Thursday, March 18, 2010

Gold rises modestly as Fed, BOJ keep easy-money policies

"World markets have been boosted by the Federal Reserve and Bank of Japan's soothing words and policies continuing [...] cheap money policies," said Mark O'Byrne, analyst at GoldCore in emailed comments.

Gold for April delivery ended up $1.70, or 0.2%, at $1,124.20 an ounce at the New York Mercantile Exchange.

The SPRD Gold Trust (NYSE:GLD) , the largest exchange-traded fund backed by gold, however, fell 0.7%.

Holdings in the trust remained for the fourth session at 1,115.51 metric tons.

The precious metal rose even as the dollar posted slight gains earlier on before eventually slipping into negative territory. The dollar index (INDEX:DXY) , which measures the U.S. unit against a basket of six major currencies, recently traded around the flat line. (more)

McAlvany Weekly Commentary, March 17, 2010

Why we do what we do: The weekly Commentary 2 years later.

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China in Midst of ‘Greatest Bubble in History,’ Rickards Says

China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP.

The Chinese central bank’s balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.

“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.” (more)

Goldman's Worries

Goldman Sachs (GS: 176.78, 1.51, 0.86%) CEO Lloyd Blankfein has told people that he and his firm are so hated that he has gotten as much as 75 to 100 pieces of hate mail in a single day. But being the most despised firm in the financial industry may not be the firm’s biggest problem. Instead, what is keeping Blankfein and his senior management team up at night is the future of Goldman given all the new regulations that are likely to come out of Washington in the coming months.

Goldman, of course, isn’t alone. As Congress creates new rules designed to limit risk taking, and preventing banks from becoming too big to fail, every major firm is facing an uncertain future. Will they be forced to scale down as regulators are prodding Citigroup (C: 4.05, 0.03, 0.75%) and Bank of America (BAC: 17.269, 0.237, 1.39%) to do? And how much capital will they have to keep on hand if they engage in risky trading activities? (more)

National Debt Up $2 Trillion on Obama's Watch

The latest posting from the Treasury Department shows the National Debt has increased over $2 trillion since President Obama took office.

The debt now stands at $12.6 trillion. On the day Mr. Obama took office it was $10.6 trillion.

President George W. Bush still holds the record for the most debt run up on his watch: $4.9 trillion. But it took him over four years to rack up the first two trillion dollars in debt. It has taken Mr. Obama 421 days.

But the Obama Administration routinely blames the Bush Administration for inheriting a budget surplus and turning it into years of record-breaking deficits and debt -- and then leaving it on the doorstep of the new president. (more)

Chart of the Day