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More to Republican gold standard flirtation than meets the eye

U.S. Republicans have all but guaranteed the backing of the "gold vote" this November by raising an idea that even the most bullish mainstream bullion boosters believe is unrealistic - a return to the gold standard.

Gold prices would likely surge to $10,000 an ounce, the greenback's credibility would vanish and global superpowers would risk a new trade war if Republicans were to restore the link between the U.S. dollar and gold that was severed 40 years ago.

But that isn't stopping Republicans from considering the idea, who will call for a commission to look at restoring a fixed value for the dollar, according to a draft of the party platform to be adopted at the Republican National Convention that begins on Monday in Tampa, Florida.

Gold has returned to the political discourse recently with the growing prominence of politicians like Ron Paul, the congressman from Texas who has said that he decided to enter politics on the day that President Richard Nixon shut the "gold window" in 1971, and with the Tea Party, which helped Utah pass a law last year to make gold legal tender.

But their support won't change the practical hurdles that would face such a wrenching shift in the currency system, one likely to have catastrophic effects on trade and growth.

To back the U.S. monetary based currently at around $2.56 trillion by the 262 million ounces of gold held by the United States government means bullion prices would soar as high as $10,000 an ounce, Capital Economics strategists said.

A sudden appreciation of the dollar's value would crush the greenback's credibility as the world's reserve currency and severely undermine the international trade balance.

"It is hard to conceive of the circumstances under which no one would want to hold any dollars," they said.

The World Gold Council, a trade group funded by gold mining companies to promote the many uses of bullion, including by investors, deems such a move "unlikely," citing international disagreement over the converting price and the fact that annual growth in gold stock may not match the monetary base.

Even the Gold Anti-Trust Action Committee (GATA), a group dedicated to exposing what its founders say is a conspiracy by Wall Street banks, the Federal Reserve and others to depress the price of gold and silver, doesn't see it happening.

At best they're hoping that the RNC will provoke an audit of U.S. holdings, proving GATA'S claim of a conspiracy.

"It really would be something for the Republican platform to call for a truly independent audit of the Fed and U.S. gold reserves," said GATA's chairman, Bill Murphy, a former Boston Patriots wide receiver who worked as a commodity broker on Wall Street before founding GATA in 1998.

CENBANKS STOCK UP

Despite widespread disbelief, a reintroduction of the gold standard has gained more support in recent years amid an intensifying debate over how to tackle U.S. debt levels and spending, and increased global anxiety over the stability of fiat currencies - a government-issued currency whose value is based on the issuer's guarantee to pay the face amount on demand.

"The idea is that it forces the U.S. to live within its means," said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott, which has around $54 billion in assets under management. "Think of it as a person with a debit card rather than a credit card. The debit card holder can only spend to what he or she has in the bank."

Governments abroad are also renewing their interest in owning gold as part of their reserves due to economic uncertainty. World central banks as a group became net buyers in 2010 after two decades of net sales. Official-sector purchase is on track to rise to a record high this year, WGC said.

The world official sector currently held about 29,500 tonnes, or 17 percent of the world's above-ground stocks. This compares to 19 percent held by investors and nearly half of the stocks made into gold jewelry.

REAGAN REDUX

The Republican proposal is reminiscent of a Gold Commission created by President Ronald Reagan in 1981, 10 years after President Richard Nixon broke the link between gold and the dollar during the 1971 oil crisis.

Reagan's commission ultimately supported the status quo, saying "restoring the gold standard does not appear to be a fruitful method for dealing with the continuing problem of inflation."

In 1973, the U.S. government raised the official dollar price of gold to $42.22 per ounce. A year later, Americans were permitted to own gold other than just jewelry.

The U.S. Congressional Budget Office warned on Wednesday that massive government spending cuts and tax hikes due next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution.

REAL POLITICAL MOTIVE

Instead of planning for a gold standard return, the Republicans are trying to placate supporters at next week's RNC and to gain more firepower in the party's promoting responsible U.S. fiscal and monetary policies in the upcoming federal elections in November, analysts said.

Minutes from the Federal Reserve's latest meeting suggests the U.S. central bank will adopt stimulus fairly soon unless economic conditions improve dramatically. Some expect Fed Chairman Ben Bernanke could use his speech at the central bank's gathering in Jackson Hole, Wyoming, at the end of this month to send a strong message to markets.

"Examining a return to the gold standard is one avenue to show the public and markets a level of seriousness about the U.S dollar, monetary policy and the budget deficit," said Jeffrey Wright, managing director of Global Hunter Securities.

SOURCE - REUTERS

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Gold, The Silent Killer: Yellow Metal's Up Big And Could Rally Further

On Friday morning, investors woke up and realized gold prices had crept all the way up to almost $1,700 an ounce again.  While markets seemed to have focused their attention on equities,Facebook, and financial scandals over the last couple of weeks, the Federal Reserve surprised many last week releasing a set of very dovish FOMC minutes.

Markets took it as an indication of a coming third round of quantitative easing. While this reaction may have been an over-exaggeration, as Dennis Gartman noted, players in the gold market seem to have placed their bets on Bernanke and additional monetary easing. Economists from Nomura and Barclays aren’t so sure on QE3, even though they have ratcheted up their expectations and believe the FOMC will deliver something in September.

 

Gold has broken up to the upside over the last couple of weeks, with the GLD gold exchange-traded fund beginning a steady rally on August 14, gaining 4.4% to Friday’s close.  Spot gold is now trading at $1,671.40 an ounce, when not long ago it was below $1,600.

The main catalyst seems to have been the Federal Reserve, and a little bit of old, but surprising, news.  While the Fed last met over July 31 and August 1, the minutes of that FOMC meeting, released on Wednesday August 22, sparked a risk-asset rally that sent gold through the roof.

“What can one say,” wrote Dennis Gartman in his eponymous newsletter, “other than the reports of QEIII sent gold prices soaring.”  Gartman, who has been long gold over the last couple of months, was cautious, noting “we fear that things may be a bit exaggerated to the upside given our view that QEIII is not impending but is instead merely ‘on the table.’”

On the more fundamental side, gold has generally been responsive to moves in the value of the U.S. dollar and Treasuries.  Indeed the greenback has traded sideways over the last three months. In fact, since the beginning of August it has begun a marked descent, as the U.S. dollar index shows.  Treasuries sold off as well, with yields on benchmark 10-yearshitting an all-time low below 1.4% in late July, only to move up all the way above 1.8% last week.

Bernanke and the FOMC have fueled a phase of buying in the Treasury markets, as yields have begun retracting, closing on Friday at 1.68%.  Barclays’ economics research team suggests the fundamentals that took Treasuries down to record-lows in July are still in place.  Europe is still on the brink, despite efforts by ECB president Mario Draghi, which hasfueled rumor of a targeted bond buying program by the European Central Bank to lower rates in troubled sovereigns like Spain and Italy.  This should increase liquidity as the ECB throws money at the problem, and liquidity favors gold, as it is used by many as a store of value.

The U.S. economy is still wavering, and this, coupled with the latest FOMC minutes, leads many to believe Bernanke will have to unleash further stimulus.  At Barclays, they don’t expect QE3 in September, but think the chances of it have increased.  “Even if [the Fed] does ease, we would expect asset purchases to include UST and agency MBS, with a more muted currency effect” cautioned Barclays.  Gold has traded inversely with the U.S. dollar, and monetary easing tends to depreciate the greenback and thus support gold prices.

Nomura’s analysts, on the other hand, believe the FOMC will implement further monetary stimulus in September.  “We expect the Federal Open Market Committee (FOMC) to implement further easing measures in response to the persistently high unemployment and greater downside risks late this year,” they wrote.  They didn’t specify if that means full-blown asset purchases, or a large program of quantitative easing, but they are waiting for something from Bernanke.

Gold markets currently face a decisive moment. After an impressive last couple of weeks, prices are now consolidating, as investors establish their positions and reduce exposure ahead of the weekend, Gartman explained. (Shares in major gold miners like Barrick Gold, Newmont Mines, andGoldcorp have accompanied the latest rally, while AngloGold Ashanti, a favorite of billionaire hedge fund manager John Paulson, has lagged).

Players in the sector have priced in a next round of easing from the Fed pretty aggressively.  They expect Draghi to deliver in Europe and bring relative calm to rattled overseas markets.  The problem now is expectations: have markets priced in a little too much? Gartman believes so, and this means the potential for disappointment is high.  At the same time, the pressure is on policymakers, from Bernanke to Draghi, to deliver.  It will be an interesting couple of weeks, and gold traders will be eyeing central bankers and take their cue from there.  Investors should be careful, though, as gold, which has been called a “safe haven,” is a rather volatile asset class.

SOURCE - FORBES

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Gold eases from 4-1/2 month high, US Fed eyed

Gold eased from a 4-1/2 month high on Friday but was still poised for its biggest weekly rise in more than two months as investor expectations of imminent bond buying by the U.S. Federal Reservecooled slightly.

The latest U.S. data sent mixed messages to investors by showing an improving manufacturing sector but a struggling labour market, after minutes released this week from the most recent Fed policy meeting expressed willingness to launch more bond buying.

"Gold has already priced the expectation for QE3 (a third round of quantitative easing), and short-covering related to the minutes has also helped gold rally over the past few days," said Dick Poon, manager of preciousmetals at Heraeus in Hong Kong.

Scrap selling improved, as did purchases by investors in the physical market, after gold prices climbed for seven straight sessions and broke above a range that had been in place since May, he added.

Some analysts and traders questioned the necessity of QE3, as well as its effectiveness if launched, echoing comments by St. Louis Fed President James Bullard that the U.S. economic outlook had brightened since the policy meeting.

"Stimulus is necessary given the messy economic conditions, but the problem is that people have way too high expectations for quantitative easing," said a Shanghai-based trader.

Spot gold eased 0.3 percent to $1,664.81 an ounce by 0618 GMT, on course for a 3.1-percent climb from a week earlier. It hit a 4-1/2-month high of $1,674.80 on Thursday.

Some profit-taking ahead of the weekend also contributed to the dip in prices, traders said.

The U.S. gold futures contract for December delivery fell 0.3 percent to $1,667.60.

Technical analysis suggested spot gold could rally further to $1,693 during the day, after clearing the $1,664 resistance on Thursday, said Reuters market analyst Wang Tao.

Investors have been expecting bold action from Europe's policy makers to boost risk appetite and in turn help gold, which has traded largely in tandem with riskier assets since late last year as a result of the tight liquidity conditions caused by the deepening debt crisis.

Spain is negotiating with euro zone partners over terms for aid to bring down its borrowing costs, though the country has not made a final decision to request a bailout.

SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, said its holdings had risen to a 4-1/2-month high of 1,286.621 tonnes by Aug. 23. Holdings of the fund have increased by 34.6 tonnes so far this month, compared with an outflow of more than 27 tonnes last month.

Spot silver lost 0.6 percent to $30.32 per ounce, heading for a weekly rise of more than 8 percent, which would be its largest since the end of last October.

Spot platinum edged down 0.2 percent to $1535.99 per ounce, on course for a second straight week of gains.

SOURCE - REUTERS

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Is gold heading to $4,500?

Gold makes its move. The bugs are rampant. The yellow metal made life very difficult for commentators trying to keep a regular schedule on Wednesday. MarketWatch’s Claudia Assis can hardly have hit the send button on her story headed “Gold ends lower as other metals gain”, which dealt with the close of floor trading — the December gold contract was down $2.40 — when the Fed minutes set the market roaring.

By the stock market close, gold had risen over $17 to stand 1% above Tuesday’s stock market closing level and at the highest since early May.

Gold shares, too, came surging out of negative territory to finish with strong gains. The NYSE Arca Gold Bigs Index XX:HUI +2.21%  closed up 2.21%, the highest since June 19 and up 17.2% since the recent low on July 24.

This late development followed a strong day on Tuesday, which saw a floor close in the CME December contract of up $19.90 (1.23%) and a 1.69% gain in the HUI.

This was enough to stimulate exuberant commentary by the Aden Forecast’s GCRU service, published early Wednesday morning: “AND..... THEY’RE OFF! The markets have taken off. The train has left the station, and another leg up in the bull market is getting started.”

“Whether it be gold shares on their own, compared to gold, versus bonds or versus the stock market, gold shares are rising from the dead.”

GCRU had a particularly kind world for silver: “Silver broke above its 75-day [moving average] for the first time in four months, showing impressive strength! Silver’s rise is the strongest it’s been since the rise earlier this year.”

GCRU’s prognostication: “Silver must break above $30 to confirm strength that could push it to the February highs near $37.”

The silver situation is exciting particular interest. Letter editors have noted that the metal had been achieving technical objectives earlier than gold during this move.

Furthermore, according to Bill Murphy at the LeMetropoleCafe website, rumors of large silver purchases in London have been followed by stories of delivery problems being experienced by London Bullion Market Association members.

Stories of this type, unfounded or not, could have an explosive effect on the thin silver market.

The gold action caught the attention of market veteran Richard (Dow Theory Letters) Russell.

Using a point and figure chart with a 2:30 p.m. Eastern Time cut-off, he noted: “Gold may finally be on its way to higher levels. Gold has risen to fill the $1,640 box, which is constructive. The next bullish action would be a rally to the $1,650 box. This would take gold clear out and above its consolidation base, and would put it in line to try for $1,680.” (By 4 p.m., gold had cleared $1,650).

Russell concluded his Wednesday evening note: “If gold takes off, the gold miners will look dirt cheap.”

The Got Gold Report last weekend quantified an expectation about the HUI: “A print above 445 would be very convincing to skeptics and set up a test of the 40-weekly moving average currently near 474.”

Wednesday’s close was 454.44.

And further? The Golden Truth website, reportedly written by a gold-market professional, says on Wednesday after a detailed chart discussion: “From both a fundamental and technical standpoint, the indicators for gold to make a run to new highs have not been this bullish in the 11-year bull market.”

At JSMineset, ultra-experienced old gold hand Jim Sinclair confines himself to republishing an Aug. 1 essay from technician Alf Fields: “The bottom line is that we now have a really strong probability that the correction which started at $1,913 on Aug. 23, 2011, has been completed both in terms of Elliott waves and also in terms of time elapsed.”

“If this is correct, the gold price should soon be expressing itself in violent upside action as it moves into the third of third wave, which is still targeted to reach $4,500.”

SOURCE - MARKETWATCH

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Gold hits highest since early May on Fed stimulus hopes

Gold and silver both rose to their highest levels in more than three months on Thursday, shaking off months of lethargy after minutes from the latest U.S. Federal Reserve meeting fuelled hopes for the swift launch of more bond buying.

Economic stimulus is expected to raise the inflation outlook, benefiting gold, which is seen as a hedge against rising prices, while the prospects of economic recovery boosted sentiment across riskier assets.

The Fed is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from the central bank's latest meeting suggested.

"The Fed's tone is totally different in the minutes from previous comments, and that helped gold break from the previous range and move into a higher price range ahead of the peak consumption season," said Chen Min, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen.

Spot gold climbed 0.7 percent to $1,665.09 an ounce, its highest since May 1, before easing slightly to $1,662.84 by 0620 GMT. Prices broke above the key 200-day moving average in the previous session for the first time in nearly five months.

The U.S. gold futures contract for December delivery gained 1.5 percent to $1,665.70.

Reuters market analyst Wang Tao said charts indicated spot gold could retrace to $1,647, after testing the resistance at $1,664.

Short-covering and the strength in the euro also helped demand for gold, keeping it on course for its seventh session of gains.

Spot silver rallied more than 2 percent to $30.51, its highest since early May.

ALL AVAILABLE TOOLS

Investors are eyeing meetings between Greek Prime Minister Antonis Samaras and other European leaders as Athens seeks more time to meet its bailout commitments, while China's central bank chief said Beijing must use all available tools to manage monetary policy effectively.

Interest in gold is on the rise on speculation of further monetary stimulus globally. Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continued to rise, hitting a three-month high of 1,281.978 tonnes by August 22.

The jump in gold prices excited physical gold traders in Asia, who expected more scrap flow to come in as gold sentiment stayed buoyant.

"People did a lot of selling overnight, and we'll probably see more when Indonesia returns next week to the market," said a Singapore-based dealer.

But scrap selling was muted in Tokyo as a strong yen makes local gold prices less attractive for sellers, dealers said.

Spot platinum rose to around $1,558 an ounce, its highest since May 3, bringing the gold-platinum premium down towards $100 -- its narrowest in more than three months.

SOURCE - REUTERS

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Gold near 3-1/2 month high on ECB hopes

Gold was steady on Wednesday near a 3-1/2 month high hit in the previous session as investors remained hopeful the European Central Bank would soon take action to contain the region's debt crisis.

Platinum hit its highest level since early May as worries about supply disruption at a mine of Lonmin, the world's No.3 platinum producer, lingered.

Recent media reports said the ECB has been mapping out details to cap Spanish and Italian borrowing costs, easing investor worries about the euro zone's festering problems, though the bank tried to quash such speculation.

The prospect of an ECB intervention pushed Spanish, Italian and Portuguese yields down on Tuesday, and fuelled interest in gold, a hedge against rampant cash printing by central banks.

"We are getting sick and tired of the crisis. We want to get rid of it," said Dominic Schnider, an analyst at UBS Wealth Management.

But investors may be carried away with hopes that upcoming meetings in the following days among various European leaders will result in convincing solutions to the crisis, but the risk exists that the results of these meetings might still be insufficient, said Ed Meir, analyst at INTL FCStone.

"For the time being, it looks like investors are giving the Europeans the benefit of the doubt that they indeed will pull out the proverbial rabbit out of the hat," he said in a research note.

Later in the day, investors will seek clues on the Fed's attitude towards a third round of quantitative easing in minutes from the latest Federal Open Market Committee gathering.

Spot gold was little changed at $1,638.49 an ounce by 0308 GMT, not far from a 3-1/2 month high of $1,641.20 hit in the previous session.

The U.S. gold futures contract for December delivery edged down 0.1 percent to $1,641.20.

Technical indicators suggest spot gold could rise to $1,647, with any break above that level possibly propelling prices to $1,664, Reuters market analyst Wang Tao said.

BACK TO LIFE

Rising holdings of exchange-traded gold funds also reflect improved sentiment. Holdings of the SPDR Gold Trust, the world's biggest gold ETF, have been climbing since the end of July and hit 1,278.962 tonnes by August 21, the highest level since early July.

Asia's physical gold market has sprung into life as prices break out of their range since May.

"There has been quite a bit of scrap selling coming out of Thailand," said a Singapore-based dealer. "We are finally out of the previous range and that will help stimulate more activity."

Spot platinum gained 0.2 percent to $1,503, extending gains to a fifth session. The metal is poised to cross above the 200-day moving average just below $1,515, for the first time since early April.

SOURCE - REUTERS

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In hard times, "I buy gold" is Italy's boom business

Times are now so tough that Valerio Novelli, a ticket inspector on Rome's buses, is planning to sell his old gold teeth.

"I can't get to the end of the month without running up debts," said Novelli, 56, who has to support an ex-wife and daughter. "I know I won't get much, but I need the money."

In a country suffering from economic crisis, buying gold off desperate people has become one of the few boom industries.

City centers are being transformed as traditional shops go out of business, their signs replaced by ones that announce "Compro Oro", or "I Buy Gold".

The Eurispes thinktank estimates the number of "Compro Oro" shops has quadrupled in the last two years. The growth of the industry is "a very good indicator of the level of hardship in the country," said Gian Maria Fara, the think tank's president.

"Business is very good, you can really feel the crisis," said 30 year-old Alexia Messi, who works in Oro Change on Via Medaglie D'Oro in northern Rome. It opened its first branch five years ago and now has seven outlets in Rome.

"People are never happy to sell, but now they come in with anything - gold, silver, old stuff, new stuff. I would say we have twice as many customers a day as we did a year ago."

Meanwhile, the toll of the crisis is being felt by traditional retailers. In central Rome, Massimo Della Rocca, 57, who has run the men's' clothes shop EDEL since inheriting it from his grandfather 30 years ago, is planning to sell up.

"Things have been getting worse for years but now it's becoming impossible. Sales this summer are down 25 percent from last year," said Della Rocca, whose garments are all made in Italy from local fabrics. "It's sad because this shop has been going for eighty years."

PROLIFERATION

Former Prime Minister Silvio Berlusconi, who was brought down by an escalating debt crisis in November, liked to claim that with restaurants still full and Italians buying as many electronic gadgets as ever, there was little concrete evidence of economic downturn in Italy.

But the proliferation of pawn shops, with an estimated annual turnover of 7 billion euros, is a very visible sign that for millions of Italians life has changed for the worse.

The euro zone's third largest economy has been in recession for a year and shrank at an annual rate of 2.5 percent in the second quarter.

There are an estimated 28,000 "cash for gold" outlets in Italy, according to Gianni Mancuso, one of six centre-right lawmakers who last month presented a request in parliament for the government to regulate the sector more strictly.

Several recent shootings in Rome have involved owners of Cash for Gold outlets. Parliament has discussed evidence that the sector is being taken over by mafia groups.

"They are all crooks, they shouldn't exist," said Valeria Arcidiacono, a 46 year-old single mother whose teenage son took and sold her gold and pearl earrings at the local pawn shop.

"They were worth 1,000 euros and they gave him 42 euros for them, with no receipt or anything," she said.

Ranieri Razzante, head of Italy's anti-money laundering watchdog AIRA, said pawnbrokers had "virtually taken over from banks" as a form of financing for Italian families, as crisis-hit lenders are increasingly reluctant to offer credit.

Bank loans to households were down at an annual rate of 0.6 percent in June, despite inflation of more than 3 percent.

Some 8.5 percent of Italians sold items at a pawnshop in 2011, according to an Eurispes survey.

Some operators are active for just a few weeks before selling on their licenses, making it difficult to counter their activities of money laundering and receipt of stolen goods.

"It's a well established pattern that organized crime tends to take a lead role in new, high-growth sectors," said Razzante.

'PUT IT ASIDE'

While pawnshops in northern Europe buy and sell a wide array of used items, the emphasis in Italy is on gold, reflecting a deeply rooted southern European tradition in which gold is the favored gift, starting from baptism.

"Since I was a child I remember that gold was given as a gift on various occasions and people used to say: 'Put it aside'," said Ivana Ciabatti, who represents gold- and silversmiths at employers' lobby Confindustria.

"We used to laugh at it, but they turned out to be right. Many families are surviving thanks to this gold."

Meeting her customers gives Giorgia Standoli an insider's view of the hardship caused by the economic crisis. She has worked for four months in a pawnshop on Via Cesare Baronio, a quiet street in southern Rome's Appio Latino district.

"It's mostly women, old ladies that sell whatever they have to be able to do the shopping," she said. "I think the saddest case I have had was a woman of less than 50, with three kids, who had lost her husband. She came in to sell her wedding ring to try to make ends meet."

While pawnbrokers are thriving, life has never been so tough for traditional shops, especially small ones which are closing down at an alarming rate. Consumer spending will fall in 2012 by more than at any time since World War Two, according to national shop owners confederation Confcommercio.

Rome's small shops and boutiques have been particularly hard hit. More than 1,500 have shut so far this year, including some illustrious names, says small retail association Confesercenti.

Lina Rocchi, a storied ladies' fashion boutique on a prime site next to parliament, announced last month that it was closing down after 80 years.

"There is a sense of desperation among our members," said Confesercenti President Valter Giammaria, who forecast that unless the economy somehow picks up, another 5,000 shops in Rome and its hinterland would close before the year is out.

Italians are even shunning record summer discounts, with sales down around 25 percent in July compared with a year ago, according to the artisans' association CNA.

The pawnbrokers, by contrast, can hardly keep up with business. They normally have the gold quickly melted down and sent abroad, making it one of Italy's fastest growing exports. Official gold sales to Switzerland leaped 65 percent last year to 120 tonnes, up from 73 tonnes in 2010 and 64 tonnes in 2009.

SOURCE - REUTERS

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Gold hovers as investors eye central bank action

Platinum stretched its gains into a third session as supply worries lingered after violence at a major mine in South Africa, the world's top platinum producing country, while gold was steady amid continued uncertainty over monetary policy.

The violence at the Marikana mine of Lonmin, the world's No.3 platinum producer, has killed 44 people over the past week. Striking workers are facing the deadline of returning to work on Monday, otherwise they may be dismissed.

Spot platinum hit $US1,474 an ounce, its highest since early July, before easing to $US1,472 an ounce by 0243 GMT, after rallying more than 5 per cent last week, fuelled by worries that the violence would disrupt supply from South Africa.

The gold-platinum premium dropped to below $US150 an ounce, its lowest since early July, after hitting a record above $US230 just last week as grim economic prospects weighed on platinum while gold remained supported by hopes for more monetary stimulus from central banks around the world.

"If things in South Africa calm down, we may see the gold-platinum spread widen again, because the demand for platinum group metals is not good," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

As the gold-platinum spread shrank to a multi-week low, some investors may start to reverse their recent trading strategy of buying platinum and selling gold, he added.

Gold awaits policy clarity

Spot gold gained 0.1 per cent to $US1,617.24 an ounce by 0243 GMT. US gold futures contract for December delivery  was little changed at $US1,619.70.

Gold investors are still waiting for clear signals from central banks on what they plan to do to shore up the fragile economies.

US consumer sentiment improved in early August to the highest in three months, adding to the argument that the US Federal Reserve may not need to launch another round of bond purchases any time soon as the economy has shown signs of stabilisation.

Hedge funds and money managers cut their net long position in US gold futures and options for a second consecutive week, as investors reduced their bullish bets because of doubts over more monetary stimulus by the Federal Reserve.
But holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.9 per cent to 1,274.739 tonnes by Aug. 17, the highest since July 9.

SOURCE - REUTERS

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Billionaires Soros, Paulson Bet Big on Gold!

Once again John Paulson is choosing to heavily invest in gold and fellow billionaire George Soros is making a similar bet.

According to Bloomberg News,  Paulson & Co. and Soros Fund Management bumped up exposure to SPDR Gold Trust to 21.8 million shares and 884,000 shares, respectively. Paulson & Co. now has 44 percent of its $24 billion fund exposed to bullion.


Getty Images

On Wednesday, according to Reuters,  gold began to rebound after two straight losing days with spot gold climbing to $1,604.35 an ounce, up 0.4 percent.  According to CNBC, in the previous four months gold has had a difficult time moving beyond a $1,525 and $1,680  range.

Known for making big bets, between 2007 and early 2009, Paulson invested heavily in the housing market garnering $20 billion in profits, according to the Wall Street Journal.

A spokesperson for Paulson & Co. did not return our request for comment. Soros Fund Management did not  return our request for comment.

The decision by Soros is an interesting one. In 2010,  Soros called gold “the ultimate bubble” during an appearance on Reuters television. “It may be going higher but it’s certainly not safe and it’s not going to last forever,” he stated.

And, some portfolio managers aren’t so sure  gold is a smart bet in 2012.

“I’m not sure gold as an outsized bet is the place to be right now unless you believe in hedging against greater unrest or a deepening credit crisis in Europe, ” said Kevin Starkey, a  partner at Capstone Investment Financial Group.

” We currently believe that 3 to 5 percent of gold exposure is the right exposure for most of our clients. We are big believers in gold as defensive play. To make it an offensive play, or make a big bet on gold, means [Paulson] sees something we do not see,” Starkey added.

Peter Sorrentino, a senior portfolio manager at Huntington Funds, which manages more than $13 billion in assets, said consumers should not rush out and buy gold.

“Historically these moves span roughly a decade and while the last phase is typically the most explosive, the risk is getting out before it rolls over. For individual investors buying physical gold involves paying sales tax both in and out as well as considerations for storage, insurance, transportation and assay fees.  These can be considerable expenses,”  Sorrentino said in statement to ABC News.

Sorrentino said gold has been in a “consolidation phase since the end of February and has traditionally moved higher after such periods.”

He continued, “the fundamentals behind gold such as available supply coming to market and end demand have not changed in any material way.  In fact, gold purchase by central banks in the pacific rim, India and Russia have reached new highs.  So from an investor psychology and supply/demand perspective, this looks like every cycle before it during the last decade.”

“The big question is whether or not this time it’s different.  Every commodity-driven cycle ultimately comes to an end, and ten years is generally the average duration for these market moves,” said Sorrentino.

But, despite big bets by two of the nation’s billionaires, he continued, “…There is an old saying among Wall Street trader;  ’It’s said with a whisper and not with a shout, when the widows and orphans get in, it’s time to get out.’”

Gold exchange-traded fund holdings topped 77.7 million troy ounces this week to another record high. ETFs are investment funds traded on stock exchanges, much like stocks. Many of them have low management costs and there is not the need to take physical possession of the gold.

SOURCE - ABC NEWS

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Gold prices firm, supported by monetary easing talk

Gold prices firmed on Thursday on speculation that central banks may be set to launch more bullion-friendly stimulus measures to boost growth, though mixed U.S. data that dampened expectations for imminent Federal Reserve action kept prices in a range.

They broke above $1,600 in late July on talk that both the Fed and the European Central Bank would take steps to stimulate their economies, but contrasting reports on the state of the U.S. economy have since kept it in a narrow range.

Further monetary easing would benefit gold by boosting liquidity and maintaining pressure on long-term interest rates, keeping the opportunity cost of holding bullion at rock bottom, as well as fuelling inflation fears and weighing on the dollar.

Spot gold was up 0.1 percent at $1,603.90 an ounce at 1405 GMT.

Markets will be watching the Jackson Hole meeting of central bankers at the end of the month, at which more clues on the outlook for quantitative easing are expected to emerge, for clues as to the next move in gold.

"After Jackson Hole, the markets will hopefully have a better idea," Afshin Nabavi, head of trading at MKS Finance, said. "Until then, we should continue trading within this range." A lack of liquidity over the quiet summer months was preventing gold from moving higher, he said.

The dollar slipped to session lows against the euro and pared gains against the yen on Thursday after U.S. data showed the number of Americans filing new claims for jobless benefits edged higher last week.

U.S. stocks also rose at the open after the data, while Treasury yields dropped from three-month highs as investors weighed the likelihood that the Fed will launch a new bond purchase programme - quantitative easing - when it meets next month. <US/>

Softer-than-expected inflation data on Wednesday reassured investors that price pressures would not prevent the Fed from launching more QE if a more negative view of growth emerges.

"My general view is that for the time being major central banks will let go of the mandate of price stability in favor of spurring growth figures," LGT Capital Management analyst Bayram Dincer said.

"This means that the central banks in an explicit or implicit inflation targeting regime will try to anchor inflation expectations around 3.0 percent," he said. "This change would be gold price supportive."

PHYSICAL DEMAND SOFT IN Q2

A closely watched report from the World Gold Council showed on Thursday that demand for physical gold from jewellers and investors fell in the second quarter to its lowest level since the first three months of 2010.

Gold consumption fell 7 percent or nearly 76 tonnes to 990 tonnes as a drop in buying in major consumers India and China outweighed a record quarter for central bank purchases.

Gold purchases in Asia slowed after prices rebounded to more than $1,600 an ounce on Thursday, as traders await the next drop in prices and demand remains under pressure as economic uncertainties weigh on consumer sentiment. <GOL/AS>

On the supply side of the market, Canadian mining major Barrick Gold (ABX.TO) is in talks to sell all or part of its 74 percent stake in African Barrick Gold (ABGL.L) to China's largest gold producer, just two years after the underperforming Tanzanian assets were spun off.

Among other precious metals, silver was up 0.1 percent at $27.85 an ounce, while spot platinum was up 0.4 percent at $1,396.49 an ounce and spot palladium was up 0.7 percent at $576.47 an ounce.

South African police ordered thousands of illegally striking miners armed with machetes and sticks to lay down their weapons and leave Lonmin's (LMI.L)(LONJ.J) Marikana platinum mine on Thursday or face an assault by security forces.

Number three platinum miner Lonmin was forced to cease mining at its South African operations after inter-union violence broke out there. Ten people, including two policemen, have died in nearly a week of fighting between rival worker factions at the Marikana mine.

 SOURCE - REUTERS
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