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The U.S. Markets are closed today yet something very interesting is starting to happen. Can you sense it? The shift from deflation to inflation. The “smart money” big investors are sensing it and starting to jump into Gold in a big way! Gold Prices are holding steady overseas above the $935 support level. Todays articles show the why and how of this move by big money into Gold, read on… and Good Investing! – jschulmansr

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 Something still stirring in precious-metals pond – Market Watch

By: Peter Brimelow of Market Watch

With some wild swings, gold gained about 3% on the week, closing Friday at $941. The Phx Gold Silver Index (XAU:

Technicians were impressed. Long-term chartist Martin Pring is deflationary-minded at present. Two weeks ago, he remarked that if certain trend lines were broken, “I would be dragged kicking and screaming into the bullish camp”. But now he simply says in his recent weekly Intermarket Review: “Not much to add to my recent bullish comments. Both the metals and shares recently broke out of giant patterns … With our Global Gold Index at a new all-time high – enjoy the ride!”
Pring also flags a powerful conceptual reason for the gold move. Discussing a chart of the inflation proofed Treasuries, and using the iShares:Lehm TIPS TIPT as a proxy, Pring says: “Here we see the inflation protected bonds, or TIPs. Who needs these in a deflation? But look, the price just broke to the upside … and volume is expanding! When we look at the longer term we see it’s still in a primary bear market … However this week’s breakout suggests a turn is likely.”
In other words, the bond market is getting seriously concerned about inflation. See Website
The Privateer, being Australian, is even more direct in its weekly remarks: “Why is gold going up? It is certainly not in spite of the global mania for bailout programs now sweeping the world. It is because of these programs. The more ‘liquid’ the global financial powers that be make their money — by creating it in ever larger swathes — the more they run the risk that the world starts to look elsewhere for a viable and trustworthy way to exchange goods and services.”
The Privateer’s invaluable $US 5X3 point and figure chart has now broken above its last downtrend, although its proprietor would like more progress: “This week the chart got up to and just above the second of the two downtrends. The ‘poke’ above the line which came with Gold’s close above $U.S. 945 on Feb. 12 is not yet decisive, a close above $U.S. 960 would be.” See Website
Silver, which I reported last week was exciting the gold bugs by showing unusual leadership characteristics, persisted — rising 3.5% on the week, including on Friday despite gold’s fall, and pushing the Gold/Silver ratio to 68.9 from last week’s 69.5.
But the star of the week was the reported bullion holdings of Spdr Gold Trust. (GLD:
GLD is regarded with deep suspicion by the radical gold bugs who think the metal’s price is manipulated. But at the least it has to been seen as a measure of the Western Hemisphere investment appetite for gold.
In contrast, Le Metropole Cafe monitors Indian gold imports and reports that, unusual in the past few years, the world’s largest gold consumer is standing aside for now. See Website
Interestingly, two sentiment indicators did not react much this past week. Mark Hulbert’s HGNSI on Friday stood unchanged at 60.90%. MarketVane’s Bullish Consensus actually lost a point on Friday to 78%, gaining only 3 points on the week. See Website
In serious gold moves, MarketVane excursions into the 90s are reportedly common.
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Endeavour Financial Corp (TSX:EDV) closed a $100 million equity offering last week, and several other “bought deal” financings point to a strengthening trend: major investors are piling into gold.

The Offering was underwritten by a syndicate co-led by GMP Securities L.P. and Canaccord Capital Corporation (the “Underwriters”). Endeavour will use the funds to support its investment activity in the mining sector with an emphasis in the short term on precious metals.

The first quarter of 2009 has seen well over $1 billion flow into near term and existing mining companies, which is a reflection of the strong gold price amid safe haven demand. With estimates of U.S. government spending reaching as high as $2 trillion, large value investors are increasingly deterred by U.S. Treasury related securities in favour of precious metals.

  • Newmont Mining (NYSE:NEM), one of the world’s largest gold mining companies, raised US$1.7 billion in a combined common share/convertible debt deal which it will use primarily to fund the acquisition of the remaining 33.33% interest in the Boddington project in Western Australia that it does not already own and the additional capital expenditures that will result from its increased ownership in the Boddington project, as well as for general corporate purposes. Citigroup Global Markets and J.P. Morgan Securities led the placement.
  • Freeport McMoran Copper and Gold (NYSE:FCX) raised US$740 million through the issuance of 26.8 million common shares at $28 per share;
  • Kinross Gold Corporation (KGC) announced a “bought deal” financing for US$360 through the issuance of 24,035,000 million common shares US$17.25 per common share. The underwriters were led by UBS Securities Canada Inc.;
  • Osisko Mining Corporation (OSKFF.PK) entered into another “bought deal” led by Thomas Weisel Partners and BMO Capital Markets. The offering of 77 million units at $CA4.55 a share will gross CA$350.4 million. Osisko is developing the 6.28 million ounce Canadian Malartic Project Quebec.

Smaller deals are becoming more common for junior emerging gold companies as well. Among the recent actions:

  • Centamin Egypt (CELTF.PK) raised $CA69 million through the issuance of 106.2 million shares at CA$0.65 per share for development and construction of the Sukari Project in Egypt. This financing was led by Thomas Weisel Partners and Cormark Securities.
  • Romarco Minerals Inc. (TSX.V:R) announced a bought deal Friday worth $20 million for the development of the Haile Gold Mine in South Carolina. Romarco issued 54 million units at $0.38 each. The financing was led by a syndicate of underwriters led by Macquarie Capital Markets Canada Ltd. and including Paradigm Capital Inc. and GMP Securities L.P.
  • International Tower Hill Mines (THM) sold 2 million common shares at $2.50 per share for gross proceeds of CA$5 million, which will be directed towards further development of its projects in Alaska and Nevada. The placement was a “bought deal” led by a syndicate of underwriters led by Canaccord Capital Corporation and including Genuity Capital Markets and GMP Securities L.P.
  • Exeter Resource Corporation (AMEX:XRA) raised CA$25.2 million at $2.40 a share for development of its assets in Argentina and Chile.

And it isn’t just gold that is attracting big financing. On February 10th, Uranium One (SXRZF.PK) announced a $270 million investment by a Japanese Consortium comprised of Tokyo Electric Power Company, Incorporated (TKECF.PK), Toshiba Corporation (TOSBF.PK), and The Japan Bank for International Cooperation.

Concurrently with the execution of the subscription agreement, Uranium One has also entered into a long-term off-take agreement and a strategic relationship agreement with the Japanese consortium, both of which will become effective upon closing of the private placement.

The off-take agreement provides the consortium with an option to purchase, on industry-standard terms, up to 20% of Uranium One’s available production from assets in respect of which Uranium One has the marketing rights.

Junior Uranium company First Uranium Corp. (FURAF.PK) was also the beneficiary of a bought deal financing led by Macquarie Capital Markets this week, which saw First Uranium place 20.5 million units of its shares at $3.00 per unit for gross proceeds of $61.5 million. First Uranium will direct the funds towards the development of the Ezulwini Mine in South Africa.

Endeavour Financial is followed by many analysts and newsletter writers for its robust project pipeline.

Brien Lundin, who publishes the Gold Newsletter, says one of the main reasons he follows Endeavour Financials is because of management – especially Mr. Frank Giustra. He says this team now senses a market bottom, as they are raising capital to go after assets that now cost a fraction of what they did last year, or even six months ago. He intimates strongly that his subscribers should do the same, using Endeavour as their proxy. A mix of entrepreneurial expertise and value investing, he outlines what the smart money is doing now.

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Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Gold: Now Demonstrating Trust in Obama – Seeking Alpha

By: Boris Sobolev of Resource Stock Guide

Gold is Starting to Believe the Obama Administration

Despite making loud headlines about stimulating the economy, the US government has been unable to raise the level of optimism among the general public, while the stock market seemed to drop into a deep state of apathy.  

 

Last week we received the long-awaited economic stimulus packet as well as the so-called plan for the rescue of the US financial system. We have already voiced our skepticism regarding the structure of the stimulus and its potential effect on the economy in a prior article.

 

As far as the size of the $787 billion package, it is clear that it is too small and too spread out into 2010 and beyond to be called a stimulus. $787 billion is just 5.6% of the GDP and when spread over two years will account for just 2.8% at a time when many industrial economies around the world are contracting by 5-10% per year. It can only be called a life support package, not a stimulus.

Japan, which got into a deflationary spiral as a result of a real estate bust, spent much more than 100% of its GDP since 1991 just to see its economy stagnate. Construction related investment alone ate up $6.3 trillion of public funds over the 17 years since 1991. Infrastructure spending accounted for $350 billion to $400 billion per year for the first half of the 1990s for an economy half the size of the United States.

The results of the Japanese fiscal stimulus were unimpressive, although it could be argued that without this stimulus, it could have been much worse.

With the United States facing similar post bubble dynamics as Japan did twenty years ago, how can we expect greater effectiveness of the Obama stimulus plan when it is insufficient and much of is clearly misdirected?

In reality, this economic stimulus package has to be viewed as only the first one of many yet to come. By having the US dollar as a world reserve currency, the US government can be much more effective than its Japanese counterpart in printing its own currency.

We will soon be quantifying the size of the government stimulus plans in trillions rather than in billions. Within the next 3 to 4 years, government spending can easily reach $10 trillion, doubling the size of the US government debt.

One of the main problems with this crisis is that the majority of the debt bubble is related to residential real estate, which does not produce cash flow, but only seems to eat it up. As home prices decline and unemployment rises, debt serviceability is worsening dramatically.

In order to avoid social unrest and to maintain popularity, the Democratic majority will face two realistic options which could begin to address the economic disaster:

  1. Forgive portions of mortgage debt which cannot be serviced. But who will pay for the losses – clearly not the weak banks. Uncle Sam would pick up the tab by printing more currency.
  2. Print new dollars to increase the nominal income of the indebted population through tax cuts, job creation, jobless benefits and various social spending.

There is no other politically possible way out of this mess other than to run the printing press. The way of the free market via bankruptcies is not popular so there is no sense to even discuss it.

Within hours President Obama will sign the stimulus into law, but we are sure that this is just the beginning of the government spending campaign.

As far as the US banks, the new US Treasury Secretary seems to be mimicking his predecessor, Hank Paulson. The essence of the announced “plan” is as follows: “We are absolutely sure that we will save our banking system, but are yet unsure of how we will do so. We will find out very soon, however. Stay tuned”.

While not knowing what to do with the banking system, the government is trying to temporarily act as one. The only specific point in Geithner’s announcement is the plan to increase the Term Asset-Backed Securities Loan Facility (TALF) facility from $200 billion to $1 trillion. This joint initiative with the Federal Reserve expands the resources of the previously announced, but not yet implemented TALF.

In essence, TALF will support the purchase of loans by providing the financing to private investors. In theory, this should help unfreeze and lower interest rates for auto, small business, credit card and other consumer and business credit. Treasury will use $100 billion to leverage $1 trillion of lending from the Federal Reserve. The TALF, which will potentially have greater effect than the stimulus plan, passed in a blink of an eye without any debate.

The markets around the world have deteriorated in deep state of indifference to the first round of actions of the new US government. Only gold is starting to demonstrate its trust in the Democratic majority. Since the inauguration, investors poured $6 billion into gold purchases through GLD alone. This is an increase of 210 tonnes in gold holdings or 24% in less than a month.

click to enlarge

Huge investment demand around the world has put an end to a steep gold correction of the second half of 2008. Most intermediate and long term technical indicators for gold have turned decisively bullish. A test of new highs by gold is very probable this spring.

In sum, gold investors are starting to believe that the Obama Administration sees one way out of economic problems which will for sure resurrect inflation.

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My Note: Did you catch that? They’re believing alright, not that Obama will get the situation fixed, just that he will cause inflation; yes even hyper-inflation , maybe even stagflation! Jump into Gold now before it’s too late… -jschulmansr

 

Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Moody’s, S&P Dole Out Global Downgrades – Time to Go Gold? – Seeking Alpha

By: Mark O’Byrne of Gold and Silver Investments

 Gold rose again on Thursday, briefly rising above $950/oz and was up 0.6% on the day. Determined selling on the open in Asia saw gold fall and profit taking has seen gold fall in Asia and in early trading in London. This is to be expected as gold had risen by more than 15% in less than a month.

 

 

US, UK Credit Ratings Look Set to Be Downgraded

The credit rating agency Moody’s has said that the UK and US credit ratings were being “tested”. In a novel and somewhat bizarre departure, Moody’s has split various “AAA” sovereign countries into three categories based on their strength in weathering the economic storm, denoting Ireland and Spain as the weakest, with the UK and US somewhere in the middle and Germany, France, Canada and the Scandinavian nations at the top.

This will in time be seen as gimmickry. Standard and Poor’s have already downgraded Spain to AA+ and did not create sub grades within the credit rating system.

Some have criticized Moody’s for being “unfair” to Ireland, Spain, the UK and US and have argued that these agencies previously gave almost everybody good ratings, and underestimated risks, but were now going to the other extreme.

This is errant nonsense and the unfortunate fact is that Moody’s, the other credit rating agencies and the vested interests in the financial services industry continue to underestimate risks, as they have done for months and years.

Given the massive deterioration in the public finances and economies of these nations, by right they should be downgraded and unfortunately in the coming months they will inevitably be downgraded.

But Moody’s and all the rating agencies realize that this would compound an already disastrous financial and economic crisis. Many pension funds internationally have mandates or investment guidelines to only invest in “AAA” rated government bonds and if these countries bonds were downgraded, they would be forced to sell those bonds en masse. This would likely see a crash in the already very overvalued government bond markets and see long term interest rates rise quickly and sharply.

The creditors of the US in Russia and China have rightly criticized the ratings agencies for their highly irresponsible practices in recent years and are increasingly nervous about their US denominated assets.

Ratings agency Standard and Poor’s in January downgraded Spain’s sovereign debt rating to “AA+” from “AAA” in January, citing insufficient means to deal with weak growth and a ballooning budget deficit. As they did the sovereign rating of New Zealand. The fiscal position in the UK and US is arguably much worse than in these two countries (Martin Wolf of the Financial Times recently said that major US banks, with their humongous Wall Street liabilities, are insolvent) and thus it seems inevitable that the UK and US will be downgraded in the coming months.

If the US is downgraded, then in effect the reserve currency of the world is being downgraded and this has huge implications for the international monetary system. Not surprisingly there have been op-ed pieces in the Financial Times and the Wall Street Journal calling for a return to some form of gold standard.

The governments of the world are nationalizing and socializing the meltdown in the shadow banking system and the international system with potentially disastrous consequences for us all.

Conditions are set to get markedly worse before they get better and the experience of Argentina and other previously wealthy South American countries may be instructive. The IMF is called in and there are structural adjustments, social services are affected or discontinued, banks nationalized, savings inaccessible, food and energy insecurity rise.

This is a potential reality for large western economies, especially if governments keep trying to inflate their way out of the current crisis. This is leading to massive currency debasement and will potentially lead to very significant stagflation and maybe even what could be called hyper stagflation.

Now more than ever, it is essential that individual savers and investors, companies, pension funds and sovereign wealth funds have an allocation to and directly own actual physical gold bullion. Paper exchange traded funds with all the attendant counter party, custodian, sub custodian, auditing and indemnification risk are speculative trading vehicles and not physical gold.

In these unprecedented economic times, it is irresponsible and extremely high risk not to have an allocation to gold bullion in an investment portfolio.

Disclosure: no positions

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My Note: No Positions??? Mr. O’Byrne I think you need to follow your own advice above! Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Is Gold the only salvation from this Financial Armageddon? – MineWeb

Source: MineWeb

Indications are that the global financial situation could yet get far worse before it starts getting better – particularly in Europe – and gold may again prove to be the only real way of protecting wealth in a continuing global financial meltdown.

Author: Lawrence Williams
Posted:  Monday , 16 Feb 2009
LONDON – 
 

 

“It ain’t over ’til its over” is one of the best known quotations from baseball catcher and coach Yogi Berra and as the global financial crisis unwinds it is very apposite yet again.  We ain’t anywhere near the end yet and possibly the worst is yet to come as far as European banks in particular are concerned.  Markets have breathed sighs of relief as various banks have been bailed out and stimulation packages are being approved if not already implemented. 

 

But, one gets the feeling that any relief is premature.  The debt situation in a huge number of debtor nations – virtually the whole of Eastern Europe falls into this category – is dire and has not really yet fallen into the sights of the investment world – but bankers must be quaking in their shoes as surely they are aware of the potential financial Armageddon that still lies ahead. 

And this time it is the already shaky Western European banking sector that is most at risk.  US Banks, accused of starting this all, maybe far less vulnerable to the times ahead.  True the US financial sector may have got us into this mess, but European bankers followed suit and, in the event, may be shown to have behaved far more recklessly than their American counterparts.  It would seem that some of the potential shortfalls being faced would be beyond the financial ability of Central Banks, Governments and transnational agencies like the IMF to sort out.  The system is like a house of cards.  One major failure could bring the whole house tumbling down. 

This is the kind of situation that leads to global nightmares – wars even.  Radical extremists get elected to positions of power – as with the rise of National Socialism in Germany after the crash of the Weimar Republic with its hyperinflation.  We could be in for a very sticky time ahead as the real implications, and depth, of the financial meltdown catch up with us. 

The problems ahead may not be beyond the wit of man to devise a solution which can ‘save the world’, but that is unlikely to come from UK Prime Minister Gordon Brown who appears to have laid claim to this cachet in a freudian moment of rhetorical madness.  Don’t forget this is the same Gordon Brown who decimated the UK’s gold reserves by selling half of them off (395 tonnes) at gold’s low points from 1999-2002 – amounting to some $12bn at today’s prices – a sum the UK treasury would give its eye teeth for in the current financial crisis, although this is small beer relative to the sums squandered by the UK banks.  But it is an indicator of Gordon Brown’s acumen, or lack of it, in dealing with global financial trends. 

Indeed Gordon Brown’s thinking is probably echoed by many others in the European and perhaps the US financial hierarchy which doesn’t bode well for any rescue package that will actually work to stem the flow of toxic debt which has built up all around the world and may almost certainly amount in total to a greater sum than all the world’s financial reserves combined,  But then that is the nature of banking.  It only takes a run on almost any bank to bring the whole institution crashing down, and to allow any country to fail – and there are signs that the European Central Bankers may let some Eastern European states go under, thus triggering a domino effect of defaults worldwide, to bring the world banking system to its knees – or worse.  There are even fears that past high flyers like the Irish Republic could be forced to default on its debts, and undoubtedly the situation for, say, the Baltic states is far worse still. 

What solution is there out there.  Printing money on an unprecedented scale will expose the world to huge inflationary pressures for years to come, but this may be the only way forward using more conventional solutions.  Perhaps a huge revaluation in the price of gold could help bolster some treasuries and bring some confidence back into the system.  And, as with any bank run it is confidence which is needed to stem the tide, not necessarily actual money! 

But where does all this leave the investor?  Not in a happy position.  The logic of further financial collapses and bank failures would be to knock the markets down and down, which in turn takes wealth out of the system and decimates pensions upon which an increasingly aging society is dependent. 

Buy gold may be an answer to protect oneself, but as we saw last year, gold too can be vulnerable as in times  of reduced liquidity funds and individuals have to sell any liquid assets to cover their positions.  But then gold is probably not as vulnerable as other assets – again as we have seen over the past year.  Those who were invested in gold at the beginning of 2008, for example, and did not sell during the year, at least maintained the value of their holdings while virtually all other investment options crashed, although this was not true of most gold stocks. 

Now we are seeing professional and institutional investors moving into gold in a big way just to try and protect their, and their clients’  wealth.  As we have pointed out here frequently, gold ETFs are seeing an unprecedented inflow of funds, although there are those out there who would say it is better to hold physical gold than any form of paper gold because of a growing distrust of financial institutions and paper solutions. 

And perhaps rather gold than other precious metals – notably silver.  Silver would be sure to be dragged up on gold’s coattails, but perhaps not as much  this time – even though history tells us that silver’s volatility leads it to perform better than gold in percentage terms on the upside and worse on the downside.  We are in a different situation with silver not really a monetary metal any longer.  Industrial demand pressures on silver may well mitigate any price rises here. 

Gold’s performance, though, is perhaps also dependent on investment demand outstripping a fall off in the jewellery market and an increase in liquidation of such holdings into the scrap sector.  If the big Asian economies like India and China, where mark-ups on gold jewellery are minuscule compared with the West, falter significantly then reduced demand and increased supply from this sector will need to be soaked up by the investment sector.  At the moment this seems to be capable of doing this hence the recent gold price strength, but unless sentiment changes in India in particular, where buyers seem to be waiting for lower prices, the fall in gold purchases there may limit global gold price growth.  If liquidity becomes a problem in the North American markets again, this could also dent upward movement. 

But overall, physical gold, gold ETFs and selected gold stocks would seem to be the best wealth protectors out there.  As commentators have pointed out, prices may remain relatively volatile, but currently the overall price trend tends to be upwards movement, followed by stabilisation, before the next upwards resistance levels are tested.  Gold does look to be steadily climbing back towards the psychological $1,000 an ounce level but it has had trouble sustaining increases beyond this level in the past.  Perhaps it will be third time lucky for the gold bulls.

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My Note: Prudence dictates at least 10% of your portfolio should be in Gold. Personally, I have that and also a lot of my discretionary funds invested in precious metals Stocks, ETF’s, Bullion…jschulmansr

Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investments. –  jschulmansr

 

 

 

GLD

GLD, , ) GLD . These rocketed a startling 13.7% to 985 tonnes, setting records each day.

XAU

Delayed quote dataHUI, , ) added 1.36% to 311.16. The stock market, in case you missed it, lost ground.

Commentary: Gold’s gains for week catch bugs’ interest

By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) — Something was indeed stirring in the precious metals pond, as I reported a week ago. Key investment letters say it still is. See Feb. 8 column

 

Here is where I buy my Bullion, get one free gram of Gold just for opening an account! Catch the New Bull! – Buy Gold Online – Get 1 gram free! – Buy Safely, quickly, and at low prices, guaranteed! – Bullion Vault.com

 

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