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Thursday, February 16, 2012

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Creeping Fascism, Part One: Return of the Company Town

Posted: 16 Feb 2012 07:19 AM PST

The US government's obliteration of the Bill of Rights via the Patriot Act, the recent defense bill that allows the military to detain citizens indefinitely without trial, the health care law that forces citizens to buy insurance, and the attempted takeover of the Internet through SOPA and PIPA has gotten a lot of attention lately, and in a few rare cases has generated some effective push-back.

But according to an article in this month's Harper's Magazine (Killing the competition: How the new monopolies are destroying open markets, by Barry C. Lynn), US corporations are evolving into forms that are more threatening to their victims than anything emanating from Washington. As the author characterizes it, a new generation of monopolists are imposing their own private governments on their industries — and not always the industries one would expect. This long, detailed article should be read by anyone with a desire to understand how the US is evolving. Here I'll highlight a few excerpts to summarize the major plot points:

Silicon Valley
Just a few years ago a software engineer's talents were almost completely portable, allowing a programmer to move effortlessly between tech companies. In other words, there was a functioning market for talent in which the individual had power and choice vis-à-vis local employers. Then a handful of companies began to accumulate near-monopoly control over their product lines — and their workers. From the article:

These days the Valley is once again abuzz. Headlines report bulging wallets and a smorgasbord of new perks. Venture capitalists hum down Route 101, and angel investors lurk and listen in the bars. But instead of a disruptive melee like that of the late 1990s, with its diversity of players and voices, the overwhelming tendency today is a further consolidation of power by the already powerful. During the past decade, a few giants have managed to fence in market after market for hardware, software, and content. Some did so simply by buying up their competitors….

Yet this de facto license to govern a trillion-dollar industry—and with it, entire swaths of the American economy—appears to have left these high-tech headmen unfulfilled. Or so we learned when the Justice Department complained in 2010 that senior executives at Apple, Google, Intel, Pixar, and two other corporations had "formed and actively managed" an agreement that "deprived" the engineers and scientists who work for them of "access to better job opportunities." Even in those reaches of society long accustomed to the rule of the few, the fact that some of the biggest and the richest had agreed not to poach one another's workers managed to shock. In an editorial, the New York Times wondered "What Century Are We In?" Yet in the Valley itself, from those most directly affected, we've heard only the rarest of whimpers. The anger is there. But it's tamped down by fear.

…At a crossroads just south of Apple headquarters, in front of a Valero gas station, I caught up with John, who was speed-walking to the dentist. "Of course I don't like it," he told me, and proceeded to recount the facts of the settlement in detail. "But what can we do? It's not like anyone ever dares to speak about it. I mean, they actively encourage us not to talk to one another. It's all taboo."

Poultry Farming
The broiler industry was one of the first in which the generation of monopolists succeeded in replacing open markets with vertically integrated systems designed to be controlled by a single local buyer. The men who rule America's chicken-processing plants have therefore had decades to master the art of setting individual farmers—who still own the land, equipment, and liabilities—against one another.

This sounds bad enough. But when I sit down with poultry grower Mike Weaver in his snug rambler to learn how such tournaments work in practice, he seems astonished at my naïveté. "That's not even the half of it," he begins.

Weaver, a former fish and game officer who can raise flocks as large as 94,000 birds on his farm, slides a "settlement sheet" across the table. It records the amounts JBS paid to seventeen farmers who delivered their flocks to the plant on one particular day. The company, he shows me, paid the top-ranked chicken grower 63 percent more per pound than it paid the bottom-ranked grower. "Naturally," he says, "this sort of differential will tend to make a man work harder to stay ahead of the next fella."

What makes the system truly insidious, Weaver adds, is that the whole competition takes place without any set standards. "There is no baseline," he explains. For one thing, JBS requires the farmers to procure from the company itself all the chicks they raise and all the feed they blow into the houses. Yet the quality of the chicks and the feed can differ tremendously, from day to day and from farm to farm.

What's more, the full-grown chickens are weighed after being trucked off the farm. The farmer is not allowed to see whether the figure on the scale is accurate—nor can he tell whether the chickens he's being paid for even came from his farm. He is simply expected to take the money he is given and say thank you.

As much as he resents being forced into a gladiatorial relationship with his neighbors, Weaver says an actual tournament with a level playing field would be "far better than what we have now." Under the current regimen, the processors "don't just force us to compete against each other. They rig the competition any way they like. They can be as sloppy as they wish or as manipulative as they wish. We are entirely subject to the company." After a moment, Weaver modifies his statement. "Really, we are entirely subject to the foreman at the plant, to the technician who keeps a watch on us. Those men can make us and they can break us, and they know it."
His face reddens. "The market in this valley is very simple to understand. They give preferential treatment to those who kiss their ass."

For the local community, the outcome of this arrangement can be devastating. Traditionally, farmers have tended to join politically with their neighbors. But Weaver, who heads the local poultry-growers association, says nowadays many farmers end up viewing their neighbors as rivals. Most of the 400 or so farmers who sell into the Moorefield plant "try to resist such feelings," he says. But over time, the system wears them down. It also makes them highly reluctant to speak out in public. "Most of the farmers are afraid to say boo for fear the companies will take away their chickens," Weaver tells me. The processors "know we have our house and our land in hock to pay for the equipment. They know we are honorable people who won't walk on a promise. And they exploit this."

Weaver has learned this from bitter experience. In 2010, he spoke at two Department of Agriculture hearings on the consolidation of the packing and processing industries. Ever since, he tells me, the foremen have rated his chickens near or at the bottom, after years of ranking them near the top. This costs him thousands of dollars per flock.

"I can't prove a thing," Weaver says when I ask if there's any way to verify that the company is retaliating against him for speaking out. "That's the beauty of the system. They know everything and we know nothing. They get to decide what's real."

Book Publishing
But perhaps the best way to understand the true structure of America's political economy in the twenty-first century is to talk to some of the people who publish, edit, and write books in America. These days, most articles on the book industry focus on technology. The recent death of the retailer Borders is depicted as a victory of Internet sales over brick-and-mortar stores, the e-book market as a battle between the Kindle e-reader and the iPad. But if we look behind the glib narrative of digitization, we find that a parallel revolution has taken place, one that has resulted in a dramatic concentration of power over individuals who work in this essential, surprisingly fragile industry.

A generation ago, America's book market was entirely open and very vibrant. According to some estimates, the five largest publishers in the mid-1970s controlled only about 30 percent of trade book sales, and the biggest fifty publishers controlled only 75 percent. The retail business was even more dispersed, with the top four chains accounting for little more than 10 percent of sales. Today, a single company—Amazon—accounts for more than 20 percent of the domestic book market. And even this statistic fails to convey the company's enormous reach. In many key categories, it sells more than half the books purchased in the United States. And according to the company's estimates, its share of the e-book market, the fastest-growing segment of the industry, was between 70 and 80 percent in 2010. (Its share of the online sale of physical books is roughly the same.)

Not surprisingly, then, we find the same sort of fear among our book publishers as we do among the chicken farmers of the Sweedlin Valley. I recently sat down with the CEO of one of the biggest publishing houses in America. In his corner office overlooking a busy Manhattan street, he explained that Amazon was once a "wonderful customer with whom to do business." As Jeff Bezos's company became more powerful, however, it changed. "The question is, do you wear your power lightly?" My host paused for a moment, searching for the right words. "Mr. Bezos has not. He is reckless. He is dangerous."

Later that same day, I spoke with the head of one of the few remaining small publishers in America, in a tattered conference room in a squat Midtown office building. "Amazon is a bully. Jeff Bezos is a bully," he said, his voice rising, his cheeks flushing. "Anyone who gets that powerful can push people around, and Amazon pushes people around. They do not exercise their power responsibly." Neither man allowed me to use his name. Amazon, they made clear, had long since accumulated sufficient influence over their business to ensure that even these most dedicated defenders of the book—and of the First Amendment—dare not speak openly of the company's predations.

If a single event best illustrates our confusion as to what makes an open market—and the role such markets play in protecting our liberties—it was our failure to respond to Amazon's decision in early 2010 to cut off one of our biggest publishers from its readers. At the time, Amazon and Macmillan were scrapping over which firm would set the price for Macmillan's ebooks. Amazon wanted to price every Macmillan e-book, and indeed every e-book of every publisher, at $9.99 or less. This scorched-earth tactic, which guaranteed that Amazon lost money on many of the e-books it sold, was designed to cement the online retailer's dominance in the nascent market. It also had the effect of persuading customers that this deeply discounted price, which publishers considered ruinously low, was the "natural" one for an e-book.

In January 2010, Macmillan at last claimed the right to set the price for each of its own products as it alone saw fit. Amazon resisted this arrangement, known in publishing as the "agency model." When the two companies deadlocked, Amazon simply turned off the buttons that allowed customers to order Macmillan titles, in both their print and their e-book versions….

Other Industries
In 1978, 43 firms made and sold beer in the US, with the biggest controlling less than a quarter of the market. Today, more than 1,750 companies make beer in this country but Anheuser-Busch and MillerCoors have control 90% percent of the U.S. market. Harper's asserts that this gives them the ability to decide which American craft brewers thrive and which don't, and quotes a microbrewer: "When I want to get my beer on a store shelf, I don't call the retailer. I have to beg Anheuser-Busch."

In the 1980s, there were more than a dozen large ad agencies and scores of smaller ones on Madison Avenue. Today four—WPP, Interpublic, Omnicom, and Publicis—control almost the entire industry. "WPP alone controls more than 300 ad agencies, including such once iconic shops as the Grey Group, Ogilvy & Mather, and Hill & Knowlton. And the four giants vigorously shore up this power with strict non-compete employment contracts."

Musicians are being squeezed by Live Nation, doctors by hospital management corporations. Retailing is concentrating into a few mega-box chains. The list just keeps going.

Some thoughts
One thing the article doesn't mention is the concentration of Wall Street financial power. The vast majority of home mortgages and financial derivatives are now originated by a handful of mega-banks. These banks are among the largest campaign contributors to both parties, while the Fed and Treasury Departments are run largely by their alumni, so it's no surprise that financial policy tends to benefit Wall Street at the expense of pretty much everyone else.

The battle against monopolies has been going on since the days when Alexander Hamilton, the spiritual father of the Federal Reserve and Goldman Sachs, attempted to use government power to consolidate control of various industries in the hands of his banking cronies. More recently, the early 20th century US economy was run largely by a handful of railroad and natural resource "robber barons." So what's happening now is not new, and the solution — break the bastards up — has historically worked, at least for a while. Our problem today is that this relative handful of companies seems to own so much of the government that the two sectors — mega-corporations and big government — are now essentially business partners.

The poultry farming story illustrates the connection between economic and political dominance. When a single company or oligopoly controls an industry, workers can't speak out or organize because they fear for their livelihoods. They're serfs in every meaningful way.

In today's United States, the left/right divide makes less and less sense, because both ideologies are getting what they want as well as what they fear. The left wants a big, active government and fears corporate control, while the right (including libertarians) wants free enterprise and fears government control. Yet as things are playing out we're getting the worst of both: pervasive government and corporate dictatorships controlling huge sections of our lives. Whether we call it fascism or totalitarianism or neo-feudalism, the end result will be indistinguishable on the ground.

Top Q4 Portfolio Moves By The 'Oracle Of Ontario'

Posted: 16 Feb 2012 06:10 AM PST

By Ganaxi Small Cap Movers:

Guru Prem Watsa, often called the "Canadian Warren Buffett" and the "Oracle of Ontario," is founder, chairman and chief executive of Fairfax Financial Holdings (FRFHF.PK), based in Toronto, Canada. He is probably also the richest investment guru you have never heard of. He is widely believed to have predicted the crash of 1987, the Japanese collapse of 1990, and the 2008 meltdown, which he benefited from by investing in credit default swaps, turning a $341 million bet into more than $2 billion. His net worth is estimated to be over $4 billion.

Founded in 1985 by Mr. Watsa, publicly traded Fairfax Financial Holdings Ltd., through its subsidiaries, is engaged in property and casualty insurance and re-insurance and investment management. Its subsidiary Hamblin Watsa Investment Counsel provides investment management to the insurance, reinsurance and runoff subsidiaries of


Complete Story »

Why New Gold Is A Great Buying Opportunity

Posted: 16 Feb 2012 06:07 AM PST

By Jeb Handwerger:

From the players who gave Newmont (NEM) and Franco Nevada (FNV) to the world of precious metals, there are significant new developments.

New Gold Inc. (NGD) has consolidated the ownership of the Blackwater Property by taking over Silver Quest. The importance of this particular chess play not only allows New Gold to command precious territory in British Columbia, but builds a commanding (100%) ownership of a rapidly growing deposit in a mining friendly jurisdiction.

New Gold has a growing and large cash position. They are committed to using these dollars to build an important growth profile. The management team of New Gold represents the rare combination of aggressive new talent united with experienced prospectors with a great track record.

With this acquisition, New Gold's Blackwater resource will increase from 5.8 million ounces to 6.5 million ounces. Additionally the company added a very large land package that boarders the western portion


Complete Story »

Should We Believe In The Housing Recovery?

Posted: 16 Feb 2012 06:04 AM PST

By Robert Brusca:

Before we went crazy with mortgage securitization and extending the reach of Freddie Mac and Fannie Mae, the US housing market was a series of local markets. What the extension of Fannie and Freddy and the sweep of derivative securities did was make the market seem like it was one.

And that is one of the reasons housing failed so badly. A house is not a dollar bill. The same house will not have the same value everywhere. The most over-told truism about real estate is that value is about location, location, location. And of course no two houses have exactly the same location.

So as we look at the housing market, we need to be circumspect. There are many who want to make broad, sweeping statements about housing as recovering, or as never to recover, about prices as stabilizing or having much further to fall. Let's realize that whatever


Complete Story »

Barrick Gold's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Posted: 16 Feb 2012 06:00 AM PST

Barrick Gold (ABX)

Q4 2011 Earnings Call

February 16, 2012 9:30 am ET

Executives

Deni Nicoski - Vice President of Investor Relations

Aaron W. Regent - Chief Executive Officer, President, Director and Member of Environmental, Health & Safety Committee

Robert Krcmarov - Senior Vice President of Global Exploration

Jamie Sokalsky - Chief Financial Officer and Executive Vice President

Ivan Mullany - Senior Vice President of Capital Projects

Analysts

Jorge M. Beristain - Deutsche Bank AG, Research Division

Stephen D. Walker - RBC Capital Markets, LLC, Research Division

Paretosh Misra - Morgan Stanley, Research Division

Steven Butler - Canaccord Genuity, Research Division

Elizabeth Collins - Morningstar Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Barrick Gold Fourth Quarter 2011 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, February 16, 2012. I would now like to turn the


Complete Story »

The Myth Of Narrow Leadership

Posted: 16 Feb 2012 05:56 AM PST

ab analytical servicesBy Alan Brochstein, CFA:

The Bull Market that began almost three years ago is alive and kicking. Tested twice and sitting near its highs from last year, the rally has been greeted with a lot of skepticism. Most recently, the talk has been focused on the narrow leadership, with a lot of attention paid to the stellar performance of Apple (AAPL). Now that the stock has suffered a nasty reversal on heavy volume, surely the market will collapse without its leader, right?

Well, the data disagree. While it is true that AAPL has been a big contributor given its large gain and its massive market cap, the breadth of the rally has been quite impressive. As of 2/15, more stocks in the S&P 500 (SPY) were ahead of the market than not, with 268 stocks (52%) returning more than 6.8%. While it's true that there are some impressive performances among the largest companies, on


Complete Story »

Silver Leading Gold Downward

Posted: 16 Feb 2012 05:29 AM PST

By Marco G.:

Having exited the minerals sector in the doldrums at the beginning of last summer 2011, I have not paid much attention to the longer-term price trends of gold and silver; I have been merely noting the daily upward and downward volatility.

Recently in 2012, I took more interest in the market as the general markets seem to be reviving. I noted that gold miners were lagging the price of gold and surmised that this was exit time. Even when trying to fathom the future path of gold, the way forward appeared to be dim.

Today, to my surprise when I took a longer-term view, I discovered a revelation, which has not been noted in the public media to my knowledge. The price of silver appears to be leading the price of gold downward.

Silver Chart

(Click charts to expand)

The chart above shows the silver SLV ETF as a proxy


Complete Story »

Gold Focused on QE3 Bets; Oil May Pull Back

Posted: 16 Feb 2012 05:10 AM PST

Gold continues to track investors' 2-3 year inflation expectations (tracked by "breakeven rates"). Prices put in their strongest performance in six sessions yesterday after minutes from January's FOMC meeting showed some policymakers expected to introduce additional stimulus.

David Morgan Silver Presentation at California Resource Investment Conference

Posted: 16 Feb 2012 04:56 AM PST

Silver-Investor.com editor and silver guru David Morgan delivers the keynote talk of the recently completed Cambridge House California Resource Investment Conference. The theme:  Debunking myths about silver.

Commentary

David begins his talk with a powerful video on silver with a very bullish "take."  He quickly tackles the "myth" that silver is currently in "shortage," but then makes the case it could and very likely will get that way if trends continue.  He makes the distinction we happen to have made often between short-term shortages of retail products, like the one we all witnessed in 2008 when the spot price was driven lower than the market was willing to pay for small retail silver products, and the supply/price for commercial silver. In 2008 there was no shortage of all silver per se, but there was a shortage of coins, bars and other retail "investment" items.  The evidence: Much higher premiums back then for small silver products on the street versus the commercial price for average 1,000 ounce commercial good delivery bars in late 2008 and early 2009, since then corrected. 

  

Continued ***

Coming Silver Ride 'One for the History Books'

Mr. Morgan sees the demand for silver increasing because of the many new applications that depend on it coupled with rapidly increasing demand for silver as a monetary asset.  David packs a metric tonne of facts and figures to support his contention that this is a different market and different world compared to 1980, the last big bull market for silver.

Quoting Milton Friedman at the 'Blanchard Conference' in New Orleans in 1993 (New Orleans Investment Conference), Morgan reminds us all that Friedman said:  "The major monetary metal in history is silver, not gold."  Some people may have forgotten that silver is money, but history and the U.S. Constitution says otherwise.  Silver doesn't care what some people think, it's just a hunk of metal, that the market is realizing is on its way to restoring itself as a way for people to preserve purchasing power of their wealth. That is now that the artificial price pressure caused by decades of  government dumping of silver stockpiles is over. 

Morgan thinks that the ride for silver as valued in fiat money will "be one for the history books."  Find out a hint of why in the video below.             

We consider the video worthy of sharing. 

Source:  Kitco.com

http://www.youtube.com/watch?v=lO0wyOOTpwY&feature=player_embedded 

Louise Yamada Bullish on Gold

Posted: 16 Feb 2012 04:22 AM PST

Gold & Silver… Heading Up

Posted: 16 Feb 2012 03:37 AM PST

from TheAUReport.com:

Roger Wiegand, editor of Trader Tracks, says cycles will bring gold and silver higher in the first half of 2012: gold up to $2,050/oz and silver up to $44/oz or even $50/oz. He sees plenty of opportunities for volatility given the political and economic situation in the U.S. and the EU. In this exclusive Gold Report interview, Wiegand reveals names of mining companies poised to profit.

The Gold Report: Roger, you attributed the recent uptick in the gold price in part to large funds bidding up the price. But these funds have also shown their willingness to sell their gold positions to cover their short positions. Can gold investors look forward to more volatility this year?

Roger Wiegand: Gold is coming back very strongly right now. People in India, China, Japan and Canada are buying lots of physical gold. In addition, some central banks that were selling gold are now buyers.

Read More @ TheAUReport.com

Gold Charts. Silver Charts. Too Many To Count.

Posted: 16 Feb 2012 03:18 AM PST

from TFMetalsReport.com:

It's 10:00 a.m. EST and I'm just starting to type. What took so long, you ask? Frankly, I printed off way too many charts. This old Officejet is smokin'! After winnowing the list down to 9, I think I'm ready to get started.

As you might have expected, we're going to start again with The Pig and, again, this disclaimer:

* I realize that, year-over-year, the Dollar Index is flat while the metals are up considerably. However, in the day-to-day trade, movements in the POSX are very significant. Why? Because the only market participants left post-MFG are The Cartels and The WOPRs. Everyone knows that weakness in the POSX causes WOPR to buy. However, strength in the POSX is even worse. WOPR sells and the Pig strength encourages The Cartel to punch the gas, too, giving POSX strength twice the impact as POSX weakness.

Read More @ TFMetalsReport.com

Global Gold Demand

Posted: 16 Feb 2012 03:12 AM PST

Global Gold Demand in 2011 Rises 0.4% To $200 Billion – Central Banks, Asia and Europe Diversifying Into Gold

from GoldCore:

Gold's London AM fix this morning was USD 1,716.00, EUR 1,320.51, and GBP 1,094.74 per ounce.

Yesterday's AM fix was USD 1,725.50, EUR 1,309.88, and GBP 1,099.33 per ounce.

The World Gold Council released its comprehensive report today, "Gold Demand Trends Q4 and Full Year 2011" looking at demand in gold demand in full year 2011 and the 4th quarter of 2011.

Read More @ GoldCore.com

Precious Metals Investing: Myths & Realities

Posted: 16 Feb 2012 03:08 AM PST

from MilesFranklinCo:

Andy Schectman, President and Andy Hoffman, Marketing Director discuss the fundamentals that have driven the 12-year Precious Metals bull market, as well as factors likely to predominate in 2012 and beyond. It will dispel common myths about gold and silver's monetary properties, discuss key issues shunned by the mainstream media, and describe various Precious Metals investment alternatives.

~TVR

Gold Imports: a Worry for Beijing?

Posted: 16 Feb 2012 02:38 AM PST

Gold always goes where the money is, writes Adrian Ash at BullionVault, and today's new data from the World Gold Council again indicate that gold is mapping the deep shift of relative wealth from West to East here in the 21st century.

All the above ground gold = 5 gold rings per person?

Posted: 16 Feb 2012 02:03 AM PST

Attached Images

2012 Price Predictions for Gold and Silver

Posted: 16 Feb 2012 01:50 AM PST

by Johnny Mellgren, RealMoneyTracker.com:

Dear RealMoneyTracker.com friends and followers of the white and yellow metals, first, let us wish you a happy and prosperous year of the Dragon. In the Chinese zodiac, the Dragon is considered the luckiest of all animals, and looking at the charts for both metals in january 2012, we're off to a good start.

As you all know 2011 was a very volatile year. Silver headed off and rushed to approximately 48 USD/oz before it fell off the cliff back in early May. Gold broke seasonal trends and had its greatest move during the summer and surpassed the 1900 USD/oz mark before it too fell off in September. Silver continued to fall during the last quarter and fell as low as almost 26 USD/oz, a staggering -45% move from its 2011 high. Bulls who played the leveraged short term markets did not get very good sleep. If the bulls dominated the first half of the year, the bears certainly showed muscle during the second.

Read More @ RealMoneyTracker.com

Global Gold Demand in 2011 Rises 0.4% To $200 Billion ..

Posted: 16 Feb 2012 01:47 AM PST

World Gold Council - Central Banks, Asia and Europe Diversifying Into Gold

Posted: 16 Feb 2012 01:40 AM PST

Our friends at Stephen Flood's GoldCore.com have coverage on the World Gold Council's just released executive summary of their Q4 2011 Gold update.  The report notes that bar and coin demand overshadows ETF demand and central banks remain net buyers.  The WGC report is "must reading" for people interested in the gold market.  A link to the WGC report is at the end of this post.   

GoldCore writes, in part:  "The World Gold Council released its comprehensive report today, "Gold Demand Trends Q4 and Full Year 2011" looking at demand in gold demand in full year 2011 and the 4th quarter of 2011.

20120216-WGC-graph1

Continued ***

Global Gold Investment Demand - Bar and Coin Demand Larger Than ETF Demand Which Remains Small

The report is 32 pages long and well worth a read if you wish to be informed about the fundamentals of the gold market.

Executive Points
Here are the key points which we have garnered from reading the report:

  • Global demand for gold in 2011 rose a very sustainable and gradual 0.4% to 4,067.1 tonnes.
  • Global gold demand was worth a mere US$205.5 billion which is not a substantial sum considering the size of global capital markets today. It was the first time that global demand has exceeded US$200 billion and the highest tonnage level since 1997.
  • Central banks were net buyers of gold and their demand surged nearly 6 fold (570%) to 439.7 tonnes in 2011 - compared with 77 tonnes in 2010.
  • Demand from the investment sector was the driving force behind demand for gold reaching a 14-year high in 2011.
  • The investment sector saw annual demand of 1,640.7 tonnnes up 5% on the previous record set in 2010 and with a value of US$82.9 billion.
  • Demand for gold bars and coins accelerated, reflecting a blend of positive influences including concern over the financial health and future viability of the euro area; high inflation in some countries; positive price expectations; and the relatively poor performance of a range of alternative investments.
  • Investment demand globally surpassed the record high of 2010, with China, India and interestingly Europe (primarily Germany and Switzerland) all reporting record levels of demand in 2011.
  • Investment was the main driver of growth, although jewellery and technology were resilient despite higher and record nominal prices.

20120216-WGC-graph2

Mine production, while rising to a record, increased minimally and was offset by lower recycling activity and significant central bank purchases.

  • Specifically, European investment demand experienced its seventh consecutive annual gain and accounted for one quarter of all global gold retail investment in 2011.
  • Demand for gold bars and coins globally contributed to strong investment demand, substantially increasing year-on-year in both volume and value terms.
  • Investment demand for gold is likely to remain high throughout 2012 as global economic uncertainty, low interest rates and high inflation in many economies reinforce the attraction of gold's diversification properties.
  • Central bank were net buyers and had demand which hit their highest amount in forty years.
  • Buying in China should overtake India this year as the world's top consumer of the yellow metal.
  • In Q4 2011, China consumed 190.9 tonnes of gold, compared with India's 173.0 tonnes, ranking China top in terms of consumption, something the WGC had not expected last year.

The data and info graphic show the continuing and often underestimated role of gold coin and bar demand over ETF demand which remains quite small vis-à-vis coin and bar demand and small vis-à-vis other markets

Investment Demand
Global demand for gold reached 4,067.1 tonnes last year, the highest tonnage since 1997, due in large part to a nearly 5% increase in investment demand, which hit a record 1,640.7 tonnes.

Asian countries like China, India, Vietnam, Thailand and others see bullion as a store of value against the growing inflation and the ongoing debasement of their currencies.

The fundamentals for gold in 2012 look good. Continuing low and often negative real interest rates will continue to support gold's safe haven status. The Fed's statement that it will continue to see rates remain very low until 2014 is very bullish for gold.

Central banks were net buyers of gold and their demand surged nearly 6 fold (570%) to 439.7 tonnes in 2011 (compared with 77 tonnes in 2010), more metal than at any time since the end of the gold standard in 1971.

The World Gold Council noted that, "The buyers are all ... in Latin America, Asia and the Far East and they are basically enjoying strong growth, fiscal surpluses and growing foreign exchange reserves."

European Demand on Eurozone Debt Crisis
Financial instability and elevated sovereign, monetary and systemic risk continues leading European investors to increasing their purchases of bullion in the form of coins and bars.

The WGC reported that European demand rose by more than 25% year on year to 374.8 tonnes in 2011, with Switzerland and Germany being the main drivers in the region.

Gold demand in the UK and Ireland remains lack lustre – although the data remains poor in this regard.

The 'Other Europe' category of demand, at 23.4 tonnes for Q4 and 90.8 tonnes for 2011, now accounts for a considerable proportion of investment in Europe. A substantial amount of this new demand has been generated by countries with previously no or very little interest in gold investment, including the UK and Ireland and a number of Eastern European countries. In value terms, annual demand from the markets grouped within this category amounted to a very small €3.3bn.

Demand for gold in ETF products reached a net 154 tonnes in 2011, compared with 367.7 tonnes in 2010, although more than 1/2 of that total's investment was solely Q4 of last year alone, when ETP demand accounted for 86.8 tonnes.

Jewellery Demand
Global jewellery demand totalled 476.5 tonnes in the fourth quarter of 2011, a 15% year-on-year decline. In value terms, demand was 5% higher at US$25.9bn, a new quarterly record. On a full-year basis, tonnage demand of 1,962.9 was 3% below 2010, showing resilience given a 28% increase in the average annual price. The value of annual demand grew by 25% to a new record of US$99.2bn

Technology Demand
Gold demand in the technology sector declined 3% year-on year in the fourth quarter of 2011 to 112.3 tonnes, the lowest quarterly figure since the third quarter of 2009. In value terms, this translated to a 19% year-on-year increase to US$6.1bn. Annual demand was measured at a broadly steady 463.5 tonnes, comfortably above the 456.3-tonne average of the preceding five year period. The value of 2011 demand surged 28% and reached a record US$23.4b.

Gold Supply
On the supply side, gold mine output rose just 4% (yoy) but reached a new annual record of 2,809.5 tonnes last year.

The WGC reported that the producer hedge book increased marginally for the first time in a decade last year, with 18 tonnes of hedging added to the estimated outstanding global hedge book of 158.0 tonnes.

Recycling remained high and fell just 2% on the year to 1,611.9 tonnes showing that the '(wo)man on the street' and much of the retail public in many western countries continues to sell gold.

Conclusion
The figures and data shows that the fundamentals of the gold market remain very sound with global demand having increased gradually and sustainably and supply remaining restrained.

Importantly, most of the buying was buy store of wealth and long term diversifiers (Asian and European coin and bar buyers and central banks). This is not 'hot' speculative money and therefore this gold is in strong hands and unlikely to be sold for some time.

The recent increase in demand have been very gradual in tonnage terms and is very sustainable given the extremely low level of gold bullion ownership internationally and particularly in the western world. Allocations to gold in global investment portfolios remain negligible.

This in conjunction with a global sovereign debt crisis centred on the appalling fiscal position of most industrialised nations, the risk of global recessions and or a Depression and very significant counter party and systemic risk means that gold's bull market looks set to continue for the foreseeable future."

World Gold Council: "Gold Demand Trends Q4 and Full Year 2011" Full Report can be read here.

More from GoldCore at the link below. 

February 16, 2012 (Source: GoldCore.com)

http://www.goldcore.com/goldcore_blog/global-gold-demand-2011-rises-04-200-billion-central-banks-asia-and-europe-diversifyin

Indias Gold

Posted: 16 Feb 2012 01:38 AM PST

2012 Infantry Soldier Silver Dollar Released Today

Posted: 16 Feb 2012 12:02 AM PST

What are your guys thoughts on this?

http://www.coincollectingnews.org/20...om-set/1016550

Ludwig von Mises Institute – Europe gold standard conference

Posted: 15 Feb 2012 11:56 PM PST

"The Gold Standard is the right answer to realise a stable financial market." This is the proposition that participants will be debating at a one-day conference organised by the Ludwig von ...

Central Banks, Asia and Europe Diversify Into Gold

Posted: 15 Feb 2012 11:55 PM PST

Global gold demand in 2011 was worth a mere US$205.5 billion, which is not a substantial sum considering the size of global capital markets today. But it was the first time that global demand has exceeded US$200 billion, and it was the highest-tonnage level since 1997.

Morning Outlook from the Trade Desk 02/16/12

Posted: 15 Feb 2012 11:49 PM PST

Back in the saddle after 6 days in wonderful California.

Greece still not settled and again pressure on equities and the Euro, ie pressure on metals. Still believe uptrend will continue. Europe's and America's position: we will provide whatever is necessary, at zero rates. Painful market if you are a trader, but metals in a portfolio position a prudent move.

Gold and Silver Prices Continue to Range Trade

Posted: 15 Feb 2012 10:57 PM PST

from GoldMoney.com:

Silver bars Yesterday was another quiet day as far as gold and silver prices were concerned, with both metals continuing to range trade. Upside momentum that bulls had at the end of January following the Federal Reserve's dovish pronouncements has been countered by the eurozone woes. Talk of a Greek default has many traders fearing a rerun of the 2008 liquidity panic. In such an environment, "cash is king", and more specifically, the US dollar – at least to the extent that it (unlike gold and silver) can be used to meet margin calls.

That said, for all the bearish talk to do with Europe it's easy to forget that stocks and commodities have had a very good start to this year. Ed Steer links to a chart from finanz.com that shows the performance this year of 40 different assets (commodities, currencies, bonds and stock indexes). Silver and platinum lead the way year-to-date – with gains of 20.7% and 16.9% respectively.

Read More @ GoldMoney.com

Chirs Duane: The Greatest Event In Human History

Posted: 15 Feb 2012 10:55 PM PST

The Fall of the Dollar, and interview with Chris Duane.

Chris Duane (Silver Shield) joins Josh Tolley to discuss the fall of the global economic system, when it will happen, and what it will look like.

Part One

Part Two

Part Three

~TVR

LISTEN: Andy Hoffman talks to AIH

Posted: 15 Feb 2012 10:50 PM PST

Raoul from Alt Investors Hangout talks to Andy Hoffman.

~TVR

Gold Eyes Fed Minutes for Direction

Posted: 15 Feb 2012 09:59 PM PST

Traders will look for clues about the probability of QE3 after Ben Bernanke and company extended their pledge to hold rates "exceptionally low" by 18 months. If this stokes bets on additional stimulus, gold is likely to follow inflation expectations higher, and vice versa.

China's Gold Imports - a Worry for Beijing?

Posted: 15 Feb 2012 09:55 PM PST

Private gold demand has suited Beijing's aim to date. But what now that imports are surging...?

read more

Tune Out...Buy Gold...Be Happy: Bill Bonner

Posted: 15 Feb 2012 09:12 PM PST

¤ Yesterday in Gold and Silver

If you check the Kitco chart below, you'll see that the Wednesday trading day in gold was virtually a carbon copy of what happened on Tuesday.  I was tempted to just cut and paste my Tuesday gold commentary in this spot to save time...but I didn't.

Like Tuesday, the prominent feature in Wednesday gold trading was the 'rally' that began at the open of Comex trading in New York.  This rally lasted less than an hour before the selling started...and it was all down hill until about 2:20 p.m. Eastern time.

Gold's low tick of the day [$1,719.70 spot] came at this 2:20 time...and the gold price recovered about eight bucks by the close of the New York Access Market at 5:15 p.m. Eastern.

Gold finished at $1,728.10 spot...up $7.00 on the day.  Net volume was not light...around 131,000 contracts.

Silver's chart was similar, but the price was far more 'volatile'.  Twice in early morning Comex trading silver tried to take off in price, but got sold down both times.  Then, to add insult to injury, a not-for-profit seller showed up at precisely 2:00 p.m. Eastern in the thinly-traded electronic market and sold the silver price down about 45 cents in about ten minutes.  This spike down [$33.02 spot] proved to be the low of the day.

But, by the close of trading, silver had regained all that 'loss'...and closed at $33.50 spot, down 'only' 8 cents on the day.  Volume, net of all roll-overs out of the March delivery month, was in the 35,000 contract range.

The dollar index opened around 79.40...and then hit its nadir [79.12] about 7:20 a.m. in London yesterday morning.  The ensuing rally lasted the rest of the day...and the dollar index closed around 79.65...up 25 basis points.

Despite the dollar rally, it's pretty obvious that gold and silver wanted to take off to the upside the moment that New York opened...and it's equally as obvious that one or more not-for-profit sellers were there to sell whatever amount of futures contracts it took on the short side to kill the rallies stone cold dead.

The gold stocks gapped up over a percent when the equity markets opened at 9:30 a.m. in New York, but that was pretty much all she wrote from that point on.  The stocks held in their pretty good until just before lunch Eastern time...but the ten dollar drop in the price over the next few hours caused the gold stocks to swoon and they never really recovered after that...despite the fact that the gold price then rallied and closed seven bucks in the black.

I'm sure that the poor performance of the general equity markets at the end of the day didn't help the HUI either...as it finished down 0.34% when all was said and done.

The silver stocks finished mixed on the day as well...and Nick Laird's Silver Sentiment Index closed basically unchanged...up 0.03%.

Well, the CME Daily Delivery Report showed that only 2 gold contracts were posted for delivery tomorrow...and no silver contracts for the second day running.  But, having said that, there are nine days left before first day notice for delivery into the March contract for silver...and the CME reported yesterday that there are still 385 gold, and 187 silver contracts open for February delivery...and 56 of those silver contracts were just added to the delivery schedule yesterday.

The GLD ETF did not have a report yesterday...but there was another withdrawal reported from SLV...as authorized participants withdrew another 1,068,875 troy ounces.

The U.S. Mint had its first sales report of the week on Wednesday.  They sold 5,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 100,000 silver eagles.  Month-to-date sales numbers are not impressive.  So far in February the mint has sold 15,000 ounces of gold eagles...3,500 one-ounce 24K gold buffaloes...and 835,000 silver eagles.

It was a rather quiet day at the Comex-approved depositories on Tuesday.  They only reported receiving 303,246 ounces of silver...and shipped 381,430 troy ounces out the door.  The link to that action is here.

Silver analyst Ted Butler had his mid-week commentary to his paying subscribers...and here are three free paragraphs...

"Let me confess one of my greatest fears about a potential future bubble in silver. If a silver bubble does develop, by definition large numbers of uninformed investors will join in the fray, eager to capture sure profits. The concerns for risk will be cast aside, as they are in any bubble. Undoubtedly, many of my former bullish arguments for buying silver will be trotted out as current reasons for buying even as price and risk grow. I doubt very much that I will be pounding the table to buy in a silver bubble and instead will probably be way too early in suggesting its sale. Yet new uniformed buyers will mistakenly view my past pronouncements as reasons to buy after a bubble is formed. The thought that I will inadvertently be responsible for damage to the latecomers is troubling."

"Of course, the risk to latecomers only grows deep into the bubble, should it form. The risk of a silver bubble bursting now is remote, because it hasn't formed yet. Yes, there is always the risk of short term sell-offs for reasons related to manipulative activities on the COMEX, but those sell-offs should be viewed as buying opportunities as has been the case for the life of the silver bull market to date. In terms of a bubble-like collapse in silver prices, that risk will not exist until a bubble first forms."

"In the meantime, since a bubble has not yet formed in silver, what are the possible effects on the price should a silver bubble form? Certainly, I have not been particularly surprised by the 8 to 10 fold increase in price over the past 5 to 10 years. If anything, the price performance to date in silver, given all the facts, has been somewhat muted. Leaving out a possible bubble forming, it would not surprise me to see eventual long term silver prices at $100 or even $200. That's without a bubble. If a silver bubble does form, it is hard for me not to imagine some multiple of those prices."

Reader Scott Pluschau, a frequent contributor to this column, sent me this short note yesterday..."Since you mentioned TA and equities the other day, Wednesday was a key reversal day in the Nasdaq 100 on a surge in volume...if you have any interest."  I did...and his blog from yesterday is well worth a look.  The chart is a standout...and the link is here.

Washington state reader S.A. sent me these two charts showing the decline in Chinese and Russian U.S. Treasury holdings...and there are no surprises.

Then a bit more than twelve hours later, the zerohedge.com story that he lifted these graphs from arrived in my in-box courtesy of West Virginia reader Elliot Simon.  The headline reads "Russia Dumps Treasurys For 14 Consecutive Months; China Slashes Holdings To Lowest In Over A Year"...and if you want to run through it, the link is here.

I have the usual number of stories for you today...and I hope you have time to at least skim most of them.

How much of this price movement has to do with the ongoing dollar rally...or an engineered sell-off...remains to be seen.
Soros Raises Gold Fund Stake as Paulson Joins Tudor in Selloff. World has seen 'peak gold,' John Embry. U.S. Supreme Court Rejects Stay in Spanish Sunken Treasure Case.

¤ Critical Reads

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US Retail Sales Disappointment Weighs on Markets

Weaker than expected U.S. retail sales figures dented market confidence Tuesday after another mass downgrade of the creditworthiness of European countries had little impact.

Figures showing that retail sales in the U.S. rose by 0.4 percent in January, half the anticipated amount. That prompted a reverse in stock markets, which had earlier shown resilience to Moody's decision to downgrade six EU countries and its accompanying warning that top-rated Britain, France and Austria could see their ratings cut too.

Following a downwardly revised flat reading for December, the retail sales figures proved a disappointment in the markets, especially in light of the recent run of strong U.S. economic data, most notably relating to the job market.

Well, dear reader, that 'strong economic data' that's mentioned in the above paragraph is all b.s...and that's why sales are weak.  I'm sure the sales data is even worse than the numbers show.  This AP story showed up posted over at abcnews.go.com on Tuesday.  I stole it from yesterday's King Report...and the link is here.

View full GSD edition

The insiders are selling heavily: Mark Hulbert

Corporate insiders are now selling their companies' stock at a rate not seen since late last July.

That's a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years.

In early August, as you may recall, the U.S. government lost its triple-A credit rating, and the bottom dropped out of the stock market. Between the last week of July and the second week of August, the Dow Jones Industrial Average dropped 2,000 points.

This marketwatch.com story is from last Thursday...and I thank Nitin Agrawal for sending it along in the wee hours of this morning.  The link is here.

View full GSD edition

JPMorgan, HSBC Among Firms Accused by Informant Bank in Canada Libor Case

JPMorgan Chase & Co., Deutsche Bank AG and HSBC Holdings Plc are among at least seven firms accused by another bank of participating in a conspiracy to manipulate the price of derivatives worldwide for more than three years.

The unnamed bank, seeking immunity, told Canada's Competition Bureau that traders and cash brokers conspired to influence the Yen London interbank offered rate from 2007 to 2010 to profit on interest-rate derivative positions linked to the benchmark. The bureau spelled out the probe in documents it filed with the Ontario Superior Court in May.

The documents, shown yesterday to Bloomberg News by court clerks, offer one of the most detailed accounts yet as watchdogs in Europe, Asia and the U.S. look into concerns that firms conspired to manipulate interest rates serving as benchmarks for trillions of dollars of financial products. Canada also is investigating Citigroup Inc., Royal Bank of Scotland Group Plc, ICAP Plc and RP Martin Holdings Ltd., the court documents show.

The rot in the financial system is deeper than anyone knows. There are no markets anymore...only interventions.  I thank Washington state reader S.A. for sending me this Bloomberg story that was posted on their website late on Tuesday evening.  The link is here.

View full GSD edition

Single currency's struggle takes its toll on Europe

The diverse nature of the 17 countries brought together in monetary union has never been so apparent.

As Greece stands on the brink of bankruptcy, Germany, its financially disciplined and powerful eurozone peer looks down with disapproval on a country that for years lived beyond its means.

Greece may be in a bad state but it is not alone, and the eurozone's weakest economies have dragged down the strongest with them. As Howard Archer, economist at IHS Global Insight, puts it, the region "stuck one foot back through the recession door" in the fourth quarter of 2011, after the combined economy shrank by 0.3pc. The other foot is expected to join it in the coming months.

"We doubt that the eurozone will be able to avoid further contraction in the first quarter and very possibly the second as well in the face of tighter credit conditions, a further tightening in fiscal policy in many countries, the ongoing pressures facing consumers, and limited global growth," said Mr. Archer.

This story was filed in The Telegraph late last night London time...and I thank Roy Stephens for sending it along.  The link is here.

View full GSD edition

Germany is 'playing with fire' on Greece, warns finance minister

Greek finance minister Evangelos Venizelos accused European leaders of "playing with fire" by trying to oust the beleaguered country from the eurozone amid fears they want to delay releasing the €130bn (£108bn) bail-out until after Greek elections in April. 

The warning came as credit rating agency Moody's last night put 114 European banks – including nine in the UK – on review for a downgrade, citing the "prolonged" impact of the euro crisis. Royal Bank of Scotland, Barclays, Lloyds Banking Group and HSBC were among those affected.

With less than five weeks to avert bankruptcy and yet
at

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