This Month in Gold – April 2011

Gold Heads for Longest Run of Quarterly Gains in 3 Decades
Bloomberg – This month, gold marked its tenth straight quarterly gain and silver its ninth – the longest rallies for both since 1975. Unrest in the Middle East has piled on to existing concerns about the stability of the dollar and the euro to drive the precious metals. An analyst from price-tracking site The Bullion Desk forecast that as long as unrest continued and a low interest-rate environment prevailed, the extended bull market should continue as well. Gold and silver’s gains may have even been restrained this quarter by renewed optimism of a US recovery. If the recovery doesn’t materialize, there may be another big move up.
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China’s New Gold Rush: Nervous Citizens Help Fuel Bullion Boom
The Australian – China’s insatiable demand is broadening from industrial commodities to precious metals. After decades of building up a massive pool of savings, China’s citizens and government are now worried about the effects of high inflation. This has caused the world’s largest producer of gold to become a net importer in 2010, driving prices higher on the global markets. Another story remarks on the growing potential for China’s demand to surpass that of India, the world’s top consumer of gold, if growth continues at current rates. While many analysts would be wary of a particular asset class that is at record highs, it is noted that gold and silver are still below their real-dollar highs and the demand from Asia only seems to be growing.
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Bill Gross Calls US Budget a “Greek Tragedy”
Fortune – After Buffett, PIMCO’s Bill Gross became the latest establishment investor to defect from Washington’s party line. Gross’s firm was among the largest holders of US Treasuries before he started quickly liquidating his positions toward the end of 2010. Now, he is predicting that the current fiscal direction will guarantee an “effective default” by the US government through excessive money-printing. By including unfunded liabilities, Gross estimates that federal debt is over 8X as high as the media reports. As such, he finds the US sovereign default risk on par with the EU’s least solvent member-state – Greece.
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Utah: Forget Dollars. How about Gold?
CNN Money – The gold standard may be making a comeback. In a potentially historic act, Utah’s governor signed into law this month a measure that treats gold and silver coins as money within state boundaries. Specifically, the act recognizes bullion coins issued by the US Mint as currency instead of simply an investment asset and therefore exempts them from capital gains and other state taxes. While the new law has a limited practical effect – most taxes are federal – it does send a strong message to the Fed that the people of Utah want a strong, reliable currency backed by gold and silver. Other states with similar measures being considered include Virginia, New Hampshire, Georgia, Delaware, Montana, South Carolina, et al.
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