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The GoldBugg Report - Investors Rush to Gold

January 31, 2008

Wall Street Journal's lead story: Investors rush to gold

• Metal Hits New High;

  Fans in the Mainstream
  By E.S. Browning
  The Wall Street Journal
  Thursday, January 31, 2008
  Page A1
  
  The new gold rush is on.
  
  As inflation has picked up and the stock market has tumbled, investors seeking a safe haven have piled into gold, driving the metal to all-time highs. - Read the article »

Silver may outshine gold, experts say

• Metal has gained 40% in past five months
  Peter Koven, Financial Post
  Published: Monday, January 28, 2008
  - Read the article »

Gold, platinum hit record on supply, rate cut hopes

• Atul Prakash, Reuters
  Published: Tuesday, January 29, 2008
  - Read the article »

Gold

• Citigroup next to call $1,000/oz gold this year. John Hill, director, metals research, at Citigroup in San Francisco, says gold prices will test a record $1,000 an ounce this year, boosted by growing investment interest, safe-haven demand and strong market fundamentals. ResourceInvestor.com
  - Read the article »
• "If you don't trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?" Kenneth J. Gerbino
• "Gold will most likely go to $1500 within a few years. If one takes $850 gold and allows for only a 7% increase a year for 5 years the price is $1200." Kenneth J. Gerbino
  - Read the article »
• When governments print money, buy gold. The price of gold tells us a lot about ourselves. It holds up a mirror to the way we are governed, our economy and its prospects. It reflects not only the physical dangers of floods, famine, terrorism and war, but also the financial perils of systemic addiction to debt and budgetary incontinence.
• Gold as insurance. Selling gold after a surge in the gold price is akin to canceling fire insurance after surviving unscathed a devastating fire destroying homes and property in the neighborhood. It can be confidently predicted that higher gold prices will bring out a lot of selling by woolly-thinking people, as if insurance against the danger of collapse of the international monetary system were no longer necessary after an initial tumble in the gold value of paper currencies.
  
  The reason for this illogical behavior is greed that is often greater than the desire for security. A large part of the gold bug population is motivated by "get-rich-quick" mentality more than by the mentality of insurance policy holders. This type of behavior should not detain us here. We do know that there were passengers aboard the sinking Titanic willing to sell their life-savers for cash.
  
  "Profit-taking", so-called, will ultimately dry up as the collateral risk (what I euphemistically call the dead-cat bounce of the dollar) will become clear even to people ignorant of the difference between monetary and non-monetary commodities. Antal E. Fekete
  - Read the article »
• Another Year of Double-Digit Growth in Gold Prices?
  - Read the article »
• New golden age for most glamorous metal.
  - Read the article »
• The Political and Economic Agenda for a Real Gold Standard by Congressman Ron Paul.
  - Read the article »
• The World Melts for Gold.
  - Read the article »
• New Year, New Gold Record, Thanks to Investment Demand and Safe-Haven Status.
  - Read the article »
• Shanghai gold fever. Chinese investors join the race for precious metals as the price of gold continues to climb. CNN's Eunice Yoon reports.
  - Read the article »
• This month GATA will place a full-page advertisement in The Wall Street Journal calling attention to the international central bank scheme to suppress the price of gold and to GATA's conference in Washington in April. The ad was devised with great care by GATA's Board of Directors over the last several weeks and The Wall Street Journal today confirmed to GATA that it will publish the ad as submitted.
  
  In the belief that this ad can strike a profound blow against the rigging of the gold market and all related markets, GATA has cobbled together assets valued at the more than quarter-million dollars to be charged by the newspaper for printing the ad and expects to convert them to U.S. dollars and make payment to the newspaper next week.
  - See the advertisement »
• Jim Sinclair, Chairman of Tanzania Royalty Exploration Corporation, believes gold will soon trade at US$1650/oz following panic in equity markets.
  - Read the article »

Silver

• Silver will reach $20 in the first half of this year and may trade as high as $25 per ounce. Gold.ie
• All markets go through four phases of emotion. First there is pessimism, then scepticism, then optimism, and finally euphoria. Right now we are still in the skeptics phase also known as the wall of worry. David Morgan-The Silver Investor
• The bottom line is despite silver's early-2008 surge, this metal still remains quite low in inflation-adjusted terms relative to its modern history. And this is not just in comparison to silver's fabled super spike in late 1979. In today's CPI-inflated 2007 dollars, silver spent about a decade straddling the 1970s and early 1980s well above its current $16ish levels. Silver could easily double from here yet still be very reasonably priced historically.
  
  And silver is particularly exciting today because gold has just broken out to new highs of its own. $900 gold is starting to get global investors really excited about the precious metals again. And when their capital starts to chase silver in earnest, its tiny market assures its gains will be fast and furious like usual. What an exciting time to be long silver. Adam Hamilton
  - Read the article »
• New Uses Give Silver Reasons to Shine.
  - Read the article »
• If you can understand that the current economic and financial environment screams for protection through ownership of gold and silver, please stop shooting yourself in the foot by thinking that the ETFs will do anything but delay and muffle the rise of gold and silver and leave the ultimate holders with nothing but worthless paper at exactly the moment you will need gold and silver for your financial survival.
  
  Nothing compares with having the gold and silver in your own possession and the gold and silver ETFs are way down the list as far as safety goes, and far below even gold and silver stocks. Richard J. Greene
  - Read the article »

Platinum/ Palladium

• Platinum, the Most Precious and Overlooked Precious Metal. Why Platinum Remains a Strong Buy. Gold and Silver Investments Limited continue to be bullish on precious metals and bullish on platinum. Platinum has recently hit new record highs at $1600 per ounce along with gold. Even though platinum has surpassed its 1980 high of $1,070 per ounce in nominal terms, it is still only some half the price of its inflation-adjusted high of $2,800 per ounce. We believe this high will be reached in the next 5 to 8 years in this new supply/demand driven secular bull market in platinum.
  - Read the article »
• Analysts expect tight global platinum market to persist into 2009.
  - Read the article »

U.S. FISCAL DEBT-U.S. ECONOMIC PACKAGE

• The deficit for the current budget year will jump to about $250 billion, the Congressional Budget Office estimated Wednesday, citing the weakening economy. And that figure does not reflect at least $100 billion in red ink from an economic stimulus measure in the works. "After three years of declining budget deficits, a slowing economy this year will contribute to an increase in the deficit," the CBO report said.
  
  The figure greatly exceeds the $163 billion in red ink registered last year. Adding likely but still unapproved outlays for the wars in Iraq and Afghanistan brings its "baseline" deficit estimate of $219 billion to about $250 billion, the nonpartisan CBO said.
  
  Senate Budget Committee Chairman Kent Conrad, D-N.D., said the 2008 deficit would reach more than $350 billion once the costs of an upcoming economic stimulus measure under negotiation between the Bush administration and Congress are factored in. The CBO crunches economic and budget data for lawmakers.
  - Read the article »
• Tax rebate deal could mean checks by May.
  - Read the article »
• Tax Rebates Deal Announced. Congressional leaders announced a deal with the White House Thursday on an economic stimulus package that would give most tax filers refunds of $600 to $1,200, and more if they have children. House Speaker Nancy Pelosi said Congress would act on the agreement hammered out in a week of intense negotiations and uncustomary bipartisanship" at the earliest date, so that those rebate checks can be in the mail."
  
  President Bush praised the agreement at the White House, saying it "has the right set of policies and is the right size." The rebates, which would go to about 116 million families, had appeal for both Democrats and Republicans. Pelosi's staff noted that they would include $28 billion in checks to 35 million working families who wouldn't have been helped by Bush's original proposal. Republicans, for their part, were pleased that the bulk of the rebates more than 70 percent, according to an analysis by Congress' Joint Tax Committee would go to individuals who pay taxes.
  
  Individuals who pay income taxes would get up to $600, working couples $1,200 and those with children an additional $300 per child under the agreement. Workers who make at least $3,000 but don't pay taxes would get $300 rebates. The first rebate payments could begin going out in May, and most people could have them by July, said Treasury Secretary Henry Paulson, noting that the IRS will already be overwhelmed processing 2007 tax returns. The rebates were expected to cost about $100 billion, and the package also includes close to $50 billion in business tax cuts.
  - Read the article »
• The Bank of Canada lowered its main interest rate a quarter point, the second reduction in as many months, and signaled it will act again to shield the economy from the threat of a recession in the U.S. The target rate for overnight loans between commercial banks was cut to 4 percent, the lowest since May 2006, at today's regularly scheduled meeting. All 22 economists in a Bloomberg survey predicted the move.
  
  "The effects of the weaker U.S. economic growth outlook will lead to additional downward pressure on export growth," the central bank said. "Further monetary stimulus is likely to be required in the near term." The bank's statement was prepared before the U.S. Federal Reserve cut its key rate three-quarters of a point to 3.5 percent this morning in an emergency move.
  - Read the article »

Other Economic Headlines and Quotes

• Here comes the bear. The fiscal stimulus plan and emergency rate cuts failed to revive stocks. Can anything turn the market around?
  - Read the article »
• U.S economy in recession: BMO Capital Markets, Sees lower growth in Canada, too.
  - Read the article »
• "The Federal Reserve is totally out of it. They're destroying the currency and driving up inflation, which will result in higher interest rates and a worse economy. We now know the Fed doesn't understand markets or economics, but is just trying to bail out its friends on Wall Street at the expense of 300 million Americans; or of the whole world." - Jim Rogers, former partner of George Soros in Quantum Fund
• During the Bush presidency the U.S. has increased the national debt by more than $5 trillion in less than 8 years. The U.S. national debt is currently $9.13 trillion, expanding at a rate of 1.4 billion dollars a day (one million dollars a minute). Five trillion dollars have been added to the national debt since G. W. Bush took office, sharply cutting the tax rates for the wealthy and launching wars in Iraq and Afghanistan. Together, these wars will cost (if not stopped sooner) $42.4 trillion over the next decade.
  
  Total U.S. consumer debt, excluding mortgages, reached $2.46 trillion in June 2007. Eight percent of the households owe $9,000 or more on their credit cards, with the average consumer having a total of 13 credit obligations on record at the credit bureau. These include credit cards, department store charge cards, gas cards, bankcards, instalment loans for cars, student loans etc. Fifty one percent of the U.S. population has at the minimum two credit cards.
  
  An article by Stephen Roach, chairman of Morgan Stanley Asia in the Jan. 7, 2008 Financial Times reported "household debt in the U.S. hit a record 133 percent of disposable income." Noting that this trend is unsustainable, he foresees a sharp drop in the price of housing with obvious serious ramifications for the U.S. economy and for the U.S. dollar. Gold.ie
• New York State's insurance regulators met this week with U.S. banks to discuss raising new capital for bond insurers, said a department spokesman. Talks in New York with the unnamed banks are part of Insurance Superintendent Eric Dinallo's effort to stabilize the bond guarantors and bolster the market's financial condition, said agency spokesman Andrew Mais in an interview.
  
  New capital may help preserve the top credit ratings for the bond guarantors such as MBIA Inc., the industry's largest, and halt any erosion of investor confidence in the $2 trillion of assets they guarantee. Ambac Financial Group Inc., MBIA's biggest rival, lost its AAA grade from Fitch Ratings this month on concern about rising defaults tied to subprime mortgages.
  - Read the article »
• Regulators push banks to provide $15bn in capital for bond insurers.
  - Read the article »
• Ambac Financial Group Inc., the first bond insurer to be stripped of its AAA credit rating, reported its biggest-ever loss and said it is talking to "a number of potential parties" to help overcome a slump in the value of guarantees on subprime-mortgage securities. New York-based Ambac, the second-largest bond insurer posted a $3.26 billion loss after writing down the value of guarantees on subprime debt by $5.21 billion, according to a statement by the company this week.
  - Read the article »
• Bank of America barely profitable; $5.3B hit. Company reports steep earnings decline, hurt by $5 billion-plus writedown on CDO-related assets.
• Global economic crisis 'serious': IMF Chief. Investors sceptical of U.S. stimulus package, says IMF's Strauss-Kahn; an American recession would spread globally, he warns.
  - Read the article »
• Ron Paul, a Republican presidential contender and Texas congressman, said Monday that the Federal Reserve is to blame for the country's weakening economy. Paul highlighted his economic remedies abolishing the federal income tax and returning to the gold standard, among them on a three-city tour of Louisiana.
  
  The libertarian-minded Paul was the only candidate to visit Louisiana on the eve of the state's Republican caucuses Tuesday. The caucuses are an intermediary step in picking a favorite candidate. A presidential primary will take place on Feb. 9 and a state convention will convene on Feb. 16.
  
  Paul blamed the Federal Reserve for the current economic conditions; stock markets worldwide fell Monday after Wall Street declined last week. On his Web site, he said the Fed has taken the United States "into a terrible crisis." Paul told an overflow crowd at a suburban New Orleans hotel Monday that the Fed has allowed the dollar to weaken, which in turn, he said, has hurt the middle class and led to inflation.
  - Read the article »
• High gas prices: Recession-proof. Americans may see falling stock markets and employment rates, but worldwide demand and OPEC should keep the heat on oil and gas prices.
  - Read the article »
• George Soros - The Worst Market Crisis in 60 Years
  - Read the article »

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The GoldBugg Report - Investors Rush to Gold
Posted by Worldwide Precious Metals on Thursday, January 31, 2008