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Getting Started in Coin Collecting

2011-09-23T14:31:00.000-04:00

When it comes to starting a coin collection, there are two key questions you need to ask yourself:

1) What kinds of coins am I going to collect?
2) How will I obtain the coins for my collection?

What kinds of coins am I going to collect?

You’d think that most collectors seriously ponder question #1 before they start collecting. Not true. I know I didn’t. When I began collecting at age nine, I collected anything that was “old” (in my case, any coin that was older than 1960) and anything that was “unusual,” (that would be any coin my Navy father brought back from a foreign country). In other words, my collection had no focus— it was a hodge-podge of “wheatback” Lincoln cents I’d gotten in cafeteria change, pre-1965 Jefferson nickels, and some 1960's coins from the Phillipines, Hong Kong and Japan. After a while, I added some “old” U.S. coins that my parents helped me buy from a local coin shop and from a Boy Scout magazine ad: a 1942 Mercury dime, a 1935 Buffalo nickel and two Indian Head cents dated 1906 and 1907.

True, my collection had no focus, no “theme.” A coin collecting purist would have told me that I SHOULD have collected with a focus in mind– perhaps a collection of Lincoln cents, every date and every mintmark, until I had a complete set. But you know what, I enjoyed my hodge-podge of a collection, and that, in my opinion, is what collecting is all about! If your collection grows astronomically in value along the way and makes you a handsome profit eventually, great. If not, the enjoyment of the hobby should be a reward anyway!

You may NOT want to begin your collection with a motley group of coins with no theme. All I can say is, beginning that way helped me to EVENTUALLY find a theme and focus: a collection of all the major U.S. coin types from 1793 to present. However, you may decide you really like one particular U.S. coin type or SERIES, say the Mercury dimes. If so, you might decide to collect every date (1916-45) AND every mintmark from the Mercury dime series. Many do collect this way and find great satisfaction in completing a series collection.

There are INNUMERABLE types of collections one can build. We’ve already mentioned the “hodge-podge,” (which I guess is a theme in itself) and the series collection. Other ways to collect U.S. coins could be as follows: denomination types (for instance, all the cent types struck from 1793 to present), odd denomination types (half cents, two-cent pieces, three-cent pieces, twenty cent pieces), a U.S. coin from every decade 1790's to present, etc. Just use your imagination!

How do I obtain the coins for my collection?
When starting a coin collection, the most common advice is to look through your pocket change– or better yet, rolls from the bank!. Which is actually good advice– you pick up coins for your collection at face value. It’s actually how I started collecting coins– looking for old “wheatback” Lincoln cents in my school cafeteria change. Not only that, today, in 2006, there’s more U.S. coins to collect from pocket change than there have been in years! Besides the old stand-bys of Lincoln cents and Roosevelt dimes and Kennedy half dollars, we now have SIX different types of Jefferson nickels, we’re closing in on 30 different state quarter designs, we have the gold-colored sacagawea dollar, and THAT will soon be joined by a series of Presidential dollars– each U.S President to get their own dollar coin!
1965 Kennedy Half Dollar, ObverseAnother way to obtain collectible coins is through inheritance. Simply put, someone in your family kept a few old coins, possibly even a collection, and those coins are passed down to you. Some of us are fortunate enough to obtain collectible coins this way, but not most of us. Even if you were able to inherit some old coins, they may not be the type you like to collect.

An exciting way to obtain old, collectible coins is to dig them up yourself! This is where a good metal detector comes in handy. And absolutely, old coins can be found this way. But it helps to be skilled at using a metal detector. Not only that, even when you DO find a good place to dig for old coins, you must secure the proper permission from the property owner! And even if you DO have a good metal detector, are skilled at using it, have found a good place to dig AND have secured permissions, it still often takes hard work and patience to find and dig up old coins.

So when it comes to obtaining older U.S. coins (pretty much any pre-1940 cent or nickel, any pre-1965 dime, quarter or half dollar) or older world coins, most of us have to buy them. This bothers a lot of folks initially (“Gee, I have to BUY my coins??”), but it shouldn’t. Any antique will cost some money, and coins should be no different. There are coins out there to meet EVERY kind of budget, and just remember, an old coin is not necessarily an expensive coin.

An entire book could be written on the art of buying coins. My advice is, start slowly, ESPECIALLY if you are eyeing your coins as a long-term investment. The more reading you do, the smarter, more informed your coin buys will be. Have fun. Make some small purchases at first of coins that look interesting to you. Then do some more reading and see if you are satisfied with your purchase. Familiarize yourself with grading-- what does a "Good" coin look like; what does a "Fine" coin look like; what does "Uncirculated" look like? This web site is an excellent place to get started. Happy hunting!

What causes prices to go up?
I will attempt to answer this question by asking another question: What causes anything to increase in value? Answer: Supply and demand. If you had a coin which was unique in all the world and no other person wanted it, then its value would be almost nothing, but if ten millionaires wanted this coin and were bidding against each other the price would be very high.

Since the beginning of coin collecting there has been a steady increase in the number of collectors or an increase in demand. By the same token there has been a steady decrease in the supply due to coins lost in fires, lost at sea, buried and never located, melted for bullion, etc. So we have an increase in demand and a decrease in supply, followed by a price rise.

In a few cases coins have decreased in value due to decreased interest in the particular series. These same coins may or may not pick up this lost value at some future date.

Article Provided by: wikicoins and Coin Docere®™ News Site

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Evaluating and Grading Coins

2011-09-15T12:04:00.000-04:00

First, the basics. Here are the coin grades from lowest to highest:

Poor
Fair (FR)
About Good (AG)
Good (G)
Very Good (VG)
Fine (F)
Very Fine (VF)
Extra Fine (XF or EF)
About Uncirculated (AU)
Uncirculated (UNC or MS-xx)
Proof

For further clarification, “Proof” is not technically a grade" – it’s essentially an Uncirculated coin for wear, but Proof coins have bolder strikes and a special mirror-like finish. For even further clarification, the “MS” (in connection to Uncirculated coins) stands for “Mint State”, while the “xx” stands for a numeral designation. More on that a little later.

How important is “grade” or “condition” when it comes to coin collecting? Important enough to spark off many a heated debate (and even lawsuits) between buyers and sellers, between fellow collectors, and between grading companies. Why? Because a coin’s value is directly tied to its grade. The higher the grade, the higher the market value. The difference from one grade to the next highest grade can oftentimes mean the difference of hundreds of dollars! That’s why an oft-repeated coin collecting true-ism states, “Buy the best grade you can afford!”

Originality and Eye Appeal
Let’s say you need a 1909-S Indian Head Cent for your collection. By a stroke of luck, a dealer has two of them for you to consider. One of the 1909-S cents grades XF, while the other grades UNC. They both cost roughly the same. Neither coin has a hole, rim damage or surface nicks. Which one should you purchase? Sound like a no-brainer? Clearly, you purchase the Uncirculated 1909-S, right?

Wrong!

In this case, you probably want to purchase the 1909-S that grades XF! Ok, I cheated– I didn’t give you all the information. What I didn’t tell you is that the XF 1909-S cent had obtained a natural, attractive red-brown patina over the years. The UNC 1909-S cent was a sparkling bright orange, but this color was NOT natural, as the coin had clearly been cleaned. Not only that, the cleaning job was less than stellar, as light abrasive marks from the cleaning were visible. What does this scenario tell us? It tells us that while both coins were technically the correct grade, a coin’s GRADE is only the first major step in EVALUATING a coin’s desirability.

In the above scenario, both coins were high-grade coins, though the UNC 1909-S cent was of the more desirable grade. But that’s the only advantage the UNC 1909-s cent had over the XF example. The XF cent had two huge things going for it. The first: it was original. It had never been cleaned, dipped or altered in any way. The red-brown toning developed naturally. So commit this to memory: numismatists LOVE “original.” They’ll pay more for “original” than they will for “cleaned”, “dipped,” or enhanced in any way.

Secondly, the XF 1909-S had EYE APPEAL going for it. Now this can be tricky– remember the old saying, “Beauty is in the eye of the beholder?” Well, that can hold true in coin collecting as well. In fact, many collectors might well prefer the sparkling bright orange UNC 1909-S cent over the more subdued red-brown XF 1909-S cent. But those that do will probably not be seasoned collectors. Dealers and advanced collectors will almost always see more beauty in the natural-toned XF cent than the un-natural looking cleaned UNC cent.

But “eye appeal” is not only debatable when evaluating cleaned vs. natural coins. For instance, two UNC. 19th century U.S. silver dollars can both be original and uncleaned coins. But while one survived its 100+ years as a lustery, bright-white coin, the other obtained an even, deep-purple tone. A good many expert silver dollar enthusiasts much prefer the deep-purple UNC silver dollar over the blazing-white dollar— in fact, many a silver dollar collector will pay big premiums for a mint-state silver dollar with an attractive purple, or even rainbow-colored, toning. At the same time, there are many expert silver dollar collectors who consider “toned” silver dollars to be “tarnished” silver dollars. So this is a case where beauty truly is, “in the eye of the beholder.”

Grading Terms
But it all starts with grading. In the opening of this article, I listed the basic grades. But what is a “Good” coin? What is a “Fine” coin? Well, let’s try to break them down in laymen’s terms.

POOR - a coin that can barely be identified. Virtually worn smooth. But personally speaking, this grade is WAY too generalized. A worn coin that can only be identified with a magnifying glass and bright lights is a “Poor” coin. But a coin that can be easily identified at a glance can ALSO be graded “Poor.” Such a coin is always ridiculously worn, but in my experience, a pretty wide range of wear falls under the category of “Poor.”
FAIR - most of the design and legends are worn away, but enough is visible to pretty easily identify it as to type. Date is only partially visible, if at all.
ABOUT GOOD - perhaps 60-70% of the design is visible, but still quite worn and shadowy. Perhaps a readable date, or at least a partial date.
GOOD - design-wise, legend-wise, date-wise the basics are there. Everything is still pretty worn and flattened. No intricate detail visible.
VERY GOOD - a coin that has seen a good deal of circulation, but now is nice enough to be what I call, a “no eye-strain” coin: design, legends, date easy to see, but not detailed.
FINE - now we are starting to see a bit of detail, but still a good amount of wear on the high spots of the design
VERY FINE - a circulated coin, but a coin with most of the finer detail visible
EXTRA FINE - a coin that circulated very little. MOST of the intricate detail is visible
ABOUT UNCIRCULATED - perhaps a hint of the original mint luster. Maybe circulated just enough to appear mint state, but a little dulled or dirty
UNCIRCULATED - Mint State! But here is where it gets a little tricky. All mint-states are not created equal. In fact there are eleven categories of “mint state” going from 60 to 70! MS-60 is an uncirculated coin with some bag or contact marks, while an MS-70 coin is FLAWLESS! MS-70 coins are pretty rare, even amongst coins fresh from the Mint!
Despite the fact that today, a coin-grading company can give each of your coins an official grade (for a fee of course) it is still important to learn basic grading for yourself. After all, if you intend on buying coins, not all of them will be in a professionally-graded slab– your eyes may have to do the grading! There are books and magazines out there that can give you illustration-by-illustration help in grading coins. But by in large, it takes practice, practice, practice. All kinds of tricky nuances come into play. What if you have a coin that grades XF but has a tiny hole at the top? What if your coin grades VF but is really dark and hard to see in its holder? What if one side of a coin grades Fine, while the other side grades About Good? What if the upper 70% of a coin’s obverse grades Fine, while the lower part grades Good? (Hint - in all cases, the grade should get a lower “net” grade than what you’d probably LIKE to give it).

At the same time, while you are working on your grading skills – also be working on your overall evaluating skills. What does an “original” coin look like? What does a naturally toned coin looked like? What does an UN-naturally toned coin look like? What are the tell-tale signs of a cleaned coin? These are all skills that are acquired over years. But don’t look at it as “study.” As I’ve said in other articles, coin collecting should be fun. The process of learning to grade and evaluate the coins in your collection, or coins that you intend to purchase, should also be fun. Ok, paying too much for a coin that you over-graded or evaluated too highly may not be the most fun you’ve had in the world. Still, any seasoned collector will tell you— allow yourself some mistakes in the beginning. That’s how you BECOME a seasoned collector!

PCGS Grading Process Video

Article Provided by: wikicoins

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Indian Head Half Eagle ~ Profile History

2011-03-11T12:25:00.001-05:00

The Indian Head gold pieces, including the Indian Head Half Eagle, are unlike any other coins produced before or since by Uncle Sam: their designs and inscriptions are sunken below the surface of the coins, rather than being raised.

Specifications
Designer: Bela Lyon Pratt
Obverse Design:
Reverse Design:
Edge: Reeded
Weight: ±8.24 grams
Diameter: ±21.6 millimeters
Composition: Gold (90%), Copper (10%)
Dates Minted: 1908-1929

Background
In 1908, American consumers must have been truly surprised and baffled when they got a look at the new Indian Head $5 half-eagle gold coin (as well as its identical little sibling, the $2.50 gold piece). Instead of the standard Liberty bust which had adorned the face of $5 gold coins since 1795, there was now the bust of a Indian chief in full headdress. On the reverse was an eagle in repose, instead of the standard spread-winged eagle on the reverses of previous $5 gold coins. But what was more startling than the new designs, was just HOW the new designs were rendered: instead of the standard raised design common on all previous U.S. coins (and pretty much all world coins for that matter), the relief was incuse– as in sunken BELOW the coin’s surface!

Yes, the incuse design of the Indian Head half-eagle was revolutionary, daring, innovative. But that was ok under the Teddy Roosevelt administration. After all, unsatisfied with U.S. coinage up to 1907, Roosevelt called for an artistic overhaul of U.S. coinage. No longer would U.S. coinage take a back seat to the great coin artistry of the European nations. In fact, President Roosevelt wanted coins that would compare favorably with the Greek coin classics of ancient times! So while Augustus Saint-Gauden’s super-bold relief Indian Head $10 gold coin and the Saint-Gaudens $20 gold coin of 1907 were ground-breaking pieces, Bostonian artist Bela Lyon-Pratt’s Indian Head quarter-eagle and half-eagle gold coins were ground-breaking in the low-relief sense!

History
Early on, there were indeed critics. It was said that the Indian chief on the face of the new half-eagle gold coin looked emaciated. There was also concern that the incuse design would be a haven for harmful bacteria lurking in the design crevices, just waiting to attack the fingers of all who held this new gold coin. So far as is known, no one became severely sick or died from handling an Indian Head half-eagle.

Like the previous Coronet Head $5 gold coin, the Indian Head $5 gold coin was 21.6 mm. and 8.3590 grams. In diameter, it was just a bit bigger than the U.S. nickel coin.

After 1929, the Indian Head half-eagle was never struck again. In fact, a circulating U.S. $5 gold coin was never struck again. By 1933, President Franklin D. Roosevelt took the United States off the gold standard, and indeed, it was illegal even to OWN a gold coin (unless its collectible status was apparent).

Collecting
Mintages for the Indian Head half-eagle were robust from the beginning, only falling under 100,000 on three occasions. This coin was struck at the Philadelphia, San Francisco, Denver and New Orleans mints. Only in 1909, however, was there production at the New Orleans mint, and it was a record-low production for the series with just 34,000 struck. It’s one of two key dates in the series, retailing at $2,000 in Very Fine, $3,400 in Very Fine.

Production was consistent from 1908 through 1915, but then the Indian Head half-eagle took a breather until 1929. When it returned, it returned with a vengeance: 662,000 were struck. So why then is the 1929 half-eagle the highest-priced date in the series, retailing $4,200 in Very Fine and $9,600 in Very Fine? Well, that shows how mass melting can affect the value of a particular coin– and the 1929's were apparently melted in huge numbers as our nation entered the Depression Years.

Grading
Besides the 1909-O and 1929, the other dates in the Indian Head half-eagle series cost about the same: $330 in Very Fine, $355-$365 in Extra Fine, $385-$400 in About Uncirculated, and $460-$560 in MS-60. The trick is, grading a coin with an incuse design! After all, unlike the standard raised-relief coin, the design on THIS coin was “worn down” (below sea-level, so to speak) to begin with! Still, there are points on the coin’s design in which to look for wear: the Indian chief’s cheekbones, the headdress feathers, and the feathers on the eagle’s wings.

Mints
Philadelphia Mint (No mintmark)
Denver Mint (D mintmark)
San Francisco Mint (S mintmark)
New Orleans Mint (O mintmark)

See Also
Indian Head Eagle

External Links
CoinFacts.com Indian Head Five Dollars or Half Eagle (1908-1929)
CoinCommunity.com 1908-1929 Half Eagle Indian Head
Indian Head Five Dollar Gold Half Eagles

Additional Facts:

America in 1908 was a nation in the midst of wide ranging social and economic change. Headlines of the day sound like they were ripped right from todays news. Women were banned from smoking in public in New York City. A car began production that was advertised to get 25 miles to the gallon, Henry Ford's Model T. The first "Round the World" car race was staged. New Years Day was celebrated by the famous ball dropping for the first time in New York's Times Square. And the new $5 Indian Head Half Eagle gold coin, as well as its smaller sibling the Quarter Eagle, debuted in November 1908 to great controversy.
President Theodore Roosevelt had determined it was time for the nations coinage to change and become more beautiful. The well known sculptor Bela Lyon Pratt designed the obverse and reverse for the Half Eagle as well as the smaller Quarter Eagle. And the design was controversial from the start. It didn't look like the typical American gold coin with its incuse, or sunken, design. Complaints were made that the portrait of the Native American model appeared emaciated. Banks complained the gold coins were difficult to stack and would be too easy to counterfeit. It was even claimed by some that the coins design would harbor dirt, germs and disease making them a hygiene problem, all of which proved untrue.
Roosevelt let the coins production move forward as planned despite the complaints and the complainers. The $5 Indian Head Half Eagles production lasted only a few, short years from 1908 through 1916. It was resurrected again in 1929 with a production run of 662,000 pieces but the majority of those were destroyed before ever leaving the mint. It was the last time a $5 Half Eagle gold coin was to be minted for circulation in the United States. From the time American gold coins were first minted in 1795 to 1916 the $5 gold coin only missed production in 3 years, 1801, 1816 and 1817. It was one of the most successful denominations produced by the U.S. Mint.
Today, the $5 Indian Head Half Eagle is one of the most popular collectible American gold coins. It is relatively inexpensive when compared with its big brother, the $20 St. Gaudens Double Eagle.
The obverse features a proud Native American facing left and wearing a War Bonnet. Around the obverse are 13 stars and the word LIBERTY featured at the top. At the bottom is the year produced and just above the year are the initials of Bela Lyon Pratt. A standing Eagle dominates the reverse of the coin standing on a bundle of arrows. Around the circumference is UNITED STATES OF AMERICA, to the left of the Eagle is E PLURIBUS UNIM, to the right the motto IN GOD WE TRUST. Physically the coin is 21.60 mm in diameter, weighs 8.359 grams and is .900 pure gold. There are key dates that stand out in this series. Obviously 1929 is one, followed by the 1909-O and 1911-D.
Because of its design it is somewhat difficult to be graded correctly, especially by those unfamiliar with its unique design, because it doesn't have the traditional high spots where you'd normally look for wear. That's why it's important to look for coins that are graded by either PCGS or NGC, or that you know and trust the person from where you are purchasing the coin.
These beautiful American gold coins enjoy a very strong following and sell quickly, especially in certified mint state or about uncirculated condition. They are a great addition to anyones coin collection. The $5 Indian Head Half Eagle is far more popular today than during the time it was produced.

Article Provided by:

wikicoins and Coin Docere®™ News Site

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Legend Numismatics Early March Rare Coin Market Report

2011-03-08T15:21:00.000-05:00

By Legend Numismatics

A MAJOR ROAD BLOCK!
We added up all the numbers for February and were shocked-Legend had its worst February in about 7 years! And we do VERY MUCH feel this is a good market. Understand, this is a slump by Legend standards (most dealers would be thrilled to run half the numbers we do). It ABSOLUTELY was the market that caused our lackluster results-even though there were no negative impacts and Gold actually ran up.

The problem we have been fearing for the past year or so finally nailed us-WE RAN OUT OF NEAT COINS TO SELL. Since the year started, we have SOLD an amazing amount of rare high grade coins. Do not get us wrong, we do indeed have some of the neatest coins for sale in the marketplace at any given time, but what we ran totally dry of was the specific coins, especially for Want Lists. At the end of February in particular (long after our FUN NEWPS were all sold) we could not find anything of significance. Also, having a large amount of NEWPS creates a buzz and interest on our other coins. We realized our NEWPS are coming in at levels of up to 60% of how much we used to post. In the long run, that’s bad for our business. So this week we elected to post a total of 3 NEWPS. 2 coins are “bread and butter” while the 3rd definitely is spectacular. In the future, we will try our best to continue to post NEWPS starting every Sunday night so long as we have at least one killer rarity (we used to post NEWPS if he had at least a dozen or more coins, how the tide has turned).

GOLD
All we can say, gold is being gold. When there is fear, it rises. That’s what just happened. Expect prices for gold to remain strong for a long time (even if the Libyan crisis is resolved soon). People are still buying generics and especially BETTER GOLD coins for their collections. We are more comfortable with gold now. We had predicted and then watched a small ‘correction” happen earlier this year. Now we think the gold market is poised for a rally more so than sharp volatility.

CONGRATULATIONS TO TOM BENDER
We wish to congratulate our friend and long time customer Tom Bender (of Indian Cant and Lincoln Cent fame) on his completion of a spectacular GEM PR $3 Gold Collection. Everyone (including PCGS) was shocked that not only is this set the FINEST KNOWN (beating the estimated sets from years back), but this is the first PR $3 set ever registered (and that’s over 25 years).

Ever since the FUN 2005 gold Rush Collection (when Tom started the set with the 1862 from that sale), we were hard at work helping him build this incredible set. Our fondest memory was of the 3 year intense effort negotiating to buy the 1856 PCGS PR65+ Deep Cameo from a very “value oriented” collector. It happens to be Toms favorite coin. The quality of this set is amazing.

The great thing about this set, besides the fact it will be on display at the PCGS table in Sacramento, Tom is not one of the serial registry wonks who does what we call “makes em and brakes em”. His set will be intact for a long time and his possession as well (don’t think we haven’t already tried to buy it). If you get the chance and are at the ANA Mid Winter, stop by and see his set. Or, check it out on the PCGS Registry.

Of all the mighty sets we have ever built (and as you know, we have built many of the all time best), this set by far ranks as one of our all time favorites! It was fun to help Tom build it-and its even better to view it complete!

THE SACRAMENTO ANA SHOW
Why must they place these events in cities that are impossible to get too??? Our expectations are low for two big reasons: #1 the lack of coins, #2 we expect only a small group of east coast dealers to make the trip. Baltimore, which is a larger and proven show is only 2 weeks away. Still, watch for any nice coin in the Heritage sale to be expensive! The market overall, is strong and even a potentially weaker show won’t slow it down.

We do have a table at the show. As usual we will begin posting our NEWPS from the show Sunday night March 20th.

For the complete Market Report,

click here: Legend Numismatics

Article Provided by: Posted by Legend Numismatics on March 6, 2011 9:24 PM

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Look Carefully for Hairlines on Uncs

2011-03-08T11:49:00.000-05:00

By F. Michael Fazzari, Numismatic News
March 07, 2011

This article was originally printed in Numismatic News

I’ve been teaching and writing about coin authentication and grading since 1973. Despite this, a statement by astronaut James Lovell: “Houston, we have a problem” comes to mind. Our problem can be expressed as numismatic ignorance on the part of active coin collectors and dealers.

Let me clarify the correct usage of “ignorance” before readers consider me a pompous old man with access to pen, paper and a computer (I still write my columns by hand).

Ignorance is defined as being uninformed – lacking knowledge about a particular subject. Therefore, on one hand, I’m personally ignorant of brain surgery, the capabilities of the old Los Angeles Class nuclear submarines and card tricks.

On the other, I believe that I am an adequately informed numismatist with respect to authentication and grading who can either prove something by direct observation or knows where to look for answers – you get the idea. I’ll also be the first to admit that I learn many new things about the U.S. and foreign coins I examine each week – but that’s a good thing.

Outside of a teaching situation, it can be frustrating to deal with uninformed collectors, especially those calling themselves coin dealers. It is not hard to learn what genuine, original coins should look like. Four major grading/authentication services have their product all over the place to examine. Unless you live hundreds of miles from state or local coin shows there is ample opportunity to examine slabbed coins. Those of you out of the mainstream can gain invaluable knowledge during one week of classes at the American Numismatic Association’s Summer Seminar. The important thing is that you take that first step to educate yourself.

Recently I sat across the table from a “dealer” who was unhappy with the grades he received on a group of dollars. He kept rocking one slab back and forth in an attempt to figure out why “his MS-65” coin was graded MS-62. After a few seconds of this, I suggested that he look at the coin using the table light (two feet away) and perhaps he might want to try viewing it with a hand lens.

After examining the coin in some fashion, he replied that it had blazing mint luster and no bagmarks so it must be a higher grade. I asked him what criteria he used to grade uncirculated coins. With some coaching, I got him to say luster and marks ,but I had to supply “strike” and then combine everything under “eye appeal.”

When I asked how long he had been a professional coin dealer, he replied “20 years” and that a coin with blazing luster and no marks should grade higher than MS-62. When he handed the slab to me, I agreed that the coin had virtually no marks and blazing luster. Next, I asked him how he would describe the quality of luster on a whizzed coin. We both agreed that the word “blazing” could be used. At that moment, I think the light bulb went on in his head.

I explained that luster is the reflection of light from a surface. Looking around the room, there was luster everywhere – on the wood tabletop, the metal lamp base, my forehead and the plastic slab. The quality of the luster was different in each case. The blazing luster on his coin differed from blazing original mint luster because the surfaces were completely hairlined, possibly from a light cleaning. According to the ANA Grading Standards, a coin with continuous hairlines throughout can only grade MS-62 or lower (Note that the commercial grading standards used by many are less strict in this regard). To a trained eye, the luster on his coin looked unnatural from a foot away.

Other coins can be many times more deceptive. Have you ever encountered a blazing gem coin, possibly an MS-66 or MS-67, in an MS-63 or MS-64 holder? When this is the case, look for a patch of hairlines, especially on the obverse.

The micrograph, taken at 10X using fluorescent light, shows a patch of hairlines on the cheek of a Washington quarter. Patches of hairlines are common on uncirculated Franklin and Walking Liberty halves, Washington quarters and Roosevelt and Mercury dimes. Hairlines such as this are often missed on “raw” coins unless the coin is rotated and tipped in one specific direction to get the hairlines perpendicular to the light source.

If you don’t know the correct way to examine a coin, specifically what to look for when grading an uncirculated coin, let’s just say that ignorance is not financial bliss.

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Daily Pfennig: 03/08/11: Thoughts Of Rate Hikes Fade...

2011-03-08T11:24:00.000-05:00

By Chuck Butler
Mar 8 2011 10:34AM
www.caseyresearch.com

In This Issue…

* Euro slips back overnight…
* Oil price pinches global growth currencies…
* Aussie Business Confidence soars…
* China takes another step…

And, Now, Today’s Pfennig For Your Thoughts!

Thoughts Of Rate Hikes Fade…

Good day… And a Terrific Tuesday to you! I saw Chris last night, and he’s doing fine…. His mom appeared to be OK too… but, sometimes, in cases like this, appearances can be just that… That’s one long drive out to near where Chris grew up… I sure wouldn’t want to have to make that drive every day! We have a guy on the desk, Aaron, that drives even further! Whew! Not me… I have a saying when people tell me the marathons they run, I say, “I don’t like to drive my car that far”!

Well… it appears that the driver of the higher priced euro, the threat of a rate hike, is beginning to fade, as the single unit really slipped overnight. Now, wait a minute, Chuck… “really slipped overnight?” that doesn’t appear to be a proper statement, my friend! OK… let me amend that by saying there was some “slippage” by the euro overnight, from the 1.40 level to 1.3945, so about 1/2 – Cent. I look at this as a “pause for the cause” because it’s been a real shot upward for the single unit lately. And so, I turned to the charts to see if there was anything there for me…

So… here I go again with my attempt to be more versatile and use charts too… Remember about 6 weeks ago, when I told you about the dollar index getting to a tipping point, then it was 78.25, and if it traded through that level, and remained there for a close, we could very well see another dollar rout… And that played along pretty well… So… my charts friend, sent me a note yesterday, and said the dollar index was nearing another tipping point, this time at 76.20… a daily close below this figure could bring about a significant shift in positive sentiment toward the dollar… ( the dollar index is around 76.67 this morning, and got as low as 76.40 yesterday)

You may recall me telling you in the past that the dollar index is not a true indication of currency moves against the dollar… But, since the markets use this index as a pulse to dollar health, we use it… The dollar index indicates the general international value of the dollar by averaging the exchange rates between the dollar and 6 major world currencies… The euro, yen, pound, loonie, franc, and krona (Sweden)… The problem as I always point out here is that the euro is so heavily weighted in the index, representing 57.6% of the index… Notice that such currencies like Aussie, and Norway aren’t here… Which is why I tend to overlook the dollar index…

I talked to a reporter from Reuters yesterday, and he wanted to know my thoughts on why the euro was still in rally mode, with the announcement from Moody’s of a 3-grade, downgrade to Greece’s debt. I said that I thought that the markets were giving the potential interest rate hike by the European Central Bank (ECB) a ton of credit… It’s been so long since a major country, (U.S. , Japan, Eurozone) raised interest rates. And now that it looks like the ECB is going to hike rates, and they’ll get the “street cred”…

But, there are other things helping the euro… Remember, the euro is the offset currency to the dollar, so dollar selling reflects favorably on the euro’s value. Commodities continue to rise in price, which erodes dollar sentiment. The potential for yield spreads VS the dollar, erodes dollar sentiment, and then there’s the fact that the U.S. stock market isn’t the only stock market in rally mode these days… in fact, some of them are outperforming the U.S. Stock markets!

The “global growth” currencies of Australia, & Brazil, are feeling the pinch of the higher Oil price, while the Canadian dollar / loonie loves the higher Oil prices… But, think about this for a minute folks… the soaring Oil prices will squash the global growth that’s going on right now, especially in the Emerging Markets. So… I’m a bit concerned about global growth right now. And not just global growth… Shoot Rudy, the nascent economic recovery going on here in the U.S. will also be squashed. I see that the price of Oil dropped a bit yesterday, after climbing to $107, it has dropped back to $104… I would think just on the thoughts that the U.S. could tap the oil reserves they have to stem the rise of the price of Oil… Hey! I just want it to keep dropping!

With the euro slipping a bit overnight, the rest of the currencies that follow the Big Dog, are also slipping… Like I said above, it appears to me as though it’s just a “pause for the cause”, but then, maybe the fact that Moody’s dropped a led balloon on Greece yesterday, downgrading their debt by 3 grades, has finally sunk in, and outweighing the thoughts of a rate hike in the Eurozone. I guess we’ll have to see how this plays out today and tomorrow, eh?

A reader sent me a note yesterday, after I mentioned that I would be speaking to a reporter today about China… And the note was a link to a story that got very little air play by the markets, as if, it slipped by them in the dark of the night… Apparently, China made some announcements over this past weekend, about how they intend to allow a greater distribution of the renminbi…. (remember, renminbi and yuan are interchangeable, like dollar and buck) Here’s what can be found in the story, that received but a blurb on Reuters….

“China hopes to allow all exporters and importers to settle their cross-border trades in the yuan by this year, the central bank said on Wednesday, as part of plans to grow the currency's international role. In a statement on its website www.pbc.gov.cn, the central bank said it would respond to overseas demand for the yuan to be used as a reserve currency. It added it would also allow the yuan to flow back into China more easily."

So… now, who out there has laughed and scoffed at my calls for the Chinese renminbi to be the next reserve currency of the world? I have to think that by China making a vocal call like this, they are bound and determined to move along this road to reserve currency status, right now!

And No… it’s not going to take place this year, or next year, or even the year after that, but it’s coming, and in the scheme of things, when it happens, it will appear to have happened overnight… Remember what I said above about appearances…. For, it will not have happened overnight, it will have been going on with baby steps, like the currency swap agreements, where dollars were taken out of the terms of trade, between China and the counterparty they signed the currency swap agreement with… or like China repeatedly calling for a change in the reserve status for the dollar… and now this statement by the Chinese… it will creep up on you, and then one day, bite you in the …. Only if you have allowed yourself to become someone that did NOT diversify their investments so that their entire investment portfolio wasn’t dollar denominated!

I’m not kidding around, folks… I know tons of people that who have not taken the steps to diversification and an allocation of currencies & metals for their dollar denominated portfolio. So, when it happens, and the dollar is reduced to second place status, and we as an economy become dragged down by the fact that our dollar is no longer the reserve currency of the world… If you want to hear more, come to Las Vegas, where I’ll be talking about this, and the affects of not having the reserve currency of the world, at the Las Vegas Money Show, May 5-9, at Caesar’s Palace… (did Caesar really live there? HA!)

Whew! I was really pounding away at the keyboard there for a minute… I can get so riled up about this stuff, but then I realize that, for the most part, I write this stuff, and people read it, and delete the email, and go on with their lives, and I think, Shoot Rudy, no reason to get your blood pressure rising, and ruin another keyboard! I’ve slowed down the ruining of keyboards… but there for awhile a few years ago, I was going through them like a hot knife goes through butter! The IT people always had extra ones, for me, because they knew… But like I said, I’ve gotten better, and have only needed to replace 1 keyboard in the past couple of years!

OK… let’s go on to something else… Hey! For a chuckle… did you see what Bernie Madoff said? He said the “U.S. Government was a Ponzi Scheme” I guess the phrase about how it takes one to know one, comes to mind here, eh? I also saw a quote from the well known and respected analyst, Marc Faber, who said something about how another crisis will happen once the Fed stops their bond purchases…. I would agree with that, which is why, I think that the even though the Fed Heads are making some noise about not supporting more bond purchases, I think it’s all window dressing, or rearranging the deck chairs on the Titanic… More Quantitative Easing is in our future, folks… Can you say QE3, or QE4?

Have you seen that commercial that the U.S. government wants to ban, that shows the Chinese laughing about owning us now? Pretty truthful… They talk about how the U.S. took the road to spend and stimulate to get out of their recession, and now are saddled with exploding debt… It’s all true stuff, it’s just hard to swallow, as an American…

As I said above, the Aussie dollar is feeling the pinch of the higher Oil price… That’s pretty evident in the price action this morning, with the A$ slipping, after the news that Australian Business Confidence rose to the highest level in almost a year during February! I’m hearing reports from “on the ground” people in Queensland, where not only floods but a cyclone the size of the U.S. ripped through, leaving devastation all around, that… the business community is looking forward to reconstruction, and thus the rise in confidence… So, if we can get the price of Oil to stabilize, the A$ can get back on the rally tracks!

Then there was this…from a trader friend at RBC….

“If the Fed truly is concerned with the employment backdrop, they will most likely refrain from tightening policy until the unemployment rate enters a given sweet spot. In the past two post-recession tightening cycles, the Fed waited for the unemployment rate to get relatively close to the so-called natural rate before raising rates (within 1.13ppt in 1990s and 0.60ppt in 2000s). Several Fed officials have brought up the notion of a higher natural rate of unemployment(between 6.5-7.0%). Comparing this with our forecast of the unemployment rate suggests we will not be within this sweet spot until late 2012 to early 2013.”

Chuck again… yes… I agree, but we have to keep an eye on those Fed Heads, for they could throw us a curve at any time…

To Recap…. The rate hike talk in the Eurozone appears to have faded as the euro slips to 1.3920 in overnight trading, dragging all the currencies that follow the Big Dog, downward VS the dollar. The price of Oil also slipped downward overnight by $3, probably on the jawbone effect of tapping our Oil reserves. The global growth currencies of Aussie and Brazil are feeling the pinch of the higher Oil prices and their affect on global growth. The Emerging Markets are really feeling queasy about the higher Oil prices! And China makes a Big Announcement, that received very little air play… doesn’t that tell you the announcement is worth reading?

Currencies today 3/8/11… American Style: A$ $1.0110, kiwi .7405, C$ $1.03, euro 1.3920, sterling 1.6180, Swiss $1.0725, … European Style: rand 6.9070, krone 5.5785, SEK 6.3460, forint 195.25, zloty 2.8550, koruna 17.3975, RUB 28.25, yen 82.45, sing 1.2675, HKD 7.7890, INR 45.09, China 6.5687, pesos 12.05, BRL 1.6550, dollar index 76.60, Oil $105.28, 10-year 3.52%, Silver $36.39, and Gold… $1,435.30

That’s it for today… Man, am I tired of this cold weather! We did have March come in like a lion, so let’s hope it goes out like a lamb, especially since Opening Day here in St. Louis is going to be March 31st! My beautiful bride, who is already in Florida, tells me the weather is nice and warm there… (I think she’s rubbing it in!) I’m running a bit late today, so I need to wrap this up, and get it out the door, so I can get ready for work, and get Alex to school… Our little Christine’s youngest son, Eddie, had a fall yesterday, and used his forehead to stop himself, which caused a gash, and lots of fear for Christine… But he’s fine… a badge of honor for a boy… and with that, let’s go out there and have a Terrific Tuesday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

****

Two decades ago, Chuck Butler embarked on his extensive career in foreign investments as the Director of Operations for the Fixed Income Division of the Mark Twain Bank. He oversaw the clearing and custody of all bond department trades and Mark Twain portfolio transactions.

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Let's Get Physical. Just not Yet. By Jon Nadler

2011-03-08T11:08:00.000-05:00

Mar 8 2011 10:07AM
www.kitco.com

The action in Tuesday morning’s markets was still largely defined by the gyrations in crude oil and attentive to Libyan developments. Gold prices fell in Asia during the overnight hours as yesterday’s rally to new peaks prompted some profit-taking selling by regional players. Meanwhile, OPEC was thought to be considering ratcheting up its output of black gold not only in an effort to fill the small gap that has been created by the disruption in Libyan flows, but mainly to cool prices which have gotten clearly ahead of themselves on the back of intense speculation lately.

Spot precious metals dealings opened on a weak-to-lower note this morning, as recurring rumors of a deal between Mr. Gaddafi and Libyan rebels continued to pressure oil prices and bolstered the US dollar. Gold opened at $1,432.90 with a gain of $1.80 per ounce, while silver advanced 30 cents to start the session off at the $36.27 mark per ounce. Spot gold went into negative price tick territory within 90 minutes of the open, as a 0.40 gain in the US dollar index (to 76.92) and steadiness (but not gains on the horizon unless Tripoli trips up the market) in crude oil prompted some light selling in a market that RBC metals analysts have labeled as “crowded” and having difficulty “enticing new longs” this morning.

The noble metals however declined some more, with platinum showing a $24 loss out of the starting gate (quoted at $1,795.00 the ounce) and with palladium recording a $12 per ounce decline, easing to the $774.00 level per troy ounce. Profit-taking and some automotive sales-related fears (on the back of surging crude prices) have been manifest in the complex in recent days.

Contrary to recent, highly optimistic quotes seen the media and also contrary to popular perception, the recent rallies in gold prices have been largely built on speculative investment demand by hedge funds, rather than any significant physical offtake by average individual investors. The most recently published physical market flow analysis by Standard Bank (S.A.) corroborates this assertion. SB analysts point out that “while the political turmoil in the MENA region is inflating investment demand for gold, physical demand for the metal has been lacklustre.”

As mentioned in yesterday’s article, the main focus of funds (speculation) has been reflected by the rise the net long non-commercial gold position in the market over the past 4 weeks. On the other hand, the physical market is still in a seasonally weak time period, and with gold prices having approached $1,440 per ounce, dealers have begun to see physical selling on a consistent basis, and such selling has been outpacing physical buying, even as Mr. Gaddafi continued with his antics.

Standard Bank’s analytical team observes that “the move in the physical market, from providing support in January and early February, to providing resistance, is evident in our Standard Bank Gold Physical Flow Index (GPFI) which has recently declined from close to all-time high levels during the middle of February to negative territory last week. A negative value indicates we observe a physical market that is on net a seller of gold, while a positive value indicates we observe a physical gold market which is on net a buyer.”

The SB research team also notes that current physical gold demand is on the weak side as the market is now entering a phase wherein further rallies in gold are more likely to attract more scrap gold tonnage. While SB maintains its projections for gold to possibly reach $1,500 sometime in Q3 of this year, (or sooner, if MENA developments warrant), the seasonal weakness in physical demand is seen as assisting the capping of any gold rallies (as it has in the past two weeks) for “a few more weeks.”

MENA news will, of course, continue to impact oil (and gold) prices and keep central bankers, politicians, and military folk plenty busy over those coming weeks.
Fed officials (and probably other central bankers as well) have basically affirmed that $150 oil would represent a significant enough pivotal level; one at or near which, monetary authorities would be prompted to take some kind of action. No one, anywhere, at this juncture, wants to place the emergent global economic recovery at risk. The risk, however, may be transitory, as a CNN Money survey reveals that most market experts think oil and gold prices will settle down after Mr. Gaddafi suffers Charlie Sheen’s “employment fate.”

Still under consideration by the White House, is the plan to release some supplies of crude from the US Strategic Petroleum Reserve; this, as $3.50 per gallon US gasoline prices have angered the consuming public and are threatening to send it back into a state of “hibernation” in terms of overall consumption, not just that of gas. As well, still under review, is a NATO plan to impose a no-fly zone in Libya that is intended to avert Mr. Gaddafi from carrying out air strikes on the rebels.

At any rate, whether or not the Libyan situation does not come to a quick resolution, the attitude on display by the US Fed is that it (or at least four of its member presidents) is in no hurry to extend or expand the QE2 program. Messrs. Fisher, Plosser, Lockhart, and Evans are all of the opinion that every good thing eventually does come to an end, especially if the risk it entails outweighs its benefits. The FOMC meets one week from today to discuss all of this, and more. The post-meeting language is likely to be parsed with at least as equal a degree of intensity as was the one that was issued in early November of last year, when the good ship QE2 was set sailing on the US economy’s rough (at the time) seas.

The trend towards hiking interest rates is hard to miss, (but by a few holdout commentators who envision “easy money” as basically an everlasting proposition, and one which will perpetually fuel “To Da Moon!” spikes in commodities). Bloomberg reports that The Bank of Thailand and Bank of Korea will each raise key interest rates this week by a quarter percentage point. As well, Malaysia may also be approaching the end of its pause in boosting borrowing costs.

Such moves will come on the heels of seven already-in-place hikes by India’s central bank and by a recent string of similar tightening actions by China’s PBOC. This coming weekend may also bear watching as China announces inflation levels and possibly what it might do about them. Of course, the 900-lb gorillas at the moment remain the ECB and the Fed. When they too commence this campaign, well…let’s let someone with long-standing market experience frame that concept at this time: Value View Gold Report’s Ned Schmidt.

Says Mr. Schmidt in his latest “Gold Thoughts” issued on Monday: “Gold is today the preferred precious metal when compared to Silver. That might not, and likely will not, prevent it from going down when the Federal Reserve folds in June. That June time period is becoming of increasing importance. The current era of free money, quantitative easing, by the Federal Reserve is scheduled to end in June. Should the ECB raise rates in April, Federal Reserve will come under increasing pressure to abandon free money policy.

Mr. Schmidt, a 30+ year veteran observer of precious metals markets (and one whose ultimate price targets for gold are actually quite lofty, BTW) also correctly notes that: “Free money has been driving financial markets. Should that era of free money begin to end in June, considerable realignment of investment market values seems likely. Silver is simply the most obvious one. Deferring the investment of idle funds, and perhaps taking some profits, might be wise until the June poker hand has been played.”

Such level-headed caution is closely related to the observations tendered to the UK’s Telegraph this morning by at least a couple of UK financial advisers; Messrs. Patrick Connolly, of AWD Chase de Vere, and Martin Bramford of Informed Choice. Mr. Connolly notes that "there continue to be bullish statements and bold predictions about gold and the assumption that the returns seen over the past decade are now the norm. There were similar sentiments in 1999 about technology stocks, and the belief that the only way was up. It's easy to forget that gold prices can go through prolonged downturns. During the Eighties and Nineties, the price of gold fell by 70 percent" while Mr. Bramford opines that "investors are understandably concerned about inflation at present. But there is a real risk that those now buying gold are doing so at the top of the market and will end up making losses when prices fall."

So much for the “this time it’s different” propositions in (over)abundant supply out there. The only difference is that the Internet has now made it possible for practically everyone to be heard, whether or not they have something of value to offer, or are just possibly hiding a self-serving commercial agenda behind putatively erudite “opinion.” One might do well to filter out some of that type of “noise” and stick with the prudent, time-tested, core, ten percent gold “just-in-case” insurance position we continue to advocate, price explosions or implosions of the future notwithstanding.

Until tomorrow, remain calm

Jon Nadler
Senior Analyst
Kitco Metals Inc.North America

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Coin Doctoring Presents A Moral Imperative to the Coin Industry

2011-03-08T10:26:00.000-05:00

Richard Schwary – California Numismatic Investments

It would be a great deal more fun to consider what R.W. Julian has to say about Gobrecht dollars but at this point in time the consideration in front of us is the rather murky numismatic subject called coin doctoring. I have talked with both David Hall of the Professional Coin Grading Service (PCGS) and Mark Salzburg of Numismatic Grading Corporation (NGC) about this problem and believe these folks along with other industry leaders understand that not taking unilateral action against the growing danger of radical coin doctoring will at some point come back to haunt us all. And in the bargain we will be criticized historically for a simple lack of leadership within the rare coin industry.

Fortunately for all of us there is still time for aggressive action but let’s not put this issue on the back burner because the window of opportunity we now enjoy will shrink as fast as this extreme danger expands. I applaud both PCGS and NGC as well as the Professional Numismatists Guild (PNG) for working toward an understanding as to what criteria should be used when considering coin doctoring. And it is not my intention to solve this Gordian knot in a few paragraphs but I do see a problem if we do not insure progress from this point forward. There must be a tipping point for this industry when we all come together on this definition or forever be condemned as showing great promise but failing to deliver on difficult issues.

A review of Vic Botharth’s well developed statement Coin Doctoring and the PNG Decision (Coinweek.com) will help greatly because it clearly states what I believe is the professionally safe position many dealers have adopted now that the initial smoke has cleared. And at the same time it raises questions which will move the discussion forward, like the notion that the grading services did not equivocate on their expertise and in fact guaranteed the product. So as the stated experts they led the way into this mess and so the problem is theirs to fix and the trade should not be concerned. Fair enough but certainly not comprehensive especially when dealer and consumer organizations like the PNG and ANA place themselves in positions of authority.

Let me also add a general feeling I think every dealer has to some degree but was raised nicely by a friend of mine and old time PNG member at the last Long Beach Show. He admitted the obvious in that we all face this coin doctoring problem but said he did not want to get involved as he did not trade in the stealth damaged goods and his hands were full with regular day to day business. I was not at the PNG General Meeting when the modified definition of coin doctoring was not accepted but I talked with members who were and appreciate the difficulty of trying to parse words when it comes to doctoring. What is and what is not has been a part of the industry dialogue for as long as I can remember and the PNG already includes in its ethics rules an admonition concerning doctored coins.

I have also talked with Laura Sperber on the subject and believe she deserves not only trade recognition but an award from the American Numismatic Association (ANA). ANA President Cliff Mishler and ANA Executive Director Larry Sheperd are great leaders and will not cut and run on this subject so public recognition from the ANA can only serve to move this discussion forward.

In some ways Sperber reminds me of the heroine Calamity Jane played by the beautiful Robin Weigert in the famous HBO Series “Deadwood”. Laura’s fire breathing oratory in the middle of a mostly male audience should be admired. If we were honest with ourselves her “over the top” approach to this danger should be seen as the most important tactic ever used in moving this nightmare out of the closet. Some might believe she is grand standing but when we talked Laura came across as sincere and hardly out of gas on this controversial subject. She also has a wonderful regard for rare coins and continues to warn readers about treasures at risk in the name of raw profit and greed.

Ultimately I choose to believe the PNG will once again address this growing problem and take a stand which better defines coin doctoring if only to state the most obvious cases. I do not want to speak for PNG President Paul Montgomery even though he is a great friend of mine. But as a Past PNG President I can say with certainty that leadership always comes at a premium especially when “no one is happy”. And it seems to me that true leadership, especially in the face of hostile fire is never easily accepted. But great leaders tough it out and understand the mission and are willing historically to be applauded after the fact.

In the meantime let’s appreciate one of the most important gains this industry has made regarding coin doctoring: We all can now talk openly about this problem and so it is forever outside the numismatic shadows. Most of us know that progress is often tedious but because of this discussion we will eventually get a sense of where improvement makes sense.

No coin professional needs to be told that radical doctoring of coins is a pathetic reality so I hope we all applaud PCGS and NGC for constant vigilance. And the PCGS attempt at scientifically killing this monster with new technology like the Shield or the Sniffer is certainly a numismatic milestone. But we should understand the trade is now facing a new and much more virulent twist to an old numismatic problem so creative work and probably a great deal more money will be needed to tame this creature.

Perhaps policing it is not the job of the PNG but taking no action must prove ultimately dangerous. For you academic or religious readers doing nothing would be a violation of what German philosopher Immanuel Kant (1724–1804) called the Categorical Imperative. And so my contention is simply that taking no action is not rational for any group which makes a rightful claim to be good for the rare coin industry.

Let’s make sure the coin industry does not stand in the way or worse tacitly contribute to this abuse while claiming the problem either cannot be defined or is not our business. No industry action or worse vague definitions fail to protect the good people who turn to rare coin professionals for proper advice and an honest deal. Inaction will also cost the industry its moral high ground and we will have no one to blame but ourselves. So in the end let us solve this problem while there was still time to set the record straight.

Posted by Richard Schwary on March 8, 2011 8:26 AM

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A.M. Kitco Metals Roundup: Comex Gold Prices Trade Near Steady; Bulls Still Strong

2011-03-08T08:32:00.000-05:00

08 March 2011, 08:04 a.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) - Comex gold futures prices are trading near unchanged price levels Tuesday morning, as the market pauses following Monday's record-setting gains. Middle East uncertainty and European Union sovereign debt concerns are supportive fundamental factors for the precious metals. Meantime, the technical postures for gold and silver remain fully bullish. Comex April gold last traded unchanged at $1,434.50 an ounce. Spot gold last traded up $2.70 at $1,434.25.

Crude oil prices are trading weaker Tuesday morning, but are still above $104.00 a barrel, as there were no fresh, major developments in the Middle East overnight. Crude oil prices Monday hit another fresh 2.5-year high near $107.00 a barrel. The stronger crude oil prices are bullish for the precious metals due to the inflationary implications and the related geopolitical uncertainty that invites safe-haven demand. Precious metals traders and other traders will continue to look to the crude oil market as a gauge of tension in the Middle East.

Moody's ratings agency Monday downgraded Greece's sovereign debt rating. While this move was not a surprise development, it reminded the market place of the serious problems the European Union is facing with its smaller countries' sovereign debt. Gold and silver bulls realize these problems cannot be quickly solved and will continue to work against the Euro currency, with the possibility of the problem spreading to a worldwide debt contagion. This will limit selling interest in precious metals for at least the near term.

The U.S. dollar index is trading firmer Tuesday on short covering after hitting a five-month low Monday. Dollar index bears still have the technical advantage, which continues to be bullish for the precious metals markets.

U.S. economic data due for release Tuesday includes the NFIB small business index, the Goldman Sachs weekly chain store sales index, the Johnson Redbook weekly retail report and the IBD/TIPP economic optimism index.

The London A.M. gold fixing was $1,435.00 versus the previous P.M. fixing of $1,437.50.

Technically, the gold market bulls still have the strong overall technical advantage as prices hit a fresh all-time high of $1,445.70 Monday. Gold prices are in a steep six-week-old uptrend on the daily bar chart. Gold bulls' next near-term upside technical objective is to produce a close above psychological resistance at $1,500.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,410.00. First resistance is seen at the overnight high of $1,437.20 and then at $1,445.70. Support is seen at the overnight low of $1,426.10 and then at $1,420.00.

May Comex silver futures last traded up 41.0 cents at $36.275 an ounce Tuesday morning. Prices hit a fresh 31-year high of $36.745 on Monday. Silver bulls have the strong overall near-term and longer-term technical advantage. Prices are in a steep six-week-old uptrend on the daily chart. The next downside price breakout objective for the silver bears is closing prices below solid technical support at $35.00. Bulls' next upside price objective is producing a close above solid technical resistance at $37.50 an ounce. First support is seen at $36.00 and then at the overnight low of $35.51. Next resistance is seen at the overnight high of $36.55 and then at $37.00.

By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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U.S. Mint initiates process for major U.S. coinage overhaul

2011-03-08T08:16:00.000-05:00

The U.S. Mint has begun the process of research and evaluation, eventually setting the stage for new coin compositions, as well as potentially changing bullion coin allocations.

RENO, NV -

The U.S. Mint Monday announced it is seeking public input on factors to be considered in research and evaluation for alternative metallic coinage materials to be considered in the production of all circulating coins.

The announcement, which is a result of The Coin Modernization, Oversight and Continuity Act of 2010, is setting the stage for a major overhaul of the metals composition of coins and how the Mint is going to manufacture them.

Basically, the Treasury Secretary and the U.S. Mint are conducting a major re-examination of minting and coinage laws.

For instance, the Mint now has the authority to research and test less expensive alloy alternatives for coins. Currently the Lincoln Penny and the Jefferson nickel cost more to produce than their corresponding face values. The Treasury Secretary is expected to address this situation under the auspices of the new act.

Other changes under the Coin Modernization Act give the U.S. Mint greater flexibility in meeting the demand for gold and silver numismatic items, as well as bullion coins. The Treasury Secretary now has the authority to determine the qualities and quantities of American Eagles, which comprise the bulk of gold and silver bullion coins.

Previously, the qualities and quantities of U.S. bullion coins were closely regulated by Congress.

The act also enables the U.S. Mint to produce proof and/or uncirculated American Eagles coins, even if the Mint is not meeting bullion coin demand. For example, the American Platinum Eagle Coin has not been available in bullion format for more than two years.

In the news release Monday the Mint said it is not "soliciting suggestions or recommendations on specific metallic coinage materials." The Mint is seeking public comment only on the factors to be considered in the research and evaluation of potential new metallic coinage materials.

Comment must be submitted to the U.S. Mint on or before April 4, 2011.

Meanwhile, the Mint has reported total February 2011 gold bullion sales of 72,500 ounces with 6,000 gold bullion ounces sold so far this month. Gold bullion sales dropped from 84,000 coins reported during February 2010.

Silver bullion sales totals for February 2011 were reported at 3,240,000 silver ounces, up from the 2,050,000 silver ounces sold during February 2010.

Author: Dorothy Kosich
Posted: Tuesday , 08 Mar 2011

United States Mint Seeks Public Comment on Factors to be Considered in Research and Evaluation of Potential New Metallic Coinage Materials

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Matron Head Large Cent ~ Profile History

2011-03-07T15:20:00.001-05:00

Matron Head Large Cents are relatively scarce in every collectable grade, but especially in mint condition.

Specifications
Designer: Robert Scot
Obverse Design:
Reverse Design:
Edge: Plain
Weight: 10.89 grams
Diameter: 28-29 millimeters
Composition: Copper (100%)
Dates Minted: 1816-1839

Background
If you’ve come across a virtually uncirculated red-brown Matron Head large cent, chances are it’s dated 1818-20, and comes from a famous U.S. coin hoard find. In fact, most of the uncirculated Matron Head large cents out on the market come from this hoard.

The Matron Head large cent is also known as the Coronet Head large cent. It’s called the Matron Head large cent due to the somewhat portly, masculine, “matronly” (if you will) portrait of Miss Liberty on the obverse. It’s our nation’s sixth large cent type, and continues the tradition of a Miss Liberty bust on the obverse, and “One Cent” within a wreath on the reverse. The Matron Head cent appeared in 1816, following the only year in U.S. history where one-cent coins were not stuck (that would be 1815, of course).

After 1839, the Matron Head large cent was replaced by the Braided Hair large cent. Today, the Matron Head large cent is popular as the first of the two “Middle Date” large cents.

History
The United States Mint had actually received their shipment of copper planchets from England in late 1815. There had been a longer-than-usual delay, thanks to the War of 1812, where the United States was actually at war with its copper supplier! Consequently, the planchets arrived too late for 1815 large cents to be struck, BUT, the first 1816 Matron Head cents were actually struck in late 1815, though they bore the date of 1816!

The quality of copper planchets was clearly superior to those used for the Classic Head large cents of 1808-14. While the Classic Head large cents wore out or become dark and corroded easily, the Matron Head large cents survive today in far better condition, even though like all large cents, they circulated quite a bit.

Interestingly, the ONLY coins struck by the United States Mint in 1816 were Matron Head large cents! A fire had destroyed much of the minting machinery at the Philadelphia mint in January of 1816, mainly the machinery used to strike silver and gold coins. Rather than invest the time and money to replace the destroyed machinery, the mint officials chose instead to coin large cents, as demand for small change for our new nation was great. Besides, foreign silver and gold coins were still plentiful enough to fill the need for the coins of higher denominations.

Unlike U.S. large cent types of 1793-1814, the U.S. Mint was clearly devoted to striking plenty of large cents. From 1816 to 1839, the entire span of existence for the Matron Head large cent, mintages for the large cent fell below 1.2 million only once: that was in 1821 when just 389,000 were struck. The first year of issue, 1816, has a recorded mintage of 2.8 million, followed by 3.9 million in 1817! Those are high mintages for a U.S. coin from what are arguably, “Early U.S.” years. In fact, the dates of 1816-20 all retail just $25 in Good, $35-$50 in Fine.

Collecting
One interesting thing you’ll notice when looking at Matron Head values, is that the 1818 and 1819 dates have the lowest retail value ($270 and $285 respectively) in Uncirculated condition, than any of the other dates in the series. As you might surmise, if you read the first paragraph, this has to do with what is known as “The Randall Hoard.” This was a large mint-sealed keg of Matron Head large cents, found in 1867, all dated 1818-20. As I said before, this is where most of our uncirculated Matron Head large cents originate from. It took until roughly 1912 for all this mint-state red-brown large cents to be distributed.

Though the 1821 has the lowest RECORDED mintage of any one date (389,000) there is the strange case of the 1823 date which is perhaps scarcer. But for some reason, we don’t know exactly what the mintage figures are for the 1823 large cent, because they were all included in the 1824 mintage of 1.2 million. So a lot of those 1.2 million cents were 1824's, and some were 1823. The 1823 Matron Head cent is the scarcest and most expensive of the Matron Head cents, retailing $80-$90 in Good, around $300 in Fine. There is a rare overdate in the series, the 1839/36 that retails higher at $425 in Good.

The 1821 and 1823 dates aside, almost all dates in the Matron Head cent series will retail roughly $25 in Good, $40 in Fine, $80 in Very fine, $175 in Very Fine. In other words, this is a great series to collect by date, as there are only a couple of dates that will test your persistence.

Varieties
If you want to go deeper than just obtaining Matron Head cents by dates, there are some varieties you can go for as well. For instance, the 1817 cent has a 13-stars variety as well as a 15-stars variety. There are a few overdates: 1824/22, 1826/25, and that rare 1839/36. And then there are the “Young Heads” of 1836-39– there are actually four Young Heads in all: the Booby Head, the Silly Head, the Petite Head and the Head of 1838. All feature a noticeably slimmed-down, longer-nosed, somewhat sassier-looking Miss Liberty. These Miss Liberty busts look so different from the Matron Head busts of 1816-35, that they could be their own type– but they aren’t. And the good news for variety collectors is that none of these Young Head sub-types retails for much higher than the standard common date Matron Head large cent.

Grading
What makes for a high quality piece? With these large cents, nice surface toning is worth a premium: deep chocolate brown, red-brown, yellowish light-brown, with no corrosion, roughness. As for detail, you want to see much of the hair curls intact, ear detail, eye and mouth detail, defined stars and a clear date. The reverse wreath will have bold leaf detail.

Around 1834-38, while the Matron Head large cent was still being produced in large numbers, there appeared on the scene, a number of different types of “large cents.” These new coppers featured designs showing Andrew Jackson, mules, turtles, sailing ships, bank institutions, even slaves. But these coppers were not official U.S. large cents– these were what is known today as, ‘Hard Times Tokens,’ a proliferation of large cent-sized cent tokens issued by private interests during the Depression of the 1830's.

Mints
Philadelphia Mint (No mintmark)

See Also
Large Cent (1816-1820)

External Links
CoinFacts.com Matron Head Large Cents (1816-1839)
USCents.com Matron Head Large Cents 1816 - 1835
Matron "Coronet" Head Large Cents

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Utah House Approves Gold, Silver as Legal Tender

2011-03-07T14:50:00.001-05:00

Written by Alex Newman
Monday, 07 March 2011 10:35

The Utah House of Representatives voted on March 4 to make gold and silver coins issued by the federal government into legal tender within state borders, prompting praise from sound-money advocates across the nation. The legislation will now be taken up by the state Senate.

In addition to possibly making precious-metal coin lawful money for intrastate and government transactions, the bill would exempt gold and silver from state sales, income, and capital-gains taxes. The legislation also states that individuals cannot be compelled to accept precious metals instead of Federal Reserve Notes. It was approved in the House with a vote of 47 to 26.

According to the bill’s summary, it “recognizes gold and silver coins that are issued by the federal government as legal tender in the state and exempts the exchange of the coins from certain types of state tax liability.” Under the measure, Utah citizens would be able to pay their taxes with precious metals at market value, as opposed to the face value used by the federal government, which is far less than the price of the actual gold or silver in the coins.

The legislation would also mandate that the Revenue and Taxation Committee “study the possibility of establishing an alternative form of legal tender” and “recommend whether an alternative form of legal tender should be established.” Those recommendations would be considered in the 2012 legislative session.

Earlier this year, the Utah state legislature was considering a similar proposal known as the “Utah Sound Money Act.” That bill would have recognized gold and silver coins issued by some trustworthy foreign governments as well. It would have gone even further toward normalizing trade in precious metals than the “Legal Tender Act,” and so attracted a broad coalition of prominent backers from across the country including long-time sound-money advocate U.S. Rep. Ron Paul (R-Texas).

“To me, the best road back to a really well-functioning monetary system is through the states, and through the states exercising their monetary power as articulated in Article I, Section 10 of the [U.S.] Constitution to make nothing but gold and silver coin a payment in tender of debts,” said Utah attorney and businessman Larry Hilton, who authored the original bill and has been a key backer of state-based sound-money legislation in Utah.

He told The New American earlier this year in an interview that, “If each of the states — or even just a small handful — do what we’re contemplating here in Utah, I think it would have a very positive impact on the dollar itself.” It would also bring countless other benefits ushered in by competition and the preservation of purchasing power, he added.

More than a dozen other states have introduced like-minded measures across the United States as the Federal Reserve cartel continues creating new money at a record pace and the fiat dollar continues its rapid loss of purchasing power. Lawmakers in Virginia, for example, were considering a bill earlier this year to officially study the adoption of alternative currencies such as gold and silver in case of an increasingly likely hyperinflationary scenario and a total breakdown of the Federal Reserve System.

State legislators in Utah, however, recognized the problem and decided to take preventative measures early on. “This is a step in preparedness; a step in security that allows us to be able to help hold up our economy as the dollar continues to shrink,” the Utah bill’s chief House sponsor, Republican Rep. Brad Galvez, told the Salt Lake Tribune.

Another supporter of the legislation, Rep. Ken Ivory, told the paper that the measure was “a way for us to preserve for the citizens of Utah … the purchasing power of the money they hold.” As an example, he cited the increased value in real terms of a 1960s half-dollar silver coin. The Federal Reserve’s paper currency, meanwhile, has lost well over 90 percent of its value since the central bank was established in 1913.

"People sense that in the era of quantitative easing and zero interest rates, something has gone haywire with our monetary policy," policy director Jeffrey Bell of the group American Principles in Action told Fox News. "If one state recognizes gold as a valid currency, I think it would embolden people not just in other states but in Washington." The organization played a role in drafting and supporting the bill.

Another group, known as Utah Sound Money, is also lobbying hard in favor of the legislation. “Although the current version of the bill has been [pared] back from the original draft, it is, nevertheless, critically important to take this first step towards the restoration of Sound Money as a viable option in our society,” the group said in a message to supporters urging them to back the new measure.

“A State's sovereign power to declare gold and silver coin a legal tender is one of only two express reservations of state power specifically included in the U.S. Constitution, as originally ratified,” it said. “The Legal Tender Act is an important exercise of that power which our nation's founders were careful to reserve to the states.” The American Constitution makes clear that no state shall make anything but gold and silver a tender in payment of debts.

A vote is expected in the state Senate sometime this week, and if approved, the legislation would require the Governor’s signature to became law. Opponents have expressed concern that the bill could lead to slightly decreased tax revenues (about $250,000 for 2012) if gold and silver coins were exempted from taxation. But supporters counter that they should not be penalized for choosing to save and do business with sound currency instead of failing Federal Reserve Notes.

Analysts predict that as the U.S. dollar continues its downward spiral, more and more states will begin making back-up plans to safeguard their economies. A wave of state legislatures reasserting their sovereignty over the federal government and promoting the concept of nullification will also likely contribute to the state-based sound-money trend. Silver was breaking new price records on March 7, in large part due to the diminishing value of the U.S. dollar.

Prominent voices in the United States, international institutions, and foreign countries are hoping to use the emerging dollar crisis as an opportunity to create a world currency controlled by an international central bank. How successful they will be probably depends in large measure on how — and how quickly — state legislatures react to the problem.

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Funds Increase Net Length For Fourth Straight Week As Gold Keeps Rising

2011-03-07T14:23:00.001-05:00

FOCUS:

07 March 2011, 11:30 a.m.
By Allen Sykora
Of Kitco News
http://www.kitco.com/

(Kitco News) - Fund managers added to their net long position in gold for the fourth straight week, according to the most recent data put out by the Commodity Futures Trading Commission, and their net length is now at the highest level of the year.

Still, the funds’ combined length remains below the peak from earlier last fall, and one futures veteran says it has not yet risen enough to leave him worried about the market being overbought.

As a general rule, the net length for other precious metals fell slightly but increased for copper.

For the week ending March 1, managed-money accounts were net long in Comex gold by 201,084 contracts for futures and options combined, according to the CFTC’s “disaggregated” reporting system that began in September 2009. This is up from 182,739 the prior week, is highest level since Nov. 2 and is up 61% from a cycle low on Feb. 1.

The most recent increase was mainly the result of fresh buying, as the number of total longs rose by 16,058 lots. There also was some short covering, in which traders buy to exit positions in which they previously sold, as reflected by a decline of 2,288 total shorts.

Under the longtime “legacy” reports, the large non-commercials – historically also thought of as the funds – were net long by 230,325 contracts for futures and options combined, up from 213,250 the previous week and the largest level since Dec. 28.

“The funds remain long, but the link is not too disproportional,” said Sterling Smith, market analyst and commodity trading advisor with Country Hedging. “I don’t see anything that would overly stress the market here…I don’t see any excessive net length here.”

Managed-fund accounts were net long by as much as 232,220 lots back in late September, while the non-commercials were net long by as much as 283,462 in early October.

During the reporting week covered by the most recent CFTC data, April gold rose $17.20 to a settlement of $1,431.20 on March 1. Analysts with Barclays said the strength in gold lately has come from speculative interest as the net length among tactical investors continued to rise. During that same time frame, holdings of the world’s largest gold exchange-traded fund, SPDR Gold Trust, dipped from 1,218.24 metric tons as of Feb. 23 to 1,210.96 as of March 1.

In the most recent data, managed-money accounts trimmed their net long position in Comex silver slightly to 35,182 lots for futures and options combined. This was down only slightly from 35,438 lots the prior week and was the first time net length had not risen since Jan. 25. For the non-commercial accounts, the net length slipped to 42,047 from 43,476.

Comex May silver rose $1.123 for the week to a close of $34.427 an ounce on March 1.

Fund net length also dipped slightly in palladium. Fund managers scaled back their net long to 13,178 in the disaggregated report, compare to 13,410 the prior week. In the legacy report, the non-commercials scaled back their net long to 15,410 from 15,751.

Figures were mixed in platinum. In the disaggregated report, fund managers increased their net long to 25,754 from 25,039 the prior week. But in the legacy report, non-commercials trimmed their net long slightly to 28,878 from 29,091 the prior week.

Elsewhere, the fund net long in copper rose, with Barclays pointing out that traders exited from more short positions than they exited from longs. Money managers cut their total longs in copper by 2,026 lots, the disaggregated report shows. But they reduced their total shorts by an even larger 3,540. The end result is the net length rose to 25,707 lots from 24,193 the previous week.

There was a similar pattern in the legacy report, as the net length rose to 26,619 from 23,230 the previous week.

.

By Allen Sykora of Kitco News; asykora@kitco.com

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Oil [Price] Spill ~ By Jon Nadler

2011-03-07T14:06:00.000-05:00

Mar 7 2011 11:12AM
www.kitco.com

The melt-up in precious metals (with the exception of platinum) resumed with the start of the new trading week, reflecting the the crude oil-fueled commodities rally that has gripped the world’s trading floors since the start of the Libyan upheaval. Recent clashes in that country have turned even bloodier as Mr. Gaddafi’s forces intensified their campaign to recapture a couple of key cities along the coast. Black gold has already leapt 25% since Libya descended into the state of civil war it is now in.

Outside military intervention showed no signs of materializing, and was still under consideration, lacking sufficient consensus by global powers. This, even as the humanitarian crisis was aggravating with each passing hour, having already resulted in the exodus of more than 150,000 people to Tunisia and to Egypt. Meanwhile, some protests continued in Yemen and Bahrain, but Saudi Arabia remained relatively calm. The fear premium being reflected in nearly $107-per-barrel crude oil continued to spill over to other commodities and it remains the main source of momentum behind the fresh records being set in gold and silver prices.

The Libyan situation has prompted the Obama administration to consider resorting to the US’ Strategic Petroleum Reserve in an effort to curb the potential economic reverberations that the resultant spike in energy values is engendering. The emergent US economic recovery stands a realistic chance of being derailed if $100-$115 oil remains on the price boards for an extended period of time, or if $140+ crude were to rematerialize, complete with $5 per gallon gasoline, just as spring and summer roll around. The latest, 2.35% advance in WTI crude (to $106.55) and the 2.2% rise in Brent crude (to $118.50 pbbl) have ignited fears that consumers will stop consuming and that employers will halt employing folks.

Precious metals trading got off to a flying start on Monday, with gold prices rallying by $11.10 per troy ounce, and they were initially quoted at $1,443.90 on the bid side of spot after having touched early highs at a new, $1,445.90 per ounce record. Gold trading positioning continued to show a rise in open interest for the latest reporting period (ending on March 4) and the net speculative length in the yellow metal is at its most robust thus far in 2011. Gold ETF balances however continued to experience some on-going leakage in their underlying tonnage, despite the recent, headline-making ascent in the metal’s value.

Over at the PDAC event in Toronto (amply covered by Kitco News), the mood is quite upbeat; no surprise, following the performance that gold and silver turned in during 2010. However, at least one speaker on Sunday sounded a bit of a cautionary alarm when dissecting the picture in gold, as it relates to macro funds. Heavy courtship by hedge funds and similar spec players has propelled bullion values to stratospheric levels in each of the past two year, at least. However, the behavior of said players is precisely what was on the mind of JP Morgan strategist Michael Jansen as he addressed the crowd of diggers yesterday:

“We are a little bit concerned about the signs of some fault lines emerging in the market. For one thing, there has been a shift by wholesale investors and some funds out of gold and back into equities, which now “look quite cheap” compared with the yellow metal. We have received a lot of feedback at the significant wholesale investor level, or the big macro funds, and they are generally starting to pull back their exposure to gold and get more exposure towards equities. We see equities emerging from a multi-year funk and moving into a two or three year bull market. And that obviously reduces the need for a portfolio hedge like gold.”

Mr. Jansen also threw a bit of cold water on the assertions that we are in some kind of ‘peak gold’ condition, as his firm believes that mining output of bullion will increase by about 3 to 4 percent in 2011 and in coming years as well, continuing the pattern we have already revealed to you in these columns over the past three years. With margins such as the current ones being enjoyed by the majority of the PDAC’s attendees, such a little fact should come as no surprise. Mr. Jansen also noted that the steepening Treasury yield-curve is prompting some gold market players to begin shifting out of the metal and into equities that now appear to be “cheap.”

Also from the stages of the PDAC, and focusing on the same idea of changing interest rate conditions, comes word that while the current low real interest rate conditions are still conducive to the types of gains we have recently witnessed in the metals’ (and other commodities) complex, the changing trend in same could have some deleterious effects on prices.

GFMS Chairman Philip Klapwijk alluded to the fact that the “froth” we are experiencing in certain commodities, and precious metals in particular, could be “taken out” when more countries begin to hike rates as India and China already have. Thus, we advise, keep an eye on the ECB and the Fed for the latter part of this year, and in 2012.

Silver prices soared to a high of $36.79 per ounce, and then opened at $36.66 on the spot market with a gain of 99 cents. Whilst silver-oriented ETFs reported a robust inflow of ounces, the open interest in the white metal did show a decline on the aforementioned reporting period, and it was the first such shrinkage since near the end of January. Copper prices, also showing signs that they have vaulted way ahead of fundamentals-based levels, were indicating that heavy speculative trading is afoot on the COMEX.

Platinum and palladium opened on the mixed side this morning, with the former showing a $3 decline to $1,838.00 the ounce and the latter ticking higher by the same amount, to reach $813.00 per troy ounce. ETFs specializing in the noble metals showed increased in platinum balances but some outflows from palladium ones. Overall however, the PGM niche seems to indicate the same heavy-handed speculation that is currently defining oil, copper, and silver and it could result in sizeable price shifts should conditions around the world turn on the proverbial dime.

Such turns were already manifest later this morning, when oil halved its earlier gains, and gold prices fell into the red just one hour after having opened with the aforementioned robust gains. A market rumor related to a possible deal between Mr. Gaddafi and Libyan rebels by virtue of which he might be granted ‘safe passage’ from his country (another sandy beach spot soon to be occupied by a deposed despot?) sapped values across the commodities’ complex in a hurry.

Thus far, rumors only, but it does show just how much of this house of commodity cards is built on emotion and conjecture. Volatility remains very much on the scene as spec funds exhibit intense activity and will not shy away from profit-taking at any moment. At last check, platinum was down $43, palladium fell $30, and silver was ahead by only 44 cents. Chalk it up to…oil. Oh, and the US dollar clawed its way back to 76.33 on the trade-weighted index.

Something else may have also contributed to the emergent profit-taking (aside from new records being etched into certain books) in metals this morning; the words of Dallas Fed President Richard Fisher. He said that under “certain conditions” he might vote to truncate the Fed’s QE2 asset purchase program: “I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it.” Mr. Fisher repeated that he would vote against extending or enlarging the purchases “barring some frightful development.”

Well, Libya is a pretty frightful development at the moment, one would say (especially if they happen to be long oil or gold). However, the type of really frightful “development” that is on Premier Wen Jiabao’s mind is more important in terms of needing to be paid attention to. We are talking about inflation and the risks it might pose along several fronts, not the least of which would be the social one.

The Chinese Premier, in his opening speech at the annual National People’s Congress taking place in Beijing pledged to rein in spiking consumer and property prices, and he said that this anti-inflation fight is now the nation’s top priority. China’s leader is well aware that rising prices for everything might well mean rising tempers among the masses and a rising risk of such tempers flaring up into events similar to those now taking place in the MENA region.

Therefore, we read with no degree of surprise that Standard Bank’s commodities analytical team writes this morning that “given that Chinese consumer and inflation numbers are set to be released this Friday, we could see another round of monetary tightening in the next few days. Looking at the PBOC’s actions in the past this will most likely come in the form of an increase in the reserve requirement. However, we have determined that raising reserve requirements are the bluntest in their effect on commodity prices. At worst, we would expect a knee-jerk sell off in reaction to news of an increase in the required deposit ratio.”

Keeping an eye on all types of combat (in Libya, in the crude oil pits, by longs versus the shorts, by the bulls versus the bears, and the emergent anti-inflation battle by central bankers and national leaders) we remain at our post

Until tomorrow

Jon Nadler
Senior Analyst
Kitco Metals Inc.North America

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Gold Up-Date - March 07, 2011

2011-03-07T13:07:00.000-05:00

By David Levenstein
Mar 7 2011 10:55AM

www.lakeshoretrading.co.za

With a falling US dollar, escalating tension in the Mideast, and higher crude oil prices, gold can only go one way.

As the value of US dollar continues to spiral downwards, the price of crude oil and gold continue to rally. The dollar index hit 76.40 last week while WTI crude oil touched $105 a barrel, Brent crude oil broke through $115 a barrel and the price of gold made a new all-time record high as it touched $1440 an ounce.

The EUR/USD surged sharply higher last week and breached the 1.4000 level after the ECB President, Jean-Claude Trichet, signalled that a rate increase may be possible as soon as April. While the ECB left the main refinancing rate unchanged at 1%, Trichet signalled that an 'increase of interest rates in the next meeting is possible' and 'strong vigilance is warranted'. Also, the reference that interest rates are 'appropriate' was taken out from the press statement.

Despite some positive economic data from the US, the US dollar was mostly softer against most of the European majors last. Both ISM manufacturing and non-manufacturing indices rose to 7-year highs in February. Non–farm payrolls unexpectedly increased by 192,000 in February and the US unemployment rate slipped to 8.9% in February from 9% in the prior month. Yet the dollar failed to respond to this positive news.

While mainstream media tell us that the US economy is showing dramatic improvement -corporate profits are up and the stock market is soaring, unemployment seems to be dropping-according to newly released numbers, more than 44 million Americans are now on food stamps. That is a new all-time record and that number is 13.1% higher than it was just one year ago. While the US Labour Department report that the unemployment is down, according to Gallup, unemployment in the US actually rose 10.3% at the end of February.

The US trade deficit continues to grow and in 2010 the trade deficit was almost 33% larger than it was in 2009. And, it is expected to grow even further in 2011. In addition, the US national debt continues to increase and it is projected that the federal budget deficit for this fiscal year will be another new all-time high record of some 1.65 trillion dollars.

The loose monetary policy of the US Federal Reserve as well as heightened geo-political tensions in the Middle East and North Africa remained the main driving force in crude oil's rally. At the time of writing, April crude was trading at $106 a barrel for WTI and $116 for Brent crude.

Although the prices of gold and oil don't exactly mirror one another, there is no question that oil prices do affect gold prices. If oil prices rise or fall sharply, investors can expect a corresponding reaction in gold prices, often with a lag. In this particular instance, the price of gold has not really responded to the higher prices of oil.

The focus this week will turn to Friday’s scheduled “day of rage” in Saudi Arabia on Friday. Protests took place on Friday in an oil producing area by Shiite demonstrators, but it is believed that it is unlikely that oil production will be affected, as production facilities are heavily guarded.

Bernanke downplayed the significance of the recent surge in oil prices, and made it clear that he would keep QE2 until expiry in June. Bernanke also said that the recent surge in commodity prices "not yet pose a significant risk" and "oil prices alone would probably not be enough to make us respond."

What was amazing last week was the latest news on Chinese domestic gold demand. In a report by Bloomberg, according to Peter Hickson, the global commodities strategist for gold-focused Swiss Bank, UBS, Chinese gold demand was a staggering 200 tons in the first two months of this year! Only a couple of months ago reports showed that Chinese gold imports in the first 10 months of 2010 totalled 209 tons, itself a 500% increase on the previous year. It now seems that demand by individuals is reaching almost frightening levels. Not only is jewellery demand seen as being up by 70% year on year, but investment demand (coins and bars as opposed to jewellery, which has been the main outlet for gold purchases in the past) is also coming on strongly from virtually nothing a couple of years ago to a WGC estimate of close on 180 tonnes in 2010. If the pace of growth continues investment demand alone could reach as much as 300 tonnes in 2011!

If the Chinese Central Bank is absorbing domestic production, as many believe then total Chinese demand this year could soar past India's. The potential is almost beyond belief. According to the report, there is evidence that China is positioning itself to make the yuan at least a part of any new reserve currency package which might replace the still-declining U.S. dollar in global trade. There is the strong suggestion that it needs to build its gold reserves as backing for this at least to levels approaching those of the biggest European Central Banks, which suggests a doubling of Chinese gold reserves at the very least in a relatively short space of time. At the moment the value of gold held by the Chinese Central Bank accounts for less than 2% of total foreign reserves which are now estimated at around $2.6 trillion. It is possible that the country will announce another revaluation of its reserves in the near future, even though it tends to be cagey about such announcements as it knows any significant increase will affect the global gold price and while it may be soaking up excess gold it still wants to buy it at what it may see as bargain prices!

While some Western economists balk at the idea of the Chinese yuan becoming a major global currency, the Bank of India is already offering a trade settlement facility between the rupee and the Chinese RMB.

"We are the first Indian bank to offer real-time settlement facility in RMB to Indian exporters and importers. It will be save a lot of time because settlement in US dollars usually takes three working days," Arun Kumar Arora, BoI's chief executive in Hong Kong, said during a recent visit to meeting regulators in Beijing.

Indian buyers are at present making payments in US dollars, and they often have to convert rupee into the US currency for the purpose. The US dollars will no more be the intermediary currency as the BOI is offering direct settlement between the rupee and the Chinese money.

Chinese exporters want their money in the local currency, which is regarded as more stable compared to the US dollar. They are also in a position to have their way because Indian buyers do not have an alternative source of low-cost goods, sources said.

In my newsletter The Delaire Report dated March 01, 2010 I stated the following: “While some Wall Street’s analysts claim China is in a bubble, I don’t buy this at all. In fact, I am sure China’s GDP growth will continue at 9% if not more. As China continues to transform itself into a major economic power, demand for gold, and silver for that matter, will continue to increase. It is estimated that by the year 2025 China will have more than 200 cities with a population of more than one million. And in 20 years, China’s cities will have added 350 million people. That is more than the entire population of the United States. As this new consumer class emerges, the demand for gold jewellery will only increase. But, in addition, the Chinese have a good understanding of the value of gold as an investment, and this new demand is going to have a positive effect on gold.”

If you don’t yet own some physical gold, it is time to include some gold bullion in your investment portfolio.

TECHNICAL ANALYSIS

The price of gold has pierced through the key resistance level of $1420 an ounce. It is now important that prices remain trading at this level or higher to confirm a break to the upside that could send prices to $1500 an ounce.

David Levenstein

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About the author: David Levenstein is a leading expert on investing in precious metals. Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.
His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.
David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.
For more information go to: www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.

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Daily Pfennig: 03/07/11: Moody's & JoJo the Monkey...

2011-03-07T12:44:00.000-05:00

By Chuck Butler
Mar 7 2011 9:05AM
www.caseyresearch.com

In This Issue…

* Euro remains on rally tracks..
* Gold & Silver are soaring again!
* Oil pushes the loonie to $1.03
* Aussies & kiwis on the mend…

And, Now, Today’s Pfennig For Your Thoughts!

Moody’s & JoJo the Monkey…

Good day… And a Marvelous Monday to you! It will be a tough day for Chris, as today is his father’s wake, with the burial / mass tomorrow. It was an interesting weekend for yours truly, and I’ll get into that in the Big Finish. I’m writing from home this morning, as my beautiful bride is already in Florida (I get there on Thursday!) , which means I had to write the letter, get ready for work, make Alex his breakfast, and lunch, and get him to school by 6:30 for jazz rehearsal. Not looking for any accolades here, just pointing out that a “guy” can get all these things done!

Well… I was off a bit on my call for a disappointing Jobs Jamboree… Recall, that the “experts” said 200,000 jobs were created in January, and I told you about the downside risks to that number saying 175,000, would be the top… Well, it wasn’t 200,000… and it wasn’t 175,000 either… it was 192,000… I’ve been through all the explanations about who gets counted, and so on, the ghost jobs, and the fall in the unemployment rates, so I won’t bore you with those details again… I’ll just say, that 192,000 is better than a sharp stick in the eye, like the 300,000 monthly job losses we saw a couple of years ago… but it’s not enough to fuel a strong economy…

When I signed off on Friday morning, before taking a quick tour of EverBank Field, and then boarding a plane for home… The currencies had backed off their lofty overnight levels, but were in still “rally mode” VS the dollar. And they remained like that the rest of the day… Silver was the best performer of the day, gaining 1.76% to nearly $36!!!!! Gold touched a new record high of $1,440… And the price of Oil hit $105… which has really pushed the Canadian dollar/ loonie to $1.03!

I read a story this past weekend, about Fed Heads calling for an abrupt end to the QE2 bond purchases… Well… I guess their calls are falling on deaf ears, because the CABAL will make purchases of about $25 Billion this week… So… neener, neener, neener… You’re not the boss of me, you can’t tell me what to do! I’m laughing loudly right now, because I’m thinking that Big Ben Bernanke is the one sounding like a 7-year old with the Fed Heads… HA!

So… this morning… well, the euro briefly fell below 1.40 on news that Moody’s downgraded Greek debt by 3 grades! Whoa there partner! I’ve never seen that before! 3 grades, and didn’t stop there, they also hang a “negative outlook” for Greek debt… I have to chuckle a bit here, because, JoJo the monkey, who performs tricks at the children’s zoo, probably already believed that Greek debt had a “negative outlook”! But, a year later, Moody’s comes along to do the trick… UGH!

But my trusty, “Bloomberg Anywhere” tells me that the euro has shaken the affects of that downgrade to one of its “outlaw states” (Greece), and is back to pushing higher VS the dollar, and yen this morning.

Other than Silver…. The best performing currency last week was the Brazilian real, and the worst performing currency last week was the New Zealand dollar / kiwi. Well, the real, saw a 50 Basis Point internal rate hike to push it higher, and kiwi heard all the calls for a rate cut to help the country deal with the aftermath of an earthquake. The Brazilian Gov’t continues their assault on a strong real, by buying dollars and selling real, by the truckload about once a week, but it hasn’t stopped the real from gaining 7.5% in the past year VS the dollar… and when you take into consideration the interest earned on the real, the overall return is nearly 14%.... Not too shabby, for a “diversification hedge” , eh? But, here’s where I pop the balloon on this seashells and balloons talk about reals… Don’t forget that Brazil is still considered to be an “emerging market”, which says simply that the volatility can be quite wild sometimes…

I say, look at kiwi like this… If the Reserve Bank of New Zealand (RBNZ) does decide to cut rates, in an effort to assist the country, the cut has already been priced in… (unless the RBNZ says something like, this is the first of many cuts to come, which I don’t think they will)… and therefore, the level we’re seeing for kiwi, could… and I mean to emphasize, “could” represent a contrarian’s view of an opportunity to buy a cheap asset…. The rebuilding of New Zealand is already beginning, as Home-Building approvals increased the most since 2009, last month… And yes, before everyone fires off emails to me telling me about Hazlitt’s broken window, and so on… This rebuilding is a good thing for New Zealand’s economy…

The job advertisements were very strong in Australia last month… So… the Aussies and kiwis are on the mend….

The Chinese renminbi continues to move higher VS the dollar, in baby steps, but still it’s a one-way move these days… Now, that’s not to say the renminbi can’t lose ground VS the dollar, I’m just saying that recently the move has been one-way… I believe I’ll be talking to a reporter tomorrow about the Chinese renminbi… And for those of you that plan on attending the Las Vegas Money Show at the end of April, I’ll be talking about how I believe the renminbi is going to be the next reserve currency of the world… And no, I don’t mean in the next year, or two years, or even three years… But eventually, as these things take time to wind through…

Well… looky here! The boys and girls over at Morgan Stanley, have removed their bearish outlook for the euro (VS the dollar), and now believe that the euro will end 2011 at 1.45…

In my opinion, that’s all fine and dandy, except for the debt solution resolution that I’ve been talking about, that hangs over the euro like the Sword of Damocles! Last Friday, I said that the euro needed to beware of the Ides of March, and that thought remains, and the Eurozone leaders have this month to come up with their solution…. If they don’t, I don’t care who removes their bearish outlook for the euro, the single unit will get hammered… But, then… if the response to a crisis can be solved… then look out, because here comes the Big Dog! The European Central Bank (ECB) is going to hike rates soon, and it will be “game on” (Wayne and Garth style!) for the euro!

I had someone ask me to explain, “Risk On”… So, here goes… basically, when the markets are buying up “risk assets” like currencies, stocks and commodities, the “risk aversion” has been removed from the markets, and therefore I call it a “Risk On” day, which simply means that it’s all seashells and balloons for the risk assets…

Well, the data cupboard here in the U.S. is pretty bare for the first 3 days of this week, but then about the time I’m boarding a plane for spring training on Thursday, the data begins to come in strong! Data prints like: the Trade Deficit, Weekly Jobless Claims, and Retail Sales… I won’t be around when the Retail Sales prints, but I can tell you that the Butler Household Index (BHI) tells me that it should be a strong report… Retail Sales are going to reflect a huge surge in car sales in February… Of which I participated!

Then there was this… “Utah took its first step Friday toward bringing back the gold standard when the state House passed a bill that would recognize gold and silver coins issued by the federal government as legal currency. The legislation now heads to the state Senate, where a vote is expected next week.

Under the bill, the coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.

If the bill passes, Utah would become the first of 13 states that have proposed similar measures. The others states are Colorado, Georgia, Montana, Missouri, Indiana, Iowa, New Hampshire, Oklahoma, South Carolina, Tennessee, Vermont and Washington.”

Chuck again… that’s pretty interesting stuff, eh? Talk about sending a message to the rest of the country and out the leaders charged with providing a strong currency… WOW!

To recap… The carryover of the news from Thursday that the ECB is preparing to hike rates, has put some wind in the euro’s sails, and it carried over the 1.40 level… there’s been some slippage on the news that Moody’s downgraded Greek debt by 3 grades, but, as I get ready to hit “send” the euro is back on the rally tracks VS the dollar and yen. The Canadian dollar / loonie is $1.03, as the price of Oil picks up steam and is over $105! The Brazilian real was the best performing currency (excluding silver) last week, and the New Zealand dollar / kiwi was the worst performing…

Currencies today 3/7/11… American Style: A$ $ 1.0160, kiwi .7385,C$ $1.03, euro 1.4020, sterling 1.6320, Swiss $1.08 (WOW!), … European Style: rand 6.8780, krone 5.5525, SEK 6.33, forint 193.70, zloty 2.8385, koruna 17.2920, RUB 28.07, yen 82.10, sing 1.2645, HKD 7.7870, INR 45.06, China 6.5630, pesos 12.01, BRL 1.6545, dollar index 76.20, Oil $106.20, 10-year 3.51%, Silver $36.48, and Gold… $1,438.00

That’s it for today… I’m doing good on time this morning, so I can stop racing around on the keyboard! Cat Stevens’ song Morning has broken is playing, but it’s still pitch black outside! So… I got to go to the Missouri Valley Championship game yesterday (Thanks Rick!) but Missouri State couldn’t win… UGH! (Not that I have an axe to grind, but they did represent the state!) Saturday night, I hosted a small get together for Alex and his friends… 13 – 15-year olds… I was glad when that was over! Dawn and Jerry came over to help chaperone, which meant I got to see Delaney Grace, and Everett the EverBaby! He’s getting to be real pudgy, which is always so cute on babies, but not adults like me! As I always tell audiences that I talk to… I take it real personal, when I hear people blaming “fat bankers’ for their problems! HA! It was great to see EverBankers last week… especially, the mortgage guys that I learned all read the Pfennig! They called me, “Mr. Butler” that cracked me up! A special mention to three of them that asked to me mentioned in the Pfennig: Bryson Bede, Matt Suresly, and Michael Smith… OK! Let’s get this out the door… I hope you have a Marvelous Monday, and stay strong Chris!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837
www.everbank.com

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Gold And Silver Set Record Highs with More Room To Run !

2011-03-07T11:52:00.001-05:00

Posted by Patrick A Heller on March 7, 2011 8:42 AM

Demand Soars, Supplies Disappear, Prices Rising!

Despite attempts by a handful of analysts to claim that supplies are plentiful, the physical silver market is experiencing a growing supply squeeze.

Here are some tidbits to consider.

In mid-February, the Perth Mint announced that newly received orders for silver bars would not be fabricated until April.
In a February 24 interview, David Madge, the sales director for the Royal Canadian Mint (RCM), stated that the RCM was having difficulty locating physical silver and anticipated that the problem would get worse in the near future. The supply problem is affecting them even though the RCM has long term contracts to obtain silver.
The US Mint sold another 3.24 million Silver Eagle Dollars in February—the most ever in the month of February, raising the annual sales to almost 10 million coins. However, the US Mint is severely restricting the acceptance of new orders. While the reason is not stated, I suspect the problem is lack of silver supply as the Mint has the staff and equipment to produce far more coins than they are now striking.
The British Royal Mint reports that they are striking twice as many gold and silver coins as they have ever struck before.
A tip from one of my most reliable sources says that there are Far East buyers who are so frustrated at the difficulty in locating physical silver to purchase that they are purchasing large quantities of shares of the SLV silver exchange traded fund. Their plan is to redeem the shares for the underlying physical silver.
I have received multiple reports that refiners are refusing to accept new orders for refined silver as they are having difficulty obtaining enough material to process. With reports like these, it is no surprise that the price of silver is up sharply in the past few weeks, settling today at $34.81, its highest price (ignoring inflation) since early 1980.

The chart below shows the COMEX silver prices as of February 25 also points out the severity of the silver supply squeeze.

In normal commodity contract trading, future month prices are higher than the spot month by roughly the interest rate minus a small amount for storage costs. This condition is called contango. When the spot month price is higher than some or all future month prices, that is a sign of a shortage of the physical commodity, a condition called backwardation.

As you can see in the chart, the silver spot price is substantially above every future month contract on the COMEX—and by a large amount.

The easiest way to cure backwardation on a commodity exchange is for higher prices to bring supply and demand back into relative equilibrium.

However, the US government has huge problem with soaring silver prices. Silver and gold prices generally move in the same direction. In the past few weeks, the surge in the price of silver has helped propel the price of gold to record high levels, again ignoring inflation.

The price of gold is a report card on the US government, the US dollar, and the US economy. When the price of gold is rising, that is a signal of developing trouble for the US government.

First, as investors fear that the US dollar will drop in value, they insist on receiving a higher interest rate on US Treasury debt to be willing to continue to hold the debt. It wouldn’t take that much of a move for the US government to have to pay another 1/2-1 trillion dollars of interest payments annually on the growing pile of debt.

The US government is currently inflating the US money supply under plan referred to as Quantitative Easing 2. It is over at the end of June. Already, two presidents of regional Federal Reserve Banks have issued statements advocating that a third round of quantitative easing begin later this year.

It is probably a safe interpretation that QE3 is a foregone conclusion and that a fourth round of quantitative easing is already under consideration.

The US government is caught in an impossible dilemma. In order to help prop up major banks, the stock markets, and the residential and commercial real estate markets, the US government has to keep increasing the money supply at low interest rates. Yet the very act of increasing the money supply will lead to higher interest rates.

Through the Federal Reserve, the US government has been trying to inflate the currency supply while holding down interest rates. The Federal Reserve now holds at least $1.2 trillion of US Treasury debt. It has surpassed the total amount of Treasury debt held by China to become the largest creditor of the US government.

This scheme will only work as long as the public does not realize that this sleight of hand is taking place. The public is starting to catch on, with the result that the US Dollar Index, a reflection of the value of the dollar compared to a market basket of major world currencies, it now all all-time low levels.

So, what can the US government do now?

How The US Government Suppresses Gold And Silver Prices

There are almost endless means by which the US government can suppress gold and silver prices.

It can make supplies appear to be greater than they really are. This can be done by surreptitiously utilizing gold reserves to dump onto the physical market. Or, gold could be leased to dump on the market, with no plans to close the lease.

Another tactic would be to scare the management of mining companies into thinking that prices may fall in the future so that they are willing to pre-sell future production.

Apparent demand can be diminished by central banks refusing to reveal that they have added gold reserves. China’s central bank did this for six years! This newsletter reported that it looked like the Chinese central bank was adding to gold reserves back in 2003. It was not until 2009 that most people found this out when China revealed that they had added reserves since 2003.

Inventories can be overstated such as when the International Monetary Fund used to require that two central banks that engaged in a gold lease were both required to report the leased gold as being in both vaults and part of reserves at the same time. Another gimmick was to pretend that the London market has 100% backing to its outstanding contracts, as the contracts technically require, yet have it turn out that the London vaults only have enough gold or silver to cover 1-3% of the contracts

The government and its allies can also change the rules of trading precious metals. For example, the COMEX could raise margin requirements, even during times of falling prices (as happened in January).

Regulations can be changed. The Commodity Futures Trading Commission (CFTC) has proposed new regulations that, on the surface, seem to place limits on commodity price manipulation in the gold and silver markets. These proposed regulations are now going through their public comment period before going into effect.

The proposed regulations have lots of loopholes. Any short positions acquired before the regulations to into effect are exempt for the regulations. While the regulations do place limits on acquiring long positions in gold and silver contracts, short sellers have almost no limits on their ongoing activity. In effect, the new regulations will permit continued price suppression manipulation while putting limits on traders who might want to acquire positions that would push prices upward.

If all else fails, the government can always use statistics to lie. The government reports on inflation, unemployment, housing, etc. all paint a picture in the headlines that the economy is better than it really is. The fine print detailing the contradictory information tends to be ignored by the mainstream media.

In sum, even though gold and silver prices are pushing up to new record levels, they will not rise in a straight line. You will see periodic pullbacks, with at least some of them orchestrated behind the scenes.

As time goes on, these manipulations are having a smaller impact for a shorter time than they did in years past.

I’m Sticking To Last Month’s Predictions

These developments simply reinforce my thoughts when I predicted in the last newsletter that the price of gold could reach $1,600 by the end of March and silver would get to $38-45. Actually, I think my silver prediction may now be too conservative. It is not impossible that silver might break the January 1980 record within the next few weeks.

Patrick A Heller is the owner and General Manager of Liberty Coin Service, Michigan’s largest rare coin and precious metals dealer since 1971. Mr Heller is the editor of the Liberty’s Outlook Newsletter, and gold market commentator for Numismaster. In addition he is a columnist for The Greater Lansing Business Monthly, and has a radio show on WILS-AM 1320.

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THE NEW ABNORMAL ~ by Roger Wiegand

2011-03-04T15:06:00.001-05:00

Why Gold And Silver Will Diverge From Most Other Markets.

Roger Wiegand
The Buy and Trade Guy

Analysts and traders have been watching precious metals closely in recent years wondering when and if the metals would separate from the trading influence of the broader stock markets. We’ve noticed a very gradual departure on the edges. It has been so gradual most would not notice it. We see it in several connected markets during rallies and sell-offs and in other related markets signals-indicators.

Will we get a fast break-away or, will the gradual approach prevail? I suspect a hard breakaway arrives when the broader global stock markets take a hard tumble. However, between now and then there could be many more months of required trading to settle this idea within the psyche of trading and investing minds.

Understand that most participants in global markets still believe in the old paradigm of fundamentals. They are believers in buy and hold forever and follow the New York investment community’s mantra as their Washington government lapdogs work in concert to “Keep The Big Game In Play,” encouraging all, that (current upsets) this too shall pass.

We don’t think so. And, with the new spreading violence in the middle East followed by subsequent rising energy prices, the “New Normal” or, should we say the “New Abnormal” has arrived and its not leaving any time soon.

“If the US Government and their counterparts in other nations would write-off ALL the bad debts, cut government spending in half and dramatically reduce taxes for all to just 10% of net for companies, and 10% for the Sheeple, then the entire world would quickly turn around creating a boom.”

Not a chance. Not even one chance in a million. The reason is the fat cats in New York and Washington, and those in global corporations like things just as they are. The Sheeple are just used for voting and paying taxes. They are considered just useful dirt under the feet of these controllers. Further, as one entrenched politico told us, “all decisions in Washington are carefully planned and on purpose.” Nothing happens that is not deliberate. So while their decisions appear very stupid, they have a nefarious purpose.

Included in those decisions are debasement of the US Dollar, the inflation of credit and the giant-credit-housing smash. Further, they planned the shipment of assets and jobs overseas to delete labor costs and the intentional destruction of the entire American middle class stealing their jobs, homes, savings and retirement funds. So far it’s working.

On the surface, sharp readers and thinkers in the Sheeple Herd keep throwing verbal barbs calling these bankers, congressional thugs and goons and, “Stupid.” Yes, they are stupid in what they are doing but its being stupid with a smart and deliberate purpose… and that purpose is to decimate and steal credit and assets of honest Americans and similar folks in other countries. One global currency and one government is the goal.

This is about power and control of whole nations…of the whole world. It has been planned since the Napoleonic Wars when the Rothchild banking cabal in France loaned piles of cash to BOTH SIDES OF THESE WARS TO MAKE MONEY.

All the bad stuff seen in this decade and some in prior decades is part of a grand plan to create a one- world government, have one currency and have all important decisions made by a handful of crooks. The only way things are going to change is when fiat currency has no value and the international criminal cabal is smashed into the ground by their own failing bond markets. If this happens, the Sheeple Herd has a small chance, but they will have to fight for it and we think they will.

Watch what’s happened in Iceland and Ireland. These folks have no intention of paying bankers back for the bad loans they instigated. After Ireland gives the Euro-bankers the one fingered salute, it is going to spread very fast and then Euro-banking sinks into a smoldering pile of wreckage and cracked-up bond markets. Watch the PIIGS go down first.

With no fiat money to spread around and no takers for their specious bonds, bills and other paper; stock and credit markets as we know them now are finished. Then we’ll see some real, old fashioned goods trading, black markets, expanding regional gangs and unbelievable backlash against the instigators. If you thought the 1850-1890 USA era was the wild west,; watch what comes next.

One American pundit said 50 years ago that “Violence is as American as Apple Pie.” I did not quote it precisely, but you get the drift. We’ve heard the gun population within the USA is anywhere from 100-400 million. We have no idea and could never even come close to a guesstimate. However, we do know one thing; the real American patriots are loading for bear and with current open attitudes on the street, they intend to take no prisoners.

We’ve quoted before from the great book “When Money Dies,” by Adam Fergesson, that over 400 politicians were assassinated in the 1920-1921 Austrian-Weimar Germany hyperinflation. This is what happens when things go very desperate.

I am a peaceful non-violent journalist interested in the truth and being of service to my readers, friends, traders and investors. I want no part in any violence but I am a smart student of history. I believe history repeats and that day of “Refreshing the Tree Of Liberty” is not very far away. Not far at all.

Most nations and those with freedom and liberty have a shelf life of approximately 250 years. America is now in our 235th year if the baseline is 1776. This means if those cycles hold true, that within the next 15 years or less, the Grand American Experiment is duly ready for some “Tree Refreshing.”

When you steal a man’s home, his job, his savings, his future, and his retirement, that man is going to go gunning. The Sheeple Boyz have got the guns and there are probably lots of girls that do too. The rule of law in the USA has long since gone down the drain. Congress, and our president are imposing laws at will and do so in violation of the U.S. Constitution and our Bill of Rights and, of course, the most important all, the Ten Commandments.

While a long hot summer appears to be arriving in the states’ this summer, those kinds of violent riots, fires and other mayhem will at first be smothered by the cops; both local and regional. However, when the dollar and the bond markets are toast, we’ll begin to enter The New Abnormal as breakdowns occur everywhere.

All the freaks, crooks, psychopaths and greedy bankers and politicians will have no where to hide. If I was in that camp I would be extricating myself from these gangs and finding a place for a new life. We do not encourage or wish violence on anyone. However history books tell us and, have proven time and time again, this is what lies ahead under these circumstances. Do not go to violence. Be peaceful and stay out of the way.

So When Do The Precious Metals Diverge?

No one is so smart that they can measure with any accuracy when credit breaks-up or exactly when the Federal Reserve and other central bankers lose control. It seems that each of the popular, in the news countries we discuss have some kind of Black Swan lurking and ready to wreak havoc. It could be China’s real estate market, Japan’s credit market or, something within Western or Eastern Europe. It could be food rationing, earthquakes, or a roiled energy market or, a catastrophic credit market failure in America. It could be violence against world leaders or, even a false report on the stock markets.

Remember the USA Flash Crash! Just this week the Aussie Stock Exchange closed for a glitch. It could be Saudi Arabia going upside down with problems similar to Egypt. In any event, so much of the world is held together with chewing gum and bailing wire, the smart ones are personally preparing to deal with it. Most understand that when a severe crisis hits you get no institutional help…they only get in the way for public relations reasons.

Some Key Events That Signal Precious Metals Could Diverge.

Precious metals shares begin to rise or stay flat (not selling) when broader markets sell off.
Gold and silver futures trade-up faster even when the broader stock markets are rising.
Base metals and precious metals diverge. When base metals are falling including key industrial metals like copper, something big is coming.
When New York analysts talk of something not in the news that ought not to require any public discussion, go opposite to what they are saying. Shakespeare called it, “Me-Thinks Thou Protesteth too much.” One example is Geithner telling the herd this morning that Congress needs to address the housing situation in the next two years. Sorry stupid, this should have been addressed and blocked when Greenspan gave zero rates ten years ago. Timmy said “Next two years” to give his boss wiggle room getting him past the election. These dolts probably won’t get to the next voting date before a crash and mayhem hits them on their lying heads.

The New Abnormal Continued

Our key discussion point in this report is to encourage traders, readers and investors to understand there is no returning to the olden days of Ozzie & Harriett and the 1950’s. The New Abnormal is inflation to hyperinflation moving toward destruction of the US Dollar. It appears we are mostly safe until May or June when the “Sell In May And Go Away” bell rings. The US National Budget will not be fixed and the GOP’s have no prayer of cutting any programs dramatically. They are making lots of dust and news, but to no avail. The government will not be shut down and politics gets more rough and nasty as the budget fights spill over into the states. Watch California-Wisconsin for a states’ failure roadmap.

Traders And Investors Should Expect The Following:

The new USA budget will be another smoke and mirrors non-budget solving nothing significant. The Federal Reserve will continue to print and pour in more paper, finishing QE2 at the end of March and beginning QE3 in the second quarter. In summer, we get QE 4. Numbers 3 and 4 will not be announced they just do it.
US inflation is now running over +20% for food and energy and is rising even faster. Other stuff is deflating or is beginning to see price increases starting newer inflation in other sectors. The definition of Hyperinflation is inflation running at an annualized rate above +50%. The USA dollar either fails and is replaced or, is cut in half on value from index80.00 to 40.00.
USA food-makers and restaurants are struggling with higher prices. Big chain grocery stores are trying to hold the line but their margins are already razor thin. Marginal food stores and small retailers will fail in droves.
American farmers are going full-out to plant fence-to-fence as grain prices skyrocket. One top analyst said that if the corn crop falters this summer for any reason we are in big trouble. Corn reserves are the lowest since 1974, yet the government is demanding more corn for ethanol. The last ethanol corn number we saw was 5 Million bushels for fuel that is essentially not economically viable. This is mandated for the greenies and tree-huggers to get votes.
China has 35% inflation (not-announced) with real estate prices totally out of control. A top analyst wrote the real estate bubble is separate from the other stuff. We see a blend of slower sectors (inflation of other stuff, moving into real hard inflation). China has severe food shortages and they will be buying lots of grain on world markets, especially USA soybeans. Major freezing-drought has killed over 30% of their grain and the government is now spending $75 Billion on domestic police security equal to their national defense budget. This means they expect riots and violence over food problems, jobs, payroll, inflation and general shortages.
Basic ores like iron, zinc, manganese, aluminum, copper and others see prices rise on China demand and new inflation. A new report says iron ore is going up +20% right now. Recently, copper was nearly $4.60 a pound; over $10,000 per ton.
Most markets seem bullish until later spring. After this we are very wary, expecting a flat summer with increasing volatility beginning in later August. This fall could be very traumatic. Inflation will be quite difficult and could morph into something worse. Remember, credit is king and when the king is dead so are we monetarily.
Crude oil and other products are now firm with higher supports and prices. On this Friday morning of 3-4-11, crude oil futures are 103.20 with highs over 103.57. Watch for 108 next higher resistance followed by $112-115. Natural gas is plentiful and prices should stay low until our summer air conditioning season when power plants ramp-up the juice to run all the A/C demand. Jet-A and diesel prices are rising. The airlines must install fuel surcharges on tickets and truckers have to raise transport prices again. This means that everything riding on a truck costs more, especially food.
Mexico suffered a hard freeze a few weeks ago from the USA border all the way to their southern border near Guatemala. Since they provide 50% of USA national demand for fruits and vegetables, those products in USA stores will encounter shortages and prices could temporarily double. The newer crop is planted next month in April and will not be ready for shipment until later May or June. Meanwhile, a large production-USA delivery hole exists.
The Middle Eastern crisis will spread. Iran is fomenting trouble in most all nations now in an uproar with riots, joblessness and inflation. The Saudi’s are throwing billions at their Sheeple to quiet their herd and so far it’s working. However, Iran and their bad-boy friends are going to “seize the moment” to gain political footholds where they have not been before.
These troubles in the Middle East will spread and give the global central bankers an opportunity to save their failing selves by starting a new World War III with Iran. We forecast Iran will be attacked by outsiders in 2012 or 2013. Sadly, this could be the mother of all wars involving most major nations in the fight for global power and energy.

Now, more than ever, it is important to take the immediate necessary precautions to protect yourself and your families and friends. Traders and investors should be buying precious metals and select shares right now. In our newsletter we have a great list of trading and investing ideas for you.

Meanwhile, you can never go wrong buying physical precious metals and holding them for security. We’ve had a constant run of nearly ten years in gold rising +15% per year or more, so this remains a good trade. In the last twelve months, gold rallied over 34% and is going ever faster. As outstanding as those numbers are, silver is doing even better.

It’s not going to stop any time soon. In fact, we predict those annual percentages will rise even more and this offers a chance, arriving only once in 25 years on the historical commodity cycles.

Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com

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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information. Listen to our Traderrog Daily Market Close on the Korelin Economics Report website http://www.kereport.com/
Contact Claudio Bassi, at Trader Tracks New York City publishing offices for an introductory 30-day trial subscription for only US$49.00. This is half the monthly rate our subscribers pay. Call us at 718-457-1426 Monday through Friday, 9:00 am to 4:30 pm (EST) for details. You can also e-mail our office manager, Claudio Bassi at cbassi@miningstocks.com for more information.

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US Marshals Service Commemorative Coins Proposed

2011-03-04T14:38:00.000-05:00

By Mary L. Crider
MCRIDER@SWTIMES.COM
TIMES RECORD

LAWMAKERS RESUBMIT MARSHALS COIN BILL

Calls for commemorative coins to honor the 225th anniversary of the U.S. Marshals Service — and to provide some funding for the national Marshals Museum — have been renewed in Washington.

Photo Courtesy Of The Fort Smith National Historic Site
Former members of the U.S. Marshals Service, most of whom
are mounted on horseback, pose for a photograph in front
of Immaculate Conception Catholic Church in
Fort Smith in an undated photograph.

U.S. Sens. John Boozman and Mark Pryor and Rep. Steve Womack reintroduced bills in the House and the Senate on Wednesday to propose striking $5 gold coins and $1 silver coins in 2014 to mark the service's anniversary. They would be the first such coins for the nation's first law enforcement agency, and up to $5 million could be raised to the museum to be built on the Fort Smith riverfront.

Museum officials are delighted the bills have been resubmitted so early in the congressional session because it provides plenty of time for staff "to roll up our sleeves and get to work" to encourage its adoption, Marshals Museum Executive Director Jim Dunn said Thursday.

The coins - and the museum - would not just honor history; the Marshals Service remains relevant today.

"We had a 24-year-old deputy marshal killed in the line of duty in West Virginia on Feb. 16 — Derek Hotsinpiller — and it is a reminder that it is an extremely dangerous job," Dunn said.

Hotsinpiller was shot in the neck with a shotgun while serving a warrant on a drug suspect in Elkins, W.Va. Two other deputy marshals, Alex Neville and Fred Frederick, were wounded.

Dunn said more than 250 members of the service have been killed in the line of duty overall, a measure of how important it is that the marshals be memorialized.

President George Washington established the Marshals Service on Sept. 24, 1789, when he signed the Judiciary Act into law.

A $50 million, 50,260-square-foot national museum is planned in downtown Fort Smith on the Arkansas riverfront, facing the Oklahoma border.

Museum officials anticipate it will draw 115,000 visitors to Fort Smith in its first year. The museum will employ 20-25 people and is projected to have a $5 million regional economic impact, Dunn said in January.

In the past 11⁄2 years, almost $7 million has been raised toward the museum's construction, and a local fundraising effort will kick off March 29 with an event honoring the volunteers working to raise funds, Dunn said Thursday. A regional drive will follow, and a national fundraising drive will follow that, museum fundraising campaign counsel Jim Johnson has said.

If approved, the first $5 million in surcharge revenue generated from the minting of the proposed coins would go to the Marshals Museum for preservation, maintenance, and display of artifacts and documents, Dunn said.

He said any additional surcharge revenues would be shared equally among three law enforcement-related nonprofit organizations:

◗ Center for Missing and Exploited Children in Washington.

◗ National Law Enforcement Officers Memorial Fund in Washington to help support the National Law Enforcement Museum and the National Law Enforcement Officers Memorial.

◗ Federal Law Enforcement Officers Association.

This marks the third attempt at passing the commemorative coin bill.

Boozman, then a congressman, first introduced the bill into the House of Representatives in June 2009, and then-Sen. Blanche Lincoln later introduced a companion bill in the Senate. Their bills proposed a 2014 mint date.

Boozman and Lincoln reintroduced both bills in July 2010, seeking a 2015 mint date. At the time, Dunn noted that proposed commemorative coins are rarely approved the first time they are introduced. Congress may only authorize two commemorative coin issues each year.

Posted: Friday, March 4, 2011 9:30 am | Updated: 10:57 am, Fri Mar 4, 2011.

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Daily Pfennig: 03/04/11: Trichet Signals For A Rate Hike!

2011-03-04T11:05:00.000-05:00

By Chuck Butler
Mar 4 2011 10:08AM
www.caseyresearch.com

In This Issue…

* Euro rallies to 1.40!
* Gold & Silver play catch-up…
* Jobs Jamboree Friday!
* Brazil GDP soars!

And, Now, Today’s Pfennig For Your Thoughts!

Trichet Signals For A Rate Hike!

Good day… It is with much sadness that I write with this morning… Chris Gaffney’s, dad, James Gaffney, passed away last night. I received a text from Chris in the middle of the night, letting me know that he would not be writing for me this morning. So, in honor of James Gaffney, I’m going to keep this short-n-sweet this morning, and probably not be my normal smart-alec self… Just keep it simple… Since I’m being pulled from the bullpen this morning, I have to go do a ton of research… So, I’ll be gone for a while… be right back!

First things first though… Yesterday, European Central Bank President, Trichet, did exactly what I said he would do on Monday… CABAL Chairman, Bernanke did what I said he would do on Monday at his testimony on Tuesday and Wednesday…. And last night when I checked the currency prices, the euro reacted exactly the way I said it would, as it climbed to 1.40 … In case you missed class that day, here’s exactly what I said about all of this…

Chuck on 2/28/11 in the Pfennig… “Well… This week, will be interesting regarding the euro and dollar… First we have Big Ben Bernanke speaking tomorrow to the Senate Banking Committee tomorrow… If Big Ben, stays steady Eddie, and tells the Committee, that the Fed intends to keep rates near zero, that will be the first step…. Then later this week, the European Central Bank (ECB) will meet, and while I don’t expect a rate hike from the ECB at this meeting, what we might, just might hear from ECB President, Trichet, is that the ECB is ready to hike rates… If those two things happen folks, you could very well see the euro trading around 1.40 by week’s end… For… the interest rate differentials, as I explained above, will be getting wider, and those differentials will move against the dollar, no two ways about it! “

I see these things happening, and quite often, they take a long time to come to fruition, while this was one that happened to fall into place right away.

So… that was last night’s action… This morning, that 1.40 figure has brought out the profit takers, and the euro has slipped back below 1.40… but, I don’t see it slipping further, especially on a Friday… the euro is around 1.3980 this morning… the other thing is that when Trichet jawboned the euro higher, along with rate hike expectations, the markets know that it’s not “hollow words”… the ECB has credibility to maintain price stability, and when they say they are going to do something, they do it!

A quick look at my new “Bloomberg Anywhere” screen and I see most of the currencies all taking liberties against the dollar this morning… yes, I have the ability now, to get live prices, and info just like I would if I were in the saddle in the office… Technology, you’ve got to love it, eh?

Gold & Silver have to play catch-up again today, as they were sold yesterday… Rate hikes could put a real damper in the precious metals ability to continue the large annual gains VS the dollar… But, that doesn’t mean I think rate hikes could end their bull runs VS the dollar… You have to remember that in the early 80’s when Gold traded above $800 (a record then), interest rates in the U.S. were around 18% (remember those days?) So… while interest rate hikes could slow down Gold & Silver, I don’t think that rate hikes will be the kryptonite that a lot of people think the rate hikes will be.

Well… it’s a Jobs Jamboree Friday… the experts believe that February will have created about 200,000 jobs here in the U.S… Which would even out January’s awful showing of just 36,000 jobs created… But averaged out, the total is nowhere close to the number of jobs needed to be created each month to keep the economy growing… I’m not going to spend a lot of time on the Jobs Jamboree, because it has become such a manipulated number, and very political… Which, I’m not saying one manipulates the data to their liking… but I could be saying that… but for legal reasons, I can’t! So I won’t! No! you can’t make me say it either!

All, I’ll say is that whenever the “experts” get giddy with a number, like 200,000 jobs, which would be the most since May of 2010, I take the other side of the bet, if you will, and say that there are downside risks to that number… So, in keeping with my normal order of business, I expect the number to be less than 200,000 and more like 175,000… Again, far less than what’s needed!

I’ll also say this about the message that ECB President, Trichet sent to the markets yesterday… I think he was also sending it to the Eurozone ministers, to work out a sustainable sovereign debt crisis response… Recall, that I also told you earlier this week, that if the Eurozone ministers don’t work out a sustainable sovereign debt crisis response by the end of March, the euro would get sold… Beware the Ides of March, Eurozone ministers…

If they do work something out that everyone agrees is workable, then we could see the euro move steadily higher VS the dollar again… So, all eyes are on the Eurozone ministers… and they won’t get “an extension” like the NFL owners and players’ union got yesterday!

Chris told you about Brazil’s rate hike yesterday… I have to say… see I told you! I told you long ago, that the Brazil’s interest rates would continue to move higher to combat their inflation, no matter what the Gov’t did, or said about all of it… OH! Brazil grew 7.5% in 2010, their fastest pace in 25 years! So, no wonder interest rates continue to go higher! There was a 7% increase in domestic spending, so the economy is being driven by consumers and not the Gov’t, which is always a “good thing” in my book! OH! And the Brazilian real? It continues to kick tail and take names later, folks…

Then there was this… From the Washington Post… “The true amount that U.S. state and local government pension funds will owe employees is at least $1.5 trillion more than what is being reported, economists said. The finding confirms fears that analysts have expressed for years but that politicians never faced. Experts said the way governments account for future pension obligations significantly understates the amount plans will have to pay.”

Chuck again… that’s scary folks… really scary…

To recap… Trichet prepared the markets for a rate hike at the next ECB meeting, and the euro immediately jumped to 1.40… the euro has backed off a bit on profit taking this morning, but the move in interest rate differentials is in the works now folks… It’s a jobs Jamboree Friday…

Currencies today 3/4/10… American Style: A$ $ 1.0130, kiwi .7370, C$ $1.0280, euro 1.3980, sterling 1.6280, Swiss $1.0760, … European Style: rand 6.91, krone 5.5625, SEK 6.3245, forint 195, zloty 2.8580, koruna 17.3785, RUB 28.22, yen 82.70, sing 1.2670, HKD 7.79, INR 44.98, China 6.5680, pesos 11.98, BRL 1.6485, dollar index 76.48, Oil $102.80, 10-year 3.56%, Silver $34.44, and Gold… $1,417.25

That’s it for today… my thoughts and prayers go out to Chris and his family. The world lost a great man… I’m headed to EverBank Field this morning, for a quick tour, and then on to the airport for my plane ride home… My beautiful bride, left for Jupiter yesterday, I’ll meet up with her next Thursday… (she’s got the life of Reilly, eh? ) We had a very nice All-Star rewards last night. I presented All-Star awards to Mike Meyer, and Kristin Kuchem… I told the people that everyone on the World Markets desk is an All-Star, but we can’t bring the whole desk to Jacksonville! I’ll end this with a mention that a very apropos song just played on my I-Pod while I was finishing this up… Dust in the Wind… all we are is Dust in the Wind… OK… I know it’s a sad day, but let’s go out and try to make it a Happy Friday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

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Take Two Coins and Call Me in the Morning - By Jon Nadler

2011-03-04T10:13:00.000-05:00

Mar 4 2011 9:24AM
http://www.kitco.com/

The final trading session of this most eventful week began on a relatively upbeat note in precious metals, following yesterday’s rather minor (1.5% from the recent high in gold) setback, which, for now, we will refrain from calling a “correction.” Crude oil rising past $103.00 on the back of continuing skirmishes in Libya, and a US dollar apparently stuck near the 76.40-76.50 zone on the trade-weighted index (and still at nearly a four-month low against the euro) gave rise to scattered early buying, but metals players were still cautious ahead of the 8:30 AM release of the US Labor Department’s employment data for February.

Spot gold dealings opened with a $3.60 gain on Friday morning, and they were quoted at the $1,418.90 indication price. Silver spot added 30 cents to open at the $34.53 level while platinum rose $3 to start the session off at the $1,828.00 mark per ounce. Palladium dropped by an equivalent amount, to open at $810 the troy ounce, while rhodium remained unchanged once again, and was quoted at $2,380.00 per ounce. Apple iPad junkies can now rejoice, as the Kcast Gold Live app can be with them 24/7365 wherever they might find themselves, and offer them the above-mentioned quotes, up to the minute.

Well, the February US joblessness rate came in at its lowest level since April of 2009 and it revealed a gain of 192,000 positions in February. The figure did miss the analysts’ estimates that had called for a gain of 218,000 jobs, but the overall US unemployment rate fell by one-tenth of a percent from January’s 9% level. Thus, early caution among commodity players dissipated somewhat on account of the 26,000 jobs-created-discrepancy between the USLD report and previous expectations, and the crowd set out to buy more gold and silver with a tad more confidence.

We are looking at probably another weekend ahead of which players might not want to go home without a safety lining in metals. However, book-squaring activities and any possible geopolitical developments could still make for a volatile session. Libya, oil, and the US dollar remain the top items on market participants’ minds.

Also on market participants’ minds this morning, were continuing reverberations from comments made by Mr. Trichet the other day. The ECB’s head sounded an even more than normally hawkish tone on Thursday as he intimated that interest rates in the euro zone could rise as early as April. Albeit the IMF warned against such a move, the ECB appears to have its mind made up that inflation -along the lines of its current trend- is not a welcome guest in the region’s economy. The word-pair “strong vigilance” was used by Mr. Trichet in his news conference, and analysts pointed out that this is historically the telltale sign of an imminent rate move.

Mind you, similar “signs” are also coming, not from the mind of M.Night Shyamalan, but from the US Fed at this time. Bloomberg reports that the Fed’s policy makers appear to be in favor of an “abrupt” ending to the QE2 program, when the end of June rolls around. The FOMC meets in eleven days, and that is about halfway through the bond-buying period that was instituted back in early November of last year. The Fed’s move came on the heels of a poor jobs and economic indicators’ scene in August, and it was seen as causing spec funds to run amok with certain commodity prices, drunken with the prospect of the ultra-cheap money environment that the Fed created for them for another six months or so, at least.

Now, however, the US economic picture has brightened considerably, and it has become fairly clear (at least to some) that the risks implicit in a prolonged easing stance are beginning to outweigh its benefits, especially when it comes to QE2 being “morphed” into QE2.5 or QE3 after mid-year. Even the full-run of QE 2 has come under questioning by some Fed members, but that fact has not stopped hard money newsletters from assuring their audiences that the Fed will continue with its current policies for, basically, …ever.

Reuters reports that according to Charlie Morris, head of absolute return at HSBC Global Asset Management, “the financial and geopolitical backdrop has not deteriorated enough for gold to show off its safe-haven credentials and it remains firmly a risk trade, while the chance to get into silver may have passed.” Mr. Morris recently cut his fund’s level of exposure to gold. Mr. Morris also opined that "we're at a crossroads and it's a very complex time because on the one hand, you want to protect yourself against inflation, but those trades are extremely overcooked."

TheHSBC fund manager has adopted a “defensive view of the world” and believes that gold “is not the best way to profit from that stance.” However, HSBC Global Asset Management remains bullish overall on gold, even if it does not envision gold as the cure-all for what ails the world at the present time. And, while gold might be a good enough value to become a buyer near $1,340- $1,350 for Dennis Gartman, the famed newsletter editor remains on the sidelines of the market, for the time being, citing risks of further retreats in the yellow metal.

Someone else who shares that view is Mr. Bernanke. Whether or not related to the state of Utah’s proposed legislation to allow its denizens to use gold and silver coins as an alternative “legal tender,” Mr. Bernanke commented that he dismisses the notion of the gold standard returning to the U.S., anytime soon. The Fed Chairman noted in his testimony before the Senate Banking Committee that gold "did deliver price stability over long periods of time, but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold. So I don't think it's a panacea."

Mr.Bernanke

Mr.Bernanke also remarked that the modern world could not re-adopt gold as its currency standard for one simple reason: there just is not enough gold in the world to effectively support the U.S. money supply. Of course, that’s the same reason for which Rep. Ron Paul has not only called for the abolishment of the Fed, but also for the return to the gold standard. While that debate goes on, what follow, are excerpts from our previous (in collaboration with the CPM Group) study “That was then, this is now” on the topic of said standard, monetary policy, and the prospects for gold’s return as currency:

“The issue of gold's role in a monetary system has been resurrected in U.S. political discussions this past year, after having been dormant for more than two decades. Two developments have led to this. One has been the seemingly relentless decline of the dollar's exchange rate in currency markets. The other has been the candidacy of Ron Paul as a Republican candidate for President of the United States. While Rep. Ron Paul was seen as having little chance of garnering the candidacy let alone the Presidency, he tapped into a wellspring of conservative discontent over financial management of the U.S. economy.

This was the first time that gold has played a role in U.S. Presidential politics since the Republican platform on which Ronald Reagan ran in 1980 carried a platform calling for a return to a watered-down gold standard for the dollar. That cynical proposal did not become a major issue during the campaign, and silently disappeared after the election.

Headline to make you laugh

The position of many advocates of a gold standard is that the Federal Reserve System ought to be abolished, that the U.S. government should allow private banks to issue currency as they see fit, and that the U.S. government should extract itself from the control of money supply in the United States. The problem is that the “good old days” never really existed. In the 65 years between the U.S. Civil War and World War One there were 16 recessions in the United States.

The concept and history of money and monetary policy in the United States always has been a point of strong opinions. When people have strong opinions about a topic, they often feel that it is acceptable to distort history and reality in order to justify their point. Thus, advocates of private banks issuing private money sometimes misquote Thomas Jefferson. Jefferson famously said: "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered."

In order to try to distort history and misrepresent one of the most knowledgeable American forefathers, people omit the word "private" from the preceding quotation, attempting to convince would-be supporters that Mr. Jefferson was opposed to the concept of a federally organized banking system, as outlined in the U.S. Constitution and envisioned by the founders of the nation. In fact, he was opposed to private banks having unrestrained capacity to issue money and build up debt, the very thing that caused much economic destruction in the period before the Civil War.

Anyone suggesting a return to the old ways of organizing and regulating a banking system and financial markets owes it to themselves and to those to whom they speak to know better the historical record of economic dislocations generated during such systems' operations. The free banking period in U.S. history was an era of massive swings in economic volatility, far greater than those experienced since the 1940s, incorporating periods of massive depressions and recessions; hyper-inflation and massive deflations; economic destruction that destroyed humans, companies, and communities; and lightly to totally unregulated financial markets that make the villainy of recent banking scoundrels seem like misdemeanors.”

Have a pleasant weekend, whatever standard you might prefer to be on.

Jon Nadler
Senior Analyst
Kitco Metals Inc.North America

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A.M. Kitco Metals Roundup: Comex Gold Firmer in Quieter Trading as U.S. Jobs Data Awaited

2011-03-04T08:26:00.000-05:00

04 March 2011,7:33 a.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) -Comex gold futures prices are trading slightly higher Friday morning in quieter dealings, as traders await the pending release of the key U.S. monthly employment report. Comex April gold last traded up $1.20 an ounce at $1,417.60. Spot gold last traded up $1.70 at $1,417.50.

For at least the moment, traders are more focused on the U.S. jobs report than the simmering civil unrest in the Middle East. For Friday morning’s employment report, the market place is expecting the important non-farm payrolls figure to have risen by around 200,000 in February. A payrolls number that comes in close to expectations is likely to be at least a bit bearish for the precious metals markets, especially since some profit-taking has already been seen late this week after gold prices earlier this week notched a fresh all-time record high.

There were no major, market-moving developments overnight in the Middle East. However, crude prices are trading well above $100.00 a barrel heading into an uncertain weekend. The overall tensions in the Middle East are still very much on traders’ minds. Also, the Middle East situation and its uncertainty are still inviting some safe-haven investment demand into the precious metals markets. Precious metals traders and other traders will continue to look to the crude oil market as a gauge of tension in the Middle East.

The U.S. dollar index is trading near steady Friday morning, ahead of the jobs report, and is hovering near a four-month low. The technical posture of the index remains very weak at present. If the dollar index continues to trade sideways to lower, which is what the technical picture is suggesting at present, then that would continue to be bullish for the precious metals markets.

Other U.S. economic reports due for release Friday include manufacturer’s shipments and orders.

The London A.M. gold fixing was $1,418.00 versus the previous P.M. fixing of $1,421.50.

Technically, the gold market bulls still have the strong overall technical advantage as prices hit a fresh all-time high Wednesday. Some profit-taking and downside corrective pressure is not at all surprising given the push to a new record high this week. Gold prices are still in a steep five-week-old uptrend on the daily bar chart. On the longer-term charts, gold prices have been trending higher for 10 years.

Gold bulls' next near-term upside technical breakout objective is to produce a close above technical resistance at $1,450.00. Bears' next near-term downside price breakout objective is closing prices below psychological support at $1,400.00. First resistance is seen at the January high of $1,426.30 and then at the December high of $1,434.10. Support is seen at the overnight low of $1,413.80 and then at $1,410.00.

May Comex silver futures last traded up 8.8 cents at $34.415 an ounce Friday morning. Prices hit a fresh 31-year high on Wednesday. Silver bulls still have the strong overall near-term and longer-term technical advantage. Prices are in a steep five-week-old uptrend on the daily chart.

The next downside price breakout objective for the silver bears is closing prices below solid technical support at $32.50. Bulls' next upside price objective is producing a close above solid technical resistance at $35.00 an ounce. First support is seen at the overnight low of $34.205 and then at $34.00. Next resistance is seen at the overnight high of $34.58 and then at this week’s high of $34.975.

By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

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Fr 747-780 Battleship Note ~ Profile History

2011-03-03T14:44:00.000-05:00

Teddy Roosevelt was not only an Army cavalry hero, leading the charge up San Juan Hill in the Spanish American War, but also a visionary naval historian, whose legacy includes one of the most descriptive of “collector” notes, the Fr. 747-780 Battleship Note, which bears a large U.S. war ship on its back.

Specifications
spec 1
spec 2
spec 3
spec 4
spec 5
spec 6
spec 7

Background
To understand this note and how it comes to have its steaming dreadnought image, one must understand the times when it was issued.

Even as a boy, young Teddy Roosevelt was fascinated by the sea. His uncle had been a Confederate Admiral. In his early twenties, T.R. wrote a serious historical volume on “The Naval War of 1812,” which was a standard for many years and continues to be studied even today. At the behest of his friend, Congressman Henry Cabot Lodge, President William McKinley tapped the rising public servant T.R. Roosevelt to be Assistant Secretary of the Navy in 1897, in which post he flourished if but briefly.

At the Navy Department, Roosevelt was an advocate of modernization, and he took the lead in preparing our sea forces for what he viewed as an inevitable clash with Spain. With the outbreak of hostilities following the explosion of the Battleship Maine in Cuban waters, he resigned his civilian post and organized a volunteer cavalry regiment, the famous Rough Riders.

Returning home from the Spanish-American war as a hero, T.R. became governor of New York, Vice President, and then in 1901 President of the United States with the assassination of McKinley. As President, Roosevelt greatly increased naval tonnage, including commissioning of a new battleship Maine Dec. 29, 1902. Other battleships followed in rapid succession: the Missouri in 1903; the Ohio in 1904; the Connecticut, Louisiana, New Jersey, Rhode Island, Virginia, and Georgia in 1906; the Kansas, Minnesota, Vermont and Nebraska in 1907.

Roosevelt’s “Great White Fleet” sailed around the globe for 14 months in 1907-1909 as a statement of America’s growing sea power. This demonstrated T.R.’s foreign policy of speaking softly “but wielding a big stick.” Included in the armada were four battleship squadrons and escort vessels painted white to impress all the nations of the world with America’s new importance and strength in global affairs.

Roosevelt especially wanted to project this power in the Pacific Theater, where the empire of Japan was a growing competitor. One of the final acts of his administration was to welcome the fleet home from its triumphal tour at Hampton Roads, VA on Feb. 22, 1909, timed to coincide with Washington’s Birthday.

Roosevelt was also a proponent of building the Panama Canal, not only for its commercial importance to our nation, but as a strategic artery to implement his two ocean navy to guard American interests in the Pacific as well as the Atlantic.

Other battle wagons followed. On Sept. 11, 1911, the keel was laid down for the USS New York (BB 34), which is engraved on the backs of large size $2 Federal Reserve Bank Notes, like the Fr. 750 shown here. On Oct. 30, 1912, the New York was launched. The ship was first commissioned on Apr. 15, 1914.

When conflict broke out only 15 weeks later in Europe signaling the beginning of World War I, the allies were glad for the projection of forward strength represented by American naval power, which could keep open sea lanes for movement of troops and the resupply of Western Europe.

The U.S. entered the conflict directly in 1917, and an Armistice ended hostilities on Nov. 11, 1918. In the interim, Congress had created the Federal Reserve System as its fiscal agent. Although privately owned by member banks, Federal Reserve Banks were authorized to issue paper money under provisions of the Federal Reserve Act of Dec. 23, 1913. Obligations on these notes are similar to those on National Bank Notes.

Background

In fact, these notes bear the title “National Currency” on their face. They were obligations of the individual banks of issue in contrast to Federal Reserve Notes, which are obligations of the system as a whole although issued regionally. FRBNs were issued in small denominations, $1, $2, $5, $10, $20 and $50. Two issues were circulated, Series 1915 and Series 1918. All bear portraits of Presidents on face and patriotic demonstrations of American commerce, industry, history on back.

This is especially true of the $2 note, the famous “Battleship Note.” Its face has Charles Burt’s engraving of Thomas Jefferson, while its back deploys C.M. Chalmers engraving of the battleship New York steaming left to right (west to east). It is said this served a propaganda purpose of warning European despots that America was ready to return and defend freedom in Europe if it were jeopardized again.

Collecting
Deuces were issued by all 12 Federal Reserve Banks as Series 1918 notes with either Teehee-Burke or Elliott-Burke signature combinations as Register and Treasurer respectively. Notes also bear printed signatures of the particular cashier and governor of the Federal Reserve Bank that issued a particular note. Total $2 notes of all varieties issued were 67.6 million. All have blue Treasury Seals and serial numbers.

Prices range generally from about $300 for well circulated notes to about $1500-$2000 for Crisp Unc. examples. Exceptional quality notes have brought $6,000-$7,000 at auction. It is believed that fewer than 70 Star (replacement) notes are extant. All varieties of Star notes are rare to unique and quite valuable. In 2006, the second reported example of Fr. 776, the $2 Dallas Series 1918 FRBN, graded Gem New, sold for $56,350 at auction.

Theodore Roosevelt’s foresight of great naval strength and fleets for both the Atlantic and Pacific Oceans grew in importance during World War II, where American sea might contributed to crushing Axis powers in both Europe and the Orient. On Aug. 29, 1946, the USS New York (BB 34) shown so proudly on the back of the “Battleship Note” was decommissioned. On July 8, 1948, the New York was deliberately sunk as a target of naval barrage of ships and planes on maneuvers.

Its patriotic image was resurrected from its watery grave on July 20, 1988, when the Bureau of Engraving and Printing issued a souvenir card for the American Numismatic Association convention featuring the Series 1918 $2 Federal Reserve Bank Note battleship design.

Theodore Roosevelt’s naval legacy continues down to the present day. In addition to the wonderful “Battleship Notes” in collectors’ hands, the aircraft carrier USS Theodore Roosevelt is the flag ship of a battle group in our Atlantic Fleet.

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An Edging in Hedging.. By Jon Nadler

2011-03-03T13:20:00.000-05:00

Mar 3 2011 10:30AM
www.kitco.com

The hitherto easy going in gold’s climb to new records ran into a couple of difficulties overnight and this morning, as talk of a Hugo Chavez-brokered Libyan mediation plan and a couple of other important market impact factors prompted some profit-taking sellers to do just that and drag prices to just under current support levels. This took place even as Mr. Gaddafi’s airborne forces bombed rebel-held oil refining targets near the town of Brega.

The irony of Mr. Chavez proposing to defuse the trouble in Tripoli should not be lost on the reader. The man was at the front of a 1992 Venezuelan uprising that bears certain striking similarities to those currently on display in Libya’s revolt of the masses against a corrupt leader. Since that time, Mr. Chavez himself has been said to have built up certain dictator-like powers.

The International Criminal Court over in The Hague opened an enquiry into Mr. Gaddafi’s actions and alleged (but very likely verifiable) crimes against humanity by stating that “there will be no impunity in Libya” and that “No one has the authority to attack and massacre civilians.” Somewhere between 1,000 and 2,000 people are thought to have been killed thus far in the civil war that Mr. Gaddafi’s recalcitrance has engendered.

Ed. The on-going Libyan violence has give rise to calls for outright military intervention, despite a few hold-outs such as Russia and Turkey declaring it as “unthinkable.” What appears more unthinkable is that the world once united (well, almost unanimously) against, and intervened to remove, certain individuals named Saddam Hussein or Slobodan Milosevic. The Colonel may not be in possession of nukes, but he has enough other lethal stuff at his disposal with which to wreak humanitarian havoc upon Libya’s denizens. Thus, a “no-fly zone” might be a good starting point in the process of excising the Gaddafi cancer from Libya.

At any rate, any small whiff of potential peace breaking out in Libya was quickly conducive to an overdue dip in crude oil prices and to a corresponding (at least in percentage terms) pullback in gold as well this morning. However, gold prices were also seen reacting to a couple of other factors which (absent the Libyan events) would have made for similar drops on a market day such as today. Let us examine them in order of appearance on the news scene:

First off, the ECB decided that despite the threat of inflation posed by the mini oil-shock currently being witnessed in the markets, the decision it needed to make as regards interest rates this morning was to leave them untouched. This, as the mini oil-shock presents another, larger potential danger to the common economic zone’s welfare: that of a double-dip.

The prospect of a fresh economic contraction carries a lot more weight with central bankers of all stripes than that of a rise beyond “target” levels in inflation for a short time. At the moment, the line of thinking appears to be that perhaps crude oil won’t climb to economically-destructive levels such as $120 or $140 and that even if it does so, it will not be for more than a brief period; one which should not translate into more than a transitory mini-spike in regional inflation levels.

Thus, the ECB’s benchmark rate was left unadjusted, at one lonely percent, for the 23rd consecutive month. In earlier days, the euro had made sizeable advances against the US dollar on bets that the ECB had reached the end or near-end of the ultra-low interest rate road and was prepping to make a graceful exit from that environment in the not too distant future (like August), or perhaps even sooner.

That said, the euro did not exactly roll over and die, and neither did the dollar’s mini-rally last too long against it, as Mr. Trichet planted a well-timed little word bomb in his news conference this morning. He alluded to the possibility that the ECB will…raise rates. Not in August, mind you, but the month of April of 2012. Mr. Trichet also fired off the “V” word in his media chat.

That’s “V” as in “strong Vigilance” when it comes to inflation and how to behave towards it. The mention of a specific month within which to commence moving rates around was good enough however to spark a reversal of the pattern we saw when the rate decision announcement was issued. However, the trend-change did not seem to help gold from still remaining on the downside by double-digits.

The second news item to undermine gold’s recent oil-driven rally was the fact that US initial jobless claims came in at a three-year low this morning. The headline figure, 368,000 (down 20,000 on the reporting week) appeared to confirm that the US economic recovery remains in place and that the current oil disturbance is not bad enough to tilt the equation back into recession mode.

With first-time jobless claims continuing under the pivotal 400,000 mark for the past month and with their falling 27% since last August (when the “R” alarm was once again sounded and QE2 was hatched as a consequence) confidence has risen that tomorrow’s employment data courtesy of the US Labor Department might contain some equally good news. That’s the kind of news that gold and other precious metals players generally do not welcome.

Gold spot prices traded over a $21 range of from $1,416.60 to $1,437.50 and silver gyrated over an 84-cent range as the sellers (and very few buyers) duked it out in the first hour of trading on Thursday. Platinum and palladium players also took some profits (albeit much smaller than their gold and silver-oriented counterparts) and eased.

The former traded at $1,836 (down $12) and the latter at $815 (down only $1) as the complex took cues from a 1.05% decline in black gold and was seen focusing on that development more than on the 0.14 drop in the US dollar index. The stock market, on the other hand, cheered the jobless claims data, the rise in US QIV productivity (2.6%), the Fed’s upbeat outlook on muni-bonds, and the February US retail sales figures (which came in at better-than-anticipated levels) with a 152-point rally out of the morning’s starting gate.

In the world of normal, historically valid inverse asset correlations this rally in equities did have reason to cause a fairly sizeable decline in gold. It appears that Dennis Gartman’s retreat to the “sidelines” in gold was (at this juncture) rather well-timed. The economist and publisher of the Gartman Letter scaled back to an “insurance-only” position in the yellow metal early today.

Finally this morning, speaking of “insurance” of sorts, we offer you the highlights of the latest report on gold hedging by the world of miners. The ABN AMRO review of Fourth Quarter hedging/de-hedging activities finds more of the same as well as some new patterns worth noting in this important component niche of the gold market.

First of all, the study reveals that the ten-year trend in the decline of hedging remained alive and well on the quarter, falling by 1.7 million ounces, to 4.7 million ounces- the largest such decline in four quarters. Major producer AngloGold Ashanti in fact unwound its hedge book completely in October, following similar uber-confident cues coming from Randgold Resources and Barrick. At this juncture, almost all major gold producers have unwound their gold hedge books. Is that a “good” thing?

ABN AMRO says that “we consider this bearish for the gold market since de-hedging has been a significant element of gold demand over the past decade. In fact with the gold price expected to reach new record highs this year and expectations that prices may ease from 2012 and beyond, the global hedge book could begin to rise again – albeit modestly if the majors maintain their no hedge policy. This would not only be an indicator that the gold market bull run has ended but would in itself be doubly bearish, as gold supply through forward sales adds downward pressure on prices.”

However, not every miner is as confident as the majors have shown to be, as regards gold prices “to the Moon” scenarios for years to come. Some are (quietly perhaps?) beginning to see the wisdom of protection against such potential slides in the value of gold. Take Minera Frisco, for example. It turned out to be the single largest hedger in 2010 –adding 1.4 million ounces to the global hedge book. The list also added names such as: EnviroGold, Orvana, Red 5Ltd, Range River Gold, plus Golden Star Resources and others.

The collective increase in hedging amounted to a 21% gain last year and hedging activity has now been rising in each year that has passed since 2009. Without taking anything away from the potentially gold-price-bearish implications of the massive, decade-long decline in producer hedging, the ABN AMRO report concludes on a bit of an ambiguous note by pondering whether or not the emergent hedging trend is a game-changer:

“The rise in new gold hedging programmes might be due to the possibility that high gold prices have moderated shareholder resistance to hedging, or it could signal a sea change in the attitude of producers that would be compounded should the gold price begin a sustained slide. In many cases the new hedging is due to projects requiring financing, with lenders stipulating some security in prices for future production before agreeing to provide loans.”

Until tomorrow, hedge your bets.

Jon Nadler
Senior Analyst
Kitco Metals Inc.North America

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Daily Pfennig: 03/03/11: Dollar continues to slide...

2011-03-03T12:52:00.000-05:00

By Chuck Butler
Mar 3 2011 10:21AM
www.caseyresearch.com

In This Issue.

* Dollar continues to slide…
* ECB to leave rates unchanged…
* Brazil raises rates…
* Ruble tops gains vs. US$...

And, Now, Today's Pfennig For Your Thoughts!

Dollar continues to slide…

Good day. Busy day on the desk yesterday, with a number of new customers calling the desk to find out about our latest MarketSafe CD, and existing customers calling to buy into the currencies and metals. After the phones were turned off last night I was speaking with the guys and we figured out the ‘call of the day’ was people looking to purchase silver. It seems that in spite of silver trading at an all time high, investors still want to get in. And I really can’t blame them, with Bernanke and his boys turning a blind eye to inflation concerns, and the unrest in the Middle East driving oil above $100 per barrel. Metals are an excellent ‘uncertainty hedge’ and we certainly have our share of uncertainty in the world right now. More on that later, but first let’s turn to the currency markets.

The dollar continued to slide vs. most of the major currencies yesterday, as investors continued to move into defensive positions. Last year, investors would have been flocking into the dollar in the face of global uncertainty, but attitudes have changed. It seems that investors have become a bit fearful of the inflationary risks posed by QEII and a possible QEIII!! Yes, as Chuck has predicted, it is looking more and more likely that QEII will be followed up with another sequel. Asked at a House Financial Services Committee hearing yesterday what conditions would warrant a third round of QE, Chairman Bernanke said that “what we would like to see is a sustainable recover. We don’t want to see the economy falling back into a double dip or to a stall-out.”

Bernanke’s testimony over the past few days has certainly not give me the warm and fuzzies regarding the Feds ability to control price increases. And while the spike up in oil will hopefully be short lived, other commodity price increases aren’t going away so easily. And the higher oil prices will certainly be a drag on the US economic rebound, as consumers will be spending a larger chunk of their income just to fill up their gas tanks.

Late yesterday the Federal Reserve released its Beige Book which details their view on the current state of the economy. The book was predictably upbeat on the future of the US economy, and pointed to what they believe is an improving labor market as proof. “Labor market conditions continued to strengthen modestly, with all Districts reporting some degree of improvement.” Overall, the economy “continued to expand at a modest to moderate pace”. We will get another indication of just how strong the labor market is with the release of the weekly jobs data this morning. Initial jobless claims are expected to show a modest increase from last week, and continue to stay stubbornly close to 400k. Data released yesterday by ADP showed private sector job growth, while the public sector has begun shedding jobs. I’m sure most of these public sector job losses are coming at the State and local level, as governments deal with budget shortfalls. This seems to be a good sign for our economy, and I sure hope this trend continues (larger private sector and smaller government!). Tomorrow will shed even more light on the employment picture here in the US, with the release of February’s employment data.

The Bloomberg terminal on my desk just chirped an alert, and I see the ECB left rates unchanged (as we expected). The markets will probably turn their focus to the press conference which Trichet will hold later this morning to see if the ECB is moving to a more hawkish position. Recent interviews with ECB members suggests there is a growing consensus among the council members that they must pull back their recent stimulus. I would expect Trichet to sound a hawkish tone in the face of $100 oil. Higher oil prices, if they continue, will certainly push inflation past the ECB’s limit, and force an interest rate increase. As I reported yesterday, European Producer Price inflation accelerated more than economists forecast in January, and these producer prices will undoubtedly trickle down into consumer price increases in the coming weeks.

A tightening policy by the ECB should be good news to the Euro. Bank of America certainly thinks so, as they have raised their first quarter and long term forecasts for the euro vs. the dollar. BOA believes the US will have difficulty dealing with its budget deficit, and the recent euro price increases will continue. BOA moved its forecast for the Euro to $1.35 for year end 2011 from $1.30 and from $1.35 to $1.40 for December 2012.

The pound sterling dropped a bit, after reports showed UK house prices fell for an eighth month. An index of British service industry activity fell to 52.6 in February, lower than economists had forecast. But the fall in the pound sterling was ended as a report was released which showed UK construction grew at the fastest pace since last summer. This last report suggests the BOE may need to raise rates again to control inflation. Higher rates by the BOE would help support higher Sterling prices.

The Swiss Franc has been on a good run, and the SNB seems content to let it continue appreciating. Swiss central bank Vice President Thomas Jordan said that policy makers don’t see a need to intervene, in spite of a nearly 5% appreciation over the past 3 months. “The franc is currently very strong and poses a lot of problems for the Swiss companies,” Jordan told reporters after a press conference in Bern today. Still, “at the moment there is no necessity of intervening in the currency market.” This is good news for investors in the Swiss franc, as the SNB has attempted to cap the appreciation of the currency in the past. Interest rates remain low, and Jordan did not indicate he would support raising them any time in the near future, so Swiss investors will need to be content with currency appreciation only.

Investors looking for higher interest rates have been turning toward Brazil, and all indications are that rates will continue to rise. Brazil’s central bank raised the overnight rate 50 basis points yesterday, and signaled it would be hiking the rates even further next month. The 50 basis point move was predicted by most economists, and had already been priced into the market. Annual inflation in Brazil has been accelerating, and the central bank is moving rates higher in order to combat these rising prices. The central bank targets inflation of 4.5% with a two percentage point range on either side; and consumer prices are expected to be within this range at 5.8% this year. President Dilma Rousseff has announced cuts to spending on defense, education, housing, subsidies to companies and farmers and payroll outlays as part of her plan to cut the budget deficits. Fiscal discipline, along with high interest rates and a growing economy certainly paint a pretty picture for the Brazilian real.

With oil rising, you would expect the commodity currencies to be doing well, and the Norwegian krone, Russian ruble, and Canadian dollar have all been gaining vs. the US$. Norway is a favorite of the desk, and the Canadian currency is another popular currency with the desk, and looks like it is firmly entrenched above parity vs. the US$. We don’t trade the Russian ruble directly, but many of our investors own it as part of our BRIC MarketSAfe CDs which were issued last year. The ruble reached its strongest level since December 2008 after the central bank loosened exchange rate controls and the finance minister said the ruble will strengthen to help lower inflation. The ruble is the best performing currency vs. the US$ this year, up 7.6%.

The Aussie dollar eased from a two month high against the dollar after government reports showed some cracks in the housing market. The number of permits issued in Australia dropped 15.9% in January, the biggest decline in over 8 years. Another report released in Australia today showed Australian exports slid 4 percent in January, the largest decline since July of last year. Australia’s fortunes are linked to a growing Asia, so a report released in China showing a contraction in non-manufacturing industries added to the negative sentiment.

Currencies today 3/3/11... American Style: A$ $1.0183, kiwi .7463, C$ $1.0288, euro 1.3862, sterling 1.6269, Swiss $1.0792, ... European Style: rand 6.9041, krone 5.5672, SEK 6.3228, forint 195.45, zloty 2.8725, koruna 17.492, RUB 28.246, yen 81.8, sing 1.2688, HKD 7.79, INR 45.045, China 6.5720, pesos 12.065, BRL 1.6553, dollar index 76.73, Oil $101.55, 10-year 3.48%, Silver $ 34.46, and Gold... $1,427.85... and let's not forget to check out the debt: www.usdebtclock.org/index.html

That's it for today. Chuck will be upset that he is missing out on the quarterly Fire Alarm testing this morning. Even though they warned us, I still jump every time the alarm starts up. Thanks to everyone who sent me nice notes regarding my father, there hasn’t been any change in his condition. The sun is starting to crest the downtown buildings, and it looks like it is going to be another beautiful day here in St. Louis. With Chuck and Mike gone, I am going to have to jump on the phones today, so I better get this out the door. Hope everyone has a Tub Thumpin Thursday!

Chris Gaffney, CFA on behalf of Chuck Butler
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

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