Posted: Aug 30 2010     By: Jim Sinclair Post Edited: August 30, 2010 at 1:34 pm

Dear CIGAs,

What Martin Armstrong offers you for free is amazing.

Knowledge of world economies is key to understanding your own economy and currency in this mirror image Forex market.

Click images to enlarge Martin Armstrong’s latest in PDF format

The fact is, these are weak attempts at justifying the massive losses their clients have faced in the last few years.

On the contrary, my colleagues not only predicted these events would unfold, but even made a movie about it over a decade ago: Millennium Money

This is not rocket science. We do not hold a crystal ball. We do not claim to be soothsayers. Anyone who bothers to study history can recognize the trends we are seeing right now.

“Still less clearly remembered are the years before the mark blew, with their breakneck boom, spending, profits,speculation, riches, poverty, and all manner of excess. Throughout these
years the structure was quietly building itself up for the blow.” – The Dying of Money, on the Hyperinflation of Germany in 1923

Sound familiar?

Massive speculations and wild volatility have preceded every major currency event in the history of man.

Why would it be any different this time?

Gold is the ultimate financial insurance against the dark art of shuffling and reshuffling the same paper assets over and over in cunning new ways.

Got gold yet?

Firm faces civil charges for oil trading mayhem

By Jonathan Spicer

NEW YORK (Reuters) – A big high-frequency trading firm faces possible civil charges by regulators after its computer ran amok and sparked a frenzied $1 surge in oil prices in February, according to documents obtained by Reuters and sources familiar with the continuing investigation.

Infinium Capital Management confirmed only that it is the company at the center of a six-month probe by CME Group Inc into why its brand new trading program malfunctioned and racked up a million-dollar loss in about a second, just before markets closed on February 3.

The glitch explains for the first time the lightning-quick oil-trading surge of that day — and it may have been a catalyst for the abrupt and largely unexplained $5 slide amid record volumes the following two days.

The firm’s buying frenzy also reveals how faulty computer codes, known as algorithms, can spark sharp volatility and send electronic markets spinning all in the blink of an eye.

Futures exchange operator CME Group is looking into the incident, which occurred at the New York Mercantile Exchange and highlights some of the same electronic-trading concerns raised by May’s “flash crash” in the U.S. stock market.

Exchange compliance officials met last month with Infinium’s management, and separately with engineers and developers who quit or were fired following the mishap, according to two sources.

The U.S. Commodity Futures Trading Commission is also looking at what went wrong, said one of the sources, who were not authorized to speak to the press.

The regulator or CME Group could charge the firm with “conduct detrimental” to the NYMEX, or with smaller offenses, the source said. A manipulation charge is a remote possibility, the source added.

Sweeping financial reform that became law last month gives the CFTC far more muscle to crack down on manipulative trading. However it is unclear whether this case involves such trading, and unlikely that the regulator could use its new enforcement powers retroactively.

In an interview, Infinium CEO and co-founder Charles Whitman said it was a “routine investigation” into an incident that “was a result of both human and computer error.”

The investigation also comes as the CFTC reviews the impact and risks of high-frequency trading in commodities, made all the more urgent by the flash crash in which markets broke down in a matter of minutes on May 6.

THOUSANDS OF ORDERS PER SECOND

Infinium, a household name in Chicago’s burgeoning trading community, relies on computer horsepower and quantitative models to earn razor-thin profits from short-term trading. It uses its own money to make markets and capitalize on tiny imbalances, a common high-frequency strategy.

The documents, dated March, reveal that Infinium used an algorithm that was less than a day old to execute a “lead/lag” strategy between an exchange-traded fund called United States Oil Fund, which tracks oil prices, and the U.S. crude benchmark future, West Texas Intermediate.

The algorithm was turned on at 2:26:28 p.m. (Eastern) on February 3, less than four minutes before NYMEX closed floor trading and settled oil prices. It immediately started uncontrollably buying oil futures, according to the documents, which include letters from Infinium’s lawyer to the regulation unit of CME Group, and cite notes from a company developer.

Infinium placed 2,000 to 3,000 orders per second before its flooded order router “choked” and was “dead in the water” a few seconds later, the developer’s notes said. The algorithm was shut down five seconds after it was turned on.

By then, the documents show, the firm had sent 4,612 “buy limit” orders into the market. It quickly offset the position, mostly with large “block” trades in the next few minutes, leaving it with a $1.03-million loss.

Infinium’s burst of buying and selling represented about 4 percent of average daily trading volume in the contract, and caused a brief 1.3 percent jump in oil prices, from $76.60 to $77.60, before settling at $76.98, Reuters data show. Trading volume spiked nearly eight-fold in less than a minute — and the reverberations turned some heads.

The next day, February 4, commodities traders struggled to explain a 5 percent plunge in oil prices, the biggest one-day drop in half a year. On February 5, crude fell further, to $71 a barrel, and volume touched a then-record high.

Some people fingered London hedge fund BlueGold Capital Management for selling long positions — a charge it promptly denied — while others pointed to the unusual end-of-day market action the day before.

Stephen Schork, who runs market analysis company The Schork Group, told Reuters at the time the volume jump “reeks of someone making a mistake or (who) was in trouble and is in more trouble today.” CME Group said February 4 it was looking into the matter.

Infinium’s Whitman told Reuters the firm immediately alerted the exchange to the problem. “The parties associated with this error are no longer with the firm,” he said, adding the firm since adjusted its software “to ensure this error would not be repeated.”

CFTC and CME Group spokesmen both declined to comment on the Infinium probe.

“The ironic and sad part of the broken algo story is that the traders identifying patterns in the market unfortunately don’t use their expertise to identify abnormal patterns in their own trading,” said Larry Harris, a market structure expert and professor of finance and business economics at University of Southern California’s Marshall School of Business.

“The failure to have simple counters to identify potential problems with the algo, such as having thousands of buy orders in a row, is extremely troubling.”

ALGOS GONE WILD

Stock market regulators last year started pounding the drums on high-frequency trading, which is estimated to be involved in more than half of all cash equities and commodities trading volume.

While the U.S. Securities and Exchange Commission, under some political pressure, has led the charge in peeling back layers of the complicated marketplace, the CFTC this year followed suit with a new technology panel that aims to sniff out unfair advantages or systemic risks associated with high-frequency trading.

Whitman is a high-profile member of this panel. With 250 employees and offices in New York and London, Infinium is among the heavyweights in a group of proprietary firms called the Principal Traders Group, which formed this year to promote the benefits of electronic trading.

Meanwhile, Commissioner Bart Chilton told Reuters late last month he is “itching” to use the CFTC’s new authorities, under the Dodd-Frank Act, to fight trading practices that disrupt oil prices.

Under the new bill, the CFTC needs only to show that a trader acted in a manner that had the potential to disrupt markets to prove a manipulation case.

The documents did not suggest that Infinium was suspected of what is known as “banging the close” — an illegal practice in which traders try to move the futures market by flooding it with orders just before it closes.

Infinium said its primary failure on February 3 was allowing thousands of orders per side per contract, instead of limiting it to the planned one, according to the documents citing the developer’s notes. The notes also indicate Infinium’s computer may not have properly recorded that it was sending orders.

The firm has answered several questions related to the mishap and now awaits a response from the exchange or the regulator.

The CFTC has been mostly unsuccessful in prosecuting manipulation cases over the last few decades. It has had better success with other types of enforcement cases, which often result in a settlement in which the accused firm accepts a fine but admits no wrongdoing in exchange for avoiding court.

Article Source

August 20, 2010

By David Bond, Editor
Silverminers.com

Molejon Manager Lazaro Rodriguez surveys the mine’s three main pits

Penonome & Panama City, Panama – In the 50 years following Christopher Columbus’s accidental discovery of the Americas, Spaniards hauled some 21 tonnes of gold out of the east-west isthmus of what is now called Panama. There ended, by AD 1550, Panama’s mining industry. Her dense jungles, populated by snakes and bugs and panthers, and overburdened with mud so slick and greasy you can bury a Land Cruiser in, forbade future prospecting.

Fast-forward 460 years, and Panama is back in the gold-mining game. Petaquilla Minerals, Ltd., (TSX: PTQ) entered gold production this year at its 2,200 tonne/day Molejon open-pit mine north of Penonome, the first of several new precious and strategic metals projects on Panama’s plate.

“Panama lies on a bed of copper and gold,” Robert Henriquez, Panama’s Minister of Commerce and Industry, told us in a recent interview in his Panama City office. “We feel that mining is an area of great potential for us.” He endorses Petaquilla’s Molejon mine as a model for future mining ventures in his country, including Inmet’s (TSX:IMN) nearby prospective $4 billion Cobre porphyry copper-gold deposit 20 km south of the Caribbean shore in Colon province. “They are doing a very nice job and we support their project.”

Forget what you think you know about Panama. Bananas, notes Henriquez, account for just $150 million of Panama’s $25 billion gross national product. The nation’s debt rating was upgraded to Investment Grade status earlier this year by Fitch, Moody, and S&P, joining Mexico, Brazil and Chile in the BBB-minus category. Panama grew its economy even in the depths of the global recession and its jobless rate peaked at 6.4 per cent, versus the 10 per cent in the U.S. and 20 per cent in Spain.

Ambitious public works projects are under way as well, including the $5.2 billion widening of the Panama Canal (under budget and ahead of schedule for its opening in 2014 – the new locks will handle ships with a beam of 200 feet, double the current width) and some $13.6 billion planned for infrastructure improvements, mainly in the areas of transportation, including a new international airport near Cocle to take some of the load off of Tocumen. If anything sucks about Panama, it’s the traffic in and around Panama City: included in the budget are an urban mass-transit system and replacing the city’s overcrowded and antiquated public buses. The country recently negotiated a free-trade agreement with Canada and is awaiting the U.S. Senate’s approval of a similar treaty. (For reasons unknown to this writer, the Obama Administration has held up free-trade deals with both Panama and Colombia that were negotiated during the Bush Administration.)

	Panama Commerce Minister Robert Henriquez (center) greets a reporter (left) and Petaquilla Gold President Rodrigo Esquivel

We digress. In 1968, the United Nations initiated a mineral survey of Central America and turned up multiple gold and copper findings the rivers and streams flowing through what is now the 842-square-kilometre Petaquilla Concession. Richard Fifer, a third-generation descendant of Panama ex-pats from Chehalis, Washington, is a player in Panama politics and business. Educated in geophysics, geology and finance, Fifer took an early interest in the Petaquilla district, as did Fifer’s father’s contemporary, the late Panamanian President Omar Torrijos, who saw Panama’s copper and gold deposits as a way out of the country’s chronic poverty. But mining was back-burnered in the aftermath of a chain of military dictators, culminating in Manuel Noriega’s fiasco in the late 1980s. Following Noriega’s removal from Panama by U.S. troops in 1989, Panama has conducted constitutional elections every five years, beginning in 1994.

The Petaquilla mining district returned to the front-burner status during the presidential tenure of Omar Torrijos’s son, Martin. When Martin Torrijos’s Democratic Revolutionary Party was turned out of office during the 2009 elections after a peaceful term (executives may not succeed themselves), it was replaced by the even more pro-mining Democratic Change Party, of which PTQ’s Richard Fifer was a founding member. As part of current President Ricardo Martinelli’s cabinet, Henriquez has been charged with making Panama the first Central American country to achieve First World status.

“Israel has done it, Brazil has done it. We will do it, too” he said.

Molejon is set to produce about 100,000 ounces of gold-equivalent ore annually over an 8-to-10-year mine life, which could be extended should preliminary laboratory successes in recovering gold from the muddy saprolite overburden prove up in the field. You can’t run gold-enriched mud through a jaw-crusher or a ball mill, but you can pelletize it with concrete and extract the yellow metal in a column with the right reagents. Mill capacity, currently at 2,200 tpd, is being expanded to 3,000 tpd, with a future second phase to 5,000 tpd from its existing foundations.

John Kapetas is an agreeable Australian who joined PTQ as exploration VP four years ago after a decade of jungle geology in Africa and Indonesia. He likes the odds of finding at least one more million-ounce gold deposit in the Petaquilla batholiths, and has spent his time with the company walking and canoeing its rivers and streams, collating data from the U.N.’s initial research with more modern sampling and mapping. Of special interest are gold anomalies along the Cocle del Norte River. Petaquilla has set up a 90-man camp and drilling station not far from the Atlantic coast to test Kapetas’ not terribly unconventional theory that where there’s gold in the river, there’s a gold mine waiting to be born  nearby.

The first phase of drilling at the Oro del Norte camp will be completed in Q3 2010, which could lead to a mine-construction decision next year following an N.I. 43-101 workup. The company recently announced discovery of a new epithermal gold vein system from its drill and trench program there; Oro del Norte is within trucking distance (20 km) of the Molejon mill.

PTQ geologist John Kapetas (right) inspects core at Oro del Norte

“Panama is an easy place to work in,” says Kapetas, who has charge of PTQ’s $200,000 per month exploration budget. “Molejon is a simple ore body in an andesite host.” Between Molejon’s two gold-bearing quartz veins is a vast quantity of aggregate waste rock that has a commercial potential for the road-building that will be necessary to Inmet’s Cobre mine, slated to enter production in 2014. Mud is so predominant in the Panamanian jungles that as much as a metre of aggregate must be overlaid before a road can be stabilized. Petaquilla paid more than $40 per ton for the stuff to build its roads. The company can produce similar aggregate from below its upper quartz zone for a fraction of that price, making Molejon’s lower gold zone much more cost-attractive.

Grade control is critical to Molejon. Lazaro Rodriguez, PTQ’s vice president of operations and manager of the mine, oversees a futuristic high-tech operation that computer-monitors output from the three pits and mill throughput down to the decimal point. Processes can be tweaked from there to maintain a constant 2.9 gram/tonne mine grade. Three ball mills digest feed from crushers, sending 74-micron muck to thickener tanks, then to leach tanks. The solution then passes through carbon pulp columns, then to the cell room. Tailings water is recirculated into the mill. Molejon produces a gold-silver Dore and Petaquilla controls the product’s marketing through to the end-user.

“I think we can get more than 10 years out of that mine,” says Chairman of the Board Fifer, given preliminary test results of Molejon’s saprolite gold returns. Built at a cost of $150 million, Molejon was financed by $69 million of debt, with the balance in equity. On 19 August, PTQ announced it had reached a forward gold sales agreement with Deutsche Bank for $42 million of the remaining debt. In essence, Petaquilla will commit to deliver 68,243 ounces of gold to the bank over the next five years – about 6.3 percent of the company’s total gold resource at Molejon.

“The lower payments that will now be due to the Company’s note holders will allow for an increase in funds to be directed towards the exploration of the Oro Del Norte region where significant gold mineralization has been discovered,” Fifer said. Also, the company is in the process of spinning off its considerable mine-building and infrastructure development capabilities into a new company, Panamanian Development and Infrastructure, Ltd. PTQ will retain a 47.78 percent interest in the new entity. Fifer will settle for a small portion of the $4 billion Inmet is expect to spend building the Cobre.

“Our track record should speak for itself, and for the future of mining in Panama,” Fifer says. “We have opened the door for the mining industry here.”

	PTQ Chairman Richard Fifer, at his finca in Panama. He works in his spare time to save Panamanian wildlife

Casimir Resource Advisors, LLC, of Cartersville, Georgia, put PTQ on its radar screen in March. Concluded Casimir President Eric T. Allison: “CRA’s review of the Molejon Gold Project has not revealed any fatal flaws. The geological modeling and interpretation is very good and the resource estimates and the Life of Mine Plan based upon them are sound. The mining activities are well planned and appear to be  professionally executed. The plant has successfully gone through its start-up and commissioning  phases and is currently fine tuning its processes and upgrading equipment as needed to fully achieve and maintain its design capacities. The careful attention to grade control coupled with the close interaction with Geovectra to continually revise the mining plan should allow the project to mine sufficient amounts of ore at high enough grades to meet its planned target of 6,000 ounces of gold per month. The exploration efforts are of high quality and are just beginning to tap into the significant potential of the balance of PTQ’s concessions. Additional growth and revenue generating projects are in the pipeline.”

Rodrigo Esquivel is a Panamanian attorney and President of Petaquilla Minerals’ wholly-owned subsidiary, Petaquilla Gold S.A. He negotiated the companies’ gold-export permits and also the so-called Petaquilla Law, by which the Panamanian National Assembly certified by law PTQ’s leases in the batholiths concession. Among its components:

- A 2 percent royalty once mine-building costs have been recouped;

- Monthly inspections holding PTQ to drinking-water standards for water discharges;

- Expenditures of $1.2 million annually on health centers, schools, road-building, agronomic activities, and chicken- and cattle-farming support.

Additionally, PTQ has agreed to re-vegetate 1,000 hectares of jungle for every 100 hectares it digs up and has a “gentleman’s agreement” to provide hot meals for the schools it has built. The anti-mining NGS can pound sand, or in Panama’s case, mud.

“It has been a wonderful experience for me to be involved in commercial mineral production. We are creating jobs and wealth in an area that was long forgotten,” Esquivel reflects. “Mining can be in a good harmony with the environment and it is the policy of Panama’s government to develop the mining industry.”

Commerce Minister Henriquez says miners and explorers are welcome in Panama so long as they play by the country’s very stringent environmental rules and establish good social contracts. “We are advancing mining projects that previously were only on paper. We welcome their state-of-the-art technologies, their commitment to international standards of environmental quality, and their willingness to support, and to get the support of, their local communities,” he said.

I like these guys. They know their country, they know their geology, and their federal government would like them to succeed. What a refreshing departure, on all fronts, from the U.S. government’s thuggery in the hard-rock western United States.

Article Source

Several tons of gold imported into the UAE by traders and investors turned out to be fake on closer inspection, resulting in millions of dirhams in losses and high levels of stress to the victims.

Speaking to Emirates 24|7, Mohamad Shakarchi,, Managing Director of Emirates Gold, said: “A lot of people in the UAE who tried to import gold at lower prices or through dubious overseas companies have been cheated.

We have inspected many consignments from African countries, especially Ghana, and found that there is not an ounce of gold in them.

For importing pure dust or other metals with yellow colour, these traders have paid several million dirhams.”

Dubai Customs sources confirmed the incidence of fake gold imports, but did not reply to a questionnaire sent by Emirates 24|7 ten days ago.

“The concerned official is on leave,” said a spokesman.

Emirates Gold has stopped examining gold imported from Africa. “We send specialists to examine a gold consignment only if it is routed through a local company.

We don’t have time to waste because most of these so called gold imports are fake. The traders got greedy. They thought they were getting gold at a discounted rate.”

Mohammed said that at least five tonnes of fake yellow metal is lying with Dubai Customs.

A tonne of gold will cost approximately $40 million. Merchants estimated that the minimum loss of fake gold imported by local traders is nothing less than $200 million.

He said many clients and Dubai Customs have requested the use of company’s expertise to verify the purity of gold. “The fake gold issue has affected many people. Some of the traders got heart attack, after our inspectors said there is no gold in the tonnes of imports brought from Africa,” Mohammed said.

Recent media reports suggested that several million dollars worth of gold with the Ethiopian Central Bank turned out to be fake. These bars of gold turned out to be gold plated steel bars

African gold merchants claim to be in possession of large quantities of gold dust or gold bars, which they offer to sell at below market prices.

The would-be buyer is made to send money for travel of the seller, for insurance, for shipping and for refinery assays before they would receive anything of any value. Investors are shown samples, which may be original gold.

But when the consignment reaches the port, it will be only mud or sand. Once Dubai Customs tightened controls, fake gold imports started reaching the UAE through other ports.

The seller can walk away at any point with virtually no risk of being caught as all contacts are via anonymous free webmail accounts accessed from Internet cafes and via prepaid mobile phones.

After the real estate and stock market investments became dull, many local investors have turned to commodity, especially gold investment, said the Chief
Executive Officer of JRG Commodities, Sajith Kumar PK.

Article Source

Combine this with the fact that Chinese tend to be a culture of savers instead of debtors, and China’s own experiences with hyperinflation, and it lays a pretty good argument as to why we can likely expect to see continued and increasing demand from both Chinese citizens as well as the government of China as they diversify out of USD based foreign reserves and into gold to solidify their position in the global economy.

China seeks to widen gold market

By Leslie Hook in Beijing

China has moved to liberalise its gold market further, increasing the number of banks allowed to trade bullion internationally and announcing measures that will encourage development of gold-linked investment products.

The move by Beijing’s central bank comes as the country’s investors pour record amounts of money into gold, in a trend that is becoming a significant factor on global prices.

Last year, Chinese investors bought 73 tonnes of bullion, up from 18 tonnes in 2007. The new policies were likely to increase liquidity in the domestic gold market and spur the development of gold financial products, analysts said.

China is the world’s largest gold producer and the second-largest consumer, after India, but its domestic market remains constrained by limited investment products.

“This is a positive sign for the gold market,” said James Steel, precious metals strategist at HSBC in New York.

“The Chinese statement reaffirms the vigour of the emerging markets’ demand for retail physical bullion.”

Gold prices rose in London, partly on the back of China’s announcement, but also on signs of robust buying from India’s jewellery sector.

Spot bullion traded at $1,190 a troy ounce, up from a three-month low of less than $1,160 an ounce last week.

GFMS, the London-based precious metals consultancy, said recently that Chinese investors, who are building wealth at an unprecedented rate, were diversifying their assets into gold to “protect themselves against inflation”.

The People’s Bank of China said “the need to perfect foreign exchange policies in the gold market is clear.”

It called for better financing services for bullion, opening the door for Chinese banks to hedge their gold risk overseas.

The central bank also hinted at changes in taxes on bullion. But it failed to endorse gold as an investment and to suggest it planned to increase the size of its bullion reserves, one of the world’s largest.

The new gold guidelines are part of the gradual internationalisation of the Chinese banking system. Restrictions on some renminbi-denominated investment products in Hong Kong have been lifted recently, and renminbi cross-border settlement programmes have been expanded this year.

Article Source

Ben Davies of Hinde Capital “Gold is now the currency of first resort”

Key points:

1. Gold substantially undervalued compared to the amount of paper currency
2. Un-allocated positions are numerous, and dangerous
3. Central banks with more sophisticated managers are buying gold

UNITED NATIONS (Reuters) – A new United Nations report released on Tuesday calls for abandoning the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value.

But several European officials attending a high-level meeting of the U.N. Economic and Social Council countered by saying that the market, not politicians, would determine what currencies countries would keep on hand for reserves.

“The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency,” the U.N. World Economic and Social Survey 2010 said.

The report says that developing countries have been hit by the U.S. dollar’s loss of value in recent years.

“Motivated in part by needs for self-insurance against volatility in commodity markets and capital flows, many developing countries accumulated vast amounts of such (U.S. dollar) reserves during the 2000s,” it said.

The report supports replacing the dollar with the International Monetary Fund’s special drawing rights (SDRs), an international reserve asset that is used as a unit of payment on IMF loans and is made up of a basket of currencies.

“A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency,” the U.N. report said.

The report said a new reserve system “must not be based on a single currency or even multiple national currencies but instead, should permit the emission of international liquidity — such as SDRs — to create a more stable global financial system.”

“Such emissions of international liquidity could also underpin the financing of investment in long-term sustainable development,” it said.

MARKETS DECIDE

Jomo Kwame Sundaram, a Malaysian economist and the U.N. assistant secretary general for economic development, told a news conference that “there’s going to be resistance” to the idea.

“In the whole post-war period, we’ve essentially had a dollar-based system,” he said, adding that the gradual emission of SDRs could help countries phase out the dollar.

Nobel Prize-winning economist Joseph Stiglitz, who previously chaired a U.N. expert commission that considered ways of overhauling the global financial system, has advocated the creation of a new reserve currency system, possibly based on SDRs.

Russia and China have also supported the idea.

But Paavo Vayrynen, Finland’s Foreign Trade and Development Minister, told reporters that he doubted it was possible “to make any political or administrative decisions how to formulate the currency system in the world.”

“It is based on the markets,” he said. “I believe that the economic players in the market are going to have the decisive influence on that issue.”

European Union development commissioner Andris Piebalgs said it would be a bad idea to dictate what the reserve currency should be.

“It is markets that decide,” he said. “Any intervention would just create additional challenges and make things even less predictable.”

Article Source

Amid all the market doom and gloom, the world’s largest gold fund is quietly celebrating another major milestone: SPDR Gold Shares, an exchange-traded fund backed by physical bullion, has recently surpassed $50 billion in assets.

Driven by concerns over the euro zone sovereign debt crisis and a double-dip recession, investors have plowed $5.4 billion of net cash into the fund during the first five months. At the same time, gold prices have continued to set records – gaining 13.4% so far this year – helping boost the fund’s size.

As of Monday’s close, the fund -  boasts total assets under management of $53.3 billion.

The fund –  known as GLD because of its ticker symbol – now hoards a total of 1,316.18 metric tons of gold and rivals most of the world’s central banks. If GLD were a central bank, it would rank fifth – just below France and above China.

Gold’s safe-haven trait was in evidence again on Tuesday, as stocks were hammered globally and commodity markets were mostly a sea of red. Gold futures for July delivery eked out a gain of $3.8, or 0.3%, to settle at $1,242 per troy ounce at the Comex division of the Nymex.

Now, investors are holding their breath to see whether the gold fund can pass out the $75.6 billion SPDR S&P 500 to become the world’s largest ETF. The gap between the two ETFs – both run by State Street Corp. — has contracted sharply this year from $44.7 billion to $21.3 billion as gold prices have gained and stocks faltered.

Article Source

According to Shadowstats.com, we are clearly witnessing a massive collapse in credit and money:

Ben Bernanke needs fresh monetary blitz as US recovery falters

Federal Reserve chairman Ben Bernanke is waging an epochal battle behind the scenes for control of US monetary policy, struggling to overcome resistance from regional Fed hawks for further possible stimulus to prevent a deflationary spiral.

By Ambrose Evans-Pritchard, International Business Editor

Fed watchers say Mr Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institute has collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed’s balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.

“We’re heading towards a double-dip recession,” said Chris Whalen, a former Fed official and now head of Institutional Risk Analystics. “The party is over from fiscal support. These hard-money men are fighting the last war: they don’t recognise that money velocity has slowed and we are going into deflation. The only default option left is to crank up the printing presses again.”

Mr Bernanke is so worried about the chemistry of the Fed’s voting body – the Federal Open Market Committee (FOMC) – that he has persuaded vice-chairman Don Kohn to delay retirement until Janet Yellen has been confirmed by the Senate to take over his post. Mr Kohn has been a key architect of the Fed’s emergency policies. He was due to step down this week after 40 years at the institution, depriving Mr Bernanke of a formidable ally in policy circles.

The Fed’s statement this week shows growing doubts about the health of the recovery. Growth is no longer “strengthening”: it is “proceeding”. Financial conditions are now “less supportive” due to Europe’s debt crisis.

The subtle tweaks in language have been enough to set bond markets alight. The yield on 10-year Treasuries has fallen to 3.08pc, the lowest since the gloom of April 2009. Futures contracts have ruled out tightening until well into next year.

Yet the statement may understate the level of angst at the Board. New home sales crashed 33pc in May to an all-time low of 300,000 after the homebuyer tax-credit expired, confirming fears that the housing market has been propped up by subsidies. Unemployment is stuck at 9.7pc. Manufacturing capacity use is at 71.9pc. The Fed’s “trimmed mean” index of core inflation is 0.6pc on a six-month basis, a record low.

“The US recovery is in imminent danger of stalling,” said Stephen Lewis, from Monument Securities. “Growth could be negative again as soon as the fourth quarter. There is no easy way out since fiscal stimulus has already been pushed as far as it can credibly go without endangering US credit-worthiness.”

Rob Carnell, global strategist at ING, said the Obama fiscal boost peaked in the first few months of this year. It will swing from a net stimulus of 2pc of GDP in 2010 to a net withdrawal of 2pc in 2011. “This is very substantial fiscal drag. On top of this the US Treasury is talking of a ‘Just War’ against the banks, which will further crimp lending. It is absolutely the wrong moment to do this.”

Kansas Fed chief Thomas Hoenig dissented from Fed calls for ultra-low rates to stay for an “extended period”, arguing that loose money risks asset bubbles and fresh imbalances. He recently called for interest rates to be raised to 1pc by the autumn.

While he has been the loudest critic, he is not alone. Philadelphia chief Charles Plosser says the Fed has blurred the lines of monetary and fiscal policy by purchasing bonds, acting as a Treasury without a legal mandate. Together with Richmond chief Jeffrey Lacker they represent a powerful block of opinion in the media and Congress.

Mr Bernanke has fought off calls from FOMC hawks for moves to drain stimulus by selling some of the Fed’s $1.75 trillion of Treasuries, mortgage securities and agency bonds bought during the crisis. But there is little chance that he can secure their backing for further purchases at this point. “He just has to wait until everybody can see the economy is nearing the abyss,” said one Fed watcher.

Gabriel Stein, from Lombard Street Research, said the US is still stuck in a quagmire because Mr Bernanke has mismanaged the quantitative easing policy, purchasing the bonds from banks rather than from the non-bank private sector.

“This does nothing to expand the broad money supply. The trouble is that the Fed does not understand broad money and ascribes no importance to it,” he said. The result is a collapse of M3, which has contracted at an annual rate of 7.6pc over the last three months.

Mr Bernanke focuses instead on loan growth but this has failed to gain full traction in a cultural climate of debt repayment. The Fed is pushing on the proverbial string. The jury is out on whether or not his untested doctrine of “creditism” will work.

“We are now walking on deflationary quicksand,” said Albert Edwards from Societe Generale.

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June 25 (Bloomberg) — BHP Billiton Ltd. and Rio Tinto Group financed a seven-week advertising campaign to end a mining tax in Australia. Instead, they got a new prime minister.

The ruling Labor party yesterday dumped Kevin Rudd, the architect of the tax, for Julia Gillard, who opened the door to talks on the proposed 40 percent tax that Morgan Stanley estimates would have taken A$85 billion ($74 billion) from the mining industry during the next decade.

“It’s amazing that one policy killed the prime minister,” Jason Teh, who helps manage $2.6 billion at Investors Mutual in Sydney. “The mining tax was a big thorn in the side for Rudd. I’m sure Gillard knows that and she will try to negotiate a better outcome to make herself look popular.”

Compromise may encourage producers to proceed with projects worth at least $21 billion that were stalled by Xstrata Plc and Fortescue Metals Group Ltd. By dropping the tax the government will need to cut spending to meet its goal of getting into budget surplus by 2013.

Gillard immediately ended the government’s A$38.5 million television and newspaper campaign backing the levy. BHP, the world’s biggest mining company, and Rio responded by suspending the advertising campaign against the tax, saying they are encouraged by Gillard’s invitation to talks.

“This looks to me like a circuit-breaker,” Owen Hegarty, vice-chairman of G-Resources Ltd. and a director at Fortescue, Australia’s third-largest iron ore exporter, said in an interview at Bloomberg’s Melbourne bureau. “The unpopularity of the previous prime minister was to do with introducing, slam- dunking, this penal resource super profit tax.”

Highest Rate

BHP dropped 2.1 percent to A$38.80 at the 4:10 p.m. Sydney time close on the Australian stock exchange. Rio fell 3 percent, Fortescue slid 4 percent and Macarthur Coal Ltd. dropped 2 percent. The new leadership is more likely to alter than scrap the tax, Credit Suisse Group AG said today in a report, citing the influence of pro-levy unions.

“My priority is to deal with the mining tax, it has caused uncertainty,” Gillard, who has undertaken to call an election in coming months, told reporters today in Canberra. “I want to genuinely negotiate.”

She also met with Treasurer Wayne Swan, who has become her deputy, and Minister for Resources and Energy Martin Ferguson today to discuss talks with mining companies. Gillard, 48, said yesterday the parties need to reach a consensus on the tax.

Mining Row

“There is some prospect that she’ll drop the tax, which would effectively extinguish the row with miners,” said Rob Henderson, markets chief economist at National Australia Bank Ltd., the nation’s biggest corporate lender. “Or she may defer the tax until after the election with much greater consultation.”

Rudd, 52, stood down after refusing to relent on the tax, estimated to raise A$12 billion in the first two years from 2012, in the face of sliding support in the polls and mounting opposition within his own party.

“Mining is our strongest industry and it’s just been kicked in the guts,” said David Flanagan, chief executive officer of Atlas Iron Ltd., which is developing the A$3 billion Ridley iron ore project. “We are not going to get our mojo back until the government is prepared to negotiate all aspects of the tax.”

Under the Rudd proposal, miners will pay a 40 percent tax on all profits above a 6 percent return on investment on their projects in Australia, the world’s biggest shipper of iron ore and coal. The tax would give the nation the world’s highest tax rate for mining companies, according to the Minerals Council of Australia.

‘Positive Outcome’

Miners want the government to exclude existing projects, reconsider the trigger level and vary the rate for different minerals. Possible changes needed to make the tax work include an increase in the rate of return hurdle to a minimum of 10 percent and preferably 15 percent, as well as a reduction in the headline rate to 20 percent from 40 percent, Morgan Stanley said June 16.

“Gillard’s appointment is a positive outcome because the tax was too high at 40 percent,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $10 billion, said in an interview with Bloomberg television. “Gillard will water down the tax, maybe to even lower than 20 percent.”

Gillard, who draws support from the Labor Party’s left wing faction, signaled the government won’t scrap the tax, saying “Australians are entitled to a fairer share of our inheritance, the mineral wealth that lies in our grounds.”

Felling Rudd

Morgan Stanley strategist Gerard Minack said Gillard was still likely to introduce a tax on resources profits after a negotiation process with the industry, given her close connection to Rudd’s policy decisions. “We will still get a super profits tax on the mining sector,” said Minack. “You can’t assume that a change in prime minister means that the tax gets dropped.”

Support for Rudd began to slide after he shelved the government’s carbon-trading plans in April, a key campaign pledge when he won office in November 2007. His popularity dropped further after the mining tax was announced May 2, retreating to 41 percent from 60 percent two months earlier, a Nielsen survey published June 7 showed.

“It was without a doubt the mining tax that felled Rudd – that people didn’t want it,” said Clive Palmer, Australia’s third-richest mining magnate with a A$3.92 billion fortune, according to BRW magazine. “The real issue is whether or not you should have a tax. That’s what we need to discuss, not the terms and conditions and how it’s supposed to be implemented.”

–With reporting by Rishaad Salamat in Hong Kong, Jacob Greber in Sydney and Kan Nishizawa in Tokyo. Editors: Keith Gosman, John Viljoen

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