GOLD

[srowe]

anyone know if krugs have a face value?

[JBmurc]

Nervous Chinese To Diversify Into Gold
With Massive $1.95 Trillion Foreign Reserves
Mark O'Byrne
11 February 2009


Of even more significance are the drumbeat of Chinese concerns, the U.S.' largest creditor regarding their massive U.S. Treasury and other debt holdings. Bloomberg reports that influential Yu Yongding, a former adviser to the People's Bank of China, said that China should seek guarantees that its $682 billion holdings of U.S. government debt won't be eroded by "reckless policies". Premier Wen Jiabao said last month his government's strategy for investing would focus on safeguarding the value of China's massive $1.95 trillion foreign reserves.

Yongding said that "China should diversify its reserves away from U.S. Treasuries if the value of China's foreign-exchange reserves is in danger of being inflated away by the U.S. government's pump-priming," he said. He has previously said that China should diversify into the euro, yen, oil and gold. Yongdinghas has warned of possible panic selling of dollar assets leading to a global financial collapse and has said that the potential increases in the value of gold meant China should be hedging its bets by diversifying into gold.

Dow Jones reported in November that China's central bank is considering raising its gold reserve by 4,000 metric tons from 600 tons to diversify risks brought by the country's huge foreign exchange reserves, according to a Chinese newspaper.

China has almost certainly been nibbling in the gold market as they attempt to gradually diversify out of dollars and into gold. Especially in light of the fact that they have less than 1% of their currency reserves in gold unlike most western nations whose gold reserves are very significant percentages of their overall reserves. Despite having the largest foreign currency reserves in the world, they are only 9th in terms of central bank gold reserves and this will change in the coming years as they rebalance and diversify their foreign exchange reserves.

Mark O'Byrne, Executive Director

Gold and Silver Investments Limited

Mark O'Byrne is Executive Director of Gold and Silver Investments Limited (www.goldassets.co.uk). He is regularly quoted and writes in the international financial media and was awarded Ireland's prestigious Money Mate and Investor Magazine Financial Analyst of 2006.

[Aussie]

anyone know if krugs have a face value?

No, they have a date. Gold coins are a bit of a mixed bag. Here's a list of the coins that I have and their info . . .

24k Gold Kiwi's - No FV - No date
24k Austrian Philharmonic - 2,000 Schillings + Dated
22k SA Krugerrand - Date Only
24k Chinese Panda - 100 Yuan - Dated
24k USA Buffalo - US$50 - Dated
22k USA Gold Eagle - US$50 - Dated
24k Australian Kangaroo - A$100 - Dated
24k Canadian Gold Maple - C$50 - Dated

Hope this helps.

Cheers

[Aussie]

Capitalism needs a sound-money foundation.


By Judy Shelton
The Wall Street Journal
Thursday, February 12, 2009

http://online.wsj.com/article/SB123440593696275773.html

Let's go back to the gold standard.

If the very idea seems at odds with what is currently happening in our country -- with Congress preparing to pass a massive economic stimulus bill that will push the fiscal deficit to triple the size of last year's record budget gap -- it's because a gold standard stands in the way of runaway government spending.

Under a gold standard, if people think the paper money printed by government is losing value, they have the right to switch to gold. Fiat money -- i.e., currency with no intrinsic worth that government has decreed legal tender -- loses its value when government creates more than can be absorbed by the productive real economy. Too much fiat money results in inflation -- which pools in certain sectors at first, such as housing or financial assets, but ultimately raises prices in general.

Inflation is the enemy of capitalism, chiseling away at the foundation of free markets and the laws of supply and demand. It distorts price signals, making retailers look like profiteers and deceiving workers into thinking their wages have gone up. It pushes families into higher income tax brackets without increasing their real consumption opportunities.

In short, inflation undermines capitalism by destroying the rationale for dedicating a portion of today's earnings to savings. Accumulated savings provide the capital that finances projects that generate higher future returns; it's how an economy grows, how a society reaches higher levels of prosperity. But inflation makes suckers out of savers.

If capitalism is to be preserved, it can't be through the con game of diluting the value of money. People see through such tactics; they recognize the signs of impending inflation. When we see Congress getting ready to pay for 40% of 2009 federal budget expenditures with money created from thin air, there's no getting around it. Our money will lose its capacity to serve as an honest measure, a meaningful unit of account. Our paper currency cannot provide a reliable store of value.

So we must first establish a sound foundation for capitalism by permitting people to use a form of money they trust. Gold and silver have traditionally served as currencies -- and for good reason. A study by two economists at the Federal Reserve Bank of Minneapolis, Arthur Rolnick and Warren Weber, concluded that gold and silver standards consistently outperform fiat standards. Analyzing data over many decades for a large sample of countries, they found that "every country in our sample experienced a higher rate of inflation in the period during which it was operating under a fiat standard than in the period during which it was operating under a commodity standard."

Given that the driving force of free-market capitalism is competition, it stands to reason that the best way to improve money is through currency competition. Individuals should be able to choose whether they wish to carry out their personal economic transactions using the paper currency offered by the government, or to conduct their affairs using voluntary private contracts linked to payment in gold or silver.

Legal tender laws currently favor government-issued money, putting private contracts in gold or silver at a distinct disadvantage. Contracts denominated in Federal Reserve notes are enforced by the courts, whereas contracts denominated in gold are not. Gold purchases are subject to taxes, both sales and capital gains. And while the Constitution specifies that only commodity standards are lawful -- "No state shall coin money, emit bills of credit, or make anything but gold and silver coin a tender in payment of debts" (Article I, Section 10) -- it is fiat money that enjoys legal tender status and its protections.

Now is the time to challenge the exclusive monopoly of Federal Reserve notes as currency. Buyers and sellers, by mutual consent, should have access to an alternate means for settling accounts; they should be able to do business using a monetary unit of account defined in terms of gold. The existence of parallel currencies operating side-by-side on an equal legal footing would make it clear whether people had more confidence in fiat money or money redeemable in gold. If the gold-based system is preferred, it means that people fully understand that the purpose of money is to facilitate commerce, not to camouflage fiscal mismanagement.

Private gold currencies have served as the medium of exchange throughout history -- long before kings and governments took over the franchise. The initial justification for government involvement in money was to certify the weight and fineness of private gold coins. That rulers found it all too tempting to debase the money and defraud its users testifies more to the corruptive aspects of sovereign authority than to the viability of gold-based money.

Which is why government officials should not now have the last word in determining the monetary measure, especially when they have abused the privilege.

The same values that will help America regain its economic footing and get back on the path to productive growth -- honesty, reliability, accountability -- should be reflected in our money. Economists who promote the government-knows-best approach of Keynesian economics fail to comprehend the damaging consequences of spurring economic activity through a money illusion. Fiscal "stimulus" at the expense of monetary stability may accommodate the principles of the childless British economist who famously quipped, "In the long run, we're all dead." But it shortchanges future generations by saddling them with undeserved debt obligations.

There is also the argument that gold-linked money deprives the government of needed "flexibility" and could lead to falling prices. But contrary to fears of harmful deflation, the big problem is not that nominal prices might go down as production declines but rather that dollar prices artificially pumped up by government deficit spending merely paper over the real economic situation. When the output of goods grows faster than the stock of money, benign deflation can occur -- it happened from 1880 to 1900 while the U.S. was on a gold standard. But the total price-level decline was 10% stretched over 20 years. Meanwhile, the gross domestic product more than doubled.

At a moment when the world is questioning the virtues of democratic capitalism, our nation should provide global leadership by focusing on the need for monetary integrity. One of the most serious threats to global economic recovery -- aside from inadequate savings -- is protectionism. An important benefit of developing a parallel currency linked to gold is that other countries could likewise permit their own citizens to utilize it. To the extent they did so, a common currency area would be created not subject to the insidious protectionism of sliding exchange rates.

The fiasco of the G-20 meeting in Washington last November -- it was supposed to usher in "the next Bretton Woods" -- suggests that any move toward a new international monetary system based on gold will more likely take place through the grass-roots efforts of Americans. It may already be happening at the state level. Last month Indiana state Sen. Greg Walker introduced a bill -- "The Indiana Honest Money Act" -- which would allow citizens the option of paying in or receiving back gold, silver or the equivalent electronic receipt as an alternative to Federal Reserve notes for all transactions conducted with the state of Indiana.

It may turn out to be a bellwether. Certainly, it's a sign of a growing feeling in the heartland that we need to go back to sound money. We need money that works for the legitimate producers and consumers of the world -- the savers and borrowers, the entrepreneurs. Not money that works for the chiselers.

----

Ms. Shelton, an economist, is author of "Money Meltdown: Restoring Order to the Global Currency System" (Free Press, 1994).

[Aussie]

Fear and Greed

Richard Russell (snippet)
Dow Theory Letters
Feb 12, 2009

February 11, 2009 Gold -- There's only one item that is bought through both fear and greed. That item is gold. Are you worried about the viability of the dollar? Then buy gold -- (fear). Are you afraid that the gold market is getting away from you? Then don't wait -- buy gold (greed).

Those subscribers who have heeded my advice -- "buy gold." They are doing OK today. Of course, for years I advocated buying gold coins and hiding them away and never looking at them or thinking of selling those little beauties. Now if you want gold, you have to buy "paper gold" in the form of GLD. Which is probably OK. Below we see an up-dated chart of GLD. And we see the breakout today at 92.29. This completes a huge base, which started at the 69 box and since has been building and building.

Note the numerous down-columns, these are the "wipe-outs" which periodically scare people OUT of their gold. Today, with the upside breakout at the 93 box on the P&F chart, we're forced to buy gold in the 944 (April futures) area. For those who missed out on gold when it was in the 700s and 800s, this is a scary proposition. So question -- is it too late to buy GLD or high-premium coins if you can find them?

As I see it, the frenzy, the speculative phase of gold, the rush of a frightened public -- lies ahead. Big bull markets always find a way to keep you frightened and OUT. Big bull markets are devils with no conscience -- to get in you have to "close your eyes, and just do it." Not easy, but in this business nothing is easy except losing money. Which is why I've always loved the gold coins. You buy 'em, you're not tempted to trade 'em, they look great and they feel great. And they're not made of paper, nor can they be created with a computer. Ultimately, "There's no fever like gold fever." And I'm beginning, just beginning, to feel the fever now. When I look at the chart, I can sense the fever rising.

Fiat paper fans and the Fed denigrate gold. They fear gold and despise it. They prefer the Federal Reserve Notes that they can manufacture at will. But as gold rises, they must face the fact that the Notes they manufacture are being devalued. You see, for thousands of years gold has been the standard against which all assets and currencies are measured. When the big bear arrives and everything faces the fire, "gold will be the last man standing, not dollars, not political talk or Presidential promises -- the only survivor will be the eternal and ultimate safe asset -- gold.

Notice the difference in gold trading during the day? Very little profit-taking. Buyers are buying gold to hold rather than to grab intra-day profits.

Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters
Russell Archives
© Copyright 1958-2009 Dow Theory Letters, Inc.

Richard Russell began publishing Dow Theory Letters in 1958, and he has been writing the Letters ever since (never once having skipped a Letter). Dow Theory Letters is the oldest service continuously written by one person in the business.

[srowe]

thanx for the input on face value Aussie Looks like G maples would be the best bet for carrying from Canada

[AMR]

I met up yesterday with a gold trader who believes that the bull run in gold is nearly over.

Reason being, the hedge funds are sitting on massive unrealised losses and going to be forced to sell gold and stock to fund their withdrawals.

[Aussie]

I met up yesterday with a gold trader who believes that the bull run in gold is nearly over.

Reason being, the hedge funds are sitting on massive unrealised losses and going to be forced to sell gold and stock to fund their withdrawals.

That's surprising. It seems to me that to a large extent this has already happened. There was a massive amount of forced de-leveraging from hedge funds last October and gold sold down to it's $680 low on the back of a stronger USD.

From both a fundamental and technical point of view gold is currently exhibiting enormous strength. In mid December when the USDX dropped below 80, gold was in the $780 area. Since then, the trading pattern has changed significantly rallying about $160 despite a strong uptrend in the USD - this is not an insignificant development . . .

Attachment 1255

Could it go down from here - possibly. But I would say that there are now many strong support lines below the current level and that any selling will be met with aggressive buying.

The US Senate this morning past a US$787B spending package. In addition to the US$700B TARP. States and municipalities are in need of a US$1Trillion bailout in order to keep their lights on . . . where is the money going to come from to fund this?

The fundamentals tell me that we are rapidly approaching the time when gold is the only place left to go. US Treasury market is a bubble waiting to pop. The dollar is on precipice of a history making decline. There is no where near enough savings in the entire world to fund the US Treasury over the next 12 months let alone the rest of Obama's term in office and the USD will begin to reflect this once "quantitative easing" begins in earnest.

So where does one go to seek safety if it cannot be found in cash or government bonds? In my opinion the bull market hasn't even begun yet . . .

Gold is now rising in USD and is making record highs in all currencies. In my opinion it will continue to do so regardless of what the world's hedge funds do. I would view any dip in the gold price from here out as a buying opportunity.

[Aussie]

Global systemic crisis – New tipping-point in March 2009:

'When the world becomes aware that this crisis is worse than the 1930s crisis'

LEAP/E2020 anticipates than the unfolding global systemic crisis will experience in March 2009 a new tipping point of similar magnitude to the September 2008 one. According to our team, at that period of the year, the general public will become aware of three major destabilizing processes at work in the global economy, i.e.:

• the length of the crisis
• the explosion of unemployment worldwide
• the risk of sudden collapse of all capital-based pension systems

A whole range of psychological factors will contribute to this tipping point: general awareness in Europe, America and Asia that the crisis has escaped from the control of every public authority, whether national or international; that it is severely affecting all regions of the world, even if some are more affected than others (see GEAB N°28); that it is directly hitting hundreds of millions of people in the “developed” world; and that it is only worsening as its consequences reveal throughout the real economy. National governments and international institutions only have three months left to prepare themselves to the next blow, one that could go along severe risks of social chaos. The countries which are not properly equipped to cope with a surge in unemployment and major risks on pensions will be seriously destabilized by this new public awareness.

In this 30th issue of the GEAB, the LEAP/E2020 team describes these three destabilizing processes (two of them are described in this public announcement) and gives recommendations to cope with the surge in risks. In addition, this issue also provides the opportunity to make an objective assessment of the reliability of LEAP/E2020's anticipations and specifies a number of methodological aspects of the analytical process used. In 2008, LEAP/E2020's success rate reaches 80%, and even 86% when it comes to strictly socio-econimic anticipations. In a year of major upheavals, our teal ise altogether quite proud of this result.

The crisis will last at least until the end of 2010

Attachment 1256
Evolution of the US money base and indications of related major US crisis periods (1910 – 2008)
Source: Federal Reserve Bank of Saint Louis / Mish’s Global Economic Analysis

As we already explained in GEAB N°28, the crisis will affect in different ways the different regions of the world. However, and LEAP/E2020 wishes to be very clear on that aspect, contrary to the dominant stance today (coming from those experts who denied the fact that a crisis was coming up three years ago, who denied that it was global two years ago, and who denied the fact that it was systemic six months ago), we anticipate that the minimum duration of the decanting phase of the crisis is 3 years (1). It shall be finished neither in spring 2009, nor in summer 2009, nor at the beginning of 2010. It is only towards the end of 2010 that the situation will start stabilizing again and improving a little in some regions of the world, i.e. Asia and the Eurozone, as well as in countries producing energy, mineral and food commodities (2). Elsewhere, it will continue; in particular in the US and UK, and in all the countries depending on their economy, were the duration could approximate a decade. In fact these countries should not expect any real return to growth before 2018.

Moreover no one should imagine that the improvement at the end of 2010 will correspond to a return of high growth. The recovery will take long. For instance, stock markets will take a decade to return to levels comparable to 2007, if they ever return to that. Remember that it took twenty years before Wall Street resumed its 1920 levels. Well, according to LEAP/E2020, the present crisis is deeper and longer than in the 1930s. The general public will gradually become aware of the long-term aspect of this crisis in the coming three months and this situation will immediately trigger two tendencies carrying with them socio-economic instability: fear of the future and enhanced criticism towards leaders.

The risk of sudden collapse of all capital-based pension systems.
Finally, among the various consequences of the crisis for dozens of millions of people in the US, Canada, UK, Japan, Netherlands and Denmark in particular (3), there is the fact that, from the end of the year 2008 onward, news about major losses on the part of the organizations in charge of managing the financial assets supposed to finance pensions will multiply. The OECD anticipates that pension funds will lose 4,000 billion USD in 2008 only (4). In the Netherlands (5) as well as in the United Kingdom (6), monitoring organizations recently blew the whistle asking for an emergency contribution reappraisal and a State intervention. In the United States, growing numbers of announcements call for contribution increases and benefit reductions (7), knowing that it is only in a few weeks time that most of these funds will start calculating their total losses (8). Most of them are still deluding themselves about their capacity to build up again their capital after the markets turn around. In March 2009, when pension fund managers, pensioners and governments will become simultaneously aware of the fact that the crisis is there to last, that it coincides with the « baby-boomer » generation’s age of retirement and that the markets will not resume their 2007 levels until many long years (9), chaos will flood this sector and governments will reach the moment when they will be compelled to nationalize all these funds. And Argentina, who took this decision a few months ago already, will appear a pioneer.

All the trends described above are already at work. Their combination and the public becoming aware of the consequences they could entail, will result in the great collective psychological trauma of Spring 2009, when everyone will realize that we are all trapped into a crisis worse than in the 1930s and that there is no possible way out in the short-term. The impact on the world’s collective mentalities of people and policy-makers will be decisive and modify significantly the course of the crisis in its next stage. Based on greater disillusion and fewer beliefs, social and political instability will settle down worldwide.

http://www.leap2020.eu/GEAB-N-30-is-...his_a2567.html

__________________________________________________ _

Don't know if many here have heard of Martin Armstrong. He is a fascinating man, an American economist who is currently serving his 7th year in prison WITHOUT EVER BEING TRIED for a fraud he claims he is innocent of. This occurred after refusing to work for the CIA and allow his proprietary models to become the property of the US Government.

http://www.topix.com/forum/business/TS8IHELKS6G8FDV65

His genius is his study, theories and writing based on the work of noted Russian economist Nickolai Dmyutriyevich Kondratieff (1892-1938). Once Stalin became aware of the importance of Kondratieff's work with the mathematics of economic cycles and the accurate predictive abilities his work produced - he was killed.

http://en.wikipedia.org/wiki/Kondratiev_wave

Armstrong released an essay dated October 10th, 2008 which is a fascinating read. At 72 pages it's definitely a download and print job. I read it all in less than a couple of hours.

http://www.contrahour.com/ItsJustTim...nArmstrong.pdf

In this document he outlines his theory of cycles and how they currently point to a market top on March 19, 2009 after which the world will enter a period of steep decline.

[airedale]

I met up yesterday with a gold trader who believes that the bull run in gold is nearly over.

Reason being, the hedge funds are sitting on massive unrealised losses and going to be forced to sell gold and stock to fund their withdrawals.

Gold has been in a bull run since 2003. Of course it will end some day. But with the Fed and other banks printing bank notes as fast as they can, I think that gold will still rise from here.
Discl: holding gold stocks