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Today In Commodities: Back To Work
Bull In A China Shop: China Will Be A Significant Driver Of Gold's Bull Run
Corvus Gold Achieves High Gold Recoveries in Large Diameter Column Tests at North Bullfrog Project, Nevada
Gold Ignores Indian Tax Hike, Rises “Because of China” as Stocks & Commodities Jump
Gold Correction Is Over, But Professionalism Is Not
Gold and Silver Outlook in 2012
All that Glitters is Gold
Gold Stock Investors—Buy "Best of Breed"
HAS GOLD'S D-WAVE BOTTOMED?
Global Gold Coin & Bar Demand Surges in 2011 - Thomson Reuters GFMS Annual Gold Survey
Morning Outlook from the Trade Desk - 01/17/12
These gold stocks could be "best buys" right now
When Will Silver Make a New High?
More Traders Notice Gold's Regularly Counterintuitive Behavior
The bubble is in national currencies, Turk tells King World News
Putin, a thorn in Washington's flesh
Irish Banks will shrink and shrink
Gold & Silver Market Morning, January 17, 2012
Liquid Silver can be Used to Print Electronic Circuits
Swiss to give Greeks back BC-era silver coin
Markets After Downgrades in Europe
South Africas gold output down 4.5 pct y/y in November
Links 1/17/12
Satyajit Das: Europe’s The Road to Nowhere, Part II – Roadblocks Ahead
Gold Market Update
The Lost Gold Bars Of Camp McKinney
The Story of Gold Money Past, Present and Future
Gold Trend Forecast for 1st Quarter of 2012
My Crystal Ball for the Markets in 2012
European Downgrades: Will There Really Be a Fallout?

Posted: 17 Jan 2012 07:36 AM PST

By Matthew Bradbard:

After a long weekend the markets are back to normal trading hours. Crude will finish just shy of 2% higher but will not retake the 9 day MA; in March at $101.25. I have advised the sidelines thinking we remain in the $10 range and do no wish to establish a position being we started the day near the middle of the range. Multi-year lows in natural gas with prices down near 7% today. This makes it five losing sessions in a row with no bottom in site. Equities inch higher as the 9 day MA continues to support. Use that level as your pivot point; in the March Dow at 12370 and the S&P at 1282. Gold traded above the 40 day MA again today closing just under that mark. I'm expecting a further leg higher and this would be accelerated if the dollar was to back off. I

Complete Story »

Bull In A China Shop: China Will Be A Significant Driver Of Gold's Bull Run

Posted: 17 Jan 2012 07:23 AM PST

By David Alton Clark:

After a recent correction it appears gold's Bull Run continues fueled by recent news that China's economy may not be headed for a hard landing. Gold rose to slightly above $1900 in the last quarter only to come crashing back down to just below $1600. Now it has broken through its 200 day moving average and I posit will hit at least $2000 in 2012. This is the eleventh 10% correction for gold since 2003. Gold has always bounced back and soared higher each time. Gold has been up 10 out of the last 10 years.

The stocks in question are: Eldorado Gold Corp Ltd (EGO), SPDR Gold Trust (GLD), Randgold Resources Limited (GOLD), Market Vectors Gold Miners ETF (GDX), Market Vectors Junior Gold Mine (GDXJ) and Novagold Resources Inc (NG).

These stocks have major upside potential and are highly correlated to gold. Please review the following gold market backdrop,

Complete Story »

Corvus Gold Achieves High Gold Recoveries in Large Diameter Column Tests at North Bullfrog Project, Nevada

Posted: 17 Jan 2012 04:52 AM PST

Corvus Gold announces the results of its initial large diameter column leach testing of oxide resource materials from its 100% controlled North Bullfrog Project near Beatty, Nevada. The leach columns, which were testing coarse crush material (2 inch minus) from the Sierra Blanca and Jolly Jane areas (representing over 80% of the existing oxide resource), returned encouraging results. Average gold recovery for large diameter column tests for the Sierra Blanca area was 70% and 64% for the Jolly Jane area, which support an overall Run of Mine recovery plan (Table 1). The Company's concept of using Run of Mine material for heap leaching of gold could significantly lower capital and operating costs at the project. A preliminary economic assessment (PEA) is expected to be completed next month, which outline more specific project economics.

Jeff Pontius, CEO of Corvus, stated: "These initial large diameter column test results are confirming the potential at North Bullfrog for a low unit cost, heap leach operation. These encouraging recovery results coupled with a highly favourable, low strip, surface mining geometry and nearby infrastructure greatly enhance the project's development potential. Corvus is encouraged by these results and will aggressively advance the North Bullfrog project to assess its potential to transform the Company into a future gold producer."

See Full Release Here

Gold Ignores Indian Tax Hike, Rises “Because of China” as Stocks & Commodities Jump

Posted: 17 Jan 2012 03:58 AM PST

BullionVault
Tues 17 Jan., 08:45 EST

Gold Ignores Indian Tax Hike, Rises "Because of China" as Stocks & Commodities Jump

The WHOLESALE MARKET gold price reached new 5-week highs as Asian trade ended and London opened on Tuesday, while global stock markets and commodity prices also rose after stronger-than-expected growth data from China.

The world's second-largest economy, China reported annual growth of 8.9% for the end of 2011 – the weakest level since mid-2009 but stronger than analysts forecast and almost 5 times the pace of US growth at last count.

The Shanghai Composite stock index jumped 4.2%. Copper led base metal prices by rising 2.6%.

Silver bullion re-touched last week's 2-month high above $30.50 per ounce, despite news of a sharp hike in Indian import duty which also affects gold.

The gold price peaked on Tuesday mornng at $1667 per ounce, more than 9.4% above the 5-month low touched in late December.

US crude oil contracts jumped back to $100 per barrel after Saudi oil minister Ali al-Naimi said the Opec-cartel member is now targeting that level – "a new line in the sand" substantially above the previous "fair price" of $75 according to Standard Bank today.

"Gold price action is becoming increasingly indifferent to physical trade and far more susceptible to broader market headwinds," says a note from Japanese conglomerate Mitsui's London team today.

"Everything is rising because of China," says one commodities analyst in Frankfurt to Bloomberg. "It's general market sentiment."

"Simply put," reckons China economist Ting Lu at Bank of America/Merrill Lynch in Hong Kong, "Beijing will continue its policy easing which was started in mid-October, though we should not expect a big-bang stimulus."

Beijing cut the required reserve ratio which banks must keep back from lending for the first time in three years last November, easing it back half-a-percentage point from a record 21.5%.

Analysts now expect a further two percentage-point cut in 2012, reports Reuters, "with many banking on one in the run-up to next week's Lunar New Year holiday."

"In terms of calendar year 2011, [gold demand from] India was ahead," says Philip Newman, research director at Thomson Reuters GFMS, presenting the consultancy's latest global data in London today but it does seem as though China, in terms of our data for the first half [of 2012], may just tip it."

GFMS now forecasts a gold price peak of $2000 per ounce, sometime in 2012.

China's domestic gold mining output – the world's No.1, and currently subject to an export ban – rose sharply in December to end 2011 some 19% higher than 2010 at 731 tonnes, according to the National Bureau of Statistics today.

Across in India – the world's hungriest gold consumer – the government today raised import duties on silver to 6% by value, and raised the duty on gold from 300 Rupees per 10 grams to a value tax of 2%.

That doubles the effective tax rate on gold, first deregulated as India moved away from a command economy in the early 1990s.

The gold price on the Multi Commodity Exchange (MCX) today rose almost 1% to INR27,760 per 10 grams, while shares in leading jewelry chains shed some 3%.

Over the last 12 months, the plunge in the Indian Rupee's forex value has made the gold price rise over 10% higher than it otherwise would. Annual imports to India – which has no domestic gold mining output – declined by 9% from 2010′s record level, according to the Bombay Bullion Association.

Meantime in Europe on Tuesday, several governments including Greece and also the cross-border Stability Fund – downgraded from its "triple-A" credit rating on Monday by Standard & Poor's – raised almost €11 billion in short-term bills, and at lower interest rates than last time of asking.

The Euro rallied 1.5¢ from last week's 17-month low near $1.26.

The gold price rose faster, however, nudging cost of gold to Eurozone buyers above €1300 for only the second time since 8th December.

"Spot gold in Euros is about to touch the November peak at €1316.48 [per ounce]," reckons Axel Rudolph, technical analyst at Commerzbank.

"Should this level be surpassed a swift acceleration higher towards last year's all-time high at €1359 should be seen."

New data released Tuesday showed the pace of consumer-price inflation slowing last month across the European Union – the largest single export market for China.

Adrian Ash
BullionVault

Gold price chart, no delay | Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Gold Correction Is Over, But Professionalism Is Not

Posted: 17 Jan 2012 03:39 AM PST

Gold and Silver Outlook in 2012

Posted: 17 Jan 2012 03:09 AM PST

The Daily Gold

All that Glitters is Gold

Posted: 17 Jan 2012 01:59 AM PST

Gold Stock Investors—Buy "Best of Breed"

Posted: 17 Jan 2012 01:51 AM PST

HAS GOLD'S D-WAVE BOTTOMED?

Posted: 17 Jan 2012 01:44 AM PST

It seems like most analysts, and gold bugs are now assuming that the reversal on December 29 marked the bottom of golds D-Wave decline. It's certainly possible that we saw a bottom two weeks ago but it's still too early to make that assumption. Gold, and most assets are about to be severely tested. How gold handles that test will be a big clue as to whether or not the correction is over.

What many analysts are overlooking is the impending daily and intermediate cycle correction that is coming due in the stock market. When the stock market moves down into a cycle low, especially an intermediate cycle low, it generates a tremendous amount of selling pressure. Invariably that selling pressure bleeds into virtually every other asset class, even gold, as you can see in the chart below. Over the last two years there were only two daily cycle corrections in the stock market where gold was unaffected (I've marked them with green arrows).

The stock market is now in the timing band for a move down into a daily cycle low. As you can see in the chart below those tend to occur almost like clockwork about every 35 to 40 days. As of Friday the stock market was on day 33. On top of that we have a larger intermediate degree cycle that should bottom sometime in March/April. The selling pressure generated at an intermediate bottom is much more intense than a mere daily cycle low. That means sometime around the middle of March or early April things are going to be looking pretty bleak. My best guess is at that time interest rates will be spiking in France and maybe the UK (along with all of the other countries that are already having debt issues).

It's late enough in the daily cycle that there is a good chance the market began that move down into its daily cycle bottom on Friday, despite recovering most of the sell off before the close. I say that because we have a coil pattern playing out in the stock market.

Contrary to what most people believe, the initial break out of a volatility coil is usually a false move that is soon followed by a much more powerful and durable move in the opposite direction. In our case the volatility coil broke to the upside and by Friday it was already trying to reverse. Once the stock market moves back through the coil zone it would be very unlikely to recover those levels until after the next intermediate degree bottom, which like I pointed out isn't due until March/April.

Sometime in the next 4-8 days we should see the stock market break its cycle trend line. It's very rare for a move down into a daily cycle low not to break the cycle trend line. So for our purposes I think we can probably assume that it will.

If the stock market just retraces 50% of the daily cycle advance (assuming 1297 is the top) then we should see a pretty hefty sell off in the next week or two.

That kind of selling pressure will almost certainly have some affect on gold. If the D-Wave is still in progress it's going to have a sharp affect on gold, probably forcing gold back below the $1523 December bottom. How gold handles the stock market moving down into its daily cycle low will give us a big clue as to whether the D-Wave has bottomed or not.

And even stiffer test is going to occur as the stock market moves down into its intermediate bottom in March/April. If gold can't hold above $1523 as stocks move into a daily cycle low then it is going to get driven much lower during the intense selling pressure that will be generated when stocks move down into a larger degree intermediate bottom.

A couple of things to keep in mind.

The last C-wave was the greatest in both magnitude and duration of the entire secular bull market. Is it possible that a 2 1/2 year, 100%+ rally can be corrected with only a 38% retracement in four short months?

There is also the problem with the last intermediate cycle in gold running very short at only 13 weeks (normal duration is about 20-25 weeks). More often than not a short cycle is followed by a long cycle that evens out the next larger cycle. In this case the next larger cycle would be the yearly cycle.

If December 29th did mark an intermediate bottom then we would've had two intermediate cycles of only 13 weeks each. A short cycle followed by another short cycle is a pretty rare occurrence. In this case exceptionally so because the yearly cycle low isn't do until February/March. If I take into account nothing else I would have to assume that gold still has about 5 to 6 more weeks before the final D-Wave and yearly cycle low are formed.

That doesn't mean that gold has to drop a considerable distance below $1523. If it does turn out that gold continues lower into a more normal intermediate timing band I doubt that gold would move below the 50% Fibonacci retracement level, which is at about $1400. That also corresponds with the extensive consolidation zone in the summer of 2010.

One other thing to consider is the powerful correlation of a stronger dollar whenever the stock market moves down into a cycle low. We should continue to see the dollar spike higher over the next couple of weeks as the stock market drops down into its daily cycle trough, followed by a much more powerful rise during the intermediate degree decline due later in the spring. As you can see in the chart below gold has had little ability to resist a rising dollar.

So unless you think that the stock market will never drop down into a cycle low again, or that the market and the dollar will drop simultaneously (very unlikely), then gold is going to be severely tested as the dollar spikes sharply higher during the next few weeks and months as the stock market works its way down into first, a daily cycle low, and then a much more serious intermediate degree correction.

Right now investors need to be on the sidelines while we wait to see how gold handles the stock market's move down into its daily cycle low. If gold can hold above $1523 while the stock market suffers what is likely to be a rather sharp correction then the odds will improve dramatically that the D-Wave did in fact bottom in December.

If however gold follows the stock market down and breaches that $1523 pivot then the odds are very high that the D-Wave is still in progress and will not bottom until late February/mid-March.

I am currently still running the one week, $10 introductory offer for the SMT premium newsletter. Since we should see the stock market form its daily cycle low sometime in the next 1-2 weeks now would be a perfect time to sample the newsletter.

This posting includes an audio/video/photo media file: Download Now

Global Gold Coin & Bar Demand Surges in 2011 - Thomson Reuters GFMS Annual Gold Survey

Posted: 17 Jan 2012 01:26 AM PST

Morning Outlook from the Trade Desk - 01/17/12

Posted: 17 Jan 2012 01:25 AM PST

Gold still in range $1,635-$1,675, with bias continuing higher. Chinese have now entered game and are adding liquidity to their own economy. The markets psychology has been hurt, with the drop of the metals against a background of global financial disasters. One would have expected to see gold at $2,500 by now. At least if you listen to the guru's. Reality however is that initial fear will boost metals as we saw in the past three years. When this fear actually becomes real and hurts your pocket book the reaction is to run to cash. This has been the paradigm for the past six months. if the equity markets can at least hold value and given the massive global easing now underway, I suspect we may be on the cusp of a major mind set change. I don't necessarily agree with the logic, but this is a perceptional market. If the perception is we have seen or know what the worst news will be, the metals could begin to lift in earnest.

These gold stocks could be "best buys" right now

Posted: 17 Jan 2012 12:59 AM PST

From The Gold Report:

When it comes to picking gold mining names in the current market environment, John Stephenson, author and portfolio fund manager at First Asset Investment Management, believes that buying the "best of breed" is the way to go. In this exclusive interview with The Gold Report, he explains his reasoning in light of how the current global economic environment is affecting prospects for the metals markets and valuations of mining company stocks. He also talks about his favorite picks in a range of three production classes and why he likes them.

The Gold Report: As a portfolio manager and an author of two books, The Little Book of Commodity Investing and Shell Shocked: How Canadians Can Invest After the Collapse, how do you see the prospects for the resource commodities in 2012?

John Stephenson: I think, in general, my prospects and outlook are very bullish. The story continues to be one of strong demand out of China. I don't see that story changing. Obviously, there have been a lot of headlines and the Purchasing Managers' Index data in China recently are not as robust as they were, but its economy is still going to grow at 8.5%–9%. That's pretty darn good. That's really where demand for most of these commodities will come from. Certainly, any improvement in Europe and the U.S. will be good news for commodities.

TGR: Are there any specific...

Read full article...

More on gold stocks:

A "big picture" look at gold, silver, and mining stocks now

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Surprising research shows almost everyone should own gold stocks

When Will Silver Make a New High?

Posted: 17 Jan 2012 12:28 AM PST

Casey Research

More Traders Notice Gold's Regularly Counterintuitive Behavior

Posted: 16 Jan 2012 09:12 PM PST

¤ Yesterday in Gold and Silver

With the United States closed for the Martin Luther King Holiday, there wasn't a lot of excitement in the gold market on Monday. After selling off a bit at the start of trading in the Far East, gold got up to around the $1,645 spot mark...and then basically traded sideways for what was left of the day.

The gold price finished at $1,642.80 spot...up $3.10 on the day. Net volume was pretty light...under 40,000 contracts.

Silver hit its low price of the day [around $29.45 spot] shortly before 10:00 a.m. Hong Kong time on Monday morning...and then rallied back to the $30 spot price around 9:30 a.m. in London. Silver made two more attempts to break through that price, but got sold off both times.

The silver price closed the day at $29.97 spot...up 20 cents. Without the New York traders around, net volume was an unbelievably light 7,000 contracts.

The dollar index jumped 20 basis points right at the open on Sunday night in New York...and then spent the rest of the Monday trading day giving it all back. The index finished basically unchanged from Friday's close.

With the New York market closed, there was no HUI...and no Silver Sentiment Index. The TSX Gold Index here in Canada finished up 0.76%...and the larger cap silver stocks that trade on Toronto put in a pretty decent performance...and the juniors were mixed.

There was no CME Daily Delivery Report, or anything from the GLD and SLV ETFs, the U.S. Mint...nor the Comex-approved depositories.

Here's a free paragraph from silver analyst Ted Butler's weekend commentary on Saturday...

"The total dollar value of the world's three billion ounces of gold bullion has reached ridiculous levels relative to the dollar value of the world's one billion ounces of silver bullion. At current prices, the dollar value of gold is 165 times greater than the value of the world's silver. That's way too much for two items so closely similar. Here's another way of looking at it. Last week's $23 rise in the gold price increased the value of the world's gold bullion by almost $70 billion. That's more than twice as much as the total value of what all of the world's silver bullion is worth. I'm talking about the change for one week in gold being twice the total value of all the silver in the world. That's crazy...and is due to silver being artificially manipulated in price."

The main reason I have a report today is because of the number of stories that have accumulated over the weekend...and I hope you have time to run through them. The last gold-related story is barn-burner.

This is the gold price manipulation scheme laid bare for all to see...and it's equally as obvious that it is, once again, an Anglo-American price fixing operation from start to finish.

When Will Silver Make a New High? Jeff Clark: An Even Better Deal than Gold - Platinum. David Bond: The War Against Us. The Next Bubble in China's Economy....Gold?

¤ Critical Reads

Citigroup: Secrets of a Sales Machine

Back in 1940, a popular book about Wall Street asked, "Where are the customers' yachts?" Investment firms, it lamented, always seemed to win, even when their customers lost.

True then and, all too often, true now — with rare exceptions. One of them was the case of Gerald D. Hosier and Jerry Murdock Jr., who invested millions with Citigroup, lost big — and came back swinging.

Documents related to the case show how Citigroup pushed exotic investments as safe alternatives to humdrum municipal bonds. The paperwork, which was unsealed recently, makes for fascinating, if disheartening reading.

This 2-page article by written Gretchen Morgenson showed up in the Saturday edition of The New York Times...and I thank reader Phil Barlett for sending it along. The link is here.

View full GSD edition

S&P downgrades euro zone's EFSF bailout fund

Rating agency Standard & Poor's cut its credit rating of the European Financial Stability Facility, the euro zone's rescue fund, by one notch to AA+ on Monday, three days after it cut the ratings of France and Austria by the same margin.

In a statement, S&P said the decision was all but inevitable following the cuts to the creditworthiness of France and Austria, which were two of the EFSF's guarantors.

"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," the agency said in a statement.

This Reuters piece was picked up by uk.finance.yahoo.com yesterday...and I thank reader Scott Pluschau for sending it along. The link is here.

View full GSD edition

Portugal's borrowing costs soar as France passes first bond auction test

Portugal's borrowing costs jumped to record highs on Monday, as investors had their first chance to react to a series of downgrades by Standard and Poor's (S&P) that saw the country relegated to "junk".

Yields on benchmark 10-year government bonds rose nearly 2.3pc, or 228 basis points, to 14.198pc in afternoon trade. The difference between Germany and Portugal's borrowing costs also widened to record highs of 1,243 basis points, following S&P's downgrade of Portugal to below investment grade.

The spike in Portugal's borrowing costs came as France sold a range of short term debt in a auction that saw borrowing costs largely fall, although demand waned slightly.

This very short news item, published on The Telegraph's website yesterday afternoon, is well worth running through...and I thank Roy Stephens for sending it along. The link is here.

View full GSD edition

Der Verkauf Ist Verboten - Germany Considers Ban On Sovereign Bond

As the Financial Times reports in its headline article yesterday, whose gist is simple enough, that Europe is on the verge, it is the tactically-placed final paragraph that is of particular curiosity. It says the following: "Speaking on the fringes of a start-of-year retreat of her Christian Union lawmakers in the city of Kiel, Ms Merkel said she would consider calls from her party colleagues for legislation to bar institutional investors such as insurance companies from selling bonds when ratings were downgraded, or fell below investment grade." Allow us to recopy and re-paste the key part: "legislation to bar institutional investors such as insurance companies form selling bonds."

And there you have it: after everything else has failed, the state, not the politically independent, if at least on paper central bank, is about to formally enter the capital markets. And yes, first it will be a ban of selling on downgrades, then it will be a ban of selling on any downtick, and finally it will be a ban of selling anything and everything.

This story showed up over at the zerohedge.com website on Saturday...and I thank reader 'David in California' for sending it along. The link is here.

View full GSD edition

Temporary Respite: Why the ECB's Tricks Won't Solve the Crisis

Ever since the European Central Bank began flooding the markets with cheap money, European banks have rediscovered their taste for sovereign bonds. But the crisis is far from over, as Standard and Poor's recent raft of downgrades showed. Some bankers are saying it's just a matter of time before yields on peripheral bonds shoot up again.

Of course, the major unknown is the situation in Greece, now that talks between Greek officials and private-sector creditors about a debt haircut have been indefinitely called off. In a statement released Friday, Charles Dallara and Jean Lemierre of the Institute for International Finance, the bank lobby representing private-sector bond holders in the negotiations, wrote that the discussions with Greece had been "paused for reflection."

Athens is pressuring private-sector creditors to agree to relinquish an even higher proportion of their claims, and the banks are calling for public-sector creditors, such as the ECB, to join in by writing off parts of their own claims. Meanwhile, hedge funds have been sabotaging every deal. With each passing day, there is a growing danger that there will either be no agreement, or that a deal is reached that isn't backed by a sufficient number of creditors.

Eugen Keller, a financial market expert with the Frankfurt-based private bank Metzler, predicts that demand for the sovereign bonds of southern euro-zone members will once again fall dramatically. "It's merely a matter of time," he says, "until we're back where we left off last year." [And as can be seen from Portugal's bond auction yesterday, we're already there. - Ed]

This story was posted on the German website spiegel.de yesterday...and is another Roy Stephens offering. The link is here.

View full GSD edition

Greece sends officials to US as default fears grow

Greece has sent top officials to the US for talks with the International Monetary Fund as it returns to centre stage in the eurozone crisis over fears that a debt deal impasse with bondholders could trigger a messy default.

The Greek Prime Minister Lucas Papademos said on Monday he was confident agreement on a debt swap plan would be reached by the time eurozone finance ministers meet next Monday.

Greece has a €14.4bn bond maturing on March 20 that it can't afford to pay in full.

A crucial second, €130bn rescue loan from the EU, IMF and ECB is dependent on reaching an agreement on a bond swap with creditors that are being asked to take a voluntary 50pc loss on their Greek government bonds.

Greece is in its fifth year of recession and in recent months had been flirting with bankruptcy, with only bailout loans from European partners and the IMF agreed on condition of unpopular austerity measures preventing a default.

This is another story from yesterday's edition of The Telegraph. It's also another Roy Stephens offering...and the link is here.

View full GSD edition

Irish Banks will shrink and shrink

The European debt crisis is moving swiftly to the next phase following the downgrade of France and the collapse of the Greek negotiations with its creditors last Friday night.

It is becoming increasingly obvious that there will be no deal in Greece. This is good news because it means the end of the pass-the-parcel-ponzi-scheme, whereby the bill for more and more institutional debt was passed on to more and more innocent people who had nothing to do with the debt in the first place.

Greece will default – as it should. The bondholders will get roasted – as they should – for making bad investments. The laws of capitalism will be allowed to do their thing. Debtors and creditors will pay – as they both should – with both parties sharing the cost.

This very interesting short essay was posted over at the Irish website davidmcwilliams.ie yesterday. It's worth skimming...and I thank reader Declan Barrat for sharing it with us. The link is here.

View full GSD edition

The bubble is in national currencies, Turk tells King World News

Posted: 16 Jan 2012 09:12 PM PST

The bubble is in national currencies, Turk tells King World News

GoldMoney founder and GATA consultant James Turk told King World News yesterday that the bubble of the moment is in national currencies, that gold already has seen its lows for the year, and that gold mining shares are as low relative to the gold price as they were during the Lehman-induced market plunge three years ago.

I borrowed the above introduction from Chris Powell...and the link to this very worthwhile KWN blog is here.

Putin, a thorn in Washington's flesh

Posted: 16 Jan 2012 09:12 PM PST

Putin, a thorn in Washington's flesh

Vladimir Putin is one of the few remaining world leaders with the gumption to obstruct Washington's agenda of full spectrum dominance, as Russia today, in tandem with China and to a significant degree Iran, form the spine, however shaky, of the only effective global axis of resistance to a world dominated by one sole superpower.

The United States today is a de facto bankrupt nuclear superpower. The reserve currency role of the dollar is being challenged as never since Bretton Woods in 1944. That role along with maintaining the United States as the world's unchallenged military power have been the basis of the American Century hegemony since 1945.

Irish Banks will shrink and shrink

Posted: 16 Jan 2012 09:12 PM PST

Irish Banks will shrink and shrink

The European debt crisis is moving swiftly to the next phase following the downgrade of France and the collapse of the Greek negotiations with its creditors last Friday night.

Gold & Silver Market Morning, January 17, 2012

Posted: 16 Jan 2012 09:00 PM PST

Liquid Silver can be Used to Print Electronic Circuits

Posted: 16 Jan 2012 08:26 PM PST

Swiss to give Greeks back BC-era silver coin

Posted: 16 Jan 2012 08:24 PM PST

Markets After Downgrades in Europe

Posted: 16 Jan 2012 08:23 PM PST

Market close numbers as of Friday, January 13. What will the new week bring with European downgrades?

Dow Jones Industrial Average: Closed at 12,422.06 -48.96 as this market moves toward a peak. Volume is normal and momentum is near a top. Price is jammed into the apex of a larger continuation triangle. Price is above two moving averages as the 20-day and 50-day are nearby at 12,061.63 for the 50 and 12,280.45 for the 20-day. The 200-day average is further below at 11,819.25. With a three day weekend and holiday on Monday, it is likely the Tuesday open will trade in a tighter trading range going nowhere. Resistance is 12,500 and support is 12,250. Further, the Tuesday open will have to contend with a down-grading of France's credit by the S&P rating service. We do not expect these factors to necessarily sell the Dow hard but rather push it into chop until the triangle pattern has run its course. Then, follow-on trading could sell back to 12,250 support. We would watch and wait before entering any new long trades to see market trends and trading results on Wednesday next week.

S&P 500 Index: Closed at 1289.09 -0.41 as price moved down to flat touching after resistance at 1290 and reversing. New support is 1275 with the close above all moving averages. While this seems bullish, we are technically ready for a correction and there are numerous signals within all the stock index charts saying so. Volume was normal and momentum is still up, but nearing a bearish double top. Traders recently broke-up and out of a triangle but seem blocked by the 1300 price and a higher down-trending channel line at 1315. There are now five major supports nearby just under the close. Those would be two previous channel lines and three moving averages. This is a tight congestion pattern signaling not much buying, or selling but rather a choppy performance between 1290 and 1280 for next week.

S&P 100 Index: Closed at 584.28 -2.72 on normal volume and rising momentum. These larger investors are done until next week and you can see it in the advanced action of the chart pattern. Price was hitting 585 resistance most of this week and could not get through it. Today's trading showed a full stall right under 585 with a close at 584.28. New support is at 575.37 on the 20-day moving average. Resistance remains on the 585.00 number. Expect low volume on choppy, sideways trading for early next week after the holiday.

Nasdaq 100 Index: Closed at 2371.98 -10.01 on rising momentum and normal volume. The Nasdaq is the faster of the indexes and has already put in a top peak with two waves of toppy, correction. The next up-wave should be on Tuesday followed by a settling down and the beginnings of a new cycle wave set. Stand aside early next week and just watch the lighter trading for trend and definition.

30-Year Bonds: Closed at 145.00 +2.46 on flat but mildly turning-up momentum on a sinking Euro-land. We have five resistance top touches for the bonds at 145.00. The lower support channel line is forcing the price into a bull triangle. However, with stocks settling down after a correction, look for a pull-back in bonds on a new stock rally. Support is 143.00 and resistance is 145.00. Also, the bonds have formed a tiny bear head and shoulders pattern. The pattern is there but signals a milder sell, not a hard selling of the bonds. Major bond support is 142.50. Expect choppy channeled trading between 143 and 145 for the rest of January.

XAU: Closed at 192.91 -2.21 on rising momentum but a flat-lined metal-to-shares ratio. Price is on the 50-day moving average and just 7 points under the 200-day moving average. Support is the 20-day average at 190.42. Resistance is the 200-day at 199.63. The metals will rally in the last week of January but next week we expect more corrective weakness and light selling. First we support at 190 and then we can slip to 185 before the new rallies on January 23-24. Traders can enter now knowing more light selling is coming, or wait until the floor is fully established between 185 and 190 before any new shares buying.

Gold: Closed at 1649.40 -10.90 as the price sold down to 1626.50 support but closed on the February futures at 1640.00. The close was above the 200-day average at 1615.67 and the 20-day average at 1625.84. New resistance is 1650 and 1654.12 on the 200-day moving average. We can see the price stalling just ahead of a major bull market. Very heavy bullion purchases over the past 60 days and new strong trading positions signal the bull is ready to run. However, between now and then, we get more stalling, small corrective moves and choppy markets until about January 23-24 2012. Let this market develop and then enter with partial positions. When gold is trading steadily at 1675+ with stronger support, new entries look excellent.

Silver: Closed at 29.79 -0.45 on rising momentum as silver rose from a $26.48 low to a touch above $30.00 before pulling back in a smaller correction over the past 3-4 weeks. The close is above the 20-day average at 29.63 but under the 50 at 30.93 and the 200-day at 33.24. Once silver can pass through all the congestion between $30 and $34.00, our next objective is $36+ and then $38+ to be followed by $44.00. For awhile this week, silver was actually rising faster than gold. This was only for one day and then it relaxed backward. Silver was way oversold from its last April high of $49.62 to the later December floor near $26. The new 50% retracement is near $38.00 resistance. We expect two or three precious metals rallies from this month through later May or early June. Have patience and I think we are pleasantly surprised.

US Dollar: Closed at 81.43 +0.65 on gradually rising but stalling momentum. The PMO momentum looks like a stalling pattern. However with the Euro back at 126.82 and still running scared, the dollar will not want to sell. What it is doing is forming a bugle pattern at the top with higher highs and lower lows. This is a bear pattern but should take some time to entirely play out. New support is 80.42 and resistance is 81.50. There is talk of a 90.00 dollar and that could be real if we see a full-blown Euro currency collapse. Rather we see steady weakening in the Euro with the dollar holding under 82.50 resistance until at least the mid-March when the Euro crisis team has a meeting and says something. If they make a mistake the Euro could take an immediate, harder haircut back to 122.50; and we forecast that for later spring. Then, the US Dollar would seek 85.5- 86.50 on an inverse trade. We would not trade either of these currencies now as the market manipulation is way out of control.

Crude Oil: Closing at 98.70 -0.66 on flat to turning down momentum. Oil has been trading in a channel since mid-November between 103.50 and 96.50. For now our trading range is 98.50 support and 102.50 resistance. The Iran concerns seemed to have cooled down, relaxing prices somewhat. Natural gas supplies are running over +17% of the five year moving average on abnormally large reserves. However, crude oil is poised for later winter and spring rallies. Our higher oil forecast was $120.00. We pulled it back to $115.00 but expect to raise it again next month to $120 and perhaps even $125 on fundamentals and technicals.

CRB: Closing at 307.70 -2.16 on rising but flattening momentum after the price hit a channel line top and sold back from near 318. The CRB had a full five wave up cycle and is now in the milder ABC correction. Resistance is 320 and support is 305-300. The entire commodity sector will get a boost from almost all markets in the CRB trading basket. This will be gradual until the last week of January when the price will move higher from a low near 300.00. We can see full support from crude oil, base and precious metals, grains and some softs. I think we can match the 2011 high for the CRB at 370 from a floor at 300 points. Give it time and give it a chance. We meander for 7-10 days or so first. -Traderrog

This posting includes an audio/video/photo media file: Download Now

South Africas gold output down 4.5 pct y/y in November

Posted: 16 Jan 2012 08:20 PM PST

Links 1/17/12

Posted: 16 Jan 2012 08:14 PM PST

I over 1000 words vanish when I put it up a post and therefore unpublished it. I am very upset since it is now 5 AM, and I don't have the energy to redo it. I am sorry you are getting thin links as a result.

La Nina 'may abet' flu pandemics BBC

Killer flu doctors: US censorship is a danger to science Independent (hat tip reader May S)

Statisticians Uncover the Mathematics of a Serial Killer Slashdot

UAE waives $5.8 billion of Iraq debt GulfNews (hat tip reader 1 SK)

Saudi Arabia targets $100 crude price Financial Times

S&P versus ECB MacroBusiness

Ever Since France Lots Its AAA Rating… Clusterstock

The Massendowngrade Effect Edward Hugh, Credit Writedowns

UniCredit: double trouble Financial Times

Euro Officials Say EFSF Has Enough Funds Bloomberg

For too many African-Americans, prison is a legacy passed from father to son Guardian (hat tip reader May S)

Morgan Stanley caps cash bonus at $125,000 Financial Times

American Capitalism: Profit, But Fairly Adam Levitin

One Way to Look at Private Equity Andrew Ross Sorkin. I am now being punished for saying that Andrew Ross Sorkin is a more palatable propagandist than Adam Davidson. Message: "We only fire people if we have to." No mention of the role that acquisition debt and aggressive return targets plays in the "have to."

Why expect S&P, Moody's, or Fitch to know it's junk when expert musicians can't tell a Stradivarius from a fiddle? VoxEu

Antidote du jour:

Satyajit Das: Europe’s The Road to Nowhere, Part II – Roadblocks Ahead

Posted: 16 Jan 2012 07:09 PM PST

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Over the next few months, the Euro-Zone faces a number of challenges including: the implementation of the new arrangements, possible further downgrading of a number of nations, refinancing maturing debt and meeting required economic targets. There will also be complex political and social pressures.

Implementation of the new fiscal compact may not be a fait accompli. The lack of agreement by Britain makes the change more complex. A number of treaties and protocols need to be amended. There are also doubts as to whether the "work around" will be legally effective.

At least four governments have indicated that agreement to the changes is contingent on the precise legal text. One key area of concern is the precise form and extent of powers granted to the EU to police national budgets. Another relates to the structure of the ESM, where a qualified majority of 85% will have the power to make emergency decisions. Finland is currently opposed to the ESM act by super majority instead of unanimity. Others are also reluctant to pay in capital, which can be placed at risk without the right to a veto.

Given issues of national sovereignty, it is possible that there will delays in implementation. Changes cannot also be ruled out.

In the background, negotiations on the Greek package of July 2011 have also stalled. There is a risk that a significant number of banks will refuse to participate in the complex debt restructuring, entailing a writedown of 50% of private debt.

Following a review, S&P have downgraded France and Austria from AAA to AA+. The rating agencies may follow. The risk of further downgrades exists. The European bailout fund is under threat of being downgraded As the number of AAA rate guarantors backing it has fallen from Euro 451 billion to Euro 271 billion (a fall on 40%). This weakens its already compromised ability to raise funds to meet existing commitments to Greece, Ireland and Portugal and to support the funding of other countries.

Wall of Debt…

A crucial issue is the ability of European sovereigns to meet maturing debt commitments and to keep borrowing costs at a sustainable level.

European sovereigns and banks need to find Euro 1.9 trillion to refinance maturing debt in 2012, equivalent to around Euro 7.5 billion each business day.

Italy requires Euro 113 billion in the first quarter and around Euro 300 billion over the full year, equivalent to around Euro 1.5 billion per business day. Italy, Spain, France, and Germany together will need to issue in excess of Euro 4.5 billion every working day of 2012.

European banks, whose fates are intertwined with the sovereigns, need Euro 500 billion in the first half of 2012 and Euro 275 billion in the second half. They need to raise Euro 230 billion per quarter in 2012 compared to Euro 132 billion per quarter in 2011. Since June 2011, European banks have been only able to raise Euro 17 billion compared to Euro 120 billion for the same period in 2010.

Given that banks and investors have been steadily reducing their exposures to European countries and banks, the ability to finance this wall of debt is uncertain. The bailout fund and the IMF with around Euro 200-250 billion each cannot absorb this issuance. Europe will be forced to resort to "Sarko-nomics" to finance itself.

The ECB has reduced Euro interest rates and lengthened the term of emergency funding of banks to three years with easier collateral rules (a lottery ticket is now acceptable as surety for borrowing). The French President suggested that banks should buy government bonds, which could then be pledged as collateral to borrow unlimited funds from the ECB or national central banks.

Nicolas Sarkozy was unusually direct: "each state can turn to its banks, which will have liquidity at their disposal." He pointed out that earning 6% on Italian bonds that could then be financed at 1% from central banks was a "no brainer". At the same, ECB President Mario Draghi is urging banks to reduce holdings of government securities and to use the funding provided to meet debt maturities.

Sarko-nomics perpetuates the circular flow of funds with governments supporting banks that are in turn supposed to bail out the government. It does not address the unsustainable high cost of funds for countries like Italy. If its cost of debt stays around current market rates, then Italy's interest costs will rise by about Euro 30 billion over the next two years, from 4.2% of GDP currently to 5.1% next year and 5.6% in 2013.

In many countries, Sarko-nomics will be supplemented by "financial oppression" as government increasing coerce their citizens and institutions to purchase sovereign bonds. Regulatory changes will require a proportion of individual retirement savings to be invested in government securities. Banks and financial institutions will be required to hold increased amounts of government bonds to meet liquidity and other requirements. There may be restrictions on foreign investments and capital transfers out of the country.

Financial oppression will complement traditional public finance strategies such as direct reduction in government spending, indirect reductions in the form of changing eligibility such as delaying retirement age, and higher taxes, including re-introduction of wealth and property taxes as well as estate or gift duties.

Debt reduction through restructuring remains off the agenda. The adverse market reaction to the announcement of the 50% Greek writedown forced the EU to assure investors that it was a one-off and did not constitute a precedent. Despite this, investors remain sceptical, limiting purchases of European sovereign debt.

Weaker Euro-Zone countries may meet their debt requirements through these measures but it will merely prolong the adjustment period. It will also increase the size of the problem, locking Europe into a period of low growth and increasing debt levels.

Reality Check…

The prospects for the real economy in Europe are uncertain. European debt problems and slowing growth in emerging markets such as China, India and Brazil may lead to low or no growth.

For the nations that have received bailouts, the austerity measures imposed have not worked. Growth, budget deficit and debt level targets have been missed.

Greece has an Euro 14.4 billion bond maturing in March 2012. Prime Minister Lucas Papademos must meet existing targets and agree the second Greek bailout worth Euro 130 billion by end-January 2012 before scheduled elections to allow official funding to be available to re-finance this debt.

Even Ireland, the much lauded poster child of bailout austerity, has experienced problems. The country's third quarter GDP fell 1.9% and its Gross National Product fell 2.2% (the later is a better measure of economic performance due to the country's large export/ transhipment activity). Ireland must reduce its budget deficit from 32% of GDP in 2010 to 3% by 2015. Despite spending cuts and tax increases, Ireland is spending Euro 57 billion euros including Euro 10 billion to support its five nationalised banks, against Euro 34 billion in tax revenue.

Spain, which has voluntarily taken the austerity cure, is missing economic targets. Spain's budget deficit is above forecast (at 8% of GDP, it is a full 2% above the target agreed with the EU) and the need for support of the Spanish banking system may strain public finances further. Unemployment increased to over 21% (nearly 5 million people). Spain's economic outlook is poor and deteriorating.

Under Prime Minister Maria Monti, Italy has passed legislation and budget measures to stabilise debt. The actions focus on increasing taxes, especially the regressive value-added tax, rather than cutting expenditures. Structural reforms to promote growth are still under consideration and the content and timing is unknown. It is also not clear whether the plans will be fully implemented or work.

If the pattern elsewhere in Europe continues, it is unlikely that Italy will be able to stabilise its public finances. The sharp drop in demand from cuts in government spending and higher taxes will result in an economic slowdown, which will result in continuing deficits and increased debt.

In the third quarter of 2011, Italy's economy contracted by 0.2%. The government forecast is for a further contraction of 0.4% in 2012. The government forecasts may be too optimistic. Confindustria, the Italian business federation forecasts the economy will contract by 1.6% in 2012.

Consumption is especially weak in many of the problem economies, with Greece experiencing falls of around 30% and Italy also experiencing large falls.

Stronger countries within the Euro-Zone are also affected. Lack of demand for exports within Europe and from emerging markets combined with tighter credit conditions may slow growth.

German export orders are slowing, reflecting the fact that the EU remains its largest export market, larger than demand from emerging countries. Germany exports to Italy and Spain total around 9-10 per cent in 2010), higher than to either the US (6-7%) or China (4-5%).

As what happens in Europe will not stay in Europe, being transmitted via trade and investment channels, negative feedback loops will complicate the economic outlook.

One complication will be the Euro itself. Following his American counterparts who insist that they favour a strong dollar inconsistent with the evidence, German Finance Minister Wolfgang Schaeuble stated that: "The Euro is a stable currency." In fact, the Euro has fallen around 12 % against the dollar.

Should the European debt crisis cause currency volatility, as seems likely, the effects will be widespread. One unstated element of the calls for the ECB to engage in quantitative easing is to weaken the Euro, increasing the export competitiveness of weaker European nations boosting growth. Such action risks setting off currency wars as both developed nations (US, Japan, Britain, Switzerland) and emerging countries retaliate. The risk of capital controls, trade restrictions and currency intervention is high.

Voting Intentions…

The risks of political and social instability remain elevated.

Greece faces elections in April 2011. The polls indicate a fractious outcome, with the major parties unlikely to gain majorities with significant representation of minor parties. An unstable government combined with a broad coalition against austerity may result in attempts to renegotiate the bailout package. Failure could result in a disorderly default and Greece leaving the Euro.

The French presidential elections, scheduled for May 2012, also create uncertain. The principal opponents to incumbent Nicolas Sarkozy either oppose the Euro and the bailout (the National Front led by Marine Le Pen) or want to renegotiate the plan with the introduction of jointly guaranteed Euro-Zone bonds (the Socialists led by Francios Holland).

The European debt crisis is also creating political problems in Germany, Netherlands and Finland, especially among governing coalitions. The risk of unexpected political instability is not insignificant.

In the weaker countries, austerity means high unemployment, reductions in social services, higher taxes and reduced living standards. Social benefits increasingly below subsistence are widening income inequality and creating a "new poor". Protest movements are gaining ground, with growing social unrest.

In the stronger nations, increasing resentment at the burden of supporting weaker Euro-Zone members is evident. Despite the tabloid headline, Germans have been relatively sanguine about their current commitment of funds to the bailout, aided by limited disclosure of the extent of the commitment and a relatively strong economy.

It seems only a downgrade of Germany's cherished AAA rating, actual losses or any steps to undermine the sanctity of a hard currency (by printing money or other monetary techniques) will force increasing focus on the costs to Germans of the bailouts. Germany's commitment to date is Euro 211 billion in guarantees, Euro 45 billion in advances to the IMF and Euro 500 billion owed to the Bundesbank by other national central banks – around 25% of GDP. The increasing risk of losses may even divert attention away from the 2012 European Soccer Championship where Germany is drawn in the "Group of Death" with Netherlands, Portugal and Denmark.

Road to Nowhere…

In the short term, Europe needs to restructure the debt of number of countries, recapitalise its banks and re-finance maturing debt at acceptable financing costs. In the long term, it needs to bring public finances and debt under control. It also needs to work out a way to improve growth, probably by restructuring the Euro to increase the competitiveness of weaker nations other than through internal deflation.

Such a program is difficult and not assured of success, but would provide some confidence. At the moment, Europe does not have any credible policy or workable solution in place.

One persistent meme is that Europe has enough money to solve its problems. This is based on the Euro-Zone members' aggregate debt to GDP ratio of around 75%. There are several problems with this analysis.

The debt is concentrated in countries where growth, productivity and cost competitiveness is low, which is what caused the problems in the first place. The relevant wealth is in the hands of a few countries like Germany that appear unwilling to bail out spendthrift and irresponsible neighbours. A substantial portion of the savings is also invested in European government debt directly or in vulnerable banks, which have invested in the same securities.

The total debt of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) plus Belgium is more than Euro 4 trillion. A writedown of around Euro 1 trillion in this debt is required to bring the debt levels down to sustainable levels (say 90% of GDP). In the absence of structural reforms and a return to growth, the writedowns required are significantly larger. This compares to the GDP of Germany and France respectively of Euro 3 trillion and Euro 2.2 trillion.

In addition, the stronger nations may have to bear the ongoing cost of financing the weaker countries budget and trade deficits. This does not appear economically or politically feasible.

Europe now resembles a chronically ill patient, receiving sufficient treatment to keep it alive. A full and complete recovery is unlikely on the present medical plan. Europe resembles a zombie economy, which functions in an impaired manner with periodic severe economic health crises. The risk of a sudden failure of vital organs is uncomfortably high.

In their song "Road to Nowhere", David Byrne and the Talking Heads sang about "a ride to nowhere". Byrne sang about "where time is on our side". Europe's time has just about run out. A failure to properly diagnose the problems and act decisively has put Europe firmly on the road to nowhere. It is journey that the global economy will be forced to share, at least in part.

Gold Market Update

Posted: 16 Jan 2012 05:00 PM PST

The Lost Gold Bars Of Camp McKinney

Posted: 16 Jan 2012 05:00 PM PST

Ghosttownusa

The Story of Gold Money Past, Present and Future

Posted: 16 Jan 2012 04:30 PM PST

Mises.org

Gold Trend Forecast for 1st Quarter of 2012

Posted: 16 Jan 2012 03:25 PM PST

My Crystal Ball for the Markets in 2012

Posted: 16 Jan 2012 12:01 PM PST

"Ow!" I yelled. It felt as if a sharp needle had plunged into my leg. I looked down, but found nothing. "Something bit me..." I muttered. As I brushed my leg, I felt another painful sting, this one on my pinkie finger. "Ow! What was that!?" Now with pinkie and leg throbbing, I could still see nothing.

My wife, Carol, was standing nearby. "I know what it is," she said.

I froze.

Later, she told me she didn't want to say what it was so I wouldn't freak out and she could flick it off. But when I gazed down at my chest and saw this nasty-looking scorpion making his way up toward my neck as if to finish the job, I let out a yell and brushed the thing off... and improbably, it landed right on to my wife's hip. She, more calmly, flicked it off and killed it with a flip-flop.

We were in Nicaragua with the family for the holidays. Fortunately, the sting, while painful, is otherwise harmless.

Well, that's frontier markets for you. There are great reasons to visit Nicaragua: pristine beaches that you will have almost to yourself, the charming architecture of its old colonial cities such as Granada, the inexpensive food and lodging and much more. But it's still a frontier market with bad roads, unreliable power and a large poor population.

There are great opportunities, but also the potential for painful setbacks. The sentiment, of course, applies to all markets - and life in general.

Welcome to 2012. What opportunities and surprises can we look for in the year ahead? Some thoughts...

Total federal outlays rise again. This one seems unstoppable. The U.S. government will spend more money in 2012 than in 2011, despite everything. It's incredible to think that as recently as 2007, federal outlays totaled $2.7 trillion. In 2012, we're looking at $3.6 trillion!

This means the government will likely have to finance an increasingly larger deficit. And why not? If investors are going to be so foolish as to lend the government money for 10-year terms at a rate of 2% or so, it's like free money. The problem is that interest rates don't stay low forever and investors don't stay dumb forever. Just ask certain members of the EU. When doubts surface about your creditworthiness, rates don't just slowly crawl upward. They jump - and then it's "game over" pretty quickly.

Will 2012 finally be the year that marks the beginning of the end of the long bull market in Treasuries? I think so.

Multigenerational households in the U.S.rise. People are living longer and outliving their financial resources. The financial crisis of 2008 and the lacklustre stock market of the last decade haven't helped. Plus, medical bills have soared. So where do people turn for help? Family.

As The Wall Street Journal reports, about 39% of adults with parents 65 years and older say they've given them financial aid in the past year. And more and more U.S. households are becoming multigenerational households.

This is a return to an older order. In 1900, 57% of adults aged 65 and older lived with relatives. I think this is a long-term trend in the making - with unclear investment implications. But it seems a fundamental shift is taking place in the American household. I'd bet the number of multigenerational households rises again in 2012.

The curtain falls on the Chavez regime in Venezuela. The year 2011 was a bad year for dictators of all sorts. I think 2012 will also topple a regime or two. At the top of my list is Hugo Chavez. Venezuela will hold a presidential election in 2012. Meanwhile, the quality of life in Venezuela continues to deteriorate. There are reports of 30,000 people living in shelters awaiting Chavez to deliver on promised homes. There are shortages of basic goods, made worse by a 27% inflation rate. All the while, Chavez is battling poor health. The election will be the spark that ignites the uprising that will end his regime.

The stock market advances. Why? Because it seems improbable, and the market often does what is least expected. It's easy to draw up an ugly scenario for 2012, mostly focused on the EU imploding. It's harder to imagine the market having a good year, which is exactly why it will have one.

Now, I have no faith in market calls, as you know. So I make this prediction somewhat tongue-in-cheek. In truth, I don't waste time thinking about what the market is going to do next. It's unpredictable, and I'm a long-term investor anyway.

Lots of folks will try to divine market direction using all kinds of flawed tools. For instance, I read over the weekend that the S&P 500 (going back to 1928) has had only nine years in which the return was plus or minus 5%. The average return the following year was 26.3%. Only once did the market fall in value the following year. That was in 1940, the year after Germany invaded Poland. Even then, the market fell only 9.8%. The positive years ranged from returns of 14.3 to 52.6%. This, of course, led our market seer toward optimism for 2012.

These kinds of things are interesting but mean nothing. The market is not bound by its own history. Mr. Market does not pull cards from a deck of defined possibilities. It can pull five kings. It can grab two aces of spades. It can draw a card we've never seen before. Keep that in mind and stay focused on what you own, not on where the market might go.

Commodities rebound a bit, but don't top 2011 highs. It was a bad year for commodities. Most fell, as shown by the Dow Jones-UBS Commodity Index. I think we'll see some rebound, but an unfolding recession in the EU will be too much to overcome, and the index won't top its 2011 highs.

This doesn't mean you can't make money in commodities. If prices for oil stay at $100 per barrel, there will be plenty of oil companies and services stocks that will do quite well.

Gold stocks have a great year. The market hated gold stocks in 2011, especially the juniors. The MarketVectors Junior Gold Miners ETF (GDXJ) is made up of small mining stocks. It fell 38% in 2011. This, despite gold itself finishing the year modestly up.

The market is offering low multiples on gold stocks right now. Price-to-cash-flow multiples, for instance, linger near generational lows. Gold doesn't have to go up for these stocks to make a lot of money.

However, I think gold will make another run at $2,000 an ounce in 2012 - and exceed it. All the factors that drove gold to new highs in 2011 are still in place. The world's monetary system is still a mess. And its leading brand, the U.S. dollar, is not well.

Combine a rising gold price with low multiples and you have a kind of financial rocket fuel.

Chris Mayer is managing editor of the US-based newsletters Capital and Crisis and Mayer's Special Situations.

This article first appeared in The Daily Reckoning USA.

Save Your ASSets First

Tuesday, January 17, 2012