NEW YORK, Nov 20 (Reuters) - The U.S. 10-year Treasury note's yield fell to its lowest in five decades on Thursday, as deepening economic gloom and an exodus from stocks and other riskier assets propelled a strong bid for safe haven government securities.
The benchmark 10-year Treasury note's price, which moves inversely to its yield, rose more than two full points, for a yield of about 3.0908 percent
http://www.reuters.com/article/marketsNews/idUSNYD00035320081120
Over the past six months we have been witness to some of the most bizarre market gyrations in recorded history. None more befuddling than the fall of Gold in the face of a global financial meltdown. Today comes the news above that the moths have not only flown to the flame, but right into it. 1958? "When you see the flash, duck and cover." Those were the words to the wise if you hoped to survive a nuclear blast. In other words, when the world's financial system implodes, "buy Gold and hide", don't race towards ground zero to save yourself.
How can Treasuries be a safe haven? Banks today, in their infinite wisdom, have come to the realization that loaning money to people that cannot pay it back is a very bad idea. Many believe right now that loaning money to anybody is a bad idea. When you buy a US Treasury bill, you are loaning money to the US. Last time I checked, the USA was the WORLD's largest debtor nation. That means the USA owes more money to the world than any and all other countries. Each day the US must borrow $2 BILLION Dollars just to make payments on its debt. THEY HAVE TO BORROW MONEY TO PAY BACK MONEY THEY BORROWED. Obviously, the USA is broke, and cannot repay their debts. Why then do people continue to loan money to the US by buying US Treasury bills? To get your money back, you will have to sell those t-bills. [or wait 10 years for them to mature] What if the day comes where nobody wants to buy them when you want to sell? That's simple, you're screwed. There is NOTHING safe about US Treasury bills. That is an old wives tale.
"Play with fire, and you'll get burned."
Gold rises on physical buying as stocks tumble
NEW YORK/LONDON (Reuters) - Gold prices ended higher on Thursday, buoyed by interest from jewelry makers and as investors sought safety after U.S. stocks plunged nearly 7 percent on mounting worries about a deepening economic slump.
"Investment demand for gold should hold up because there is strong risk aversion in the markets right now. That's why we are optimistic gold will hold up," Barbara Lambrecht, analyst at Commerzbank, said.
http://www.reuters.com/article/hotStocksNews/idUSTRE4AJ8LH20081120
Now there's a headline we haven't seen in awhile. Gold up as markets tumble? Could Gold be reaching for a turning point in sentiment? It should be noted that since Golds brief dip below $700 on November 23, it has traded in a tight range between 708 and 764. The hard bounce in Gold off that low on the 23rd was brought about by Hanky Panky Paulson's revelation that he and his cronies would not be buying up toxic mortgage waste from banks and would instead focus on getting money to consumers. Stories about the Fed's "quantitative easing" have filled the financial pages ever since. This quantitative easing is hugely bullish for the Gold camp. The Fed and Treasury, by following this path, have chosen balls to the wall inflation as their solution of last resort to guide us through this global financial crisis. In effect, Hank has decided to debase the currency. Wall Streets reaction to Hank's news has been to turn violently lower. They should be dancing in the streets at Wall & Broad on this news. The inflation that Hank's decision will inflict on the globe is sure to send the price of EVERYTHING, including stocks, much much higher in time. Gold bugs can smell inflation ahead of the rest of the crowd. It is no coincidence that the Saudis have purchased over $3 Billion Dollars of Gold in the last month. Few nations stand more to lose from the debasement of the Dollar than the Saudis because it is Dollars they accept for payment for their Oil. [But with the Bush family soon out of the White House, that Dollar gambit may end quickly to save the Kingdom.] China stands to lose a great deal as well with the debasement of Dollar. Word on the street is that they may accumulate up to 4000 tonnes of Gold. This "small" purchase alone could send the price of Gold soaring:
Is China Ready to Buy Gold at Last?
China wants 4000 tonnes of gold, to help "diversify" their $1.9 trillion in U.S. bonds. It's quite a joke. Please bear with me as I explain.
A tonne of gold is 32,151 ounces. Please search "troy ounces per tonne" at google to confirm, because this one bit of information, and a simple calculator, can help you unlock and decipher the meaning of what you read in the news regarding the gold market, as gold at the national level is usually always quoted in terms of tonnes.
The total ounces China is seeking, is thus: 4000 tonnes x 32,151 ounces/tonne = 128,604,000, or 128.6 million ounces.
That's an interesting number because it is about half of the U.S. official gold reserves of 261 million ounces.
It's also an interesting number because the total annual gold market consumption is said to be about 4000 tonnes, while annual mine production is only about 2500 tonnes.
But let's now multiply by the current gold price, to see how much of China's reserves could be diversified if they obtained that, without disturbing the price.
At $736/oz., times 128.6 million ounces = $94649.6 million, or $94.6 billion.
That's funny, because $94.6 billion is not very much of $1.9 trillion, which is $1900 billion.
What's the percentage? Simple: $94.6 / $1900 x 100 = 5%.
See, if China diversified 5% of their reserves, they would dominate the world gold market, buying an equal amount bought by the rest of the world in a year, and that could crash the dollar by 50%, while gold prices could double!
http://news.silverseek.com/GoldIsMoney/1227122206.php
Of course, we have been waiting for years now for the rest of the world to diversify their Dollars into Gold. If, and/or when that will ever happen is clearly open to debate. But with US Treasury's yielding just 3% in a highly inflationary environment, not to mention owning the debt of a bankrupt entity, it would prudent to begin dumping ones Dollar assets for Gold.
We see this morning that there is a bit of a run progressing in Gold and Silver. The Dollar is down almost a full point. We're not too excited yet. Gold must still clear 776 and Silver 10.50, and stay there, before the Gold Bulls can run again. A true flight to quality and the real safe haven of Gold may still be a ways off yet, but it is never too soon these days to book your ticket.
Reflation Challenge & Gold
Jim Willie CB
A major challenge looms large on the immediate horizon. The USEconomy must be reflated in order to avoid collapse. Debts have become a crippling factor. Liquidation of speculative trades coincides with economic retreat, and hedge funds are under attack by their creditors (largely Wall Street firms) while major companies shed workers by the tens of thousands. When asked about economic prospects, a standard answer lately of mine has been to observe important signals not of recession but of potential disintegration. Almost all of the economic data, almost all of the Fed regional reports, almost all of the consumer sentiment indexes, almost all of the jobs data, almost all of the housing foreclosure data, is negative. The most dangerous and disgusting aspect of the current rescue initiatives is that almost all Dept Treasury and USFed actions are not revealed via any disclosure at all, nothing. Despite demands for transparency, nothing is shared on detail. Corruption and fraud usually thrive in such an environment.
Many clownish elite economists seem to miss the point, when they overlook how bank insolvency is much more the issue than liquidity. Big banks not only have doubts as to their own solvency, but they dislike the credit standing of many of their borrowers. So the challenge will be to reflate the economy even as desired, to proceed with money flowing into its credit centers, and to exploit how current loans can be paid back with cheaper future money. Gold will thrive in this environment, since a climax of a disaster, or a climax of produced price inflation will benefit gold enormously. Both scenarios are very favorable to gold and silver prices. Besides, a default at the COMEX for both gold and silver seem highly likely, with cracks forming in December, and outright highly publicized defaults suffered in 1Q2009.
http://news.goldseek.com/GoldenJackass/1227131103.php
As for my "prediction" that Oil was within 5% of it's low...oops. Maybe 10%, we'll see. I do firmly believe that the upside in Oil here is far greater than the downside. $65-70 Oil, minimum, is essential for the Oil industry...not to mention OPEC.
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