GOLD :

What Bull? Dow Is Down 83% In Terms of Gold.

2009-11-21T07:35:00.002+08:00

"I had no idea how bad it was," my friend Richard Smith told me after crunching the numbers...

Richard (founder of the excellent TradeStops) should know about crunching numbers... He has a Ph.D. in "mathematical systems theory." I'm not sure what that Ph.D. actually means, but I do know Richard is able to take a massive pile of numbers and find a simple way to tell me what they mean. Here's his simple conclusion:

The entire rally in the DJIA from 2003 to the peak in 2008 was actually a continuous decline when priced in gold... Even the super-rally in stocks over the last six months is nothing more than a very weak bounce off the bottom.

The simplest way to ask the big question is like this: How many ounces of gold does it take to buy the Dow Jones Industrial Average (DJIA) Richard answers:

From a peak of nearly 42 ounces of gold to buy a share of the DJIA earlier this decade, we made it down to a low of almost seven ounces in March 2009. That is a decline in the "value" of the DJIA of 83%.

The implications are scary...

Sure, the man on the street feels good when he sees stock prices are up, gold is up, oil is up, etc. It feels like things are getting better. But it's not the truth...

The truth is the value of the dollar is going down fast. People want to believe differently. They want to believe the creation of money at a record pace by our government is creating wealth. But you don't create wealth on a printing press.

The government's simple goal was to reignite the U.S. real estate market. If you cut rates to zero and make money available, home prices can't fall any more – or so the government thought. The government didn't realize the low rates and money "printing" would lead to higher prices in everything BUT real estate.

A few years ago (summer of 2005), you would have needed 550 ounces of gold to buy an average house. Today, you need more like 150 ounces of gold. That is a 73% decline in the "value" of real estate.

You'll hear on the evening news that home prices are down by, say, one-third nationwide. But on TV, they never account for the destruction in the dollar. In terms of gold, home prices are down by more than 70%... Wow!

Yes, it takes more dollars to buy gold, oil, and the stock market lately. But don't kid yourself... Don't feel better... You are not any richer. The dollar is just dramatically weaker.

Sizing things up in terms of gold is one clear way to see it.

The significance of the IMF-RBI gold sales

2009-11-12T03:49:00.000+08:00

Much has been written in the last two days about the surprising purchase by the RBI (Reserve Bank of India) of some 200 tonnes of gold bullion, valued at about $6.7 billion, from the IMF (International Monetary Fund).

Why the Rise in the Gold Price is Different this Time.

2009-11-03T23:29:00.002+08:00

For over more than 18 months we have watched the gold price churn below $1,000 and in the process forming three tops, before breaking out to above $1,050 in early October 2009. Why will it not fall back to well below $1,000 and possibly as far as $850 this time?

Technical Picture
Peter has given a great deal of detail below, in this issue and has warned, precisely, of the various support and resistance levels to watch out for. This information is critical for you, the subscriber, so as to help in your buying and selling considerations.

The U.S. $
For many months now too, while traders played the gold price against the U.S. $ the gold price has been precise in its inverse correlation to the $. We believe that this has mistakenly led commentators to place far too much emphasis on the $, as the inverse measure of gold.

We say this because the moves occurred at a time when many facets of the gold market were absent from the gold market, such as investment demand, low jewelry demand and central bank demand. Traders held sway over the gold price and it is they that decided that the moves of the $: € decided the price of gold. This lacked a reasonable basis to it. Why should the gold price be tied to the €? Such a relationship implies that the $ in isolation, is the most important factor in the gold market. We counter that and say, yes COMEX is a U.S. market and such traders do have enormous pricing power, but when the full force of all sides of the gold market come into play, COMEX diminishes in importance, just as the waves of the sea are of less important than tides are, to where the sea will climb on the shoreline.

Yes, the state of the $ is important in pricing gold and it is the ‘hub’ of the currency world, but to gaze at it alone is to ignore the much bigger world of gold in its entirety, acting together in synthesis, in deciding the gold price.

This is amply demonstrated by the fact that the U.S. $ is sitting not far off the same place, against the €, as it was when gold was just below $1,000. We now foresee a larger de-coupling from the $ by gold, as we move forward. Yes, the waves of the $ will ebb and flow and continue to cause traders to move the gold price against the $ as before, but the tide of investment demand and other factors in the gold market will flow and dominate these moves over time.

Why Different this Time?

As we wrote last week, while the facts of the article in the Independent [British] newspaper, informing the market that France, China, Russia and select Persian Gulf oil producers were going to price oil in a ‘new’ currency were denied, the market is convinced that this will happen in time, even if it takes another decade. The reaction in the gold market was to bring in new investment demand via bullion itself, to prompt heavier central bank selling, to slow scrap sales and to cause traders to add some more gold to their holdings.

On top of the consolidation phase the gold price has been going through over the last 18+ months, this was a breakout pointing to an end of that phase. Now it sits on top of the $1,000 level, which forms a huge support to the price.

Watershed for the Monetary System

This showed a tipping of the see-saw against confidence in the monetary system. It was due to the realization that very little is going to be done to effectively reform the currency world and bring back stability to these markets. More than that, it was the realization that world governments just don’t have the real political will to ensure a stable world currency system. There are just too many conflicts of interest for them to do so.

Meanwhile, the system decays on a broad front. The very fact that the hub of the currency world, the U.S. $ is losing favor so quickly sends out a bigger warning to investors and the global economy. Just take a look at what central banks have been doing in the last few months.

Foreign currency holdings grew by $413 billion last quarter, the most since at least 2003, to $7.3 trillion. Nations that report currency breakdowns put 63% of this new money into the € and Yen in April, May, and June. That’s the highest percentage in any quarter with more than an $80 billion increase. Until now China has expressed concern about the behavior of the $ alongside other nations but were hesitant to act like this, because of the damage it would do to the exchange rate of the $. Now the realization of the fact that the $ will weaken is prompting action.

Imagine if oil was priced in a ‘basket of currencies, that diversification would be unstoppable and the $ would face a major crisis. Now, it is only a question of when.

Some commentators are saying gold is rising because of inflation fears, but inflation is not likely to accelerate until the global recovery is strong and deflation has evaporated. And yet gold is rising.

What concerns foreign holders of the $ is its exchange rate. This means far more than U.S. goods getting cheaper and European goods getting more expensive, it means the future worth of the $ in terms of all other currencies.

e.g. If Europe sells goods to China, it prices them in the U.S. $. The buyer and seller need to price those goods in a way that allows them to budget correctly and be able to pay correctly and make their profit on the deal. If the U.S. $ [which has nothing to do with the underlying transaction] falls, then Europe gets less Euros to pay the supplier. This gives a great incentive not to use the $ in these transactions. If that trend takes off, then the $ will be used less, globally, and cause an excess of dollars to float around the system, taking it even lower. The dollar’s 37% share of new reserves fell from about a 63% average since 1999.

The point for gold is that even central banks are wary of the U.S. $ and consequently expect uncertainty to spread like the plague through other dependent currencies, as they try to keep their exports competitive in the world market. Despite it being money in earlier times only, gold remains the only money that can be exchanged when confidence is lost and still hold its value. This reality is rapidly rushing at us and is why gold is rising in price.

Need to Quantify?

Among financial professionals the need to quantify, to measure, to relate is insatiable. Look back across the last few years of the gold market. Gold was thought to move against oil. This was dropped when the facts showed differently. Gold was thought to be anti-inflationary. While it has these properties, the price is rising in the absence of inflation at the moment. Growth or the lack thereof was tied to gold’s performance, but when deflation hit and gold held its price that was dropped too. In general the gold price was thought to be a tied into something in the U.S. alone. Is this because of the myopic view of U.S. markets or is it really a reality? Clearly, Europe and the rest of the world are involved in the gold market too. In fact 90% of the world’s bullion is dealt in London!

So we have to counter this hunger to quantify and recognize that there are a huge number of times in our lives and our markets when reason and measurability are absent. The gold market is reflecting one of those times right now. When emotions creep in, many such professionals go into denial, until they can find something else to measure that emotion against. By that time the damage has often been done. The point of the Independent newspaper report was that it precipitated pent-up emotion against the U.S. $. Now the $ will be seen in that negative light, not as a strong currency dominating world currencies. It is moving to pariah status if it keeps on this road. It is too late for political ‘spin’.

When the Titanic sank, there was a point in time, when the ‘unsinkable’ ship in the passenger’s minds, changed to a sinking ship. The breakout in the gold price was just such a point in time.

yen dollar The Price of the $?

What has happened imperceptibly is a change in measuring value. Until now, everything was measured in the U.S. $. It was the ultimate measure of value for over half a century. With uncertainty, led by global central banks, other measures of value are now needed. Where can they be found, amongst other currencies?

The ailments hitting the U.S. $ can affect other currencies, all of which are controlled ultimately by their central banks and governments. If the U.S. Administration can’t hold financial confidence why should any other currency do so? The road down for the $ will eventually lead to something that cannot be debauched by governments. The actions of the Chinese and Russian central banks, tells us that they trust a ‘basket of currencies’ [which minimize the impact of any individual government] and, to some extent, gold.

For years now we have said a day will come when the gold price won’t be say $1,000, but that $1,000 will be worth an ounce of gold. We’ve arrived.

Courtesy financial sense

Gold price reaches $1,000 landmark

2009-09-12T12:30:00.002+08:00

Evening Standard, This is Money writers and Reuters 13 March 2008, 3:53pm

The price of gold soared to a record high of $1,000-an-ounce today, fuelled by a weakening dollar, strong demand and the rising cost of oil.

Demand for gold has surged in recent months as investors seek out safehavens for their money in the wake of the credit crunch and market turmoil.

It has also become cheaper for foreign investors as a result of the falling dollar, which has crashed against currencies around the world.

Ross Norman, of TheBullionDesk.com, forecast gold to hit $1,250-an-ounce before the end of the year. Oil also hit a record $110.7 a barrel today.

In early January 2008, gold prices cleared the 1980 record highs of $875 in benchmark futures and $850 in spot, and they are up around 20% this year.

After adjusting for inflation, the 1980 high was $2,079 an ounce at 2006 prices, while the real average price in 1980 has been calculated at $1,503, according to precious metals consultancy GFMS Ltd.

Gold is often used as a hedge against fluctuations in the US dollar, the world's main trading currency. If the dollar appreciates, the dollar gold price falls, while a fall in the dollar relative to the other main currencies produces a rise in the gold price.

A key area of demand is from emerging market central banks including Russia, South Africa and Argentina. China is also looking to diversify the huge foreign currency reserves away from the weakening dollar, with gold a consideration.

Even a small increase in China's percentage of gold reserves would cause a huge increase in demand. Asia - particularly India - and the Middle East are seeing large increases in domestic jewellery demand as disposable income increases.

But while demand is robust, supply is another issue – the supply of mined gold has been stagnant. A lack of new mines opening offset against the decline in gold production has meant a drop in supply.

Metals Stocks : Gold falls on stronger dollar, jobs data; copper also down .

2009-07-02T22:30:00.000+08:00

By Moming Zhou, MarketWatch - Jul 2, 2009

NEW YORK (MarketWatch) -- Gold futures fell Thursday, moving below $930 an ounce as the U.S. dollar strengthened against most of its rivals after a disappointing U.S. jobs report, reducing gold's appeal as an investment alternative.

The dollar rose after the Labor Department reported Thursday nonfarm payrolls shrank by 467,000 in June, higher than the 325,000 decline expected by economists surveyed by MarketWatch. Other metals also moved lower.

August gold was last down $12.50, or 1.3%, at $928.80 an ounce on the Comex division of the New York Mercantile Exchange. The loss came on the heels of gold's 1.5% gain Wednesday.

"The U.S. dollar was seen benefiting from" the jobs data, said Jon Nadler, senior analyst at Kitco Metals Inc. "Thus, gold unwound the bulk of yesterday's gains."

With Thursday's loss, gold futures are heading for a weekly loss of more than 1%. Trading is closed Friday in observance of the Independence Day holiday.

In currencies trading, the dollar index /quotes/comstock/11j!i1:dx\y (DXY 80.18, +0.55, +0.68%) climbed above 80. See Currencies.

The Labor Department report also showed the unemployment rate ticked higher to 9.5% in June, the highest since August 1983. See Economic Report.

The jobs data weighed on copper prices. September copper futures, the most active contract, fell 5.65 cents, or 2.4%, to $2.2745 a pound. The front-month July contract lost 5.85 cents, or 2.5%, to $2.2565. Copper is heading for a weekly loss of about 1.6%.

In other metals Thursday, September silver lost 38.5 cents, or 2.8%, to $13.375 an ounce, October platinum fell $17.60, or 1.5%, to $1187.50 an ounce, and September palladium dropped $6.85, or 2.7%, to $248 an ounce.

In exchange-traded funds, holdings in the SPDR Gold Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 91.40, -0.99, -1.07%) , the biggest gold ETF, stood at 1,120.55 metric tons Wednesday, unchanged from a day earlier, according to data from the fund.

Holdings in the iShare Silver Trust /quotes/comstock/13*!slv/quotes/nls/slv (SLV 13.18, -0.37, -2.72%) , the largest silver ETF, stood at 8,724.86 metric tons Wednesday, unchanged for the 11th session in a row.

In other economic news, orders for U.S.-made factory goods rose by the biggest amount in close to a year in May, climbing 1.2% on a big jump in orders for transportation equipment, the Commerce Department reported Thursday. See Economic Report.

Moming Zhou is a MarketWatch reporter based in New York.

Why Gold Will Rise to at Least $6,000 per Ounce

2009-05-30T10:09:00.000+08:00

By Dr. Murray Sabrin | May 26 2009

In November 2003, a month before the 90th anniversary of the creation of the Federal Reserve, I spoke to a group of money managers and bond traders in south Florida about the Federal Reserve’s nine decade legacy. At that time the price of gold was approximately $380 per ounce. I informed the attendees that gold was the most undervalued asset on the planet. Nearly six years later, gold has nearly tripled in price and may have been the best performing asset class in the world since then, and one of the best investments in this decade.

Hopefully, the money managers who heard my remarks about the evolution of our monetary system took my advice for their clients’ sake and added gold to their personal portfolios as well. But then again, gold was so out of favor as an asset class by Wall Street a few years ago, it would not be surprising that the attendees ignored my advice and did not add the yellow metal to their portfolios.

With gold currently trading at $950 per ounce, where will the price of gold be six years from now? Conceivably, much higher than any current forecast. How high? Later in this essay, I will explain how returning to a “hard money” dollar and a sound banking system will require a gold price of at least $6,000 per ounce and possibly much higher

Before we hypothesize a future price of gold, it is imperative we understand the current financial crisis and the need to abolish fractional reserve banking, paper money and central banking. In other words, for the American economy—and the global economy-- to enjoy sustainable prosperity we need to inject a heavy dose of free enterprise in our money and banking systems.

This is easier said than done. The political and financial elites of America want to maintain the status quo, namely, the creation of money out-of-thin air, artificially low interest rates, and massive bailouts engineered by the FED and the U.S. Treasury.

Nevertheless, the financial meltdown of the 21st century has been well documented in two outstanding books of the past year, William Fleckenstein’s Greenspan Bubbles and Thomas Woods’ Meltdown. If you have not read them both, they should be on the top on your summer reading list. Both authors place the blame for the back-to-back bubbles, the dotcom bust and the housing collapse, squarely on the Federal Reserve’s easy money polices under Fed chairman Alan Greenspan.

In a nutshell, easy money drives down interest rates, which in turn set into motion feverish activity and speculation in sector or sectors of the economy that benefit from the flow of new money from the FED. The excess credit propels prices higher for common stocks, real estate, commodities, etc. When the FED “tightens” credit to rein in the overheated economy, the inevitable correction sets in. Bankruptcies soar, unemployment rises, stock prices drop precipitously, and state and local governments face huge revenue shortfalls as income and sales tax revenues drop. In other words, the unsustainable boom appears to create a perpetual “party” in the economy, only to be exposed as a period of “false” prosperity.

The booms and busts of the past two decades are textbook examples of the financial and economic crises caused by central banking. Of all the schools of thought, only the Austrian School of Economics explains how waves of boom and bust are inevitable if central bankers try to substitute credit created out-of-thin air for genuine savings. Working in the same tradition, economist Jesus Huerta de Soto in his monumental survey of world economic history (Money, Bank Credit and Economic Cycles), explains how economic fluctuations are the result of bank credit expansion prior to the establishment of central banking and how business cycles have unfolded since the creation of the first central bank in England (1692).

To prevent further boom-bust cycles, the following changes in the U.S. monetary/banking system should be implemented ASAP. These would require banks to restructure along the following guidelines.

All demand deposits would be backed by 100% reserves. In other words, fractional reserve banking would be prohibited as a violation of property rights. This would eliminate the bank run, because banks would have all the money in reserves to meet depositors’ requests for cash. This reform would be potentially deflationary since the banking system would have to contract the amount of money and credit in the current inflationary system to restore 100% reserve banking.
Banks would offer time deposits from one day to 30 years or more. This would provide a pool of real savings for banks so they could perform their role as financial intermediaries without government protection and intervention.
FDIC insurance would be eliminated. Banks and depositors would operate in a free market. Savers would determine how much risk they want to incur and lend their funds to banks based on their time horizons.
Permanent bank capital—preferred and common stockholders—would be the foundation of a free enterprise banking system. Risk of default would be allocated among shareholders and savers.
The Federal Reserve would be abolished and would no longer manipulate short-term interest rates and be the lender of last resort. The FED’s track record of the past century should convince any objective observer and analyst that it has been a failure. The dollar’s purchasing power has fallen by more than 95% since the FED was created and the business cycle is still with us.
The dollar will once again be defined as a weight of gold. What should the ratio be between the supply of dollars and the 260,000,000 ounces of gold held by the Federal Reserve?

There are several ways to revalue the dollar in terms of gold and make the U.S. dollar a hard money once again. This would create a 100% gold dollar. Americans as well as foreigners are used to conducting their exchanges dollars so the goal is to regain the confidence of dollar holders by ending the devaluation of the dollar.

All currency and demand deposits and other forms of money would be convertible into gold. That would mean all forms of money that people are familiar with would “backed” by gold. Inasmuch as there about $1.6 trillion of this form of money outstanding that would be backed by about 260,000,000 million ounces of gold held by the Federal Reserve, the price of gold or more accurately the value of the dollar would be 1/6,153 of an ounce of gold. In other words, the price of gold would be $6,153 per ounce.
According the Rothbard/Salerno definition of the “True Money Supply,” the current amount of dollars in the economy that functions as the general medium of exchange is about $5.5 trillion. Based on this approach, the FED’s 260,000,000 ounces of gold would have a dollar/ratio of 1/21,153, or the price of gold would be $21,153 per ounce. Before you mortgage the house and sell the kids to make more than twenty times your money, another economist challenges the Rothbard/Salerno definition of the true money supply.
Economist Frank Shostak in his essay on the money supply, argues that savings deposits should be removed from the definition of money because they are a credit deposit rather than a demand deposit. Based on the Shostak approach, investment manager Mike Shedlock calculates M’, (M Prime), as approximately $2.2 trillion. The gold/dollar ratio would be 1/8.461 or a gold price of $8,461 per ounce under this definition of the money supply.

Clearly, no matter what definition of money is used to restore a gold backed dollar, the price of gold will have to be adjusted upward by a factor of at least six or more from today to reflect the enormous deprecation of the dollar since the FED was created nearly a hundred years ago.

The revaluation of the dollar will not happen because Ben Bernanke, chairman of the Federal Reserve and Timothy Geithner, U.S. Treasury Secretary embrace hard money principles and realize 100% reserves are necessary for the banking system to function as a reliable financial intermediary. The restoration of a gold backed dollar will occur when dollar holders lose confidence in the purchasing power of the greenback. The sooner the next great money and banking reforms are implemented, the less chance there will be for a global monetary debacle, given the trillions of dollars the FED and other central banks have created in the past six months. In the meantime, load up on the yellow metal. It is your best insurance policy against Obama, Congress, Bernanke, and Geithner.

Zimbabwe gold output plunges by nearly 50%

2009-05-29T13:59:00.000+08:00

Fri May 29, 2009 | AFP

HARARE – Zimbabwe's gold production fell by 49 percent last year due to an adverse operating environment and lack of working capital, the Chamber of Mines announced on Friday.

"During the year 3,576 kilogrammes was produced compared to 7,017 kilogrammes reported in 2007, a decline of 49 percent," according to the Chamber of Mines annual report.

"The performance of the Zimbabwean mining industry in 2008 is best described as dismal and gloomy," said David Murangari, Chamber of Mines president, at organisation's annual general meeting.

Prime Minister Tsvangirai who also attended the meeting, however, said the mining sector presented the country with the most immediate opportunity to attract significant investment.

The "government has a window of opportunity to prepare a conducive policy environment by mid 2010... that could see Zimbabwe's mineral sector attracting between six billion (US) dollars and 16 billion (US) dollars in exploration and mine development investment during 2011-2018 period," he said.

The report said the major cause of the decline in production was the restricted working capital for production.

"Most mines operated under extremely difficult macro-economic conditions for the first nine months of the year. Most importantly, there is dire need for recapitalisation of the industry... the current world recession was something that we in Zimbabwe had not anticipated," said Murangari.

Gold sector earnings during the first six months of the year also declined to 62.1 million US dollars compared to 93.5 million dollars earned the previous year.

Although gold sector earnings have declined, platinum production increased by 8.5 percent in 2008 compared to 2007.

Annual platinum production increased from 5,085.74 kilogrammes in 2007 to 5,495.10 kilogrammes in 2008.

The Only Two Reasons to Own Gold

2009-05-27T11:56:00.000+08:00

By The Mogambo Guru

05/25/09 Tampa Bay, Florida I always get a real kick out of hearing that “the consumer is 70 percent of the economy,” mostly because it gives me a chance to heap ridicule and scorn on whoever said it, and I say that the consumer is 100 percent of the economy!

One CAN say that, with or without the heaping of ridicule and/or scorn, but at least with an arrogant and smug authority that comes from 100 percent certitude, that “The Mogambo is 100 percent certain that the consumer is 100 Freaking Percent (100FP) of the economy!”

I make this Bold Mogambo Assertion (BMA) for two reasons. First, I hope that by debunking this silly “the consumer is 70 percent of the economy” crapola, I will win a Nobel Prize or some other award that has a cash-award component of the prize winnings, perhaps one that has a LARGE cash-award component.

My argument is that the ultimate consumer pays the price for everything by buying and consuming, for instance, a frozen pizza or delicious candy bars, and maybe something nice to drink, knowing that a slice of the purchase price is used to pay back creditors and producers for the use of capital, labor and land invested in producing these – and more! – delicious ‘ready-to-eat’ snacks and treats of high caloric content, of which the sugary, chocolaty and salty varieties I find particularly good. Yum!

And speaking of spending, I was surprised to see that the current-account balance of the USA has collapsed to $673.3 billion in the last 12 months, down from its high of over $800 billion, and the trade balance has fallen to $730.4 billion in the last year, which is down about 20 percent from its high of a couple of years ago, too.

And while the 12.8 percent fall in industrial production in the last year seems like bad news for us Americans, it is worse by whole orders of magnitude other places. Japan has industrial production down 34.2 percent over the last 12 months, and in the euro area it is down by 20.2 percent.

Just when I thought I would go berserk at such horrific economic news, I see John Stepek at Money Morning newsletter had a subhead that caught my eye, which was “Three sound reasons to own gold.”

I admit that I did not read the article, but as far as I know, there are only two good reasons to own gold; to preserve wealth when prices are stable, and to make a lot of fiat wealth when your government acts so stupid as to create, or allow to be created, excess money and credit that eventually destroys the currency, especially when undertaken so as to enlarge the size of government, like now, which makes the problem of inflation worse because those more government weenies have a bigger incentive to save their own phony-baloney jobs, but can only make things worse.

Like, I said, I did not read the article because I am lazy, but the advice to buy gold is the lesson of the last 4,500 years of governments acting irresponsibly when given control of a fiat currency with which they could create as much money as they wished; inflation in prices inevitably caused chaos, misery, starvation and revolution.

I tried to explain to the employees that inflation in prices was essentially just a mismatch between gains in income, if any, versus gains in prices that must be paid with that income, which I hoped would prove to be a valuable insight when I then told them how I was slashing their salaries by a lousy 5 percent, and if they did not like it, then they could all go to hell because we are on our way to bankruptcy anyway.

I was going to suggest that the lesson, which they would immediately grasp if they were not so stupid, is to immediately buy as much gold, silver and oil as they could, but they were not in the mood to hear good advice gleaned from history, and instead wanted to whine about their puny pay cuts.

If they were not so stupid, they would see that buying gold now would easily make up for their meager income reductions, and if they had been buying gold, silver and oil all along, they would be miles ahead!

Whee! This investing stuff is easy!

Until next time,

The Mogambo Guru
for The Daily Reckoning

Of gold reserves, US dollars, yuan and a new global currency

2009-05-13T23:00:00.000+08:00

GOLD prices leapt with the recent announcement by the Chinese government of an increase in its gold reserves to 1,054 tons.

The disclosure - an IMF requirement - caused a general reappraisal of gold's relevance as a reserve asset by central bankers.

The Chinese government is not in the habit of releasing figures detailing its gold reserves - the last time such figures were disclosed was in 2003 when holdings stood at 600 tons.

The rise in gold holdings is substantial. Though this figure represents a 76 percent increase and places China fifth in the list of gold holding nations, it is worth noting that this rise has been spread out over a period of six years.

Moreover, gold holdings represent only 1.5 percent of China's foreign exchange reserves in comparison with some European banks that hold 50 to 60 percent of their foreign exchange reserves as gold.

As a tidal wave of greenbacks looks set to come crashing into the US economy bringing searing inflation in its wake, Beijing has been steadily acquiring gold as a hedge against eventual dollar decline.

And the Chinese government is pushing hard to put the dollar out of its misery as the currency of international trade.

China has already negotiated currency swap deals for bilateral trade with Argentina, Malaysia, South Korea, Belarus and Indonesia as a way of unblocking trade finance and presenting the renminbi (yuan) as an acceptable alternative to the US dollar.

Putting further pressure on the US dollar was the decision at the end G20 summit to grant the IMF US$1 trillion in extra funding with a view to resurrecting the idea of its Special Drawing Rights (SDRs).

SDRs were launched in 1969 when the US dollar was attached to gold as a new international reserve asset class to assist liquidity. They are a supplement - or an alternative - to the US dollar for trade purposes. SDRs are, in effect, a de facto global currency outside the control of any sovereign nation.

Under the IMF constitution, the value of SDRs is fixed according to a basket of four currencies (The US dollar, the euro, the yen and the British pound).

The weighting is determined by the level of exports and the reserves of currency concerned held by IMF members.

The impact on the remnimbi of this new form of international liquidity will be determined largely by whether it is included in the basket of currencies and with what weighting.

The Russian government has proposed regional baskets of currencies so that the central SDR basket could be comprised of a number of regional baskets, each in turn including various local currencies.

However, the role of reserve currency puts upward pressure on the exchange rate by increasing demand for that currency.

For net importers, this is good news, but for net exporters it is a threat to growth as exports get priced out of foreign markets, as China and Japan have already experienced.

There are a number of problems, both political and economic, associated with SDRs but they may represent a temporary palliative to world trade anxieties.

The move away from the US dollar and towards a basket of currencies and perhaps gold as a new international reserve currency - not itself an entirely unproblematic scenario - is the likely outcome.

(The author is counsel of AllBright Law Offices in Shanghai. The views are his own. His e-mail: sbmaguire@allbrightlaw.com.)

Black Gold - rises above US$59 to 6-month high

2009-05-13T01:06:00.001+08:00

LONDON, May 12 – Reuters

Oil prices rose more than a dollar today to a six-month high above US$59 (RM212.40) a barrel, boosted partly by a weaker dollar and gains on equity markets.

US crude was up US$1.14 a barrel at US$59.64 a barrel by 1200 GMT (8pm, Malaysian time). It earlier touched US$59.85 a barrel, its highest since November last year. It has risen nearly 20 per cent this month.

London Brent crude was up US$1.16 at US$58.64 a barrel.

“Oil is riding the coat-tails of the equity market bounce for now, largely ignoring the build-up in oil inventories,” said Harry Tchilinguirian, senior oil analyst at BNP Paribas.

“Weakness in oil fundamentals is reflected in elevated inventories, yet the market’s price assessment appears to have brushed this aside.”

The global economic downturn has hit demand for oil, which has created a massive supply overhang.

There is an estimated 100 million barrels of crude oil stored at sea on tankers. US crude inventories are at their highest in 19 years.

But a rally in global equity markets in anticipation that the economic climate might improve has boosted oil despite its bearish supply/demand picture.

The dollar has also played a part.

“The US dollar is slightly weaker which could be spurring a bit of strength,” said Tony Machacek at Bache Commodities Ltd.

Oil, which is priced in dollars, tends to rise when the dollar falls.

The global downturn has pushed oil down from a record high above US$147 a barrel hit in July to a low in December of US$32.40.

Prices have rebounded this year.

US crude is up more than 80 per cent from a January low of US$32.70 a barrel.

Crude oil demand in China, the world's second-largest energy user, provided support for prices with Chinese customs confirming on Tuesday that crude imports in April rose to reach the second-highest daily rate on record.

But the country’s export data proved disappointing.

US oil inventory data due tomorrow is forecast to show a further rise in crude oil stocks.

US crude stockpiles probably rose for the 10th straight time last week, up by 1.2 million barrels. Distillate stocks are likely to have risen by 1.1 million and gasoline stocks by 500,000 barrels, a preliminary Reuters poll showed.

8 Reasons To Own Gold

2009-05-11T21:59:00.002+08:00

Gold is respected throughout the world for its value and rich history, which has been interwoven into cultures for thousands of years. Coins containing gold appeared around 800 B.C., and the first pure gold coins were struck during the rein of King Croesus of Lydia about 300 years later. Throughout the centuries, people have continued to hold gold for various reasons. Below are eight reasons to own gold today.

1. A History of Holding Its Value

Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next. (Read more in Understanding Supply-Side Economics.)

2. Weakness of the U.S. Dollar

Although the U.S. dollar is one of the world's most important reserve currencies, when the value of the dollar falls against other currencies as it did between 1998 and 2008, this often prompts people to flock to the security of gold, which raises gold prices. The price of gold nearly tripled between 1998 and 2008, reaching the $1,000-an-ounce milestone in early 2008. The decline in the U.S. dollar occurred for a number of reasons, including the country's large budget and trade deficits and a large increase in the money supply.

3. Inflation

Gold has historically been an excellent hedge against inflation, because its price tends to rise when the cost of living increases. Since World War II, the five years in which U.S. inflation was at its highest were 1946, 1974, 1975, 1979 and 1980 (as of 2008). During those five years, the average real return on the Dow Jones Industrial Average was -12.33%, compared to 130.4% for gold. (As Coping With Inflation Risk explains, inflation is less dramatic than a crash, but it can be more devastating to your portfolio.)

4. Deflation

Deflation, a period in which prices contract, business activity slows and the economy is burdened by excessive debt, has not been seen globally since the Great Depression of the 1930s. During that time, the relative purchasing power of gold soared while other prices dropped sharply. (Read more in What Caused The Great Depression?)

5. Geopolitical Uncertainty

Gold retains its value not only in times of financial uncertainty, but in times of geopolitical uncertainty. It is often called the "crisis commodity", because people flee to its relative safety when world tensions rise; during such times, it often outperforms other investments. For example, gold prices experienced some of their largest recent movements during periods of tension with Iran and Iraq in 2007 and 2008. Its price often rises the most when confidence in governments is low. (Read how to cut through the confusion and invest successfully in Investing During Uncertainty.)

6. Supply Constraints

Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks. This selling by global central banks slowed greatly in 2008. (Read more about the different options for investing in gold, from bullion to ETFs, in Getting Into The Gold Market.)

At the same time, production of new gold from mines has been on the decline since 2000. According to BullionVault.com, annual gold-mining output fell from 2,573 metric tons in 2000 to 2,444 metric tons in 2007. It can take from five to 10 years to bring a new mine into production. As a general rule, reduction in the supply of gold increases gold prices. (For more insight, read Economics Basics.)

7. Increasing Demand

Increased wealth of emerging market economies has boosted demand for gold. In many of these countries, gold is intertwined into the culture. India is one of the largest gold-consuming nations in the world, and gold has many uses there, including jewelry. As such, the Indian wedding season in October is traditionally the time of the year that sees the highest global demand for gold. In China, where gold bars are a traditional form of saving, the demand for gold has also shown rapid growth. (Read about another way that China and India are impacting world markets in What Determines Gas Prices?)

Demand for gold has also grown among investors. Many are beginning to see commodities, particularly gold, as an investment class into which funds should be allocated. In fact, the largest gold ETF, StreetTracks Gold Trust (PSE:GLD), became one of the largest ETFs in the U.S. and one of the world's largest holders of gold bullion in 2008, only four years after its inception. (Read more about gold ETFs in The Gold Showdown: ETFs Versus Futures.)

8. Portfolio Diversification

The key to diversification is finding investments that are not closely correlated to one another; gold has historically had a negative correlation to stocks and other financial instruments. Recent history bears this out:

* The 1970s was great for gold, but terrible for stocks.

* The 1980s and 1990s were wonderful for stocks, but horrible for gold.

* As of 2008, this decade has been a good one for gold, and an unfavorable one for stocks.

Properly diversified investors combine gold with stocks and bonds in a portfolio to reduce the overall volatility and risk. (Read Introduction To Diversification to find out how diversifying a portfolio can enhance returns and reduce risk.)

Conclusion

Gold should be an important part of a diversified investment portfolio because its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. Although the price of gold can be volatile in the short term, gold has always maintained its value over the long term. Through the years, it has served as a hedge against inflation and the erosion of major currencies, and thus is an investment well worth considering.

by Tony Daltorio,

GOLD VS DOLLAR

2009-04-10T02:00:00.001+08:00

April 04, 2008 - The value of the dollar is dropping like a rock and this video is to show how this is affecting the prices of everything from gas to milk. This is the first of several videos to show what is really happening to the ecomy of the United States and why this country is in a lot of trouble financially.

Why gold is best way to ride recession

2009-04-08T10:34:00.001+08:00

By Diane Francis, March 31, 2009

Nobody knows whether the current Washington bailout plans will work quickly, at all or at what cost to the U.S. currency.

China and others are talking up a new reserve currency, or basket of the biggest such as the Euro, Yen, U.S. dollar and a fewothers of significance.

The future is always a matter of opinion, as is political competency, which is why it's a good idea to own a little gold.

That may be a leap to most people, but the facts are that protecting yourself against the vagaries of markets, leaders and capitalist running dogs has never been more important or perilous. Best advice I've come across is to divide your asset mix into four classes: real estate, stocks, bonds and gold (probably bullion or coins not stocks).

IT'S APPARENT THAT MORE PEOPLE IN THE WORLD ARE TURNING TO GOLD FOR SEVERAL REASONS:

1. The U.S. dollar as a reserve currency is on the endangered species list and as it wobbles the only safety play is gold.

2 . Capitalism as we have known it recently is also coming to its logical conclusion and the uncertainty of what, when, how and who has led the millions of younger entrants to Asia'smiddle class to buy a little bling.

3. Chicken Littles: these are the survivalists who think the world as we know it is also coming to its logical conclusion.

They counsel the purchase of gold coins, bottled water, a generator, canned goods, a garden and guns. (dailyreckoning.com.)

4. Legacy gold bugs whose beliefs are rooted in libertarianism and paranoia about gold price manipulations.

5. Other gold bugs include those who will never believe in paper currency and want a return to "fiat"money, backed by gold as was the case until a handful of decades ago.

My favourite lately is an excerpt from a gold bugmanifesto out of Australia: "After gold's breathtaking $38 surge in 15 minutes, there is much renewed interest in the Ancient Metal of Kings. The Federal Reserve, which is clearly being runby lunatics, publicly announced it is going to create over a trillion dollars out of thin air to monetize U.S. debt.

This degree of pure monetary inflation is utterly unprecedented, Gold soared because it remains the best asset to own in inflationary times. Inflation is an immoral stealth tax levied on everyone." Of course, Canada is a big gold producing nation, and I'm on a gold mine board, so I'm a bigger fan of the shiny stuff than most.

But the five reasons behind the belief in gold's intrinsic value continue to drive prices upwards. And buyers are not looney-tunes living in armed treehouses. Here are estimates I blogged about last week as to prices in 2009 and 2010 by a sprinkling of financial institutions: Citi Group -- gold will hit US$2,000 an ounce by end of 2009 Bank of America, Merrill Lynch -- average US$1,000 an ounce in 2009, up from a previous estimated average for the year of US$875 an ounce. In 2010, US$1,050 an ounce.

UBS--US$1,000 an ounce average in 2009.

Morgan Stanley -- also US$1,000 an ounce in 2009.

On the other hand, an Indian website called Sife points out that gold reached a peak of US$800 an ounce in 1980 which is equivalent, in real terms, to US$2,500 an ounce today

- Blog: http://www.financialpost.com/dianefrancis

IMF gold sales expected to be on G20 agenda

2009-03-31T05:56:00.000+08:00

Draft G20 communique suggests IMF will be asked to advance gold sales proposals to help aid low-income countries.

LONDON (Reuters) - Posted: Monday , 30 Mar 2009

G20 leaders are expected to discuss using proceeds from planned gold sales by the International Monetary Fund (IMF) to double funding available for poor countries which need help dealing with the global economic crisis, a source familiar with the plan said on Sunday.

The source said there was not unanimous support for the idea, including within the IMF, because the IMF's low-interest lending to poor countries does not generate enough return to fund further lending.

Regardless of any possible gold sales, IMF Managing Director Dominique Strauss-Kahn has already asked the G20 group of the world's 20 biggest economies to provide additional funding to double resources for IMF low-income programmes.

According to a draft G20 communique obtained by the Financial Times, the IMF will be asked to "bring forward, by the spring meetings, proposals to use the proceeds of agreed gold sales to support low-income countries".

The IMF last year approved the sale of 403 tonnes of gold from its stocks of 3,217 tonnes (103.4 million ounces) as part of a plan to put its finances on a sounder footing and create an endowment with the proceeds.

Selling IMF gold requires ratification by the legislatures of member countries, including the U.S. Congress, a process which is expected to take at least several months.
The IMF has therefore emphasised that plans to sell gold are not part of proposals for near-term financing needs associated with the current global financial crisis.

But a recent surge in IMF lending to countries facing balance of payments crises related to the global downturn has led analysts to ask whether the Washington-based institution needs to proceed with the gold sales as part of a broader make-over of its financial structures.

African leaders and anti-poverty groups have long called on the IMF to sell more gold to raise immediate funding for poor countries, which are now being hard hit by falling exports and lower commodity prices.

The IMF has repeatedly said that any gold sales would be made under the umbrella of a central bank gold agreement, to avoid disruption in the market.

Gold Still the Focus for Investors

2009-03-31T00:56:00.001+08:00

Mar 20 2009

Strong investor interest in gold has led to impressive returns for bullion and gold companies.

The gold price has soared to $985 an ounce, nearing its all-time high of $1,014. That record was set last March, at the height of the U.S. banking crisis. The price then fell sharply as gold joined every other asset class in being dumped by investors, touching $700 by October. Through much of last year, the U.S. dollar was the safe refuge of choice.

Investors, still shell-shocked from the financial crisis that engulfs the world, have now turned to gold as a safe haven. Recognizing the vulnerability of the dollar, investors have a hard time finding a currency that doesn’t look shaky. Government bailouts are piling trillions of dollars worth of debt onto every major economy.

Investors are becoming more aware that debts of that magnitude are leading to massive increases in money supplies. Over time, that money will become less valuable in relation to hard assets, with gold being the most evident.

The shares of gold companies are also benefitting from the growing investor interest in bullion. The gold companies presented in the three December issues have all done well, with gains of as much as 8-fold in that couple of months.

Gold will certainly go higher over time. However, there is no assurance that the price will move in a straight line. History tells us that the gold market is subject to violent swings as investors and other participants in the gold market change their mood. At this time, some of the gold companies that have delivered big gains are beginning to look expensive. We are watching the situation carefully and will have more to say in the coming weeks.

Lawrence Roulston

Peter Schiff Warns America - Buy Gold & Silver !

2009-03-26T04:46:00.004+08:00

Peter D. Schiff is the president of Euro Pacific Capital Inc., a brokerage firm based in Darien, Connecticut. Schiff adheres to the principles of the Austrian School of Economics and the Ludwig von Mises Institute. Schiff frequently appears as a guest on CNBC, Fox News, and Bloomberg Television and is quoted in major financial publications.

Schiff points to the low savings rates of the United States as its worst malady, citing the transformation from being the world's largest creditor nation in the '70s to the largest debtor nation at the turn of 2000. His extremely bearish views on the U.S. Dollar, the United States stock market, bond market, and the United States economy have earned him the nickname "Dr. Doom."

He was an economic adviser for the Ron Paul campaign in the 2008 Republican Party primaries. Schiff also hosts a live Internet/shortwave radio show called "Wall Street Unspun."

November 14, 2008

Gold rallies over 7% as Fed move fuels inflation fears

2009-03-20T02:16:00.000+08:00

Courtesy : Moming Zhou is a MarketWatch reporter based in New York. March 19,2009

NEW YORK (MarketWatch) -- Gold futures climbed to top $950 an ounce after the Federal Reserve pledged to purchase as much as $1.15 trillion in U.S. bonds and mortgage-backed securities to encourage lending, sparking worries of inflation ahead.

"Looking ahead, we fear inflation. It may be that Dr. Bernankenstein has created a monster beyond his control," Michael Farr, president of Farr, Miller & Washington, said of Fed Chairman Ben Bernanke.

The U.S. dollar's losses in the wake of the Fed's move also lifted gold prices, with investors buying gold as a hedge against inflation and a weaker dollar.

Gold for April delivery surged $66.5, or 7.6%, to $955.6 an ounce on the Comex division of the New York Mercantile Exchange. It climbed to $963.5 earlier in the session, the highest level in nearly one month.

Gold's gain came after it lost $27.70 to end at $889.10 Wednesday, the lowest closing level in two months. Wednesday's floor trading ended before the Fed announced its decision.

George Gero, a precious metals trader for RBC Capital Markets, called gold's quick reverse from down nearly $30 dollars to up more than $60 "shock and awe." The Fed's plan "could change [the] inflation outlook and result in a greater trading range," he added.

Silver prices marked an even bigger rally. Silver for May delivery jumped 12.7% to $13.445 an ounce.

The Fed said it would buy longer-term Treasury bonds to help arrest a deepening slide in the U.S. economy, a surprise move that also sent stocks soaring and triggered violent moves in other markets.

The Fed's move, one of several actions taken Wednesday aimed at making it less expensive to borrow money, doubled the amount of money the central bank has poured into the economy to try to stimulate economic activity.

"The Fed's announcement of further quantitative easing triggered renewed inflation fears," wrote James Moore, a precious metals analyst at TheBullionDesk.com. "Gold is well-placed to re-challenge $1000 an ounce."

GLD : 93.87, +0.78, +0.8%) jumped to 1,084.33 tons Wednesday, up 15.28 tons from a day ago, according to the latest data from the fund. The total is nearly 80 tons higher than a month ago.

In economic news Thursday, the number of people collecting state unemployment benefits jumped by 185,000 to a record seasonally-adjusted 5.47 million in the week ending March 7, while new claims dipped by 12,000 to 646,000 in the week ending March 14, the Labor Department reported Thursday.

On Wall Street, stocks meandered between gains and losses following Wednesday's rally. Asian and European stocks also moved higher. In energy trading, crude jumped more than 7% to about $52 a barrel.

Many Americans investing in Gold

2009-03-14T04:17:00.001+08:00

Fri, 13 Mar 2009 03:00:48
Morris Jones, Press TV, Washington

Gold & The Panic Phase

2009-03-11T22:11:00.001+08:00

by Jim Willie, CB. Editor, Hat Trick Letter | March 5th, 2009

A couple of bright friends reported to me some overriding themes at the PDAC gathering in Toronto last weekend. Apparently, some surprise came to them. They mentioned that more than a few analysts, writers, and speakers still do not get it. They actually believe the situation with the USEconomy and US banking system has begun to stabilize. That is like saying a college basketball player has Michael Jordan under control, or a farmer has his Clydesdale horse under control, or a misguided King can call back the ocean tide, or a man has a hurricane under control as he clings to a roof rafter. The USEconomy has entered an accelerated phase of disintegration, while the populace has entered a new panic phase. The US stock market is under the microscope, and it just broke a key multi-year critical support level. This article is intended to be constructive, with a list of perceived meters and conditions, followed by a four-step foundation for a recovery. When finished reading the four planks, one should easily conclude that no solution, let alone attempt, is on the correct path or is in the works.

Therefore the plan for individuals, who have been betrayed on a colossal scale, must defend themselves by exiting all assets and hunkering into cash. The betrayal lies at the feet of bankers, politicians, military brass, and corporate chiefs. By the way, cash is prescribed in that perfectly crafted document called the US Constitution. Gold & silver are the only forms of money that can legally satisfy debts public and private. That near perfect document has also been betrayed, with even the last president calling it a ‘mere piece of paper’ incredibly. The financial problems of the nation took deep root with the Vietnam War and the subsequent abrogation of the Bretton Woods Accord that had forged the US$-Gold linkage. The analysts, pundits, bankers, and politicos seem to have totally lost sight of this basic fact. Their deep error, along with profound corruption, will be centerpieces in the next chapters written in history. My rational and considered belief is that gold, as well as crude oil, will be anchors to the next global reserve currencies. What better route to stabilize both financial and commercial price systems? Those who believe that the USDollar will prevail and survive this turmoil as the global reserve currency are precisely as incorrect as those who believed the US banking system could survive the mortgage debacle as it unfolded. We are witnessing a long slow drawn-out death experience for the USDollar, liquidation of the USEconomy, to be followed by a default by the USTreasury Bonds. During the panic phase, the response in the gold & silver prices will be profound, with advances to date only a prelude to a march to $2000 gold and $50 silver.[more]

Gold: More Strength on the Way

2009-03-05T04:25:00.000+08:00

Mary Anne & Pamela Aden
The Aden Sisters
Feb 24, 2009
Courtesy of www.adenforecast.com

Gold shot up, reaching a nearly one year high on Friday [Feb 20th], and rapidly approaching its record high area.

The ongoing current A rise that started last November is the strongest in this bull market and the strongest since 1999. Since this is an abnormally strong 'A' rise in an abnormal world recession, if gold reaches a new record high above $1004, gold will most likely be embarking on the start of a great bull market rise.

Gold could then jump to the $1200 level as its next target. Keep an eye on $910 as gold's 'A' rise is very strong above it (see Chart 1).

GOLD: An eight year phenomenon

Further backing this up is gold's ongoing bull market, which turns eight years old this month. The eight year mark has been a consistent low time for gold going back to the late 1960s when gold began trading in the free market.

Chart 2, below, shows this best. Note the pattern. It has repeated four times since 1969 and the fifth one is possibly happening now. Important lows vary from 7 years to 8-1/2 years following the previous low, with the average being eight years. This recurring pattern tells us that the low could've been last November's low, three months shy of eight years, or it could still be upcoming. The long side would be a low this Summer.

The point is that gold's near or at an important low time. This means we want to buy more gold during weakness this year because gold is set to reach a record high, and the $2000 level would eventually be a likely target, near the top of the mega upchannel (see Chart 2).

In other words, whether it was last November's low or a low upcoming this year, the gold price is getting closer to the start of an even greater bull market rise. We should, therefore, have all of our gold positions completely bought well before year end.

Feb 20, 2009
Mary Anne & Pamela Aden
info@adenforecast.com
The Aden Forecast

Tuesday market close: Price of gold predicted to double by summer

2009-02-01T14:19:00.002+08:00

By Mickey Clark | Mailonline | 27th January 2009

Stand by for the biggest gold rush since the Klondike. The price of the precious metal is set to soar as investors becoming increasingly gloomy about the global economy.

Gold is often seen as a safe haven in times of economic and political upheaval, and is certain to benefit as investors' options of where to put their money are reduced.

Citigroup forecasts gold will top $2,000 an ounce, the price more than doubling by the summer. It currently trades at about $901, having already come up from $777 since Lehman went bust last September.

Gold rush: The price of the precious metal is set to soar

Citigroup says: 'We continue to remain unequivocally bullish on the medium- to long-term view on gold, and still believe that we can ultimately see levels in excess of $2,000.'

It adds that this can be achieved in several ways, either with gold continuing to be used as a safe haven or by it starting to trade higher as the massive liquidity injection by governments around the world brings reflation, and with it inflation.

The broker does not believe in the hyper-inflation scenario, but takes the view that generating such levels of liquidity will result in growing inflation.

Gold briefly touched a record $1,030 last March, coinciding with JPMorgan's rescue of bear Stearns.

It has since traded within a narrow range, but Citigroup concludes: 'We feel that if we can see a break through resistance in the $875-$890 area, it could open up the way for a move to new highs by this summer.'

Dealers say companies likely to benefit would be the big gold miners such as Anglo American, down 17p at 1346p, and Randgold Resources, 100p lower at 3075p.

Meanwhile, Rio Tinto remained a weak market, losing 17p at 1639p amid persistent talk the miner may eventually need to tap shareholders to reduce debt levels. BHP Billiton lost 31p at 1219p after Citigroup dropped the shares from its most favoured list, but later closed 14p up at 1264p.

Shares generally came off the boil, giving back some of yesterday's gains as investors focused on the economy and growing job losses.

The FTSE 100 index fell 14.6 to 4194.4. Wall Street traded nervously this afternoon after US consumer confidence dropped to a record low. The Dow rose 8.53 to 8124.56.

Barclays extended yesterday's lead, but only just, with a rise of 1.3p to 90p. The price has slumped from 157p in the past week amid fears the bank will need further funding, and may be nationalised. But Barclays has reassured the City, saying it remains profitable and has no need to raise extra cash.

Royal Bank of Scotland added 1.2p to 15.7p while Lloyds Banking firmed 1.9p to 67.1p.

Wolseley continued to reel from yesterday's profits warning, the shares losing a further 21p to 180p, stretching the two-day deficit to 104.8p. Brokers fear the plumbing-equipment supplier will have to turn to shareholders for extra funds to reduce debt.

Panmure Gordon has cut its target from 280p to 170p.

Kalahari Minerals firmed 1½p to 43¼p after the miner reported that uranium resources at a prospect in Namibia had exceeded expectations.

British Land fell 14p to 431p after Goldman Sachs downgraded from neutral to sell and slashed its target from 613p to 383p.

The broker warned that real estate investment trusts will need to dispose of properties to combat the recession in the commercial property market, and that could lead to a dilution of earnings.

Goldman has raised rival Hammerson, 5p lighter at 393p, from sell to neutral but lowered the target from 591p to 484p. It has cut Brixton, off 2½p at 93¾p, from 153p to 103p, Great Portland Estates, 1¾p softer at 218p, from 244p to 221p, Segro, 2½p easier at 163p, from 276p to 190p and Shaftesbury, 2¾p better at 279¾p, from 316p to 281p.

All three companies continue to be rated neutral.

Derwent, off 9½p at 590½p, remains a sell, with its sights lowered from 607p to 537p, along with Liberty International, 5¼p lighter at 375p, with the target down from 581p to 392p.

Merrill Lynch says rich turning to gold bars for safety

2009-01-14T21:37:00.003+08:00

By Ambrose Evans-Pritchard | 9 Jan 2009 | Telegraph UK

Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.

"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.

Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.

The metal should do well whatever happens. If deflation sets in and rocks the economic system it will serve as a safe-haven, but if massive monetary stimulus gains traction and sets off inflation once again it will also come into its own as a store of value. "It's win-win either way," said Mr Dugan.

He added that deflation may prove the greater risk in coming months. "It's very difficult to get the deflation psychology out of the human brain once prices start falling. People stop buying things because they think it will be cheaper if they wait."

Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate. "Don't start selling your government bonds," Mr Dugan said, dismissing talk of a bond bubble as misguided.

He warned that the eurozone was likely to come under strain this year as slump deepens. "There is going to be friction as governments in the south start talking politically about coming out of the euro.

I don't see the tensions in Greece as a one-off. It is a sign of social strain in countries that have lost competitiveness."

Gold in 2008 & the Exciting 2009 | Julian Phillips

2009-01-01T10:29:00.002+08:00

Phillips examines in detail what happened to gold in 2008, and tells us what to expect in 2009. Federal reflationary policies are meant to represent a lifeboat for embattled Americans, but there will be no calming of the storm.

Investors should brace for more of the same volatility experienced in 2008, a situation that can only benefit the gold markets as more and more people realize just why it has such an important place in history. Inflation will accelerate, and gold market fundamentals will push the price upwards as production falls and investment demand grows.

The prospect of stability, effective monetary reform or systemic health is fast disappearing, leaving volatility, fear and doubt in its wake. Central banks may sell their allotted 150 tonnes next year, an amount that will affect the gold price not at all, but they are almost certainly rethinking the "benefits" of building confidence in currencies through such sales.

The attraction of obligation-free, nationality-free and global acceptability of gold will create a rising market for gold and gold shares.

As Alan Greenspan, former Fed chairman, testified before Congress in 1999:

"Gold is always accepted and is the ultimate means of payment and is perceived to be an element of stability in the currency and in the ultimate value of the currency and that historically has always been the reason why governments hold gold."

All in all, 2009 will prove to be one of the most exciting years for gold we will ever see.

[ read more ]

Decline of the USD - Death By Fiat

2008-12-26T12:53:00.001+08:00

There's only one thing more dangerous than a man who breaks the law - and that's a man who MAKES the law - because NO ONE is above him.

-------------- courtesy : wakeupfromyourslumber.com

The United States economy is in steep decline.

The signs are all around us - record breaking numbers of foreclosures, jobs being exported left and right, factories shutting down, bankruptcies and homelessness on the rise, and consumer prices and healthcare costs skyrocketing.

All signals are pointing in the same direction - DOWN.

But, WHY? How did we get to where we are?

To understand HOW we got here, we must understand what RULE of LAW means and how it can be manipulated to serve only special interests such that it becomes indistinguishable from RULE by FIAT.

fi·at [fee-aht, -at; fahy-uht, -at] –noun

an authoritative decree, sanction, or order: a royal fiat.
a formula containing the word fiat, by which a person in authority gives sanction.
an arbitrary decree or pronouncement, esp. by a person or group of persons having absolute authority to enforce it: The king ruled by fiat.

Most people think that Rule by Fiat is corrupt and objectionable while Rule of Law is exemplary and desirable, when in fact the latter can easily degenerate into the former.

If the essential characteristic of the law is the same (i.e., unjust), then the only difference between a monarchy, under which people are commonly known to be 'ruled by fiat,' and a "democracy" under which people are commonly understood to be 'ruled by law,' is simply a formality.

In other words, the democratic process underwhich we are supposedly "ruled by law" is nothing but a charade.

Take for example, the Federal Reserve Act, passed into law in 1913. The United States was not a monarchy at the time, but whether passed by Congress, "democratically" or decreed as fiat by a King, the law's common feature is that it favors one group of people to the detriment of others.

In other words, it is corrupt and UNJUST.

And just as LAWS decreed by FIAT favor one group of people over others, private MONEY created by FIAT does the same.

In fact, the reason people prefer that money be based on something tangible is so that it cannot be manipulated to favor one group over another.

Of course, many people believe that money should be based on gold or silver. I disagree, but that's the subject of a different post.

My point is that it's not just our FIAT money system that is destroying our nation - it's our FIAT legal system too.

Americans cannot remedy the problems that we face as a nation today, unless we realize that our system of democracy is seriously flawed - it enables a corrupt few to RULE by FIAT over the vast majority.

Of course, first and foremost, we must dismantle the monopoly of our FIAT money supply.

But, we must also disarm the corrupt process that enables vipers and extortionists to "legally" establish their RULE by FIAT.

AMERICANS MUST BAN LOBBYING IN CONGRESS.

WE MUST MAKE SURE THAT OUR GOVERNMENT IS BY THE PEOPLE AND FOR THE PEOPLE - REGARDLESS OF WHETHER OR NOT THEY HAVE MONEY.

If we don't, the US will be condemned to CERTAIN DEATH by FIAT.

Is type of Gold Coin / bar important for selling later?

2008-12-04T19:50:00.001+08:00

One, extracted from a forum :

Well, real coins are pretty well known and have been trusted for a long time which include the eagles. Other choices are sovereigns, francs, pandas, maples, lires, kangaroos, pesos and of course the krugerrands. Just know the weight and dimensions of your gold coins as well as your seller. Beware of frauds and stay away from items you don't know well or learn about them if you are going to be a serious gold coin collector. Bars are also good. Forget about the flakes.

For MALAYSIANS, gold coins are minted in Kelantan.

The Six Biggest Myths About Gold

2008-11-22T13:44:00.000+08:00

Gold. People either love it or hate it. There aren’t many who feel ambivalent toward it. Unfortunately, gold is deeply misunderstood by investors, and that misunderstanding is hurting their portfolio returns. Many in the investment community trot out the old myths about gold: that it is a bad investment; that it is very risky; that it is not a good inflation hedge. But is there anything behind these assertions? If investors take the time to examine the facts, these commonly held beliefs simply do not stand up to scrutiny. It is precisely because these myths have become so prevalent that gold is still undervalued. Once the general public realizes these beliefs are not valid, the price of gold will be much higher.

Myth 1:

Gold Is A Bad Investment

A frequently cited argument is that since it peaked at $850 per ounce (all amounts in U.S. dollars unless otherwise noted) in 1980, gold’s return has been poor compared to the major stock indices. However, that peak price was a short-lived, single-day aberration. Investors who avoided the mania phase and purchased gold one year earlier in 1979 at its average price of $306 per ounce also avoided any significant losses during the subsequent bear market. The performance of different asset classes varies from cycle to cycle. The previous cycle from 1968 to 1980 saw the Dow Jones Industrial Average remain flat with significant volatility, while gold increased by 2,300 percent. In the current cycle, which began in 2002, gold has posted a compounded return of 14 percent, while 15 of the 30 Dow components are negative.

Many studies compare gold to equities over periods as far back as the 1700s. But these studies ignore the fact that gold’s price was fixed until 1971. Prior to that time, gold was money and not an investment. Interestingly, virtually none of the stocks listed in the 1700s still exist today. Instead, the returns of major indices such as the Dow are boosted by the removal of bankrupt companies and poor performers, which are replaced by high performers. Three of the 30 companies that made up the Dow in 2000 have since been replaced.

From a strategic portfolio allocation viewpoint it is easy to see why Ibbotson Associates, one of the world’s most highly regarded asset allocation specialists, determined that holding between 7.1 percent and 15.7 percent in precious metals bullion reduces portfolio volatility and improves returns.

Myth 2:

Gold Is Not A Good Inflation Hedge

The arguments against gold as an inflation hedge are usually based on calculations arising from the intra-day price spike in 1980. While gold did not keep up to inflation using daily prices from 1980 to 2002, the annual average gold price has kept up extremely well since 1971, when the price was no longer fixed, Figure 1. During the same timeframe, the U.S. dollar lost about 80 percent of its purchasing power. In fact, all the world’s major currencies have depreciated by significant amounts due to continuous excessive increases in the money supply. The impact of this devaluation on real returns is significant.

Figure 1 - Annual average gold price vs. annual inflation rate since 1980

Gold had increased in purchasing power since 1971.

Conversely, gold has not only maintained its purchasing power but increased it against all major currencies. It will continue to do so as long as the world’s central banks keep increasing the money supply by a greater percentage than their country’s GDP growth.

More importantly, gold maintains its purchasing power not only during inflationary periods, but also during deflationary periods. An extensive study, published by Roy Jastram, analyzed the purchasing power of gold in England and the U.S. from 1560 to 1976. Jastram concluded that gold held its value remarkably well over time. The purchasing power of gold and precious metals actually increases during deflationary periods because other assets decline in price by a much greater amount than precious metals do.

As central banks continue to accelerate the pace at which money is printed, inflation will increase, and the purchasing power of paper currencies will decline. This will result in more and more astute investors fleeing to the safety of gold. As a consequence, gold’s price should rise far in excess of the Consumer Price Index and the true inflation rate. In order to protect portfolios from rising inflation, Wainwright Economics concluded that an all-bond portfolio would need an 18 percent allocation to gold, silver and platinum, while an all-equity portfolio would need 40 percent just to stay ahead of inflation.

Myth 3:

Gold Is A Risky Investment

Risk means different things to different investors. A pension fund may perceive risk as a failure to meet its liabilities, whereas an asset manager may view risk as a failure to meet its benchmark. Most investors, however, associate risk with a loss of their capital or underperformance of their investments in comparison to their expectations. “Risk comes from not knowing what you are doing,” according to Warren Buffett.

There are many kinds of risk: currency risk, default risk, market risk, inflation risk, systemic risk, political risk, interest rate risk and liquidity risk. While all of these apply to financial assets, many do not apply to gold bullion. Physical bullion is not subject to default risk, liquidity risk, political risk, inflation risk or interest rate risk. In the rare circumstance of strong currencies, gold may be subject to short-term currency risk and, at times, to market risk. Unlike financial assets, however, gold bullion cannot decline to zero. Gold is the only asset that can protect wealth from non-diversifiable systemic risk.

Precious metals provide high returns at low risk

Volatility or standard deviation are often used as measures of risk, and gold is considered to be quite volatile. However, when annual compounded returns are plotted against standard deviation, the individual Dow stocks are all more volatile than gold, and all but two of the Dow stocks had poorer performance than gold, silver, and platinum over the past eight years. Figure 2.

Returns are important, but even more important is to compare risk-adjusted returns. Clearly, an investment that has higher volatility may still be attractive if the returns are appropriately higher. Nobel prize-winning economist William Sharpe devised the most commonly used measure of risk-adjusted performance: the Sharpe Ratio. This ratio measures the amount of excess return per unit of volatility. The interpretation of the Sharpe Ratio is straightforward: the higher the ratio the better.

Bullion is unlikely to suffer underperformance risk in the near future. Demand for gold, silver and platinum is increasing for both commodity and monetary attributes, while annual mine production is declining. As the price of oil continues to rise due to production declines and increased demand, inflation will accelerate. As central banks increase money supply at accelerating rates, the purchasing power of currencies will continue to decline. As these two major trends interact with each other, the price of gold will continue to rise.

Myth 4:

Gold Does Not Pay Dividends or Interest

The Bank of England used this argument to justify selling half the country’s gold holdings at the bottom of the market in 1998. It wanted a “safe” investment, one that would generate interest, and it chose U.S. treasury bills. The gold was sold for under $300 per ounce. In the months following that sale, the price of gold tripled, and the value of the U.S. dollar lost 30 percent against the British pound. The currency exchange losses plus the opportunity cost resulted in billions of pounds in losses, significantly offsetting any interest income the Bank might have received.

The same is true for bond investors. In an inflationary environment, the “real” or inflation-adjusted interest rate they receive is often negative. Gold, like any other asset that sits in a vault, will not earn interest or dividends, but neither is it at risk. No asset class generates income unless you give up possession and take the risk of not getting it back. However, gold’s capital appreciation is many times greater than the prevailing interest yields, while not being subject to any of the risks that interest-bearing investments are subject to. For a comparative analysis of holding bonds versus a systematic withdrawal program for BMG BullionFund units.

Myth 5:

Gold Is An Archaic Relic

A comparison of bullion to the larger producers shows gold has outperformed mining stocks since March 2007

Gold is often referred to as an archaic relic with no monetary role in today’s modern digital society. Several facts contradict this view. The world’s central banks still hold 29,000 tonnes of gold in their reserves. Gold, silver and platinum trade on the currency desks – not the commodity desks – of the banks and brokerage houses. The turnover rate of physical gold bullion, between the nine members of the London Bullion Marketing Association, currently averages $24 billion per day. Trading volume is estimated at seven to ten times that amount. Clearly, gold is still trading in its traditional role as an alternative currency.

Myth 6:

Mining Stocks Are Better Investments Than Bullion

While mining stocks can generate impressive returns during an uptrend in precious metals prices, they do not always outperform bullion. It is unfair to compare junior mining companies to bullion because of the huge disparity in risk. While successful junior miners can generate impressive returns, over 90 percent of precious metals discoveries never become productive mines. A better comparison would be the larger producers. While mining stocks have outperformed bullion during the early stages of this bull market, gold bullion has outperformed the major mining indexes since March 2007. Figure 3.

Mining stocks tend to be significantly more volatile and risky than bullion, and during sharp market declines they tend to follow the broad equity markets downwards – even if the price of the metal is rising. During the late stages of the bull market of the 1970’s, mining stocks underperformed bullion. In order to adequately compensate investors for the higher risk, mining stocks would have to outperform bullion.

Conclusion

Investors who take the time to carefully evaluate the benefits of bullion will realize that these commonly held myths do not hold up to scrutiny. Those investors stand to reap significant rewards. Investors who believe these myths are missing out on the opportunity to add an asset class that diversifies portfolios, protects against inflation, and may provide better returns than traditional assets, such as stocks and bonds.

Under a worst-case scenario of systemic risk, bullion may be the only asset that holds its value. As these myths are dispelled and the price of bullion rises, as many mainstream analysts predict, informed investors will benefit from purchasing bullion at today’s undervalued prices.

When the public at large becomes fully educated with respect to precious metals, it will bid up the price. Considering that global financial assets are estimated at over $180 trillion, while total global above-ground gold is only $4 trillion (and above-ground bullion is less than $1.5 trillion), a massive wealth transfer event is likely to occur. It is interesting to note that even a 10 percent switch from financial assets to gold would result in a 450 percent to 1,200 percent increase in the gold price.

The first and second editions of this article are published in Canadian MoneySaver September 2008 and Wealth Management Review 2008 Volume 2

Nick Barisheff
President, Bullion Management Group Inc.
November 2008

Courtesy : Nick Barisheff is President and CEO of Bullion Management Group Inc., a bullion investment company that provides investors with a cost-effective, convenient way to purchase and store physical bullion. Widely recognized in North America as a bullion expert, Barisheff is an author, speaker and financial commentator on bullion and current market trends. He is interviewed monthly on Financial Sense Newshour, an investment radio program in USA. For more information on Bullion Management Group Inc. or BMG BullionFund.

Iran - Yes to Gold !

2008-11-17T19:31:00.000+08:00

Iran discards crude for gold

MUMBAI : Crude reserves were considered the biggest hedge against any eventuality so far. For many oil rich countries, especially the Arab nation, crude was the trump card.

Not any more. Iran’s recent conversion of its financial reserves into gold proves that gold is a better hedge, especially that the prices of crude have fallen flat.

Local newspapers in Teheran reported that the office of Iranian president Mahmoud Ahmadinejad confirmed that action was to avoid problems in future especially with U.N. and U.S. sanctions over the alleged nuclear programmes.

Moreover the crude prices have tumbled and countries like are re-thinking on its strategy to depend its complete economy on crude.

Iran is the world's fourth-largest oil producer and before the fall of 60 percent from peak of $ 147 per barrel, Iran gained considerably. But the lowering crude prices will only aggravate the financial isolation.

Read report from guardian.co.uk

Commodityonline

Gold coins in short supply, command 50% premium.

2008-11-17T16:48:00.000+08:00

CALIFORNIA: Popular gold and silver coins such as the one-ounce gold and silver American Eagles produced by United states Mint is not available for sale in the market and those who sell do it at a premium of 50 percent or more on spot price, according to Michael Maroney, Vice President, Monex Deposit Company.

"One-ounce and smaller gold and silver coins . . . ten-ounce and hundred-ounce silver bars . . . ten-ounce ingots and 32.15 ounce "kilobars" of gold have virtually disappeared from the marketplace," explains Maroney. "They're in private hands now, and people are holding onto them, unwilling to sell them back into the market."

"We've seen a tremendous increase in demand for these tangible assets from private, individual investors who are, quite frankly, shocked and appalled at the steep decline in the value of many of their paper assets over the past few months. These people are angry, they're scared and it appears that many have come to the conclusion that one of the very few reasonable investment alternatives at the present time can be found in the physical precious metals markets," says Maroney.

But many people are discovering that one-ounce and smaller gold and silver coins are becoming harder and harder to find every day, according to Maroney. When these coins can be found, says Maroney, sellers are demanding (and receiving) premiums of up to 50% or more over the per-ounce spot price. "Investors are getting a classic lesson in the laws of supply and demand," says Maroney. "When demand increases for a declining supply of anything, the price tends to increase."

"It's the exact opposite of what's been happening in the 'paper investment' world," notes Maroney. "In stocks, in real estate and other 'paper-based' markets, demand is actually decreasing for an increasing supply of 'paper'. . . and accordingly, we're seeing far lower and even plunging prices in these markets," says Maroney.

"As a result," says Maroney, "I see this as a 'Red Alert' buy signal for investors who may be interested in buying precious metals. The time to buy gold and silver is when prices are relatively low, and when there are supplies available. Prices right now are well below the historic highs set earlier in the year.

And although Monex still has plenty of gold and silver bullion and coin products available, the supply squeeze is starting to affect us as well. I believe physical supplies of metal will continue to tighten, perhaps dramatically so, and I believe prices are going to skyrocket in the not too distant future. There may never be a better time to buy gold and silver than right now," reasons Maroney.

According to Maroney, "Gold and silver have traditionally been held as hedges against both economic and political uncertainty for centuries. And it's no secret that there's a lot of uncertainty throughout the world right now. The U.S. government has bailed out one troubled financial institution after another this year, costing taxpayers at least $700 billion, and counting. Our national debt is now well over $10 trillion. Banks have gone bust. The stock markets are off more than 20% (so far) this month alone! Housing prices have been plummeting with foreclosure rates at unprecedented levels. It's a mess out there right now."

"In troubled times, investors quite naturally gravitate towards 'safe haven' investments that tend to offer more stability and intrinsic value than 'paper investments,'" says Maroney. "Gold and silver fill that bill for many investors. Owning something that is real and tangible . . . something that people have held onto during the 'bad times' for centuries . . . something that the politicians and Wall Street types can't easily manipulate - well, it's no surprise that gold and silver are of great interest to a wide range of people today."

"And at today's relatively low price levels - prices today are 30% to 40% below March 2008 market highs - this could be an ideal time to get started in precious metals or add to an existing position," says Maroney. "As I look around the world's markets right now, I can't see much outside of precious metals that I'd want to own right now. The future for 'paper investments' looks pretty bleak to me. Gold and silver, though, that's a different story. It's pretty obvious that lots of people want precious metals right now."

Says Monex Deposit Company VP Mike Maroney, "If you're worried or concerned about what you seeing happening in this country and around the world right now, and how that could affect your wealth in the years ahead, I think you owe it to yourself to find out how precious metals could or should become a part of your portfolio of investments. We talk to thousands of people a day about that very subject. And an amazing number of them are buying right now . . . more and more people, every single day."

(Courtesy: PRWeb Press Release Newswire)

Money as Debt

2008-10-27T04:20:00.001+08:00

Gold edges up on strong oil, weak dollar

2008-07-11T16:10:00.000+08:00

	2008-07-11 11:00:00

	Commodity Online NEW YORK : Gold prices advanced the most in a week Thursday mainly on oil’s surge,weak dollar and on geopolitical tensions. Mounting tensions over Iran's nuclear program and slumping global equities sparked demand for the metal as a haven. Silver also gained. Gold futures for August delivery climbed $13.40, or 1.4%, to $942 an ounce on the Comex division of the New York Mercantile Exchange, marking the biggest percentage gain for a most-active contract since July 1. Silver futures for September delivery rose 14.5 cents, or 0.8%, to $18.32 an ounce. The metal has gained 23% this year, while gold climbed 12%. In other metals trading, September silver rose 14.5c to settle at $18.32 an ounce, October platinum rose $26.40 to $1998.40 an ounce and September palladium climbed $3 to $452 an ounce. September copper settled 2.05c lower at $3.7185 a pound in chart-related trading. Silver futures for September delivery rose 14.5 cents, or 0.8%, to $US18.32 an ounce. The metal has gained 23% this year, while gold climbed 12%.

DGCX Gold : Falls as Dollar strengthens

2008-06-25T11:15:00.000+08:00

A sharp recovery in the dollar against the euro drove gold price downwards yesterday.

International spot gold traded in the range $907.15 - $877.00 and last quoted at $883.35 ($900.85).

The Euro was affected by data from Euro-zone, which showed German business confidence fell in June to the lowest level since December 2005. The Ifo economic research institute’s business climate index fell to 101.3 from 103.5 in May.

Weak economic data dampened the expectations that European Central Bank would increase interest rate soon.

But official data last week that showed a 10.1 percent decrease in South Africa’s gold production in April 2008, compared to the corresponding month in the previous year, supports the bullion.

The two-day meeting of Federal Open Market Committee to decide whether to adjust its benchmark interest rate from 2% will start today.

The recent data from various sectors in the US have given rather mixed hints regarding the economy.

According to the data released by US Labor Department last week, the initial jobless claims filed in the week ending June 14 fell by 5,000 to 381,000; but the four-week moving average for initial claims increased by 3,250 to 375,250.

Housing starts fell a more-than-expected 3.3% in May to a seasonally adjusted annual rate of 975,000, the lowest level since March 1991, as reported by US Commerce Department last week.

Another data from the Labor Department showed a rise in US consumer prices at the fastest pace in six months, strengthening the growing expectations for a Federal Reserve interest-rate hike. As per the data, US consumer price index climbed 0.6% in May.

The US trade deficit had widened 7.8% in April to a seasonally adjusted $60.9 billion from $56.5 billion in March, according to the report by US Commerce Department. The growing deficit was driven by a surge in crude oil imports, which eclipsed a significant gain in the nation’s exports.

The Bureau of Labor Statistics of the US Labor Department reported a more-than-expected rise in the unemployment rate in May to 5.5%, against the expected 5.1%.The total number of unemployed persons increased by 861,000 to 8.5 million in May, after seasonal adjustment, as per the government's Household Survey Data.

According to the data released by Commerce Department, real gross domestic product of the US increased at a 0.9% annual rate in the first three months of the year, slightly faster than the previous estimate of 0.6%.

Oil prices edged higher as Saudi Arabia’s willingness to increase output from next month was overshadowed by short-term supply concerns due to geo-political tensions in the Middle East and Nigeria.

Weekly Outlook (Spot Gold)

Weakness expected below $887. Supports are $880, $873, $865; resistances $897, $903, $914.

Last day DGCX Gold Aug traded in the range $909.50 – $878.00 and closed at $885.30 ($903.30).

Courtesy Commodityonline 24 June 2008 12:15:41

MCX Silver Futures trading high

2008-06-25T11:11:00.000+08:00

As Dollar gained confidence Silver was the one which faced severe setback last night. Prices on domestic markets of MCX touched a low of 23513 per kg before closing at Rs 23744 down Rs 749.

On COMEX it was a loss of 56 cents in Silver with prices reaching $ 16.795 per ounce at the closure. MCX Silver July expiry contract is trading at Rs 23840 per kg up Rs 97. Resistances for the contract are at 24000 levels.

Today’s recovery has been because of the fact that traders have started the session on bargain hunting, Dollar is so far regained its position at 1.5568. Further clarity in prices will come once the Fed decides about its interest rates.

Courtesy Commodityonline 24 June 2008 16:18:38

The Ben Bernanke effect on Gold and Oil

2008-06-14T03:59:00.000+08:00

By Jon Nadler

Ben Bernanke's dollar-supportive words had a chilling and immediate effect on both gold and oil. The commodity duo started to fall apart shortly after comments by the Fed Chairman echoed the sentiment that an unwelcome rise in inflation had raised the central bank's levels of concern and that a strong dollar policy could lead to a more obvious fight against price increases.

In a marked departure from the tone heard in previous jawboning sessions, Mr. Bernanke linked the declining dollar to the rise in inflationary pressures.

Therefore, his "drawing a line in the sand" as to the amount that the dollar could or should fall by, effectively obviates the "death plunge" in the currency that oil and gold had been eagerly awaiting since September.

The greenback took off on a sharply higher trajectory following Bernanke's words. The risk to the downside for gold has now been significantly augmented once again.

In the interim, George Soros put the oil bubble at the top of the list of causes of the inflationary trend the US has been experiencing. It is possible that today will be recorded as the turning point for the dollar - something that we noted yesterday in the Dessauer comments.

courtesy commodityOnline

Gold, Dollars, and Federal Reserve Mischief

2008-06-06T23:59:00.000+08:00

The mainstream financial press is now reporting the weakening of the U.S. dollar as measured against other currencies. This is unsettling news, as a relatively strong dollar was considered a hallmark of the economic boom of the 1990s- a boom that had far more to do with rapid credit expansion than real increases in productivity. The value of the dollar is down 18% this year compared to gold, which acts as a bellwether for the health of paper money. Gold prices historically rise when faith in paper currencies erodes, as investors seek the intrinsic value of gold to protect themselves from the arbitrary actions of the world’s central banks, including our own Federal Reserve.

Gold is history’s oldest and most stable currency. Central bankers and politicians don’t want a gold-backed currency system, because it denies them the power to create money out of thin air. Governments by their very nature want to expand, whether to finance military intervention abroad or a welfare state at home. This expansion costs money, and the big-government politicians don’t want spending limited to the amounts they can tax or borrow. This is precisely why central banks now produce all of the world’s major currencies.

Yet while politicians favor central bank control of money, history and the laws of economics are on the side of gold. So even though central banks try to mask their inflationary policies and suppress the price of gold by surreptitiously selling it, the gold markets always cut through the smokescreen eventually. Rising gold prices like we see today historically signify trouble for paper currencies, and the dollar is no exception. Should the dollar continue to decline in value, America will find itself struggling to service our already massive debt load even as our foreign creditors become less interested in our dollars.

America once enjoyed a stable dollar backed by gold deposits, a "gold standard" system. This system gradually was undermined throughout the last century, until President Nixon finally severed the last tenuous links between the dollar and gold in 1971. Since 1971, the Fed has employed a pure fiat money system, meaning government can create money whenever it decrees simply by printing more dollars. The "value" of each newly minted dollar is determined by the faith of the public, the total amount of dollars in circulation (the money supply), and the financial markets. In other words, fiat dollars have no intrinsic value.

What does all of this mean for you and your family? Since your dollars have no intrinsic value, they are subject to currency market fluctuations and ruinous government policies, especially Fed inflationary policies. Every time new dollars are printed and the money supply increases, your income and savings are worth less. Even as you save for retirement, the Fed is working against you. Inflation is nothing more than government counterfeiting by the Fed printing presses. Inflation acts as a hidden tax levied disproportionately on the poor and fixed-income retirees, who find the buying power of their limited dollars steadily diminished. The corporations, bankers, and wealthy Americans suffer far less from this inflation, because they can take advantage of the credit expansion that immediately precedes each new round of currency devaluation.

Brilliant Austrian school of economics scholar Murray Rothbard asked a seemingly complex question in the title of his essay: "What has Government Done to our Money?" The answer turns out to be pretty simple: Government consistently debases our money. How and why it debases our money has everything to do with politics, and nothing to do with the laws of economics.

Ron Paul - Texas Straight Talk
June 10, 2002

Report: Long recession seen ahead US

2008-02-09T17:36:00.000+08:00

Sat, 09 Feb 2008 01:38:02

The US economy has entered a recession that will be more painful and drawn out than the usual downturn, a University of Michigan report says.

Inflation pressures will linger despite the retrenchment in consumer spending, complicating the task of policy-makers, the University of Michigan's Richard Curtin said in a report, citing data from the industry group The Conference Board.

"This is no ordinary recession," he said. "The aftereffects will last much longer than the typical downturn."

He said the Conference Board's expectations index is a strong predictor of economic contractions and that it is currently flashing red.

With Americans getting hit with everything from a housing downturn to excess borrowing, things will get worse before they get better.

"Consumers must take more drastic steps to stabilize their finances in the midst of high fuel and food prices, stagnant incomes, and record debt," Curtin said.

The new report adds that a rising wealth gap will, even more than usual, lead to disproportionate pain for middle- and lower-income Americans.

"Growing income inequality has insulated higher income groups to a greater extent than ever before," the report said.

SG/HAR

What is the Nisab?

2007-12-30T04:24:00.002+08:00

To be liable for zakat, one's wealth must amount to more than a threshold figure, termed the "nisab". To determine the nisab, the are two measures: either gold or silver.

Example: In 1423 AH, Suraya's zakatable wealth came to only £65. She owes no zakat. The next year was better for her, and she now owns £2000 in zakatable wealth. She will be liable for zakat after the money has been in her possession for a lunar year.

Gold: The nisab by the gold standard is 3 ounces of gold (87.48 grammes) or its cash equivalent. This is approximately £650 or $926.40, but will vary with the current market value of gold. For the latest prices, refer to the Online Zakat Calculator
Silver: The nisab by the silver standard is 21 ounces of silver (612.36 grammes) or its equivalent in cash. This is approximately £70 or $130.
NISAB FOR KELANTAN THIS YEAR IS RM6,296.82

Dollar down Gold up in Europe market

2007-11-24T17:27:00.000+08:00

Thu, 22 Nov 2007 03:18:25

Unlike the US dollar which has fallen comparing to other major currencies the price of Gold has risen in the European trading market.

The euro traded at $1.4828 up from $1.4815 in New York. It earlier hit a record high of $1.4856 before going down.

Other dollar rates in Europe compared to earlier on include 108.49 Japanese yen down from 109.69, 1.1039 Swiss francs down from 1.1060 and 0.9875 Canadian dollars up from 0.9832.

The British pound was quoted at $2.0565 up from $2.0497.In midday New York trading the dollar bought 108.53 yen and 1.1035 Swiss francs while the pound was worth $2.0582.

Gold traded in London at $797.90 per ounce up from $793.00. In Zurich gold traded at $796.90 bid per ounce up from $792.25. Silver also traded in London at $14.39, down from $14.58.

NA/RA

Currencies and oil

2007-11-24T09:37:00.002+08:00

Countdown to lift-off

Nov 22nd 2007
From The Economist print edition
Gulf countries are rethinking their currency pact with the dollar

Illustration by Satoshi Kambayashi

HARDLY a week goes by without a new reason to be gloomy about the dollar. The latest scare is that members of the oil-rich Gulf Co-operation Council (GCC) might loosen their links to the greenback, depriving the foreign-exchange markets of a reliable buyer of the troubled currency.

The United Arab Emirates (UAE), through its central bank governor, recently hinted that it would like to free itself from the dollar peg, but would prefer to do it in concert with the other GCC members—Saudi Arabia, Kuwait, Qatar, Oman and Bahrain. Last May Kuwait broke ranks and decided to track a basket of currencies. Since then, the Kuwaiti dinar has risen by nearly 5% against the dollar.

Now others might follow Kuwait's lead. Someone close to the GCC says that some members are advocating a substantial revaluation—perhaps by as much as 20-30%—if the dollar's slide continues. Another option being talked about would be to link the Gulf currencies to euros as well as dollars, with up to half the basket in the European currency. Further discussions will take place at a council summit on December 3rd and 4th. Futures markets are already pricing in a slight loosening of the dollar peg—though the UAE's central bank sought to quell speculation on November 22nd by cutting short-term interest rates.

The immediate problem for the Gulf states is that the inflationary effects of the oil-price boom are being amplified by their yoke to a weakening currency. Inflation, which until 2003 was rarely above 3% in the Gulf, is now around double-digit rates in Qatar and the UAE (see chart). Even in Saudi Arabia, where inflation has been more muted, it picked up to nearly 5% in September. Much of the pressure is from rising world food prices, which are a bulky item in consumer-price indices.

A revaluation would help cap inflation by making imported food cheaper. But housing costs are the biggest contributor to inflation in the UAE and Qatar, say Gerard Lyons and Marios Maratheftis, economists at Standard Chartered Bank. Spurred by strong oil revenues, these two economies have been growing at an annual rate of 8-10%, drawing in more workers from overseas and pushing up rents.

The rigidity of the exchange-rate regime gets in the way of policies that might temper these forces. Countries with pegs to the dollar have to mimic the policy of the Federal Reserve. If a GCC state tried to tighten its monetary policy when, as now, the Fed is easing, it would push its currency above the dollar peg.

The trouble is, a policy setting that is right for recession-threatened America is wrong for the GCC, especially at a time when oil prices are reaching record highs, as they briefly did on November 21st, of $99.29 a barrel. The pressures are made worse by speculative deposits, in anticipation of a revaluation, that drive down interest rates and add more fuel to the boom. The broad-money supply grew last year at an annual rate of 15-40% in GCC countries, according to Standard Chartered.

If, as seems likely, some GCC members let go of their existing dollar pegs, what might they put in their place? The simplest gambit would be a one-off revaluation: keep the link with the dollar but at a higher exchange rate. That would cap import prices and soak up the speculative hot money that has added to liquidity. It should also take the steam out of asset markets—and perhaps housing costs—by making investments more expensive for foreigners, including imported workers.

Yet a revaluation would not address the problem of policy inflexibility; the GCC would still be yoked to the Fed. A bolder course would be to follow Kuwait's lead and peg to a basket of currencies. Mr Lyons reckons that the dollar accounts for around 70% of the Kuwaiti basket, the rest made up of the euro and other currencies. Fuzziness about the precise make-up of the currency weighting allows Kuwait some discretion on interest rates—a “great benefit,” says Mr Lyons.

But even this is not ideal. Benchmarking to any rich-world interest rate is unlikely to suit the Gulf, since high crude prices depress income for oil importers but boost it for oil exporters. Brad Setser of the Council on Foreign Relations suggests one way around this problem is to have oil as one of the prices targeted in the basket.

A revaluation has costs. The huge stock of dollar assets held in the GCC would be worth less in terms of the home currencies. But unchecked inflation would also erode the domestic value of foreign assets and in a more damaging way.

A shift towards a looser peg in the GCC would undoubtedly hurt the greenback. At the very least, dollars would be purchased at a slower rate—leading to what Mr Lyons calls “passive diversification”. At worst, the policy might encourage others to follow, sparking panic sales of American assets. That is the main reason why Saudi Arabia is reluctant to move now, when dollar sentiment is so precarious. But given the inflation problem elsewhere in the GCC, the odds are that one or two more members will follow Kuwait.

source economist.com

Gold likely to reach $800

2007-11-07T04:10:00.000+08:00

Sun, 28 Oct 2007 22:41:38

Gold price hit record high.

Gold is likely to hit $800 per oz for the first time since 1980 due to the US sanctions on Iran and conflict between the PKK and Turkey.

Most traders, investors and analysts polled by Bloomberg from Sydney to Chicago advised purchasing gold due to last week's 2.5% rise that pushed the commodity to $787.50 per ounce in New York, said Bloomberg.

Gold soared for three consecutive weeks to a record high on October 26 along with crude as the US dollar fell to the lowest against the euro.

The looming Turkish incursion into northern Iraq has fueled the current trend in gold prices.

MPR/RE

Gold price sets a new record high

2007-10-31T23:12:00.000+08:00

Mon, 29 Oct 2007 22:40:23

Gold price rises as US dollar slides

Soaring oil prices and weak dollar have caused the price of gold to spiral to new record high, ever witnessed during the past 27 years.

The precious metal was traded at a peak of $794.70 per ounce in the London market, the highest price since January 1980.

Since gold price moves in tandem with oil prices, as the US dollar slides, investors often purchase gold as a protection against economic trouble, political turmoil and inflation hedge.

Meanwhile, the euro surged to another record high against the dollar, since its float in 1999, to reach $1.44 on Monday.

Also, oil prices hit a historic new high of $93 per barrel for the first time due to concerns over supply shortages.

MK/FH/RA

Chavez blames US for high oil price

2007-10-26T17:59:00.000+08:00

Fri, 26 Oct 2007 05:46:48

Hugo Chavez

Venezuela's president has predicted the price of crude oil heading for USD 100, calling US responsible for the increasing oil prices.

Hugo Chavez said, " if the United States keeps threatening oil-producing countries or trying to destabilize us like they did in Iraq, the price of oil is going to continue rising.''

Oil futures closed at a new record of USD 90.46 a barrel Thursday on news that OPEC production increases will be slow in coming, and output quotas won't likely be raised at next month's meeting of the Organization of Petroleum Exporting Countries.

Chavez also accused US President George W. Bush of "threatening World War III with atomic weapons."

AGB/MMA

Oil tops $92 a barrel on ME tension
Fri, 26 Oct 2007 22:16:24

Oil hits record high $92

Crude has hit above $92 a barrel for the first time after the US imposed new sanctions on Iran and accused it of supporting terrorism.

Nothing is going to stop oil from heading towards $100, reported Bloomberg quoting MFC Global Investment Management Chief in Boston, Chip Hodge.

Recent Turkish attacks on northern Iraq, the new US sanctions on Iran and dropping crude supplies are among the reasons for the price hike, he added.

Crude for December delivery lifted 0.8% to $91.2 a barrel and futures contract jumped to $92.22 on the New York Mercantile Exchange. Crude has increased 51% from a year ago.

According to the Energy Department, US crude dropped 5.29m barrels to 316.6m last week, the lowest since the week ending Jan 5.

MPR/RA

Commodities and Emerging Market Propel (Gold)

2007-10-23T05:54:00.000+08:00

World Bank, IMF meeting underway (USD issues)

2007-10-23T05:28:00.000+08:00

Data Shows surprise U.S job loss

2007-10-21T05:06:00.000+08:00

Oil prices hovering close to $89

2007-10-19T01:06:00.000+08:00

Turkey is keen to pursue Kurdish rebels despite US opposition

Oil prices are hovering close to $89 a barrel as traders weigh up supply issues and the geopolitical tensions building in the Middle East.

US light, sweet crude, which hit the record $89 mark on Wednesday before easing, is up $1.01 at $88.41 while Brent Crude added 59 cents to $83.72.

Prices had pulled back in early trading after unexpectedly large gains in US oil and petrol inventories.

But simmering tensions along the Turkey-Iraq border kept prices aloft.

There are continuing concerns about tensions between Turkey and Kurdish rebels in Northern Iraq.

Turkey's parliament has approved a government plan to attack rebels and although military action is not considered imminent, it has raised fears of instability in the area.

Opec action?

Comments by a member of the oil producers' cartel Opec that the group may now consider boosting output also helped the oil price pull back.

Nigerian oil minister Odein Ajumogobia said Opec leaders could now meet as early as 17 November, three weeks ahead of their next planned meeting.

Oil traders fear that exports from northern Iraq could be hit

"We are still a month away and it depends what transpires before then," he added.

Prices were also supported by figures showing a smaller-than-expected increase in US gas stocks last week.

Oil prices have quadrupled since 2002 because of strong demand from fast-growing economies such as China and India, allied to instability in oil-producing nations in the Middle East and Africa.

The cost of oil is still below the inflation-adjusted level of about $90 a barrel seen in 1980, when spiralling prices helped contribute to a recession in the US.

Last month, Opec said that it would be boosting its production by 500,000 barrels per day from the beginning of next month, to cope with resilient global demand for oil.

Dollar plunges to fresh Euro low

2007-10-19T00:53:00.000+08:00

European exporters are being squeezed by the high euro

The US dollar has been dragged down to a new low against the euro after the latest piece of US economic data.

Labor Department figures showed the number of people seeking unemployment benefit had leapt by the largest amount since February.

The data boosted expectations that US interest rates could be cut further before the end of the year.

In afternoon trading on Wednesday, the euro hit a high of $1.4305, before pulling back slightly.

It broke the previous record, set on 1 October, when one euro bought $1.4282.

Export implications

The Labor Department figures, which showed an extra 28,000 claims for benefit, came a day after data showing the construction of new homes and apartments in the US had plunged to a 14-year low in September.

The dollar has been sliding since the Federal Reserve cut rates from 5.25% to 4.75% in September to help rejuvenate confidence in the world's largest economy.

This followed a summer of turmoil in the world's credit markets, sparked by record loan defaults in the US sub-prime mortgage sector.

Since then, a raft of mostly disappointing economic news and soft inflation figures has prompted anticipation of further rate cuts.

US deficit far greater then a year ago

2007-10-14T03:08:00.000+08:00

US $, 'Gone with the wind'

2007-09-18T08:32:00.000+08:00

Sat, 15 Sep 2007 21:51:07
Source: Agencies

US dollar is at the edge of a cliff

New data released by the New York Federal Reserve indicate that foreign banks have been the biggest sellers of US currency over the past few weeks.

Since July, these banks dumped over $48 billion of their dollars, out of which $32 billion was exchanged in the past two weeks alone. Experts believe the continuation of dollar selling trend could spell big trouble for the US economy.

The US dollar and consequently the US economy is directly dependant on the exporting of its dollar as the main currency for global energy trades. Moreover, if its value continues to shrink, many countries and most importantly China will decide to replace their dollars with a more stable currency such as Euro or Yen in order to increase their purchasing power.

In a report in The Telegraph, Hans Redeker, foreign exchange strategy chief at BNP Paribas, one of Europe's biggest banks said the reduction in treasuries "comes as a big surprise and its definitely worrying," while adding "the numbers indicate that world central banks are in a hurry to get out of the US."

One of the biggest worries is when China decides to dump its dollars since the country currently holds over 1.34 trillion dollars in its foreign exchange reserves. Chinese media referred to the nation's stockpile of US dollars as their economic 'nuclear option', capable of destroying the dollar at any time.

Beside the imminent danger of dollar's fall, there are other factor contributing to US deteriorating economic conditions including a massive and growing debt loans, huge trade deficit, overspending by the government and a corrupt financial system which mean the US economy is certain to fall sooner than later.

"The [US] jobs data ... is simply horrific and fans the most pessimistic fears -- the housing market woes will undermine the US consumer, push the US economy into recession and drag down growth in much of the rest of the world," said Marc Chandler, foreign-exchange strategist at Brown Brothers Harriman in New York.

"A 25-basis-point cut now would be disappointing. The Fed needs to get ahead of the proverbial curve."

MAK/KB

Iran's gold export hits $350m

2007-09-02T12:28:00.000+08:00

Sat, 01 Sep 2007 13:20:44 Press TV

Iran has exported at least $123 million of gold since March 2007.

Iran's official figures indicate Iran has exported $350 million of gold in the past two years without taking into account undeclared exports.

Managing director of Iran's Gold, Jewelry and Silver Industry Export Development Fund, Ali Fakhr-Movahedi, asserted that the actual export volume of gold should have been nearly $2 billion if undeclared exports had also been calculated.

Iran is the world's eighth largest exporter of gold and jewelry, Fakhr-Movahedi added on Tuesday.

Referring to the extreme government incentives Iran offers to promote the gold industry, he stated that gold export tariffs were 6 percent several years ago, but have been set to zero.

Over $123 million of gold ornaments and jewelry were officially exported from Iran since March 2007.

Persian Gulf Arab states including Kuwait, Bahrain, Oman and the United Arab Emirates as well as Central Asian countries were the major customers of Iran's gold.

2007-07-11T11:42:00.000+08:00

AP MONEY MINUTE - Blockbuster, Stocks, Microsoft

2007-06-14T11:09:00.000+08:00

Invest your money into gold

2007-05-23T08:37:00.000+08:00

GOLD - Using it to attend to your needs.

2007-04-26T10:21:00.000+08:00

(This is the last part of this article, if you are new to this blog you will have to read from the earliest postings at the bottom of the blog).

Possible future value of Gold

In April 2000, gold was selling for $279 per ounce. Yesterday, at the close of the market it was $680.00 per once, that’s more than double the price.

With the present scenario of USD as the determining factor in the value of fiat currencies of other countries for or and it is tied to the price of the black gold, the oil, not the METAL GOLD, as has been explained in the earlier postings, which took place in the very early 1970s. The USD which is managed through the interest rates and hence too, the other fiat currencies . If a future value analysis is done, unless there is a drastic ond revolutionary change in the world currency system, chances are the price of gold in twenty years time is going to be more than 5 times of what it is today.

Future use of Cash

For instance your need some immediate cash to finance for your children education in some state university ( IPTA ), say the cash needed then to pay for the fees is RM7500.00 some 20 years down the road

You can utilized part of the Gold by pawning it, in RM worth of Gold needed is

60% = 7500

100% = 12500

If the cost of Gold then is RM360/g

Then the amount of Gold needed will be 35g of Gold

A case for allocation for redemption

For this calculation you have to use the concept of time value of money. I would suggest that you progressively safe money in a very secure place say a proven unit trust or mutual fund scheme (in Malaysia-like the Government Sponsored and Guaranteed Schemes).

As an example of a return, 9% per annum. Let’s assume that you pawn the gold to raise RM7500 and that you plan to redeem it after 10 full months.

Thus we have this scenario,

Amount needed to redeem = Amount Pawned + Fees

Thus we have,

FV = 7500.00 + (7500.00 X 0.75% X 10) = 8062.50

You will be depositing monthly at a return of 9% per annum

Payment will be made 9 times monthly ( for full 10 months )

The amount monthly your have to set aside in future will be RM870.00 per month at the end of every month.

( For above calculation I used ms-excel 2003 functions )

END of GOLD, still the best store of Value.

Accumulating Gold for personal financial plan.

2007-03-14T16:41:00.000+08:00

For personal financial plan for Malaysians, living in Malaysia I would recommend that you keep as a store of value a certain among of gold, depending on your life style. Let discuss how much good to keep, what to do and the how to procure them.

i. Answering how much to keep?

In these plan, we are planning to cover your contingencies using gold and the pawn houses. Thus initially say 3 month worth of your actual survival expenses whole based on the pawn valve of gold in the Islamic Pawn Houses. Say you need RM1500.00 a month – single and without dependents.

Calculation example :
1. A month need - RM1,500.00
2. 3 months need - RM4,500.00
3. That 60% worth of gold
4. 100% means - RM7,500
5. Present cost of gold approximately RM72.00 per gram 18-20 carat
6. Have to acquire – 105g

Keep this in view and review it once a year every Ramadhan. Bear in mind that last year limit of gold excluded by the Islamic zakat (taxation) on gold is RM6000.00 for year 2006. So, ask your mum or sis to wear the gold or part of if it reaches that amount. Acquired the gold progressively and If it need be then increase the amount to be accumulated if you have enough resource.

Risk factor, if you like you may increase by 10% of the final amount to note that you have accumulated within 3 years and the second year is taken as the time you have accumulated it. The risk factor is like a percentage taken for inflation to cover the time value of money

ii. Answering what to do?

You are progressively acquiring gold according to your affordability to an amount of 3 months salary.

1. Your purchase of gold is subject a criteria of preparation contingencies as stated and discussed above or earlier.
2. Criteria 3 months reserved.
3. Long term investment.
4. Keep in touch, buy when price of gold low in short term, you can check the
Gold price cycle for previous years.

iii. Answering how to procure?

If you consider the first 3 years of your career to accumulate that amount of gold paribus celeries (all other things remains the same) you will need approximately,RM 7500.00 / ( 3 years x 12 months ) you need to save approximately RM210.00 ( to the nearest RM10) a month for the whole 3 years.

1. Accumulate progressively to accommodated anticipated high & low prices period.

2. When you have some money but still inadequate to buy gold you may keep the money in a PNB for Malaysian, and you will get same nominal return at the year end.

You can start buying gold in the band range of RM500.00 to RM1000.00 per item so you may acquire gold every 3 to 5 months for jewelries, try avoiding those with human or animal figures and no valuable stones like jade or diamonds please! Islamic pawn houses do not like those things and hence will not accept them for pawn. Your mum or mum-in-law can assist here. They will be familiar with the local goldsmith.

You can get gold minted in Kelantan. Which started recently. Depending on cost of gold, the Kelantan Dinar value is if I remember correctly RM340.00 a piece I think recently. Probably details about gold and for buying them can be obtained from the Pejabat Setiausaha Kerajaan ( State Secretary’s Office ), Tingkat Atas, Blok 7, Kompleks Kota Darulnaim,15503 Kota Bharu Bandar Raya Islam, Kelantan Darulnaim, Malaysia. Telephone number +609-748 3529 (DL) , +609-748 1957 ext 7810 Facs +609-743 3729

The first three years just accumulate Gold!!!

LIQUIDITY OF GOLD for PERSONAL FINANCIAL PLANNING

2007-01-16T11:52:00.000+08:00

In this part of the world, my country Malaysia and especially my State, Kelantan, we have the Islamic pawn houses called Ar-Rahnu. With the presence of Ar-Rahnu, which cater for the liquidity of gold – it is just a perfect social need.

These pawn houses are like “safety boxes”. For gold safekeeping and the gold owner can get a certain percentage, as a loan, normally 60 or 65% of the market price of gold, in Malaysian currency (Ringgit Malaysia, RM). They charge a storage fee of 0.75% per month on simple interest, on the amount of cash taken out for the gold deposit. Though it is a secured loan the financial charges are much lower than say credit card where you have a 1.5% per month interest and compounded.

The norm here is that, these pawn houses have a standard term of 6 months for any loans taken. However they generally give a grace period of 4 extra months so, in summation, it comes to 10 months. If the owner does not redeem their gold, the gold is placed for auction but the extra cash obtained will be refunded to the owner.

At times when the value of gold is higher and it is more than enough to cover the the storage charges. The owner may redeemed the gold without actually having to produce the required cash. These pawn houses will renewed their contract and disbursed the owner the difference. However the onus is on the owner to keep tract of the gold prices.

Chances are with the present ICT technology, you will have no difficulties to keep tract of the gold prices, and the gold owner can get away – from losing some of the gold, in financial terms, without taking the gold out of their safety boxes. The gold can always be in the pawn house's safety box, after all they are insured. The table for gold prices included below in USD per gram reflects exactly what the price of gold in Malaysia is, after conversion of the USD into RM. The chances of the gold owner losing the gold to the pawn house is close to nil.

As a final safety valve, it should be mentioned here that the pawn papers or receipts can be sold in the open market or by approaching individuals who are keen in buying gold. It may be slightly lower than the market price but it is a cut loss option and only a marginal loss.

What does this information got to do with - personal financial plan.

After presenting the rationale above, one good contingency plan is to cover the sudden need of cash is by using gold and deposit it into these pawn houses when the time of need arises. The occasions for such a need can be:

1. Hospital bills – in case of emergency. Even if you are insured, you require cash before your insurance claim come out. Hospitalization and surgical insurances are indemnity based contracts.

2. Marriage – my recommendation will be to accumulate the gold before marriage. The focus on the gold purchases will reduce your other savings, one may need to use the gold for marriage expenses.

3. Children entering Tertiary education – Start up expenses are heavy. During that beginning of a children tertiary education, the gold could be pawned, allowing one to spread the cost throughout more months .

4. Cash Need between jobs – when someone leave his current job and in a no-income situation while looking and waiting for another job. Should that situation arises the gold can be pawned.

For personal financial plan for Malaysian living in Malaysia I would recommend to anybody to keep, as a store of value a certain among of gold, depending on their life style. In the earlier this and earlier posts I had discussed the aspects of what and where. It the next coming posts, let us discuss the how part of the plan.

To my knowledge, in total sum, in countries like India the people kept a lot of gold. The writer has to admit the lack of knowledge about India or other countries of their pawn system and culture. As such, for those not living in Malaysia, for example, those who are living in India. They have make their own study on the liquidity and practicality of using a limited amount of gold for their personal financial plan. In Malaysia, at present, I believed not many are open to this idea of using gold as a part of their personal financial plan.

Why use Gold for personal financial planning, a view.

2006-12-30T07:09:00.000+08:00

A public speaker the former Minister of Finance of Malaysia informed his audience in a small alumni group that since the time of the Prophet PBUH some 1400 years ago the price of a chicken is almost the same in terms of silver or gold, that was during the Asean financial crisis. All the hu..ha about inflation and time value of money is on the fiat currency. Interesting enough it did not apply to the relatively rare precious metal, gold - though like oil, finite in supply in this world. If the minister is right gold remained a chicken all these years without turning into chicks after 1400 years, then certainly it is a good store of value.

With the introduction of e-currency the gold is not being side stepped. e-currency come in the form link up to both Gold and fiat currency. The world appear more receptive to eGold, conversion into fiat currency and buying into eGold is seen as a there and then necessity, conversion more for local expenses and buying to make available their money, in their account, elsewhere on the globe to meet their expenses there. Gold is more prominent and easier to comprehend and relate to. Gold will stay on, no matter the USD or any fiat currency to remains strong or slide down. It is worth to have gold as a store of value. Gold’s intrinsic value and could be related to any fiat currency, is clearly manifest here as seen, from the demand of e-gold is there. It denotes public acceptance of the value of gold.

To have gold as a store of value? Gold have been known to be a valued possession. Ladies of the old days no different from those doing petty trading today at Pasar Siti Khadijah in Kota Bharu, Kelantan (local market) – they are said to be gold rich, accumulating progressively until gold filled up the whole length of their arms. The first thing that crop into our mind and our concern is – how liquid is gold? If we are forced to sell it off at a forced sale value, that will not be any good. We may still end up loosing? Is it so? Is it practical then! We shall discuss about this aspect in the next posting – the strategy, how to handle that.

Gold fluctuate in the short term but in the long run it rises steadily compared to the fiat currency. Gold performance is like a ‘matured stock exchange’ and doing well perpetually or without the economic cycle of the slumps. Thus it is even a better store of value than shares certificate. Thus anyone who keep gold has to think to keep it in the long haul, long term.

e-currency - Gold, private money and the world

2006-12-20T14:44:00.000+08:00

We already heard of electronic money and it is in practice now. e-currency became fashionable about a decade ago. You have probably come across e-currency like PayPal and eGold and half a dozen or so of others.

The e-currency is borderless unlike fiat currency. The ones like PayPal is money backed and valued as such. Another gold backed, like e-gold – started by a couple of men and said to be fully backed by gold. It is interesting to note that though these e-currency are said to be more risk free. e-currency, being owned privately, falls under the category of private money.

With this e-currency, one can trade easily across nations and continents. e-currency is easily transferable from one hand to another via the internet. People have to convert the e-currency into fiat money acceptable in their various national boundaries for usage. There are e-currency changer now in almost all major cities in the world. Hence the e-currency is as liquid as any fiat currency now. Today’s HYIP (high yield investment Products) are e-currency investments. PayPal for instance had just increases their fiat money or national currencies acceptance portfolio by more than a dozen. Soon the whole membership of the UN will be in their list.

Global Socio Economics impact of e-currency and global trading.

The present economic scenario in the states, as I heard of, is that for every 100 Americans, 3 are billionaires. The other 97 are working very hard to make them rich and as a result making that 3 billionaires richer. Will it be that way, with the private money - e-currency? Or will it be worst in terms of accumulation of wealth in the hands of the few and the growing gap between the rich and the poor.

I am being positive here. If the economist are right that competition reduces the margin of profits especially made by middle man. ICT has enabled international trade to blossom and developed at a pace, to a distance and a speed unlike ever seen before. These sourcing and outsourcing activities will result in tremendous cross border transfer of wealth, mainly from United States to China and India. China and India are the countries with human capital to capitalize on the means production, with financial capital too will be flowing into those countries, in the form of economic investments to back up and promote that. The political game will come into play too. Issues like Intellectual Properties and Patterns. Nonetheless still the general demand in America and Europe will create jobs and prosperity in China and India. For these reasons, non fiat currency will become dominant, a primary factor that accommodate and enable the wealth transfer, e-currency and eGold, though private money, will play the key role and fiat currency wil play a subordinate role as a final exchange is needed.

Secondly the delivery system will be more open, more people will be involved in sourcing and supplies. With the ICT being affordable to many. Many will end up in trading . The present bubble created by ICT due to successes of the pioneers and crowd psychology will die down and reached an equilibrium with a sizeable ratio settling for ICT industry and ICT related and created opportunities, feeling independent in their own way in “wealth ownership” democracy of todays world.

The opportunity created by ICT result in twofold aspect to the American politics and civil society. Firstly the Americans as a whole will feel a much friendly world outside their continent and redefine their relationship to suit such scenario. Geography and history will be relearned in the context of global fraternity. Secondly, American will ceased to see themselves as the center of the “universe”, the world do not revolved around them and the 3% wealth owners of America and hence the world. A new sense of social awareness and political freedom will engulf America and the general political mentality of Americans, this should lead to a position where they will modify their world view to be more sociable and pleasant for humanity at large.

The present trend will take a different course with “the war on terrorism” and “us and them” mentality shed off. ICT has developed friendship and peace on people to people basis. The leadership cannot afford take a different stance. Open skies gives information that propaganda and twisted journalism have no room to spread and survived. Only through open arms and prosper thy neighbour attitude can American and Europe, the west, can continue dominance, otherwise their position will be taken over by China whom will be seen as friendlier and more compassionate.

These happenings are made possible by private money such as eGold, PayPal and whatever.

In the next posting we will discuss about Gold for personal financial planning.

Fiat Currency and the USD

2006-12-16T12:12:00.000+08:00

Once, we had paper money backed by gold , meaning, just alike 'gold deposit notes 'you can redeem gold with your paper money on demand. Now, basically anywhere in the world you cannot redeem your paper money with gold. in fact, in total sum, there are more money in circulation than gold. Thus, we can safely say that paper money is not backed by gold any longer. The reason you can buy gold using paper money is because the sovereign of the land or the government had given a value to it. Look at your ringgit notes, what does it says? “Wang kertas ini sah diperlakukan dengan nilai ....” signed the Governor, Bank Negara

Malaysia

. Paper money is only a form of money but not the only form. You have m_o, m₁, m₂ and m₃ andthat’s excluding electronic money.

Today any National Government gave a value to its money, that’s why it is termed as ‘fiat currency’. Economic parameters are of course taken into account. International economics, trade and political scenarios do dictate the value of these fiat currencies issued by the various National Governments. Paper money itself becomes a commodity traded internationally All these factors places a value to one National Government issued paper money relative to another. At a time of serious political crisis, one National Government issued paper money can be utterly useless. It was said that the Vietnamese boat people could ran away, survived and functioned on the Malaysian Island was because they had gold with them.

The world needs energy to function. The prime basic commodity that generate energy is oil. The USD had managed to position herself as a prime fiat currency that is accepted to buy oil, the number one source of energy. The two major bourses of oil in the world are the London based IPX and the New York based NYME, both trade in USD.

That’s how and why the USD becomes the major currency on this planet, today. The US greenbacks had shifted from a position of being back by gold (at least in theory) into “petrol dollars” being back by its ability to buy black gold or oil. Black gold is the number one need of the world today thus so too is the USD, it becomes the number one fiat currency.

National Governments have to keep USD in reserved to prepare for eventualities, in which case the USD will be needed to be used to buy oil. This causes a factor why other National fiat currencies are valued or priced relative to the USD.

e-currency, fiat currency and Gold

With the advancement of ICT, what will the future be like? With this e-currency coming into the picture and the equation of world economics.

We shall look into e-currency briefly and its possible socio-economic impact globally. Then we will look into Gold and how we should utilized it in our personal financial planning.

Gold Still the best Store of Value

2006-12-07T00:47:00.000+08:00

. . . followed by a recommendation to use gold in personal financial planning.

Evolution, they said had a medium for it to take place. For trade to take place it needed a medium too and that medium is currency, which now is a fiat currency. There was a time in history where gold was minted to be used as a currency. Gold however has an intrinsic value that do not degenerate and society at large was very concerned, possessive and protect of gold.

Because of the intrinsic value gold was easily acceptable and as such became a medium of exchange. Gold was deposited in for safekeeping in a secured place, the gold storage, stores owned by individuals. Nowadays we still do that but with government recognized banks. These stores then produced ‘deposit notes’. To make the story short people accepted these notes to pay for goods and services. These deposit notes became the precursor of today’s paper money.

These were redeemable using these deposit notes. In another word gold back-up those deposit notes. Some smart store owners realizing that the gold deposited were never redeemed - all at once. As a matter of fact some kept the notes and some deposit notes were just changing hands not much unlike today’s paper money.

Thus those smart men began to write deposit notes without any gold deposits for a fee, in anticipation that some depositors will not redeem their gold. That was the ancestor of toady’s concept of ’statutory requirement’. Today all Central Banks and private institutions controlled by Sovereign National Governments practice this, including or more so the Federal Reserve of America.

In the next posting we will look into third aspect where paper money became a fiat currency. Then we will discuss generally on gold itself, why it is the best store of value . . . followed by a recommendation how to use gold in personal financial plan.