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QE Finished, Gold Fans Clearly Crackpots

The US Fed just ended quantitative easing. Anyone thinking history or gold worth a look must be a crackpot for worrying...   TIME WAS the Gold Standard simply rain or snooker tables, writes Adrian Ash at BullionVault.    Zero rates and quantitative easing are the monetary equivalents today. Doing anything else puts a cental bank into the "hall of shame" according to Bloomberg. The Financial Times gasps that today the US Fed's "grand experiment is drawing to a close..."   Oh yeah? The world hasn't yet seen the last of US quantitative easing, we think. Not by a long chalk. QE is getting new life after 15 years in Japan, the world's fourth largest economy, and it has barely begun in the single largest, the Eurozone.    Only China to go, and the QE Standard will be truly global. But financial markets and pricing mechanisms the world over are already through the looking glass. After $3 trillion of US Fed asset purchases, climbing back to the other side will take more than a month's rest from extra money printing.    The Gold Standard, meantime, now exists only to fill space when financial hacks run out of other silly things to talk about.    Take this classic Phil Space nonsense, for instance, from the Washington Post.   To recap...    Over a week ago, billionaire tech-stock investor and former PayPal boss Peter Thiel appeared on right-wing shock jock Glenn Beck's TV show. He mumbled something about the value of money...reality...and the virtual world of monetary politics we've all lived in since 1971.    Nothing to see or hear in that. Even the laziest gold bug can see US president Nixon's decision to end the Dollar's gold link changed nothing and everything all at once. Metaphysical mumblings are the best anyone's since managed in trying to understand how humanity got beyond itself in that moment.   Yet on Friday, Thiel's comments were picked up by a right-leaning think tank blogger...and finally last night, this "unthink" piece appeared at the Washington Post online.    So what? Well, George Selgin, new Cato Institute director, said earlier this month that anyone challenging the way money currently works must do better if they want to be taken seriously. Amateur bug-o-sphere stuff only makes things worse.   But Selgin underplayed the task ahead, I fear. QE, zero rates and unlimited money-supply growth are big, important issues. Today's US Fed meeting proved that once again.    On the other side of the debate however, even the most qualified and serious economist daring to doubt the sanity of printing money to buy up government debt, mortgages, stocks or other nation's currencies now looks like a "crackpot" to most politicians, financiers and reporters today.   Because, hey! Nothing bad has happened. No inflation, currency destruction or financial apocalypse fuelled by money-from-nowhere.    Not yet. And now the Fed is turning off the taps. For now.   What could possibly go wrong? We must be crazy to bother owning gold as financial insurance, never mind worrying about how money basic to civilization as the written being bent and remade in the latest central-bank experiments.

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Gold Bullion Hoarded by Russia, Shed by GLD Ahead of "Dovish" Fed FOMC Decision

GOLD BULLION prices in London's wholesale market fell near 3-week lows Wednesday as world stock markets and commodities rose ahead of today's US Federal Reserve decision.   Silver was firmer, bouncing above last week's closing level at $17.20 to cut the Gold/Silver Ratio of relative bullion prices to a 2-week low beneath 71.   "Consensus is the FOMC will abolish its QE program but not elaborate on forward guidance" over raising interest rates in 2015, says Swiss refining and finance group MKS.   "Any changing in the wording of the [Fed] statement to suggest later rate hikes will benefit gold and vice versa."   "In general," repeats today's note from the commodities team at Standard Bank, "the broader financial markets expect a dovish [Fed statement] today.    "We believe that precious metals are also pricing a dovish FOMC...As a result, either the outcome is a non-event, or the risk lies to the downside if the FOMC is less dovish than anticipated."   Shedding another 2 tonnes Tuesday, the giant SPDR Gold Trust (NYSEArca:GLD) – the world's largest exchange-traded fund by value at its 2011 peak – was today on course for its biggest monthly outflow of 2014 to date.   Losing over 26 tonnes so far in October – some 3.4% of the bullion needed to back its shares at the start of the month – the GLD shed a monthly average of 46 tonnes during the 2013 price crash, then equal to 4.3%.   The Russian state, meantime, boosted its gold bullion reserves at the fastest pace last month since its local-government debt default of 1998, Bloomberg reports.   Now the world's 5th largest state-owned bullion reserves, Russia grew its gold holdings by 37 tonnes in September to 1,150 tonnes – the largest level since 1993, and equal to 9.1% of the former Soviet state's total foreign exchange reserves.   Current president Vladimir Putin set a 10% target in 2006 when first in the Kremlin.   "The Swiss National Bank [in contrast] has the liberty of deciding how much gold to hold," notes French investment and bullion bank Societe Generale analyst Robin Bhar today.   But next month's Swiss gold referendum – what Bhar calls "a tail risk" for otherwise falling prices – could change that, forcing the SNB to hold 20% of its assets in gold bullion.   "If the referendum passes, the central bank would likely buy over a multi-year period," says SocGen's Bhar, forecasting perhaps 2,800 tonnes of new demand at prices of $1000 per ounce, or only 1,500 tonnes at $1500.   "I can honestly say the Swiss gold vote is giving me sleepless nights," said Swiss National Bank board member Fritz Zurbrügg to Aargauer Zeitung today.   If the initiative is passed, "We will be limited in our monetary policy and our credibility will be damaged."

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Gold Prices Spike $10 from 2-Week Low, Commodities "Also Priced for Dovish Fed"

GOLD PRICES rose to 3-session highs above $1233 per ounce Tuesday lunchtime in London, recovering more than $10 from an overnight dip to 2-week lows as the Dollar fell following weak US data.   With the US Federal Reserve set to taper the last $15 billion of monthly QE asset purchases tomorrow, durable goods orders last month showed a 1.7% drop from August, said the US Commerce Department – the fastest drop in 2014 so far.   Some four-in-five economists polled by Bloomberg News expect the Fed to retain its promise of keeping interest rates near zero for "considerable time" in Wednesday's statement.   Sweden's Riksbank today took its key lending rate down to zero, and held its deposit rate for commercial bank reserves at minus 0.5% for the 3rd month running.   "Monetary policy is aimed at influencing people's behaviour," said Bank of Japan deputy governor Kikuo Iwata told the Tokyo parliament today   "It can't be like a train schedule," said Iwata, confirming the BoJ's commitment to QE and zero rates.   Silver rose faster than gold prices, touching near-1 week highs at $17.40 per ounce before also easing back.   "We still think commodities are pricing a dovish Fed too," says one London trading desk, noting this week's rally from new 5-year lows in broad raw materials indices.   "As a result the surprise may come to the hawkish side, relative to expectations."   Shedding 15 tonnes last week, the giant SPDR Gold Trust (NYSEArca:GLD) held yesterday at 745 tonnes of gold backing its shares – the smallest amount needed since October 2008.   Gold "remains in a downtrend," says Societe Generale analyst Robin Bhar, "but pick-up in physical buying [is] supportive."   Retail gold sales in India – the world's No.1 consumer nation until import controls were imposed 16 months ago – last week rose 20-25% from the same Dhanteras festival in 2013, reports The Asian Age from Mumbai.   Shanghai gold premiums meantime slipped Tuesday to 25 cents per ounce over London prices, suggesting weak demand and ample supply in China's wholesale market.   The strong monthly rise in Chinese gold imports through Hong Kong reported Monday "comes as no surprise," says a note from Standard Bank, "given that the SGE premium was around zero for most of July and August, then pushed up a little to $3 in September, incentivising more imports."   Year-to-date howver, "China’s gold imports still undershoot 2013 levels despite a strong start," Standard's commodities team – led by Walter de Wet – goes on.   "More broadly, we still believe it will be difficult for Asia to match the gold demand of last year – especially in Q4...[because] market expectations have adjusted to the lower gold price, and gold would need to move lower to spur demand."

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Silver Cheapest vs. Gold in 5 Years as Both Slip, Diwali "In Line" with 2013 So Far

GOLD PRICES fell below last Friday's 6-week closing high in London trade Thursday, slipping to $1232 per ounce as US bond yields rose and commodity prices fell yet again.   Manufacturing PMI data from China and Europe beat analyst forecasts but world stock markets held flat overall.   Silver prices fell faster than gold, nearing 2-week lows at $17.05 and driving down to the cheapest level in terms of gold since July 2009.   Hitting just 33 ounces of silver per 1 ounce of gold when silver prices peaked in spring 2011, the Gold/Silver Ratio fell to 85 during the Lehmans Crash of late 2008.   Today it touched 72.4 ounced of silver per 1 ounce of gold.   "The general US Dollar strength and strong equities [are] translating into pressure for gold," says a note from Swiss refiner MKS's traders.   "Flow-wise...Chinese demand [has been] drying up at these higher levels and Indian demand is likely to curtail following Diwali."   The 5-day Hindu "festival of lights" beginning Tuesday with Dhanteras has so far seen gold demand "match last year" the Economic Times of India quotes Suresh Jain, director of manufacturer and wholesaler Royal Chains in Mumbai, who yesterday became president of trade body the Indian Bullion & Jewellers Association (IBJA).   "Feedback trickling in from jewellers and bullion dealers across the country," says Jain, "suggests that sale of coins and jewellery was more or less in line with Dhanteras 2013."   Chinese gold prices meantime held level with London quotes at the end of Shanghai trade Thursday, lacking any sizeable premium for the 3rd day running but missing the $10 drop per ounce which then followed in global trade.   Activity in China's manufacturing sector has risen slightly, according to HSBC's Purchasing Managers Index, released overnight.   France 's manufacturing and services sectors are both slowing however, Markit's PMI release said today.   Hoping to boost business lending in the Eurozone, commercial bank debt now being bought by the European Central Bank "could amount to between €1 billion and €2bn" this week, says French bank BNP Paribas' senior covered bonds strategist Heiko Langer to Bloomberg.   "Eventually, real interest rates are likely to rise," said Ben Broadbent, deputy governor of the Bank of England in a speech today, "[but] are likely to stay low for some time yet."   Previously setting a low of 2.0% during its 300-year history, the Bank has now kept UK rates at all-time lows of 0.5% for more than half-a-decade.   "Will these morons ever learn?" asks French bank Societe Generale's strategist Albert Edwards today.   "The central banks for all their huffing and puffing cannot eliminate the business cycle. They should have realised after the 2008 Great Recession that the longer they suppress volatility, both economic and market, the greater the subsequent crash."

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World Gold Council report highlights responsible gold mining’s continuing constructive impact on host economies

The World Gold Council yesterday released its second Responsible Gold Mining and Value Distribution report at the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development in Geneva. This edition of the report reinforces the continuing contribution responsible gold mining can make in supporting economic development in host countries. As well as providing greater...

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