First stop is China where we have this snippet about inflation and gold in china.
Although it's rarely mentioned in the Western media, the Chinese government is encouraging their citizens to buy physical gold bullion as part of an effort to cool further investment in the red-hot real estate and housing sectors.
"Unlike the property market, investment in the gold sector is something the government is encouraging," ICBC's Zhou told Reuters.
China actually banned its citizens from owning gold from 1950-2003.
ICBC, the world's largest bank by market value, sold about seven tons of physical gold in January this year, nearly half the 15 tons of bullion sold in all of 2010, Zhou said.
ICBC is also coming up with other creative ways for Chinese citizens to invest in the shiny metal.
In an initiative with the WGC, ICBC started offering physical-gold linked savings accounts in December. Over one million such accounts have already been opened, and the bank is now storing over 12 tons of gold on behalf of investors.
"There is frantic demand for non-physical gold investments. We issued 1 billion yuan ($151 million) worth of gold-price-linked term deposits in 2010, but we managed to sell the same amount over just a few days in January this year," Zhou said, adding that investors will deposit more than 5 billion yuan ($759 million) in gold-linked accounts this year.
Last week, the bank launched its second physical gold investment product, which sells gold bars to investors. They can then be resold for cash through ICBC based on real-time gold prices.
Zhou said that the huge increase in Chinese demand would continue in 2011 due to a "choppy stock market" and concerns about how rising interest rates will affect property markets.
Fitz-Gerald says insatiable Chinese demand can do nothing but continue to drive gold prices higher.
"For global gold buyers [this will have] a huge impact because Chinese buying programs are going to drive prices a lot higher before this is done...especially if the dollar gets worse," he said.
Fitz-Gerald believes gold prices will hit $2,500 in the near future.
Now for a quick 'take' from the United States on inflation and gold prices:
The stakes have seldom been higher. With the unemployment rate still above 9%, and federal debt at record levels, this latest error by the monetary authorities is likely to be the most costly since the Great Inflation of the 1970s. Monetary instability will slow employment growth and further erode confidence in government at the same time that higher interest rates will add billions of dollars to the interest cost on the national debt. Yet, failure to act in a timely basis will lead to an even greater crisis.
When it arrives, the Federal Reserve and its defenders will call it “cost-push” inflation and blame it on economic growth, the weather, Arab sheiks, China, and perhaps greedy companies and labor unions.
The actual cause of the looming crisis is the same as the cause of the Great Inflation of the 1970’s: a too easy monetary policy that has devalued the dollar by 40% against gold during the past two years.
I choose gold as the reference point for the dollar’s value because it has the remarkable characteristic of maintaining its buying power in terms of other goods and services over long periods of time. As a consequence, the dollar price of gold is the best, though imprecise, real-time measure of the price level. Other, more traditional measures, such as the consumer price index (CPI) are merely lagging indicators of inflation or deflation that has occurred already.
I also choose gold because I remember what happened after President Richard Nixon in August 1971 severed the link between the dollar and gold. At the time, those who warned that the rising price of gold was signaling higher inflation ahead were widely dismissed as “gold bugs.” The conventional wisdom then, as now, is that economic slack would protect the U.S. economy from inflation regardless of what happened to the value of the dollar in terms of gold.
But it didn’t work out that way.
Out of Africa we have this snippet:
The JSE shaved off in excess of 360 points at its close on Tuesday amid profit taking, while political unrest in north Africa continues to plague the oil price.
In Asia, markets also suffered sharp losses, hurt by a major earthquake in New Zealand and a move by Moody's Investor Service to cut the outlook on Japan's Aa2 rating to negative from stable.
On the JSE, Anglo American (AGL) gave up 2.55 rand to 371 rand, and BHP Billiton (BIL) lost 60 cents to 278.60 rand. Sasol (SOL) declined 2.33 rand to 372.50 rand.
Among gold miners, Anglogold Ashanti (ANG) lost 5.19 rand or 1.48 percent to 346.55 rand, Gold Fields (GFI) was down 2.40 rand or 1.87 percent at 126 rand and Harmony (HAR) shipped 1.50 rand or 1.78 percent to 82.99 rand. Junior gold miner Simmers & Jack Mines (SIM) on Tuesday reported a 34 percent rise in gold production from its Tau Lekoa and Buffelsfontein Gold Mine to 49,170 ounces for the quarter ended December 2010 from 36,608oz in the September quarter.
Gold revenue increased from 327 million rand for the quarter ended September 2010 to 463 million rand, with nearly half of the increase due to increased volumes, while 17.9 million rand was due to a 5 percent increase in the rand gold price per kilogram. Simmers moved up a cent at 93 cents.
Hang on its going to be white knuckle bumpy ride from here on in. Hold onto to your core position unless you are a terrific market timer and increase your physical holdings as and when you can.
Over in the options pit another profitable trade was closed on Friday so we now have 65 winners out of 67 options trades, or a 97.00% success rate If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.
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Stay on your toes and have a good one.
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