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Superior Gold Group - What does China do to international gold markets?

China wields greater and greater influence in global financial markets with every passing day, as the world's largest nation transitions from its old role as a low-wage manufacturing center to a mature economy with higher consumption. For decades, it was America's consumers and investors who set the marching orders for economies around the globe, but when over 1.5 billion Chinese people began earning and consuming more, a shift was inevitable.

It stands to reason, therefore, that China will have an impact on the market for physical gold bullion, as well as the various gold investment vehicles. At present, only five banks in China are allowed to import and export gold. The People's Bank of China, though, issued a statement this week saying that it would open up the markets, giving more financial institutions permission to get involved in the bullion business.

Even more important than the financial dealers, though, may be the behavior of individual Chinese investors. The stunning rise in the price of gold over the past decade has been driven, as much as anything, by the realisation of more and more average Americans - and Europeans - that paper currency may not be the safe haven that many believed.

Fearing inflation, American investors have poured record-breaking amounts of money into physical gold, turning to one of the world's oldest stores of value.

In Asia, the important role gold bullion, jewelry and coins play in preserving wealth has been remembered better than it was here, across the Pacific. Asian investors have seen the devastating effects of inflation and currency crises first hand; the 1997 Asian Financial Crisis wiped out decades of progress in some nations

The collapse of the housing bubble was a pivotal moment for many Western gold investors. It's important, then, that China appears to be in the middle of its own real estate bubble.

Journalists in China report vast construction projects with no tenants, banks with enormous, hidden portfolios of non-performing loans and a government determined to wallpaper over the cracks in many circumstances.

As the world's largest producer of gold, China offers investors amazing access to the physical gold markets. If even a fraction of Chinese investors turn to gold in the same way that Americans have in the past few years, the global market could see an astonishing tightness in supply and further increases in the price of physical gold.

Gold101.com - Silver, gold prices rise while equities continue to slide

The trend that began yesterday continued today, with precious metals gaining while equity indexes slumped to fresh lows. The Dow Jones Industrial average started the day down about 1 percent, and wavered throughout the session.

Meanwhile, physical gold prices started strong and continued to improve. At 2:30 p.m. EST, gold was up nearly 1.5 percent to $1,216.80 per troy ounce. Silver snapped the decrease that began yesterday, rising 0.69 percent to $18.03 per troy ounce.

Economic uncertainty and worries increased, with higher initial jobless claims in the last week than analysts forecast. According to a Bloomberg News survey, jobless claims for the week ending August were expected to drop by 19,000 to 465,000.

Instead, claims rose 2,000 to 484,000 for the last week, the highest level in almost five months. In addition, supplemental unemployment benefits claims jumped by 1.34 million, driven by a government extension of the program.

The rising trade deficit became another source of concern. The gap between imports and exports rose to its highest level in 21 months in June, up 19 percent from May. In total, the trade deficit was $49.9 billion, far above projections of around $42.7 billion.

The size of the gap was largely driven by demand in the United States for goods made abroad, like iPhones or televisions. China's surplus grew as well, which means that the U.S. will probably soon begin pressuring China to allow the renminbi to appreciate against the dollar and other global currencies.

"A lot of the pickup in demand will go toward imported goods rather than domestically produced goods," Michael Moran, an economist at Daiwa Capital Markets, told the Wall Street Journal.

Combined with falling employment, the trends don't look good for the domestic U.S. economy. The current state of affairs is unsustainable, with the government tipping over into unsustainable debt even as many of our dollars go overseas to buy foreign-made goods.

No one can figure out whether it is inflation or deflation we need to be worried about, and bonds are giving slim, sometimes negative yields.

In such times, physical dealer gold and silver represent havens - assets which will preserve value as others see their worth crumble.

Marc Faber: The Fed will create a "final crisis"

Marc Faber, a noted Swiss investor and economist of the Austrian school, says that the Federal Reserve is underestimating the fundamental strengths of the U.S. economy, and has no idea what it's doing, reports CNBC. The result, says Faber, will be a devastating inflation shock that will precipitate a "final crisis" and wipe out many investors who believe too strongly in the safety of bonds and cash.

Famous for his Gloom Boom & Doom Report, Faber is a classic contrarian, who told his clients to bail out of the stock markets a week before Black Monday in 1987.

"Investors should have listened to me already six months ago when I wrote that the Fed will continue to monetize … they will print and print and print until the final crisis wipes out the whole system," Faber told CNBC in an interview.

The Federal Reserve has a policy meeting scheduled for August 10, and the investors wary of inflation suspect that Chairman Benjamin Bernanke may recommend more quantitative easing, which could see the Fed buying up U.S. Treasury notes or mortgage-backed bonds.

Faber actually sees more safety in equities than in bonds, a relatively unusual position. Mostly, though, that's just because he does't trust bonds in the slightest. Faber famously said earlier in the year that investors should by some gold, every month, forever.

The Federal Reserve tends to abandon monetary stability in favor of trying to stimulate the economy by printing money, so today's job figures are strongly supportive of anti-inflation hedges like precious metals. As trading came to a close today, gold was back up above $1,200, trading at $1,208.10 per troy ounce. Silver also rose, climbing to $18.475 per troy ounce.

At the end of 2010, the total U.S. national debt will stand close to $14 trillion, so it's not hard to see why faber might be bearish on bonds. His view on the economy's strength is a bit puzzling, though, given the recent job losses in June and July.

Despite his somewhat eccentric tendencies, Faber has been a relatively reliable prognosticator, fairly good at realizing when things will get bad, if not always when they may improve.

If he thinks the Fed is on a crash course with inflation, then, it might be time to listen.

Superior Gold Group - Gold prices rise as US unemployment and jobs figures disappoint

A lot of people expected disappointing jobs figures from the Department of Labor today - and they were vindicated. The U.S. economy shed 131,000 jobs in July, mostly temporary government employees employed by the 2010 U.S. Census. In addition, the department revised its June figures downward by nearly 100 percent; it said that June saw 221,000 jobs disappear, not 125,000.

If there was a bright spot for the economy, it was in the private sector. Led by small and medium-sized businesses, private employers added 71,000 jobs in July, missing analysts' forecasts of 90,000 added positions.

The news slammed equities markets - which lost between 0.5 and 1 percent - and the dollar, which slipped over 0.75 percent against the euro and nearly 0.5 percent against the British pound.

The greenback's drop and investors' desire for a haven asset helped boost the precious metals. Gold climbed around 0.9 percent to trade at $1,209.70 per troy ounce, pushing it decisively back above that critical $1,200 level. Silver did even better, rising 1.2 percent to $18.54 per troy ounce.

Today's results confirm that in times of economic uncertainty and distress, physical dealer gold and silver present an attractive alternative to bonds, blue-chips and fiat currency as a store of value.

Superior Gold Group - Indian silver imports look to recover, driving up prices

India is the world's largest consumer of gold and one of the largest consumers of silver, so the trends in its imports tend to have a strong impact on the markets. With that in mind, the news from MineWeb that silver buying in the subcontinent is looking to have a strong recovery represents good news for the metal.

Bullion traders told the magazine that this year, India will buy far more than than the 1,000 tons of silver it bought last year, possibly as much as 1,500 tons. Much of the demand is due to silver's role as an investment and a hedge against inflation.

In many Asian countries, particularly India, investors are cautious of the dangers of inflation or national crises, and stockpiling precious metals like physical gold and silver is a longstanding tradition. There is also a significant component of demand for consumer use, primarily in jewelry. It is the manufacture of jewelry that consumes the majority of India's physical gold imports.

In New York trading, the price of silver futures rose by .46 percent to $17.80 per troy ounce.

Superior Gold Group - Gold and silver prices rise as dollar weakens

Thursday started promisingly for commodities traders, as the price of almost every major metal, energy, agricultural and industrial commodity gained in early trading. The weakening dollar was one of the key drivers, as the greenback fell almost .65 percent relative to the euro and over 1.5 percent relative to the Swiss Franc.

The Federal Reserve's Beige Book survey found several signs of a slowing recovery, with stagnation most pronounced in the Midwest. Both the Cleveland and Kansas City Federal Reserve districts said that economic activity was unchanged over the last seven weeks.

One of the most worrying indicators was the drop, reported earlier in the week, in durable-goods orders. As consumers buy fewer big-ticket items, the inventory restocking and capital investment that many businesses have engaged in may backfire. The problems could become especially severe if retailers end up having to cut prices and endure razor-thin margins in order to sell goods like televisions and washing machines.

All of these effects battered investor confidence in the dollar, and many sought out alternatives. Silver and gold were both beneficiaries, with the white metal gaining 1.1 percent to $17.64 per troy ounce, while the yellow metal rose .34 percent to $1,116.40 per troy ounce.

In addition, currency traders boosted their confidence in the euro, driven by a drop in Germany's unemployment figures and consumer sentiment improved across the euro-zone. Others saw cause for optimism in news that the Italian parliament approved a plan that would allow the European Union rescue fund, called the European Financial Stability Facility to rise money by selling debt.

The EFSF is the lynchpin of the 750 billion-euro rescue package designed to backstop the incipient crisis in the sovereign bonds of Greece and other shaky euro-zone nations. Unfortunately, the solution to Greek indebtedness appears to be even more debt, in a different configuration with different backers.

Overall, the picture remains as murky as ever. No one is quite sure what will emerge from the euro-zone, and the finances of the states in the U.S. are equally troubled. Any economic recovery feels tepid at best. New asset bubbles may be forming in Chinese real estate and emerging markets.

All it will take to to jolt the price of precious metals like physical gold and silver is another shock to the system, and there are plenty of vectors from which such an unpleasant surprise could arrive. Dealer gold is still the superior choice for the prudent investor concerned with preserving value.

Superior Gold Group - Asia stocks rise after Europe 'stress tests'

Asian stocks pushed higher on Monday, shrugging off worries about Europe's banking stress tests and buoyed by Wall Street, with most markets displaying cautious optimism.

Tokyo ended up 0.77 percent, with exporters helped by a weaker yen and optimism about upcoming earnings results after a report by the Nikkei business daily that Sony had probably swung to the black in the first quarter. The Topix index of major firms was up 0.55 percent.

While many analysts questioned the credibility of Europe's banking "stress tests", which came out on Friday, investors generally took the results in their stride, as did European markets when they opened later.

"Much of the negative news on Europe's financial and economic conditions was priced in since May so the market's focus is starting to shift away from the issue and on to earnings," Yoshinori Nagano, senior strategist at Daiwa Asset Management, told Dow Jones Newswires.

Sentiment around the Asia-Pacific region was helped by last week's solid gains on Wall Street, where the Dow reached its highest level in a month.

Hong Kong closed up 0.12 percent, adding 24.58 points to 20,839.91, lifted by optimism about upcoming earnings results from heavyweights such as HSBC and Hang Seng Bank.

Sydney was up 0.62 percent, closing at 4,486.1 after touching a four-week high of 4,503.1.

"I think the uncertainty about things like the European financial system and US corporate earnings is continuing to recede," said Macquarie Private Wealth Division director Martin Lakos.

Seoul ended up 0.63 percent, buoyed by data showing that South Korea's economy grew by a faster-than-expected 1.5 percent in the April-June quarter from three months earlier.

South Korea's central bank said growth in the nation, a recent economic high-flyer, had returned to pre-crisis levels, although global uncertainties remained a concern.

Shanghai closed up 0.65 percent at 2,588.68 after a nervous start, as confidence grows that Beijing will refrain from further economic tightening measures. Metals stocks also provided momentum after a report that the central government planned to limit production of non-ferrous metals.

Encouraging company earnings propelled Wall Street higher, with the Dow Jones index jumping 3.2 percent over last week.

However US economic statistics this week could temper optimism about the world's largest economy, including an advance estimate of second-quarter economic growth due on Friday.

Much attention had been focused on what European stock markets made of last week's stress tests, with initial reaction appearing positive. The results found that of 91 European Union banks only seven -- five in Spain and one each in Germany and Greece -- were under-capitalised and unprepared to absorb a new financial crisis.

Critics said examiners had set the bar too low to assess the capacity of European banks -- many of which hold bonds issued by debt-ridden governments -- to overcome fresh financial pressures.

But along with European markets, the euro edged up against other currencies in Asia, trading at 1.2910 dollars, compared with 1.2906 in New York late Friday. It temporarily hit a seven-week high of 113.49 yen before easing back to 112.98 yen, compared with 112.80 in New York.

The dollar rose to 87.51 yen from 87.36.

Oil prices extended gains, with New York's main contract, light sweet crude for delivery in September, up nine cents to 79.07 dollars a barrel, while Brent North Sea crude for September delivery rose 19 cents to 77.64 dollars.

Gold closed at 1,192.00-1,193.00 US dollars an ounce in Hong Kong, down from Friday's close of 1,199.50-1,200.50 dollars.

In other markets:

* Singapore closed down 0.22 percent, or 6.48 points, at 2,966.99.

Agribusiness group Wilmar International and oil rig maker Keppel Corp both added four cents to reach 6.36 and 8.98 respectively.

* Taipei closed up 0.34 percent, or 26.23 points, at 7,787.45.

Formosa Petrochemical Corp lost 1.68 percent after a blaze broke out at one of its three refining units, potentially causing tens of millions of US dollars in damage. MediaTek was up 2.13 percent.

* Wellington closed 0.87 percent, or 26.28 points, higher at 3,021.18.

Investors focused on the upcoming reporting season. Telecom closed one cent higher at 1.97 dollars, Fletcher Building was 10 cents up at 7.73 and Contact Energy rose three cents to 5.69.

* Manila ended flat, losing 2.07 points to close at 3,414.03. Philippine Long Distance Telephone Co. was unchanged at 2,430 pesos. The installation of a new software system caused glitches that delayed the release of closing figures.

* Kuala Lumpur closed up 0.46 percent, or 6.14 points, at 1,351.82.

Conglomerate Tanjong lost 1.40 percent, builder SP Setia shed 2.90 percent, while leading bank CIMB gained 3.30 percent.  

Superior Gold Group - Seven Europe banks fail stress test, credibility questioned

Seven European banks are not strong enough to withstand another recession and would face a capital shortfall of 3.5 billion euros ($4.5 billion), far less than expected, stoking fears the keenly-awaited stress tests were too soft.

While the modest findings cast doubt on the credibility of the bank tests -- released on Friday in a bid to restore investor confidence -- with the European economy apparently improving fast, some analysts said that may not matter.

Five of Spain's smaller regional lenders, known as cajas, failed the test and their recapitalisation will almost complete a state-funded drive to consolidate the country's network of its unlisted savings banks. They need 1.8 billion euros, the Bank of Spain said.

Banks in Germany and Greece were also seen as weak spots and in need of restructuring, but state-owned Hypo Real Estate was the only German lender to flunk and state-controlled ATEbank was the only Greek bank to fail.

Analysts had expected five to 10 banks to fail the test, but estimated the capital shortfall could be over 30 billion euros.

As expected, no big banks failed the health check.

"Arguably the failure here is not the banks concerned, but the test itself. There is little evidence that the tests have been applied consistently and there is a distinct lack of credibility, making this a wasted opportunity," said Richard Cranfield, Chairman Global Corporate Group at Allen & Overy.

The Committee of European Bank Supervisors (CEBS), a previously little known group with 25 staff at a small London office that coordinated the process, said its test was more severe than the US process.

Europe tested how 91 banks would cope with another recession and losses on government debt after the Greek crisis hit markets and raised fears the euro zone could unravel.

It aimed to repeat a health check on US banks last year that helped restore investor confidence and underpinned a recovery by bank shares.

With latest data showing signs of a strengthening recovery in Europe, banks could find themselves in a healthier position than expected, perhaps explaining the muted market reaction.

The euro fell against the dollar as some investors cast doubt on whether stress tests were tough enough but German government bond futures fell on relief that they threw up no nasty surprises. European bank shares ended up on the week, before the results were announced, and the cost of insuring the debt of most European banks fell afterwards.

"Despite questions about transparency and how the Euro stress tests don't measure up to the US tests last year, I think these tests will start to put these euro zone concerns behind us," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.

"There might be some initial disappointment leading to some selling on Monday when European markets reopen, but the market will soon get over it."

Government bonds disclosure

Under the most severe scenario banks were tested on how they would cope with a moderate recession this year and next, with additional losses on government bonds thrown in.

As part of the process many of the banks revealed all of their sovereign debt holdings, but some dodged full disclosure, raising further question marks. Any bank whose Tier 1 capital ratio falls below 6 percent by the end of 2011 failed the test, and would be expected to raise funds to make up the capital shortfall.

Of most concern to investors was that government bond losses were only applied to trading books, and not hold to maturity bonds, as the test did not consider there was a risk of any sovereign default.

Banks' holdings of government bonds were subjected to a 23.1 percent loss on their Greek debt, a 12.3 percent loss on Spanish bonds and a 4.7 percent loss on German debt, all based on 5-year bonds and their value at the end of 2009.

Spain, Germany in spotlight

The hunt for weak spots in European banking has focused on Spain's regional savings banks, as well as regional German lenders, known as landesbanks.

Spain and Germany have set up funds to help weak banks recapitalise and Spain wants more cajas to merge.

The Spanish banks to flunk were Banca Civica, Diada, Espiga, Unnim and Cajasur.

The worst case scenario included a 28 percent fall in Spanish house prices during 2010-11. Banks that came close to failing with a Tier 1 ratio of less than 7 percent under the most stressed scenario included Germany's Deutsche Postbank, Greece's Piraeus, Allied Irish Banks, Italy's UBI Banca and Spain's Bankinter.

"The banks that have scraped through may have more of a challenge on their hands and they may be the ones the market focuses on," said Cranfield.

Last year's US bank test helped draw a line under worries about the sector there and Europe's attempt to match it has faced splits in the 27-nation EU about how to model the test and how much to divulge.

European banks have also already raised about 300 billion euros since the start of the crisis, whereas the US tests kick-started the fundraising.

Banks in Ireland, Greece, Spain and Germany have also already received funds or are in the process of doing so, possibly pre-emptively to help them pass the test.

source: reuters  

Superior Gold Group - NPR asks: 'Can the European welfare state survive?'

An episode of Morning Edition, airing on National Public Radio, asks a question that many Europeans must be asking themselves - can their generous welfare states, with the promise of gold-plated healthcare, childcare and pensions for all, survive increasing levels of debt and slowing growth?

From Ireland to Italy, Europeans became accustomed to a "cradle-to-the-grave" state offering benefits that most Americans could only dream of. In return for high taxes and inflexibility in the labor markets, citizens of European nations got to retire early, go to the doctor for free and take years off for maternity leave.

Now, however, the bill is coming due. As Nicolas Doze, a French economics commentator, told NPR, "our social system in France alone has accumulated more than 100 billion euros in debt, and it just isn't viable anymore. Today it survives thanks to one thing: France's AAA credit rating and our ability to keep borrowing to pay for the social programs."

With legislation in the U.S. pushing the country closer to the European model, sharper increases in debt seem inevitable. Once new entitlements are put in place, it becomes harder to scale them back.

NPR reports on the hundreds of thousands who protested in France over President Nicolas Sarkozy's proposal to raise the retirement age by just two years - from 60 to 62. Yet regardless of how much people protest, there are budget shortfalls, which will have to be paid.

Here, state governments are learning the hard way about excessive debt. Illinois recently had to sell $900 million in taxable municipal bonds, even as it stops paying workers, social services and hospitals.

One thing that indebted governments won't do - whether local, state or national - is stop paying the interest on their bonds. It might seem callous to cut off benefits and payments to public institutions, but if bondholders decide that the debt is too risky, the credit markets could seize up entirely.

All of these circumstances combine to create an environment where currency inflation might seem like the easy way out. Printing money makes it easy to pay the debt, but it leads to high interest rates, creates problems with selling new bonds and devalues the hard-won savings of workers and companies.

Still, if inflation is coming, it makes sense to prepare by compiling a stock of physical gold and other precious metals, which are almost universally regarded by investors as the perfect hedge against inflation.

Superior Gold Group - Gold prices edge higher as dollar looks shaky

An unexpected drop in a key New York manufacturing index contributed to nervousness about the dollar, driving the price of gold higher on Thursday. The price of gold for immediate delivery gained $1.60 to trade at $1,208.40 per troy ounce.

Also on Thursday, Goldman Sachs increased its own 12-month forecast for the price of physical gold, bumping it up 1.5 percent to $1,350 per ounce.

Despite recent rallies in equities and some increased risk-taking with regards to Europe, traders have struggled to push stock indexes up on good news and shown signs of panic at every disappointing figure. Corporate profits are doing well, but economic indicators - with employment being the most significant - continue to rise sluggishly or even decline.

The employment situation isn't likely to get much better, either, as hundreds of thousands of census workers are laid off over the next six months.

Official figures might not reflect the disastrous situation, though - as the country approachs the the second anniversary of the disastrous 2008 market crash, many Americans laid off in that year will come to the end of their 99-week unemployment benefits, taking them off the official statistics.

Many analysts think buying dealer gold with spot prices near $1,200 per ounce represents a great opportunity to get into the market before prices spike once more on economic and inflation concerns.