Metals: a trustworthy value
"New gold peaks ahead" -80 experts ... "Buy gold dips" -Pat Boone
BY DAVID BRADSHAW ~ Editor, Real Money Perspectives
Global Currency Crisis ~ Special Report
features ~ links ~ wisdom ~ weekly email ~ daily email
July 30, 2010 ~ ((M-F podcast)) ~ gold fraud alert!

Friday gold prices shot up over 1% on bargain hunting, weak buck, slowing growth. Gold last traded up $14.90 to $1,181.40/oz., silver rose $.25 to $17.97/oz.

* 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 on periodic prices dips.

* 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.

* "The recession was deeper than the government previously thought. The Commerce Department, in revisions issued 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.

* 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.

* 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.

* 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 prices fell 2% Tuesday on weak consumer confidence data and heavy technical selling triggered by an option expiration. Gold prices gravitate toward an option strike price as traders try to profit from their bets when options expire," reports Reuters.

* "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.

* Is the Worst Over?: "What will be the aftermath of the recent crisis? More of the same we have experienced over the last four decades. 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.

* 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.

* 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.

* 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.

* "U.S. single-family home prices rose more than expected in May, still reflecting robust spring sales spurred by homebuyer tax credits. House prices are basically flat over the last seven months. It still looks possible that the housing market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy," reports FoxBus.

* The Death of Paper Money: "Each big inflation -- whether the early 1920s in Germany, or the Korean and Vietnam wars in the US -- starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck. People’s willingness to hold money can change suddenly for a 'psychological and spontaneous reason' , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money," reports Telegraph.

* Without Stable Money, There Can Be No Trust: "Most problematically for savers and investors, the dollar's value since 1971 has collapsed. While a dollar bought 1/35th of an ounce of gold back then, today it purchases roughly 1/1200th. Is it any wonder then that today trust among Americans in our government has declined? At its core the dollar is a concept of value issued by our federal government, but Washington has let it collapse, and in the process the savings and wages of most Americans have been eviscerated," reports Forbes.

* "Fed Chairman Ben Bernanke said the outlook for the U.S. economy is 'unusually uncertain,' and that the Fed is willing to do more if growth proves to be weaker than forecast. In congressional testimony, Ben Bernanke signaled that no moves were imminent to bolster the recovery despite a 'somewhat weaker outlook' for the economy," reports Marketwatch.

* "U.S. taxpayers' total support for the financial system by $700 billion in the past year to $3.7 trillion, a government watchdog said last week. The Special Inspector General for the TARP said the increase was due largely to the government's pledges to supply capital to Fannie Mae and Freddie Mac and to guarantee more mortgages to the support the housing market," reports Reuters.

* New Obamacare Scare!: "Nationwide, businesspeople are outraged by the new reporting requirements embedded within Section 9006 of Obamacare for at least three important reasons: First, the burden of paperwork this ill-conceived provision will put upon businesspeople will be devastating and is likely to further kill jobs. Second, this provision is designed to further invade the public's privacy. Third, section 9006 raises new concerns of the possibility of another gold confiscation by the Federal government like we had back in 1933," writes Swiss America Chairman Craig R. Smith.

* Secrets Slipped Into Obamacare: "A scarcely noticed tack-on provision to the health care legislation puts gold coin buyers and sellers under closer government scrutiny [starting in 2012]. 'Everyone agrees that small businesses are job creators and the engine which drives the American economy. I am dumbfounded that this Administration is doing all it can to make it more difficult for businesses to succeed rather than doing all it can to help them grow,' said Rep. Daniel Lungren, R-Calif., who has introduced legislation [H.R. 5141] to repeal the section of the health care bill that would trigger the new tax reporting requirement because he says it's a burden on small businesses. ICTA says identity theft is another concern because criminals may set up shops specifically to extract personal information that would accompany the filing out of a 1099," reports ABCNews. [Ed. Note: All businesses, not just gold dealers, hope to repeal this idiotic provision of Obamacare: U.S. Chamber of Commerce fights for H.R. 5141].

* Financial Reform: A crisis of ethic proportions: "Unchecked market forces have overwhelmed traditional standards of professional conduct, developed over centuries. The result has been a shift from moral absolutism to moral relativism. The old notion of trusting and being trusted -- which once was not only the accepted standard of business conduct, but the key to success -- came to be seen as a quaint relic of an era long gone. Somehow, our society must be spurred into action to return to that standard. Until it is, I fear that a repeat of our recent meltdown is probable, for there's no end to the ways that motivated individuals can get around even the most stringent regulations. True reform of our financial markets will not be found until our nation's financial professionals turn their focus away from the salesmanship and embrace the stewardship that their profession demands. Such a change cannot happen soon enough," reports John Bogle, founder of The Vanguard Group.

* Vast Left-Wing Media Conspiracy : "Why is the media so liberal? The question often reflects a suspicion that members of the press get together and decide on a story line that favors liberals and Democrats and denigrates conservatives and Republicans. My response has usually been to say, yes, there's liberal bias in the media, but there's no conspiracy. The liberal tilt is an accident of nature. The media disproportionately attracts people from a liberal arts background who tend, quite innocently, to be politically liberal. Hundreds of journalists have gotten together, on an online listserv called JournoList, to promote liberalism and liberal politicians at the expense of traditional journalism," writes Fred Barnes at WSJ.

* "Seven of Europe’s 91 largest banks would struggle to survive an unexpected decline in economic growth or a sharp deterioration in the value of European government bonds, and will need to raise more capital, regulators said Friday in releasing results of closely watched bank stress tests. Whether the tests succeed in reviving confidence depends on whether investors and analysts believe they were severe enough to expose vulnerable banks," reports NYTimes.

* The Great Unemployment Extension Debate: "Every day another 50,000 Americans lose that badly needed lifeline [unemployment insurance]. Most economists agree that extending unemployment insurance is one of the single most cost-effective ways to help jumpstart the economy," according to President Obama. The speech comes just in advance of a vote to break the Republican filibuster and extend the unemployment benefits. Both Republicans and Democrats are maneuvering to be viewed as the party of jobs as campaigning for November’s midterm elections heats up," reports WashIndp.

* Unemployment Benefits Aren't Stimulus: "The current debate over extending and increasing federal unemployment benefits encapsulates the disagreement between the Democrats in power in Washington and their Republican opponents. What the consequences will be of raising unemployment benefits in today's depressed economy is at issue. The most obvious argument against extending or raising unemployment benefits is that it will make being unemployed either more attractive or less unattractive, and thereby lead to higher unemployment," reports WSJ.

* "Concerns about the outlook for the U.S. economy in the second half moving front and center in investors' minds. Those concerns are casting a harsh light on earnings from large financial corporations with deep roots in Main Street. Bank of America's 9% drop led the blue chips lower," reports Marketwatch.

* Higher education fund buys gold: "Fearing unstable international financial markets and the possibility of high inflation, Texas' higher education investment managers have bought more than $500 million in gold. The gold purchases represent only 3% of the University of Texas Investment Management Co.'s $22.3 billion in investment funds, but it indicates how deeply the fund managers are concerned about the global financial future," reports HousChron.

* Rust Discovered On Bank Of Russia Issued .999 Gold Coins: "Russian commercial precious metal trading company, International Reserve Payment System, discovered on thousands of (allegedly) .999 gold coins "St George" (pictured) issued by the Central Russian Bank are rusting. The Central Bank of Russia has been one of the biggest purchasers of gold in 2010, having bought gold every single month. It would be embarrassing if it were discovered that not only is the bank diluting the gold content once received with oxidizable materials, but subsequently passing it off for .999 proof precious metal," reports ZeroHedge.

* Consumer inflation, sentiment & markets retreat: "The Consumer Price Index dipped 0.1% in June, the Labor Department reported Friday. Meanwhile, consumer sentiment weakened in early July to its lowest in 11 months on a resurgence in fears about the economy. This steep pullback in sentiment is ominous for the U.S. economy, which is already showing signs of slowing. Consumer spending accounts for some 70% of the U.S. economy," reports CNBC.

* New FinRegs a "legislative monster": "Congress on Thursday passed the stiffest restrictions on banks and Wall Street since the Great Depression, clamping down on lending practices and expanding consumer protections. From storefront payday lenders to the biggest banking and investment houses on Wall Street, few players in the financial world are immune to the bill's reach. Sen. Richard Shelby, R-ala., who worked with Dodd on certain aspects of the bill, denounced it as a "legislative monster." "We're going to be driving jobs and business overseas with this massive piece of legislation," said Sen. Saxby Chambliss, R-Ga," reports AP. (Key elements of the bill-Reuters/CNBC)

* "Lower gold prices rekindled demand from physical buyers early this week, Portugal's debt downgrade brought back fears of a European demise. 'I think this could be the beginning of the next leg up. The next couple of sessions will be critical,' said Matt Zeman, a trader at LaSalle Futures Group in Chicago to Marketwatch.

* "Inflationary risks have seemingly fallen out of the mindset of many investors recently, with the European debt crisis causing many to re-evaluate their outlook for global economic growth in concert with record low headline consumer price index numbers being released. Despite this, gold, traditionally a hedge against inflation, continues to move up in price. Is this dynamic inconsistent? We don't think so," reports ATimes.

* "European sovereign risk and inflows into gold ETFs have been the main drivers of stronger gold prices in 2Q10. We expect U.S. dollar weakness will be the catalysts for $1,450/oz. gold in 2011 and $1,600/oz. in 2012," said Jorge Beristain, Deutsche Bank Securities analyst to Fortune.

* Gold set to shine as dollar flood fuels double-dip recession: "More than 50% of America’s money supply has been created in just four years, according to an eminent economist, leading gold bugs to argue that marginal softening in bullion prices represents a buying opportunity," reports Telegraph.

* "While gold’s meteoric rise still has room to run, silver’s run is yet to get started. As such, it certainly appears evident that now is the time to buy all things silver. History will look back at the artificially high silver to gold ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they’re all an illusion. This fiat currency experiment will end badly in a currency crisis," writes Lorimer Wilson, editor of at 24hgold.

* Debt commission warns of fiscal 'cancer': "The co-chairmen of President Obama's debt and deficit commission offered an ominous assessment of the nation's fiscal future here Sunday, calling current budgetary trends a cancer that will destroy the country from within unless checked by tough action in Washington. "We can't grow our way out of this," Bowles said. 'We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues,'" reports WashPost.

* The mattress economy: "Government policies designed to stimulate the economy seem to be having the opposite effect. Consumers aren't buying, businesses aren't hiring, and those fortunate enough to have some cash on hand don't seem to be investing. I call it the mattress economy. People seem to be following this investment strategy. Step one: Go to Mattress Discounters and buy the biggest mattress you can find. Step two: Take it home, and stuff all your money in it. Step three: Lie down, and get some rest," reports Townhall.

* "FICO, a leading provider of credit scores, said more Americans are seeing their average credit scores fall to new lows. The shift is significant not just because of its magnitude, but also because the repurcussions of these lower credit scores will be with us for a long time to come. About 35% of Americans (70 million consumers) now have a credit score below 650, which is considered subprime," reports CNBC.

* Crisis Awaits World's Banks as Trillions Come Due: "There is another gathering threat: the trillions of dollars in short-term borrowing that institutions around the world must repay or roll over in the next two years. Banks worldwide owe nearly $5 trillion to bondholders and other creditors that will come due through 2012. About $2.6 trillion of the liabilities are in Europe. U.S. banks must refinance about $1.3 trillion," reports NYTimes.

* Even as Market Jumps Higher, Investors Head For Exits: "Perhaps the past week's stock market rally was only a mirage: Fund-flow data showed retail investors ran for the exits even as the major averages were staging their biggest surge in months," reports CNBC.

* Double Dip or a Bull Market?: "The question of whether the economy is headed for a double-dip—and will take the stock market with it — could be answered when second-quarter earnings season kicks off this week. With investors wrestling over whether the market has seen merely a normal pullback or is teetering on brink of something far worse, investors again are likely to focus far more on what companies see in their future," reports CNBC.

* "World markets soared last week as investors scooped up stocks that had been recently pummeled. Weak data from major economies over the past few weeks has diminished confidence in a strong rebound from last year's global recession and unnerved markets, many of which are in the red so far this year. But after days of selling, some investors felt stocks had become cheap, making it a ripe time to buy," reports AP.

* "Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. Roughly a million Americans have dropped out of the jobs market altogether over the past two months. That is the only reason why the headline unemployment rate is not exploding to a post-war high. Let us be honest. The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10% of GDP. The Fed is already eyeing the printing press again," reports Telegraph.

* "Another recession is what we should expect right now. This is because both GDP and employment are driven by private business investment, and huge tax increases on both business income and capital investment are now only six months away. However, the oncoming recession is also visible in the numbers. In the past six months, the "Real Dow" (the DJIA divided by the price of gold) has declined by 17.4%. Falling indicators, plus the contraction in total employment during the past two months, suggest that we are heading into another recession - the dreaded "double dip". Unless policy changes are made," reports RCMarkets.

* Banks Too Big to Fail, Too Big to Bail Out: "European governments face the quandary of being unable to afford to bail out banks that are still considered too big to fail, while the global economy is heading for a slowdown in the second half of the year, economist Nouriel Roubini told CNBC. Governments are running out of ways to counter a 'massive slowdown' or the risk of a double-dip recession," Roubini said to CNBC.

* Is Your Portfolio Ready for A Double-Dip Recession?: "With the threat of a double-dip recession in the near future, investors should position their portfolios to protect themselves from another downturn. In times of uncertainty, many investors turn to gold. The precious metal is a good alternative in the sense that it's generally not correlated to basic economic activity, says John Derrick, director of research for U.S. Global Investors. "It's an insurance policy against bad government policies," he says reports USNews&WR.

* THE BATTLE: How the Fight between Free Enterprise and Big Government Will Shape America’s Future -- "America faces a new culture war. This is not the culture war of the 1990s over religion, abortion, guns, and gay rights, nor is it a war between Democrats and Republicans. Rather, it is a struggle between the traditional American culture of free enterprise and the current drifts toward a European-style social democracy," writes Arthur C. Brooks, president of American Enterprise Institute (video link).

* GOLD RUSH!: "You don't have to be an economist to see that the factors inflating the price of gold aren't likely to change anytime soon. Gold demand typically rises in times of economic uncertainty. In particular, folks thinking about buying gold (or more gold) are worried about the debasement of the dollar — and perhaps rightly so. Consider this fact: No "fiat" currency (that is, money declared to be money by a government) has lasted forever. Modern-day gold fever also has brought the possibility of shenanigans. Those planning a deeper plunge into the purchase of precious metals as an investment ought to become knowledgeable about the game," reports NewTimes. [Ed. Note: Visit our gold fraud alert for "5 Steps Before Buying or Selling Gold"]

* Despite month and quarter-end speculative profit-taking last week, precious metals had a stellar 2nd quarter, with gold prices rising 12% and silver prices up 9%. The case for owning real money for safety and growth is gaining momentum daily as governments around the world vow to reduce debt while fighting a "third depression".

* "There is a perfect storm for gold. The metal has become the ultimate currency, as few want to commit to the euro, pound or yen. And while the U.S. dollar may be the best of a weak lot, it also holds little appeal," Bill O’Neill, former head of commodity research at Merrill Lynch and now a partner at Logic Advisors, told CNBC. Central banks are shifting some of their currency reserves to gold, which also will boost the metal, O’Neill says.

* "What you are seeing is this unwinding of the euro-gold trade," said Walter de Wet, analyst with Standard Bank in London. Investors who bought gold in euros are now selling to cut losses arising from a stronger euro. Moreover, much of gold's gains since the start of the year came as the European debt crisis reduced confidence in currencies, particularly the euro, and boosted demand for gold's safe haven," reports Marketwatch.

* Why Obamanomics Has Failed: Uncertainty about future taxes and regulations is enemy No. 1 of economic growth."The administration's stimulus program has failed. Growth is slow and unemployment remains high. The contrast with President Reagan's antirecession and pro-growth measures in 1981 is striking. Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending. Recovery began about a year later. After 18 months, the economy grew more than 9% and it continued to expand above trend rates. Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions," said ALLAN H. MELTZER, author of "A History of the Federal Reserve" reports WSJ.

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* "The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency. A new global reserve system could be created, one that no longer relies on the U.S. dollar as the single major reserve currency," said the U.N. World Economic and Social Survey 2010," reports Reuters.

* Time to shut down the Fed: "The 20th Century was a horrible litany of absurd experiments and atrocities committed by intellectuals, or by elite groupings that claimed a higher knowledge. Simple folk usually have enough common sense to avoid the worst errors. Sometimes they need to take very stern action to stop intellectuals leading us to ruin. Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control," reports Telegraph.

* "Gold's new record is significant because it shows that investors are beginning to understand that just because governments around the world claim that things are improving, this is nothing more than meaningless rhetoric. We can expect gold to move higher while governments continue to debase the value of their currencies by printing more fiat money. Recently, we have seen gold make new historic highs in US dollars as well as euro, sterling, Japanese Yen, Swiss Franc, Russian Rubble, Indian Rupee, Mexican peso and Chinese Yuan," reports Mineweb.

* "Throughout history gold's value has stood tall when the schemes of greedy profiteers and politicians crumble, as they are now. Gold remains what it has been since biblical times: a reliable store of value that government cannot devalue by printing more or by manipulating paper investments," writes Swiss America Chairman Craig R. Smith

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