05/23/11 Phnom Penh, Cambodia – It’s “risk off” as a new week begins. Markets are jittery about the eurozone again…
- S&P downgraded its outlook for Italian government debt from “stable” to “negative”
- Spain’s ruling Socialists got clobbered in regional elections yesterday, casting doubt on the future of Spanish austerity measures
- Greece is scrambling to sell off unspecified assets (the Parthenon?) to stave off a “restructuring” (read: stretching out the payments) of its debt.
Ten-year Greek bonds yield 16.98% as of this writing. In the credit default swap market, traders now give Greece a 68.7% probability of defaulting in the next five years.
At the moment, the market impact looks like this…
- The Dow and the S&P have both tumbled a little over 1%
- Oil is off more than 3%, to $96.90
- Yields on 10-year U.S. Treasuries are down to 3.1%… their lowest all year
- The euro clings to $1.40… while the dollar index has moved decisively above 76 for the first time in a month.
Gold, however, is holding its own in the face of this action. At last check, the spot price was $1,513 – virtually unchanged after Friday’s run-up. Silver is likewise steady at $35.15.
In euro terms, gold has reached a record of EUR 1,080 an ounce.
This will be interesting to watch. We could be entering a period much like the first half of 2010 – in which the dollar index ran up 19%… but gold did not fall accordingly. Indeed, it rose 11%… before powering up another 13% by year-end.
The Shanghai Gold Exchange plans to launch exchange-traded funds to help meet demand for precious metals. No timetable yet, but no doubt the exchange’s managers have noted overwhelming demand for overseas gold ETFs – which Chinese first got access to in January.
As we noted last week, China is now the No. 1 source of investment demand for gold – surpassing the longtime leader, India. And the Chinese central bank has a long-term aim of growing its gold reserves eightfold.
Maybe the new “gold as money” law in Utah will have a little more impact than we first thought.
Earlier this year, the legislature passed and the governor signed legislation affirming gold and silver’s status as currency. The only practical effect we saw at the time was precious metals became exempt from state capital gains taxes.
Now along comes an entrepreneur named Craig Franco, who plans to open the Utah Gold and Silver Depository next week. He has no website yet, so we’re left to rely on an Associated Press account that says, “The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.”
“I expect a wait-and-see attitude,” Franco says. “Once the depository is executed and transactions can occur, then I think people will move into the marketplace.”
Based on this, we’re not sure how the “debit-like card” is supposed to work… or how it differs from other efforts like those of our friends at GoldMoney.com. But we’ll keep an eye on it.
Addison Wiggin
for The Daily Reckoning
Addison Wiggin
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
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Sounds like a scam to me
Is Madoff already out again ?
The whole Idea og going to True money,Gold & silver coins is loss of fait H in the Fiat printing press.
So People are supposed to trust “Franco” with their real money, so that he can “print” reciepts on the the amount/Value.
Good luck
Yeah Mike, I agree with you – who does this guy think he is, the Federal Gov?