Is it all just a Ponzi scheme?

December 30, 2009

By: Eric Sprott & David Franklin

In our May/June Markets at a Glance, “The Solution…is the Problem”, we discussed how much debt the US government would need to issue in order to balance the budget for fiscal 2009. We calculated they would need to sell $2.041 trillion in new debt – or almost three times the new debt that was issued in fiscal 2008. As a thought experiment, we separated all the various US Treasury owners and asked our readers whether each group could afford to increase their 2009 treasury purchases by 200%. In the end, we surmised that most groups couldn’t, and prepared our readers for the worst.

Almost seven months later, however, nothing particularly bad has happened on the US debt front. There have been no failed auctions, no sovereign defaults, no downgrades of debt and no significant increase in rates…not so much as a hiccup in the treasury market. Knowing what we discussed this past June, we have to ask how it all went so smoothly. After all – it was pretty obvious there wasn’t enough buying power to satisfy the auctions under ‘normal’ circumstances.

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Gold is the Decade’s Best Performer

December 28, 2009

SAN ANTONIO (U.S. GLOBAL INVESTORS) – Happy holidays wishes to all, with a special season’s greetings to the permanent gold skeptics.

The decade that ends Thursday is on track to be the worst in recorded history for the U.S. stock market – worse than all of the many boom-and-bust cycles of the 19th century, worse than the Great Depression-era 1930s, worse than the recession-plagued 1970s.

The S&P 500 opened the decade at 1,469.25 on January 3, 2000. When the market closed on Christmas Eve, the S&P 500 stood at 1,125.46 – with four trading days left in the decade, the index’s annual performance over that span is negative 2.6 percent.  The Dow Jones Industrials has lost about 1 percent per year over the same period, and the Nasdaq Composite is down a whopping 5.9 percent annually. When adjusted for inflation, the 10-year returns for these indices are even lower.

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Adjusted for Inflation, Dow’s Gains Are Puny

December 28, 2009

Many investors realize that stocks have been among the worst investments of the past decade. But they may not realize quite how bad the decade was, because most people forget about the effects of inflation.

Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels. Using today’s dollars and starting at 10520.10, the Dow would have to surpass 13460 to get back to its 1999 level in real, inflation-adjusted terms.

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Year-End Gold Rush for Beijing Residents

December 28, 2009

Gold jewelry sales jumped more than 30 percent over the weekend in Beijing, as bargain shoppers swarmed the city’s major jewelry stores on year-end promotions.

In a collective sales campaign after international gold prices fell, stores including Caibai, Gongmei, and China Gold reduced the pure gold’s price by as much as 9 yuan per gram, with more Christmas-themed jewelry designs for shoppers to choose from.

According to the Beijing Morning Post, China National Gold has doubled its sales to 40 kilograms per day. Caibai, the largest gold store in China, reported 30 percent more business than last year over the weekend after it dropped the price from 278 yuan to 269 yuan per gram.

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Asia Central Bankers Say It With Gold

December 28, 2009

Strong dollar equals falling gold price, right? Except, perhaps, when Asia’s central bankers are involved.  Three-quarters of the region’s $5 trillion in foreign-exchange holdings are parked in U.S. dollars. A desire to diversify away from the greenback, though, has become evident. The dollar’s share in reserve accumulation dropped to less than 30% in the third quarter, Barclays Capital estimates.

Admittedly, knowing exactly what is in central-bank reserves takes guesswork, but analysts think most diversification in 2009 favored the euro.  Recently, gold has turned up as a second alternative. The Reserve Bank of India stirred markets when it revealed it purchased 200 tons of gold from the International Monetary Fund in October, increasing gold’s share of central bank reserves to 6.4% from 3.6%.

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Still bullish on gold – $1500 in 2010 and $2000-$3000 longer term

December 24, 2009

Specialist gold analyst Jeff Nichols, is still bullish on gold despite the recent price correction and would not be surprised to see $1500 gold next year and higher levels to come.

Author: Jeffrey Nichols

Gold has enjoyed a long and enviable climb, rising some 380 percent from a cyclical low near $255 an ounce in April 2001 to an all-time high just over $1,225 early this month.  Nevertheless, the bull market in gold has a long way to go – both in magnitude and direction. 

Looking ahead to 2010, don’t be surprised to see gold trade at $1,500 or higher sometime during the New Year.  And that’s not all:  I’ve been telling clients that the yellow metal’s price will continue its long-term upswing for at least a few more years, very likely reaching $2,000 an ounce . . . and possibly hitting $3,000 or more before the gold price cycle begins its next long-term cyclical “bear” phase. 

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Gold rises 1.5% as U.S. dollar falters

December 24, 2009

Greenback dips, easing from three-month highs

Humeyra Pamuk

Thursday, December 24, 2009

London — Gold prices rallied more than 1.5 per cent on Thursday to above $1,100 an ounce as the dollar lost ground and on the back of robust investment flows betting on higher bullion prices.

Other precious metals took their cue from gold’s strength with both palladium and platinum rallying to their highest in about a week at $375 an ounce and $1,4560.50 an ounce respectively.

Spot gold was at $1,104.05 an ounce by 1035 GMT, versus $1,087 an ounce late in New York on Wednesday. Bullion tumbled to a seven-week low of $1,074.10 an ounce earlier this week.

Analysts said the price moves were partly exaggerated due to low liquidity because of the Christmas holiday period, but the fundamentals which sent gold to an all-time high of $1,226.10 an ounce in early December were also still in place.

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