February 2010

Friday gold prices rose above $1,115/oz. on a weaker dollar as Greece aid hopes boosted the euro. Gold last traded up $11.30 to $1,117.90/oz., silver rose $.39 to $16.49/oz.

* Gold prices ended February up 3.4%, outpacing stocks again for the month and year, while silver prices rose 2%. In February precious metals successfully scaled a wall of economic worry and key technical resistance. While further consolidation is possible, solid fundamentals are pushing metals into their 10th consecutive year of growth.

* "The precious metal recently broke from its usual inverse relationship with the U.S. dollar to move more in sync with the climb in the greenback, showing off its prowess as a resilient world favorite. 'Gold moving up with the dollar is a sign of tremendous strength in gold,' said Sam Kirtley, CEO of SK Options Trading to Marketwatch.

* China will bid on IMF's gold: "China has confirmed its intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, a Russian news agency said. Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market. China is interested in the development of the domestic consumer market," reports GATA.

* India potential buyer of IMF gold: "India’s central bank looks set to be a buyer again when the International Monetary Fund begins selling 191.3 tonnes of the precious metal amid volatility in major currencies. The uncertain outlook for two of the world’s major reserve currencies — the dollar and euro — provides a spur for central banks, including India’s, to buy gold. India’s gold holdings lag those of major economies despite a big purchase in October," reports DailyTimes.

* 'Buy farmland and gold,' advises Dr. Faber: "The world’s most powerful investors have been advised to buy farmland, stock up on gold and prepare for a 'dirty war' by Marc Faber, the notoriously bearish market pundit, who predicted the 1987 stock market crash. 'The next war will be a dirty war. What are you going to do when your mobile phone gets shut down or the internet stops working or the city water supplies get poisoned?,' he told fund managers, " reports Timesonline.

* "Investors have poured money into gold as a hedge against currencies' volatility due to fears about debt defaults in the euro zone, while the metal's steady rebound since falling below $1,100 also ignited technical buying. Dealers expected gold to eventually test January highs around $1,150," reports Reuters.

* "Gold experienced a major technical breakout in February. Now that gold prices have closed above $1,100/oz.; short, mid and long-term trends are all signaling BUY," said Swiss America Sr. Broker Jim Carrillo.

* Metals correction technically over: In February precious metals successfully scaled a wall of economic worry and bearishness. This is very bullish especially in the face of a stronger dollar (supported by a Fed rate hike) and news of a 191 ton sale of gold by the IMF. Rising wholesale inflation data and elevated currency and debt worries supported bullish sentiment.

* Credit Suisse analyst David Sneddon says the price of gold is poised to move sharply higher to 1,227/oz. "Gold priced in the 16-nation currency reached a record 826 euros today on concern debt-laden economies in the region will hamper recovery and amid speculation the European Central Bank will keep its benchmark lending rate at a record low," Bloomberg reports.

* "Gold will never be well received by the financial industry in general because it's the enemy to financial assets. And stock and bonds make the financial services industry go round and round. What bothers me to no end is an organization like GATA can’t be heard by the same media. The anti-gold crowd calls anyone who shows even the littlest love for it 'goldbugs' or worse. I call them perma-bears," reports Peter Grandwich at Agoracom.

* "Gold is benefiting firstly from its value as a defensive investment, and secondly from the marked improvement in the technical picture, which emerged at the start of the week," said Mitsubishi precious metals strategist Tom Kendall. Gold’s usual relationship with the US dollar has weakened as fears over the outlook for paper currencies in general lifted interest in bullion as an alternative asset, reports BusDay.

2010 Economic Realities

* "Fifty-six percent of people say they think the federal government's become so large and powerful that it poses an immediate threat to the rights and freedoms of ordinary citizens according to a CNN survey released Friday," reports CNN.

* "U.S. consumer confidence fell in February to the lowest in 10 months, as consumers' short-term outlook for the jobs market worsened, according to a private report released Tuesday. U.S. stocks declined on the news," reports CNBC.

* "New orders for long-lasting U.S. manufactured goods unexpectedly fell in January, while the number of workers filing for jobless benefits rose last week, suggesting a loss of momentum in the pace of economic recovery," reports CNBC.

* "Sales of new U.S. homes plunged 11.2% in January to the lowest on record dating back to 1963, the Commerce Department estimated Wednesday. The third-straight drop in sales on a month-to-month basis was unexpected," reports Marketwatch.

* Uncle Sam wants your retirement money: "The Obama administration has just solicited public comment on their proposal to take money from Americans’ private 401(k) retirement accounts and convert it into government-backed annuities. In other words, they want to take your money now to purchase U.S. Treasury bonds, then pay you a monthly sum later after you’ve retired. A government raid on private retirement funds wouldn’t necessarily take the form of outright confiscation. It could take the form of mandatory conversion into government accounts, where the government would determine how much money retirees could receive," reports Dr. Paul Hsieh at Pajamasmedia.

* "Problem" banks jump 27%: The number of problem U.S. banks jumped 27% during the fourth quarter of 2009 to 702, the highest level since 1993 and a sign the industry's recovery is still shaky. Smaller institutions are still struggling with deteriorating loan portfolios, especially with loans tied to commercial real estate," reports Reuters.

* U.K. Deathbed of Keynesian Economics: "Britain has the worst of all possible worlds: a stagnant economy, a crippling budget deficit and rising prices. The economy is flat on its back, unemployment is rising, the pound is sinking, and the bond markets are bracketing the country with Greece and Portugal in the category marked "bankruptcy imminent." At some point soon, even the most loyal disciples of Keynes will have to admit defeat, and accept that a radical change of direction is needed. Just as the Keynesians were wrong three decades ago, they are wrong now. What's needed is a total change of direction. Get the deficit under control. Raise interest rates to restore confidence in the pound, and reward saving. Cut taxes to stimulate enterprise and investment. A country can't spend its way out of a recession. And it can't fix what was at root a problem of too much debt by just borrowing more and more," reports Matthew Lynn at Bloomberg.

* Sovereign Defaults, 'Painful' Austerity: "Greece is just the beginning. We almost always have sovereign risk crises in the wake of an international banking crisis, usually in a few years, and that's happening," according to Harvard University Professor Kenneth Rogoff, Rogoff said "the worst is yet to come in the U.S." and predicted the collapse of "major" investment banks, reports Bloomberg.

* Central Banks on the Defensive: "Nobody at the Fed will say what is really at stake: an independent audit of the government's gold holdings, which are officially held for the government by the Fed for safekeeping. If the gold is gone, or if there are legal claims against it by foreign central banks as a result of Fed swaps, this would constitute fraud on a massive scale. The Federal Reserve's opposition to being audited under legislation being pressed by U.S. Rep. Ron Paul, R-Texas, is largely a matter of needing to prevent the American people from learning the status of the U.S. gold reserve," reports GATA.

* Citibank Warns of Withdrawal Gate: "Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change." I called Citi about it and they said the warning applies only to customers in Texas and that the notification had been mistakenly included on statements nationwide. Whatever the explanation, it doesn't exactly inspire confidence in Citi," reports FutureofCapitalism.

* "The consumer price index rose a seasonally adjusted 0.2% in January for the fifth straight month, the government said. Higher energy and medical costs more than offset the largest decline in services prices since 1982. Hotel and motel rates plunged 2.1%. Residential rents were unchanged. Homeownership equivalent rents fell 0.1%. Meanwhile, energy prices rose 2.8%. Gasoline prices rose 4.4%, and fuel oil prices rose 6.1%," reports Marketwatch.

* Setting the stage for stagflation: "Prices rose 2.7% during 2009, according to the Consumer Price Index (CPI). This is a worrisome fact because last year's unemployment rate averaged more than 9%. This trend may signal a return of 'stagflation,' a merger of stagnation and inflation. The fundamental weakness in the Keynesian theory that grips our financial press is that economic growth doesn't necessarily cause inflation, and high unemployment doesn't necessarily prevent it," reports WashTimes.

* "Gold production has peaked; the highest production was in 1999 and it has declined since then. The big open-pit mines, which were these massive units that produced lots of gold are coming to the end of their lives. Production is coming down in all of the key producing counties of South Africa, America and Australia," Dave Paxton, CEO of Vatukoula Gold Mines, told CNBC Friday.

* "The dollar jumped against major counterparts, after the Fed delivered a surprise hike in its discount rate after the close of U.S. markets. Bonds, currencies react sharply to start of 'exit strategy'. Central bank raises discount rate to 0.75% in effort to get banks to borrow from the private market," reports Marketwatch.

* U.S. wholesale prices rose 1.4% in January, the largest since November, on double-digit increases in gasoline and home heating oil, the Labor Department estimated Thursday. The PPI report shows significant inflationary pressures from higher commodity prices. Federal Reserve officials have largely ignored the PPI, saying that inflation at the consumer level is expected to be modest for the next few years," reports Marketwatch.

* IMF opens up 191.3 T gold sale to wider market: "The International Monetary Fund said late Wednesday it will soon begin phased sales of 191.3 tons. "The question now is obviously, are current (price) levels attractive for such a large quantity of sales?" said Saxo Bank senior manager Ole Hansen. "I will not be surprised if the Reserve Bank of India or other Asian central banks opt for IMF's gold," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai. "After the global financial crisis, everybody knows that with a longer-term perspective it is not desirable to have concentration of reserves in any one currency. Everybody is trying to diversify," reports Reuters.

* IMF's gold sales don't mean much: "Gold is not sold to 'raise money'; it is sold to suppress the price of a currency that competes with fiat currencies and, when traded freely, is a measure of their debasement. Official gold sales correspond with rising gold prices, not falling gold prices. Official sales are manifestations of central banking's controlled retreat when money and credit creation have gotten out of hand relative to the gold supply and gold's price is threatening to explode and make a scene very embarrassing to governments and central banks. No doubt some gold holders and traders will be duly frightened out of their gold by the IMF's latest announcement, and that will be discouraging for those who remain gold investors. But if this gold 'sale' turns out like the others over the last 10 years, before long the gold price will be higher still," report GATA.

* "My projection for gold within twelve months is $1,400. The preponderance of the indicators are favoring a continued rise in gold prices. Over the last 24 years is between the months of March and October of every year there is a strong tendency for prices to move higher," said Daniel Bruno, chartered market technician from www.FXboss.info, to CNBC Thursday.

* "George Soros doubled his investment in the world's largest gold fund – just weeks before claiming investing in the precious metal is now the "ultimate bubble". The World Gold Council said on Wednesday that pension funds began actively investing in gold last year, viewing the metal as a long-term safe haven," reports Telegraph.

* "Spot-gold prices rallied to a two-week high Tuesday as investors bought gold to protect against currency volatility. 'It looks like safe haven buying is coming back into the market. People are afraid of paper currencies and inflation,' said Michael Kempinski, a precious metals trader at Commerzbank in Luxembourg," reports WSJ.

* "This is the end of the correction. The surprises in gold will be mostly to the upside," said Peter Grandich, chief commentator on Agoracom.com to TheStreet.

* "Experts told CNBC that the euro will strengthen in the second half of the year as the dollar weakens. The euro's selling is overdone and currencies will benefit from dollar weakness in the second-half, says John Kyriakopoulos, head of currency strategy at NAB Global Markets Research.

* "Gold prices rose to $1,100/oz. in Europe on Monday. The euro retreated as doubts intensified about whether policymakers in the euro zone will help debt-laden Greece. Strength in the dollar usually weighs on gold, but when fears over financial market stability are rising, both sometimes benefit from risk aversion," reports Reuters.

* GOLD'S BIGGER PICTURE: Precious metals have consolidated their 2009 gains over the last 60 days again illustrating how a healthy bull market should function. Gold prices touched a low of $1,060/oz. this month before rebounding as bargain-hunting buyers outpaced short-term speculative sellers. "Buying near market lows helps investors maximize long-term growth," said Swiss America Chairman Craig R. Smith.

* The Chindia Effect on Gold: "China and India are the world's two largest consumers of gold - and the former is the world's largest gold miner. To many the future path of the gold price is inextricably related to the world's two most highly populated nations, both of which are undergoing internal growth at a phenomenal rate. Their population's inbuilt perception is that of seeing the yellow metal as the ultimate store of wealth, or even as adornment to demonstrate their wealth and position to their fellows," reports Mineweb.

* Foreign demand for Treasury debt falls: "The government said Tuesday that foreign demand for U.S. Treasury securities fell by the largest amount on record in December with China reducing its holdings by $34.2 billion. The reductions in holdings, if they continue, could force the government to make higher interest payments at a time that it is running record federal deficits," reports AP.

* SOVEREIGN ALCHEMY WILL FAIL: "There has never before been a potentially catastrophic combination of so many virtually bankrupt major sovereign states (US, UK, Spain, Italy Greece, Japan and many more) and a financial system which is bankrupt but is temporarily kept alive with phony valuations and unlimited money printing. But governments will soon realize that they are not alchemists who can turn printed paper into gold. During the next phase up in gold which we expect to start within the next few weeks, mainstream investors will discover what only a few investors have understood in the last ten years, namely that physical gold is one of the very few ways to protect their assets and preserve capital," reports Egon von Greyerz of Matterhorn Asset Management in Zurich.

* "U.S. consumer sentiment slipped in early February, with high unemployment expected to continue and with most looking for no gain in income or home values in the year ahead, a survey released Friday showed. The cumulative financial strain during the past few years has meant that consumers have remained extremely cautious spenders," reports CNBC.

* "I don’t see any scenario where gold will collapse," said Marc Faber, of the 'Gloom, Boom and Doom Report.' Gold advanced 24% in 2009 as governments cut interest rates and spent trillions of dollars to prop up economies and central banks in nations including India and China boosted bullion reserves," reports Bloomberg.

* "The Greek case signals that we are in a new phase of the global financial crisis where the forefront issue becomes fiscal sustainability rather than exiting the recession," said OECD officials Thursday to Globe&Mail.

* US, Europe Will Default On Debt: "The governments of every developed economy will eventually default on their sovereign debt, including the US, the UK and Western Europe. In the developed world we have huge government debt to GDP and unfunded liabilities that will come due. These unfunded liabilities are so huge that eventually these governments will all have to print money before they default," said Marc Faber, editor of the Gloom, Boom & Doom report to CNBC.

* "Over the next few years, a wave of commercial real-estate loan failures could threaten America's financial system, and in the worst case scenario, hundreds of additional community and midsize banks could face insolvency, a congressional watchdog group said Thursday. $1.4 trillion in commercial real-estate loans will reach the end of their terms between 2010 and 2014, of which nearly half are now under water," reports Marketwatch.

* Wall Street's Race to the Bottom : "Banking is based on trust. The banks get our paychecks and hold our savings; they know where we spend our money and they keep it private. If we don't trust them, the whole system breaks down. Yet for years, Wall Street CEOs have thrown away customer trust like so much worthless trash. This generation of Wall Street CEOs could be the ones to forfeit America's trust. When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies," writes Elizabeth Warren at WSJ.

* Iran is now a 'nuclear state' says Ahmadinejad: "As Gordon Brown warned that the world's patience is wearing thin, Ahmadinejad told scores of cheering Iranians that the Islamic Republic is capable of producing weapons-grade uranium. He spoke as tens of thousands of people took to the streets in Tehran to mark the 31st anniversary of the Islamic revolution," reports DailyMail.

* "The inevitable 'sovereign debt panic' finally struck last week, causing severe one-day drops in stock markets from New York to London to Toronto last Thursday. The epicentre of the crisis is Greece, in danger of defaulting on its debt payments to worldwide holders of its government bonds, or sovereign debt. But the fear about state defaults quickly spread to Spain, Portugal and Ireland, fiscal train wrecks that together with Greece now go by the unfortunate acronym PIGS. The world is awash in potentially unsustainable debt. The U.S. looms largest. Obama tabled a budget that projects a doubling in America's national debt, to $28 trillion by decade's end," reports TheStar.

* China retreats from risky dollar assets: "China has ordered managers of its vast currency reserves to withdraw from risky dollar assets and retreat to core debt guaranteed by the US government, a clear sign that Beijing is battening down the hatches for fresh trouble on global markets. 'We don't think the dollar rally is going to last much beyond the first quarter because we're in a new world of rotating sovereign crises where politics matters again,' said David Bloom, head of currencies at HSBC," reports Telegraph.

* "The dollar is approaching being overbought over the past 60 trading days, while the gold is showing signs of being oversold. The dollar's rally appears to be a short-term safe haven move, rather than a response to improving U.S. economic conditions. This weakness makes it less likely that the Fed will play it safe by not raising interest rates, and more likely that Congress and the Obama administration will pump more financial stimulus money into the system," reports Frank Holmes at Mineweb.

* Where is the inflation? (late 2010): "Most economists, including yours truly, have been saying that the huge budget deficits the country is running will result in inflation. So, where's the inflation? Inflation normally lags changes in the growth of the money supply by one to two years. The big monetary expansion took place in the last half of 2008. So if the economy follows past trends, one would expect to see growing inflation by the latter part of this year," reports WashTimes.

* Fed to Outline 'Exit Strategy': "Fed Chairman Ben Bernanke will begin this week to lay out a blueprint for a credit tightening, to be followed once the Fed decides the economy has recovered sufficiently. The Fed has ended several emergency lending programs, but the big step of broadly tightening credit looms. For now, the central bank has little interest in discouraging bank lending or consumer borrowing. Eventually, it will, to forestall inflation," reports WSJ.

* Will Baby Boomers Bankrupt Social Security?: "The National Research Council and the National Academy of Public Administration studied the growth in three major entitlement programs— Medicare, Medicaid, and Social Security. The report, "Choosing the Nation's Fiscal Future" concluded that spending was outpacing tax revenue so much that "any efforts to rein in future deficits must entail either large increases in taxes to support these programs or major restraints on their growth – or some combination of the two." Given that no one in power is serious about restraining the deficit, we are rapidly heading toward a crisis," reports CNBC.

* "The U.S. Dollar Index fell as much as 0.4% Tuesday on speculation European officials will agree to help Greece tackle its budget gap. U.S. currency climbed for a third week last week as concern over the Greek deficit weighed on the euro. China’s sovereign wealth fund took a $155.6 million stake in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion," reports Bloomberg.

* "Employers unexpectedly cut 20,000 in January, but the unemployment rate surprisingly fell to a five-month low of 9.7%, according to a government report last Friday. A sharp increase in the number of people giving up looking for work helped to depress the jobless rate. The economy has purged 8.4 million jobs since the start of the recession in December 2007," reports Reuters.

* Jobs: "We need across-the-board tax cuts!" said Swiss America Chairman Craig R. Smith to Fox News last Friday. "I think this economic recovery will stall out unless the Obama Administration gets it through their heads that we need to get more money flowing to the people and less to the government. Face it, the government can mess up a one-piece puzzle."

* 7th Annual Golden Opportunity Sale: Instead of getting caught up in the media hype over gold's recent price correction, look at the facts. The chart illustrates there have been seven major corrections in the current long-term bull market in gold since 2003:

1. 2003 - Gold at $382 dropped to $319 (-16%)
2. 2004 - Gold at $425 dropped to $375 (-13%)
3. 2005 - Gold at $536 dropped to $489 (-9%)
4. 2006 - Gold at $725 dropped to $560 (-22%)
5. 2007 - Gold at $841 dropped to $778 (-8%)
6. 2008 – Gold hit $1002 on Mar 17 then dropped to $746 on 9-11-08 15 (-25%)
7. 2009-10 --Gold hit $1215 on Dec 7th then dropped to $1060 on 2-4-10 (-14.6%)

* "While past price movements do not always foretell future movements, following each of the last six major corrections since 2003 gold prices have risen an average of 36%. That means we could see gold prices rise above $1,400/oz. before the next major correction, if this pattern continues," said Swiss America Chairman Craig R. Smith. (Here's what we reported about the last major correction 9-11-08: $750 gold: buy of the year! "Reports of my demise have been grossly exaggerated!"-GOLD, 2003-2010)

* "Market participants sold the euro, gold, commodities and equities amid a pan-market swoon over mounting fears that Greece, Portugal and Spain may find it difficult to bring their budgets under control, jeopardizing a fragile euro-zone economic recovery. 'That is sucking risk appetite out. The economic recovery is still kind of touch and go," said Stephen Platt, analyst with Archer Financial Services to DowJones.

* "Gold will climb to $1,500 an ounce and silver will top $25 this year as the dollar loses its haven status. Fear of sovereign debt defaults by one or another European country could benefit the dollar and temporarily hurt gold," according to Jeffrey Nichols, managing director of American Precious Metals Advisors reports Bloomberg.

* Since September 2008 the FED and central banks worldwide have flooded the markets with liquidity, causing the money supply and their balance sheets to triple. During the same period gold prices shot up from a 2008 low of $750/oz. to 12/2/09 high of $1,215/oz., a 62% price rise. The secular bull market remains strong and healthy as we look ahead into the next decade. (more... Time to buy, sell or hold?)

* Gold fundamentals strong: "The World Gold Council said that suggestions of a gold price ‘bubble’ do not take account of gold’s market fundamentals, which remain robust. 'The current trading range should not be regarded as an overnight spike, but the result of a measured rise, supported by favourable and robust gold fundamentals,' said Aram Shishmanian, CEO of WGC," reports Telegraph.

* "Gold prices rose the most in three weeks on speculation that the dollar’s rally will stall, boosting demand for the metal as an alternative investment. The U.S. budget deficit in 2011 is projected at $1.3 trillion. "The dollar is losing its mojo today. Those budget numbers have people freaked out. We continue to print money with reckless abandon, so that's why people are buying up hard assets like gold and oil,' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago to Bloomberg.

* In January the Dow fell 3.5% for the worst month in nearly a year, disappointing investors who adhere to the adage "As January goes, so goes the year." For the month gold prices eased back 1.5% while silver slipped 4.4%. Precious metals remain a fundamental buy and hold, with their decade-long bull market soundly intact.

* Why gold will keep going up for years: "As sure as death and taxes, continuing excessive money creation by the central banks will lead to accelerating inflation. To this day the central bankers have remained undaunted and have increasingly intervened in all markets, but their influence is waning dramatically in the gold market. Today central banks are discovering to their increasing discomfort at what history has always demonstrated -- that manipulation of the free-market process ultimately fails. No amount of government interference and price manipulation can change the reality of the free market over the long term. It is gold's return as money that is going to be really instrumental in driving gold to prices that would seem fanciful to most at the present time. In reality, it isn't gold that is changing, because it has been a constant store of value for 6,000 years. It is the value of fiat paper money in which gold is priced that is on the slippery slope to oblivion," writes John Embry at GATA.

Debt, deficits & taxes rising

* A New Era Of Irresponsibility: "This is the most irresponsible budget in American history. Two years of bailouts and 'stimulus' have failed us miserably. The new budget tries the same tax-and-spend strategies, despite the loss of 8 million jobs and an ongoing financial crisis. The so-called rich aren't stupid, however. They'll disinvest from the U.S., taking their money, skills, creativity and energy elsewhere. Or they'll just find new ways to shelter their wealth. Either way, it means fewer jobs, lower tax revenues and declining incomes for all," reports Investors.

* Backdoor taxes to hit middle class: "The Obama administration's plan to cut more than $1 trillion from the deficit over the next decade relies heavily on so-called backdoor tax increases that will result in a bigger tax bill for middle-class families. If the Bush tax cut provisions are allowed to expire on December 31, the top-tier personal income tax rate will rise to 39.6% from 35%. Lower-income families will pay more as well: the 25% tax bracket will revert back to 28%; the 28% bracket will increase to 31%; and the 33% bracket will increase to 36%. Investors will pay more on their earnings next year as well, with the tax on dividends jumping to 39.6% from 15% and the capital-gains tax increasing to 20% from 15%," reports Reuters.

* Deficit to Hit All-Time High: "Obama's $3.8 Trillion Budget Forecasts a $1.6 Trillion Shortfall for 2010 Before It Drops. President Barack Obama will propose on Monday a $3.8 trillion budget for fiscal 2011 that projects the deficit will shoot up to a record $1.6 trillion this year, but would push the red ink down to about $700 billion, or 4% of the gross domestic product, by 2013, according to congressional aides. The deficit for the current fiscal year, which ends on Sept. 30, would eclipse last year's $1.4 trillion deficit, in part due to new spending on a proposed jobs package," reports WSJ.

* How does Obama's 2011 projected deficit compare? "Is the deficit too large? Many economists consider deficits in excess of 3% of a nation's annual economic output (gross domestic product) as unsustainable. The United States' $1.56-trillion deficit this fiscal year is estimated at 10.6% of its GDP. The White House forecasts the deficit to stay above 3% of GDP for the rest of this decade. So by traditional economic measures, the present deficits are much too large to sustain. Should we worry ... Slashing the federal budget now could tip the country back into recession -- and probably make the deficit problem bigger. At the same time, presenting a budget that is credible and has a realistic plan to reduce future deficits is important for reassuring holders of U.S. government debt. Failure to do so could heighten fears of rising inflation in the future, which could spark higher interest rates in the short term," reports LATimes.

* "U.S. consumer spending slows in December. Savings rate rises to 4.8% of disposable incomes. Americans increased their spending in December at the slowest pace since September, allowing their savings rate to drift to the highest level since June, the Commerce Department estimated Monday," reports Marketwatch.

* Iran issues Feb 11th threat: "The United States has expanded land- and sea-based missile defense systems in and around the Gulf to counter what it sees as Iran's growing missile threat, U.S. officials said. Officials said the expansion was meant to increase protection for U.S. forces and key allies in the Gulf. The chairman of the U.S. military's Joint Chiefs of Staff, Admiral Mike Mullen, said last month the Pentagon must have military options ready to counter Iran should Obama call for them," reports Reuters.

* "The U.S. economy grew at a faster-than-expected 5.% pace in the fourth quarter, the quickest pace in more than six years, as businesses reduced inventories less aggressively, the Commerce Department said on Friday. Stripping out inventories, the economy expanded at an annual rate of 2.2%, accelerating from the 1.5% increase in the third quarter. For the whole of 2009, the economy contracted 2.4%, the biggest decline since 1946," reports CNBC.

* Experts See Another Global Dip Ahead: "The global economic recovery could lose pace later this year, dashing hopes for a rapid escape from the deepest downturn of the postwar era, economists and investors said at the World Economic Forum's annual meeting in Davos. Heavy debts will weigh on governments and households in the U.S. and Europe for some time, while hopes for global growth will continue to rest on fast-developing countries such as India and China," reports WSJ.

* $1.9 trillion deeper in debt: "The Democratic-controlled Senate has muscled through a plan to allow the government to go a whopping $1.9 trillion deeper in debt. The party-line 60-40 vote was successful only because Republican Sen.-elect Scott Brown has yet to be seated. Sixty votes were required to approve the increase. The measure would lift the debt ceiling to $14.3 trillion. That's about $45,000 for every American," reports AP.

* "Uncertainty is the market's greatest fear. We are in the most uncertain period than at any time in most Americans' memory. Businesses simply are responding accordingly. It is axiomatic that the market hates uncertainty, in a manner akin to the way nature abhors a vacuum. While nature fills its vacuums, business addresses its uncertainty with inactivity," reports WashTimes.

* Bernanke Wins Second Term: "Federal Reserve Chairman Ben Bernanke won Senate confirmation for a second term, ending a bruising political battle that forced the head the world's most powerful central bank to fight for survival," reports CNBC.

* "The Federal Reserve maintained its pledge to keep interest rates near zero for an 'extended period' Wednesday and restated its intention to cease buying $1.25 trillion of mortgage-backed securities in March, opening a rift among policy makers for the first time in a year," reports Bloomberg.

2010 State of Union "A deficit of trust"

* State of Union "A deficit of trust": "Declaring 'I don't quit,' an embattled President Barack Obama vowed to make job growth his topmost priority and urged a divided Congress to boost the still-ailing economy with a new burst of stimulus spending. Obama looked to change the conversation from how his presidency is stalling — over the messy health care debate, a limping economy and the missteps that led to Christmas Day's barely averted terrorist disaster — to how he is seizing the reins. Despite stinging setbacks, he said he would not abandon ambitious plans for longer-term fixes to health care, energy, education and more," reports AP.

* The State of the Union speech Obama would give in a more honest world: "My fellow Americans, the state of our union is . . . well, quite wretched at the moment. As president, I owe you that honesty and candor. It would be bad enough that we're stuck in an endless war against vicious terrorists or that we've just been through a financial crisis that wiped out a quarter of our wealth and left one in six adults without a job or underemployed, to say nothing of the fact that our planet is on the brink of an environmental calamity," reports Steven Pearlstein at WashPost.

Gold vs. The Great American Debt Machine: "Gold is not in a bubble but undervalued. As long as the US monetary and fiscal policies remain debt-based fueling future inflation, gold's bull market run has only just begun. Money is no longer money. Wall Street may have just discovered gold, but gold's role has withstood thousands of years of history. We remain convinced that gold will soon trade at $1,300 an ounce and in the long run push beyond over oft-stated $2,000 an ounce target," reports John Ing at SafeHaven.

* "Gold remains in fundamental uptrend due to negative outlook of debt and government deficits, said Martin Murenbeeld at DundeeWealth. Sentiment is cautious ahead of COMEX option expirations and the Federal Reserve's interest rate decision on Wednesday," reports Reuters.