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The GoldBugg Report - May 27, 2008

May 27, 2008

-Gold price on course to double says top manager. "'I think we should see gold hit $1,600 an ounce in the next 12 months,' the top performing manager of the ABN AMRO US Opportunities fund says." The top US equity manager Francois Moute, believes the gold price should be 16 times the price of a barrel of oil and on a par with the price of platinum.

'We have seen research which suggests gold should be 16 times the price of a barrel of oil,' he said. He points out that the current price of an ounce of gold, $920, is only around seven times that of the oil barrel so the upside potential is considerable. Read more here-http://www.citywire.co.uk/personal/-/news/markets-companies-and-funds/content.aspx?ID=302771

-Gold price may double in long-term: Citigroup. Mining and metals analyst John Hill said the mix of macro and supply/demand factors, along with the same forces that have pushed gold higher for the last five years, give him good reason to remain bullish on gold. He sees prices climbing through 2009 and 2010, but a significant lift may not come until the fall when fabrication constrains supplies.

"Longer term, we would not be surprised to see gold double from current levels as the global policy prescriptions for the credit crunch remain powerfully and uniformly re-flationary," the analyst told clients. Read more here-http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/21/gold-price-may-double-in-long-term-citigroup.aspx

-All the gold that was in existence in 1980 is still in existence. But silver used in electronics manufacturing is rarely recycled, being lost forever. Mark O'Byrne

-"The gains in silver will be double those of gold on the next uplegs." "My favorite remains silver, for many reasons." Jim Willie CB

-Eric Sprott argues that market players who think the resource and energy boom may already have peaked are dead wrong. "Everybody in the world is trying to call the end of resources," he declared. "They're just wrong every day and every day they look worse." Theglobeandmail.com

-Consumers expect prices to rise 5.2 percent in the next 12 months, according to a monthly survey by the University of Michigan in Ann Arbor, the most pessimistic they've been since 1982. Bloomberg

-So long as consumers do not eat, buy gasoline or heat their homes, inflation in the United States is benign. Economist John Williams, who runs shadowstats.com, reads everything the government number crunchers provide and it isn't that the government outwardly lies, but that it gives certain numbers more prominence.

Williams began tracking inflation in 1980. His statistics and the government's headline stats were identical during those first three years. But in 1983 the BLS (Bureau of Labor Statistics) headline data entered a holding pattern in the run-up to the 1984 presidential elections, which has varied little to this day with a 2 percent to 4 percent annual rate.

However, William's measure of consumer inflation, using the finer, hidden data from BLS has been on a steady increase since 1996 from 6 percent that year to 12 percent in April 2008 or where it stood in April 1981 with BLS headlines at that time. Williams also shows that the unemployment rate has climbed to 13 percent (as opposed to BLS' headline of 5 percent,) since the government no longer counts 7.5 million people who could not find jobs in April.

Bob Chapman, the international forecaster at GoldSeek, concluded today that gold is still the right investment due to inflation pressures yet to come. Calling off the credit crisis, as the government has done recently, is misleading, he wrote. "We believe the financial sector will have many more negative surprises as time passes." "This isn't just a mortgage crisis; it is a systemic crisis," that amounts to at least $2 trillion, he said.

"Twelve and three eighths percent inflation is reality and it will be 15 percent before the year is out," Chapman wrote. "Year-on-year worldwide food prices are up 57 percent, rice is up 125 percent and wheat 65 percent. Oil prices have quadrupled since 9/11. At $125 a barrel the bill for Americans is $300 billion," he wrote. Chapman predicts $5.00 per gallon gasoline and $150 per barrel oil by the end of 2008.

This run-away inflation is the fault of the Federal Reserve Bank, coupled with the United States' costly occupations of Iraq and Afghanistan, Chapman said. "The falling dollar is a product of both. We believe that M3 creation has passed 18 percent over the past month with no let up or end in sight," Chapman wrote. [M3, which is no longer published by the government, is the broadest form of currency supply growth. It was at its highest level 8 percent when the Fed ceased publishing the numbers in March 2006.]

Bond fund Pimco Total Return noted the United States' inflation rate was "a con job." Bill Gross, who manages the fund, said the government deliberately understates inflation in order to keep Social Security payments and other government costs artificially low. In a conservative estimate, Pimco determined that changes in the way the government calculates true inflation since 2003 has shaved at least 1 percent off the BLS headline number.

The government figures do not take into account a lower standard of living either, argued Peter Schiff, president of Euro Pacific Capital. The fund tells its readers that as consumer prices increase they become more creative in how they buy goods. In one example, a family that may have purchased steaks one year ago may only be able to afford ground beef this year. "But [government figures] do not measure this trend," he said. Diamonds.net

-Fed chief Volcker sees 70's-style inflation risks. Former U.S. Federal Reserve Chairman Paul Volcker warned on Wednesday the United States could face a 1970s-style period of skyrocketing inflation if investors lose confidence in the buying power of the U.S. dollar. "If there is a real loss of confidence in the dollar, then I think we are in trouble.

That is something that has to be watched," Volcker told the congressional Joint Economic Committee. The former Fed chief who championed the battle against double-digit inflation in the 1970s by raising interest rates sharply, warned that without careful focus on the declining dollar and inflation, the U.S. could face similar, or even worse, inflation pressures.

"That has to be very much in the forefront of our thinking, without that, we are back to the inflation of the 1970s or worse," Volcker said, questioning the relevance of measuring inflation by stripping away volatile food and energy prices. Read more here-http://uk.reuters.com/article/companyNews/idUKN1449649720080514

-Inflating Away US Debt. Three lessons from history for printing up money. Middle-class families and savers looking to get ahead of the game both inside and outside the Federal Reserve's fast-inflating currency zone might want to consider Buying Gold as defense.

Because however this latest attempt to inflate away debt pans out in the long run, it's sure to make history. And history says time and again that solid Gold Bullion holds its value whenever man-made currencies are forced to lose value. Read more here-http://www.321gold.com/editorials/ash/ash051908.html

-Not included in US inflation statistics is the Baltic Exchange's Sea Freight Index, which monitors the costs of shipping dry goods across 40 major trade routes for minerals, grains, cement and sugar. Earlier today, the key gauge of global economic activity jumped 4% to a record 11,067.

Asian demand for grains and natural resources has not been dented by the global banking crisis or the economic recession in the United States. Freight shipping costs on key export routes are 75% higher than a year ago, and 1100% higher than seven years ago. Read more here-http://www.321gold.com/editorials/sirchartsalot/dorsch051608.html

-George Soros says stock markets are still underestimating the severity and length of the economic downturn, especially in the US, and are now having a "bear market rally". He told BBC business editor Robert Peston that the "acute phase" of the credit crunch may be over but effects on the real economy are yet to be felt. Read more here-http://news.bbc.co.uk/2/hi/business/7408620.stm or http://www.bloomberg.com/apps/news?pid=20601087&sid=aVgM4AiWfExY&refer=home

-"This is a bear market rally" said Gregor Smith, a London-based fund manager at Daiwa Asset Management who helps oversee $1 billion. ``The economic fundamentals don't really support where the stock markets are at the moment.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=af_CXgV_udUE&refer=home

-Oil Monitor to Slash Estimate of World's Supply of Crude. The Paris-based International Energy Agency is in the middle of a large study of the condition of world's top oil fields. Its findings won't be released until November, but the bottom line is already clear: Future crude-oil supplies could be far tighter than previously thought.

The IEA has predicted for several years that crude-oil supplies will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030. But the agency is now worried that aging oil fields and diminished investment mean that companies could struggle to break beyond 100 million barrels a day over the next two decades. WSJ

-Private investors shun US assets, data show outflow. Read more here-http://www.guardian.co.uk/business/feedarticle/7518643

-The Old Titans All Collapsed. Is the U.S. Next? Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/05/16/AR2008051603461_pf.html

-Megabubble waiting for new president in 2009. 'Numbers racket' exposes potential disaster for economy, markets. Kevin Phillips, a former Republican strategist for Nixon, and today America's leading political historian. Phillips just published "Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism," everything you need to know about today's credit meltdown. Read more here-http://www.marketwatch.com/news/story/governments-numbers-racket-about-blow/story.aspx?guid=%7bF91A0843-69B4-4C0C-92CE-B835D9907945%7d&print=true&dist=printTop

GOLD

-Goldcorp confident of 4-digit gold price this year. Goldcorp President and CEO Kevin McArthur Tuesday said he is certain that investors will again see four-digit gold prices this year with the potential to "go well into the four digits." Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page68?oid=53349&sn=Detail

-James Turk: Gold the Ultimate Inflation and Catastrophe Hedge. Read full interview here-http://www.kitco.com/ind/GoldReport/printerfriendly/may212008.html

Gold Report: Where do you think gold and silver will be at the end of this year?

James Turk: Well, I am not changing my price forecast. Back in December I said that we're going to see a four-digit gold price this year, and we have. I am expecting gold will go up to $1,500 sometime during the course of the year and my year-end target is $1,100 to $1,200. I'm sticking to that same forecast. And in silver, I think we have the potential to go in the ratio from the 50s down to 40 or 42. And a 40 ratio at $1,100 to $1,200 that puts silver around $28, maybe $30.

-"Ever since gold became free trading in the early 70s, we've been telling you, 'Buy it as an inflation hedge'," wrote Peter Grandich, editor of the Grandich Letter. "Everywhere one looks they see prices and costs rising and as the inflation concerns grow, so should the price of gold," Grandich added. Kitco Daily Resource

-Investors are prudently hedging against inflation with gold and some see gold as a safer play than oil right now because gold has had a healthy correction and is flat in the last 30 days while oil has surged to new record highs and is up more than 10% in the last 30 days.

Uncertainty regarding the outlook of stock markets which historically have performed very badly in periods of stagflation will lead to a resumption of safe haven demand in the coming weeks. The gold/oil ratio strongly suggests that oil is now a hold or sell while gold is again a buy. Similarly with the silver/oil ratio. Gold.ie

-Peter Grandich, editor of the Grandich Letter, chipped in with, "Oil is obviously leading gold and if the historical gold vs. oil ratio ever returns, we could see gold as high as $1,500." Kitco Daily Resource

-James Turk, of goldmoney.com says "The gold and crude-oil relationship is out of whack and due to adjust, gold has a lot of catching up to do and will rise as a result," Turk believes. Kitco Daily Resource

-Peter Spina, of GoldForecaster.com is very positive, writing that, "Current market expectations are rather subdued and from a contrarian standpoint that is a rather bullish sign. Gold continues to have inter-market relationships which demonstrate the present gold price is highly undervalued. The possibility is quickly growing for gold to revisit the four figures area."

However, he notes, "The other side of the short-term risk/reward equation is a sizeable pullback in the oil price as short-term gains appear overextended.

The US Dollar's prospects on the whole remain bleak and any short-term rebounds will be met with heavy selling. How will reversals in those short-term trends translate into the gold price going forward? They could inflict some damage into its renewed and growing momentum. Until the reversal in these pro-gold trends, I would be quite afraid to stand in front of this golden bull!" Kitco Daily Resource

-"The technical picture has gone very positive on gold and so we could see a good run now," wrote Julian Phillips, also of GoldForecaster.com. With inflation rising, "this is the beginning of what we feel will be a decaying global economic picture, with the exception of Asia, in 2008, which will benefit gold and silver, Phillips wrote. So, "I don't think the summer will see a long period of 'doldrums' as many expected." Kitco Daily Resource

-"There is a definite air of the 1970s in recent economic data and the reality of falling economic growth and rising inflation or stagflation," said Mark O'Byrne, of Gold and Silver Investments Ltd. Because of that, "With the dollar having strengthened against the euro, the prime reason for gold's early strength looks to have been inflation hedging buying due to oil going above $130 prior to a small sell off," O'Byrne wrote. Gold may not hold above $900, said O'Byrne, as "profit taking is to be expected." In the near term, "Gold needs to consolidate between $885 and $915 before the next leg up in the bull market," he concluded. Kitco Daily Resource

-Contrarian Investing Positive for Gold. The mood towards gold in much of the financial press and in the markets remains bearish to lukewarm at best and this is another contrarian signal that the worst of gold's sell off may be over. A contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong and thus goes against the crowd who are invariably wrong.

It is interesting that much coverage of equity markets is to continually buy the dips and use corrections to add to positions (no matter how much risk there is in the financial markets). Rarely do pundits say that stock markets have 'peaked' and it is time to sell all stocks. Stocks for the long term is the mantra. Even though gold has outperformed the benchmark S&P 500 and Dow Jones since 1971.

This is a truly long term time frame of 37 years which is the lifetime of your average investor. Yet, there is a continual barrage of such misguided commentary on the gold markets. Tops have been called in the gold market when gold reached $500, $600, $700, $800, $850, $900 and $1,000 and all were proved wrong. Eventually the gold perma bears will be proved right (interestingly they are normally stock perma bulls) but that will be when gold has surpassed its 1980 inflation adjusted high of some $2,300 per ounce.

Timing the market in any asset class is a mug's game and proper diversification into all major asset classes, including gold, is advised. The allocation to each asset class should be based on the macroeconomic conditions of the moment. Thus, in current times risk aversion should be paramount and thus an allocation of at least 10% to gold is merited. Gold.ie

-Most of us have been waiting for higher inflation to erupt on the scene for some time. Government statisticians have been able to avoid the reality of market place. How many million words have been written on these web sites on nonsense of core inflation?

Simplistic nature of that measure, which ignores developments in prices for oil and Agri-Food, is about to come back to haunt those policy makers that have hidden behind it. As this week's graph portrays, luxury of lower prices for goods from China's factories has faded.

Higher prices for oil, Agri-Foods, and labor are now being passed onto the world by Chinese merchants. For example, price of cotton, important for clothing, has risen 40% on year ago. Higher demand and competition for land and inputs by other Agri-Food commodities have forced prices up. Statisticians will not be able to spin out of their measures these rising prices.

As these higher prices flow through core rate of inflation, the views of Gold investors will be validated. Inflation is indeed moving higher, when measured by the market place rather than by governments. However, as higher inflation becomes reality pressure will build on Federal Reserve, and other central banks, to cease lowering interest rates.

Expectations have been shifting to belief that the Federal Reserve might need to begin reversing interest rate cuts. In the parlance of Federal Reserve hugging economists, reversing rate cuts is different than raising rates. This shift may add support to U.S. dollar, weakening Gold prices in short-term.

Only in short-term is Gold at risk due to this possible policy change, as the long-term positive outlook remains in place. The other short-term factor to remember is that the oil price is perhaps $40-50 above equilibrium. Investors should not be chasing Gold due to paper oil mania. Any price weakness in Gold's price brought on by these factors should be used by investors to add to holdings. Ned W. Schmidt

-Bargain-Hunting for Gold: Seasonal Price Trends Look Favourably on Summer Purchases. Read more here-http://news.goldseek.com/GoldSeek/1211224662.php

-Baby Boomers in Japan Buy Gold as a Hedge Against Turbulent Stocks. In January, when the price of gold soared to a 24-year high, the Ginza Tanaka precious metals store in Tokyo had to extent its business hours every day to keep up with the rush of customers flocking there to sell their gold. But customers were also buying the yellow metal. Noticeable among them were baby boomers looking to invest some of their retirement money.

Jewelry shops near JR Okachimachi Station in Tokyo's Taito Ward report a noticeable increase in the Indian jewelry trade, and the owner of one store there said interest in bullion and jewelry is likely to continue growing. Bullion and jewelry, which are portable and can be readily converted to cash, are important investment vehicles in India.

They are also assets that do not require investment savvy to understand. Because there is also a custom in Indian farming villages to give gold jewelry to new brides, the number of marriages in India is said to influence the global gold markets. Diamonds.net

-Gold demand in Q1 five year low Vietnam becomes the largest retail investor. High prices continue to hit tonnage, but value during the first quarter was at close to record levels. Supplies fell sharply quarter-on-quarter, as mine de-hedging more than offset an increase in scrap. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=53375&sn=Detail

-Big Q1 drop in gold hedge book, but end of dehedging in sight. The quarterly Fortis Hedging and Financial Gold report says the first quarter of 2008 saw a "huge" drop in gold hedging, but the market support from producer buybacks is coming to a close. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=53109&sn=Detail

-Venezuela won't be adding to world's gold supply. Mineral-laden Venezuela on Thursday shut the door to new gold projects and threatened other mining and logging concessions in a step by leftist President Hugo Chavez to tighten control of natural resources.

Environment Minister Yuviri Ortega said the South American country will not give permits for any open-pit mines and will not allow companies to look for gold in its vast Imataca Forest Reserve. Read more here-http://www.gata.org/node/6306

SILVER

-Silver major uptrend alert. The technical condition of silver has continued to improve since the last bullish Silver Market update was posted a week ago. This is because it has held above the strong support in the $16 - $16.50 area, and by virtue of moving sideways during last week, it has broken out upside from the bullish Falling Wedge so that it is now in position to take off immediately, and is likely to, especially given that gold has started to lift off, rising strongly on Thursday on Friday of last week.

The position of silver, on strong support not far above its rising 200-day moving average, coupled with the strong convergence of the boundary lines of the Falling Wedge just completed are a particularly potent combination pointing to a strong advance very soon. Clive Maund-Read chart here-http://www.321gold.com/editorials/maund/maund051908.html

-Industrial and investment demand for silver remains very strong. Geoffrey Burns, chief executive officer of Pan American Silver Corp., said last week, that there is rising industrial demand internationally as mine output declines. Investment demand has remained very strong with the silver ETF adding a sizeable amount of ounces last week. A further nearly 2 million ounces were added to the ETF last Wednesday alone. Gold.ie

-Silver Surges and Remains One of the Worst Analyzed Commodity Markets. Silver futures for July delivery rose 69.7 cents, or 4.1 percent, to $17.725 an ounce Wednesday. The price has advanced 19 percent this year, while gold climbed 9.8 percent. Silver remains one of the worst and most inaccurately analyzed of all the commodity markets and this creates a huge opportunity for investors who are willing to do their own research and go against the herd. Incidentally the herd were wrong on the NASDAQ, on property and they will be wrong on assuming that this will be another short benign recession. The article below is slightly out of date but all the fundamentals remain the same. Most institutions have been bearish on silver since it was above $7 per ounce and continue to be as they fail to look at the big picture reality as looked at in this article: http://rs6.net/tn.jsp?e=001UMHLJTW9s3lSuQhiRF2Or0WsQPiJznyVObeMTa2yh_N-q7tpyWDEzG3wqDrZm8o14lfUDixh7of4QyJ0pKhKw17hCLLIIxwDjo4RBO8CVmq5f4_wT92yt4pQjiiIXqWH0mdaJcemdpH2MrCm-V4qMPHCaJuMpNakcvoJKE7Ijl7OAyXr1ua4OyJlZffjvCDKihD8FB1hOKYPyMbsDkPmx4-rc6MJJbJT Many silver experts and analysts said that it was the best analysis of the silver market they had encountered and it was picked up internationally and syndicated and referenced in papers such as the International Herald Tribune. While gold was up some 2% Wednesday, silver was up by more than 4% and we expect this outperformance of silver vis-a-vis gold and all other commodities to continue in the coming months. With regards to the price of gold and silver after the recent healthy correction, they are both now cheap vis-a-vis other commodities and especially against black gold or oil.

Gold, silver and oil are highly correlated over the medium to long term. But oil can often outperform them in the short term prior to the precious metals catching up when higher oil prices lead to inflation hedging buying of silver and gold. Not to mention safe haven buying when higher oil prices lead to slowing economic growth. The long term average gold to oil ratio is 15 to 1 or 15 barrels of oil to one ounce of gold. Today, the ratio is near record lows at 7.1 ($920/ $130 = 7.08). Oil is at over $130 per barrel and so if we multiply it by 15 we get a gold price of $1,950 At the higher end of the scale gold has traded at over 30 times a barrel of oil which based on today's oil price would result in a gold price of $3,900. Thus based on today's oil price of $130, the gold/oil ratio would suggest that gold is very undervalued at a near historic low of 6.8. The ratio will revert to the mean in the coming weeks and months and will thus see gold reaching its inflation adjusted high of some $2,400 per ounce in the coming years. Similarly with the silver/oil ratio. The average is 4.4 but at the moment it is at 7.6 or 7.6 ounces of silver required to buy one barrel of oil ($130 / $17.90 = 7.26). Should there be a classic reversion to the mean average of 4.4 that would result in silver prices rising to over $29.55 per ounce (130/ 4.4).

This happened as recently as 2002 and 2004 and is more than likely to happen again. Indeed the ratio was as low as 2.4 as recently as 1999 when oil traded at $10 a barrel and silver at some $4.50 per ounce. At the higher end of the scale, in the 1970s silver traded at a ratio with oil of between 3:1 and 1:1. At today's oil prices that would mean silver trading at between $42 and $127 per ounce. Gold.ie

Swap all your Gold for Silver! The following is a list of facts and reasons to switch all your Gold investments into Physical Silver. Read more here-http://news.silverseek.com/SilverSeek/1210917480.php

-Ted Butler silver commentary. The fundamentals for silver are still spectacularly bullish. Demand appears strong for as far as the eye can see, thanks to world growth, in particular from the BRIC countries (Brazil, Russia, India and China.). Production, after a bump up in the next few years, looks constrained. Investors appear to have awakened to the potential in silver after ignoring it for decades.

The silver ETF wasn't even being discussed when the 2004 report came out. Today, it is devouring silver in incredible amounts. I can't overstate the importance of silver investment demand surging precisely at the same time there is less silver available for purchase than ever before. Read more here-http://news.silverseek.com/TedButler/1211293587.php

-CFTC still finds no evidence of silver futures market manipulations. Despite silver bugs, who insist the price of silver has been artificially depressed, the second study by the Commodity Futures Trading Commission in four years finds no evidence supporting the allegations. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=53092&sn=Detail

-Silver Price Manipulation. This week I must address the latest Commodity and Futures Trading Commission (CTFC) findings that, "The U.S. commodities regulatory body found no evidence that silver prices had been manipulated downward by short sellers after re-examining long-term and recent allegations of misconduct."

I was asked by Dow Jones to comment on the CFTC findings. The first point I stated was, "It is not possible to manipulate the trend in a market, but it is possible to "manage" the price within silver's uptrend." I went on to state that the price of silver can be managed, within certain boundaries, through short selling. I believe silver would be far higher if not for selling of "vast amounts" of silver that doesn't exist, or "naked shorts." David Morgan-Read more here-http://news.silverseek.com/SilverInvestor/1211435880.php

-Silver-Coated Endotracheal Tubes Cut Down on Infections. Saves money and time spent in intensive care units, researcher says. Read more here-

http://health.usnews.com/articles/health/healthday/2008/05/19/silver-coated-endotracheal-tubes-cut-down-on_print.htm

PLATINUM-PALLADIUM

-The price of platinum could increase by 50% in 2008, according to a poll of analysts by the Reuters news agency. Prices are pushed higher by production problems in South Africa and a rise in demand for catalytic converters using the metal to filter fumes. Edel Tully, a metals analyst at Mitsui Global Precious Metals, said that out of the five precious metals the firm would remain "most bullish" for platinum.

"We believe that the metal can eclipse its record high of $2,290 and trade up to $2,500 this year," he said. Platinum is mainly used into jewellery and catalytic converters. As stricter rules have come into force regarding vehicle emissions, the need for platinum has risen. Read more here-http://news.bbc.co.uk/2/hi/business/7408253.stm

-Price Drivers in the Platinum and Palladium Markets. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42907

-Johnson Matthey expects big deficit in 2008 platinum market. Johnson Matthey, a world authority on platinum, forecasts platinum's trading range for the next six months. Power problems in SA is expected to play a big role in supply. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=53245&sn=Detail Full PDF file here-

http://www.platinum.matthey.com/uploaded_files/Pt2008/08_complete_publication.pdf

-ETFs seen drawing 150,000 oz platinum in '08. Read more here-http://uk.reuters.com/article/idUKN1950324020080519

-Impala Platinum concerned on long term power supply and pricing. Impala Platinum CEO, David Brown, is concerned that the lack of a secure power supply in South Africa will seriously affect output. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=53360&sn=Detail

-Power issues predominate at platinum presentations. The South African power situation and its likely effect over the next few years on new and existing platinum developments was the common issue noted by the speakers at RBCCM's first annual platinum conference in London. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=53165&sn=Detail

-Investment funds warm to palladium. Investment funds are warming to palladium as a substitute for more expensive precious metals in autocatalysts, jewellery and dental equipment.

-Russian palladium sales key to 2008 supply-JM. Read more here-http://www.reuters.com/article/marketsNews/idUSL1993909520080519

-Palladium rings, for the bride on a budget. Couples are turning to palladium for their wedding rings because of the rising cost of platinum. Read more here-

http://www.telegraph.co.uk/news/uknews/1997225/Palladium-rings,-for-the-bride-on-a-budget.html?service=print

OIL-GASOLINE

-Crude Oil Prices 1861-2008. Read chart here-http://www.forbes.com/home/2008/05/13/oil-prices-1861-today-real-vs-nominal_flash2.html

-Oil for 2016 Delivery Passes $141 on Supply Concern. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=ao7pUZ.pCTaM&refer=home

-Blame Wall Street for $135 Oil on Wrong-Way Betting. Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid=a3MgWEz_Qch0&refer=home

-Opec says oil could hit $200. Read more here-http://www.ft.com/cms/s/0/4200dc9e-1521-11dd-996c-0000779fd2ac.html?nclick_check=1

-OPEC unhappy with oil price surge, Read more here-http://www.breitbart.com/article.php?id=080522181940.v0s5g6bv&show_article=1

-Oil Rises to a Record After Pickens Says Prices May Reach $150. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=az63Jw4mbA88&refer=canada

-Saudis see no reason to raise oil production now. Read more here-http://news.yahoo.com/s/ap/20080516/ap_on_re_mi_ea/bush_mideast&printer=1;_ylt=Aj.Y3TR0P_ESPp3u3zSWf18UewgF

INFLATION-STAGFLATION

-World faces choice between higher energy, food costs: experts. Read more here-http://www.abs-cbnnews.com/storypage.aspx?StoryID=118359

-Who's to blame for oil and food prices? Read more here-http://www.theglobeandmail.com/servlet/story/RTGAM.20080519.wrreguly0519/BNStory/Business/columnists

-Pimco's Gross Says U.S. Underestimating Inflation.. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aKrj06nAn.0c&refer=home

-Canada Inflation Unexpectedly Quickens on Fuel Costs. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=azE2XATCtnxo&refer=canada

CREDIT-LIQUIDITY CRISIS

-World economy on thin ice U.N. The United Nations blames dire situation on the decline of the U.S. housing and financial sectors. The world economy is "teetering on the brink" of a severe downturn and is expected to grow only 1.8% in 2008, the United Nations said in its mid-year economic projections Thursday.

That's down from a global growth rate of 3.8% in 2007, and the downturn is expected to continue with only a slightly higher growth of 2.1% in 2009, the U.N. report said. Read more here-http://money.cnn.com/2008/05/15/news/international/global_economy.ap/index.htm?section=money_topstories

-ECB's Trichet says worst of crisis may be ahead. Read more here-http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/05/19/bcntrichet11.xml

-Buffett, Soros Refute 'Credit Crunch Over' Mantra: Market Pays Heed. Read more here-http://finance.yahoo.com/tech-ticker/article/17964/Buffett-Soros-Refute-

-Insight: Life won't be easy in the 'nasty decade'. The Governor of the Bank of England, Mervyn King, has declared the "nice decade" to be over. It might be accurate to state that the "nasty decade" is underway. Read more here-http://us.ft.com/ftgateway/superpage.ft?news_id=fto051920081051320403&page=2

-Fears of longer credit crisis set to hit Wall St. Read more here-http://us.ft.com/ftgateway/superpage.ft?news_id=fto052020080934150607&page=2

-Banks Hide $35 Billion in Writedowns From Income, Filings Show. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=ajTu.H_velzQ&refer=home

-Post-Subprime Economy Means Subpar Growth as New Normal in U.S. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aVZRne8kZBGI&refer=economy

-JPMorgan cutting 55% of Bear staff. Read more here-http://money.cnn.com/2008/05/20/news/companies/jpmorgan_bear_stearns.ap/index.htm

-UBS $100 Billion Wager Prompted $24 Billion Loss in Nine Months. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=a3sm9FOrsWcg&refer=home

-Moody's Begins Probe on Report Bug Caused Aaa Grades. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aDGkiET1_Y7w&refer=home

-Buffett Says Moody's Should Dismiss Errant Workers. Billionaire Warren Buffett said the board of directors at Moody's Corp. should dismiss employees if a probe finds they did ``things they shouldn't have done.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=awUJybvo5xaM&refer=home

U.S. FISCAL DEBT GROWS

-Taxpayers' bill leaps by trillions. Read more here-http://www.usatoday.com/news/washington/2008-05-18-Redink_N.htm?csp=34

INTERST RATES

-Fed Says `Most' Officials Viewed April Rate Cut as `Close Call'. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=ajgwOPINrE_8&refer=home

-Fed's Kohn: More Trouble From Housing, Inflation. Read more here-http://www.cnbc.com/id/24724526

U.S. DOLLAR

-Dollar to Keep Falling. The dollar's recent bounce is likely to have been another short term bounce in its ongoing bear market. Despite all the positive "talking up" of the dollar in recent days, its recovery has been meager at best. In the last 30 days it did rise some 3% versus the euro however it was 4.8% weaker than the Swiss franc and 2.2% weaker than the Japanese yen during the same period.

It was also down against the Australian dollar and many of the Asian currencies during the month, showing that the much touted recovery was primarily against the euro and is tentative at best. While the dollar may continue to strengthen against the euro in the short term it remains in a bear market. In the same way that many analysts were wrong when they said that 1.30 would be the high in the euro/dollar rate so they will be wrong with the call that 1.60 is the highest the euro will rise against the dollar.

Indeed, it is not beyond the realms of possibility that the dollar will fall to 2:1 to the euro as it did with sterling in recent years unless there is a significant steep recession in the Eurozone. The same people who have called the end of the dollar bear market will be proved wrong again. The dollar remains a currency facing substantial headwinds in the form of the huge annual trade, current and now increasing budget deficits and burgeoning stagflation. Until these deficits are materially corrected and the threat that is stagflation dissipates, gold will remain in a bull market. Gold.ie

GEOPOLITICAL

-White House denies Army Radio report on plan to attack Iran. Read more here-http://www.jpost.com/servlet/Satellite?cid=1210668683139&pagename=JPost%2FJPArticle%2FPrinter

-U.S. sees need for "tangible action" on Iran: Israel. Read more here-http://www.reuters.com/article/worldNews/idUSL1669745620080516?feedType=RSS&feedName=worldNews&rpc=22&sp=true

-'Iran's nuke program may spur arms race'. Iran's disputed nuclear program has sent a wave of interest in atomic energy across the Middle East, a think tank said Tuesday, warning that it risked setting the scene for a regional nuclear arms race. Read more here-

http://www.jpost.com/servlet/Satellite?cid=1210668683868&pagename=JPost%2FJPArticle%2FPrinter

-Bin Laden lashes out at Arab leaders. Read more here-http://apnews.myway.com/article/20080519/D90OGDAO1.html

-FBI too badly organized to stop attacks: agent. Read more here-http://www.breitbart.com/article.php?id=080522183039.b6ftajru&show_article=1

-China quake losses hit $9.5 billion. Beijing says last week's earthquake has resulted in $9.5 billion in direct losses for companies. Read more here-

http://money.cnn.com/2008/05/19/news/international/china_quake_damage.ap/index.htm

The GoldBugg Report - May 27, 2008
Posted by Worldwide Precious Metals on Tuesday, May 27, 2008