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The GoldBugg Report - August 26, 2008

August 26, 2008

-"Geopolitical risk is higher now than at any time since the end of the Cold War and looks set to remain heightened in the coming months. This will be a contributory factor in markedly higher gold prices in the coming months and years." Mark O'Byrne

-It is worth remembering that gold's price of 12 months ago was $650 and we are still up 28% since the start of the credit crisis ($650 to $834). A mean feat considering the extent of declines in other markets. Mark O'Byrne

-"Gold and silver are nearing the end of the savage correction they have endured. With silver the 'long shadow' of gold falling further on the decline we would expect it to outperform gold going forward, particularly as we see investment demand in that metal appearing ahead of that demand in gold." Julian Phillips

-Gold May Rally Through 2010 as Demand Gains, Citigroup Says. Gold may rebound from a slump and rally through 2010 as fabrication demand rises and on expectation the dollar will resume its decline against the euro, Citigroup Inc. said.

GOLD

-U.S. Suspends Sales of American Eagle Gold Coins, Treasury Says. The U.S. Mint suspended sales of its ``American Eagle'' gold coins after soaring commodity prices led collectors and investors to deplete supplies, a Treasury official said. Treasury spokeswoman Jennifer Zuccarelli confirmed the government notified dealers of the suspension last week. It is the first time in two decades that the Mint halted sales of the coins, which are made of 22-carat gold from domestic mines. The coins also contain small amounts of alloy for hardening.

Gold prices soared over the past year, with the most active gold futures reaching a record $1,033.90 an ounce on March 17 as the price of crude oil increased and the dollar weakened against the euro and other currencies. Commodity prices have since retreated. American Eagle coins, introduced in 1986, are also available in silver and platinum. The suspension was reported in today's editions of The Wall Street Journal. Bloomberg

-U.S. mint suspends gold coin sales; futures price is a fiction. Read more here-http://www.gata.org/node/6489

-American Eagle gold coins sold out after spree. Read more here-http://www.gata.org/node/6505

-The Eagle Has Been Grounded. Mint Halts Gold-Coin Sales After Supply Depleted Amid Price Drop. Read more here-http://www.gata.org/node/6504

-Another gold conspiracy unveiled! A dig at GATA from a U.S. gold coin dealer over assumptions it has made, and publicized, regarding the U.S. Mint's recent suspension of 1 ounce Gold Eagle sales. All credit to GATA though in that it has linked to this article on its own website too. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=60275&sn=Detail

-Why Precious Metals Retreated. Silver and gold lease rates were in negative territory the last few weeks as the central banks are selling cheap silver and gold to stabilize the financial markets, notes Jurg Kiener, CEO of Swiss Asia Capital. He tells CNBC's Martin Soong & Sri Jegarajah more. Read more here-

http://www.cnbc.com/id/15840232?video=826763189&play=1&__source=RSS*tag*&par=RSS

-Franklin Sanders: Paper prices no longer rule the precious metals markets. Twenty-eight years of brokering silver and gold have not prepared me for what I met this morning.

One of my wholesalers said he was not selling anything, only buying, until further notice. Another refused to give any prices until he adjusted his spreads.

Another was spreading one-ounce gold coins, normally at $7-$8, at $25. Another said he was making no sales for immediate delivery or deferred payment, only sales for 30 days' delivery paid at once. Read more here-http://www.gata.org/node/6492

-The gold rush is still on. Yes, the precious metal has pulled back with other commodities. But the underlying trends still suggest it will climb to $1,000 and beyond. Read more here-

http://articles.moneycentral.msn.com/Investing/CompanyFocus/TheGoldRushIsStillOn.aspx?page=all

-Gold "Bubble" Burst? Much of the financial media is once again heralding the bursting of the "gold bubble" or "precious metals bubble" and many seem to think that this is the end of the bull markets in gold and silver. It is interesting that it is the same commentators who never predicted a bull market in gold, barely acknowledged a bull market was in existence and yet they are again gleefully banging the "precious metals bubble is burst" drum.

The extent of the bearishness amongst many commentators and institutions is a classic contrarian indicator and is exactly what happens in bull markets which climb a 'wall of worry'. Bull markets do not normally end with the majority calling the top correctly rather they end when the majority (including the media) have been conditioned to expect ever higher prices and have given up attempting to call a top.

Only when the prevailing mass psychology is all bullish do bull markets end. As by then there are few buyers left to prop up prices and there is often a final exhaustion rally prior to the end of a bull market. We are a long way from that now with much of the media continuing to completely ignore gold most of the time and only some specialist financial media covering it on a regular basis.

There is blood in the street in the futures market and worry and fear is at levels not seen so far in this bull market and this should see prices bottoming in the coming days. Also it is worth recalling the huge sell off in 1974. Gold had surged from its fixed Gold Standard price of $35 per ounce to over $200 in 1974 prior to a brutal sell off that saw prices fall in half to nearly $100.

At the time, many called a market top and they were proved very wrong when prices subsequently rose 8 fold in the next 6 years. The fact that an asset class can be considered in a bubble when it has only recently surpassed its all time record nominal high of 28 years ago is astonishing and will be seen as so in the coming years when gold likely reaches its inflation adjusted high of some $2,400 per ounce. Don't believe the gold and silver "bubble" burst hype! Mark O'Byrne

-Unprecedented Investment Demand Leads to Supply Issues in Physical Bullion Market. The massive disconnect between the physical market and the paper futures market continues. There is now an unprecedented situation where large wholesalers and retailers of physical bullion in the US and internationally are having difficulty keeping up with investment demand.

Some are completely out of stock of some of the most popular bullion products such as gold Krugerrands (1 ozt) and gold American Eagles (1 ozt) and silver American Eagles (1 ozt) and silver bars (1 ozt, 10 ozt and 100 ozt).

There are similar issues internationally and The Times of India reports: "There is a shortage of the yellow metal in the bullion banks and traders." There are now also significant delays in delivering bullion (usual deliveries of 5 to 10 days are now taking some dealers 4 to 8 weeks to make). Gold Investments is a bullion broker and due to relationships with many of the major wholesalers in the US and EU has not been affected by these supply and delivery issues and can currently offer all bullion products in quantity for delivery internationally within 10 working days.

Large government mints and refiners are having difficulty meeting the demand and some are rationing supply to large dealers. Large wholesalers, retailers and institutions such as the Perth Mint are experiencing huge demand and even as spot prices have been falling sharply, there are little or no sellers and buyers are continuing to vastly outnumber sellers. Another indication of the sharp tightness in the bullion market is seen in the fact that premiums are rising very significantly on nearly all bullion coins and bars. Wholesale prices for some bullion coins have risen 2% to 3% in a matter of weeks.

This huge demand is not being reflected in the futures market where the speculative hot money of large hedge funds and institutions with short term horizons is leading to materially lower prices. Leveraged margin players who were long have had their heads handed to them on a plate as the shorts are pushing prices as low as possible in order to maximize profits. Clearly, this situation is not sustainable as ultimately the laws of supply and demand of the physical metal will dictate prices and not the speculative and manipulative antics of black box, momentum following traders.

Large, smart money is accumulating physical bullion away from the more risky leveraged casino that is the futures market. Thus, this latest of vicious sell offs is set to be another sharp correction in the gold bull market designed to as usual flush out the weak hands. The bounce when it comes will likely be just as dramatic as the shorts attempt to cover en masse. Should some large players decide to stand for delivery of near term futures contracts when they expire, then we could see some real fireworks and gold will be above $1,000/oz in very short order. Mark O'Byrne

-Why Buy Gold? Read more here-http://news.goldseek.com/ZihlmannInvest/1219244400.php

The chart above clearly shows one thing: long-term trends often last many years. The bear market that started in 1988 ended in 1993. The up-swing that followed lasted three years from 1993 until 1996 and culminated in what may be called a false break-out. Then another bear-market unfolded taking the gold price down to $250 over a period of almost four years.

Then the spike in the gold price (1999) came as a consequence of the central banks' announcement that they would be limiting their gold-sales. The 1999 bottom was tested again at the beginning of 2001. At that time, when few believed that any money should be put into precious metals, the present bull market started; a bull market we deem has still a long way to go in spite of the present correction.

In 2006, the gold price reached a fresh recovery high of $720.1 after a steep rise of roughly 80%. The correction that followed took it down to $560 or 22% before the gold price started to climb again. As per closing price of Friday August 15, gold has fallen 21% from its high reached in January 2008. This correction resembles the one we had gone through in 2006. The long-term trend is intact and we expect the gold price to reach a new high not later than 2009.

-Heavy demand for India gold amid dwindling stocks. India's gold prices were higher on Monday as foreign markets rebounded, but heavy demand from investors and retailers left sellers with little stocks to offer, dealers said. "I am saying 'no' to customers. I'm telling them to inquire the next day," said Jitendra Kantilal, partner at Jugraj Kantilal & Co, a large bullion trader in Mumbai's Zaveri Bazaar. Read more here-http://in.reuters.com/article/businessNews/idINIndia-35059020080818?rpc=401

SILVER

-Try to see gold and silver as just another currency. Gold and silver are likely to act more and more like a currency rather than metals with other uses from hereon. There will also be an increased decoupling from the euro and pound sterling which will go there own way against the dollar without influencing precious metal prices.

The painful mid-summer correction in precious metals appears to be over, and those who bought junior explorer shares at the depth of this panic have already been rewarded with large gains. However, there is still plenty of money to be made by buying the juniors as they remain at depressed prices relative to the metals.

Investors around the world are increasingly attracted to cash. That is logical in a world where shares look overvalued in a recessionary environment for profits, bonds are giving negative returns after inflation and real estate is still highly overvalued.

It is not logical, however, to buy US dollars. The systemic crisis in the US financial system has several more down legs to come. We know that typical financial crises last for about three years and we are only one year into this event.

The dollar may be on the rebound now, and possibly for this autumn but this rally will not last. Buying US stocks can only be a short term strategy and one doomed to failure, with a major bear market still to come.

That is why gold and silver remains the best investment opportunity, and the sell-off of mid-August gives a prime buying opportunity. The buyers of US stocks today are setting themselves up for big losses in the coming crash as the US economy is destined for even greater weakness in 2009 and profit expectations are still way too optimistic.

In an environment this bearish you can really only choose cash or precious metals for safety and treat the latter as currencies. Personally I prefer a currency outside the control of the US which is prone to devaluation and inflation. Gold and incredibly undervalued silver will rise to this challenge. The euro and pound also look losers. Peter J. Cooper-Story here-http://news.goldseek.com/GoldSeek/1218723600.php

-A Fabrication Bottleneck or Something More. The Internet is abuzz with reports that precious metal dealers have stopped selling coins and small bars because they have run out of inventory.

For example, Franklin Sanders reports on goldprice.org that his inability to purchase product from his suppliers is something that he has never seen before in his "twenty-eight years of brokering silver and gold." On Friday afternoon, Kitco posted the following notice: "Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products."

The rush out of fiat currency and into precious metals on this latest drop in prices is not just a North American phenomenon. The Times of India reports: "There is a shortage of the yellow metal in the bullion banks and traders."

The bottom line is that it is difficult, if not impossible, to buy coins and small bars. Mints and refiners are back-ordered. Dealer shelves are bare. But the question is, why? Is it just a fabrication bottleneck, or is something else happening?

When I see or hear that store "shelves are bare", my first reaction is that government price controls have been imposed. Price controls always create shortages. But there are no price controls on the precious metals at least not yet anyway. So absent price controls, the answer to dealer shortages is simply that the price of gold and silver is just too cheap. James Turk-Read more here-http://goldmoney.com/en/commentary.php

-Unfortunately, many folks are panicking or depressed about silver, gold and other commodities. I think that we need to remind ourselves about the legendary Jesse Livermore when he said to be "right and sit tight." Silver, gold, oil and other commodities are on a long, zig-zag upward march that can't be stopped by any firm or government agency.

The commodities super-bull market is alive and well because the fundamentals are too powerful to suppress. Don't get fooled or spooked by the irrational and ill-conceived short-term gyrations. Stick with the fundamentals and stay focused on the long-term. I know that I am. Paul Mladjenovic-Read more here-http://www.safehaven.com/article-10998.htm

-Now is not the time to panic. Whatever you do, don't be scared into selling! Invest whatever you can in gold and silver now. Sometimes I feel like a broken record when I issue buy recommendations and say that this is the lowest price you will ever again be able to buy silver, but I think it is true.

Silver has been making higher lows since 2003 and every missed buying opportunity means that you will end up buying at a higher price down the road. Timothy Silvers-Read more here-http://www.silverbrothers.com/081708.html

-Silver Shortage? What, Me Worry? David Bond-Read more here-http://news.silverseek.com/SilverSeek/1218779880.php

-Jason Hommel: Silver has run out now! Read more here-http://www.gata.org/node/6502

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1219089988.php

-David Morgan silver commentary-http://news.silverseek.com/SilverInvestor/1218807383.php

-Eric Sprott's Barron's interview on the markets, energy, gold and silver. Read more here-http://webreprints.djreprints.com/2012610711858.pdf

-Silver Is Key To Reducing Pneumonia Associated With Breathing Tubes. Read more here-http://www.sciencedaily.com/releases/2008/08/080819170435.htm

PLATINUM-PALLADIUM

-Platinum price to reach new highs over next quarters CPM Group expert. The CPM Group's commodity expert Jeffrey Christian tells Mineweb why platinum is still an attractive investment and reveals some of his price projections.

Platinum is still a relatively attractive investment in the market as the price is set to increase to $2,200 in the first half of next year and to remain at high levels of around $2000- $1,900/ounce through the end of 2009 and 2010, says the CPM Group's commodities expert Jeffrey Christian.

Christian told Mineweb in an interview that the downward movement in the platinum price over the last few weeks was technically driven as new resources funds and hedge funds were simply selling because the platinum price had started to decline.

He said there were no macro economic reasons for the technical sellers' actions, nor were they acting on price fundamentals. The sellers of platinum were following a "gut feeling" and price charts that prompted them to sell when the price declined and to buy when the price increased.

Vehicle manufacturers also played a role in recent platinum price movements as they bought PGMs to add to metal inventories in the first quarter when the South African power crisis erupted, but either sold or lived off their inventories in the second quarter as they fought for survival.

However, Christian said he has seen new buying in the market over the last two weeks by investors driven by platinum's long-term fundamentals. He believes the platinum market is currently tighter compared to nine months ago as the South African power crisis in the fist quarter of the year saw producers and refineries selling off inventories.

Lower prices also dampen selling in the physical market, while the auto industry's use of platinum has probably decreased by 2% and not by 10% as commonly believed. And while South African producers are pushing as much concentrate as possible through their smelters to make up for losses, this would only cause a short-term surge in supply. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page35?oid=60097&sn=Detail

-Platinum, Palladium Will Rise in Next Three Months, UBS Says. Platinum, palladium and silver will advance in the next three months, UBS AG said. UBS expects platinum to trade at $1,550 an ounce in one month and $1,700 in three months, the bank said today in an e-mailed report. Palladium will trade at $300 an ounce in one month and $350 in three months. Silver will trade at $14.70 an ounce in a month and $16.40 in three months. Bloomberg

DEFINITIONS-QUOTES-QUICK HITS

-Short Covering. Purchasing securities in order to close an open short position. This is done by buying the same type and number of securities that were sold short. Most often, traders cover their shorts whenever they speculate that the securities will rise. In order to make a profit, a short seller must cover the shorts by purchasing the security below the original selling price. Investopedia.com-Read more here-http://www.investopedia.com/terms/s/shortcovering.asp

-SEC May Propose New Short-Sale Rules Within `Weeks,' Cox Says. U.S. Securities and Exchange Commission Chairman Christopher Cox said his agency will propose new rules aimed at curtailing manipulative short sales of stocks in the "next few weeks." Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a754hMpneMR8&refer=home

-If Michael Phelps were to melt down the eight gold medals he won at the Beijing Olympics Games and sell the gold, he could probably make about $1,225. Read more here-

http://www.marketwatch.com/news/story/olympic-medals-more-valuable-metal/story.aspx?guid={6D995B86-A2F3-489A-A89E-0EE7EFCAB03A}&dist=TNMostRead

-For some additional perspective, it's well to remember that a year ago, gold was trading at $670/oz. "The events of a few days, or even a few months, do not necessarily undo what is so far an event that has been going on for seven years," said George Milling-Stanley, a director at the World Gold Council. "A bull market can stand a correction of 30% in the price from time to time and still remain intact." Casey Daily Resource

-Star fund manager sticks to $1600 gold troy ounce prediction despite slump. Despite gold falling to below $800 for the first time in nine months on Friday and hitting his fund's performance, AAA-rated star US equity manager François Mouté is standing by his prediction of the gold price reaching $1600 per troy ounce in the next year.

Mouté thinks this recovery in the dollar will prove short-lived. 'The recovering dollar has been another factor putting pressure on gold,' he says. 'But the dollar is not going much further up. So I think the problem caused by the dollar is essentially complete.' The basis for his bullishness on gold is a negative real interest rate environment. He points to the US headline CPI figure of 5.6% combined with the far lower levels of interest rates for fed funds and US treasury bills (2% and 1.8% respectively).

'We have negative real interest rates like we have not seen since the seventies, so I think fundamentally there is a strong background for gold in particular, but also commodities in general. I am patiently waiting for the price to return.' Silver exposure is also a significant feature of Mouté's portfolio. The silver price has also fallen, leaving it extremely undervalued according to the veteran Frenchman. 'Silver at $12.50 is like having gold at $600. Silver is very depressed at the moment,' he says. Read more here-

http://www.citywire.co.uk/selector/-/news/fund-manager-interviews/content.aspx?ID=311838

"Longer term, we would not be surprised to see gold double,'' the bank's analysts John Hill and Graham Wark wrote in a report. "We would be aggressive buyers at current levels expecting gold to work higher through 2009/10.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=aVmAo0qxUH.U

-While gold is suffering during this time of a rallying U.S. dollar, nevertheless, Citigroup advised, "We would be aggressive buyers at current levels." While Citigroup finds that gold "has been punished amid a broad-based correction in commodities," the analysts assert that the floor in the U.S. dollar "is likely a short-term blip for gold, as it underscores the frailty of fiat currency globally."

"We see gold as attractive, heading into a period of seasonally strong physical out-take, which tends to tighten the market and allow any negative macro catalysts to be rapidly transmitted to prices. Gold will likely shine over time. Long-term drivers remain intact; falling mine production especially in S. Africa, competitive currency devaluations, wealth creation on India/China, and petrodollar flows." Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=60092&sn=Detail

-Gold fundamentals remain very strong with geopolitical risk, deepening worries about the financial sector, poor economic data, soaring inflation and stagflation internationally leading to very significant physical demand internationally.

Retail demand is huge in the U.S. with retailers, wholesalers, refiners and government mints having difficulty keeping up with physical demand for coins and bars. In India too the demand is massive with gold inventories cleared out, shortages and soaring premiums.

Available bars of gold in India have all but disappeared, due to a 'perfect storm' that has restored gold's lustre and forced physical premiums skyward ahead of the peak season for jewellery demand. A senior figure at a bullion bank in London said "pretty well everyone is sold out of stock there. We have seen premiums as high as $2.50 an ounce which is unheard of in India. Most refiners are now booked solid through September."

Reuters reports strong physical demand throughout Asia and in India this week: "Premiums for gold bars shot to their highest level this year as consumers returned to the physical market in droves, encouraged by a sharp drop in bullion prices ahead of key religious festivals in Asia." Mark O'Byrne

-Another indication of the strength of precious metals investment demand is seen in the lack of selling or redemptions in the precious metal ETFs. Gold, silver, platinum and palladium prices have fallen some 20%, 36%, 39% and 51% respectively. However ETF gold holdings had only fallen 4.1% to 1000.1 tonnes as of last Friday. ETF holding's of silver, platinum and palladium are down 1.3%, 41.4% and 5.3% respectively.

This clearly shows that ETFs are being bought by long term holders who are concerned about macroeconomic and systemic risk. Speculators remain in the futures market with all the leverage and risk involved but smart money investors are remaining passively in the precious metals (particularly in gold and silver) in anticipation of higher prices as the global economic crisis deepens. Mark O'Byrne

-Peter Spina, of Goldforecaster.com, who is nearly always clearheaded about these things, wrote: "The short-covering rally in the dollar is a prime driver for the pullback in gold prices and that was aided by free market intervention by Central Banks.

All this has done is provided additional time before the serious nature of the financial crises has to be once again confronted. The ingredients are in place for a significantly higher gold price and this short-term anomaly only means that gold can still be accumulated sub $1,000 an ounce. The rapid rate at which dollars are being created (according to shadow stats the no longer published M3 is expanding at double digit rates) remains the primary driving force in the gold market, this cheap monetary policy will continue to debase the value, integrity and confidence in the faith-backed Dollar.

Competitive paper money devaluations will enhance gold's luster going forward as hundreds of billions of fictitiously created paper currency is used to continue these monstrous bailouts with government deficits rapidly growing." Casey Daily Resource

-Farmers' Almanac says cold winter ahead. Read more here-http://news.mainetoday.com/updates/031815.html

RARE COLORED DIAMONDS

-Auctioneers of luxury commodities such as art, wine and diamonds say investors are exploring alternative markets as stocks decline, economies stall and banks sack workers. Financial shares have led the MSCI World Index to a 17 percent slump this year as losses and writedowns top $500 billion. Art investment funds buy and sell a pool of works for a set fee and a share of any profit made. "Demand for the rarest things is still very strong,'' said Owen in a telephone interview. "The middle market is more difficult.'' Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEFEhsFWo_m8

-A rough diamond story. Rough diamond prices continue to rise, and listed diamond stocks continue going down, and down. The Diamond Trading Company (DTC), the marketing arm of De Beers, the world's biggest miner and marketer of rough diamonds by value, announced further price increases this week, for a 16% cumulative increase since the start of the year. But just as rough diamond prices have continued to rise, so investors have continued selling down listed diamonds stocks. Read more here-

http://www.mineweb.co.za/mineweb/view/mineweb/en/page37?oid=60323&sn=Detail

-African Diamond Industry Faces Diminished Reserves. "We can no longer guarantee big stones because mines are giving more of small stones." "We need to move over 100 tonnes for every little carat diamond. With increased cost of fuel and electricity mining is a very capital intensive business." Read more here-http://www.newera.com.na/archives.php?id=22296

OIL-GAS-GASOLINE

-Why oil won't fall below $100. With a surge in the price of global commodities, it's costing more to produce a barrel of oil than ever before. Read more here-

http://money.cnn.com/2008/08/21/news/economy/oil_price_floor/index.htm?postversion=2008082115

-As Oil Giants Lose Influence, Supply Drops. Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand.

Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies.

And much of their production is in mature regions that are declining, like the North Sea. The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence and with it, their ability to increase supplies. Read more here-http://www.nytimes.com/2008/08/19/business/19oil.html?_r=2&adxnnl=1&oref=slogin&partner=rssnyt&emc=rss&pagewanted=print&adxnnlx=1219337595-6Ww+xwC1r6Dgn4DAnYjRqA

-Natural-Gas Discount to Crude Is `Too Large.' Natural gas is poised to outperform crude oil after prices for the heating and power-plant fuel dropped almost 40 percent since the end of June. The ratio of crude to gas futures prices on the New York Mercantile Exchange rose Aug. 14 to the highest level since September 2006. It also shows how historically, gas outperforms crude after the ratio climbs to more than 10 or 12 to 1.

The ratio of oil to gas prices, which has averaged 8.04 since 2000, reached 14.14 last week. "It's too large of a price disparity,'' said Tom Orr, director of research at Weeden & Co. in Greenwich, Connecticut. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aa_VeMmtncY0

-Gasoline running short in Alberta, B.C. Between 80 and 90 gas stations in British Columbia and Alberta have run out of fuel as Petro-Canada continues to grapple with an equipment breakdown at its Edmonton refinery. About a dozen stations were out of gasoline last week. Read more here-

http://www.globeinvestor.com/servlet/story/RTGAM.20080821.wgasshortage0821/GIStory/

COMMODITIES

-Commodities Rally, Heading for Biggest Weekly Jump Since 1975. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=adS1jGB9mmq8&refer=home

-Do the math: Commodities are oversold. We believe this correction, while painful, is healthy and constructive for natural resource markets over the long term. Commodity supplies remain extremely tight and as global population and emerging economies continue to grow, these trends will be supportive of commodity prices.

The risk to this scenario would be major policy changes by the world's most populous countries that would slow infrastructure spending, which we continue to view as unlikely. Frank Holmes is CEO and chief investment officer at U.S. Global Investors-Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=60332&sn=Detail

-Don't Write off Gold and Commodities Bull Run. Read more here-http://news.goldseek.com/GoldSeek/1218812400.php

INFLATION-STAGFLATION

-Canada Inflation Accelerates to Fastest Since 2003. Canada's annual inflation rate rose to the highest since 2003 in July because of a surge in gasoline prices for the country's drivers.

Consumer prices rose 3.4 percent from July 2007, Statistics Canada said today in Ottawa, in line with economists' median forecast in a Bloomberg survey.

Prices rose 0.3 percent from June, less than economists' 0.4 percent forecast. With most of July's gain tied to energy prices, which have dropped in the past month, the report may not affect the Bank of Canada's ability to cut interest rates to kick start growth. Policy makers signaled in mid-July that borrowing costs would stay put for the foreseeable future, citing slow growth and projecting inflation to peak at 4.3 percent next year, more than double their target.

"We see this report as a sign the Bank of Canada has room to cut rates,'' Karen Cordes, an economist at Scotia Capital Inc. in Toronto, said by telephone, adding cuts may come later this year. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=aJQYJ_BbNk3w&refer=canada

-Canadian Wholesale Sales Rise at Fastest in 16 Months. Canadian wholesale sales rose at the fastest pace in 16 months as the automotive industry rebounded. Sales advanced 2 percent to C$45.2 billion ($42.4 billion), Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg said sales would gain 0.7 percent, the median of 16 estimates. The agency revised May's gain to 1.5 percent from the initially reported 1.6 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=aQyXuJeonIkM&refer=canada

-U.S. Producer Prices Surge More Than Forecast in July. Prices paid to U.S. producers rose twice as much as economists had forecast in July, reflecting the jump in energy and commodity costs that has since started to wane.

The 1.2 percent increase in the producer price index followed a 1.8 percent increase the prior month, the Labor Department said today in Washington. Costs were up the most in 27 years from a year before. So-called core prices that exclude fuel and food rose 0.7 percent after a 0.2 percent gain in June. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid=aArLqb.zZlKM&refer=home

-Bracing for Inflation. Despite the recent softening of oil prices, the U.S. could be looking at double-digit inflation as early as 2009. Read more here-

http://www.businessweek.com/bwdaily/dnflash/content/aug2008/db20080815_021990.htm?chan=top+news_top+news+index_news+%2B+analysis

-U.S. food prices seen rising most since 1990. Read more here-http://www.gata.org/node/6503

-Meat, Dairy May Push Food Inflation to 28-Year High. Rising prices for meat, dairy products, cooking oil and fresh produce may accelerate U.S. food inflation this year at the fastest pace since 1980, the government said in a report.

Food-price gains may be as much as 6 percent this year, up from last month's top estimate of 5.5 percent, U.S. Department of Agriculture said in the report to be released Aug. 25. Gains may reach 14 percent for fats and oils, 9 percent for dairy products, 5.5 percent for fish and seafood, 6 percent for fresh fruits and vegetables and 3.5 percent for beef, the USDA said.

The last time food jumped as much was in 1980, when the U.S. was mired in a recession. Price gains are accelerating as producers spend more on energy and livestock feed, USDA economist Ephraim Leibtag said. Gasoline jumped to a record $4.114 a gallon at the pump on July 15, and corn used to raise cattle, hogs and poultry was the highest ever on June 27.

"The main story has stayed the same'' as last month, when the USDA predicted food inflation may reach the highest rate since 1989, Leibtag said today in an e-mail. The Bureau of Labor Statistics, which supplies the historical data that USDA uses in its forecasts, showed in an Aug. 14 report that food costs jumped 0.9 percent in July after a 0.8 percent increase in June, while energy rose 4 percent after a 6.6 percent gain the previous month. Food prices account for almost one-fifth of the consumer price index. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZrPJ8RP.Jpw

-Hershey's is raising prices on all their products. By a lot! The cost of your chocolate Kisses and other such items will be 10% higher in the near future. "Commodity costs have been volatile over the last several years and continue to remain at levels that are well above historical averages," said David J. West, president and chief executive of Hershey's. "Market prices for ingredients such as cocoa, corn sweeteners, sugar and peanuts are up 20% to 45% since the beginning of the year." Perezhilton.com

-Higher Costs Are Taking a Toll on Business. Prices for goods purchased by American businesses surged more than expected in July and have jumped by nearly 10 percent over the last year the sharpest increase since 1981. Read more here-http://www.nytimes.com/2008/08/20/business/economy/20econ.html?_r=1&oref=slogin&partner=rssyahoo&emc=rss&pagewanted=print

-U.S. Economy: Housing, Price Reports Raise Stagflation Danger. U.S. builders broke ground on the fewest new homes in 17 years and producer prices climbed the most since 1981, providing no sign of an economic recovery or easing inflation. Housing starts fell 11 percent in July to an annual rate of 965,000, the Commerce Department said today in Washington. The Labor Department reported the producer price index jumped 9.8 percent from a year before.

"There's no doubt we're in a period of stagflation now,'' said Peter Kretzmer, a senior economist at Bank of America Corp. in New York who formerly worked at both the Federal Reserve Bank of New York and the Fed Board in Washington. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aBbE5iz5ywC8&refer=home

CREDIT-FINANCIAL CRISIS

-Credit crunch may take out large US bank warns former IMF chief. The deepening toll from the global financial crisis could trigger the failure of a large US bank within months, a respected former chief economist of the International Monetary Fund claimed today, fuelling another battering for banking shares.

Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.

"The US is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say the worst is to come," Prof Rogoff said at a conference in Singapore. In an ominous warning, he added: "We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," he said. Read more here-http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4563171.ece or

http://www.bloomberg.com/apps/news?pid=20601087&sid=admWYNXiEBEs&refer=home

-Nobel Laureates Say Credit Crunch Hurting Growth. Nobel Prize-winning economists Myron Scholes and Daniel McFadden predicted the yearlong credit squeeze will inflict more pain on the world economy and financial markets.

The crisis is "not over and I'm not exactly sure when it's going to end,'' Scholes said today at a conference in Lindau, Germany, featuring 14 Nobel laureates in economics. McFadden said in an interview "that as the crisis continues you will see a lot of business failures.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aTtYLhidMBuI&refer=home

-Bank borrowing from ECB is out of control. The European Central Bank has issued the clearest warning to date that it cannot serve as a perpetual crutch for lenders caught off-guard by the severity of the credit crunch. Not Wellink, the Dutch central bank chief and a major figure on the ECB council, said that banks were becoming addicted to the liquidity window in Frankfurt and were putting the authorities in an invidious position.

"There is a limit how long you can do this. There is a point where you take over the market," he told Het Finacieele Dagblad, the Dutch financial daily. "If we see banks becoming very dependent on central banks, then we must push them to tap other sources of funding," he said. Read more here-http://www.gata.org/node/6506

-Dollar Surge Will Not Stop America From Feeling Effects of Global Crunch. Read more here-http://www.gata.org/node/6495

-The next credit crunch. Our easy access to plastic is about to dry up and with it our ability to fake living the good life. We made it through the bursting of the Internet bubble and now the bursting of the real estate bubble. Next we may be approaching the end of the most worrisome bubble of all: the standard-of-living bubble.

That conclusion comes from the latest data on credit card debt. It's growing fast, but the problem is bigger than that and to understand what it means, we have to take a few steps back. Read more here-http://money.cnn.com/2008/08/18/news/economy/Colvin_next_credit_crunch.fortune/index.htm

-Goldman sees more pain for banks, brokers. Analysts cut profit estimates and warn of more write-downs, asset sales. Read more here-

http://www.marketwatch.com/News/Story/Story.aspx?guid={9C094170-BC50-4FFF-A5A7-9E603A93F3F4

-Sharp contraction in money supply points to Wall Street crunch. The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months.

Data compiled by Lombard Street Research shows that the M3 "broad money" aggregates fell by almost $50 billion (L26.8 billion) in July, the biggest one-month fall since modern records began in 1959.

"Monthly data for July show that the broad money growth has almost collapsed," said Gabriel Stein, the group's leading monetary economist. On a three-month basis, the M3 growth rate has fallen from almost 19 percent earlier this year to just 2.1 percent (annualized) for the period from May to July. This is below the rate of inflation, implying a shrinkage in real terms.

The growth in bank loans has turned negative to a halt since March. "It's obviously worrying. People either can't borrow, or don't want to borrow even if they can," said Mr. Stein. Read more here-http://www.gata.org/node/6498

-Pimco's El-Erian Says Raising Bank Capital Is Harder. Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co., said it has become harder for financial firms to raise capital because investors such as sovereign wealth funds have gotten ``smarter.''

"We are in the process of a major adjustment of the banking system which is made harder because you don't have the capital to lubricate it,'' El-Erian said in an interview from Newport Beach, California, on Bloomberg Radio. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=alU0HWTj3r4Q&refer=home

-Lehman May Report $4 Billion Writedown, JPMorgan Says. Lehman Brothers Holdings Inc. may write down about $4 billion in credit-related investments and other assets when it reports fiscal third-quarter earnings, JPMorgan Chase & Co. analysts said. "The credit environment continues to be difficult,'' New York-based analysts led by Kenneth Worthington wrote in a report yesterday. "It will be another difficult quarter for Lehman.''

Lehman may mark down some of its $61 billion of mortgage and other asset-backed securities after benchmark residential and commercial mortgage-related indexes declined by as much as 20 percent, the analysts wrote. The company may have already been selling some commercial mortgage assets, they added. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaZw_5o4U1Y4&refer=home

-Merrill, Wachovia in Danger of Failing: Strategist. Read and watch video here-http://www.cnbc.com/id/26262925

-Morgan Stanley Says Financial Crisis Will Last: Report. Read more here-http://www.cnbc.com/id/26252398

FREDDIE-FANNIE

-Fannie, Freddie Fall as Barron's Says Bailout Likely. Fannie Mae and Freddie Mac fell to almost 18-year lows in New York trading on concern the government will be forced to bail out the mortgage-finance companies, wiping out common stockholders.

Both Fannie and Freddie slid as much as 12 percent after Barron's said government officials anticipate the companies will fail to raise the equity capital they need, prompting the U.S. Treasury to step in. Fannie is down 82 percent this year. Freddie has fallen 85 percent. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=amCEpnB6I_Hw&refer=home

-Investors expecting wipeout for Fannie and Freddie. Read more here-http://www.gata.org/node/6501

-Fed's Lacker Clashes With Paulson on Fannie, Freddie. Richmond Federal Reserve Bank President Jeffrey Lacker called for ``demonstrably'' privatizing Fannie Mae and Freddie Mac, becoming the first Fed official to publicly clash with the Bush administration's strategy of keeping them as federally backed firms.

"I would prefer to see them credibly and demonstrably privatized,'' Lacker said today in an interview with Bloomberg Television. He agreed with former Fed Chairman Alan Greenspan's view that the two largest U.S. mortgage finance firms ought to be nationalized, then split up and sold off.

Treasury Secretary Henry Paulson by contrast has tried to keep Fannie Mae and Freddie Mac in their current form as government-sponsored companies owned by shareholders. Lacker's remarks come as a slide in the firms' stocks and increase in their borrowing costs spur speculation the Treasury will intervene. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHbJk11JLWtk&refer=home

-Bernanke Tries to Define What Institutions Fed Could Let Fail. Ben S. Bernanke is still trying to define which financial institutions it's safe to let fail. The longer it takes him to decide, the tougher the decision becomes.

In the year since credit markets seized up, the 54-year old Federal Reserve chairman has repeatedly expanded the central bank's protective role, turning its balance sheet into a parking lot for Wall Street's hard-to-finance bonds and offering loans through its discount window to investment banks and mortgage firms Fannie Mae and Freddie Mac.

The lack of clearly defined limits may put the Fed's independence at risk as Congress discovers that its $900 billion portfolio can be used for emergency bailouts that might otherwise require politically sensitive appropriations and taxes. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a0v71H6gketc&refer=home

U.S. DOLLAR

-The Strong Dollar Illusion from Peter Schiff. Read more here-http://www.321gold.com/editorials/schiff/schiff081808.html

-The Dollar: Short-Term Rebalancing Of Expectations, Long Term Risk. Read more here-http://www.321gold.com/editorials/brusuelas/brusuelas081508.html

U.S.-U.K. RECESSION

-U.S. Economy: Leading Index Signals Deeper Slowdown. The U.S. slowdown will deepen in the second half of the year as housing continues to slump and unemployment rises, according to a measure designed to predict the economy's direction.

The Conference Board's index of leading indicators fell 0.7 percent in July, more than triple the drop forecast by economists surveyed by Bloomberg News. Separate reports showed the number of Americans collecting unemployment insurance remained near a five- year high last week and manufacturing in the Philadelphia region shrank for a ninth straight month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a37O.tbVC1c8&refer=home

-U.S. Economy Facing `Rough Patch,' Fisher Tells Morning News. The U.S. economy will face a ``rough patch'' before improving, and central bankers are partly to blame for ``letting things get too far,'' with easy credit, Dallas Federal Reserve Bank President Richard Fisher told the Dallas Morning News. "I blame the regulators, including the Federal Reserve, for letting things get too far,'' said Fisher, who spoke to the newspaper in a question-and-answer session last week, in an article published today.

"The credit markets are rough right now,'' he said. ``So I expect us to have a rough patch here before we pull our socks up.'' Fisher also told the newspaper that inflationary forces in China will likely increase after the Olympics, and that the impact might be felt in the U.S. Fisher is the only voting member of the interest rate- setting Federal Open Market Committee to dissent five times this year in favor of tighter policy than his colleagues. Bloomberg

-Mrs. Fields to file for bankruptcy. The cookie company reveals its finances are crumbling, in a filing with the Securities and Exchange Commission. Read more here-

http://money.cnn.com/2008/08/15/news/companies/mrsfields_bankrupt.ap/index.htm

-UK 'Recession And Unemployment.' Some 300,000 people will lose their jobs over the next two to three years and unemployment levels may top two million, Britain's business leaders say. The British Chambers of Commerce (BCC) also forecasts the UK economy will enter recession within the coming year.

In its latest quarterly economic forecast, the BCC said Britain was heading into a "technical" recession of two or more quarters of declining output over the next six or nine months. Read more here-http://uk.biz.yahoo.com/18082008/140/uk-recession-unemployment.html

-Apocalyptic times for Britain's economy. Read more here-http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/08/20/dl2004.xml

-Goldman Sachs Says Half of the World Economy Faces Recession. Goldman Sachs Group Inc. said countries that account for half of the world's economy face a recession a year after the credit crisis began.

The U.S., Japan, the 15-nation euro area and the U.K. are ``either in recession or face significant recession risks in the months ahead,'' Goldman's London-based international economist Binit Patel said in a report to clients today.

A year since the U.S. housing slump sparked about $500 billion in credit market losses for banks globally, the world's largest economies are all stumbling as rising borrowing costs combine with record commodity prices to sap growth. The U.S. is close to a recession and France, Germany and Japan all contracted in the second quarter. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=atnK8SXk1G.8&refer=home

JIM ROGERS

-Jim Rogers Predicts Bigger Financial Shocks Loom, Fueling a Malaise That May Last for Years. The U.S. financial crisis has cut so deep and the government has taken on so much debt in misguided attempts to bail out such companies as Fannie Mae and Freddie Mac that even larger financial shocks are still to come, global investing guru Jim Rogers said in an exclusive interview with Money Morning.

Indeed, the U.S. financial debacle is now so ingrained and a so-called "Super Crash" so likely that most Americans alive today won't be around by the time the last of this credit-market mess is finally cleared away if it ever is, Rogers said. The end of this crisis "is a long way away," Rogers said. "In fact, it may not be in our lifetimes." Read more here-

http://jutiagroup.com/2008/08/19/exclusive-interview-jim-rogers-predicts-bigger-financial-shocks-loom-fueling-a-malaise-that-may-last-for-years/

-Jim Rogers Says Commodities Will Rebound After Drop. Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, said a tumble in commodities from records represented a temporary reverse in a long-term rally. "I don't see that it's the end of the bull market,'' the chairman of Rogers Holdings, said in an interview in Bangkok before speaking at an investor conference later today.

"Until either a lot of supply comes on stream or the economy collapses, the bull market will continue,'' he said. Soybeans, copper, platinum and crude oil have dropped from all-time highs after a rally in the dollar curbed demand for raw materials as a hedge against inflation and concerns increased that economic growth will slow.

Sixteen of the 19 commodities in the Reuters/Jefferies CRB Index fell this month, after the index plunged 10 percent in July, the biggest such drop in 28 years. "I am contemplating whether it's time to get involved in base metals again,'' Rogers, 65, said today. "I haven't bought any for awhile.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601012&sid=abseyMStTAb4&refer=commodities

DR. DOOM

-On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession.

He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac. The audience seemed skeptical, even dismissive.

As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, "I think perhaps we will need a stiff drink after that." People laughed and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a "permabear."

When the economist Anirvan Banerji delivered his response to Roubini's talk, he noted that Roubini's predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer. But Roubini was soon vindicated. In the year that followed, subprime lenders began entering bankruptcy, hedge funds began going under and the stock market plunged.

There was declining employment, a deteriorating dollar, ever-increasing evidence of a huge housing bust and a growing air of panic in financial markets as the credit crisis deepened. By late summer, the Federal Reserve was rushing to the rescue, making the first of many unorthodox interventions in the economy, including cutting the lending rate by 50 basis points and buying up tens of billions of dollars in mortgage-backed securities.

When Roubini returned to the I.M.F. last September, he delivered a second talk, predicting a growing crisis of solvency that would infect every sector of the financial system. This time, no one laughed. "He sounded like a madman in 2006," recalls the I.M.F. economist Prakash Loungani, who invited Roubini on both occasions. "He was a prophet when he returned in 2007." Read more here-http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?_r=2&oref=slogin&ref=business&pagewanted=print

REAL ESTATE

-U.K. House Prices Fall Most Since at Least 2002, Rightmove Says. U.K. house prices posted the biggest annual decline in August since at least 2002 as reduced mortgage lending deepened the property slump in London, Rightmove Plc said.

The average asking price for a home fell 4.8 percent from a year earlier to 229,816 pounds ($426,929), Britain's most-used property Web site said in a statement today. On the month, home values fell 2.3 percent, the most since December, led by London.

"The lack of mortgage finance is central to the problem,'' Miles Shipside, commercial director of Rightmove, said in the statement. ``London, in particular, appears to be having its own special summer sale, with over 21,000 pounds off in a month.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aPPMVVpeaGto&refer=home

-Demand for U.K. Rental Homes Gains at Fastest Pace in a Decade. Demand for rental homes in the U.K. climbed in the second quarter at the fastest pace in at least a decade as a slump in property prices deterred homebuyers, a report by the Royal Institution of Chartered Surveyors showed.

During the quarter, 37 percent more real-estate brokers reported an increase in new rental contracts than those that said there was a drop, the London-based industry group said. RICS members also reported the largest increase in mandates to rent out properties since the survey was first carried out 10 years ago. Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid=aPC4BFM1PjgQ&refer=home

-'Bloated inventory': RealtyTrac counts 750,000 foreclosed houses for sale in L.A. Read more here-http://latimesblogs.latimes.com/laland/2008/08/bloated-invento.html

-U.S. Builders' confidence holds at record low. A survey of homebuilders' assessment of the housing market shows the industry's sentiment tied the all-time low level set in July. Read more here-http://money.cnn.com/2008/08/18/news/economy/builders_confidence/index.htm

FORECLOSURES-MORTGAGES

-Foreclosures up, defaults down. ForeclosureRadar.com estimates that California homes are foreclosing at a rate of 1,300 per business day. And the drop in defaults is not very promising. Read more here-http://www.latimes.com/business/la-fi-realblog17-2008aug17,0,2442032.story

-S.F. Foreclosures smack home prices down 29.3%. Cut-rate foreclosed homes being unloaded by banks wreaked havoc on the Bay Area's median price in July, sending it down nearly 30 percent to a level not seen in more than four years. Read more here-http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/08/19/MNPK12DR3G.DTL

-The next wave of mortgage defaults. More borrowers with good credit are defaulting on their home loans, and that's going to make it even harder for the staggering housing market to recover. Read more here-http://money.cnn.com/2008/08/12/real_estate/prime_defaults_price_drops/index.htm

-U.S. MBA's Mortgage Applications Index Fell 1.5%. Mortgage applications in the U.S. declined last week to the lowest level since December 2000, further evidence that the housing market has yet to reach bottom, as fewer homeowners sought to refinance their loans. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aw_z0K.3pF6g&refer=home

A FILM ABOUT U.S. DEBT IOU U.S.A

-Another inconvenient truth. Fiscal Armageddon, coming to a cinema near you. David Walker, who until recently ran the Government Accountability Office, has made it his mission to get the nation to acknowledge and treat this "fiscal cancer". His efforts form the core of a new documentary, "I.O.U.S.A.", out on August 21st.

The message is simple enough: America's financial condition is a lot worse than advertised, and dumping it on future generations would be not only economically reckless but also immoral. Read more here-http://www.economist.com/finance/displaystory.cfm?story_id=11921663

-Movie website here-http://www.iousathemovie.com/ Watch movie trailer here-http://www.youtube.com/watch?v=HBo2xQIWHiM

-Buffett spotlights nation's debt crisis. Billionaire investor teams up with Wall Street luminaries to focus attention on America's ballooning budget deficit. Read more here-

http://money.cnn.com/2008/08/21/news/economy/buffett_town_hall.ap/index.htm

GEOPOLITICAL NEWS

-US refuses to sell planes to Israel, fearing strike on Iran. Read more here-http://www.jpost.com/servlet/Satellite?cid=1219218601145&pagename=JPost%2FJPArticle%2FShowFull

-Iranian claims of jet range dismissed. Iran's claim of having increased the range of its fighter jets, allowing them to fly as far as Israel and back without refueling, did not signify any new operational abilities, an arms expert said on Sunday. Read more here-http://www.jpost.com/servlet/Satellite?cid=1218710384313&pagename=JPost%2FJPArticle%2FShowFull

-Iran sparks US concern with satellite rocket launch. Iran said it had sent a rocket carrying a dummy satellite into space on Sunday, triggering fresh concern in Washington that the technology could be diverted to ballistic missiles. The launch is likely to further exacerbate tensions with the West over its nuclear drive, which Iran's arch-foe Washington and its allies claim is a cover for atomic weapons ambitions.

"The Safir (Ambassador) rocket was successfully launched. All its systems are Iranian-made," Reza Taghipour, head of Iran's space agency, told state television, adding that a "test satellite was put into orbit." "We have paved the way for placing a satellite in space in future," state television said, showing images of the pre-dawn rocket launch which was attended by President Mahmoud Ahmadinejad. Read more here-http://www.breitbart.com/print.php?id=080817202726.v33hy5pa&show_article=1

-Iran Pushes Ahead on Nuclear Power Plants With Search for Sites. Iran took a step toward building more nuclear power plants, selecting six Iranian companies to find sites for the projects. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=acZLquhZoQvE

-Fear of new Mid East 'Cold War' as Syria strengthens military alliance with Russia. Read more here-http://www.timesonline.co.uk/tol/news/world/middle_east/article4573599.ece

-Russia warns of response to US missile shield. Russia says its response to the further development of a U.S. missile shield in Poland will go beyond diplomacy. Russia's Foreign Ministry issued a statement saying the U.S. missile shield plans are clearly aimed at weakening Russia.

The U.S. says the missile defence system is aimed at protecting the U.S. and Europe from future attacks from states like Iran. The United States and Poland signed a deal Wednesday to place a U.S. missile defence base just 115 miles from Russia's westernmost fringe. Read more here-http://www.breitbart.com/print.php?id=D92M5GM81&show_article=1

The GoldBugg Report - August 26, 2008
Posted by Worldwide Precious Metals on Tuesday, August 26, 2008

The GoldBugg Report - August 20, 2008

August 20, 2008

Why Precious Metals Retreated-Silver and gold lease rates were in negative territory the last few weeks as the central banks are selling cheap silver and gold to stabilize the financial markets, notes Jurg Kiener, CEO of Swiss Asia Capital. He tells CNBC's Martin Soong & Sri Jegarajah more.

http://www.cnbc.com/id/15840232?video=826763189&play=1&__source=RSS*tag*&par=RSS

GOLD

-Citigroup forecasts $950 gold and a strong rebound 4Q in metal prices, mining equities. Is the bullish metals cycle over? Citigroup metals analysts say "no" and forecast a "strong rebound" in metals prices and mining stocks during the fourth quarter. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=59517&sn=Detail

-Gold is Oversold and Likely at Seasonal Lows. Gold' deep and lengthy consolidation since March should see a very sharp rally in gold's favoured Autumn months (as was seen last year and in nearly all years since 2000 see charts below). Correction and consolidation in any market is healthy and normal. This looks likely to be the last such sell off prior to a strong rally into the autumn as is typical. Gold seasonal patterns often result in lows in July or August prior to strong rallies into year end.

Previous years may be instructive in this regard. Last summer, gold fell some 7% from $687 on July 16th to $641 on August 13th. The $641 reached on August 13th marked the seasonal low and subsequently gold rallied strongly in August, September, October and early November. It reached $845 less than 3 months later for a return of nearly 32%.

Gold subsequently had a shallow and brief correction in November and early December prior to rallying from mid December low of $787 to its highs in March of $1003 or a return of 27%. A similar performance can be seen in previous years in this current secular gold bull market as seen in the excellent charts below which featured at the James Joyce Table in Lemetropolecafe.com. See charts here-http://news.goldseek.com/GoldSeek/1218628800.php

-Adam Hamilton of Zeal LLC recently completed another excellent research piece on gold' seasonal price movements and why they take place. His chart shows the strongest months of the year for gold are the autumn months. September is the best month for gold, followed closely by November, December and January.

As Hamilton astutely writes, "So of the six months between early August and early February, gold's massive seasonal autumn rally, fully four are gold's biggest months of the calendar year. You absolutely want to be long gold, and indeed the entire PM-complex since everything PM-related ultimately follows gold's lead, in September, November, December, and January. Seasonal-demand-driven price increases are very compelling then.

Obviously this is really exciting today since we are now on the verge of gold's biggest seasonal rally of the year. But remember that seasonals are a tailwind, a secondary indicator. So if gold was overbought today and greed abounded, the bullish seasonals could easily be overridden. But thankfully it is not, indeed just the opposite has occurred. Gold is deeply oversold today and sentiment is horrendous. Excessive levels of both fear and frustration have conspired to create an explosively-bullish sentiment mixture." Gold.ie

-Stage two of the gold bull market is just beginning. A war breaks out in the Caucasus, pitting Russia against a close ally of the United States. Inflation reaches a new peak in the euro-zone. The CPI reaches the highest in Britain since Bank of England independence. Rampant inflation sweeps the developing world.

Well, my own view is that gold bugs should start looking very closely at something else: the implosion of Europe. Gold bugs, you ain't seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder. Read more here-http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/08/12/stage_two_of_the_gold_bull_market_is_just_beginning

-Four reasons to buy gold now. Remembering that key support has been broken and that in 1974 we had a correction of almost 50% (yes, 50%) in an ongoing bull market, it is with some trepidation that I say gold is a buy down here, just above $800.

On top of all the fundamental arguments for gold, which you will all know only too well, here's why. In the short-term we are due a bounce. For gold to sell off like this for five weeks in succession, even with all the volatility of this bull market, has not been seen since May 2006. We are hugely oversold. We got a big bounce then and should get one now.

The central bank selling appears to have subsided. The dollar is hugely overbought and due a retrace. The inverse applies to precious metals. August is the best month of the year to buy gold and silver. Read more and view charts here-http://www.moneyweek.com/investments/precious-metals-and-gems/four-reasons-to-buy-gold-now-85754.aspx

-Gold Bull Seasonals. The bottom line is gold does have strong seasonal tendencies. Even though gold isn't grown like wheat, the passage of the calendar influences gold investment demand across the globe which directly impacts the gold price. Gold is deeply woven into cultures around the world and their various customs create lumpy gold investment demand. It is clustered at specific times instead of spread out evenly across the year.

Naturally investors and speculators should exploit these seasonal tendencies. The best time seasonally to go long gold and other PM-related trades is right now. From August to February gold's biggest seasonal rally of the year erupts. During this timespan, which includes gold's four best calendar months, the lion's share of its entire bull-market gains have been made. I fully expect the rest of 2008 to unfold according to this precedent. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton081108.html

-Gold is cheap says Richard Russell. My own policy, ever since the year 2000 I have kept a portion of our assets in gold with a smaller section in gold stocks. I've been adding bullion to our position periodically ever since. I don't consider this a trading position any more than I consider our home a trade.

I have always considered gold to be a store of wealth an asset that I don't worry about. That's still my position, unlike stocks or even bonds I never worry about the solvency of gold. Read more here-http://www.321gold.com/editorials/russell/russell081308.html

-In most recent Trading Thoughts we reported that the largest purchases of U.S. government debt by foreign official institutions had occurred in the prior week. Initially, reason for those purchases was a mystery. That is, until Russia decided to crush Georgia militarily.

The Russian army does not move into invasion mode without some prior preparations. Someone knew what was to happen. A massive amount of money flowed, at a $1.4+ trillion annual rate, into U.S. debt in less than a week. Those financial transactions had two ramifications.

First, a shortage of dollars was created which caused the value of the dollar to spike upward. Second, as payments for those bonds were made, a massive amount of liquidity flowed into the Street. That excessive liquidity quickly flowed into financial markets, causing a 300+ point DJIA rally. As news of the Russian mini-blitzkrieg spread, others fled to the dollar.

As this week's chart shows, the U.S. dollar spiked upward on this panic buying. The U.S. dollar is now as over bought as it has been. Note that each time dollar has spiked upward, another down leg was not too far off. Why does this happen? Most Forex trading systems are nothing more than momentum models. Some time is required to turn such models bullish. By the time they turn bullish, the move is old and they come in late.

With the U.S. dollar incredibly over bought, Gold is on the bargain table. Rarely have we witnessed Gold this over sold for this long. Investors should be buying Gold while funds are pushing dollar to unsustainable levels. With "Putin, the Terrible" running rampant in Russia and the calendar moving toward Israel's "Window of Necessity" on Iran, Gold is a must for portfolios. Ned W. Schmidt

-Gold, Oil Ratio `Out of Whack' After Declines. Gold may outperform crude oil in the next six months as buyers in India, the world's biggest consumer of gold, stock up on the metal, according to Patrick Chidley, an analyst at Barnard Jacobs Mellet USA LLC. Gold jewelry demand in India and Turkey was "extremely strong" in the past week, with sales to India the highest since this time last year as buyers took advantage of lower prices and rebuilt inventories, according to UBS AG.

Gold has dropped 16 percent from a record in March as lower oil prices eroded demand for the metal as an inflation hedge and jewelry demand waned. The "black gold ratio,'' showing how much gold it would take to buy a barrel of oil rose to 0.1538 of an ounce on June 12, the highest since at least 1950, and averaged 0.066 since 1970. Based on historical averages, if oil falls to $100, gold would go to $1,515 an ounce.

"This ratio is way out of whack,'' Chidley said from Stamford, Connecticut. ``As we've seen the oil price come off, that relationship could come back into focus and I see the relationship below 0.1 in the next six months with gold coming up. Indian jewelers have to come back to the market.'' The October-December period is the busiest season in India for jewelry sales, spurred by the wedding season and Diwali, the Festival of Light. Bloomberg

-Golden Buying Opportunity, With a Silver Lining! Gold made a bottom at $651 on August 16th 2007 before rallying to over $1025 by March 2008. The anniversary of that low is less than a week away and we suspect history is going to repeat itself as gold prepares for anther tremendous rally. This sell off in precious metals (and oil) has primarily been caused by a strengthening US dollar.

Why has the greenback been making gains? Hot air. The USD has been moving up as the Fed has been talking about inflation and the possibility of raising interest rates. We must keep in mind that the Fed hasn't actually raised rates yet, and even if they do, how far will they go? We expect any rise in interest rates to be minimal. And even if they do embark on a rate raising policy, will this stop golds accent to $2000+? Absolutely not.

The most it will do is delay gold making an inflation adjusted all time high. Remember that in 1980 gold ran to $850 in the face of double digit interest rates. So even if the Fed takes rates up to over 10%, which represent a quintupling in interest rates, this will not be enough to stop gold and silver marching onwards and upwards. Our message for this week is simple: BUY gold and silver then hold on for the ride! Sam Kirtley-Read more here-http://www.kitco.com/ind/Kirtley_Sam/printerfriendly/aug112008.html

-Why Gold Got Crushed This Week and Why It Will Roar Back. Read more here-http://www.kitco.com/ind/Litle/aug142008.html

-Going forward, gold will likely resume its up-trend due to one of two reasons:

Another spell of problems in the financial system will cause gold (and the US treasuries) to once again take the place of safe haven investments, as was the case in the second half of 2007.
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Fear of deflation and a further slowdown in the US will spread around the world. As a result, a vicious wave of competitive devaluation will cause not only price shocks (oil, food, etc.) but also spiraling monetary inflation, eventually raising long-term bond yields. This will be the beginning of a real gold bull market when gold outperforms all other major classes of assets including most hard assets. Read more here-http://www.321gold.com/editorials/sobolev/sobolev081108.html

-The US$ and the Gold Sector. The Dollar Index will probably trend higher over the next few months. If so, will this prevent gold and gold stocks from rallying? We don't think so. Why should strength in the US dollar driven by the realization that other fiat currencies are just as bad as the dollar prevent gold and gold stocks from rallying?

It is also worth noting that the best part of the 1973 rally in gold stocks occurred while the US$ was strengthening relative to other fiat currencies. Steve Saville-Read more here-

http://www.321gold.com/editorials/saville/saville081208.html

-What Made the Gold Price Drop Through $900? Read more here-http://news.goldseek.com/GoldForecaster/1218216673.php

-Got Gold Report, Gold Near a Bottom? The report looks at the gold market and lists factors which suggest that a bottom might be near. Read more here-

http://www.resourceinvestor.com/pebble.asp?relid=45229

-Gold: surviving oil and the dollar? The Bank Credit Analyst sees gold bullion likely finding support around USD 850 an ounce, with fair value in the lower USD 900's. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59470&sn=Detail

-Record gold demand by value in 2Q World Gold Council. Gold demand in dollar terms at a new record, retail investment up 29% year-on-year. Jewellery takes in increasing amount of consumer discretionary spending. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59577&sn=Detail

-Gold's choke point? India's gold bullion imports fell 48% in July; since then dozens of listed gold stocks have plunged, currently to an average 46% lower than their record highs. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59376&sn=Detail update here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59705&sn=Detail

-India's rising gold demand stutters but probably temporarily. Wednesday's price recovery for gold from its near $800 low point caused a pause in the demand resurgence for gold in India, but there are plenty of orders for the yellow metal in the $805-810 range. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page34?oid=59542&sn=Detail

-Thai gold shops fear pretend gold will suppress real gold. Read more here-http://www.gata.org/node/6474

-Global gold de-hedging to slow dramatically in the second half. Analyses from two different banks, Société Générale and Fortis, put out within a few days of each other, both largely draw the same conclusion that the volume of gold dehedging will fall off substantially over the remainder of the current year.

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59379&sn=Detail

-Gold Agreement Central Banks show lack of desire to sell gold. The Fortis/VM Yellow Book says the apparent reluctance of European Central Banks to sell gold is bullish for the gold price. However, central banks remain committed sellers and the prospects of a third Central Bank Gold Agreement is high. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59125&sn=Detail

-How to Calculate Your Own Gold Price Projection. Read more here-http://www.321gold.com/editorials/casey/casey080808.html

SILVER

-The next intermediate term target for the silver price is $24.50 to $26.50, again towards late 2008 or early 2009. Troy Schwensen-Read more here-

http://www.321gold.com/editorials/schwensen/schwensen080808.html update here-http://www.321gold.com/editorials/schwensen/schwensen081408.html

-The recent price smash in silver, as well as a whole host of commodities, has created questions in every investor's mind as to what happens next. This is particularly true for potential investors in silver, both those new to silver and those in the position to add to existing holdings. The sell-off has been so severe that it demands more than just simple answers. It requires that we go back to square one; back to the start.

Let me give you advance notice. I will try to convince you, through your own common sense and an objective reading of the facts around us, that silver is a better prospective investment today than ever. And that's considering that silver has already been among the very best of investments over the past 3 to 5 years. Obviously, since I can't turn back the clock and create $5, or $7, or $12 silver, I must present a case that convinces you that the value of silver today is priced at the equivalent of $5, as it was in 2003-04.

It's all about risk, value and reward. It has been my contention for the past year or so, that investment demand would be the driving force in the price of silver. I think silver investment demand is just starting to crank up. This will be what drives the price of silver sharply higher. Value and low risk and high reward is a potent brew for the intelligent investor. It isn't about the real facts in silver becoming bullish, as it is hard to imagine them becoming more bullish than they are now.

It's simply a matter of more people becoming aware of the facts. That's unavoidable and inevitable. Please take the time and closely examine all the real facts in silver. If you do, I'm sure you will come to appreciate the spectacular risk/reward that has just been created. We're back to the start of $5 silver. Don't let it get away from you. Ted Butler-Read more here-

http://www.investmentrarities.com/08-11-08.html

-The recent dip in silver prices is nothing to worry about, and is merely a normal fluctuation in the grand scheme of things, the grand return and re-emergence of silver as money, which is a process that may take many years to play out. For those who ask me what to do in terms of short term price movements, all I can say is that I bought more physical silver today. Jason Hommel-Read more here-http://news.silverseek.com/GoldIsMoney/1218400412.php

-Despite profitable 2Q08, Apex Silver warns of liquidity crisis. Apex Silver CEO Jeff Clevenger told analysts Tuesday that the major issue for his company is "getting through the rest of 2008 and 2009" to meet mounting cash obligations. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=59516&sn=Detail

PLATINUM-PALLADIUM

-Platinum metals report for July 2008. Read more here-http://www.platinum.matthey.com/uploaded_files/monthly%20reports/prices0708.pdf

-A platinum catalyst is being used in new technology that could reduce the risk of salmonella being carried on food. The infra red drying system combines air with a platinum catalyst to create an oxidation reaction. This means a controlled level of infra red energy and minimal carbon dioxide can be created to target the moisture and dry out food.

Researchers claim that using the infra red energy on the food can kill the bugs and their larvae and ensure that no disease is carried on the food. It can do this without heating or spoiling the produce because it operates at a higher-frequency wavelength than microwaves. Read more here-http://www.platinum.matthey.com/media_room/platinum_catalyst_used_in_new_drying_technology_18725391.html

DEFINITIONS-QUOTES-QUICK HITS

-Liquidity Squeeze. When concern about the short-term availability of money causes reluctance among financial institutions to lend out money from their reserves. This hold on reserves causes the interbank market rate to rise, making it more expensive for banks to borrow from each other. Ultimately, this causes credit standards to tighten, making it more difficult and expensive for consumers to receive loans.

In order to limit the impact of liquidity squeezes, central banks will often increase liquidity by injecting more money into the economy through lower interest rates. Doing so gives financial institutions a less expensive alternative to borrowing. This process also serves to alleviate the fear of insufficient liquidity in the short run and make bank loans more accessible to consumers and businesses. Investopedia.com

-"I don't set trends. I just find out what they are and exploit them." Dick Clark

-"It would be reasonable to expect that reckless behaviour begets negative consequences. But on Wall Street, the rules are different. Especially if you are CEO Richard Syron of Freddie Mac. Financial trouble turns to disaster under your irresponsible watch, and for your efforts, you get to keep your job and earn $38 million." Bill Fleckenstein Aug 11, 2008-Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CrybabyCapitalistsWhineForMore.aspx

-One thing you can take to the bank is that the dollar will trade at .72 , .62 and .52 USDX. Dollar fundamentals go from incredibly bad to incredibly worse, even just today. Although market quotes and value rarely meet, this dollar rally has a foundation in sand. Jim Sinclair

-The US dollar rallied fast and furious last week. The dollar rally was the biggest in 8 years vs. the Euro. This immediately brought out calls of Dollar Intervention. What the ESF did is simply sold about 10 billion Euros and bought dollars plain and simple massive intervention that virtually everyone has missed or ignored or pretended doesn't exist or whatever. Mike Shedlock-Read more and view chart here-http://globaleconomicanalysis.blogspot.com/2008/08/currency-intervention-and-other.html

-"Of course there will be corrections along the way. This is normal because no market goes straight up. That's what's happening now. But recognize that these down moves are corrections within the mega uptrends." Adens Sisters-Read more here-http://www.kitco.com/ind/nadler/aug142008a.html

-Gold will rise to $1,200 possibly 90 days later than anticipated. Gold will trade at $1,650 or more before the second week of January 2011. The US dollar will trade at .62 USDX and after great efforts to stop the decline trade at .52 USDX. Black Boxes are primarily momentum driven so keep an eye on that fact in terms of the US dollar versus the Euro. Jim Sinclair

-Jim Sinclair: European Central Bank intervention is out in the open. Read more here-http://www.gata.org/node/6487

-American Precious Metals Advisors Jeff Nichols said in an update to clients two weeks ago that gold should return to above $1000/oz later this year and could be trading in the range of $1500-$2000/oz in the next year or two. Although gold was volatile in the short term, in the long term he believed the deteriorating global economy and disruptions to supply from SA would support the price. Resource Investor

-In sum, I believe that in the next few years the returns from equities will be disappointing (short-term rallies aside), which could cause other asset classes (especially industrial commodities) also to come under pressure. When I look around, I find it hard to identify any asset that is particularly attractive at this point.

Therefore, in the absence of anything that promises far superior returns, I am still happy to accumulate physical gold. In democracies, where the leadership is afraid to ask for sacrifices from its citizens and with money printers at central banks, gold would seem to be the only sound currency. Marc Faber-Read more here-

http://www.dailyreckoning.com/Issues/2008/DR080608.html#esssay

-Nick Majendie, chief investment strategist and money manager at Canaccord Capital, noted in his report last week that the ratio between gold and oil has averaged 15 times over the past 38 years. "Any time the ratio has got down to 10 times or under, it has recovered to at least 15 times within a minimum of three years," with one exception, he said. The ratio at the time of the report was 7.4 times.

The ratio has been 7.5 times or less only three times since 1970. "What is so significant about the gold/oil ratio going below 7.5 times is the subsequent performance of gold and gold stocks over the ensuing 12 months," Mr. Majendie said. "If gold bullion rose by the same amount as in the previous two periods, the implied price per ounce would be $1,330." Globe and mail

-Oversold? Sure. Is the bottom in place? Not so sure. Will stormy sessions continue to unnerve? Absolutely sure. Liquidate core holdings out of fear? Not on your life. Holding on to 'life insurance' for your asset basket? Priceless. Jon Nadler Senior Analyst Kitco Bullion Dealers Montreal

-"Gold's fall is overdone," said Si Kannan, associate vice president at Kotak Commodity Services Ltd. "There is a good support for gold and crude around their current levels." "Global inflationary pressures are still pretty high, so one can't be bearish on gold," said an analyst at Motilal Oswal Commodities Broker Pvt Ltd. Reuters

-The percentage increases in gold from August to the end of each year for 2003 to 2007 are 17.72%, 12.78%, 18.31%, -1.02%, 25.48%. That makes an average gain from August to the end of the year, of 14.6%. Dominic Frisby

-There can be no disputing the fact that US financial assets have provided disappointing returns since the beginning of this decade. It is worth noting that even though the Dow Jones index is flat in nominal terms since 2000, it has lost more than half of its value against gold over the same period. At the turn of the millennium, the level of the Dow Jones could buy over 40 ounces of gold.

Eight years later, the level of the Dow Jones can only buy roughly 12 ounces of gold! Clearly, gold has been a much better investment than US stocks over the past 8 years. In the years ahead, I expect to see further underperformance of financial assets and maintain my position that hard, tangible assets will continue to provide superior returns. Puru Saxena-Read more here-http://www.321gold.com/editorials/saxena/saxena080808.html

-The opportunity to buy physical gold in the low $800s could very well end up being the bargain of the year. Physical interest continues to be very strong from both India and the Middle East. With no central bank sales in the offing that we are aware of, and both mine production and forward sales falling, there could be a delivery squeeze in the making. Peter A. Grant

-Kevin Kerr, editor of Global Resources Trader, thinks we may have reached bottom in gold. "The fact is that now we are getting way overdone on the downside and we could easily see this market snap back suddenly as more bad news filters in and if anymore geopolitical and currency uncertainty grows," Kerr said. Casey's Daily Resource Plus

-Gold has fallen from a high of $988 to below $810 in less than a month. The 20% sell off in less than 30 days has led to significant technical damage to gold. However, gold's fundamentals remain as sound as ever as investment demand will remain more than resilient on geopolitical risk, creeping stagflation and macroeconomic risk.

The vicious sell off has resulted in gold now being massively oversold. While bottom calling is a dangerous pursuit and the old market adage to never catch a falling knife remains appropriate, value investors and bargain hunters with longer term horizons are likely to be strong buyers at these very depressed levels. Gold.ie

-Since the start of the credit crisis, one year ago, gold remains up 27% (from $650 to $830). It has thus outperformed all major equity indices all of which are down some significantly since the start of the credit crisis. With no end in sight to the credit crisis indeed there are many indications that conditions could deteriorate even more in the coming months, investors should be mindful of gold's outperformance and continue to focus on the long term. Risk aversion and wealth preservation should continue to be pursued. Gold.ie

-Banks' Subprime Losses Top $500 Billion on Writedowns. Banks' losses from the U.S. subprime crisis and the ensuing credit crunch crossed the $500 billion mark as writedowns spread to more asset types.

The writedowns and credit losses at more than 100 of the world's biggest banks and securities firms rose after UBS AG reported second-quarter earnings today, which included $6 billion of charges on subprime-related assets.

The International Monetary Fund in an April report estimated banks' losses at $510 billion, about half its forecast of $1 trillion for all companies. Predictions have crept up since then, with New York University economist Nouriel Roubini predicting losses to reach $2 trillion. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a8sW0n1Cs1tY&refer=home

-Merrill Chief Investment Strategist Richard Bernstein said investors are ``significantly underestimating'' the extent of the credit crisis. Guy Moszkowski, Merrill's top-rated analyst for securities firms, downgraded Morgan Stanley, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc., his firm's three biggest U.S. rivals.

"Conditions have deteriorated significantly from July,'' Moszkowski wrote in a note today. "The typical summer slowdown has been exacerbated by renewed fear over credit, the direction of the economy, and home-price depreciation, along with the sudden about-face in the oil price and hedge-fund losses.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=adEH.n0OdYAU

-Indebted Ever After-Scared by National Deficit? You Should Be, Filmmakers Say. A private-equity billionaire, a former federal government official and a Baltimore newsletter editor have made a documentary film that they hope can do what an endless parade of policy papers has not: Persuade Americans that debt has created a looming economic crisis that would make the Great Depression look like a market correction.

The movie, "I.O.U.S.A.," debuting Aug. 21, is an 87-minute alarum on what it calls the tsunami of debt bearing down on the United States' future, caused by the rising national deficit, the trade imbalance and the pending costs of baby boomers cashing in on entitlements. Early reviewers have dubbed the film "An Inconvenient Truth" for the economy, meaning it's not exactly the feel-good movie of late summer 2008.

Except for budget wonks in love, it hardly counts as a date movie. The film's thrilling action sequence has a guy going to a refrigerator for a Tab. There are no car chases and nothing blows up. Except, possibly, for the entire economic future of the United States. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/08/06/AR2008080603569.html

WWW.RARECOLOREDDIAMONDS.COM

-Diamonds Attract Funds as Largest Gem Prices Surge 76% in Year. Diamonds, like art, are a commodity that is gaining attention as an alternative investment. Increases in the price of the rarest colorless and colored diamonds are attracting wealthy investors and structured funds as stock markets and real-estate values decline. The price of 5-carat gems with the potential to be sold at $1 million or more has risen 76.5 percent in the year to May 2008, according to Idexonline.com, the Web site of the International Diamond and Jewelry Exchange.

"There's a group of very savvy, tremendously wealthy people who have put a small portion of their fortunes aside to invest in diamonds,'' said Francois Graff, managing director of London- based Graff Diamonds International, in a telephone interview. ``They've made incredible returns.'' Five years ago, dealers were paying $70,000 per carat for colorless diamonds of 10 carats and more, said Graff. "Now we're paying over $200,000 per carat,'' he said. There are only about 200 highest-grade, D-flawless colorless diamonds of more than 5 carats discovered per year, according to Raymond Sancroft-Baker, Christie's International's European director of jewelry.

The annual yield of large-scale blue and pink stones is considerably smaller. "Diamonds are getting rarer. The earth just isn't giving them up,'' said Sancroft-Baker in a telephone interview. The commodity asset-management firm Diapason Commodities Management SA listed a specialist investment fund, Diamond Circle Capital Plc, on the London Stock Exchange on June 25. Full story here-http://www.bloomberg.com/apps/news?pid=20601093&sid=aKVjxYejpss0&refer=home

-Super-rich still pay dear for rare diamonds. The rapid rate of increase in wholesale prices of rare polished diamonds is unsustainable, but for now the growing number of super-rich are paying rising prices for top-tier diamond jewelry. Charles Wyndham, founder of PolishedPrices, a leading index of wholesale diamond prices, said on Friday prices of larger, rare, near-flawless gemstones had shot up by roughly 200 percent over the past 18 months. Read more here-http://www.reuters.com/article/newsOne/idUSL0416926920080705

-Demand for rarest diamonds outstrips supply. Read more here-http://www.reuters.com/article/reutersEdge/idUSL0646558820080606

COMMODITIES

-Why the commodities boom is not yet over. Continued population growth and rising incomes will continue to drive commodity demand and most of this economic growth will be driven by the rapidly expanding economies such as China. The mainland's demand for iron ore alone is expected to jump 380 percent from now until 2020.

The International Energy Agency predicts the global demand for oil products will grow by an average of 1.6 percent per annum to 2013, with China accounting for a third of the increase.

On the agricultural side, World Bank predictions are that grain production will have to rise by 50 percent to meet demand by 2030.

On oil, the IEA predicts that the world could be demanding an extra 30.5 million barrels of oil per day by 2030 over a third more than current levels. In conclusion: the commodities boom is not slowing down. It is actually gathering pace. Julian Galvin is an associate director at Tyche Group-Read more here-

http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=69908&sid=20129989&con_type=1&d_str=&fc=1

-Commodities Still Well Shy of 2006 Correction. Read more here-http://seekingalpha.com/article/90181-commodities-still-well-shy-of-2006-correction

-Consumer Driven Commodity Bull Market. Read more here-http://hk.ibtimes.com/articles/20080811/bull-market.htm

-Is the Commodities Bull Market Over? In view of the basic fundamentals of supply and demand, the market is still very tight, inventories of agriculture products are historically low, the oil supply has stayed almost the same, and the mine supply of precious metals from South Africa is dropping because of a shortage in the electricity supply.

All this brings us to the conclusion that the recent decline in commodity prices is a healthy correction to the commodity bull market that is still going on. Read more here-http://seekingalpha.com/article/90333-is-the-commodities-bull-market-over

OIL

-Oil 'could hit $200 within years'. A serious oil supply crisis is looming, which could push prices above $200 a barrel, a think tank has warned. A "supply crunch" will affect the world market within the next five to 10 years, the Chatham House report said.

While there is plenty of oil in the ground, companies and governments were failing to invest enough to ensure production, it added. Only a collapse in demand can stave off the looming crisis, report author Professor Paul Stevens said.

"In reality, the only possibility of avoiding such a crunch appears to be if a major recession reduces demand - and even then such an outcome may only postpone the problem," he said in The Coming Oil Supply Crunch. Read more here-http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/7549044.stm

-Oil price forecast for '09 gets a trim. Government says it now expects crude to average $124 a barrel next year, down $9 from previous forecast. Home heating bills expected to weigh on consumers. Read more here-http://money.cnn.com/2008/08/12/news/economy/EIA_energy_outlook/index.htm

-Biggest drop in U.S. oil demand in 26 years. Read more here-http://news.yahoo.com/s/nm/20080812/us_nm/usa_oil_demand_dc_2&printer=1;_ylt=Ag3LxaLvoxNjd.rAPZTpgCIXIr0F

-Oil: What the drilling advocates say. Supporters saying there could be much more oil offshore than the government predicts as they fight for access to new supplies in order to lower the price of oil. Read more here-http://money.cnn.com/2008/08/13/news/economy/offshore_drilling/index.htm?postversion=2008081312

GASOLINE

-A big surprise on gas-You may not believe it, but fuel is more affordable than it was during the early '60s. Read more here-http://www.latimes.com/news/opinion/la-oe-goklany11-2008aug11,0,1107249.story

-Petro-Canada says some of its stations in Alberta and the B.C. Interior are running out of gasoline. The shortages are the result of unexpected problems at the company's refinery in Edmonton, which had to be shut down last week. Petro-Canada vice-president Dan Sorochan says the company regerets any inconvenience and that it is working hard to minimize the impact.

The company is repairing the gasoline processing unit as safely and quickly as possible and is adjusting its distribution channels so that as much gas is available in Western Canda as possible. Petro-Canada is also using trucks to move gasoline into the area and is trying to find additional gas supply from elsewhere. Making sure essential services get their fuel has also been made a priority. Drivers will know a gas station is short on gasoline if its price signs are zeroed out. CBC

INFLATION

-U.S. Consumer Prices Rise More Than Forecast. U.S. consumer prices jumped to a 17 year high in July, reducing the scope of the Federal Reserve to lower interest rates as economic growth slows.

The consumer price index climbed 0.8 percent, twice as much as anticipated, the Labor Department said today in Washington. The cost of living was up 5.6 percent in the year ended in July, the biggest rise since January 1991. So-called core prices, which exclude food and energy, also advanced more than projected.

The surge last month reflected energy prices that have since declined, signaling July may represent the peak in inflation. Still, increases went beyond food and fuel, including gains in clothing, airline fares and education, likely intensifying discussions among Fed policy makers about how quickly to shift toward raising rates. Read more here- http://www.bloomberg.com/apps/news?pid=20601087&sid=aoOKMz5QYK9w&refer=home

-U.K. Inflation Reaches 4.4%, More Than Double Target. U.K. inflation accelerated to more than double the central bank's 2 percent target in July, making it harder for policy makers to cut interest rates as the threat of a recession looms.

Consumer prices rose 4.4 percent from a year earlier, breaching the government's 3 percent upper limit for a third month and the most since comparable records began in 1997, the Office for National Statistics said today.

-UK inflation exceeds Bank interest rate for first time since 1981. Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/13/cncpi113.xml&CMP=ILC-mostviewedbox

-U.K. Producer Prices Rise by Most Since at Least 1986. U.K. producer prices increased in July at the fastest pace since records began in 1986, adding to pressure on the Bank of England to wait before cutting interest rates as the economy edges toward a recession.

Prices charged by factories rose 10.2 percent from a year earlier, compared with a 10 percent increase in June, the Office for National Statistics said in London this week. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=a3dCUQVglsew&refer=home

-India Inflation Accelerates to 16-Year High of 12.44%. India's inflation soared to a 16- year high and may accelerate further after the government approved wage increases for civil servants. Wholesale prices rose 12.44 percent in the week to Aug. 2, after increasing 12.01 percent in the previous week, the commerce ministry said in New Delhi today. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=afddBxL8e6gk

-China wholesale prices surge. July producer price index jumps 10% the highest rate since 1996. Read more here-http://money.cnn.com/2008/08/11/news/international/china_inflation.ap/index.htm

-Nestle, Kellogg Struggle to Pass on Rising Food Costs. Nestle SA, the world's largest food company, and Kellogg Co., the biggest U.S. cereal maker, can't raise prices fast enough to sustain earnings growth after the cost of grains, dairy products and meat surged to records. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aD7YNdPKw1g4

-Drug prices up 100% or higher Spikes bring legal, political scrutiny. Drug companies are quietly pushing through price hikes of 100% or even more than 1,000% for a very small but growing number of prescription drugs, helping to drive up costs for insurers, patients and government programs. Read more here-

http://www.usatoday.com/printedition/news/20080808/1a_bottomstrip08_dom.art.htm

-The world's worst inflation. How Zimbabwe's ruler ruined an entire economy and why it will finally bring him down. Read more here-

http://money.cnn.com/2008/08/13/news/international/worlds_worst_inflation_spiers.fortune/index.htm

INTEREST RATES

-Australia Central Bank Says Room to Cut Interest Rate. Australia's central bank says it will have more room to cut interest rates because a ``significant moderation'' in domestic demand will slow inflation, cut economic growth by half and drive up unemployment.

"Economic growth will be fairly slow in the period ahead,'' the Reserve Bank of Australia said in its quarterly policy statement released in Sydney today. Gross domestic product will probably expand 2 percent this year compared with 4.3 percent in 2007 and less than the 2.25 percent forecast in May. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=aOIPR8319JOI

U.S. DOLLAR

-Why the buck stops here. The dollar has had a nice run, but a soft economy is likely to cut the rally short. The dollar has sprung off its deathbed, but a swift return to ruddy good health looks like a long shot. Unfortunately, the dollar may not be much help there in coming months, because its run may be coming to an end.

Yes, it's true that European economies are struggling against a looming recession, which is bad for the euro. But the fact is that weak U.S. fundamentals particularly in the housing and finance sectors, as well as the nation's need to borrow overseas to finance current spending are likely to cap the dollar's gains.

"Nothing here is sunny," said CMC Markets currency strategist Ashraf Laidi. He likens the dollar's recent gains against the euro to a campaign between two un