Why hard assets shine in hard times
BY DAVID BRADSHAW ~ Editor, Real Money Perspectives
Global Currency Crisis ~ New Special Report & CD
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Aug 31, 2010 ~ ((M-F podcast)) ~ gold fraud alert!
Tuesday gold prices shot toward $1,250/oz. on safe haven buying, goodbye Dow 10k? Gold last traded up $11.30 to $1,247.70/oz., silver rose $.36 to $19.40/oz.
* "Will gold continue to shine?" asks CNBC, as a decade-long bull market continues to climb a wall of worry. "Yes!" says veteran gold bug Frank Holmes, for more reasons than his short TV segment allowed him to cover. Thankfully the gold bears still have a following, as the London Telegraph story Gold: is it really a safe haven? outlines. Without these gold bears prices would already be $1,500-$2,000/oz. Meanwhile, gold rose 5.5% in August, silver jumped up 7%.
* Gold Rallying to $1,500: "Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds. Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21," reports Bloomberg [Ed. Note: Gold's Future Bright -80 experts.
* How will gold perform in a double-dip recession?: "As the U.S. economy heads for a double dip it will likely try and inflate itself to avoid a depression. Meanwhile major economies are already diversifying out of the dollar. The big picture for the long-term could not be better for gold, than it is now. Gold has proved capable of performing well in deflation, in uncertainty, in fear. Internationally it is liquid in all parts of the world. It is internationally acceptable cash. More than that, it is an effective counter to the devaluing of currencies through quantitative easing or currency devaluations," reports Mineweb.
* Get Ready, Get Set, Gold! - the best months are just ahead: "Looking at more than four decades of seasonality, September has been the best month of the year for gold and gold stocks. The gold price has climbed an average of 12.4% during the 2001-09 seasonal rallies even as the price steadily moved into four digits. Based on the long-term record, this may be a good time for investors to consider establishing or adding to a gold or gold-stock position in advance of seasonal demand growth," reports Mineweb.
* Last week silver lead the worldwide rush into hard money, rising 6%, while gold inched up 1%. "Gold is its own money, and no government can print or inflate it. Historically when paper money's value evaporates, gold rapidly gains in relative value," writes Swiss America Chairman Craig R. Smith in a new special report.
* Last week "Fed Chairman Ben Bernanke said the Fed will consider making another large-scale purchase of securities if the slowing economy were to deteriorate significantly and signs of deflation were to flare. Bernanke's remarks, prepared for delivery to a conference here, came 90 minutes after the government said the economy slowed sharply in the second quarter to a 1.6 percent pace," reports AP.
* Snapshot of economy bleaker: "Consumers can't be sure their jobs are safe, with unemployment so high. Business executives don't know if sales and profits will grow enough to justify adding jobs. And potential changes to tax laws at the end of this year and other policy reforms also make it hard to plan ahead, economists say. 'People have been overwhelmed by uncertainty,' said Ethan Harris, an economist at Bank of America Merrill Lynch," reports AP.
* "The World Gold Council's latest quarterly recap of the gold market: demand is strong (up 36% from a year earlier), supply (up 18%) is not keeping pace, and global economic worries are driving investors toward gold as a safe haven. Investment demand in the second quarter of 2010 more than doubled compared to the same period in 2009," reports Frank Holmes at Kitco.
* Silver `Looking Cheap': The ratio of gold to silver dropped to a three-week low after gold's rally to the highest level in eight weeks prompted some investors to buy the white metal. An ounce of gold bought as little as 64.96 ounces of silver today, the lowest amount since Aug. 5, according to Bloomberg. Silver has outperformed the yellow metal since Aug. 23, gaining 6% compared with gold's 1.4% gain, as investors bought the white metal because of its relative cheapness to gold. Silver is unique in that it is a precious metal and an industrial metal," reports Bloomberg.
* Global Economic Fears Push Investors Out of Stocks: "If people had confidence, they wouldn't be pouring money into Treasury securities yielding nothing, and paying more than $1,200 for an ounce of gold," said Morris Mark, president of Mark Asset Management. "There's a concern here that the strength of the world economy is not going to be able to get us out of this," reports WSJ.
* Housing weakness stalling economic recovery: "New U.S. single-family home sales unexpectedly fell in July to set their slowest pace on record, government data showed on Wednesday. The Commerce Department said sales dropped 12.4% to a 276,000 unit annual rate, the lowest since the series started in 1963. Meanwhile, sales of previously owned homes dropped 27% in July to their slowest pace in 15 years. While the end of the tax credit is distorting the housing data, a 9.5% unemployment rate is also worsening the situation. Continued housing weakness is holding back the broader economic recovery, reports CNBC.
* Economy Caught in Depression, Not Recession: "Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression," Gluskin Sheff economist David Rosenberg told CNBC on Tuesday. "The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed. "False premise," Rosenberg said. "And guess what? We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%. Gold is operating on its own particular set of global supply and demand curves and should be an out-performer, especially when the next down-leg in the U.S. dollar occurs."
* "With the trillions of dollars in government spending and stimulus will come higher taxes and a higher cost of living in 2011. Government-induced monetary inflation will, like locusts, reduce the value of our life-savings dollars to mere pennies, unless our dollars are converted into something that political fakery can't destroy. Smart money has snapped out of the political trance and begun exchanging paper dollars for gold, the world's best anti-dollar!" writes Swiss America Chairman Craig R. Smith.
* "The Dow Jones Industrial Average will lose about half of its value over the next couple of years as it follows a Nikkei-like pattern of several sharp rallies in an overall decline, according to Charles Nenner of Charles Nenner research. Stocks are currently in a bear-market rally...leading indicators suggest the Dow will drop to 5,000 in the next two to two-and-a-half years, Nenner told CNBC. Nenner is bullish on gold and silver over the longer term and expects the precious metals to start a new leg higher by the end of the year."
* Rethinking Gold: What if It Isn't a Commodity After All?: "For a long time, we've all heard that gold is a commodity — no different, really, from silver or wheat or pork bellies. The implication [of the long-term opposite correlation between the dollar and gold prices] is that gold isn't a commodity — at least not one that hews to the definition of something that people and industry consume. Instead, "gold is a currency" whose daily price is a gauge of the market's concern about the "potential diminishment" of the purchasing power of the dollar and other paper currencies, says Paul Brodsky, a principal at New York's QB Asset Management. If he is correct, it is the potential longer-term weakening of the dollar that is the real issue for the gold market, not inflation or deflation," reports WSJ.
* Groundwork Being Set for Major Gains in Gold and Silver: "While gold has outperformed all other asset classes in the past ten years, an analysis of our current economic and financial environment indicates that the ongoing increase in precious metals has only just begun and should ensure a sustainably positive environment for gold and silver, gold and silver shares and warrants in the years to come. Bull markets end in euphoria, and this substantiates our argument in favor of an imminent transition to an accelerated trend phase to somewhere between $3,000 and $10,400/oz. for gold, between $75 and $650/oz. for silver and in excess of $250 per barrel for crude oil," reports Ronald-Peter Stöferle, CMT, Erste Group Bank AG, Vienna, Austria at Munknee.
* Gold prices closed up 1% last week, while silver prices dipped 1%. Ongoing economic worry is supporting precious metal prices as the summer draws to an end. September has been the best month of the year to buy gold, averaging 12.4% growth during the seasonal rallies, according to researchers at Mineweb.com.
* Small Investors Flee Stock Market: "Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market. Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute. People have lost a lot of money over the last 10 years in the stock market...In the financial markets, there is one truism: flow follows performance," reports NYTimes.
* Getting Ready For A Dollar Collapse? "Could the Federal Reserve's decision to restart its quantitative easing program trigger a dollar collapse? That's what John Hussman, a fund manager, argues in his latest weekly note to investors. And the case he makes is strong ... as long as one ignores that other central banks don't want and are unlikely to accept a big dollar devaluation. The result will benefit borrowers at the expense of savers worldwide. But, then again, maybe given the state of global imbalances–too much debt in the U.S. and other Anglo-Saxon economies; too many assets held by Chinese, Japanese and oil-producing countries–maybe a massive bout of global inflation is the only way forward," reports WSJ.
* "Last week's jobless claims rose to a nine-month high and manufacturing in the Philadelphia region contracted. The Conference Board said its index of leading economic indicators climbed 0.1% in July, with the lackluster rise pointing to slowing growth. The reality of the current recovery is that more sectors of the economy remain weak than are expanding," reports Marketwatch.
* Western Economies Face Hyperinflation: "There will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park. The world financial system has temporarily been on life support by trillions of printed dollars that governments call money. But the effect of this massive money printing is ephemeral since it is not possible to save a world economy built on worthless paper by creating more of the same. The hyperinflationary depression that many western countries, including the US and the UK, will experience is likely to mark the end of an era that has lasted over 200 years since the industrial revolution," reports Egon von Greyerz of Matterhorn Asset Management.
* The Federal Reserve began buying U.S. Treasuries, as part of a plan recently announced to help pump money into the economy. The global macro data will set the stage for a supportive gold buying environment as more money in circulation can lead to devalued currencies," reports TheStreet.
* Hot money in inflation mode: "The government reported producer prices rose for the first time in four months in July, while industrial production rose more than expected. The Fed's cheap money, or near-zero interest rates, after having failed to inspire much lending and borrowing from banks and consumers, is for sure leading investment banks and hedge funds to make big bets on such things as gold. Eton Park Capital Management LP, a hedge fund, revealed it took a big stake in the SPDR Gold Trust ETF on Monday with a regulatory filing," reports Marketwatch.
* "Renewed concerns over the growth of the U.S. and global economies.... and safe-haven plays are likely to continue to lift gold prices. Barclays Bank said gold is comfortable wearing its 'currency hat' because of a return to worries over macro economic fears, so investment demand should support prices in the months to come," reports KitcoNews.
* Obama tax increase would be 'bullet in the head' of recovery: "U.S. Chamber of Commerce economist Martin Regalia on Monday said the tax increases advocated by President Obama would essentially kill any chance for an economic rebound. "That's what you're suggesting, is a corporate bullet in the head," Regalia said. "That is going to be a bullet in the head for an awful lot of people that are going to be laid off and an awful lot of people who are hoping to get their jobs back," reports TheHill.
* Economists Want Policy Makers to Back Off: "30 out of 48 economists.... said the economy doesn't need any more fiscal or monetary stimulus. Six economists said more fiscal stimulus is necessary, while five want more monetary stimulus from the Fed and seven said the economy could use both. The survey was conducted prior to the central bank's announcement last week that it would reinvest proceeds from its mortgage-backed securities and agency debt portfolio into Treasurys, essentially boosting monetary stimulus. 'The economy needs government to get out of the way,' said Stephen Stanley of Pierpont Securities," reports WSJ.
* The End of American Optimism: "There seems to be a structural change in the American economy. The relationship of household debt to income has proven unsustainable. The ratio is normally established somewhere below 100%, but in 2007 the debt ratio hit 131% of income. It has now fallen to 122%, but at this pace it would take another five years to bring it under 100%. The pre-bubble norm was 70%. To get to this ratio again, debt would have to be reduced by about $6 trillion. In the meantime, we may well be looking at a vicious cycle of defaults that in turn would produce credit tightening and still more economic weakness," reports WSJ.
5 REASONS WHY $1,200/oz. GOLD IS A BETTER VALUE THAN $600/oz: "YES ... GOLD AT $1,200/OZ. TODAY REPRESENTS AS GOOD, IF NOT A BETTER VALUE THAN AT $600/OZ. BACK IN 2006 FOR AT LEAST FIVE GOOD REASONS.
1. GOLD: RISK VS. REWARD RATIO
2. GOLD: FILLS THE CONFIDENCE VOID
3. GOLD: PRICE REFLECTS FAIR VALUE
4. GOLD: NOW ACCEPTED AS MONEY
5. GOLD: HONEST MONEY, COINED FREEDOM
* Chinese Invest in Europe, Japan -- Less in U.S: "China is voting its views on America's economy with its own pocketbook as the Chinese are starting to invest more in Europe and Japan and less in the U.S. A Chinese government economist also reported last week that China is buying Japanese government debt rather than U.S bonds because they believe it's a safer investment," reports CBNNews.
* "I find it fascinating that the Chinese government is telling the public to go to gold, which is the exact opposite strategy that's being followed in the Western world. I think they realize that this is probably the safest place for their people to be invested in the coming period. The Chinese are very smart. I think, quite frankly, that in the end the Chinese will back their currency with gold," said Sprott Asset Management's Chief Investment Strategist John Embry reports Mineweb.
* "The US economy is almost certainly headed back into a double dip recession, and economists aren't seeing it because they're using the old rules of thumb that don't apply this time, well-known economist David Rosenberg told CNBC.
* "The US trade gap grew at its fastest monthly pace on record to reach $49.9 billion, threatening to erode already slow economic growth. 'This is spectacularly terrible,' said economist Ian Shepherdson of High Frequency Economics, explaining that rising imports eat in to already anemic US growth figures," reports AFP.
* Global fears strike stocks, Dow slides 265: "Stocks are deep in red after the U.S. trade deficit widens and Asian economies' slowdown signals and a subdued Bank of England join concerns about the Fed's statement to unsettle Wall Street," reports Marketwatch.
* "The U.S. dollar slid to a 15-year low against the yen Wednesday, dragged down by the anemic recovery in the world's biggest economy. Investors stepped up selling of dollars after the Federal Reserve announced Tuesday additional monetary easing steps in a bid to shore up the flagging U.S. economy," reports TimesUnion.
* The world is facing a serious currency crisis: "NOT so much a 'forgotten' as a hidden war, the conflict currently playing out in foreign exchange markets among major global currencies marks a failure of economic diplomacy and political statesmanship among world leaders. As such, it can only end in tears. Gold, other precious metals and the commodity complex in general will provide an immediate financial hedge but global trade, investment and other transactions cannot rely on these for stability unless we return to a gold standard or barter system," reports BusTimes.
* Fed Signals Further Easing: "The Federal Reserve on Tuesday said it would begin funneling proceeds from its maturing mortgage bonds into longer-term government debt in an effort to support a sputtering economic recovery. The decision to reinvest mortgage bond proceeds represents a significant policy shift for a central bank that just a few months ago had been avidly debating an exit strategy from the extraordinary stimulus delivered during the financial crisis," reports CNBC.
* "This Fed meeting will ultimately be seen as a clear signal to buy gold and lots of it. Even Joe Terranova on CNBC, after reading and deciphering the the Fed statement, said he bought gold today," writes Swiss America Chairman Craig R. Smith at WND
* Fed Looks to Spur Growth by Buying Government Debt: "With growth weakening in the second quarter and company job gains in July falling short of estimates, today’s step signals that risks of a downturn have increased enough for the Fed to delay its exit from unprecedented stimulus. Chairman Ben S. Bernanke told Congress last month that the Fed was 'prepared to take further policy actions as needed.' The Fed said it will 'continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.' The reinvestment policy applies to agency debt and agency mortgage- backed securities held by the central bank," reports Bloomberg.
* "The Federal Reserve Board is claiming deflation is the new boogeyman to fear. If the Fed is telling the truth, gold prices must be lying. If we have such strong deflationary forces at work, the price of gold should have dropped to $800, not run back up near $1200. The sane, thinking world sees inflation ahead," writes Swiss America Chairman Craig R. Smith.
* "Deflation is in vogue on Wall Street but the smart money is starting to focus on inflation. Today the Fed will conclude its meeting on monetary policy, and most market participants are expecting the Fed to expand its balance sheet more and introduce Quantitative Easing 2.0. The whisper number is currently around $1 trillion, which would be used to buy securities and US treasuries. In a 2002 speech, Bernanke said, 'Under a paper-money system, a determined government can always generate higher spending and hence positive inflation.' It’s no wonder the smart money -- like Buffett and John Paulson -- is betting on inflation," reports Minyanville.
* The Golden Mean -John Hathaway: "Should people wait before they start investing? Can you time it?" asks Barrons. "It is very hard to say. Diversification into some form of gold exposure strategically still makes sense. If this were a football game, we would be at the beginning of the third quarter. The first two quarters lasted about 10 years. The first quarter you had this stealthy accumulation. Second quarter, gold became more fashionable to talk about, and you began to see some very high-profile, smart investors coming in. The third phase will be more people jumping on the bandwagon, and the fourth quarter is just silly season. It's just Greenspan's irrational exuberance," says John Hathaway, Manager, Tocqueville Gold Fund.
* Is Silver Ready to Move Higher?: "There are several compelling reasons to consider adding physical silver to your precious metal portfolio, but why isn't silver receiving the same attention as gold? Silver is still in stage one of its bull market, while gold is already in stage two. Bull market first stages are always marked by apathy....and disbelief that any uptrend is sustainable. Those conditions explain what happened to gold, when it was under $1,000/oz. Only when it hurdled that psychological barrier did gold start receiving widespread attention of its attributes and upside potential," reports James Turk at GoldMoney.
* U.S. Is Bankrupt and We Don't Even Know It?: "Let's get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills. Based on the CBO's data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. The IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: 'The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.' It adds that 'closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14% of U.S. GDP.' So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act," reports Bloomberg.
* "The U.S. economy shed more jobs than expected in July while the unemployment rate held steady at 9.5%, a further sign the economic recovery may be losing momentum. The Federal Reserve may consider taking steps to support the economy when officials meet next Tuesday," reports WSJ.
* "The greenback fell as much as 1.1% after a payroll report signaled the U.S. will be slow in recouping jobs lost in the recession. Gold reached a three-week high. Before today, the metal increased 9.4% this year. 'The dollar is getting odious compared to the euro, which was the rankest thing around in the first half of this year,' said Frank McGhee, the head dealer at Integrated Brokerage Services. 'If the Fed has to do something more accommodative to spur the economy, you’re going to see an explosive rally in gold,'" reports Bloomberg.
* A Healthy Appetite For Gold: "A decade after gold started its current bull run, we are still at half its inflation-adjusted peak. The run-up has been slow and orderly, with the price consolidated over the last three months at around $1,200. Dips like the recent drop below $1,160 have been correctly identified as bargain buying opportunities. Despite a long rally without a major reversal, Wall Street aurophobes [gold fearers] still refuse to see gold as a good investment; but they were wrong on the fundamentals in 2000, and the fundamentals haven't changed. As the world edges closer to the collapse of the US dollar system, gold prices have nowhere to go but up," reports GoldIRAs.
* "Investors were buying gold as a safety net as worries surfaced about a weak U.S. unemployment report Friday. Wednesday's Automatic Data Processing report said that the private sector added 42,000 jobs in July, which analysts say is good but not good enough. The report is keeping investors jittery headed into the Labor Department's nonfarm payroll report on Friday," reports TheStreet.
* "China will allow more domestic banks to export and import gold as part of steps to encourage more liquid trade, which could underpin the country's growing private demand for the precious metal. The policy will help China's gold market to grow rapidly. China's demand for gold has been growing strongly, and that demand will need to be satisfied. China is the world's largest producer of gold and second largest consumer of the metal after India," reports Reuters.
* Why Deflation Fears Are Overblown: "Given abundant evidence of inflation, the Federal Reserve has pulled off a good trick by convincing Americans that we are about to 'suffer' through a protracted period of deflation. Why have we been so easily duped? In the past 10 years the monetary base has grown from $600 billion to $2 trillion. This expansion has accompanied a rise in the price of gold from below $300/oz. at the beginning of the decade to around $1,200/oz. today. The price of gold is the best arbiter for a currency's purchasing power. Therefore, gold is still telling us that inflation is eroding the value of our dollar," reports Forbes.
* "The U.S. dollar fell to its lowest level since April, weighed down by a news report that Federal Reserve officials will consider a slight policy shift next week amid concerns over the strength of the U.S. economic recovery. The dollar remained lower Tuesday after a report showed U.S. consumer spending and incomes came in weaker than forecast in June. U.S. pending sales of homes fell 2.6% in June, and factory orders declined," reports Marketwatch.
* According to Sprott Asset Management's chief investment strategist, John Embry, gold's rise is likely to be much stronger than usual. Speaking on Mineweb.com's Gold Weekly podcast, "I would expect the last few months of the year to be quite robust which in a seasonal sense is often the case, but this time I think it's going to be more robust than usual... If it's not between $1,500 and $2,000 in the next 18 months, I'm dead wrong."
* Why gold now? 47% safety, 53% growth: "Asian investors are more likely to buy gold in the next six months than their North American and European counterparts, a global survey found. Among investors who said they would buy gold in the next six months, 47% said they would invest gold to protect their wealth, and 53% said they intended to profit from gold investments," reports Mineweb.
* In Missouri 71% say NO to Obamacare: "Missouri voters on Tuesday overwhelmingly rejected a key provision of President Barack Obama's health care law, sending a clear message of discontent to Washington and Democrats less than 100 days before the midterm elections. About 71% of Missouri voters backed a ballot measure, Proposition C, that would prohibit the government from requiring people to have health insurance or from penalizing them for not having it," reports AP.
* Time to Quit Your Old 401(k)s?: When changing employers, many workers leave money in the company retirement plan. But moving the dollars to your new firm or an IRA might be a better deal. While leaving money in an old 401(k) plan is sometimes a smart move, experts say the primary reason people don't take these accounts with them when they change jobs is inertia. There also is confusion about the options," reports WSJ.
* "The recession was deeper than the government previously thought. The Commerce Department, in revisions issued last Friday, estimates the economy shrank 2.6% last year -- the steepest drop since 1946. That's worse than the 2.4% decline originally estimated. The economy's plunge underscores why the unemployment rate surged to 10.1% in October, a 26-year high," reports AP.
* Is the Worst Over?: "What will be the aftermath of the recent crisis? A long-term devaluation of the U.S. dollar, additional government spending adding to the debt and higher cost of living for each citizen as the government continues to mismanage the nation. For all those who believe the worst of the financial crisis is behind us and all is well, they may be right. But it will be short lived. When the next crisis comes, will you be prepared? Or will you be a day or two late? When inflation and the debasing of currencies hits, $1,200/oz. gold will look like a bargain," writes Swiss America Chairman Craig R. Smith.
* CBO Warns of Greek-style U.S. Debt Crisis: "The non-partisan Congressional Budget Office released its most dire warning yet of a looming U.S. debt crisis, openly comparing the U.S. budget situation to the Greek, Irish, and Argentinian debt crises and calling for a 20 percent cut in the size of the federal government. The July 27 report, 'Federal Debt and the Risk of a Fiscal Crisis,' comes just days after the Obama administration revised upward its deficit projections for fiscal 2010-11 to a two-year total of $2.89 trillion. The CBO had labeled the federal spending path “unsustainable” in a June report," reports NewAmerican.
* Dangerous [debt] curve ahead: "Sometimes a chart is worth a thousand editorials. The one we reproduce here, courtesy of the Congressional Budget Office, is one of those. It shows the federal debt throughout U.S. history and the daunting slope of what is likely to happen in the next few decades. The federal debt held by the public -- and, increasingly, 'the public' means foreign governments and investors -- has mushroomed from 36 percent of gross domestic product at the end of the 2007 fiscal year to a projected 62 percent of GDP at the end of fiscal 2010. 'Policy options for responding to it would be limited and unattractive.' Debt could be restructured, the currency inflated or an austerity program (tax increases plus spending cuts) implemented," reports WashPost
* Why more Quantitative Easing can’t be avoided and will threaten the developed world and the U.S. Dollar: "Inside the U.S. the current thriftiness of the consumer will turn to spending as he realizes that his savings are also being devalued, as is his debt. This will speed the velocity of money again as well as stimulate retail sales, inventory building, investment in capital goods and growth. Should inflation run amok, they always have the Volker solution. Such consequences will be seen as more than justifying the debilitation of the Dollar. The careful balancing act needed to manage such an environment may be too much for the Fed with its limited tools. If it acts too early to slow inflation, deflation resurges. If they act too late, inflation will be rocketing, so subsequent cooling of inflation will once again have a devastating effect on the economy, bringing much heavier deflation and an environment of mortally wounded confidence, back again," reports Goldseek.
* Why are consumers so gloomy?: "Consumer Confidence falls in July to the lowest since February, weighed mostly by worries about the job market," reports CNBC. Although experts say the economy is slowly recovering it appears consumers lack confidence in rosy outlooks by both politicians and economists.
* Risk of Falling Confidence: "Consumers in both the U.K. and the U.S. are fearful of high and rising unemployment and falling incomes. Fiscal retrenchment is likely to hurt confidence even more. The danger is that this will generate a further downward spiral. And watch out for those economists with their worthless Markov-switching DSGE economic models who will probably tell you this decline in expectations doesn’t mean much. What do they know? In such circumstances, common sense prevails. Confidence is the key. The worry is we aren’t making enough progress," reports Bloomberg.
* Gold Bears Are Wrong, Smart Money Isn't Selling: "Big-money investors take positions based on fundamentals and then continually buy dips until the fundamentals reverse. The fundamentals haven’t reversed for gold so I’m confident in saying that smart money isn’t selling its gold, it's using this dip to accumulate. Like clockwork, gold invariably puts in a major bottom in July or August before the run up into the strong fall season," reports Minyanville.
* Gold prices ended July down 5% after touching a 2010 high of $1,260/oz. in June. Given the rising level of political and economic uncertainty facing investors this year, smart money is buying precious metals during annual July-August prices dips.
* Following each of the last six major corrections, gold prices have risen an average of 36%. "While past price movements do not always foretell future movements, we could see prices above $1,400/oz. soon. Buying near market lows helps investors maximize growth," said Swiss America Chairman Craig R. Smith.
* Gold best performing asset class over 6 months, 1, 3, 5 and 10 years: "Over the past ten years gold's annual return has been 14.3% in sterling terms, compared with 5.9% pa from bonds, 1.6% in cash and just 1.2% in real estate. Equity returns were negative. Over the most recent ten year period, in UK terms gold has outperformed its nearest competitor (bonds) by over 240%," reports Mineweb.
* "Ongoing fears over sovereign government bonds, debt monetization and currency debasement will lead to an escalation of demand for physical gold and coins in the second-half of 2010. A new report said ongoing pressure on debt markets, combined with persistent concerns over private sector credit contraction, will raise the specter of debt monetization repeatedly over the next few years," reports CommOnline.
* David Rosenberg's Advice for Surviving a "Meat-Grinder" Market: "The market is overbought and there is a renewed sense of complacency in the marketplace that I think could get shattered pretty quickly. His recommendations for investing: Cash is Trash: Even if it feels safe to put your money under a mattress, you can't be in cash because of the Fed's ultra-easy policies. After falling 8% from the record highs reached on June 21, gold is a no-brainer and will rally again to new highs, with a conservative upside target of $3,000/oz.," reports Yahoo.
* "Turning Hard Times into Good Times," host and newsletter writer Jay Taylor recently interviewed Dr. Fred Goldstein of Swiss America in Phoenix, a longtime GATA supporter. They discussed GATA's work, the mechanism for holding gold in an Individual Retirement Account, and a gold coin investment strategy. Listen to the interview here.
* Bullion buyers bank on gold coins: "The world's thirst for gold coins has risen more than sovereign government mints can quench it, with demand on track this year to outpace 2009, itself a record. The coin craze is part of gold's growing investment allure, based on fears of currency debasement, inflation, a debt debacle in Europe, and rising debt levels in the U.S. Ongoing fears about the pace of the global recovery have only given gold more momentum, with prices hovering just below $1,200 an ounce and the consensus looking for $1,300 an ounce before the year is out," Marketwatch.
* "Gold prices are set to mark an eleventh year of gains in 2011 as investors seek refuge from an uncertain global economic outlook, with analysts revising up expectations sharply in a Reuters survey. A poll of 55 analysts and traders showed expectations for gold prices in 2011 have risen by nearly 7 percent to a median $1,228 an ounce," reports Reuters.