Month: February 2013

By Bill Bonner, billbonnersdiary.com

Stocks up another 53 points on the Dow yesterday. Gold down another $5.

The Dow is above its 14,000 peak; gold is below $1,600/oz.

I’ll come back to this in a minute. First…

Even a seasoned traveler can make remarkably dumb mistakes. That’s
why we are writing to you from Baltimore rather than from Beijing. For
the second time in a single week, we got to Dulles International Airport
yesterday and discovered that we lacked the proper visa for travel to
China. We had forgotten that you need a visa at all.

You don’t always go where you intend to go, but you always end up where you ought to be. Why ought we be in Baltimore? We don’t know. But here we are.

Getting Out of Gold

Even seasoned investors make mistakes too. And now they seem to be
selling gold. Yes, dear reader, our favorite metal is taking a beating.
Gold has dropped below $1,600/oz to trade at $1,594/oz at writing. The
best investors are said to be abandoning their yellow metal for more
“productive” positions. From Bloomberg:

Billionaire investors George Soros and
Louis Moore Bacon cut their stakes in exchange-traded products backed by
gold last quarter as futures dropped the most in more than eight years.
John Paulson maintained his holding.

The fourth-quarter decisions by Soros
and Bacon may bolster speculation that gold’s 12-year bull run is coming
to an end as economic data from the U.S. to China show signs of
recovery, curbing haven demand.

Soros Fund Management LLC reduced its
investment in the SPDR Gold Trust, the biggest fund backed by the metal,
by 55% to 600,000 shares as of Dec. 31 from three months earlier, a
U.S. Securities and Exchange Commission filing showed yesterday. Bacon’s
Moore Capital Management LP sold its entire stake in the SPDR fund and
lowered holdings in the Sprott Physical Gold Trust. Paulson & Co.,
the largest investor in SPDR, kept its stake at 21.8 million shares.

And under the headline “Gold Sinks Through $1,600 on Recovery Hopes,” the Financial Times adds:

Gold prices tumbled… for the first time in six months as investors turned to other assets amid hopes of an economic recovery.

Recovery? The U.S., eurozone and Japanese economies are all
(according to the most recent quarterly results) shrinking, not growing.
What kind of a recovery is this?

Nevertheless, mainstream opinion believes this is no time to cower in
the safety of cash… or gold. Take chances. Buy stocks! Look at
Buffett. He’s teamed up with a Brazilian tycoon; they’re paying $28
billion for a ketchup company.

Dumb and Lifeless

Well, what do you think? Are they right?

Why would you ever want to hold gold, anyway? It is dumb and
lifeless. It issues no upbeat press releases. It never “beats analysts’
estimates.” It doesn’t come out with a slick new handheld device… or
announce a major acquisition.

None of the good news you hope to get from an investment ever comes
from gold. No matter how much you own, it doesn’t seem to care about
you; it makes no effort whatever to increase shareholder value.

Instead, it just sits there… like an old umbrella next to the front
door, only useful when it rains. War? Gold goes up. Market crash? Gold
goes up. Inflation? Gold goes up.

End of the world? Who knows, maybe gold would go up too.

So, you decide. What’s ahead? Good news? Or bad news? Will the 100
leading economists be right… or wrong? Fair weather… or foul?

It’s impossible to say. So, we hedge our bets. We own some real
investments – stocks, bonds, real estate – and hope the 100 leading
economists know what they are talking about.

And we hold on to our gold too… in case they turn out to be the numbskulls they usually are.

Regards,

Bill

Huge Gains on “Poor Man’s Gold”

Silver has all the benefits of gold and trades at a small fraction of
the price… some even call it “poor man’s gold.” But the extremely low
price of silver is due to a “price glitch” that’s about to be
corrected. If you get in now, you could be looking at gains as high as
521%. And I’d like to share three ways to play the silver boom for big
profits today.

You must see this now or risk losing out…

Other Related Articles:

• Do You Deserve to Lose Money
• Did These Hidden Forces Elect the President?
• How to Make a Safe 16.5% on Your Money Without Touching Stocks

AUDUSD failed to break above 1.0373 resistance, and is now facing 1.0226 support, a breakdown below this level will signal resumption of the downtrend from 1.0597, then further decline to 1.0150 area could be expected. On the other side, as long as 1.0226 support holds, one more rise to re-test 1.0373 resistance is still possible, a break above this level will indicate that the downtrend from 1.0597 has completed at 1.0226 already, then the following upward movement could bring price back to 1.0700 zone.

Daily Forex Forecast

By MoneyMorning.com.au

Don’t worry, we’re not about to reveal something salacious.

But as you know, we’re always looking for signals to warn you that the stock market is about to change direction.

Yesterday on our Google+ page we noted that Geoff Wilson from Wilson Asset Management has slapped a 6,000 point target on the S&P/ASX 200.

That’s 17.7% above yesterday’s closing price.

Big calls like that always put us on edge.

But that isn’t the only sign that has us questioning our bullish outlook. The first was something your editor’s wife said to us as she balanced the books for our weekly budget…

For some months the share trading account of our self-managed super fund has appeared on the same login as our everyday bank account.

It means we can see the account balance without having to log in to the trading account.

But for most of that time the missus didn’t mention a thing…perhaps she hadn’t noticed. Then about three weeks ago she noticed…and every week since she’s noticed the value rising and gotten more excited.

Now, you have to understand something, she doesn’t pay much attention to financial markets. She’s just really not that interested in it.

And that’s fine by us. We like having some downtime at home where we don’t have to think about central bankers, PE ratios or dividend growth rates.

So when the missus asks if we should buy more shares, well, we almost fell off our chair. But that was just the first warning sign. The second? That’s where Warren Buffett enters the frame…

Since When is Paying a Record High Price Value Investing?

You may have seen the recent news about multi-billionaire investor Warren Buffett. His Berkshire Hathaway [NYSE: BRK-A] investment company has teamed up with a private equity firm to pay USD$28 billion for the HJ Heinz Company [NYSE: HNZ].

Warren Buffett is a ‘value investor‘. That simply means he believes the market has undervalued a company’s current and future earnings potential and seeks to buy the stock at what he sees as a discount to the real value. (Our colleague Greg Canavan is also a value investor.)

To be honest, we haven’t crunched the numbers on Heinz. But we raised our eyebrows when Buffett agreed to pay USD$72 per share for a company that had closed the previous day at USD$60.48.

And which was already at an all-time high…higher than both the 1998 and 2008 peak:

Click here to enlarge

Now, buying above a record high price doesn’t mean it’s a bad deal. But it does mean that Mr Buffett thinks he can see some value in the stock that millions of other investors have missed.

Or it means that Mr Buffett has overpaid for the stock. And he wouldn’t be alone. The fact is you tend to see an increase in takeovers when the stock market is high. Why?

Because high market prices tend to coincide with the end of economic growth. So, when companies see growth slowing organically (i.e. they can’t increase sales to existing customers) they have to ‘buy’ sales from other companies.

But when a business buys another business at the top of a market cycle, it runs a big risk of overpaying. That’s the fate that could face Berkshire Hathaway and Warren Buffett. Buffett is paying double the price that Heinz traded at during the slump in 2009.

So isn’t it reasonable to say that the market has already priced in a fair amount of future growth? And isn’t it reasonable to say that after the entire US market has doubled since 2009 that Buffett feels pressure to get some of Berkshire Hathaway’s USD$47 billion cash stash working?

As we say, we don’t know for certain. But it’s a big reason to put you on high alert. And if those two signals weren’t enough, another one appeared on cue last night…

Gearing Up Before a Crash?

We saw the following note in the Eureka Report‘s free eletter:

‘Gearing up: It’s all in the timing – The stronger stockmarket raises the question of whether investors should reconsider gearing…here’s what you need to know.’

Margin lending now? Hmmm.

All this isn’t to say the market can’t go higher. As we’ve noted over the past few months, we still see a lot of value in the market…especially among beaten-down small-cap stocks.

But even so, the Australian stock market has torn through 5,000 points and now many folks (including your editor) are banking on prices going even higher.

It’s at times like this when you should pay attention to the warning signs and make the appropriate adjustments to your investments.

That doesn’t mean selling everything, it simply means arranging your portfolio to protect you from big falls while still allowing you to benefit if the market keeps going up.

Cheers,
Kris
Join me on Google Plus

From the Port Phillip Publishing Library

Special Report: The Gold Mirror of Kaieteur Falls

Daily Reckoning: Shock Monetary Therapy: Should You Cut Back Your Exposure to Gold?

Money Morning: The Poster-Child for the US Shale Gas Revolution

Pursuit of Happiness: My Goals Now I’m 64

Australian Small-Cap Investigator: Why Invest in Small-Cap Stocks? And Why Now?

By MoneyMorning.com.au

As the FTSE pushes to five-year highs, gold has just had another torrid week. It is currently sitting just above $1,600, a level last seen in mid-2011 and some way off its peak.

So, the key question for investors is this: is it time to declare it ‘game over’ and bail out of the precious metal?

My analysis suggests we could reach a key decision point for the gold price before the end of March. Here’s why.

The Gold Price is Stuck in a Rut

I want to start with a chart that I posted a few weeks back. It shows the action in gold over the last two years. You can see that since the blow-off of August-September 2011, gold has been stuck in a range. $1,800 – the red band – marks the top of the range (resistance). $1,520 – the amber band – marks the bottom (support).

Since October 2012, gold has been moving steadily lower in a rather orderly fashion. This move is defined by the two blue tramlines. While some kind of short-term bounce looks likely, as we are sitting on the lower boundary of this channel, it looks as though we are now heading back down to test that amber area of support.

If that area of support does not hold – if, to put a round number on it, $1,500 is broken – then my theory that gold is forming a base before another one of its big moves higher is invalidated. It might even be time to move on from gold. Yes, that’s what I just wrote.

Is the Great Gold Bull Market Over?

It wouldn’t be the most poetic way for a bull market to end. I’d always envisaged some kind of triumphant spike up, perhaps even some official recognition of gold as a monetary asset, but hey, I’m not in charge.

But hold your horses. Don’t despair. We haven’t even got to that $1,520 area yet, let alone gone through it. There’s no guarantee we will even get there. Though it’s never too early to be considering what your exit strategy might be, it’s too early to be declaring game over. There are a few things we can be very positive about.

Sentiment Supports Gold

Take sentiment. Being subjective, sentiment is notoriously difficult to measure. Some might see my own current hesitation about gold – given that I’m normally so bullish – as a positive contrarian indicator in itself. But just about every reading is at lows only normally seen at, or close to, market bottoms.

Mark Hulbert of Marketwatch notes that Hulbert Gold Newsletter Sentiment Index (HGNSI), which ‘reflects the average recommended gold-market exposure of a subset of short-term gold timers’ has been -3.3% over the last four months. ‘You have to go back as far as 1991 to find another four-month period in which the average HGNSI reading was this negative,’ he says. In 1991, gold was $360 an ounce.

Bloomberg sentiment readings are almost as extreme. Its measure of positive sentiment – CMSEGSBL – stands at 32%. It has reached these levels before, but usually only at market lows – once in 2004, twice in 2008, 2009, 2010 and 2011.

Bloomberg’s measure of negative sentiment – CMSEGCBR – stands at 59%. It has only been this high three times 7– once in 2009, once in 2010 and once in 2011.

Baron Rothschild once said, ‘Buy when there’s blood in the streets.’ Sentiment is one way of measuring blood.

The relative strength index (RSI) is another. By measuring the velocity and magnitude of recent price movements, it attempts to show if a market is over-bought or over-sold. Gold’s RSI has only been this low three times in the last fourteen years. Last year, at the depths of the 2008 crash and at the historical low of 1999, better known as ‘Brown’s bottom’.

These kind of extreme measures suggest gold is a market that perhaps getting ready to turn back up. These are feelings associated with bottoms rather than tops. However, for now, the trend is down – and trends are powerful things.

Is the Equity Market Flashing Buy or Sell?

It’s widely believed that gold and the equity markets trade in opposite directions. As one moves up, the other falls. You buy gold if you think equities are going to fall and vice versa. This is mistaken.

This chart shows gold and the S&P500 since 1981. Gold is in black, the S&P500 in red. I have marked with blue squares the periods when the two moved in different directions – in opposition. These periods were late-1984; 1988 to early 1993; 1996 to 1999; and 2001 to early 2003. With the exception of these periods gold and equities have moved in the same direction. Usually one has outperformed the other, but the direction has been the same.

Since 2003, gold and the SP500 have moved in the same direction. They have risen and fallen together with the fluctuations of the global financial markets.

Until last November that is. Over the last three months they have decoupled.

In summer 2011, they decoupled briefly – as is shown by the blue box in the chart below. Gold soared as equities tanked amidst panic over Europe. But they soon got back in tandem.

Since November however, gold and equities have decoupled. As stock markets have soared, gold has sold off.

I’m not yet sure what I draw from this. In the short term, of course, it indicates people are selling gold and buying equities. But what are the long-term implications? If equities carry on rising, will gold get back in tandem? If stock markets sell off, will gold sell off by even more? Or will it stay in opposition? Will the money that leaves equities as those markets sell off make its way into gold?

It remains to be seen how this will play out – but it is a development that warrants attention.

We all know the fundamentals for gold – even if the market is not currently delivering on them. They haven’t changed. Governments are debasing their money and gold ‘should’ be the go-to asset in such an environment. (By the way, this is something that the virtual currency Bitcoin is proving to be. This alternative money is rising quickly in value – up some 500% in the past year as far as I can make out.)

For now, gold remains in its multi-year consolidation pattern. But it looks like a defining re-test of that key area of support may be just around the corner. I will of course be updating you with my thoughts as this dramatic re-test unfolds. In the meantime hold onto your gold but also your hats – the next phase of the ride promises to be interesting.

Dominic Frisby
Contributing Writer, Money Morning

Ed note: This article first appeared in Money Week.

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From the Archives…

Four Things to Look Out for When Buying Gold Stocks
15-02-2013 – Kris Sayce

Here’s One Way to Eke More Gains from this Rising Stock Market
14-02-2013 – Kris Sayce

When Will the Inflationary Stock Boost End?
13-02-2013 – Murray Dawes

Gold Stocks: Back Up the Truck
12-02-2013 – Dr. Alex Cowie

The Next Surge in the Gold Price Looms: It’s Time to Buy Gold Now
11-02-2013 – Dr. Alex Cowie

Is hyperinflation coming to the U.S., Britain or Japan?

Hyperinflation in the eurozone would be a better bet.

So says James Montier, of investment management firm GMO, in a new
white paper titled “Hyperinflations, Hysteria and False Memories.”

Montier picked up an interest in hyperinflation as a child as a
result of his father’s smoking habit. At the time, exotic bank notes
were packaged with cigarettes. Montier senior passed a collection of
these on to his son… including a 1 million mark note from the Weimar
Republic.

Montier examines hyperinflation episodes in:

• German Weimar Republic (1922-23)
• Hungary (1945-46)
• China (1937-49)
• Bolivia (1984-85)
• Brazil (1987-94)
• Federal Republic of Yugoslavia (1992-94)
• Georgia (the country, not the state — 1992-94)
• Zimbabwe (2007-09)

And after going through this laundry list of hyperinflation episodes and causes, Montier concludes:

To say that the printing of money by central banks to finance
government deficits creates hyperinflations is far too simplistic
(bordering on the simple-minded). Hyperinflation is not purely a
monetary phenomenon. To claim that is to miss the root causes that
underlie these extraordinary periods.

It takes something much worse than simply printing money. To
create the situations that give rise to hyperinflations, history teaches
us that a massive supply shock, often coupled with external debts
denominated in a foreign currency, is required, and that social unrest
and distributive conflict help to transmit the shock more broadly.

Money printing alone does not light the hyperinflation fuse. Something major has to go haywire — courtesy of an outlier such as war, supply shock or crushing external debt load.

This is why Montier concludes the eurozone is actually a larger hyperinflation risk than the U.S., Britain or Japan.

This is because, although these three countries are racking up huge
debts relative to their output, all three also borrow in their own currency and have relatively stable politico-economic regimes.

The eurozone, on the other hand, is made up of multiple countries
with huge external debts denominated in currencies they do not control
— think Greece, Spain and Italy — coupled with great anger at “the
system,” high potential for civil unrest (over 50% youth unemployment in
Greece and Spain), and serious breakdowns in basic stability
mechanisms.

There is a lot of hype these days about hyperinflation in the U.S.
But extreme amounts of government borrowing are more likely to slow down
the U.S. economy than speed up the arrival of hyperinflation, as
governments “crowd out” more entrepreneurial uses of funds and near-zero
interest rates cause capital to languish in stagnant pools.

When giant corporations can borrow for 20 years at 2% banks only
choose to make super-safe loans. More dynamic businesses can hardly get
capital at all. This leaves the real economy (as opposed to the paper
Wall Street version) in a quagmire.

This makes it hard for hyperinflation to kick in, as monetary
velocity — the speed at which money changes hands from one transaction
to another — falls.

Some prophesy a bond crash will usher in U.S. hyperinflation, as the
world decides to sell all its bonds overnight. But this is unlikely
because of what happens when bond prices fall: Long-term interest rates
go up.

That means, in the event of a bond “crash,” rates would spike,
leading to an economic crash… which in turn would pummel risk assets
and scare everyone into buying bonds again!

For mature economies such as the U.S., stealth inflation is a far
more realistic outcome than hyperinflation. This is usually how the
buying power of a currency goes down — not in great hysterical swoops,
but in humdrum dribs and drabs.

The best protection is hard assets. Make sure some of your wealth is
invested in stores of value such as gold and precious metals and real
estate. These are the best way to counteract the slow death of the
dollar.

And be careful of going long European stocks or the euro itself. If
history is any guide, it could be the next economy to fall foul of a
hyperinflationary episode.

Carpe Divitiae,

Justice

http://www.insideinvestingdaily.com/

By The Sizemore Letter

Almost exactly two years ago, I wrote a short piece on Hugh Hefner’s leveraged buyout of Playboy Enterprises and commented that the company was transitioning away from its adult media businesses and into licensing and brand management.  Essentially, founder Hugh Hefner wanted to turn his company into something like a Dolce and Gabbana, but with an edgier reputation.

It’s easy to understand Hefner’s motivation.  The internet had taken a wrecking ball to his business model.  Magazine and newspaper sales are in terminal decline. (Remember, men buy Playboy Magazine for the articles. Really.)   And it’s difficult to turn a profit in adult media given that you’re effectively competing with free.

Playboy Enterprises definitely had the pieces in place.  The Playboy bunny is one of the most recognizable brand logos in the world, and the robe-wearing, pipe-smoking Hefner is a brand in of himself.  Long after the 86-year-old Hefner passes, his image will have marketability.  It’s crass, but it sells.

Incidentally, Hefner is grooming his 21-year-old son Cooper to wear the robe and carry the pipe after he is gone, becoming the public face of Playboy.  Given that the company already has professional management currently led by CEO Scott Flanders, it’s not entirely clear what the young Mr. Hefner’s role will be other than attending extravagant parties with beautiful young women on each arm.  I suppose it’s a hard job for a young, red-blooded American male, but someone has to do it.

All joking aside, the young Hefner’s role will be extraordinarily important if Playboy Enterprises is to have a future.  Because now more than ever, the company is selling a feeling rather than a product: the aspirational image of the modern bon vivant. Think about the “most interesting man in the world” commercials for Dos Equis beer.  This is the image they are going for.  If Cooper Hefner is to sell the lifestyle as effectively as his dad, he has a large robe to fill.

So, how is the company’s transformation going?

Actually, not that bad.  Since taking control of the company in 2009, Flanders has cut the payroll by 75% and sold off some its older media businesses.  Revenues are down from $240 million in 2009 to just $135 million in 2012.  But profits have nearly doubled, from $19.3 million to $38.9 million (measured as adjusted EBITDA).

Playboy is distancing itself from what most people would consider pornography, ditching its video business and offering media without nudity.  The Wall Street Journal calls it Less Smut, More Money. The company even has an iPhone app and a SiriusXM radio station.  And of course, there was the popular E! series The Girls Next Door.

The company is hoping to go public again in 2014, but it’s going to have a hard time getting there.  Licensing only accounted for $62 million of its $135 million in revenues last year, and the magazine continues to lose money.  The company is in violation of its loan covenants and may get downgraded by Standard & Poor’s.  And Playboy Enterprises’ ability to grow and go further mainstream will be limited by its toxic association with pornography and by the general cloud of sleaze surrounding its image.

And if the company does go public again, institutional investors will not exactly be lining up to buy shares.  If tobacco, alcohol and gaming stocks are difficult to own in the age of political correctness, then imagine having to justify a social pariah like Playboy to the trustees of a pension plan, foundation, or university endowment.

I wrote last year that Not All Sin Stocks are Created Equal, and Playboy Enterprises is a perfect case in point.  Its brands have value, but its core businesses have no moats.  If the company is successful in cleaning up its sleazy image and builds its licensing revenue streams high enough to compensate for a failing print media business, then the company might have a future.  Whether that future is enough to sustain the lifestyle created by Mr. Hefner is another story.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post The Playboy Leveraged Buyout, Two Years Later appeared first on Sizemore Insights.

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By www.CentralBankNews.info     Namibia’s central bank held its benchmark repo rate steady at 5.50 percent, saying the current low interest rate should be maintained to mitigate the impact of slow growth in many of the country’s trading partners.
    The Bank of Namibia, which cut its rate by 50 basis points in 2012, said economic growth is expected to ease slightly in 2013, in line with key trading partners “although growth of domestic demand may remain strong, while elevated inflation may persist,” the bank said in a statement from its governor, Ebson Uangutu.
    Namibia’s economy is estimated to have expanded by 4.6 percent in 2012 and is forecast to grow by 4.4 percent in 2013, driven by secondary industries, particularly construction, the bank said. In 2011 the economy grew by 4.8 percent.
    The mining sector, which was estimated to have expanded by 17 percent in 2012, is expected to see moderate growth of 3.8 percent this year.
    Namibia’s Gross Domestic Product contracted by 5.4 percent in the third quarter from the second for an annual decline of 1.3 percent, down from the second quarter’s annual growth rate of 10.7 percent.
    Namibia’s inflation rate rose to 6.6 percent in January, above 2012’s average rate of 6.5 percent, and December’s 6.34 percent rate.

    The increase in inflation was due to annual increases in administered prices, particularly education and housing, while food inflation remained elevated, the bank said.
    Domestic demand remains strong with private sector credit extension up an annual 17 percent in December, the second highest level seen in almost six years. Credit to businesses grew by 22.2 percent at the end of December while credit for mortgages was up by 13.1 percent, below November’s 14.3 percent.
    Namibia’s dollar currency depreciated against major currencies in January, December and November, based on its peg to the South African Rand which has declined due to the sale of rand-based assets, including government bonds, the Bank of Namibia said.
    But Namibia’s stock of international reserves is sufficient to cover the fixed exchange rate peg with foreign reserves equal to 3.4 months of import cover.

    www.CentralBankNews.info
 

By www.CentralBankNews.info

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 20 February 2013, 07:00 EST

THE SPOT gold price dropped below $1600 an ounce for the first time in six months Wednesday, as the Dollar strengthened and stock markets were broadly flat, ahead of the publication of the latest Federal Reserve policy meeting minutes later today.

Silver fell to $29.19 an ounce, also a six month low, while other commodity prices were little changed on the day.

Major government bond prices fell, with UK Gilts dropping sharply along with the Pound following the latest Bank of England minutes.

Dealers in India reported an increase in gold buying today, with some citing next week’s budget as a factor.

“Most people in the market are concerned about policy changes in the budget,” one dealer in Mumbai told newswire Reuters this morning.

“Some sort of measures to curb gold imports can be there, that’s why bullion players, especially jewelers, are increasing their stock levels.”

Last month, India raised the import duty on gold from 4% to 6%, with authorities having cited gold imports as a factor exacerbating the current account deficit.

Over in China, trading volumes on the Shanghai Gold Exchange continued to fall Wednesday, having set a record on Monday as the exchange re-opened following Lunar New Year week.

“We have seen quite strong interest in the domestic market as prices weaken,” says one trader in Beijing, “although such demand is unable to push prices much higher…once prices stabilize around this level, we may see demand dwindle. But another sharp retreat or rally in prices will trigger a lot of investment and physical gold demand.”

Less than three months after setting a new all-time record, the Euro gold price fell below €1200 an ounce for the first time since December 2011 this morning.

The Pound meantime fell to a nine-month low against the Dollar this morning, dropping sharply immediately after the publication of the latest Bank of England Monetary Policy Committee minutes. The minutes show that three of the nine MPC members – including the current governor Mervyn King – voted earlier this month to increase the size of the Bank’s quantitative easing program from £375 billion to £400 billion, with the majority voting to leave it unchanged.

“The Committee agreed that, as long as domestic cost and price pressures remained consistent with inflation returning to target in the medium term, it was appropriate to look through the temporary, albeit protracted, period of above-target inflation,” the minutes read.

“The BoE minutes surprised on the dovish side,” says Citigroup strategist Valentin Marinov, “which could be seen as disappointment for those thinking that a lot of negatives are [already] in Sterling price by now.”

“This lowers the bar for further intervention,” adds Deutsche Bank economist George Buckley, “though we still argue that if the BoE’s forecasts for sticky inflation and GDP growth gradually recovering are proved right no more quantitative easing will be needed.”

Gold in Sterling jumped to £1048 per ounce immediately following publication of the minutes, slightly above the previous high for this week, before trading lower towards lunchtime in London.

The UK’s three-month unemployment rate meantime rose to 7.8% in December, up from 7.7% a month earlier, data published this morning show, although January’s claimant count figure fell by more than anticipated.

In the US, the Federal Reserve publishes the minutes of last month’s Federal Open Market Committee later today.

“The Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens,” said the statement published immediately after that meeting.

“We suspect the [Fed] will again spell out its prolonged easing stance in very clear terms,” says Ed Meir, analyst at brokerage INTL FCStone, “but whether this is going to be enough to trigger a round of renewed [gold] buying is doubtful.”

“We don’t think there should be anything in the minutes to spook the markets,” adds Standard Bank currency strategist Steve Barrow, “[but] we definitely sense that the market is more sensitive to hawkish comments [implying tighter policy] than dovish ones.”

Ahead of the Italian elections starting on Sunday, former prime minister Silvio Berlusconi’s party has sent out thousands of letters to voters pledging to reimburse their IMU property tax. The letter told voters that should Berlusconi become economy minister, they will be able to collect their tax rebate from the post office.

“Silvio Berlusconi may be an effective campaign strategist,” German finance minister Wolfgang Schaeuble said last week, “but my advice to the Italians is not to make the same mistake again by voting for him.”

Despite recent weakness in the Yen, Japan’s trade deficit set a new record last month, figures published Wednesday show.

Ben Traynor
BullionVault

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

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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.