder conference, in Perth.

Nogxina, the former director-general in the Mineral Resources Department and now an adviser to Minister Susan Shabangu, said that international investor uncertainty was justified, despite the ruling African National Congress (ANC) insisting that mine nationalisation was currently not government policy.

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Gem Diamonds recovers 553 ct white diamond at Letšeng

August 31, 2011 by · Leave a Comment 

London-headquartered Gem Diamonds has unearthed a 553 ct diamond at the Letšeng mine in Lesotho, which ranks as the 15th largest white diamond ever to be recovered.

The stone, which is yet to be named, is a type II D colour diamond. It is currently undergoing analysis in Antwerp.

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ARM to spend R10bn to 2014, FY earnings surge

August 31, 2011 by · Leave a Comment 

Diversified miner African Rainbow Minerals (ARM) saw a surge in earnings during its 2011 financial year and said that it intended to spend R10-billion up to 2014 to ensure further growth.

The miner, which has an interest in iron-ore, platinum, coal, chrome, manganese and nickel, reported a 94% increase in headline earnings to R3.32-billion, or 1 559c a share, compared with headline earnings of R1.71-billion, or 807c a share, the previous year.

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