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The Goldbugg Report - March 9, 2010

2010-03-09T16:11:00.000-08:00

March 5, 2010

The Week in Review

“Forget US Stocks – Buy Gold Every Month ‘Forever’: Faber”. That was the largest, and leading, headline on CNBC’s website for most of the morning and afternoon on Thursday. Marc Faber, editor of The Gloom, Boom & Doom Report said these exact words in an interview with CNBC on Thursday morning. When asked why he would say such a thing, he had this to say: “[Gold’s] quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar. I’m not saying that the dollar will go straight away down, because other currencies like the euro are even worse at the present time, but eventually, if you print money, the purchasing power will lose [value].”

Initial claims for unemployment dropped for the first time in three weeks last week. Continuing claims for unemployment also fell, but this number has been skewed by the sheer number of people who have exhausted their benefits and are now on either extended benefits, or simply no longer qualify for benefits. The number of people receiving extended benefits, in the week ended February 13 (the latest data available), increased to 5.9 million people.

Europe continues to be embroiled in its debt crisis. The British Pound had its largest one-day fall against the dollar in more than a year on Monday. The euro continued its slide, fueled by further fears that Greece is not the only country in need of bailing out and that the situation is continuing to deteriorate. Several Germans have gone so far as to suggest that Greece sell off some of its islands in order to pay off its debt. Ashok Shah, CIO of London & Capital said Wednesday that “there’s a risk of a double dip recession round the corner. Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe.”

Pending home sales dropped 7.6% in January. This figure counts those homes that actually have signed contracts in place on them. Many blame the decline on the weather but with the deadline for the extended home buyer tax credit fast approaching next month, the weather really should have had minimal impact on those looking to take advantage of the credit. The general feeling is that the housing market continues to be plagued by weakness.

US crude oil inventories rose more than expected last week however the price stayed fairly steady at just over $80 a barrel.

After a confusing “setup for disappointment” earlier in the week by Lawrence Summers, economic advisor to president Obama, the jobs numbers came in better than expected. Summers came out early in the week hinting that Friday’s numbers may be horrible due to the recent severe weather experienced across the US. The numbers, when they were released Friday, showed unemployment remains steady at 9.7 % and fewer jobs than expected were cut by US employers. Interestingly, the stock market, the US dollar and commodities all rose on the news.

We consider our February 5^th memo to have been a major buy signal. In that memo we quoted James Turk as saying “Every once in a great while, the market offers a unique opportunity to buy precious metals ‘on the cheap’. I believe today is one of those moments.” To those of you who read that quote and took advantage of prices at the time to add to, or start your precious metals portfolios, congratulations! As you can see in the table below, your decision has served you well.

Volatility should be expected to continue. The situation with Greece and the rest of the eurozone has yet to resolve itself. Germany’s chancellor said Thursday that there would be no aid coming as far as Germany was concerned. The US Congress, apparently ignoring the will of the people of the US, appears to have every intention of pushing through the unpopular health care bill using any means necessary. Deficits around the world continue to skyrocket. Central banks around the world, their hands tied by a global recovery that continues to be sluggish, are keeping policies in place that are increasing the supply of currencies in the world. More money supply in the world means less buying power, which means inflation. We continue to see new precious metals ETF’s coming to the marketplace and although we feel such ETF’s do not properly represent physical ownership of product since a share in one of these funds is only a paper representation of a fractional portion of physical product, it certainly shows that more and more people are trying to capitalize on upward moving prices. Increasing interest in precious metals as an investment means an increase in demand of a finite product. Supply and demand rules would suggest that prices, under those conditions, should increase remarkably. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-Implications for Currencies and Gold: http://beforeitsnews.com/news/22664/Sovereign_Debt_-_The_Implications_for_Currencies_and_Gold.html

-Marc Faber: Buy Some Gold Every Month “Forever.” “Gold is not the liability of someone else its quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar,” Faber told CNBC on Thursday in a live interview.

“I’m not saying that the dollar will go straight away down because other currencies apparently like the euro are even worse than the U.S. dollar at the present time,” he added. “But eventually if you print money, the purchasing power of money will lose value. Read more here-http://wallstreetpit.com/18613-marc-faber-buy-some-gold-every-month-forever

-China Gold Buy Would Be No Surprise: Analysts. Read more here-http://www.kitco.com/reports/KitcoNews20100226.html

-J.S. Kim: Why China's purchase of IMF gold would be huge. Read more here-http://www.gata.org/node/8379

-George Soros is helping drive up gold prices by doubling his bet in a market even he considers a “bubble” as Goldman Sachs Group Inc., Barclays Capital and HSBC Holdings Plc predict more gains before it bursts.

Soros Fund Management LLC, which manages about $25 billion, increased its investment in SPDR Gold Trust, the world’s largest exchange-traded fund for the metal, by 152 percent in the fourth quarter, a Feb. 16 Securities and Exchange Commission filing shows.

While prices have fallen 9.2 percent since reaching a record on Dec. 3, 15 of 22 analysts in a Bloomberg survey say gold will reach a new high, with the median forecast predicting a 17 percent advance to as much as $1,300 an ounce this year.

“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment,” Soros said at the World Economic Forum’s annual meeting in Davos, Switzerland, in January. “The ultimate asset bubble is gold,” he said.

In a Jan. 28 Bloomberg Television interview, the 79-year old billionaire recalled that former Federal Reserve Chairman Alan Greenspan warned of “irrational exuberance” in financial markets three years before the technology bubble burst in 2000. The Standard & Poor’s 500 Index rose 89 percent in the period. Buying at the start of a bubble is “rational,” Soros said.

Gold’s fourfold rally since the end of 2000 has also attracted money managers John Paulson, Paul Tudor Jones and David Einhorn. Paulson’s Credit Opportunities Fund soared almost sixfold in 2007 by betting that subprime mortgages would plummet. Einhorn said in October that his Greenlight Capital Inc. bought gold to bet against the dollar.

Investment demand, including in bars and coins, doubled to 1,820 tons last year as investors sought a refuge from the global recession, according to GFMS Ltd. That exceeded jewelry demand for the first time in three decades, the London-based research firm said Jan. 13. Prices reached the record $1,226.56 a decade after the metal fell to a 20-year low of $251.95 amid sales by central banks.

“Perhaps Soros thinks gold is going to bubble but the bubble is going to last for a while and he wants to profit from it,” said Jeffrey Nichols, managing director of American Precious Metals Advisors and an adviser to central banks and mining companies. “We could have a bubble but gold can reach $2,000 or $3,000 before it’s over.”

Goldman predicts gold will reach $1,235 in three months and $1,380 in 12 months. Barclays Capital says the metal will average $1,235 in the fourth quarter. HSBC says it may peak at $1,300 this year. “I absolutely believe it’s heading into a bubble, but that’s why you buy it,” said Charles Morris, who manages $2.5 billion at HSBC Global Asset Management’s Absolute Return Fund in London. “A bubble is good,” he said, forecasting the metal may rise to $5,000 in five years to explain why 11 percent of his fund is in gold.

“Gold makes sense as an investment,” said Jeffrey Christian, the managing director of CPM Group. “Just because the price of gold is going up for the 10th year doesn’t mean it’s a bubble.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=avsz5zUl.3yo

-Parsing 200 years of gold trades. Commentary: What is the gold chart saying about the future price? Read more here-http://www.marketwatch.com/story/story/print?guid=E250F4EA-4AD2-4D2F-A8C4-0A529AB94006

-Adrian Douglas: Alarming trend in Comex gold and silver inventory data. Having examined six months of delivery and inventory data from the gold and silver divisions of the New York Commodity Exchange, GATA board member Adrian Douglas has discovered that bullion dealer inventory appears to be reducing dramatically and is not being replaced. Douglas, publisher of the Market Force Analysis letter, concludes that this likely indicates a worsening shortage of gold and silver bullion. Read more here-http://www.gata.org/node/8373

-Gold rise linked to sovereign credit bonds: BMO's Coxe. Sovereign credit bonds are as significant in fueling gold's current rise as is a lack of supply, Don Coxe, Strategy Advisor for BMO Capital Markets, said Wednesday. Coxe told the BMO Capital Markets Annual Global Metals and Mining Conference in Florida that the amount of new mined gold has been falling year-over-year, but gold’s rise is not solely attributable to this.

“The fascinating thing about gold is that it peaked past the magic $1,000 mark at a time when the two biggest end-use consumers of gold the jewelry industry worldwide and brides in India were buying much less of it because the price was so high,” Coxe said in his keynote address. “So here you had the two biggest users of the product cutting back drastically on their purchases and yet gold goes to $1,100 an ounce, why?” he questioned.

Coxe said in his answer that the printing of money story is only is part of the equation. “What has happened with gold is that it is a beneficiary of the deteriorating position of another asset class which is seemingly unrelated to it sovereign credit bonds,” he said.

“Investors are looking to what is happening to what were considered the securest assets, government bonds. What they are saying is, ‘what is the long-term store of value?’ Nobody knows what inflation is going to be in two years, five years or 10 years from now. The other thing is we don’t know what currency is going to do because the only major currency of the world that has powerful underlying strength is the Renminbi of China,” said Coxe.

According to Coxe, Gold is gradually becoming the shadow currency . “As opposed to just setting one currency against the other in a classic George Soros style people are saying maybe all the currencies are going to turn out to be bad.” Read more here-http://www.kitco.com/reports/KitcoNews20100303A.html

-Gold to reach $1,500 by year end, continue decoupling from dollar Jeff Nichols. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=99961&sn=Detail&pid=1

-Gold entering period of rising prices as currencies depreciate. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100027&sn=Detail&pid=33

-Global Gold Supply. Read more here-http://www.321gold.com/editorials/wright/wright022610.html

-Gold breaks the rules. Precious metal and U.S. dollar start to trade in tandem, but for how long? Read more here-http://www.marketwatch.com/story/story/print?guid=145628E9-3CB7-4E1B-97DA-803477831BA3

-The golden slope of hope. Commentary: Gold timers increasingly see glass as half full. Read more here-http://www.marketwatch.com/story/story/print?guid=6FD64FA2-A74C-4B3B-863F-8E6D273CA876

-Do we really want $5,000 gold? What does $5,000 gold really mean? Perhaps social chaos and, if so, who really wants that? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99713&sn=Detail&pid=33

-Usher in credit cards backed by gold bullion. Read more here-http://www.commodityonline.com/news/Usher-in-credit-cards-backed-by-gold-bullion-26099-3-1.html

-Peter Grandich challenges the Tokyo Rose of the gold market. Read more here-http://www.gata.org/node/8394

-Grandich increases challenge to gold perma-bears. Agoracom market analyst Peter Grandich reports that he has doubled his $50,000 offer of a wager to gold perma-bears that gold's next milestone will be $1,200 and not $1,000. But with the bet now standing at $100,000, Grandich has gotten no takers. Read more here-http://www.gata.org/node/8377

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,200 the silver price would be $15.00

Gold to silver ratio at 70 to 1 with gold at $1,200 the silver price would be $17.14

Gold to silver ratio at 60 to 1 with gold at $1,200 the silver price would be $20.00

Gold to silver ratio at 50 to 1 with gold at $1,200 the silver price would be $24.00

Gold to silver ratio at 40 to 1 with gold at $1,200 the silver price would be $30.00

Gold to silver ratio at 30 to 1 with gold at $1,200 the silver price would be $40.00

Gold to silver ratio at 20 to 1 with gold at $1,200 the silver price would be $60.00

Gold to silver ratio at 15 to 1 with gold at $1,200 the silver price would be $80.00

-There is a lot made of the silver-gold ratio. Silver probably will reach what I call the classic, or the monetary ratio, which is 16:1. It could even get down to the natural ratio, which at this time is about 10:1, but I don't see it getting to any better ratio than that. Of course, this implies that silver is undervalued relative to gold.

We have a 10-year bull market behind us and in my view we have several more years to go. What happens is at the end of these great bull markets is you get into the euphoric or manic stage and this happens in almost all markets. You've seen it in the technology sector, when people were buying dot-com stocks that had no business plan and no equity, just an idea.

I think we'll see the biggest run up of all time in gold and silver, especially the equities, a euphoric state of panic buying driven by fear and greed. I'll probably face a lynch mob me when I say "sell," because no one will want to trade physical metal for paper currency and I don't blame them. Anticipating this, I've already planned some techniques to use to preserve our physical metal and still allow us to sell to a strong market, but those are days ahead.

When the panic hits, gold probably will go up to $2,000 and beyond the average person will wake up thinking, "Oh, I've got to get gold equities; I listened to my friends and I thought they were idiots and now I see the light." Many will turn to silver because it'll still affordable relative to gold.

Significant money will move in to the metals. And because silver is cheaper than gold, a lot of it will go silver, which will cause the ratio to spike relative to gold. You'll see the ratio drop from 60:1 to 50:1 to 40:1 to 35:1 to 20:1, maybe to 16:1 or 10:1 because there'll be more money, relatively speaking, moving into silver than in the past. And since silver is such a small market, any small increase in buying power will send the price far higher. David Morgan-Read more here-http://news.silverseek.com/SilverInvestor/1267220221.php

-David Morgan Gives his Predictions for Future Silver Prices. Listen here-http://www.kitco.com/ind/kitcoradio/index.html

-Gene Arensberg: Investors fancy silver in 2010. Read more here-http://www.gata.org/node/8392

-Ted Butler reports at King World News on gold, silver COT. Listen here-http://www.gata.org/node/8383

-Silver Supply Crisis Looms, Part 1. Read more here-http://www.thestreet.com/story/10691881/1/silver-supply-crisis-looms-part-1.html

-Silver Supply Crisis Looms, Part 2. Read more here-http://www.thestreet.com/_catholic/story/10693050/1/silver-supply-crisis-looms-part-2.html

-Chinese Government to Citizens: Buy Gold and Silver. Read more here-http://news.goldseek.com/GoldSeek/1267715760.php

-Brien Lundin: Gold Looking Good; Silver Even Better. Read more here-http://news.silverseek.com/SilverSeek/1267665330.php

-RBC says silver demand will continue to outpace new mine supply. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=99957&sn=Detail&pid=32

-Q4 Silver news from the Silver Institute. Read more here-http://www.silverinstitute.org/images/pdfs/4q09.pdf

-What is an Olympic Gold Medal Worth? Read more here-http://news.goldseek.com/GoldSeek/1267123200.php

U.S. DEBT CRISIS

-America's hidden debt bombs. America's total debt load is on pace to top $13 trillion this year, and $22 trillion by 2020 and that's just the debt we're counting. What's not being counted: potential debt bombs that don't get factored into most budget analysis.

When anyone talks about U.S. debt, they typically refer to two numbers. The first is the debt held by the public. That's money owed to those who have bought U.S. Treasurys, most notably big bond mutual funds and foreign governments. Debt held by the public today is roughly $8 trillion and rising.

The second number is the money the federal government owes to government trust funds, such as those for Medicare and Social Security. The government has used revenue collected for those programs to cover other outlays. Currently, the debt to the trust funds is approaching $5 trillion.

The two combined is the total gross debt that's accounted for. But deficit hawks also worry about what's not on the books. Here is just a sampling of the unseen or underplayed obligations that could worsen the debt outlook. Read more here-http://money.cnn.com/2010/03/01/news/economy/budget_debt/index.htm

-Rogoff: America Has Defaulted Before And It Will Run Into Trouble Again. Read more here-http://www.businessinsider.com/rogoff-america-has-defaulted-and-we-will-run-into-trouble-again-2010-2

-Bernanke delivers blunt warning on U.S. debt. Read more here-http://www.washingtontimes.com/news/2010/feb/25/bernanke-delivers-warning-on-us-debt//print/

-California is a greater risk than Greece, warns JP Morgan chief. Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece's current debt woes. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7326772/California-is-a-greater-risk-than-Greece-warns-JP-Morgan-chief.html

-City of Angels on brink of abyss. Los Angeles, the second-largest US city, is facing a crisis of funding not seen since the darkest days of the Great Depression. Read more here-http://www.guardian.co.uk/commentisfree/cifamerica/2010/feb/25/financial-crisis-useconomy

-Barack Obama's home state of Illinois is near the point of fiscal disintegration. "The state is in utter crisis," said Representative Suzie Bassi. "We are next to bankruptcy. We have a $13bn hole in a $28bn budget." Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7338857/Dont-go-wobbly-on-us-now-Ben-Bernanke.html

-Bill Gross: Markets Will Soon Discover How Sovereign Nations Can Go Bust Just Like Companies. Read more here-http://www.businessinsider.com/gross-markets-will-soon-discover-how-sovereign-nations-can-go-bust-just-like-companies-2010-3 or

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Failed Banks get Pension-Fund backing. FDIC needs money.- http://www.businessweek.com/news/2010-03-08/failed-banks-may-get-pension-fund-backing-as-fdic-seeks-cash.html

-Charts of the week: Actually, Gold Is On A Tear, And Near All-Time Highs. Disappointed that gold isn't regularly busting to new highs like it did last year? You're just looking at it wrong.

In Euros, a currency that's come under serious pressure, gold is basically at an all-time high.

In other words, it's not gold that's gone up or down, it's changing attitudes towards underlying currencies that has changed. When gold sells off against all the currencies because investors suddenly have a new found love of paper money that will be a story. Read more here-http://www.businessinsider.com/chart-of-the-day-gold-price-euro-per-ounce-2010-3

Source: www.chartoftheday.com

-Chart of the week: Why This Market Needs Cheap Money To Keep On Rallying. The key story of the moment is the beginning of the Fed's tightening cycle, a topic on which Morgan Stanley

analysts recently dedicated a major report. In it, the company explored the historical connection between cheap money. As you would expect, the market likes it. A lot.

As the below chart shows, the S&P 500 has been nicely correlated with excess credit growth or the change in non-financial credit. This latest rally was no exception. When the Fed does close the spigot, watch out below. Read more here-http://www.businessinsider.com/chart-of-the-day-sp-500-vs-excess-credit-2010-3

Source: www.chartoftheday.com

-Charts of the week: For some long-term perspective, today's chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, when adjusted for inflation, the bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s.

Also, the inflation-adjusted Dow is a little more than double where it was at its 1929 peak and trades 54% above its 1966 peak not that spectacular of a performance considering the time frames involved. It is also interesting to note that the Dow is up 57% from its March 9, 2009 low which is actually slightly more than what the inflation-adjusted Dow gained from its 1966 peak to today. Read more here-http://www.chartoftheday.com/20100226.htm?T

Source: www.chartoftheday.com

-"You have to trust in something: your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life." Steve Jobs

-"All you have to do is know where you're going. The answers will come to you of their own accord." Earl Nightingale

-"Let others lead small lives, but not you. Let others argue over small things, but not you. Let others cry over small hurts, but not you. Let others leave their future in someone else's hands, but not you." Jim Rohn

-I hope we can find a way of resurrecting the subprime market, because it was working well until those mortgages were widely securitized. Alan Greenspan, Bloomberg, February 23, 2010

-“Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavour to move away from paper currencies. What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment." Alan Greenspan, 9 September 2009

-Gold is “just an asset that, like everything else in life, has its time and place. And now is that time,” Paul Tudor Jones said in an October letter to clients. Bloomberg

-Gold makes sense as an investment. Just because the price of gold is going up for the 10th year doesn’t mean it’s a bubble. Jeffrey Christian, CPM Group, Bloomberg, 01 March 2010

-“Gold is going to become the currency of choice as people lose faith in fiat currencies,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “These countries continue to write checks that they can’t cash.” Bloomberg

-“There are hopes that the Greek deficit cuts will stem the tide of the declining euro,” GoldCore Ltd., a broker in Dublin, said in a report. “Concerns that the austerity measures being taken in Greece may soon have to be undertaken in other European economies and in the U.K. should lead to continuing safe-haven demand for gold.” Bloomberg

-Russia’s central bank wants to increase the proportion of its international reserves held in gold, First Deputy Chairman Alexei Ulyukayev said in an interview published in Izvestia today. His comments were confirmed by a Bank Rossii official. The bank added 100,000 ounces to its reserves in January. Bloomberg

-“We expect stronger willingness by emerging-market central banks to buy and hold more strategic gold reserves for diversification purposes, due to lost confidence in the dollar,” Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland, said in a report. Gold may average $1,150 this year as the metal enters a “second golden decade,” he said. Bloomberg

-I believe the most important event at our Toronto CIGA meeting was the testimony of two attendees. Two men spoke independently. One is a Canadian resident from Russia and the other from Poland. Both said the same thing, "All the signs that preceded our inflation of more than 100% per year are here now in the West." What more do you need to know? Jim Sinclair

-Overall investment in gold was 7% higher in 2009 than 2008. This is significant when you consider that demand in the fourth quarter of 2008 during one of the worst financial meltdowns in history was so great that shortages of physical metal abounded everywhere.

And yet investors bought more gold in 2009 when investor fear about global financial uncertainty was subdued. Further, 2009 total funds invested in all forms of gold exceeded 2008 by 20%, and the average price was 11.6% higher.

In other words, investors were buying gold even though the price wasn’t necessarily “low.” To be sure, that’s a broad statement. But the fact remains that year-on-year, more gold was purchased at higher prices when the markets were less scary, than when the price was lower. Casey Daily Dispatch

-Despite the run up in stocks that took place during 2009, the Dow Jones Industrial Average and the S&P 500 Index are still down about 30% from the highs of 2007. Casey Daily Dispatch

-The fair value of the S&P 500 is 850, 23 percent below today’s 1105, said Jeremy Grantham. He arrives at that valuation by assuming a long-term average price-to-earnings ratio of about 15 for U.S. stocks and applying it to a long-term average for profit margins.

Jeremy Grantham warned in January 2000 that U.S. equities were “more overpriced than at any time in the last 70 years due to the massive overpricing of technology and especially dot-com stocks.” Bloomberg-Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid=ai6GqIOSEWhk

-Bullish sentiment gets more bullish. The latest Investors Intelligence poll shows that the bulls are at 42.1%, up from 41.1% last week; and the bear camp was trimmed back to 22.7% from 23.3%. So the widening in the bull/bear spread is a modest negative for those who are constructive on the market. All the more so with the VIX index now south of 19. Complacency reigns. David Rosenberg-Gluskin/Sheff

-Personal bankruptcies in the U.S. jumped 9% in February and is 14% higher than last year’s already extremely high levels. David Rosenberg-Gluskin/Sheff

-The bottom line is that the U.S. economy is currently about 12 million jobs shy of being at full employment and as such it will likely take anywhere from 5 to 10 years to get back to the prior pre-recession peak in the employment-to-population ratio. David Rosenberg-Gluskin/Sheff

-The Bureau of Labor Statistics reports that total private employment has decreased by 8.5 million jobs and fallen 7.4% from 2007 highs. Real unemployment as reported by John Williams’ Shadow Government Statistics (SGS) is running at 21.2%.

While 21.2% unemployment might raise questions in terms of a comparison with the purported peak unemployment in the Great Depression (1933) of 25%, the SGS level likely is about as bad as the peak unemployment seen in the 1973 to 1975 recession.

The Great Depression unemployment rate was estimated well after the fact, with 27% of those employed working on farms. Today, less than 2% work on farms. Accordingly, for purposes of a Great Depression comparison, I would look at the estimated peak nonfarm unemployment rate in 1933 of 34% to 35%. John Williams

-Over the next four years $1.5 trillion or more in commercial real estate loans will come due. About 50% are in deep trouble. From the top in 2007 their values are off 35% to 40%, so they only have 30% to 35% to go. Losses could be as high as $700 billion. The fallout will affect all banks big and small. The reality of losses will be devastating.

Lenders, mostly banks, already broke, are going to get hit very hard and many will go under. All debt in real estate is in serious trouble. That is why we believe more than 2,000 banks will go out of business over the next 1-1/2% to 2 years.

That is why you should have no CDs and only three months expenses in the bank for operating and 6 months for businesses. That money should be in gold and silver related assets. Read more here-

http://news.goldseek.com/InternationalForecaster/1267632300.php or http://news.goldseek.com/InternationalForecaster/1267370379.php

-The renewed downturn in home prices may be weighing on consumer sentiment too. We just got the latest Zillow data and they showed that final sales prices in February came in 2.8% below the latest asking price in January.

This followed a 2.7% cut from the listing price in December and 2.6% in November so make no mistake, this is still very much a buyer's market and there is a ton of supply that will continue to weigh in real estate values for the foreseeable future.

The steepest discounts remain in Florida. A must-read, by the way, is Banks Warn on Rates and House Prices on page 4 of the FT “Mortgage rates will rise, home prices will fall and the supply of credit will diminish when the US Federal Reserve and other central banks wind down emergency programmes, a group of global banks warned yesterday.” David Rosenberg-Gluskin/Sheff

-When you read articles like When It's OK to Walk Away from Your Home in the WSJ and you see websites being constructed that show distressed homeowners how to not pay their mortgage and still stay in their house strategic defaults that allow people to switch from paying their mortgage to vacations in Disney World then all you know for sure is that we have reached a point where freeing up debt means freeing up cash flow for other purposes.

The reason why this was not the Great Depression was because back in the 1930s there was still a certain shame in not meeting your payments there is no longer any stigma in defaulting and the bank-bashing by the Obama team, not to mention foreclosure moratoria by edict and recently, musings from the White House that foreclosures will be practically outlawed entirely, has reinforced this mentality that being delinquent only carries consequences for lenders and their shareholders.

So at the margin, what we have are a growing number of Americans living for free in homes they never could afford to begin with during the bubble era, and the repercussions lie with the lender in today’s populist backdrop, not the borrower. As the banks and the taxpayer foot the bill, retail sales get underpinned even as credit contracts because the debt is either being written off by the banks or socialized by Uncle Sam.

In the meantime, the debtor is enjoying the benefits of living for free with the complicity of a government finding it easy to point the finger at the banks for creating the mess we are still in today. This is why the banks were forced to charge off 2.9 % of their loan book at the end of 2009 the highest rate since the FDIC began keeping records in 1934; not to mention the fact that 5.4% of all bank loans were at least 90 days late at the end of last year.

Meanwhile, the FDIC ate two more banks on Friday, bringing the total number of failures so far this year to 22 compared to 16 this time in 2009 when everyone thought the Battle of Megiddo was days away. As the WSJ concluded, “whether we like it nor not, walking away from debt is as American as apple pie.”

One has to wonder what the implications of all this will be on credit activity in the future. What financial institution will ever want to lend again without the ability for recourse, as is the case in Canada (where for some reason, the default experience turned out to be totally different than was the case state-side). David Rosenberg-Gluskin/Sheff

-Retail sales are down 5.5% from 2007 highs. Meanwhile, corporate earnings have picked up a bit, though sales are still swirling around the toilet bowl. But the kicker is that total household and government debt outstanding is at a new all-time high and has grown 21% over the past three years (and more than doubled in the past ten). In other words, we’re still in the thick of it. And we expect it could get much worse before it gets better. Casey Daily Dispatch

-A possible relapse in home prices that had Fed policy makers concerned late last year may now be coming to pass, underscoring forecasts by economists such as Jan Hatzius that an interest-rate increase is a long way off. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=aYZxJTQI3w74

-Canada Keeps Lending Rate 0.25%, Cites Faster Prices. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=aqo3FufkOC7o

-ECB Keeps Key Rate at 1% as It Weighs Greek Crisis. The European Central Bank left its benchmark interest rate at a record low as policy makers weigh the risks of withdrawing emergency lending measures amid Greece’s fiscal crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=adMQdResWgC8

-Man who broke the Bank of England, George Soros, 'at centre of hedge funds plot to cash in on fall of the euro'. Read more here-http://www.dailymail.co.uk/news/worldnews/article-1253791/Is-man-broke-Bank-England-George-Soros-centre-hedge-funds-betting-crisis-hit-euro.html

-Webster Tarpley: Bankers in slump plot against euro to save dollar. Watch here-http://www.youtube.com/watch?v=8XRFII9AiQc&feature=player_embedded

-The BOE kept interest rates at a record low of 0.5 percent Thursday and made no increase to its unprecedented asset-buying scheme. Read more here-http://www.reuters.com/article/idUSLAC00566120100304

-While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next. Turcan Connell, which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt.

“Alarm bells were ringing in Greece for a long time and when it happened, it happened very quickly,” Haig Bathgate, head of strategy at Turcan Connell, said at the company’s offices in the Scottish capital. “The U.K. is in a similar predicament. It could be hit very hard.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aJhONJ3Sdkqw

-CLSA's Chris Wood "In Five Years The US Dollar Paper Standard Will Collapse." Read more here-http://www.zerohedge.com/article/clsas-chris-wood-five-years-us-dollar-paper-standard-will-collapse-due-persistent-taxpayer-f

-Central bank report tells South Korea to prepare for dollar's fade. Read more here-http://www.gata.org/node/8385

-Why the Fed won't stop printing money. Ben Bernanke can talk tough, but the economy would sputter if the cash stopped flowing. Also: The inflation or stagflation that's probably in our future. Read more here-http://articles.moneycentral.msn.com/Investing/currency/why-the-fed-wont-stop-printing-money.aspx

-James Turk-US Dollar Money Supply Is Underreported. Read more here-http://www.fgmr.com/us-dollar-money-supply-is-underreported.html

-Will The US Devalue the Dollar? Read more here-http://news.goldseek.com/GoldSeek/1267632000.php

-James Turk: What are banks doing with their depositors' money? Read more here-http://www.gata.org/node/8381

-Head of IMF Proposes New Reserve Currency. IMF's Strauss-Kahn suggests IMF may one day provide global reserve asset. Read more here-http://abcnews.go.com/Business/wireStory?id=9958995

-It is astounding how many economists, government officials, and Wall Street strategists construe the current economic conditions as evidence of a bona fide recovery. It is a testament to the power of the rose colored glasses handed out by our nation's leading universities that such a feeling could be widely held despite the clear and present danger that compounds daily.

The myopia leads us to enact policies that actually exacerbate our problems. The "remedies" are postponing, perhaps indefinitely, a true recovery. The only possible way consumers can spend is if the government gives them the money. However, since the government cannot legitimately give money to one American without first taking it from another, the most likely means of doling out cash will be to run it off the printing presses.

That, in a nutshell, is our government's plan for economic recovery. Print a bunch of money and give it to consumers to spend. This is not a plan for recovery but a recipe for disaster. Those betting that this program can succeed in putting together a healthy and sustainable economy simply do not understand the nature of their wager. The smart money is going the other way. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff030210.html or http://www.321gold.com/editorials/browne/browne030110.html or http://www.321gold.com/editorials/browne/browne030510.html

-Economists Warn Another Financial Crisis on the Way. Nonpartisan Group Led by Nobel Winner Calls for Stronger Financial Reforms. Read more here-http://abcnews.go.com/Business/economists-warn-financial-us-economy/story?id=9990828

-US senator warns of ‘financial meltdown’ risk. The US is heading for a debt-driven “financial meltdown” within five to seven years, according to Judd Gregg, the outgoing Republican senator for New Hampshire. In a robust and at times testy video interview for the Financial Times’s View from DC series, Mr Gregg also complimented China for showing rising alarm about the US’s mounting levels of public debt.

“We have had China say that they are looking for other places to put their reserves and that is probably a smart decision on their part,” said Mr Gregg, who will not seek re-election in November. “So the warning signs are pretty clear and the path is unsustainable and, at this point, unless we take different actions, unavoidable.” Read and watch more here-http://www.ft.com/cms/s/0/d618a9a4-225b-11df-a93d-00144feab49a.html or http://www.infowars.com/us-senator-warns-of-financial-meltdown-risk/

-Fannie Seeks $15.3 Billion in Aid After 10th Loss. Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aEYsPfLirnuU&pos=2

-American reliance on government at all-time high. The so-called "Great Recession" has left Americans depending on the government dole like never before. Without record levels of welfare, unemployment and other government benefits as well as tax cuts last year, the income of U.S. households would have plunged by an astonishing $723 billion more than four times the record $167 billion drop reported last month by the Commerce Department.

Moreover, for the first time since the Great Depression, Americans took more aid from the government than they paid in taxes. The figures show the devastating results of the massive job losses last year and indicate that the economic recovery that began last summer is tenuous and has a long way to go before many Americans resume life as normal, analysts said. Read more here-

http://www.washingtontimes.com/news/2010/mar/01/americans-reliance-on-government-at-all-time-high//print/

-Who is Paying Taxes in the U.S.? Read more here-http://www.mint.com/blog/trends/who-is-paying-taxes/?display=wide

-More consumers file for bankruptcy protection. The economic recovery effort has not slowed consumer bankruptcy filings. They surged 14% in February compared with a year earlier, according to the American Bankruptcy Institute. The 111,693 cases filed last month also represented a 9% increase from January, the report said. Read more here-http://www.usatoday.com/money/economy/2010-03-03-bankruptcy03_ST_N.htm

-Blockbuster to Shut 500 U.S. Stores, Restructure Debt. Blockbuster Inc., the largest U.S. movie-rental chain, will close at least 500 U.S. stores and is exploring ways to restructure debt. Blockbuster is working with Rothschild Inc. on financing and strategy, the Dallas-based company said today in a statement.

The company has total debt of $963.9 million, including leases, according to the statement. The company closed 253 stores in January as more consumers turned to Coinstar Inc.’s Redbox movie vending machines, and mail-order and online rental services such as Netflix Inc. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=axyx0rAJ922o

-The Flu Season That Fizzled. Cases of H1N1 Have Dwindled, Seasonal Flu Has Been a No-Show and Doctors Wonder Why. Read more here-http://online.wsj.com/article/SB10001424052748703429304575095743102260012.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsSecond

-China, Russia Urge More Iran Talks as France Seeks Sanctions. China and Russia said negotiations with Iran remain the best way to resolve the dispute over the purpose of its nuclear program, after a French envoy said the time has come to adopt tougher United Nations sanctions. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aOLRz4Tjnhyc

-China should build the world's strongest military and move swiftly to topple the United States as the global "champion," a senior Chinese PLA officer says in a new book reflecting swelling nationalist ambitions. Read more here-http://www.reuters.com/article/idUSTRE6200P620100301

-Batman comic book beats Superman at auction, sets record. The Dark Knight may be Superman's next greatest nemesis, after Lex Luthor. Just three days after auction site ComicConnect.com claimed to break world records when it sold an original Superman comic for $1 million, Batman stole his thunder.

A rare, high-quality copy of Detective Comics #27, which marked the first appearance of Batman in 1939, sold for $1,075,500 on Thursday. Heritage Auctions of Dallas sold the comic book to an unnamed bidder on behalf of an anonymous collector.

Seven bidders from three countries participated in the combination live and online auction, taking about eight minutes to decide on a final price -- an "eternity" in auction time, said Heritage Auctions president Greg Rohan. Read more here-http://money.cnn.com/2010/02/26/news/economy/batman_comic/index.htm

WWW.RARECOLOREDDIAMONDS.COM

-The Rare Colored Diamonds Historical Value Tracker system is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://www.rarecoloreddiamonds.com/HistoricalPriceTrackingsystem.html

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html

-Rare blue De Beers diamond expected to fetch £4million. A rare flawless blue diamond that was once part of the De Beers Millennium collection is expected to fetch almost £4 million at auction. The 5.16 carat, pear-shaped internally flawless Fancy Vivid Blue gem is the first diamond of its kind to appear at an auction from the collection that De Beers, the world's largest diamond producer, presented in 2000 to celebrate the Millennium.

It is being put up for sale by a private collector and is the star lot at Sotheby's Hong Kong jewels and jadeite 2010 spring sale on April 7 and bidding is expected to reach the £3.8 million ($5.8 million) estimate price. The De Beers Millennium collection comprised 12 rare gems and took decades to assemble. "The diamond's high and even saturation of brilliant sky-blue colour, internally flawless clarity and classic pear shape will undoubtedly spur intense bidding amongst discerning collectors from around the world," the auction house said in a statement.

The auction's location is not surprising: China is one of the world's largest and fastest growing diamond markets, with jewellers forecasting it will be the next big purchaser of rare jewels as its economy surges as the rest of the world still grapples with the fallout from the global financial meltdown. Blue diamonds are among the rarest of all gems and owe their natural blue colour to the presence of the chemical element boron during the stone's formation.

In May 2009, a 7.03 carat, cushion-shaped internally flawless fancy vivid blue diamond set the world record price per carat for any gemstone at a Sotheby's Geneva auction when it was bought by a Hong Kong collector for £6.4 million ($9.4 million). Read more here-http://www.telegraph.co.uk/news/worldnews/asia/hongkong/7344676/Rare-blue-De-Beers-diamond-expected-to-fetch-4million.html

-World's most famous 'unseen' blue diamond. Read more here-http://news.bbc.co.uk/2/hi/americas/8488183.stm

-Diamond the size of a 'chicken's egg' sells for record $35.3 million. A 507½-carat gem discovered in South Africa last year has become most expensive rough diamond ever sold. Hong Kong’s Chow Tai Fook Jewellery Company bought the Cullinan Heritage stone for $35.3m, Petra Diamonds announced on Friday.

Petra recovered the gem, the 19th largest ever found described as the size of a chicken's egg, from its Cullinan mine near Pretoria in South Africa in September last year . Read more here-http://www.telegraph.co.uk/finance/newsbysector/industry/mining/7325663/Diamond-the-size-of-a-chickens-egg-sells-for-record-35.3-million.html

TWO MORE U.S. BANKS FAIL

-FDIC shuts down banks in Nevada and Washington. Regulators shut down banks in Nevada and Washington on Friday, marking the 21st and 22nd failures this year of federally insured banks. The Federal Deposit Insurance Corp. was appointed receiver of Carson River Community Bank, based in Carson City, Nev. and Rainier Pacific Bank in Tacoma, Wash.

Carson River Community Bank had $51.1 million in assets and $50 million in deposits as of Dec. 31. Rainier Pacific Bank had $717.8 million in assets and $446.2 million in deposits as of Dec. 31. The FDIC said that Carson River's deposits will be assumed by Reno, Nev.-based Heritage Bank of Nevada. Carson River's lone branch will reopen Monday as an office of Heritage Bank.

Heritage Bank will purchase $38 million of the assets. The FDIC and Heritage Bank agreed to a loss-share agreement on $28.5 million of Carson River Community Bank's assets. Rainier Pacific's deposits will be assumed by Umpqua Bank in Roseburg, Ore. Rainier Pacific's 14 branches will reopen during normal business hours as offices of Umpqua Bank.

Umpqua Bank will purchase $670.1 million of Rainier Pacific's assets. The FDIC will retain the rest. The FDIC and Umpqua Bank agreed to a loss-share agreement on $578.1 million of Rainier Pacific's assets. The pace of bank seizures this year is likely to accelerate in coming months, FDIC officials said this week. Read more here-http://finance.yahoo.com/news/FDIC-shuts-down-banks-in-apf-509896487.html?x=0

RBS PAID 1.3 BILLION BONUSES ON PROFIT OF 1 BILLION

-RBS paid £1.3bn bonuses on profit of just £1bn. Royal Bank of Scotland paid its investment bankers £1.3bn in bonuses for making just £1bn in profit last year, not the record £5.7bn declared last week. The state-backed lender's results show that £4.7bn of the investment bank's worst losses were hived off to the "non-core" division being wound down. Although the bank's split into "core" and "non-core" units has been well explained, the separation generously flattered the investment bank's numbers and allowed management to present it as a record year for the division.

Stephen Hester, chief executive, used the performance to justify the £1.3bn bonuses paid to investment bankers, at least 100 of which received more than £1m. RBS's numbers show that impairments in the "core" investment bank totalled just £640m, helping it produce £5.7bn of the £8.3bn of profits made by the bank's ongoing businesses. By contrast, investment banking impairments dumped in the "non-core" bank totalled £4.7bn.

No other UK bank separates out its "toxic" legacy debt. Barclays' investment bank, Barclays Capital, suffered £2.6bn of impairments last year, cutting profits to £2.46bn. However, analysts point out that RBS, now 84pc owned by the state, has taken more conservative marks on its assets than peers, which contributed to the size of the "non-core" writedowns.

Few rivals have removed the "toxic" assets from their investment bank. Credit Suisse has hived assets off but is linking bonus payments to the performance of the portfolio. Last week, Commerzbank, the German lender that was rescued by Berlin, said it was not paying any bonuses at all in its investment bank. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7340087/RBS-paid-1.3bn-bonuses-on-profit-of-just-1bn.html

REAL ESTATE-FORECLOSURES-MORTGAGES

-U.S. Economy: Sales of Previously Owned Homes Fall. Sales of previously owned U.S. homes unexpectedly dropped 7.2 percent in January to a seven-month low, indicating a lack of job growth is undermining government incentives to bolster the housing market.

The decline to an annual pace of 5.05 million, reported today by the National Association of Realtors in Washington, was the second-largest on record after December’s 16.2 percent plunge. A separate report showed the economy grew at a 5.9 percent pace last quarter, faster than initially estimated. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a1WCoPgGSmlg&pos=1

-Pending Sales of U.S. Existing Homes Fell 7.6% in January. The number of contracts to buy previously owned U.S. homes unexpectedly fell in January, showing the extension of a tax credit is sparking little interest.

The index of purchase agreements, or pending home sales, dropped 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors announced in Washington. In November, pending home sales slumped 13.7 percent. Snowstorms in February probably limited contract signings and sales that month as well, the group said.

The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales last year. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aeXJoqa_E6YI

-Detroit homes sell for $1 amid mortgage and car industry crisis. One in five houses left empty as foreclosures mount and property prices drop by 80%. Read more here-http://www.guardian.co.uk/business/2010/mar/02/detroit-homes-mortgage-foreclosures-80

-Buffett Says U.S. Housing Will Recover by Next Year. Billionaire Warren Buffett said the U.S. residential real estate slump will end by about 2011, predicting that’s how long it will take demand for homes to catch up with the supply.

“Within a year or so, residential housing problems should largely be behind us,” Buffett wrote Feb. 27 in his annual letter to shareholders of his Berkshire Hathaway Inc. “Prices will remain far below ‘bubble’ levels, of course, but for every seller or lender hurt by this there will be a buyer who benefits.”

The worst housing decline since the Great Depression has left one in five U.S. mortgage holders owing more than their houses are worth. Record foreclosures last year flooded a real estate market already glutted with unsold property, causing new construction to fall to the lowest in at least 50 years. The fall in homebuilding is the only fix unless the U.S. decides to “blow up a lot of houses,” Buffett joked.

“People thought it was good news a few years back when housing starts the supply side of the picture were running about two million annually,” said Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire. “But household formations the demand side only amounted to about 1.2 million.” Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid=aIDoMVA9jD_Y

-China risks property bubble as prices rise 20pc a month. Property prices in Britain may be back on a downward trajectory, but there is one market where they are still white hot China. Read more here-http://www.telegraph.co.uk/finance/china-business/7339669/China-risks-property-bubble-as-prices-rise-20pc-a-month.html

The Goldbugg Report - March 02, 2010

2010-03-02T14:51:00.001-08:00

February 26, 2010

The Week in Review

There was a new twist on the Greece situation this week. Not only did major banks, including Goldman Sachs and JP Morgan, help hide the fact that Greece’s debt was growing out of control, it turns out that they’ve been betting on the fact that they might very well default on that debt as well. Goldman Sachs, JP Morgan and about a dozen other banks created an index (based on credit default swaps and started before Greece’s debt problems became public knowledge), that allowed traders to bet on whether Greece and other EU countries would default on their debt. If the term “credit default swaps” sounds familiar to you, you might recall that they were the same financial voodoo that nearly bankrupted AIG. You may also recall that there was a bank that made tremendous amounts of profit betting on AIG’s default: that would be Goldman Sachs. The Fed has issued a statement that it will be investigating the matter.

Initial unemployment claims rose again last week, climbing by 22,000 and defying analyst’s expectations that they would fall. The unemployment numbers helped move the stock market lower, coming right on the heels of a report that home sales hit record lows in January. On Wednesday, the Senate approved a $15 billion dollar package of tax breaks and highway spending aimed to bring down unemployment.

Data out of Europe this week showed the overall economic recovery may be faltering. Household and business confidence dropped unexpectedly and bank loans to the private sector fell for the fifth straight month. Julian Callow, chief European economist at Barclays Capital in London said “Europe is where we see the biggest risk of a double dip at the global level, Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” Standard and Poors announced that it may downgrade Greece one more time as it continues to struggle with its debt crisis.

Data out of Asia was markedly better than what was coming out of Europe. India’s finance minister announced that its economy may grow 10 percent. According to Finmarket, a Russian news agency, China has announced that it will bid on the remaining 191.3 tons of IMF gold at an open auction. While this news has not been confirmed by Chinese officials, China has long been assumed to be looking to purchase more gold to diversify its reserves further.

Existing home sales dropped 7.2% in January. While some of that decline can probably be attributed to massive amounts of snow that have been falling across the US, the general consensus is that the housing sector is much worse off than previously expected.

Crude oil prices touched $80 a barrel before retreating back below that level on weak data out of the US and another wave of heavy winter storms.

The euro touched a one year low against the yen as the fears in Greece continue. The US dollar, after showing some recent strength against the yen, retreated against that currency after fears of an impending rate hike by the Fed subsided. Revised GDP numbers that were worse than expected also helped drive the dollar lower.

Here are your Short Term Support and Resistance Levels for the upcoming week.

Volatility should be expected to continue. Adrian Douglas, publisher of the Market Force Analysis newsletter, analyzed 6 months worth of daily delivery notices and inventory data from COMEX. His analysis led him to conclude that there is an increasing shortage of gold and silver. The CFTC announced this week that it would host a public meeting in late March to discuss speculation limits in the US metal futures. Bart Chilton, a CFTC commissioner, said “I’m not suggesting they [those who think banks are conspiring to keep precious metals too cheap] have a legitimate argument. I looked at it carefully and I became convinced that it’s something we should investigate.” The pressure is on the large banks including JP Morgan, Goldman Sachs, et al. to stop manipulating the precious metals market. These large banks have been abandoning their short positions in precious metals left and right, as reflected on the weekly Commitments of Traders (COT) report put out by the CFTC. The COT reports provide a breakdown of each Tuseday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. China and India may soon be competing with each other over the IMF’s remaining gold for sale. The situation in the EU is rapidly devolving, with Greece beginning to lash out at those that control the purse strings for the bailout it so desperately needs. The term “double dip recession” is popping up more and more in the media and there seems to be quite a bit of fear that the recovery may be slowing down, this time led by the EU. The global financial market seems to be teetering on the edge of a tipping point, and it looks like that tip won’t be for the positive. Starting, or adding to your existing, precious metals portfolio may well be an excellent way to ride out the avalanche of turmoil if that tip occurs. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-CFTC to Hold Public Meeting to Examine Futures and Options Trading in the Metals Markets,

http://www.cftc.gov/newsroom/generalpressreleases/2010/pr5782-10.html

-Citi: China Sold Their Treasuries Because They Want To Buy Tons Of Gold. Read more here-http://www.businessinsider.com/citi-theres-no-problem-for-gold-2010-2

-China will bid on IMF's remaining gold offer, Russian news agency says. China has confirmed its intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.

World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.

The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius, and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most, 200 tons.

China's interest in international trade is connected with the development of the nation's economy, as well as with the growing consumer demand in the country. "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," the agency reports. Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.

The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries. Read more here-http://www.gata.org/node/8372

-Will she won't she? China's gold dance. First the rumours are that China won't buy the IMF gold, then there are equally strong rumours that it will. If China or India, the other rumoured buyer, don't cough up does it really matter? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99671&sn=Detail&pid=1

-Dominic Frisby: Ignore the IMF sales Soros is right about gold. Read more here-http://www.gata.org/node/8367

-Gold Production Has Peaked: CEO. The world's supply of new gold is shrinking as the major producers are finding less of the precious metal and the days of big open-pit mines are fading, Dave Paxton, CEO of Vatukoula Gold Mines, told CNBC Friday.

"Gold production has peaked; I think the highest production I saw was in 1999 and it has declined since then," Paxton said. Production is coming down in all of the key producing counties of South Africa, America and Australia, the former mining analyst added.

"The big open-pit mines, which were these massive units that produced lots of gold are coming to the end of their lives," Paxton said. "We're not finding any more of the large open-pit gold mines. We're going back to more the underground mines, which are the long-term producers, but they are much higher costs," he added. Read more here-http://www.cnbc.com//id/35475766

-Peak gold theory gains impressive adherents. In his latest Basic Points analysis, global market strategist Don Coxe suggests investors maintain a high exposure to gold and gold miners whose production comes from politically secure areas.

Global market strategist Don Coxe, chairman of Coxe Advisors, said he believes in "a hitherto-undiscovered erogenous zone in gold bugs: peak gold-which could be the latest Big Thing since peak oil." In his latest Basic Points, Hard Rocks and Hard Shocks, Coxe credits "Aaron Regent, Barrick's market-savvy new CEO" for "fueling the flames of desire" through the concept of peak gold.

Regent has noted "that new mined production of gold has been declining for a decade," suggesting this could prove to be the equivalent of peak oil, the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

Much of the recent commentary on gold, Coxe said "is that Obama's deficits, coupled with Bernanke's money-printing, could produce either a Depression or runaway inflation. To us, this is an argument investors really should take seriously." Coxe advised that "a holding of gold and gold stocks offers excellent protection under both extremes, and attractive potential under a regime of moderate inflation and modest recovery."

In his analysis, Coxe noted that a "big boost in bullion prices has not meant a big jump in gold production-but was actually accompanied by declining output. Rather, he adds, "the kinds of mining companies in which you should invest are those that recognize that each ton of ore taken out of ground brings the mine closer to closure." Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99054&sn=Detail&pid=1

-Strong start to 2010 gold demand in China, India WGC. The WGC says India's jewellery sector has been buying regularly while tighter monetary policy in China has not affected buying. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=99636&sn=Detail&pid=1

-Credit Suisse Says Charts Show Gold Is Poised To Jump Higher. Watch video here-http://www.businessinsider.com/credit-suisse-says-charts-show-gold-is-poised-to-jump-higher-2010-2

-Gold: A picture tells a thousand words. The net long dollar position on Inter continental exchange is 150 times the six-year average; CME Euro is heavily oversold. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99654&sn=Detail&pid=1

-Gold: Long-Term Fundamentals Remain Promising. Read more here-http://news.goldseek.com/GoldSeek/1267043375.php

-Redburn Partners On The Coming Gold War: "Gold Is Money And Nothing Else". Gold price will reach at least US$1,500/oz: we are raising our long-term gold price estimate to US$1,500/oz (from US$900/oz) with the possibility of a spike to US$4,000-5,000/oz. Read more here-http://www.zerohedge.com/article/redburn-partners-coming-gold-war-gold-money-and-nothing-else

-Peter Grandich: Perma-gold bears hitting new lows. Read more here-http://www.gata.org/node/8362

-I.M. Vronsky, I knew I should have bought gold. Read more here-http://www.gold-eagle.com/gold_digest_08/vronsky021610.html

-Listen to GATA Chairman Murphy's interview on Liddy radio show. Listen here-http://www.gata.org/node/8370

-Gary North: Fed's secrecy aims mainly to hide gold's disposition. Read more here-http://www.gata.org/node/8357

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,100 the silver price would be $13.75

Gold to silver ratio at 70 to 1 with gold at $1,100 the silver price would be $15.71

Gold to silver ratio at 60 to 1 with gold at $1,100 the silver price would be $18.33

Gold to silver ratio at 50 to 1 with gold at $1,100 the silver price would be $22.00

Gold to silver ratio at 40 to 1 with gold at $1,100 the silver price would be $27.50

Gold to silver ratio at 30 to 1 with gold at $1,100 the silver price would be $36.67

Gold to silver ratio at 20 to 1 with gold at $1,100 the silver price would be $55.00

Gold to silver ratio at 15 to 1 with gold at $1,100 the silver price would be $73.33

-Silver Can Hit $1,500. Mike Maloney, author of Rich Dad's Guide to Investing in Gold and Silver, predicted $15,000 gold but think silver offers more upside over the long term. Watch video here-

http://www.thestreet.com/video/10675784/silver-can-hit-1500.html#65406945001

-A long-term look at Silver. Read more here-http://www.321gold.com/editorials/roy_byrne/roy_byrne022310.html

-Butler tells King World News metals are 'locked and loaded' for rally. Listen here-http://www.gata.org/node/8351

-Howard Ruff-Think Outside the Box: Maverick Investing in the Age of Obamanomics. Your investment program should be based in coins and bullion. Invest at least one-third of your assets in gold and silver coins or bars. Read more here-http://www.kitco.com/ind/Ruff/ruff_feb242010.html

-Cash for metals not a sign of a market top. Read more here-http://news.goldseek.com/PeterCooper/1266933660.php

-New COMEX Rule: Another Reason to Fear Metals ETFs. Read more here-http://www.kitco.com/ind/Lewis/feb172010.html

-CFTC to examine trading in metals markets. The U.S. Commodity Futures Trading Commission said on Tuesday it will hold a public meeting on March 25 to examine whether position limits are needed for gold, silver, and copper futures markets.

The CFTC, the top regulator for futures markets, has long enforced position limits for grains trading, and is now mulling similar restrictions on the number of contracts speculators can hold for other markets. Read more here-http://www.gata.org/node/8364

-Financial Times notes Butler's and GATA's clamour to CFTC. Read more here-http://www.gata.org/node/8368

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: History Shows Why Another Sovereign Debt Crisis Is Right Around The Corner. This chart from Gerard Minack at Morgan Stanley, inspired by the research of Harvard professor Ken Rogoff, shows how, surprisingly, sovereign debt crises are pretty common from a historical perspective.

The developed world has gone through many cycles of debt accumulation followed by sharp and sudden corrections of debt imbalances via sovereign debt crises of some form as shown below. The blue line indicates the percentage of nations either in default or restructuring their debt each year.

You can see that individual national crises tend to clump together and happen in waves. The last wave was around 1990, while the 2000's were characterized by a lull in overt sovereign debt problems.

Which means that a new wave of sovereign debt defaults could be just around the corner and would be perfectly normal historically speaking; since as Morgan Stanley said in their recent related report, 'this time will probably not be different.' Read more here-http://www.businessinsider.com/chart-of-the-day-sovereign-external-debt-1800-2006-2010-2

Source: chartoftheday.com

-Chart of the week: Bankers Getting Paid A Lot To Sit On Their Hands And Do Jack Squat. Yesterday we pointed you to the latest data from the St. Louis Fed showing that bank lending continues to plunge.

Rather than ply businesses with loans, banks are instead opting to hoard cash and buy Treasuries. And yet despite the lending shutdown, bonuses are back up, per fresh data out today from the New York Comptroller.

In other words, sitting on your hands and doing nothing is a pretty lucrative gig. Read more here-http://www.businessinsider.com/chart-of-the-day-wall-street-bonuses-vs-bank-lending-2010-2

Source: chartoftheday.com

-Chart of the week: Banks Continue To Pull The Rug Out From Under The Economy. Can the economy revive if banks don't start to lend again? Let's hope so. Today the St. Louis Fed released its latest monthly look at commercial and industrial loans at major banks a measure that some would say represents the essence of the US banking system.

As you can see, this measure is still falling like a knife a bad sign for the ongoing health of the economy. (And also not what we were promised when we bailed out the banks.) Read more here-http://www.businessinsider.com/chart-of-the-day-commercial-and-industrial-loans-at-all-commercial-banks-2010-2

Source: chartoftheday.com

-Chart of the week: Wall Street's Gravy Train Is About To Hit A Brick Wall. The major banks are loving the uber-steep yield curve that allows them to borrow money on the cheap, and then lend it back to the government at a fat yield.

Well, that's just about over. Bernanke has signalled the beginning of the rate-hike cycle (driving up the cost of short-term borrowing) and as this historical chart of the 2year-10-year yield spread (via Waverly Advisors) indicates, the curve just can't get any steeper. In fact if history is any guide, it's about to collapse big time. Read more here-http://www.businessinsider.com/chart-of-the-day-2y10y-yield-spread-2010-2

Source: chartoftheday.com

-The economy is so bad that...I ordered a burger at McDonald’s and the kid behind the counter asked, “Can you afford fries with that?” Anonymous

-As we all know, the global economic crisis started neither in Greece, nor in Russia, nor in Europe. It came to us from across the ocean. Russian Prime Minister Vladimir Putin, 16 February 2010

-The Bank of England may still have to restart its asset-buying programme if the economic outlook worsens, and things are not looking good in the euro zone, Governor Mervyn King said Tuesday. Read more here-http://www.nytimes.com/reuters/2010/02/23/business/business-uk-britain-bank-qe.html?_r=3

-The Federal Deposit Insurance Corporation is bracing for a new wave of bank failures that could cost the agency many billions of dollars and further strain its finances. Read more here-

http://www.nytimes.com/2010/02/24/business/24fdic.html?ref=business

-It’s truly amazing that there are still economists out there who think we don’t need emergency interest rates. What a laugh! David Rosenberg-Gluskin/Sheff

-The dollar rally will soon end and speculators should begin to take short positions. All the good news for the dollar is out. For the moment it is the best of a bad lot. Then only real money is gold and silver.

In the future more and more people worldwide will realize that and eventually there will be a stampede into the two precious metals. America will produce a debt to GDP ratio or 95% to 100% this year. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1267024590.php or http://news.goldseek.com/InternationalForecaster/1266783816.php

-Those who were unemployed/underemployed, to little surprise, spend 36% less, on average, than those who have a job ($48 per day versus $75 per day for a 36% gap). Fully 56% of the unemployed-underemployed reported that they have enough money to cover basic necessities and that compares to 86% for the ranks of the employed.

Things are so tight for these 30 million folks that we see in the NYT that applications for federal help on heating bills (LIHEAP) have risen 15% this year (from 8.8 million households). David Rosenberg-Gluskin/Sheff-Read more here-http://www.gallup.com/poll/125960/Underemployed-Report-Spending-Less-Employed.aspx

-I believe the short-term problems in Europe are being overblown and the potential demise of the euro highly exaggerated. For those who can connect the dots however, the Greek drama throws some much needed light on the far more daunting problems unfolding within our own U.S. fiscal house. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff022410.html

-There is no doubt that on a technical level the Euro is massively oversold but on a more fundamental basis, the questions over its sustainability are not likely to subside any time soon. That is where most of the contagion risk is located when it comes to the PIGS (Portugal, Italy, Greece and Spain) and their pig-like fiscal financial picture.

As per Morgan Stanley data, 51% of Portugal’s debt ($165bln) is owned by Spanish banks. Fully 32% of Spain’s debt ($748bln) is held by German banks, and 25% of that is owned by French banks. According to Commerzbank, 60% of new Greek bond issuance in recent years was gobbled up by non-Greece European borrowers.

So, any restructuring of Eurozone debt is going to fall squarely on the region’s banks, which would likely have to take massive writeoffs. Even a move by the rating agencies to cut the debt rankings of any European country would translate immediately into rating changes for the banks as well as higher capital charges (the Economist had a good take on this a few weeks ago).

As an aside, we see today on our Bloomberg screen that Ken Rogoff (co-author of “This Time is Different” and who is not prone to hyperbole) expects ballooning deficits and public sector debts to trigger a “bunch” of sovereign defaults. David Rosenberg-Gluskin/Sheff

-Nice to see the credit crunch is over. The FDIC was a hungry beast on Friday and ate up four more regional banks, with La Jolla being a big catch at $3 billion of assets. This brings the number of U.S. banks that have failed so far this year to 20 and that compares to 13 at this same stage a year ago when practically everyone feared the world was coming to an end (but before Geithner and Bernanke declared that any bank that was thought too big to fail would not be allowed to). David Rosenberg-Gluskin/Sheff

-Goldman Sachs is among the biggest contributors in the financial industry. Over twenty years, it has given $31,462,375 to politicians that’s an average of $1,573,199 per year. Casey's Daily Dispatch-Read more here-http://www.caseyresearch.com/displayCdd.php?id=355

-House Republicans are pushing the Obama administration to add Fannie Mae and Freddie Mac’s $1.6 trillion in outstanding debt to the federal budget in legislation to be introduced today. Representatives Scott Garrett, Spencer Bachus and other Republicans on the House Financial Services Committee will propose subjecting the companies’ unsecured debt to the $14.3 trillion public debt ceiling and accounting for their other liabilities and assets similar to federal loan programs.

“Now that they have been placed in conservatorship, the distinction between Fannie Mae and Freddie Mac being government sponsored, rather than government operated, has been eliminated,” Garrett of New Jersey said in a background memo on the bill circulated in Washington yesterday. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aqUsQss37UJc

-Home prices are already double dipping. According to Zillow.com, home prices are now deflating in 21% of the 143 markets it tracks; and the average discount amounts to 11% from the original listing price. One in five homeowners, as per the Zillow database, is under water on their mortgage in the fourth quarter.

Moreover, we also see from RealtyTrac that 2010 will be a big payback from all the government-imposed moratoria because an estimated 4.5 million foreclosure filings is slated for this year compared to 2.8 million in 2009.

Meanwhile, the Mortgage Bankers Association, to little media attention, released its Q4 data, which found that a record 15.02% of housing loans were either in foreclosure or behind on at least one payment on Q4. About 3.9 million Americans are more than 90 days behind on their payments, which is triple triple! the level of two-years ago. David Rosenberg-Gluskin/Sheff

-The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget, is required annually to submit financial statements for the U.S. government to the President and the Congress.

Since 1997, the Government Accountability Office (GAO) has been required to audit these statements. And it’s my understanding that the government has failed each and every such audit. The most recent report, covering 2008, marks the 12th year in a row in which the government’s consolidated audit statement received a judgement of “no comment” from auditors. Porter Stansberry Read more here-http://www.caseyresearch.com/displayCdd.php?id=354

-U.S. double-dip recession possible: Shiller. The U.S. housing market showed early signs of stabilization in December, but that may not mean a recovery is at hand. In fact, Yale economics professor Robert Shiller tells BNN home prices could fall further and a double-dip recession is possible. Watch video here-http://www.bnn.ca/news/15894.html

-Bernanke Says ‘Nascent’ Recovery Requires Low Rates. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aJDZb0jjJyL0&pos=2

-Fed Won’t Lift Target in 2010, Pimco’s Clarida Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=apSZLR4rKxXE&pos=4

-Greenspan Says Crisis ‘By Far’ Worst, Recovery Uneven. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a4lpUmEdbebw

-Yellen Says U.S. Economy Will Perform Below Potential. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aPLqIw9VZgjg

-Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity. Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks.

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.

Global scrutiny of sovereign debt has risen after budget shortfalls of countries including Greece swelled in the wake of the worst global financial meltdown since the 1930s. The U.S. is facing an unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the government has forecast.

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co-wrote a history of financial crises published in 2009. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aI8fxn.J_Fs4&pos=5

-Economist Rogoff Who Predicted The U.S. Crisis And A European One, Now Predicts A China Collapse. Read more here-http://www.businessinsider.com/economist-rogoff-who-predicted-the-us-crisis-and-predicts-a-european-one-now-predicts-a-china-collapse-2010-2 or http://www.bloomberg.com/apps/news?pid=20601087&sid=aMfBJ1pwuKgw&pos=4

-Record U.S. Debt Hampers Fiscal, Monetary Policies: Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=aJdsMXW4DFrE

-U.S. Stocks to Fall, Faber Says; Wood Doubts Recovery. U.S. stocks will probably fall this year, according to investor Marc Faber, and the country’s economy won’t face a “normal” recovery as job cuts dent consumer spending, said CLSA Asia-Pacific Markets’ Christopher Wood. Read more here- http://www.bloomberg.com/apps/news?pid=20601110&sid=a5O3DHxpH2II

-Matt Taibbi-Wall Street's Bailout Hustle. Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy they're re-creating the conditions for another crash. Read more here-http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print

-Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=ax3yON_uNe7I

-SEC Votes 3-2 to Curb Short-Sale, Disappointing Goldman Sachs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aLZZMYHxmtDw

-Millions of Unemployed Face Years Without Jobs. Read more here-http://www.nytimes.com/2010/02/21/business/economy/21unemployed.html

-States had to borrow $31B for jobless pay. South Carolina and other cash-strapped states borrowed a total of about $31 billion from the federal government over the last two years to provide their unemployed workers with benefit checks, and now as the country climbs out of recession the states must find a way to pay it back.

John Rainey, South Carolina's chief economic adviser, said the state needs to take calculated steps to repay its $800 million debt while some others hold out hope that the federal government will forgive the loans.

Rainey said the federal government should have no place in erasing the debt that will largely be the responsibility of the business community to pay back. Read more here-http://www.postandcourier.com/news/2010/feb/22/states-had-to-borrow-31b-for-jobless-pay/

-The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, a sign that the economic recovery will be uneven as the labor market struggles to rebound. Initial jobless applications rose by 22,000 to 496,000 in the week ended Feb. 20, the highest level in three months, Labor Department figures showed today in Washington.

The total number of people receiving unemployment insurance gained and the four- week moving average of weekly claims jumped close to a three- month high. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a94m9InQxJjM&pos=3

-US Jan mass layoffs edge up on weak manufacturing. Read more here-http://www.reuters.com/article/idUSN239866720100223?type=marketsNews

-Ferguson: We're One Downgrade Away From The End Of American Empire. Niall Ferguson is candidly calling time on the American Empire, or at least pointing to the combination of factors that will soon lead to its demise, in the latest issue of Foreign Affairs.

Ferguson, who has become one of the leading intellectuals of the deficit hawk camp, theorizes that empires don't decline in the slow, cyclical process long assumed. Instead it is dramatic events that push them over the edge to oblivion. Read more here-http://www.businessinsider.com/ferguson-were-one-write-down-away-from-the-end-of-american-empire-2010-2

-California One Step Closer To Insolvency After State Cancels $2 Billion General Obligation Bond Sale. Read more here-http://www.zerohedge.com/article/california-one-step-closer-insolvency-after-state-cancels-2-billion-general-obligation-bond-

-Doomsday is here for the state of Illinois. To become solvent, the state must enact the largest tax-increase package in Illinois history, whack another $2 billion from already starved government programs and wrest major financial concessions from the state's unionized work force, a nonpartisan government watchdog contends. Read more here-http://www.suntimes.com/news/maxedout/2062132,CST-NWS-doomsday22.article

-Citigroup Warns Customers It May Refuse To Allow Withdrawals. The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.

"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," Citigroup said on statements received by customers all over the country. Read more here-

http://www.businessinsider.com/citigroup-warns-customers-it-may-refuse-to-allow-withdrawals-2010-2

-Slump in Tax Revenue Creates State of Siege. U.S. states face a "lost decade," says Raymond Scheppach, head of the National Governors Association. The problem is a broken fiscal model exposed by the recession, and likely to extend the pain beyond the downturn's official conclusion. Read more here-http://online.wsj.com/article/SB10001424052748703315004575073403314799286.html?mod=WSJ_Markets_section_Heard

-Muni Defaults May Rise Amid ‘Unprecedented Stress’ on Finances. Defaults by issuers of municipal bonds will rise as the worst recession since the 1930s leaves governments facing “unprecedented stress” on their finances into next year, according to Moody’s Investors Service. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a50udaSCFULE

-How long can the U.S. dollar defy gravity? Read more here-http://www.reuters.com/article/idUSTRE61M3MI20100223

-South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state. Read more here-http://www.cbsnews.com/blogs/2010/02/17/politics/politicalhotsheet/entry6217403.shtml

-A Madoff in-law has filed for a name change, hoping to rid herself of the notorious moniker that has become synonymous with swindle. Stephanie Madoff, daughter-in-law of the imprisoned Bernard Madoff, filed for a name change with the New York Supreme Court in Manhattan, citing death threats against her family. Read more here-http://money.cnn.com/2010/02/25/news/companies/madoff_name_change/index.htm

-Swine Flu Protection Added to Seasonal Flu Vaccine. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a0uX494vslsk

-It's a bird, it's a plane it's a $1 million comic book. Since he started selling comic books at age 16, Vincent Zurzolo had only dreamt of selling a million-dollar comic book. Monday was his lucky day. That was the day that Superman hit the jackpot.

"It is the single most important event in comic book history," said Zurzolo, who co-owns auction site ComicConnect.com with founder Stephen Fishler. Zurzolo and Fishler posted a rare copy of Action Comics #1 on their site Monday morning. It was the issue where the Man of Steel made his debut in 1938. They were selling it on behalf of an unnamed collector. Within one minute, Zurzolo said, another unnamed collector bought it for $1 million.

That price is more than three times the previous record, set last year by a lesser-quality version of Action Comics #1, which ComicConnect sold for $317,200. Monday's $1 million sale was for a very rare edition, because it was in much better condition. Only about 100 copies of Action Comics #1 are known to exist, and of those, only two are in such good shape, Zurzolo said. Read more here-http://money.cnn.com/2010/02/22/news/companies/superman_comic/index.htm

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html

-“I think diamonds could end up being thought of like they once were an emergency escape mechanism. The Jews sewed them into their hems and used them for safe passage. We’re all worried about the Banks and how we would 'get out of Dodge' if we had to.” Trend expert Faith Popcorn

-Bear Stearns and Lehman Brothers have disappeared and the Big Three and Citigroup hover on the edge of vanishing a diamond is forever. From Adam Hanft article De Beers: Diamonds Are a Recession's Best Friend

-If more people bought diamonds instead of credit-default swaps, we’d be just fine now. From Adam Hanft article De Beers: Diamonds Are a Recession's Best Friend

-Diamonds Hold Allure as Gem of an Investment. Despite the financial meltdown, luxury assets such as wine and art are drawing strong interest from rich buyers, some looking at the goods as investments. Now, promoters of diamonds are hoping to add the precious stones to the investment mix.

The 'Vivid Pink' sold in Hong Kong for $10.8 million. Record sales at recent auctions, set by Asian bidders, is spurring talk of a surge in high-end diamond demand. Several investment funds focusing solely on diamonds have launched or are in the works and are hoping to take advantage.

Asian bidders, especially from mainland China, represent a growing presence at auctions, says Patti Wong, chairwoman of Sotheby's Asia. At a Sotheby's auction in New York City earlier this month, five of the top 10 buyers were Asian.

The most expensive item a 30.48 carat oval diamond went to a buyer from mainland China for approximately $4.11 million. At a Christie's auction in Hong Kong this month, a colored diamond, called "The Vivid Pink," sold for $10.8 million, setting a record for a gemstone of its kind.

It's unclear if the buyers were after the rocks for investment purposes or simply to enjoy. But proponents are hoping to turn diamonds traditionally seen as ornaments into wealth-accumulating vehicles. Read more here-http://online.wsj.com/article/SB126099490068094349.html

20 U.S. BANKS HAVE FAILED IN 2010-BANKS AT RISK OF GOING BUST TOPS 700

-Banks in Calif., Ill., Fla., Texas are shut down. Regulators shut banks in Calif., Ill., Fla., Texas, putting US bank failures at 20 for year. Read more here-http://finance.yahoo.com/news/Banks-in-Calif-Ill-Fla-Texas-apf-1195100471.html?x=0&.v=12 or http://finance.yahoo.com/news/Banks-in-Calif-Ill-Fla-Texas-apf-1195100471.html?x=0&.v=12

-Banks at risk of going bust tops 700. More than 700 banks, or nearly one out of every 11, are at risk of going under, according to a government report published Tuesday. The Federal Deposit Insurance Corp. said that the number of banks on its so-called "problem list" climbed to 702, its highest level since June 1993.

The number of banks under scrutiny by regulators has moved steadily higher since the recession began. Just 76 financial institutions were on the list in the fourth quarter of 2007. Banks that end up on the problem list are considered the most likely to fail because of difficulties with their finances, operations or management. Read more here-http://money.cnn.com/2010/02/23/news/companies/fdic_list/index.htm

-U.S. ‘Problem’ Banks Soar 27%, Fund Deficit Widens, FDIC Says. U.S. “problem” banks climbed to the highest level in 17 years, signaling failures may accelerate in 2010, the Federal Deposit Insurance Corp. said. Bank lending had the biggest retreat in more than six decades.

The FDIC included 702 banks with $402.8 billion in assets on the confidential list as of Dec. 31, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said today in a quarterly report. “Problem” banks account for 8.7 percent of all U.S. lenders.

“The growth in the number and assets of institutions on the problem list points to a likely rise in the number of failures,” FDIC Chairman Sheila Bair said today at a Washington news conference. “Both the problem list and bank failures tend to lag behind economic recovery.”

Regulators are closing banks at the fastest pace since 1992, seizing 20 lenders through seven weeks this year after shutting 140 institutions in 2009 amid loan losses stemming from the collapse of the home and commercial mortgage market. A total of 28 banks failed in 2007 and 2008 combined.

“The pace is going to pick up this year and is going to exceed where we were last year,” Bair told reporters. Banks showed “incremental” improvement in the fourth quarter, Bair said. Overall profit was $914 million, compared with a $38 billion loss in the year-earlier period. Net charge offs slowed for a third consecutive quarter, the agency said.

“It’s not that this was a strong quarter,” Bair said. “It’s simply that everything was so bad last year.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aoYm3JlMWLkY&pos=3

-Sick banks may mean feeble recovery. The rot in the U.S. banking system threatens to warp an already weak economic recovery. The dynamics that made 2009 such a downer for banks are still in place, the Federal Deposit Insurance Corp.'s quarterly banking review showed Tuesday.

FDIC chief Sheila Bair said she expects bank failures in 2010 to surpass last year's 140, as institutions still struggling with mortgage losses gird for a massive commercial real estate bust.Read more here-http://money.cnn.com/2010/02/23/news/economy/banks.sick.fortune/index.htm

-Banker sees U.S. failed bank tally hitting 1,000. About 1,000 U.S. banks could fail as a result of the recent banking crisis that saddled financial institutions with large portfolios of bad loans, a leading investment banking executive said on Thursday.

James Dunne, senior managing principal of Sandler O'Neill, said 300 to 400 banks could be seized this year, especially as institutions start to deal with deteriorating commercial real estate loans.

"This is going to be a very slow recovery," Dunne said in an interview with Reuters.

Regulators have seized 185 banks since January 2008. The Federal Deposit Insurance Corp has said the pace of failures is expected to peak this year. The agency said earlier this week that its "problem" bank list jumped 27 percent during the fourth quarter to 702.

Historically, less than 15 percent of the banks on that list end up failing. Read more here-http://www.reuters.com/article/idUSTRE61O6J120100225

MEREDITH WHITNEY-INVESTORS DONT REALIZE WHATS ABOUT TO HIT THE BANKING SECTOR

-Meredith Whitney spoke with Maria Bartiromo on the floor of the NYSE. She predicts big-cap banks will be down some 15%, because investors still aren't pricing in the risks ahead. Here are some things that will hit the sector: Populism, Government taking away the punchbowl, The end of the re-equitization cycle (all those fees!). Watch more here-http://www.businessinsider.com/meredith-whitney-investors-dont-realize-whats-about-to-hit-the-banking-sector-2010-2

CHARLIE MUNGER-ITS OVER FOR THE U.S. ECONOMY

-A parable about how one nation came to financial ruin. As it worked out, the politicians ignored the Good Father one more time, and the Basicland banks were allowed to open bucket shops and to finance the purchase and carry of real securities with extreme financial leverage.

A couple of economic messes followed, during which every constituency tried to avoid hardship by deflecting it to others. Much counterproductive governmental action was taken, and the country's credit was reduced to tatters. Basicland is now under new management, using a new governmental system. It also has a new nickname: Sorrowland. Read more here-http://www.slate.com/id/2245328/pagenum/all/#p2 or http://www.therightperspective.org/2010/02/24/its-over-for-us-economy-buffett-partner/

JAMES TURK-HYPERINFLATION WATCH

-The US Treasury has taken another step on the road leading to hyperinflation. It announced that it will borrow $200 billion and leave this money on deposit with the Federal Reserve. The announcement was made with bald disinformation aimed at camouflaging the true impact of this step.

The Wall Street Journal dutifully reported that taking this step “will make it easier for the Fed to raise interest rates when the time comes.” This red herring is obviously intended to make the Treasury’s overt dollar debasement appear reasonable. The WSJ statement itself is nonsensical. How can raising interest rates be made “easier” than it already is? All the Fed needs to do is pull the trigger and interest rates go up.

The Fed of course is lacking the will to do that. It may also be lacking the insight that the system is broken, but I doubt that point. The Fed must know the system is broken, but because it is a captive of vested interests who benefit enormously from the situation at present (anyone mention banker bonuses recently?), it works solely to keep the system from falling apart.

So the Fed is fanning inflation by creating more dollar currency, and easy money always leads to inflation. The US is now so far down the inflation road, having travelled it for decades, that it is hurtling pedal-to-the-metal toward hyperinflation. Read more here-http://www.fgmr.com/us-treasury-takes-another-step-on-the-road-to-hyperinflation.html

CONSUMER CONFIDENCE AT RECESSION LEVELS

-Confidence among U.S. consumers fell in February to the lowest level in 10 months, a sign that concern about job prospects may hold back the spending needed to sustain the recovery. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aZu.flR6PChM&pos=1

BRITAIN AT RISK OF WORSE DEFICIT THAN GREECE

-Britain is at risk of a Government deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country. Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion higher than even the Chancellor’s forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7266097/Britain-at-risk-of-worse-deficit-crisis-than-Greece.html

-Jim Rogers: The U.K. Will Lose Its AAA-Rating THIS YEAR For Sure. Read more here-http://www.businessinsider.com/indias-biggest-threat-water-2010-2

ROGERS-CHINA WILL CONTINUE TO SELL U.S. TREASURIES

-China's move to reduce its holding of US debt is likely to continue in the long term while the "euro scare" may last a while, legendary investor Jim Rogers told CNBC.com Wednesday. On Tuesday, government figures showed that foreign demand for Treasurys fell by the largest amount on record in December.

China cut its holdings by $34.2 billion to $755.4 billion, losing the top spot in terms of foreign ownership of Treasuries to Japan. Japan also cut exposure, cutting ownership of Treasurys by $11.5 billion to $768.8 billion, a much slower pace than China.

"I am surprised China has not dropped more," Rogers told CNBC.com. Asked if the US should be worried about this trend, Rogers, who does not hold US Treasurys, said: "Of course. The US should be worried about everyone lightening up not just China." Read more here-http://www.cnbc.com/id/35438488

-Concerns grow over China's sale of US bonds. Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first. Read more here-http://www.telegraph.co.uk/finance/currency/7300770/Concerns-grow-over-Chinas-sale-of-US-bonds.html

REAL ESTATE-FORECLOSURES-MORTGAGES

-Home Prices in U.S. Drop 1.2%, Smallest Decline in Two Years. U.S. home prices fell 1.2 percent in the fourth quarter from a year earlier, the smallest loss in two years, as a federal tax credit for homebuyers boosted demand.

Prices were down 0.1 percent from the third quarter, the Federal Housing Finance Agency said today in a report. The year- over-year drop was the smallest since a 1.1 percent decline in 2007’s fourth quarter, the Washington-based agency said.

Government stimulus programs including the homebuyer tax credit and a Federal Reserve program to buy mortgage-backed bonds lifted the real estate market in the closing months of 2009. A sustained recovery in housing faces hurdles that include mounting foreclosures and a weak labor market, said Thomas Lawler, a former economist with Fannie Mae who now is an independent housing consultant in Leesburg, Virginia.

“The government programs have helped to stabilize housing, but the market is still unbelievably fragile,” Lawler said in an interview. “Nobody knows what’s going to happen to all those properties in the foreclosure process.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aAyeLAKZ9DuU&pos=7

-Home Prices in 20 U.S. Cities Rose for Seventh Month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=azNrZPIn0GXg or http://money.cnn.com/2010/02/23/real_estate/2009_Case-Shiller_report/index.htm

-U.S. New-Home Sales Unexpectedly Fell to Record Low. Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand.

Purchases declined 11 percent to an annual pace of 309,000, figures from the Commerce Department showed today in Washington. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased.

The report underscores Federal Reserve Chairman Ben S. Bernanke’s comments today that the economy is in a “nascent” recovery still in need of low interest rates. Homebuilders face competition from foreclosed properties that have driven down prices at the same time companies are reluctant to create jobs.

“The foreclosure flow is robbing demand from the new-homes market, and that process seems to be strengthening,” said Julia Coronado, a senior economist at BNP Paribas in New York. “The new-homes market just can’t get off the floor. If new homes suffer, construction suffers and jobs suffer.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=acWCYvHlWvs8&pos=1

-U.S. Mortgage Foreclosures Rose in Fourth Quarter. A record number of Americans were in danger of losing their homes in the fourth quarter, even as new delinquencies declined, the Mortgage Bankers Association said.

Loans in foreclosure rose to 4.58 percent of all mortgages, while those more than 90 days overdue the point at which lenders usually begin the process of seizing a property climbed to 5.09 percent, the Washington-based trade group said in a report today.

“We have a hard-core block of unemployed who have been out of jobs for a long time, and that’s keeping the long-term delinquencies high,” Jay Brinkmann, the association’s chief economist, said in an interview. Read more here-http://www.bloomberg.com/apps/news?pid=20601214&sid=aHLH3zOdh4ro

-Nearly 25% of all mortgages are underwater. More bad news on the housing bust front: Nearly 25% of all mortgage borrowers were underwater, meaning they owe more on their loans than their homes are worth.

First American CoreLogic, the research firm that monitors housing equity, reported Tuesday that 11.3 million homeowners or 24% of all homes with mortgages were underwater as of the end of 2009. That's up from 23% and 10.7 million borrowers three month earlier.

Nevada was the state with the worst record at 70% of all mortgaged properties underwater. That was followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%). Read more here-http://money.cnn.com/2010/02/23/real_estate/underwater_rates_rise/index.htm

-If bankers get their way, Floridians facing foreclosure could be kicked out of their homes in as little as three months. Read more here-http://www.tampabay.com/news/business/realestate/florida-bankers-move-to-dramatically-speed-up-the-foreclosure-process/1069024

-Commercial Mortgage Default Rate in U.S. More Than Doubles. The default rate for commercial property mortgages held by U.S. banks more than doubled in the fourth quarter and may reach a peak of 5.4 percent at the end of next year, according to Real Capital Analytics Inc.

The default rate for loans on office, retail, hotel and industrial properties surged to 3.8 percent from 1.6 percent a year earlier, the New York-based real estate research firm said yesterday in a report. The default rate for loans on apartment buildings climbed to 4.4 percent from 1.8 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aj9Yttz_UYxg

-More generations living under same roof. More generations are living under the same roof and the trend will deepen as families grappling with near double-digit unemployment share expenses, a study showed on Monday. Read more here-http://www.reuters.com/article/idUSTRE61L1WR20100222

GEOPOLITICAL NEWS

-Iran to 'hide nuclear plants inside mountains'. Iran said on Monday it is considering plans to build two new uranium enrichment plants concealed inside mountains to avert air strikes, drawing condemnation from the United States.

The announcement from Iran's atomic chief Ali Akbar Salehi came soon after top US General David Petraeus warned that Washington would now pursue a "pressure track" against Iran to thwart its galloping nuclear programme. Read more here-http://news.yahoo.com/s/afp/20100222/wl_mideast_afp/irannuclearpolitics

-Israel unveils new drone fleet that can reach Iran. Israel's air force on Sunday introduced a fleet of huge pilotless planes that can remain in the air for a full day and could fly as far as the Persian Gulf, putting rival Iran within its range. Read more here-http://apnews.myway.com/article/20100221/D9E0PR5G0.html

-Russia warns West against "crippling" Iran sanctions. Read more here-http://news.yahoo.com/s/nm/20100224/wl_nm/us_nuclear_iran_russia

The Goldbugg Report - February 23, 2010

2010-02-23T15:04:00.000-08:00

February 19, 2010

The Week in Review

The Federal Reserve unexpectedly announced that they raised the Fed Discount rate from 0.50 percent up to 0.75 percent on Thursday. The interest rate in question is the one the Fed charges banks for rarely used emergency loans and they went to great lengths to try to reassure companies and consumers that the move would not raise borrowing costs for them, saying “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.” Despite the reassurances from the Fed, there is a growing fear that a hike in the federal-funds rate may be coming when the Fed meets next in March which will lead to higher interest rates for an already strapped consumer.

Initial claims for unemployment jumped far more than expected last week. Producer prices also had a larger than expected increase in January. The increase is being blamed largely on higher gasoline prices and greater energy costs due to unusually cold temperatures. Interesting that they should be blaming the PPI increase on these when Oil, Gas and energy as a whole are far from their highs at the start of the financial crisis. Even when they stripped out food and energy costs, the core producer prices still rose faster than expected. It will be amusing to watch the spin-doctors work on this one. Stripping out mandatory costs such as food and energy on claims that their volatility is skewing the numbers has never made sense. Now even that old smokescreen can’t hide the fact that prices are going up and inflation is beginning to loom ever closer.

Core consumer prices (prices after they stripped out energy and food costs, of course) fell for the first time in 28 years. The media immediately jumped on the data as a sign that inflation worries are overblown. Consumer prices, when you include food and energy, actually rose, but it was less than expected. In our view, the drastic measures that the retail sector took in the months of December and January, cutting prices just to try to move inventory, are the factors that moved the prices down. Retailers can’t keep that up and report a profit, especially since the cost to produce the goods they are selling has gone up according to the PPI numbers. Carrefour, the world’s second largest retailer next to Wal-Mart, reported their profit fell 74% and Wal-Mart’s own numbers were less than spectacular.

Foreign demand for US Treasury securities plummeted by the largest amount on record in December. China alone reduced its holdings by $34.2 billion, potentially moving it into second place behind Japan in ownership of US Treasuries. If the reduction in demand continues, the US government may be forced to make higher interest payments. This news comes right on the heels of president Obama creating a new commission, through an executive order, to come up with a plan to reduce the deficit.

The International Monetary Fund announced Wednesday that it will begin selling 191.3 metric tons of gold in the open market. The sales are to “be conducted in a phased manner over time.” The IMF said that they will still continue to sell gold to central banks, which could reduce some of what they have available to sell in the open market. Even though news of the upcoming sale was already widely known, there was an apparent knee-jerk dip in prices upon the announcement.

Crude oil prices came up this week, approaching $80 a barrel, boosted by the PPI numbers, despite an increase in inventory numbers that would normally have driven prices down.

The Fed’s Discount Rate announcement after markets closed on Thursday helped push the dollar to new highs against the euro, reaching levels not seen since May of 2009.

A South Carolina representative has introduced legislation banning “the unconstitutional substitution of Federal Reserve Notes for silver and gold coin.” The move would essentially mandate gold and silver coins as currency for the state. Representative Pitts said in an interview that “if the federal government continues to spend money at the rate it’s spending money, and if it continues to print money at the rate it’s printing money, our economic system is going to collapse.” Have you started to acquire your gold and silver coins yet? Have you started your precious metals portfolio to help protect against a collapsing dollar? No one expects the legislation to go anywhere, but it does bring to light an interesting point: at the state government level of at least one state, confidence in the US Dollar is collapsing.

Friday to Friday Close

Volatility should be expected to continue, especially in the wake of the Fed decision on Thursday. In an SEC filing made on Tuesday, George Soros showed that he doubled his bet on gold at the end of 2009. US Bank lending is falling at the fastest rate in history. Tim Congdon, from International Monetary Research said “It is absurdly premature to think of withdrawing stimulus while bank credit is still sliding. To have allowed this monetary collapse to occur a full 18 months after the financial cataclysm is extreme incompetence. They seem to have forgotten that the lesson of the 1930s was the falling quantity of money.” Commercial shorts (as in JP Morgan) have been rapidly reducing their short positions in precious metals as we get closer to the month of March, when the CFTC will be looking at setting position limits for precious metals. If the commercial bullion banks are forced to cover their short positions, which exceed the available supply (and have for years!), by the actions of the CFTC then the price of precious metals may literally explode. Now, more than ever, may be the time to add to or start your precious metals portfolio. Dave Paxton, CEO of Vatukoula Gold Mines said on Friday that the world’s supply of new gold is shrinking, saying that “The big open-pit mines, which were these massive units that produced lots of gold, are coming to the end of their lives.” World currencies are all losing their inherent value, even as debt around the globe is skyrocketing. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-Soros More Than Doubled Gold ETF Stake in 4th Quarter. Billionaire George Soros’s Soros Fund Management LLC more than doubled its holding in the biggest gold exchange-traded fund in the fourth quarter after bullion advanced 8.9 percent to a record.

The $25 billion New York-based firm became the fourth- largest holder in the SPDR Gold Trust, adding 3.728 million shares valued at $421 million, according to a filing with the U.S. Securities and Exchange Commission yesterday. Its investment was worth about $663 million, the fund’s largest single investment, as of Dec. 31.

Soros joined China Investment Corp. and central banks including those in China and India in acquiring gold. China Investment, the $300 billion sovereign wealth fund based in Beijing, took a 1.45 million-share stake in the SPDR Gold Trust worth $155.6 million, according to a SEC 13F filing posted on Feb. 5.

“The dollar is weak and people are just shifting their money into a safer haven,” Tetsuya Yoshii, vice president for derivative products at Mizuho Corporate Bank Ltd., said from Tokyo today. “Central banks are adding gold to their reserves and we’re going to see more people adding gold to their investment portfolio as they shift into safer stuff.”

India bought 200 metric tons from the International Monetary Fund in October, while China’s holdings have expanded 76 percent to 1,054 tons since 2003, it said in April. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKs0jaibTSmY&pos=7 or http://www.reuters.com/article/idAFN1624135220100217?rpc=44

-George Soros buys gold despite dubbing it 'ultimate bubble'. 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". Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7259161/George-Soros-buys-gold-despite-dubbing-it-ultimate-bubble.html

-The 'ultimate bubble' meets the ultimate speculator. Read more here-http://www.gata.org/node/8339

-Gold May Advance to $1,400 in 12 Months: Technical Analysis. Gold may climb to about $1,400 an ounce in the next 12 months, according to technical analysis by Chartered Market Technician Daniel Bruno, who advises banks and hedge funds.

The attached chart shows gold is trading above a trend line that starts from the metal’s low in January last year. A climb to $1,419 an ounce would equate to a 150 percent projection of bullion’s rally from January 2009 to its record in December, according to a series of numbers known as the Fibonacci sequence.

Gold “remains robust above its rising trend line,” and the recent rebound from a three-month low on Feb. 5 is a “bullish” signal, Bruno said in an interview. “We project about $1,400 within 12 months as long as the $1,000 level holds,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=auBQnoSvlsEk

-Gold price will surge to $5,000 in two years. Gold Prices will climb to $5,000 within two years due to US dollar weakness and significant buying by players in the hedge fund industry looking to preserve the value of their funds.

That is the opinion of New Zealand market trading expert Welles Wilder, who has previously been highlighted by publications such as Forbes and Barron's for his skill in the markets, stuff.co.nz reports. Read more here-http://www.commodityonline.com/futures-trading/technical/Gold-price-will-surge-to-$5000-in-two-years-14431.html

-The International Monetary Fund, which set out in September to sell about 13 percent of its gold reserves, said it will “shortly” expand sales to the open market after central banks bought 212 metric tons in private deals.

“In accordance with the priority of avoiding disruption of the gold market, the on-market sales will be conducted in a phased manner over time,” the Washington-based IMF said in an e-mailed statement today.

The institution has 191.3 tons left to sell after purchases by the central banks of India, Mauritius and Sri Lanka. Central banks still have the option to buy more of the metal, which would reduce the amount available on the market, the IMF said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alOoEXinykfo

-Gold market analyst Peter Grandich could not be more enthusiastic about tonight's announcement by the International Monetary Fund that it will sell another 191 tonnes of gold. In commentary headlined "Even When Opportunity Knocks a Man Still Has to Get Up Off His Seat and Open the Door," Grandich writes that the IMF announcement could actually hasten gold's rise. Read more here-http://www.gata.org/node/8343

But then Grandich puts his money where his mouth is. In commentary headlined "An Open Challenge," he offers gold bears a $50,000 bet that gold will see $1,200 per ounce before $1,000 per ounce. Read more here-http://www.gata.org/node/8343

-Why the IMF's supposed gold sales don't mean much. Read more here-http://www.gata.org/node/8340

-Asian central banks tagged as potential buyers for 191.3 tonnes of IMF gold. The International Monetary Fund says it will soon begin a planned sale of a remaining 191.3 tonnes of gold to raise funds for lending operations. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=98842&sn=Detail&pid=1

-James Turk-No Surprise in Gold’s Big ‘Bounce.’ Read more here- http://www.fgmr.com/no-surprise-in-golds-big-bounce.html

-James Turk: Gold at new euro record. Read more here-http://www.gata.org/node/8342

-Gene Arensberg: Gold, silver COT action best since 2009. Read more here-http://www.gata.org/node/8341

-1001 Reasons to own gold. The reason there are so many “reasons” is because gold is unlike any other asset. It responds to its own supply and demand, protects against short-sighted government actions and interventions, is a bellwether of market sentiment and economic outlook, protects against currency devaluation and inflation, is global, is one of the most beautiful metals ever found in the earth’s crust, is a store of value, is timeless, is money, How many assets can you say have all those characteristics?

In spite of gold’s recent correction, the reasons haven’t decreased. In fact, the case for holding gold is stronger than ever. And over the past two weeks, a few “reasons” have surfaced that have fallen mostly under the radar. These, I believe, portend of a higher gold price to come. In fact, it is catalysts like these that could end up in our children’s history books that, in retrospect, were obvious to see.

1. For the first time ever, China has invested in GLD, the gold exchange-traded fund. Their sovereign wealth fund, China Investment Corporation, recently invested $155 million in the ETF. The amount represents only .05% of the sovereign funds’ $300 billion, meaning there’s a lot more where that came from.

Those mainstream lemmings who predicted China was done buying gold now have to deal with the reality that this move more likely signals they are closer to the beginning – and not the end – of a long-term strategy to diversify into gold.

2. The Prime Minister's Office in India is creating a stream-lined process so that the country’s state-owned corporations can “aggressively pursue the acquisition of strategic mineral resources.” The Indian government, normally known for thick-layered bureaucracy, has created a centralized body that will have “rapid strategic and decision making powers.” This is telling, both from the perspective that they see some urgency to the matter, and that the acquisition targets are minerals.

Given the country’s historic propensity to own gold, it’s not a stretch to think the yellow metal will be high on the list of “strategic investments.” Recall their government purchased almost half the IMF gold for sale last year in one fell swoop. The upshot? Don’t be surprised to soon hear of India following China’s lead to begin buying precious metal companies and resources.

3. “Iran is now a nuclear state,” declared President Ahmadinejad last week. The Islamic republic has produced its first batch of high-level enriched uranium, which they claim is solely for electricity purposes but can also be used to create material for atomic weapons if enriched to 90%. In response, the U.S. imposed new sanctions, and the U.N. is considering adding more of its own sanctions, too.

The West recently proposed that Iran export its uranium for enrichment and then have it returned as fuel rods for a reactor. Iran demanded changes to that plan, which were rejected, so claimed they had “no choice” but to start enriching to higher levels on their own. “God willing,” declared Ahmadinejad, “daily production will be tripled.” I’m sure this will all just blow over, right?

4. The U.S. government must inflate. Here’s another reason we think that sooner or later inflation trumps deflation by 2020, government economists project that entitlement benefits (Social Security, Medicare, etc.), along with interest payments on the national debt, will devour 80% of all federal revenues.

This assumes entitlement benefits don’t grow, which, of course, they are. The overall national debt, meanwhile, will rise to 100% of GDP within a few years, an alarming level by any measure. Even Moody’s warned that our credit status could lose its triple A rating if the nation's finances don’t improve, an unheard-of prospect just a few years ago.

So, we’re abruptly fleeing our debt-adding habits, right? As you probably heard last month, Obama signed legislation that raised the cap on government debt from $12.4 trillion already close to being breached to $14.3 trillion to permit more borrowing. As Doug Casey has pointed out numerous times, this is the exact opposite of what the government should be doing, and will have serious inflationary ramifications.

There’s only one way out: devalue the dollar to reduce the debt burden. And the direct result of that is a rising gold price. We may very well see another round of deflation, but the end game is inflation.

What I would point out is that any one of these reasons would be sufficient for wanting to put some gold in your portfolio. It’s the cumulative effect that’s potentially scary, one that argues we should be overweight precious metals at this point in history. The reasons are numerous and, in my opinion, overwhelming. Jeff Clark, Senior Editor, Casey’s Gold & Resource Report-Read more here-http://www.caseyresearch.com/displayCdd.php?id=347 or http://news.goldseek.com/GoldSeek/1266521422.php

-Aden Sisters-Gold's Bull Market Turns 9 Years Old. Read more here-http://www.321gold.com/editorials/aden/aden021710.html

-Brace Yourself For A Big Gold Shortage. Read more here-http://www.businessinsider.com/brace-yourself-for-a-big-gold-shortage-2010-2

-China and India the Asian gold-buying phenomenon. The ever growing purchasing power of the Chinese and Indian general populations throws bearish fundamental analyses of the gold market into disarray. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=98598&sn=Detail&pid=33

-Financial houses are now bigger than governments, Sinclair tells King World News. In a fascinating 50-minute interview with Eric King of King World News, JSMineSet.com's Jim Sinclair remarks that the biggest financial houses of the world are now bigger than governments. He also tells some great market anecdotes and explains why real gold is going to defeat the tricks of the paper gold market. Listen here-http://www.gata.org/node/8331

-Gold is money again and has a long way to go, Lassonde tells King World News. Read more here-http://www.gata.org/node/8325