US 'will return to gold standard', says Euro Pacific Capital chief Peter Schiff

A major US investor has predicted the world's leading economy will return to the gold standard, giving further weight to Republican moves to set up a commission to look at the issue. 

Peter Schiff, chief executive of Euro Pacific Capital, has argued that the US is heading for a currency crisis, and an immediate move to peg the dollar to gold is needed as the economy is caught in a "phony recovery".

"Eventually we will be back on a gold standard, not because politicians want it, but because the public demands it and the situation requires it," he told King World News.

"We are headed for a currency crisis, and the only way we’re going to stop it is by putting real value back into the paper dollar. So we have to tie it to gold.

"The sooner we do it the better because the sooner we start to repair the problems the easier it is. The longer we wait, the bigger the problems get. But I think it’s happening soon [a return to the gold standard]."

The economy is so bad, Mr Schiff argues, that despite Ben Bernanke's speech today in which he is expected to dampen hopes of further monetary policy stimulus, the Federal Reserve chairman will soon be forced into another round of quantitative easing.

“QE3 is coming. You know we’ve got a phony recovery, so it’s going to fail. So we are going to get more QE. It’s not that we need it, but if we don’t have QE3, then we are back in recession," said Mr Schiff, who ran as a candidate in the Republican primary for the US Senate seat in Connecticut in 2010.
"We have a lot of problems, and if we cure them it’s going to mean a short-term recession as we repair the damage. Until the Fed lets us have a real recession, as painful as that may be, we are never going to have a recovery."
Added to North America's economic woes, a "fiscal cliff" is looming. A number of tax increases and spending cuts are due at the end of the year that are expected to weigh heavily on growth and possibly drive the economy back into a recession.
Mr Schiff believes this will push the US into currency and debt crises, paving the way for a return to the gold standard.
"They want to keep growing the government, growing the deficits. That eventually means we will have a currency crisis, and a sovereign debt crisis, which will lay the foundation for a return to the gold standard."
The gold standard has returned to mainstream US politics for the first time in 30 years with a “gold commission” becoming part of official Republican party policy. This commission will look at whether a return to the gold standard is feasible.
Marsha Blackburn, a Republican congresswoman from Tennessee and co-chair of the committee, recently told the Financial Times: “These were adopted because they are things that Republicans agree on. The House recently passed a bill on this, and this is something that we think needs to be done.”
The proposal evokes memories of the Gold Commission created by Ronald Reagan in 1981, 10 years after Richard Nixon broke the link between gold and the dollar during the 1971 oil crisis. That commission supported the status quo.
Some argue a return to the gold standard would foster economic stability and prosperity, primarily by creating price stability, fixed exchange rates and placing limits government deficit spending as well as trade imbalances.
However, opponents believe it would limit the flexibility of governments and central banks in managing economies, restricting the ability to adjust money supply, government budgets and exchange rates.
Gold rose 0.3pc to $1,660.95 an ounce on Friday.

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/9511886/US-will-return-to-gold-standard-says-Euro-Pacific-Capital-chief-Peter-Schiff.html

Gold margins getting tight, says Gold Fields chief

The wave of rationalisation that is starting to emerge among the major diversified miners will soon spread to the gold sector, as soaring costs and labour shortages begin to squeeze margins.

That warning from Nick Holland, the head of South African miner Gold Fields Limited, came this afternoon as the world's fourth biggest gold company addressed the Melbourne Mining Club.

Mr Holland criticised fellow gold producers for failing to include corporate and capital costs when publicising their profit margins, saying they were only fooling themselves and governments, who would duly seek to tap the industry for more taxes.

Mr Holland said rising energy, labour and production costs would virtually double costs in the next five years, and a gold price of close to $US2000 per ounce would be needed to keep pace.

If costs remain close to $US1600 where they have been in recent weeks, much of the industry would be "killed", he said, and many companies would have to pull back on projects.
"It may be that we have are going to have to see the sector rationalise before people believe us," he said.
Mr Holland said gold companies would have to start favouring dividends and returns to shareholders over marginal production if it is to win back investors, who have fled to gold-focused exchange traded funds in recent years.
Gold Fields is based in Johannesburg but operates the St Ives mine in Western Australia, and Mr Holland said he was looking for another mine in Australia.
Mr Holland said margins at St Ives were "tight" and the company would have to work hard to sustain that mine.

The triumph of politics

On August 15, 1971, President Richard Nixon declared that the United States would no longer honour its promise to exchange US dollars held by foreign central banks for gold at a fixed price of $35 an ounce. The innocuous term ‘Nixon closed the gold window’ that is now widely used to describe this act does not quite convey its significance. (Was something to be stopped from going out or from coming in through the window? Can the window be reopened again?)

What Nixon did was cut the last remaining official link between the world’s leading reserve currency and gold and thus remove the last constraint on fiat money creation.

Was this a big deal? – It was very big deal. In fact, we are only now beginning to realize the full consequences of it. In fact, the present crisis is nothing but the endgame of this system, or non-system, of this, mankind’s latest and so far most ambitious, experiment with unrestricted fiat money. The first truly global paper standard.

Nixon knew that it was big. On TV that day he felt compelled to reassure the American public that this was only temporary and that the purchasing power of the dollar was secure. Forty-one years later we are still on the same system (or non-system), and the dollar has lost eighty percent of its purchasing power.

But, the mainstream economists, who weren’t even involved in designing this system (or non-system), as nobody designed it, it was simply the result of political opportunism — these economists today tell us that this system is great, it is to our advantage. We should be grateful for it.

Because the eighty percent drop in purchasing power quoted above, isn’t the whole story, that is only CPI, the consumer price index. For the past thirty years, a lot of the newly created money was channeled predominantly not into the markets for consumer goods but into the stock market, the bond market, the real estate market, and again the bond market. This created illusions of wealth. It also created a lot of debt, overstretched banks, a gigantic financial industry, various bubbles, and yet more debt. It did so around the world. And whenever this house of cards looks like it could come crashing down on us – we print more money!

Simple. What can go wrong?

Of course, there was also real economic progress over those forty-one years. Entrepreneurship, trade, innovation, saving, and all that old fashioned stuff that modern, enlightened economists don’t talk about any more. But on top of that real prosperity an ever thicker layer of make-believe prosperity accumulated. And our economists have adapted to this new reality – a reality created not by them, or their theories, but simply borne out of cynical political expediency – and become experts in the various techniques of governments to create illusionary prosperity and short-term growth spurts. Stimulus. Growth through low interest rates. Growth through more debt. Growth through currency debasement. Growth through fiscal policy. Growth through monetary policy.

Modern economists don’t know capitalism. They certainly don’t care about it. If the economy grows it is because of good policy, which means low interest rates and stimulus. If the economy doesn’t grow, it is because of bad policy, which means interest rates are too high (even if they are zero) or the central bank does not print enough money. Since Nixon ‘closed the gold window’, we have progressively replaced savings with cheap credit, the market with policy, and entrepreneurs and innovation with the FOMC and the G20.

Since 1971, the number and intensity of banking crises around the world has gone up markedly, according to Carmen Reinhart and Kenneth Rogoff, hardly anti-establishment economists. Debt levels exploded. The ten years up to the start of this crisis in July 2007 have seen house prices in the US rise ten times faster than over the previous one hundred years.

Look around the world today. Is it a coincidence that all major central banks are at zero interest rates to support bankrupt banks and bankrupt governments the world over?

Bizarrely, it is today the advocates of sound and hard money who are made to explain their atavistic ideas. — Gold standard? To establishment figures like Lord Skidelsky, the advocates of a gold anchor are like druids who dress in strange clothes and worship ancient gods – rather than, as befits the enlightened modern economist, worship at the altar of Keynes, the IMF, and big government. And ex-central banker DeAnne Julius simply knows that it would be foolish to return to a gold standard. All power to the bureaucracy!

What I find fascinating is how many intelligent people are willing, even feel urged, to provide intellectual support for a system that is not the result of intellectual discourse but came about – rather non-intellectually – through sheer power politics, opportunism and hubris, and that is evidently failing. Our financial system (or non-system) offers a great example of Nietzsche’s dictum that investigating the true origin and the true motivation behind things most often leads to surprising results. The purpose and the clever design that most people later believe to be behind various institutions are often only projected onto them with hindsight.

Even more bizarre is the willingness to absolve the political class of their responsibility for the disaster they have inflicted on us, and to even look to the political class to now save us from this ever-growing mess. There is something disturbing and sickening about the pathetic reverence of commentators, analysts and economists for the policy bureaucracy, the central bankers, the G20, the finance ministers; how every word they say is scrutinized for any hint of another clever scheme, another policy initiative that could make all our past mistakes go away and that could make the status quo operable again. “The weak labour market could force the Fed into action,” as if the Fed had the key to the solution in some drawer, as if all that was needed now was another round of QE, another rate cut, another twisty price manipulation.

I wonder if forty years of paper money have made the politicians bolder and the economists dumber. But maybe at this stage they are both simply getting more desperate.

And nothing is more dangerous to your personal and material wellbeing, and your liberty, than desperate politicians. Desperate politicians think that the end justifies the means. No constraints on their ad hoc decision-making can be tolerated. Laws must be changed if they stand in the way.

On October 27, 2010, Chancellor Angela Merkel promised the German parliament that the bailout fund EFSF (European Financial Stability Facility – you couldn’t make this stuff up!) was a temporary thing. As temporary as Nixon’s closed window, one assumes. In February of 2010, Greece had already been bailed out the first time – in contravention of the no-bailout clause in European treaties. Now a bailout fund was needed. But not to worry. This is only temporary. And we know what we are doing.

Of course, as more bailouts were needed, the EFSF grew bigger. It will now be replaced with the ESM – the European Stability Mechanism, no sniggering please. And this thing is, of course, permanent. (The German Constitutional Court will rubber-stamp it soon. Not to worry.)

What do our commentators and mainstream economists have to say about it? – Great! We need a big bazooka! Merkel should do more!

EVERY law, regulation and restriction that was part of the original set-up of EMU has now been broken.

The limits on budget deficits and overall public debt limits (Maastricht Criteria)? –Ignored.

The no-bail out provision? – Ignored.

The ban on ECB buying sovereign bonds to support fiscal policy? – Circumvented with the flimsiest of excuses.

Let’s face it. There is no master plan here. The political class is losing control. There is not even a conspiracy. There is a lack of control, of direction and of design. One quick-fix after another, and every one brings us a step closer to a very nasty endgame.

For the final option is always the same, not only in the Euro Zone, where new ‘hope’ just arrived in the form of Mario Draghi’s apparent willingness to buy more government debt, but also in the US, the UK, Japan, and China: print more money.

If you have no (or little) debt, if you are a productive citizen and if you have saved a bit, you are already in the crosshairs of the policy bureaucracy. Either your property will get taxed away or inflated away. Probably both.

The biggest threat to your property and to your individual liberty does not come from markets and not even from the bankers. It comes from politics.

http://papermoneycollapse.com/2012/07/the-triumph-of-politics/

Hong Kong’s Largest Bullion Vault Signals Rising Asia Wealth

 

Hong Kong’s largest gold-storage facility, which can hold about 22 percent of the bullion now in Fort Knox, will open in September to meet rising demand from banks and the wealthy, according to owner Malca-Amit Global Ltd. (3271)

 The facility, located on the ground floor of a building within the international airport compound, has capacity for 1,000 metric tons, said Joshua Rotbart, general manager for the Hong Kong-based company’s Malca-Amit Precious Metals unit. Two of the vaults may hold assets, including gold, for banks and financial institutions, and others will be used for diamonds, jewelry, fine art and precious metals, said Rotbart.

The move in Hong Kong reflects increased demand for gold in Asia even as the commodity struggles to sustain its rally into a 12th year. Gold-demand growth in China, the world’s second- largest user after India last year, is slowing, according to the World Gold Council. Vault charges will depend on each customer’s operations, according to Rotbart, who declined to give a figure for the venture’s cost beyond millions of dollars.

“Hong Kong is a very important center for gold, especially because it acts as a doorway to China,” said Sunil Kashyap, head of Asia-Pacific foreign exchange and precious metals at Scotiabank. “Current international hubs are in New York, Zurich and London. There’s still a need to set up an Asian hub for physical gold. The trend is for more people to look at storage and trading in Asia, when it comes to physical metal.”

11-Year Rally

Immediate-delivery gold rallied from 2001 to 2011 as investors sought protection from weaker currencies and the risk of inflation, and central banks boosted holdings. The metal traded at $1,618.75 an ounce at 7:42 p.m. in Hong Kong today, 3.5 percent higher this year. It rose 10 percent in 2011. Gold held in exchange-traded funds reached a record 2,413.61 tons on July 5, according to data tracked by Bloomberg.

The U.S. Bullion Depository Fort Knox in Kentucky, held as an asset of the nation at book value of $42.22 an ounce, holds 147.3 million ounces (4,582 tons) at present, according to data on the U.S. Mint website. In total, U.S. holdings of gold amount to 8,133.5 tons, according to World Gold Council data.

“The general trend is for moving the assets from the West to the East,” said Rotbart, who also oversees business development and marketing of the company’s vault in the Singapore FreePort. “Proximity to China is very important.”

China’s gross domestic product expanded 7.6 percent in the second quarter, the least in three years, a report showed on July 13. Gold demand in the country may increase 13 percent to 870 tons this year, according to a revised forecast this month from the WGC, which abandoned a target for usage to gain as much as 30 percent to 1,000 tons. Last year, demand in the world’s second-largest economy grew 20 percent to 769.8 tons.

Increasing Wealth

Asia-Pacific millionaires outnumbered those in North America for the first time last year, according to Capgemini SA and Royal Bank of Canada’s wealth-management unit. The number of individuals in the region with at least $1 million in investable assets rose 1.6 percent to 3.37 million, helped by increases in China and Indonesia, according to the firms’ World Wealth Report, released last month. So-called high-net-worth individuals in North America dropped 1.1 percent to 3.35 million.

The new storage facility will compete with services offered by the Airport Authority Hong Kong, which began storage operations at a 340 square meter site in 2009 for government institutions, commodity exchanges, bullion banks, refiners, wealthy individuals and exchange-traded funds. Capacity is reviewed on a regular basis to ensure there is adequate storage over the medium term, the authority said in a statement.

Singapore’s Push

Singapore is also among economies in Asia vying for a greater share of the bullion trade. In February, the government announced a plan to exempt investment-grade gold, silver and platinum from a goods and services tax, starting from October. The aim is to raise the city-state’s share of the global gold trade to as much as 15 percent in five to 10 years from about 2 percent, according to IE Singapore, the external trade agency.

Malca-Amit plans another storage facility in Shanghai as the firm targets 10 or more sites around the world over the next two to three years, from six at present, said Rotbart. The logistics company, founded in Tel Aviv in 1963 and handling more than 50 percent of the world’s diamond transportation, started its precious-metals storage business after the 2008 global financial crisis reduced demand for gemstones, he said. 

http://www.bloomberg.com/news/2012-07-25/hong-kong-s-largest-bullion-vault-signals-region-s-rising-wealth.html

The world gold production 2012

The world gold production 2012

http://www.dani2989.com/gold/goldprod2012gb.html

"Oil And Gold Seasonals Suggest BTFD"

Brent Crude's two major bullish seasonals...

and Gold's three periods of bullish seasonality...

Quote & images : Zerohedge

Gold margins getting tight, says Gold Fields chief

The wave of rationalisation that is starting to emerge among the major diversified miners will soon spread to the gold sector, as soaring costs and labour shortages begin to squeeze margins.
That warning from Nick Holland, the head of South African miner Gold Fields Limited, came this afternoon as the world's fourth biggest gold company addressed the Melbourne Mining Club.
Mr Holland criticised fellow gold producers for failing to include corporate and capital costs when publicising their profit margins, saying they were only fooling themselves and governments, who would duly seek to tap the industry for more taxes.
Mr Holland said rising energy, labour and production costs would virtually double costs in the next five years, and a gold price of close to $US2000 per ounce would be needed to keep pace

If costs remain close to $US1600 where they have been in recent weeks, much of the industry would be "killed", he said, and many companies would have to pull back on projects.
"It may be that we have are going to have to see the sector rationalise before people believe us," he said.
Mr Holland said gold companies would have to start favouring dividends and returns to shareholders over marginal production if it is to win back investors, who have fled to gold-focused exchange traded funds in recent years.
Gold Fields is based in Johannesburg but operates the St Ives mine in Western Australia, and Mr Holland said he was looking for another mine in Australia.
Mr Holland said margins at St Ives were "tight" and the company would have to work hard to sustain that mine.

http://www.smh.com.au/business/mining-and-resources/gold-margins-getting-tight-says-gold-fields-chief-20120731-23cal.html

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