Vinny’s Blog

Do you remember the post I made over the weekend why USD is up ?

If not please click here to read it. Without reading that post this one is probably not going to make much sense to you.

–If you remember in that post there were 3 arguments about value of USD. One article suggested it’s manipulated, another one showed technical reason and my own interpretation of news showed critical demand and supply differences for gold which is always in adverse position of USD.

Does not matter which argument you follow or pay attention to they all seem to point to same outcome USD value should decline.

Yesterday governments across world pumped in trillions of dollars to revive the markets, markets responded very well yesterday on the planet almost every market turned positive. Now, if the 2nd argument in the previous post is correct that recent surge in USD value is due to short covering, then after yesterday’s plenty of $$ liquidity should have caused USD value to decline…did it ?

Fed Releases Flood of Dollars, Market Rates Fall (Update3)
By John Fraher and Simon Kennedy
Oct. 13 (Bloomberg) — The Federal Reserve led an unprecedented push by central banks to flood the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_5OrlUxIIYM&refer=home

-Is there any truth behind the second argument has USD value declined now that more $$ are available ? Yes it did !

Dollar slips vs. euro, pound
European currency climbs as governments take aggressive steps to combat the world financial crisis.
By Ben Rooney, CNNMoney.com staff writer
October 13, 2008: 11:44 AM ET
http://money.cnn.com/2008/10/13/markets/dollar/index.htm?postversion=2008101311

-However - It’s too early to conclude. Markets are very volatile, if this trend continues than you know where it’s going….so keep watching that trend….

In the same post (previous post) I made my own analysis where I grouped information about Gold’s demand and supply. The articles I came across clearly showed demand for gold was exceeding and supply side was contracting. Today I searched and found few more articles that suggest that demand side trend is strong.
When times are tough and confidence in economies erode as the case is these days people across the globe tend to look at gold buying as insurance that may protect them during tough times…check this out…

Gold ETFs rise by over $3 billion in just five days - how much was done Over the Counter?
Valuation is much more instructive than just tonnage. Net inflows into the major gold funds over the quarter exceeded $3 billion over the quarter - with one particularly exciting week in September. Silver funds also saw substantial activity.
Author: Rhona O’Connell
Posted: Wednesday , 01 Oct 2008
http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=63581&sn=Detail

Investors fly to safety of gold ETF
SPDR Gold Shares rakes in $4 billion; metal backing trust hits record levels
By John Spence, MarketWatch
Last update: 12:52 p.m. EDT Oct. 2, 2008
BOSTON (MarketWatch) — The value of an exchange-traded fund tracking gold prices rose by about $4 billion in September as investors scurried for cover amid
the worsening credit tempest and uncertainty over a potential bailout package.
http://www.marketwatch.com/news/story/skittish-investors-pour-billions-dollars/story.aspx?guid={235E3C87-C4C7-4224-9E54-BA900F8DB8CB}

Austria witnesses new gold rush Sunday, 12 October 2008 09:01 UK
By Bethany Bell
BBC News, Vienna
There’s a new gold rush.
The financial crisis is prompting people to look for safer forms of investment than stocks and shares.
Sales of Vienna Philharmonic gold coins have gone up by more than 230% since last year.
http://news.bbc.co.uk/2/hi/europe/7663753.stm

Investment | 08.10.2008
Germans Stockpiling Gold Amid Market Panic Bars of gold
Großansicht des Bildes mit der Bildunterschrift: Gold dealers can’t keep up with the demand
German gold dealers have stopped taking new orders for the precious metal as demand has skyrocketed. Gold is seen as a safe investment during the market turmoil.
http://www.dw-world.de/dw/article/0%2C2144%2C3698865%2C00.html

Wealthy investors hoard bullion
By Javier Blas in Kyoto
Published: September 30 2008 19:00 | Last updated: September 30 2008 19:00
Investors in gold are demanding “unprecedented” amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.
Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
http://www.ft.com/cms/s/0/bf8246aa-8f13-11dd-946c-0000779fd18c.html

Hoarding pushes gold leasing rates up
Price spike forecast as banks stockpile bullion
Jonathan Ratner, Canwest News Service
Published: Friday, October 10, 2008
The cost of borrowing gold has surged to its highest level since May 2001 as central banks appear to be hoarding the precious metal.
The one-month lease rate for gold has soared more than threefold, to 2.68 per cent, in just more than a week and the parabolic move — symbolic of the expanding reach of the credit crunch — has experts labelling it another bullish sign for bullion. Prices continue to hover around $900 U.S. an ounce after rising 22 per cent in the past year.
http://www.ft.com/cms/s/0/bf8246aa-8f13-11dd-946c-0000779fd18c.html

-Gold demand has reached levels that it’s pushing mining to double the output….
Perth Mint Doubles Gold Output on Haven Buying (Update1)
By Jason Scott
Oct. 10 (Bloomberg) — The Perth Mint, producer of 10 percent of the world’s bullion, doubled output in the past six months, joining a global push to boost production as investors seek protection from the credit crisis.
http://www.bloomberg.com/apps/news?pid=20601080&sid=asmvRlbfitV8&refer=asia

–As always I saved the best for the last…….it’s Diwali time so, talking about gold is good…and timing could not have been better. Get a load of it………..

You may know that India is largest importer of gold……there is a lot of gold in India…and still being accumulated….however gold trade is traditionally governed by local Jewelers some big and some small and 100s of middle men….the whole industry is a confusing maze but worked amazingly efficiently. I came across this article way back in 2006……

September 02, 2006 16:43 IST
India, world’s largest importer gold with over 800 tonnes of imports, is set to become a global hub for the precious metal.
“The government is taking and will continue to take all possible measures aimed at making India the gold hub of the world,” Company Affairs Minister P C Gupta told a global gold summit organised by Assocham.
http://www.rediff.com/money/2006/sep/02gold.htm

–No kidding with the amount of gold India has it should have become a hub long time ago. Indians have always been late to party…..but finally here they come…..this is going to put India and Indians on a golden map for this world.

India’s opaque gold industry gives in to change
8 Oct, 2008, 1233 hrs IST, REUTERS
MUMBAI: India’s bullion industry, known for its opaque and fragmented nature, is giving in to transparency as business houses vie for sales and consumers turn to gold as a savvy investment.
“Gold trade has come a long way since the days it was smuggled prior to 1992… now it is seen becoming more competitive and the consumers will gain,” said Nayan Pansare, an analyst who works for jewellery export houses.
The Dhanteras festival on October 26 may herald one of the biggest changes when a long-delayed spot gold exchange is likely to be launched, with the Bombay Stock Exchange, Reliance Money and Bombay Bullion Association as stakeholders.
http://economictimes.indiatimes.com/Infotech/ITeS/
Indias_opaque_gold_industry_gives_in_to_change/rssarticleshow/3573118.cms

– You still haven’t seen my Diwali wish for you. If you bought gold earlier guys…..what you’re going to read next will make you very happy…….

Gold could hit $1,500, say Merrill analysts ( Happy Diwali folks !!)
By Moming Zhou
Last update: 8:26 a.m. EDT Oct. 14, 2008
NEW YORK (MarketWatch) — Gold prices could hit $1,500 as global plans to rescue the financial industry are set to increase inflation pressures, according to analysts led by Francisco Blanch at Merrill Lynch. “The unintended consequence of the ongoing financial bailout will be a return of inflationary pressures to the commodity markets,” wrote the analysts in a note released Monday. The analysts didn’t say when gold would hit the price target. They also predicted oil prices will rise to $150 a barrel.
http://www.marketwatch.com/news/story/gold-could-hit-1500-say/story.aspx?guid=7BA5996AE5%2D3242%2D4F5B%2DAFF6%2D1A46E86D44AD%7D

–Just so you don’t think it’s one off news article…let me back this up…with some predictions made way back when market DOW was still strong(er)….by Citigroup analyst.

Posted: Monday , 30 Jun 2008
Citigroup says long-term gold price could double or even triple
Citigroup suggests that inflation and the fabrication outlook favor gold.
Author: Dorothy Kosich
In their recent Gold Commodity Update, Citigroup metals analysts John H. Hill and Graham Wark also predicted that “longer term, we believe that gold is capable of doubling or tripling from current levels.”
The Citi global metals forecasts have an upward bias, at $906/$950/1000 average in 2008/09/10.
The analysts said “secular and seasonal factors favor gold” during the second half of this year. “We remain positive on gold, based on macro and supply/demand factors. The forces that have propelled gold for 5 years are firmly in place.”

During the second quarter of this year, gold has averaged $896/oz, up 34% from the same quarter of 2007 and down 3% from the first quarter of this year. “Following a series of downside fundamental tests gold appears to have found a floor, and quietly climbed back to $917/oz.”
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=55618&sn=Detail

–Which one of your investments have paid you 34% in a year (EVER) ?
– remember USD…….timing couldn’t have been better again………looks like it’s really running out of time………..

US debt clock runs out of digits
The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount.

The board was erected to highlight the $2.7 trillion level of debt in 1989.
The clock’s owners say two more zeros will be added, allowing the clock to record a quadrillion dollars of debt.
Douglas Durst, son of the late Seymour Durst - the clock’s inventor - hopes to replace the Manhattan clock with its lengthier replacement early next year.
For the time being, the Times Square counter’s electronic dollar sign has been replaced with the extra digit required. For its part, the digital dollar symbol has been supplanted by a cheaper version - perhaps a sign of the times for the American economy.
Some economists believe the $700bn bail-out plan for ailing US financial institutions could send the national debt level to $11 trillion.

http://news.bbc.co.uk/2/hi/business/7660409.stm

Surprise - US Debt Clock runs out of numbers !!

-I will be leaving soon for a short trip overseas and may not be able to make new posts frequently………but I will try…………………….

[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]