“I have always depended on the kindness of strangers,” said Blanche DuBois, in the final words of the play A Streetcar Named Desire. Well, don’t we all.

Many citizens probably still cling to the old saw that public debt doesn’t matter because “we owe it to ourselves.” Wrong. Debt always matters. And as for whom we owe it to, it is a lot of kind (or, at least, not yet unkind) strangers.

As recently as 1970, foreign holders of U.S. debt were essentially non-existent. But their slice of our obligation pie has steadily increased, especially over the past two decades, until now foreign governments and international investors hold about 35% of Treasuries, as the following chart reveals.

Chart of U.S. national debt holders, domestic and foreign

Of about $11 trillion in U.S. debt, foreigners have about $3.8 trillion, with China in the lead at nearly $1 trillion and Japan not far behind at around $750 billion.
Most likely, though, this trend has already leveled off. The Chinese, Japanese, Russians, and Indians have openly announced their decision to cut back on further purchases and existing holdings of U.S. government debt. Beyond that, the source of funds previously allocated to their purchases — trade surpluses — has declined sharply with the recession. As a consequence, going forward, foreign buying is more apt to shrink than increase.
While foreigners are continuing to show up for the record-sized Treasury auctions, it’s due to the dollar retaining its status (albeit shakily) as the world’s reserve currency. But they have become quite cautious, generally investing towards the front end of the yield curve, which is a vote of no confidence in the buck’s future. As the chart below illustrates, sales of long-term bonds to foreigners are way down.

Treasury bond sales graph

So what does all this mean?

It means that a big chunk of our prosperity during the past twenty years was due to a trade deficit that put billions of dollars into the hands of foreigners, who then turned around and bought Treasuries with them, helping the U.S. government finance its massive deficit spending. That’s over — and the unwinding process has just begun.

Yet federal deficit spending, far from reflecting this reality, has grown by leaps and bounds. But who will finance it? Let’s extend our first chart out a few years.

Projected U.S. Debt

As you can see, we project that foreign participation has plateaued. U.S. private domestic investors can probably increase their holdings moderately, now that households are consuming less and saving more, and financial institutions have money to invest in Treasury paper. The agencies and trusts (like Social Security) are really not a part of the equation, but rather reflect programs on “auto-pilot” and quickly headed to the point where they will negatively impact, not help, the deficits.
Adding it all together, even under the most conservative of assumptions, there are simply not enough buyers to cover the accelerating federal deficits. That leaves the lender of last resort, the Federal Reserve, as the only remaining candidate to satisfy the government’s grotesque appetite for funding. There is no viable alternative.
The Fed will take up the slack in the only way open to it, by printing money out of thin air and exchanging it for promises from the Treasury. That means an escalation of monetary inflation and, somewhere down the road, serious price inflation as well. We don’t know exactly when that will happen, only that it must.
The editors of The Casey Report have been alerting subscribers to this very possible scenario for quite some time. If foreigners stop buying U.S. government debt, the whole house of cards will come crashing down. But you can do a lot to protect yourself financially – run with the trend instead of swimming against it. Find out more about the accurate predictions of trend hunter Doug Casey and his team, and how to profit from them . . . click here.

…wait until you see what’s in the cards for commercial real estate.

That’s right, the next train wreck will be in commercial real estate. Couldn’t be worse than last year’s residential market crash? That remains to be seen. But it’s coming soon, probably as early as the second quarter of next year, and there’s nothing that can prevent it. The government will intervene, trying desperately to delay the day of reckoning, and may even succeed. For a while. But make no mistake about it, that train is going off the tracks no matter what.

Every part of the sector – from multifamily apartment buildings to retail shopping centers, suburban office buildings, industrial facilities, and hotels – has accumulated a huge amount of defaulted or nonperforming paper. It’s an impossible, swaying structure that cannot long stand.

Just ask Andy Miller.

Andy is one of the most knowledgeable people around when it comes to commercial real estate. Co-founder of the Miller Fishman Group of Denver, he has spent twenty years buying and developing apartment communities, shopping centers, office buildings, and warehouses throughout the country. He’s also worked extensively – especially lately – with asset managers and special servicers (those who handle commercial mortgage-backed securities, or CMBS) from insurance companies, conduits, and the biggest banks in the U.S., advising them on default scenarios, helping them develop realistic pricing structures, and making hold or sell recommendations.

It isn’t easy. Commercial real estate sales are off a staggering 82% in 2009, compared with 2008, and last year was worse than ’07. No one is selling at depressed prices, but it hardly matters as there are no buyers, either because they’re afraid of the market or can’t meet more stringent loan requirements. Two years ago, the value of all commercial real estate in the U.S. was about $6.5 trillion. Against that was laid $3-3.5 trillion in loans. The latter figure hasn’t changed much. But the former has sunk like a bar of lead in the lake, so that now between half and two-thirds of those loans will have to be written down, Andy estimates.

“If the banks had to take that hit all at once, there wouldn’t be any banks,” he says.

And it’s actually worse than that. As even average citizens became aware during the subprime meltdown, loans in recent years were bundled into exotic financial vehicles that could be sold and resold, a class generically known as conduits. These commercial mortgage-backed securities, while less well known than their cousins built upon home loans, are nonetheless ubiquitous.

Three guesses who were among the significant buyers of CMBS. If you said banks, banks, and more banks, you got it. Thus these folks are sitting not only on their own malperforming loans, but on a whole lot of everyone else’s toxic junk, too.

This is how bad conduits are: A 3% default rate last year jumped to 6% in 2009 and is expected to double again, to 12%, in 2010. An entity that takes a 12% hit to its portfolio – and this includes countless banks, pension and annuity funds, international institutional investors, and others – is in deep, deep trouble.

The real tsunami is coming, probably in the second quarter of 2010, Andy estimates. Because that’s when banks will have to start preparing for the wave of mortgages that were written near the market top and are maturing in 2011-12. Unlike home loans, commercial loans tend to be relatively short-term in nature (average 5-7 years), because – outside of apartment building loans backed by Fannie or Freddie – there are no government programs to subsidize longer-term ones. These guys mature in bunches.

According to a recent Deutsche Bank presentation, the delinquency rate on commercial loans as of the end of 2Q09 was greater than 4%. Of these, they expect that north of 70% will not qualify for refinancing. Imagine what will happen to the estimated $2 trillion in commercial mortgages that mature between now and 2013.

And even that is not the end of it. There’s a second huge wave on the way in 2015-16.

Problem is, instead of trying to meet this inevitable challenge head on, asset managers have decided to believe in such phantoms as the tooth fairy, honesty at the Fed, and an economic turnaround powerful enough to bail them all out. De Nile is not just a river in Egypt.

To be fair, it’s difficult to envision what an intelligent, aggressive response would look like, given the breadth and depth of the crisis, and the lack of resources available to deal with it. Miller recently met with a group of asset managers from a number of different, prominent banks. They reported that they’re completely overwhelmed and can’t even begin to cope with the sheer volume of problem loans on their calendar. It’s so bad that they’re now dealing with some borrowers who haven’t paid a cent in a year and a half.

What do you do if, as Andy thinks is the case, 85-90% of the entire commercial real estate market is under water relative to its financing? What happens to a property when its value drops way below the loan, a seller can’t get enough money to get out, a buyer can’t raise enough money to get in, and the bank can’t afford to foreclose? Simple. It just sits there, carried along on the bank’s books at some inflated “mark to fantasy” price that makes the institution’s balance sheet look passable. The industry even has a catchphrase for the situation: “A rolling loan gathers no moss.”

In the case of a retail store, a bankrupt tenant walks away. Andy looked at just the part of Phoenix where his firm does business and found 90 vacant big box stores, with an aggregate floor space of 8 million square feet. If Christmas season is as lackluster as cash-strapped consumers are likely to make it, there will be many others to follow.

The hotel business is terrible. Overbuilding based upon travelers who went into debt to finance lavish vacations is taking its toll on tourist destinations. At the same time, business travel has seriously contracted. Flights into Las Vegas, which caters to both, have been slashed so much that even if every seat on every remaining flight were filled and visitors stayed for an average number of days, the hotels still couldn’t break even. In industry parlance, banks are now engaged in “extend and pretend,” i.e., giving hotels three- to six-month loan extensions in the hope that things will somehow improve in the near future.

Office space is doing okay in central business districts, but not faring well elsewhere. Some estimates tab the national office vacancy rate at over 16.5%, compared with 12.6% in January 2008. It exceeds 20% in parts of Atlanta and San Diego, and in many places in between.

Multifamily apartment buildings – and the very creaky Fannie and Freddie are carrying a load of them – may be the next to topple. As values deteriorate and landlords are faced with loans coming due, there is no incentive to fix whatever goes wrong. If, for example, you have a $10 million loan maturing in two years, and the property value has declined to $6 million, why would you spend half a million to fix leaky roofs? The question answers itself. Yet, as capital spending needs are not attended to, the apartments deteriorate. Which leads to working-class tenants replaced by meth labs. Which leads to even lower property values. And so on. In the end, when the banks are forced to take possession, they will be left with either expensive repair jobs, or the cost of demolition and a total write-off.

As the overall commercial real estate crisis escalates, the banks will do the same thing they did last year: run to the government, palms outstretched.

How will Washington respond? Good question. On the one hand, further bailouts will further infuriate the public. But on the other, the political sentiment will be that allowing the banks to fail will have even more dire consequences.

The Fed has already tried to let some of the relentlessly building pressure out of the balloon through TALF (Term Asset-Backed Securities Loan Facility). But that hasn’t worked, because TALF only backs the most senior, creditworthy bonds in a CMBS pool. Those aren’t the problem. The problem is the junior notes no one wants.

In order to increase market liquidity and get conduits moving again, the government will likely be forced to create a guarantee program similar to the FHA, Miller thinks, whereby short-term money (on the order of 5-7 years) is made available. Will that just push our problems five to seven years down the road? Quite possibly. But what is being purchased is time, the only thing left to buy. The hope, of course, is that it’s enough time – for the real estate market to stabilize, prices to return to more “normal” levels, and the world to turn all hunky dory.

Rock, meet hard place. Let all the troubled banks fail, and the consequences will range from some excruciating but short-term pain, to a plunge into full-bore depression. Prop them up with yet more newly printed fiat money, and anything from high to hyperinflation will inevitably result, along with the possibility of extending the problem well into the next decade.

Both are frightening prospects. We don’t want either, but realistically, we’re going to get one or the other. Let’s be clear, it won’t be the end of the world. However, it will be the end of the world as we know it. That makes it imperative to prepare for the new one that’s coming.

The editors of The Casey Report, supported by real estate pro Andy Miller, have been warning of the coming commercial real estate debacle since September 2008. This one’s rather easy to time – because they know when the loans will come due. And as subscribers can testify, accurately predicting big trends is the forte of Doug Casey and his expert team. To learn how you can profit from making the trend your friend, click here.

Before we delve into the reasons behind all the publicity, here’s the basic skinny on REEs: One, they are rare, at least sort of. Two, they are indispensable to modern technology. Three, the number of active, dedicated producers is tiny, with more than 90% of the world’s supply coming from China.

If you took high school chemistry, you probably remember the periodic table of the elements. But if you’re like most of us, even if you pulled a 95 on the chem final, you may not recall many of the details today. And there’s a better than even chance you never bothered to memorize the names of the REEs. It’s time to get reacquainted.

They’re generally clustered in a separate grouping at the bottom of the table, are known collectively as the lanthanoids, and these are their names, in order of atomic number (57-70): lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, and ytterbium. Yttrium (39) and lutetium (71) are also sometimes included.

Need to Know, Point 1: Rarity

Fact is, we begin with something of a misnomer. These elements are not, strictly speaking, rare. Earth’s crust is full of them. True, they’re not as common as iron, carbon, or silicon, but are about on a par with nickel, copper, and zinc. Even the scarcest is way more abundant than gold, platinum, or palladium.

What is rare about them is that they’re widely dispersed. Very seldom are they found in economically exploitable deposits. Complicating matters further is that there are so many of them, and they clump together. They have to be separated first from the ore and then from each other.

Thus REE production comes primarily from other mines’ byproducts. The miner strips off the metal he’s really after, then sends the REE clusters to a specialty refiner.

Need to Know, Point 2: Applications

It’s safe to say that life as we know it would be very different without the REEs. The more our technological accomplishments pile atop one another, the more crucial these metals become. Because of their unique properties, there are generally no substitutes for them.

Of all the REEs, the one people may have heard of is neodymium. Alloys containing it have revolutionized permanent magnet technology, allowing miniaturization of all sorts of electronic components in appliances, A/V equipment, computers, communication systems, and military gear. Your hard drive probably has neodymium in it. So does your DVD player.

Liquid crystal displays depend on europium. Fiber-optic cables can’t function without erbium. Virtually all specialty glass products, from mirrors to precision lenses, are polished with cerium oxide. Several REEs are essential constituents of both petroleum fluid cracking catalysts and auto emissions-control catalytic converters. Half a dozen REEs go into the manufacture of the energy-efficient fluorescent bulbs that will soon be mandatory. Lanthanum-nickel-hydride rechargeable batteries are replacing older ones based on lead or cadmium. And no REEs, no electric cars. Nor next-generation wind turbines.

That’s only a partial list. But what makes REEs an increasingly sensitive topic is their role in national defense. Here are a few small items that have become dependent on them: jet fighter engines, missile guidance systems, underwater mine detectors, range finders, space-based satellite power plants, and military communications systems.

Think the Pentagon is very, very interested in maintaining a steady REE supply?

Need to Know, Point 3: Supply

95% of the world’s REE production originates in China. If you’re looking for reasons why we’re so nice to the premier Communist power left standing, this is a biggie.

We weren’t always so dependent. Not long ago, mines such as Mountain Pass in California made us nearly self-sufficient in REEs. But in the early ‘90s, China flooded the market with cheaper product, until it had driven all of its competitors out of business.

Today, Mountain Pass is being revived, but the start-up of an old mine is a lengthy and costly process. There are also some from-scratch REE development projects under way in the U.S., as well as Canada and Australia. But for the moment, China holds the hand with all of the high cards in it.

Forget your hard drive. Forget 11th-grade chemistry experiments. This is a national security issue. The American government cannot afford to lose that supply source, period. Maybe someday, but not now.

And that’s what’s behind the recent furor over these obscure elements. Because China threatened just that, a cutoff. The one thing that really gets Washington’s knickers in a twist.

In August, the story broke in the mainstream press. Sources in China leaked news of a draft copy of a report from the Ministry of Industry and Information Technology. It allegedly calls for a total export ban on five of the rare earths, with the rest restricted to a combined export quota of 35,000 metric tons a year, far below annual global consumption of 125,000 tons, and rising fast.

This doesn’t look like a move they’d follow through on, if only because of the lost trade revenues. And it’s only a recommendation; final approval rests with China’s State Council. But consider it an opening shot across our bow, if you wish. Or perhaps they’re telling us they need their REEs for the domestic economy, and we’d best go find our own supplies. Either way, the scramble is on to find alternatives.

That could backfire. REE prices and demand were already dropping last fall as the recession deepened, and China maintains a decided competitive advantage beyond control of supply: lax environmental standards (many REEs are highly toxic). Thus the new companies could spend the fortunes required to come on line, only to find themselves victims of yet another market glut engineered by the Chinese. Still, these metals are so important, it wouldn’t surprise us if the U.S. government subsidized domestic production, rather than risk a squeeze.

The Market

The market took due notice of the China story, driving the stocks of Western REE producers, and would-be producers, nearly straight up. Since late August, Avalon Rare Metals (TSE:AVL) has gained 120%, Arafura Resources is up 75%, Rare Element Resources has added 72%, and Lynas Corp. (ASX:LYC) is 50% higher (China, ever the master strategist, exploited the credit crisis to grab 25% of Arafura and more than 50% of Lynas). Lurking in the background is Molycorp, the private company redeveloping Mountain Pass. It’s planning an IPO that may well come out of the gate red hot.

With market action this frantic, the sector is on the frothy side at the moment. The heady market caps being awarded to these companies are obviously not based on fundamentals, and a savvy investor takes care not to get caught on the wrong side of a bubble.

Even though the Chinese export ban may never materialize, the ever-growing need for REEs is dead serious. And while the current bubble may pop any day, the long-term prospects for successful miners are outstanding.

Regards,
Doug Hornig

Source: Why All the Fuss Over Rare Earths?

Now as then, China keeps its own counsel. We know what they want us to know, plus what we can surmise from rumor and reading between the lines. But lately, we’ve been able to add presumption to news and come up with something that looks very significant.

Specifically, there’s been a flood of tantalizing stories out of the East that, taken together, strongly suggest a growing preoccupation with a form of money that was ancient even in Signor Polo’s time. And it ain’t silk. It’s gold.

We already learned, back in April, that China has been salting away bullion for the previous six years, out of sight of international gold watchers. To the tune of 14.6 million ounces. Now the evidence suggests that that was merely the prologue.

Let’s take these tidbits one at a time:

Sovereign Wealth Fund Dumping $$ for Gold?

This one is still at the rumor stage, but highly-respected website Mineweb.com is supporting it. What we know for sure is that the country founded its primary sovereign wealth fund, China Investment Corporation (CIC), two years ago, with the stated aim of rapidly deploying some of its $1.5 trillion forex surpluses – $200 billion initially, with another $100 billion recently added to the kitty – into investment in non-Chinese enterprises. This it has been doing in spades, acquiring businesses around the globe. Extractive industries are among them, including Teck Corp., the diversified Canadian mining giant.

Might it also be buying up gold? We don’t know that for sure, but it seems likely. And, in addition, rumors sneaking off the mainland indicate that within the CIC, a lot of effort is being poured into prospective investment deals in the oil and precious metals sectors. The more it produces, the more it can keep.

The Chinese have made no secret of their disdain for current American economic policy and what they see as the inevitable destruction of the dollar. That they would be moving to diversify out of the greenback shocks precisely no one, and gold is one logical landing place for all those bucks. We suspect that’s exactly what is happening, behind the scenes as well as center stage.

Gold and Silver Pushed to the People

As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions. In fact, as Mineweb and other sources report now it’s actively pushing folks to buy some personal metal, with China’s Central Television, the main state-owned television company, running news programs cum infomercials, letting the public know just how easy it is to purchase gold and silver as an investment.

It truly is as simple as can be, because every bank sells gold and silver bullion bars in four different sizes to individuals. (Try to find the same the next time you make the trek down to Wells Fargo.) Mining companies are reportedly encouraging employees to convert some of their wages to gold on payday. Gold is traded in some form 24 hours a day. And paper proxies for the metal are also soaring in popularity.

There are persistent rumors that the export of silver has already been banned. Gold could be next.

Thus China, which only yesterday was the lowest per-capita consumer of gold in the world, is bidding to become the biggest. Some analysts believe it will pass India – the top dog since forever – as early as 2010. Clearly, the government believes the country is strengthened if everyone who can holds some hard currency.

All this suggests a mania in the making, and only in the formative stage. Imagine if hundreds of millions of new consumers climb on that particular bandwagon…

China Repatriates its Bullion

Meanwhile, in early September numerous sources reported an announcement that Hong Kong is pulling all its physical gold holdings from depositories in London and transferring them to a newly built, high-security depository at the city’s airport.

That means the government is backing the promotion of Hong Kong to a more formidable status as a Swiss-style, regional trading hub for bullion, at the same time as it reduces London’s role as a key settlement and storage center.
Press reports cited government officials as saying that marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility. Outreach will also be made to commodity exchanges, banks, precious metals refiners and ETF providers.

There can be little doubt this signals that the Chinese government fully recognizes the importance of gold in a time of crisis, and that the most prudent plan involves keeping its stores close at hand.

China Threatens to “Just Walk Away”

In one of the year’s most intriguing developments, commodity and derivative markets were thrown into a tizzy on Monday, August 31, by the worldwide circulation of a story published two days earlier in Caijing magazine (and reported by Reuters here).

According to the Caijing article, a spokesperson for China’s state-owned Assets Supervision and Administration Commission – the regulator and nominal shareholder for state-owned enterprises (SOEs) – told six foreign banks that SOEs reserve the right to default on contracts.

Say what?

Maybe the commission has been paying attention to the “just walk away” forfeiture movement that blossomed among American homeowners whose overall debt on their properties far exceeded the assessed value.

Small wonder there was panic in trading houses that hold a lot of Chinese paper. They hope any problems will be worked out short of a default. In fact, “It’s [only] a handful of companies who are being encouraged by regulators to ‘re-negotiate’,” says one banking source. “It’s outrageous, but it’s China, so everyone is treading very carefully.” Very carefully.

Nevertheless, in addition to tangible losses, those potentially affected fear the establishment of a dangerous precedent, one that could lead to utter chaos in the enormous, tangled world of derivatives.

And there is one other, albeit highly speculative, possibility. Some major entities – we don’t know who, due to the opaque nature of international gold trading – have huge, perhaps quite concentrated short positions in the metal, both on the COMEX and OTC market. Is one of them China, acting through American intermediary banks?

A short position in precious metals means that the initiator of that position is obligated to deliver physical gold or silver if the buyer (who holds the long end) wants it. Suppose China is one of the big shorts. Suppose it’s been playing the market in order to buy at what it sees as bargain prices. Now suppose a gold rally induces it to just walk away from all those obligations to deliver. Who’s going to force it to make good? Guess what, no one has a gun large enough.

Granted, it’s an outlandish scenario. But impossible? No. Beijing has shown nothing but indifference to what others think of it. And if the dollar does crap out as the world’s reserve currency, there’s nothing to say that China won’t see its self-interest as lying in a completely new direction.

Conclusion. Gold, and the companies that produce it, have enjoyed a brisk runup of late, as the metal mounts yet another assault on the beckoning, symbolic $1,000 level. How much of this can be traced to what China has done, is doing, or may yet do?

We don’t know, but we suspect it’s not entirely coincidental. All rumor and speculation aside, as China clearly turns more and more bullish on gold, so will everyone else.

Regards,
Doug Hornig

Source: What the Heck Is Going on in China?

No one reads it. The mainstream media ignore it.

It’s the product of the best prognosticators in the Department of Energy. Okay, that may be what puts most people off. But if you’re patient enough to dig into it, it will cough up some fascinating nuggets of information.

The present edition is no exception. The report refrains from spelling out the conclusion that seems most obvious from its data. However, confirming a trend begun just last year, the 2009 edition clearly reveals that the government has been forced to admit that Peak Oil is coming. Moreover, it’s expected to arrive much faster than was believed as recently as two years ago.

This represents a remarkable turnaround in the agency’s opinion. Up until 2008, they were predicting unbroken growth in world oil supplies for the next two decades. But in ’08 and ’09, the rosy picture turned decidedly unrosier.

Before we look at the numbers, a couple of notes on terminology. The EIA makes its projections based on what its analysts call the “reference case,” i.e., average economic growth. It also provides estimates for better- and worse-case scenarios, but the reference case represents the best guesses they have.

Oil (as we generally think of it), upon which most of the world economy depends, is termed “conventional liquids,” i.e., the stuff that comes gushing up from under Saudi sands. “Unconventional liquids” – extra-heavy oil, bitumen, coal-to-liquids, gas-to-liquids, and biofuels – are also covered in the report, as we’ll see, but conventional is far and away the most important one at this moment in history.

With that in mind, by 2007 the IEO was in its final year of irrational exuberance, confidently predicting that world production of conventional liquids would be 107.5 million barrels/day (up from 81.9 in 2005). That dovetailed nicely with a forecast for world demand of 118 million b/d, with 10.5 million barrels of unconventional liquids taking up the slack.

By ’08, they had put the info into table form, and look what happened:

Same table, ’09:

Projected production, as you can see, is suddenly shriveling up. From 107.5 million b/d of oil projected for 2030 in 2007, to 102.9 million b/d in 2008, to this year’s meager expectation for 93.1 million. That’s a drop of 13.4% in only two years, and posits production growth of only 11.6 million b/d (14.2%) from 2006 levels.

If that isn’t an admission that the era of Peak Oil is upon us, what is?

The report assumes that some of this stunning shortfall will be made up by development of unconventional liquids to the tune of 13.5 million b/d, including a jump of 5.9 million b/d in biofuels. At the same time, while conventional liquid production from non-OPEC nations is projected to grow only 7%, OPEC is expected to substantially increase its contribution, ramping up output by almost 25%. (All figures are for the period of 2006-2030.)

Does this seem optimistic? Well, it presupposes some heavy lifting on the part of OPEC, a dicey proposition in the best of times.

And it means creation of the infrastructure necessary to exploit extra-heavy oils, tar sands, shale, ultradeep deposits and other unconventionals, all of which require sophisticated technological know-how and face significant environmental challenges.

Biofuel production could more easily be elevated. But to reach the lofty level of nearly 6 million b/d would necessitate a huge diversion of cropland from food to energy, certain to be attended by a rise in food prices, not to mention potentially serious food shortages. The need for food being rather more primal than the need for gasoline, politicians are going to be reluctant to risk loosing angry mobs into the streets.

Even if all of these developments proceed flawlessly, though, we’ll still have to face a widening gap between production and consumption. Or will we?

As it turns out, we’re in luck! Or so the EIA would have us believe. Because, accompanying that falling supply is – you guessed it – declining demand. In 2007, the IEO anticipated world demand for all liquids of 118 million b/d in 2030. This year, that estimate shrank to 107 million b/d, right in line with production.

The important point to take away from the IEO’s analysis is that the world is facing a decline in liquid fuel production and the government, after years of straight-faced denial, is now admitting it.

Does this mean we’re going to run out of oil? No. But supply constrictions mean that the good old days of limitless, cheap oil are gone. And, though viable alternatives eventually will be developed, there’s no way of putting a timetable on that. In the interim, we’re going to have to pay up if we want to keep the family jalopy on the road.

How much? The IEO report’s reference case calls for $130/barrel oil in 2030, but that’s based on relatively modest demand increases from India, China, and other developing nations, and we find it very optimistic. It easily could be twice that.

Regards,
Doug Hornig

Source: Washington Capitulates: Peak Oil Is Real

Well, it’s always good to bear in mind that there is no telling what the government might do. It’s already doing things that were unthinkable just a few years ago. If President Obama believes there is political hay to be made from seizing your gold – or even if he sincerely thinks such a move would be “good for the country” – we’re sure he won’t hesitate to make the grab. After all, his favorite predecessor, Franklin Roosevelt, set the precedent.

Many Americans don’t even realize that private gold ownership was forbidden for forty years, but it was. The relevant edict is Presidential Executive Order 6102 of April 5, 1933, which begins:

Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled

An Act to provide relief in the existing national emergency in banking, and for other purposes,in which amendatory Act Congress declared that a serious emergency exists,

I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding of gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations…

There was, of course, no constitutional peg on which to hang such an outrageous crime against the people, so FDR decided to fall back on the 1917 Trading with the Enemy Act, which he claimed gave him the authority to do this in order to prevent gold from falling into the “wrong” hands. If that seems a flimsy argument, it is.

But it echoes eerily today. How much of our personal freedom have we already been asked to sacrifice to the Forever War on Terrorism? And note also the reference to an “existing national emergency in banking” that requires extreme measures. Sound familiar?

So, no question that Obama could follow in the footsteps of his mentor, if he wanted to. That said, though, the likelihood of a new gold confiscation is remote, for a number of reasons.

2009 is not 1933. Back then, the money supply was constrained by the gold standard. As Roosevelt concocted the New Deal, he ran smack up against that wall. He needed more money than he had, couldn’t raise taxes in a depression, and couldn’t print dollars that weren’t gold-backed.

His solution may have been reprehensible, but it was elegant. First, make the private possession of gold illegal, paying those who surrender their metal the official price, $20.67 per ounce. Then revalue gold to $35 per ounce. Voilà: Instant inflation, lots of new money, problem solved. And the New Deal was off and running.

But we have long since abandoned the gold standard, and Obama doesn’t face FDR’s constraints on monetary inflation.  However much money is needed to finance his New Deal Redux, he can have it. All he has to do is rev up the printing press or turn an unlimited number of bits and bytes into electronic cash.

Given this kind of clout, what does he need gold for?

An argument can be made that the yellow metal is still useful. It runs like this: Creating money out of thin air is inflationary, and a large stash of gold, even if it doesn’t officially back anything, serves as a sort of counterweight. People around the world will have greater confidence in your currency knowing that, as a last resort, you can pay your bills in gold. And the more gold you have, the better.

Furthermore, confiscating gold and assigning it a fixed dollar value would also prevent the kind of runaway gold price that the coming massive inflation is bound to trigger. As those who argue that the gold price is already suppressed correctly point out, the government has decided to sacrifice the dollar in order to avert deflation. Thus a lower-than-free-market gold price helps obscure the damage that’s been done to the currency. People feel richer with more, albeit inflated, dollars in their pockets; a rapidly escalating gold price shows them that they’re not.

These two arguments aren’t empty, but they’re not convincing. Most folks in government subscribe to the “barbarous relic” school of thought about gold. Precious metals probably cross the minds of Obama’s economists only when they’re out buying jewelry.

And most American citizens have never even seen a physical gold coin, much less own one. Reeling in all the bullion out there will, in reality, do the government little if any good.

One final point. In the 1930s, when people were asked to turn in their gold, compliance was quite high. Americans believed their government when told that it was for the greater good. Imagine.

Today, that attitude seems laughably naïve. Those who have gold know that it is an unequaled storehouse of value. That they would meekly part with it at the government’s behest requires a belief that naïveté still rules the land.

Far more likely is that gold owners would resist. And since they also tend to be gun owners, there could be serious confrontations. The government doesn’t want mass resistance to one of its orders, nor an escalation of the domestic violence it will probably get anyway, when unemployment rises to Depression-era levels. It’s simply not worth it.

Never say never where government stupidity is involved. But all things considered, a modern-day gold confiscation is not high on our list of financial worries.

Regards,
Doug Hornig

Source: Are We Being Conned About Gold Consfication?

Gold jumped up about midway through trading in the Far East and continued its rise through London and the Comex open to an intraday high just north of $955. But at around 10 a.m. in New York the yellow metal got knocked down below $950 where it stayed through the Globex close, finishing at $949.10/oz., up $11.40. Overnight, gold is little changed.

Platinum experienced a sharp sell-off late in Hong Kong, but clawed its way back to post a decent gain for the day, closing at $1181/oz., up $9. Overnight, platinum is slightly higher.

Silver made big gains through Hong Kong and early London trading that were far too substantial to get wiped out by the 10 a.m. sell-off in New York, after which it remained range-bound between $13.60 and $13.65 and closed near the middle at $13.63/oz., up 22 cents. Overnight, silver is trending lower. (Click here for charts)

Gold closed at its highest price since June 11, not surprising since the dollar took it on the chin and oil rose for the fourth day in a row.

“The weaker U.S. dollar and rising oil prices gave gold another boost,” said Barbara Lambrecht, an analyst at Commerzebank. However, “a change in sentiment could potentially trigger a sharper price correction.”

Meanwhile, Standard Bank Group technical analyst Darran Grabham said gold’s recent advance could stall as the metal meets two important resistance points.

Grabham noted that the $965.25 and $995 levels represent “resistance trendlines of short-term and medium-term consolidation phases.” Resistance levels are where sell orders tend to be clustered.

“An initial support band is situated between $937 and $932,” Grabham wrote. “Gold strength beyond $965.25 would be interpreted as positive, underpinning the market toward $983. A break above $995 would require confirmation in the form of a weekly close above $1,000.”

Currencies and Economic News

In the currency market, the dollar fell sharply against the euro. Late Monday, the euro was trading at $1.4226 vs. $1.4099 on Friday.

Equity markets set the tone in currency trading Monday, as investors showed continued appetite for stocks and higher yielding currencies than the U.S. dollar.

“While the news stream has been light, the positive start to the earnings season from both the financial and non-financial sector is helping to bolster sentiment,” wrote strategists at Brown Brothers Harriman.

And according to MarketWatch, that’s left the dollar and the Japanese yen to lose ground. Both low-yielding currencies have tended to come under pressure as equities rise. Conversely, both have tended to benefit when economic and financial fears are on the rise.

On the economic front, U.S. stocks engaged in a smallish rally Monday as Goldman Sachs forecast the biggest second-half move in stocks in more than a decade and the June index of leading indicators signaled to short-sighted investors that the economy has moved closer to a recovery.

In the wake of better-than-expected earnings reports, Goldman Sachs on Monday raised its forecast for the S&P 500, saying an improvement in earnings will drive a sharp second-half rally. Goldman raised its year-end S&P 500 target to 1060 from 940, reflecting a potential price return of about 13% from current levels.

If Goldman’s legendary market-manipulating prowess is real then maybe its forecast will prove correct. But we don’t think the S&P 500 will be anywhere near 1000 by year’s end.

Energy

In the energy market, crude oil for August delivery rose 42 cents from Friday to close at $63.98/barrel. August reformulated gasoline climbed 2 cents to finish at $1.79/gallon.

Dollar weakness and rising global equity markets buoyed sentiment among energy traders on Monday.

Even so, oil prices finished well below their intraday highs and analysts warned that the fundamentals of the oil market remain weak.

“There’s pretty much general agreement that prices are not in line with market fundamentals,” said Michael Fitzpatrick, analyst at MF Global.

“I’ve seen no consistent signs of sustainable economic growth yet and that I think that’s what is going to be required before we go much higher,” Fitzpatrick said.

Base Metals

Base metals were all up on Monday. Copper climbed 3.6 cents to close at $2.4442/lb. Nickel added more than 9 cents to finish at $7.3444/lb. Zinc gained two and a half pennies, ending at $0.7431/lb. Aluminum tacked on more almost a quarter of a cent, closing at $0.7611/lb., while lead moved to $0.7608/lb., up three-quarters of a penny from the previous session.

Bloomberg reported that copper jumped to a nine-month high on speculation that rallying equity markets signal a recovery in global growth, which will spur gains in metal use.

Copper has surged more than 74% this year as demand rose in China, the world’s largest buyer, and the U.S. housing market stabilized to some degree. Rallying equity markets signal an improved outlook for the global economy, said Lannie Cohen, the president of Capitol Commodity Services Inc.

“The economy is starting to look like it’s really gearing up,” Cohen said. “The better outlook for the economy is going to mean better demand for copper.”

Copper climbed 9.2% last week, the biggest gain since early March, on signs of improvement in the U.S. housing market. Builders are some of the largest copper consumers, using pipes and wires made from the metal.

“The latest fundamental data suggest that demand is starting to improve and that downside risks to prices from current levels are fading,” Tobias Merath, Credit Suisse Group AG’s head of commodity research in Zurich, said in a report. “The likely increase in housing construction activity and strong car sales should see demand for base metals picking up.”

Source: The Daily Resource – July 21, 2009

Reports of dwindling supply are accurate in some areas; however, the story is not that simple. Unlike most metals that are consumed in industrial use, most of the gold ever mined is still around. Gold is forever. Thus newly mined, refined, and fabricated gold is not all that’s entering the marketplace; there are multiple ways of meeting demand. Here’s a look at each.

Breaking Rocks

Imagine that you could turn back the calendar to late 1848, as word was beginning to spread about the gold discovery at John Sutter’s sawmill on the South Fork of the American River in Coloma, California. Would you have loved gold enough to be one of the 49ers who responded to its siren song?

Those were heady times. The Golden State – though it wouldn’t officially receive its apt nickname until 1968 – had a seemingly endless supply of yellow metal, much of it just lying in remote creek beds, waiting to be scooped up. The French Ravine in Sierra County yielded single nuggets of 426 oz. in 1851 and 532 oz. in 1855. By 1869, the record was a monstrous 1,893-ounce specimen from the Monumental Mine in the Sierra City district.

The days of fabulous discoveries are not entirely gone. As recently as 1980, Kevin Hillier, a lucky Aussie following beeps from a metal detector, dug up a nugget that tipped the scales at 876 troy ounces. And in Ruby, Alaska, in 1998, bulldozer operator Barry Clay was stunned to see a 294-ounce nugget roll off the dirt pile ahead of his blade.

Modern commercial producers, though, aren’t looking for fist-sized nuggets, or even the fingernail-sized flakes that many 49ers hoped to find at the bottoms of their pans. Today, a major gold strike might grade out at 5 grams per ton of rock, and economical recovery is routinely done at significantly lower levels.

The easy-to-get stuff is largely gone. With demand rising, miners are struggling to produce ever more gold from ever-lower grades of ore. And they’re falling behind.

The CPM Group’s 2009 Gold Yearbook, one of the bibles of the industry, notes that world gold production peaked in 2001, after increases in 14 of the 15 prior years (despite a vicious bear market). Production increased only fractionally in 2001, to 82.1 million ounces, and has declined in five of the seven years since. And substantially so, with 2008 production coming in at only 74.6 million ounces, a more than 9% drop.

There are a number of simple reasons for the production decline. The older, more productive mines are playing out; newer mines tend to be lower grade; fresh mega-discoveries have become rare; cost of extraction has soared; environmental regulations are more stringent; and greedy governments demand a growing slice of the revenue pie.

South Africa has been particularly hard hit. After ruling the roost for nearly a century, it dropped to second place in production, behind China, in 2007; and into third, behind the U.S., last year. South African output topped out in 1970, at 32 million ounces, and has since fallen off more than 75%. Some miners now must burrow two miles underground to bring up something usable, and the country appears about played out.

Though the U.S. does hold the #2 spot, at 7.6 million ounces in 2008, it too has experienced a long slide. From the 1998 peak of 11.9 million ounces, it’s fallen every year but one, for a 36% overall decline.

There are some bright spots. Russia, still mostly unexploited, continues slowly but steadily ramping up production, delivering 5.9 million ounces to market in 2008. And China’s industry is growing by leaps and bounds. It captured world leadership in 2007 and cemented that position last year, with production of just over 9 million ounces.

In addition, there are some very large, well-defined deposits waiting to come on line. Kinross/Barrick’s Cerro Casale project in Chile, with 23 million ounces of gold reserves, is scheduled for a 2012 commencement; Barrick’s Pueblo Viejo in the Dominican Republic (20.4 million ounces) is slated for 2011; Newmont’s Boddington Expansion (13 million ounces) is targeted for the third quarter of this year.

But other elephant-sized discoveries are problem-laden. NovaGold/Barrick’s Donlin Creek project in Alaska (30 million ounces) is so remote it may never be economical; Barrick’s Pascua Lama on the Chile/Argentina border (18 million ounces) has been beset by anti-mining NGOs; and Las Cristinas in Venezuela (16.9 million ounces) probably will be developed only if Hugo Chavez is in the mood.

Considering the present state of the industry and the limited opportunities for developing new mines, we think it likely that gold production will fail to meet consumption for years to come. Either the price must rise to mute demand, or the shortfall must be made up from elsewhere.

The Gnomes of Zurich (and Beijing, and…)

For the past two decades, central banks have been dishoarding their gold at a pretty decent clip and have been a major source of the metal hitting the market.

Before 1999, each central bank was free to sell whatever amount it cared to. But in that year, the 15 largest European central banks (excepting only Britain) adopted a Central Bank Gold Agreement (CBGA). Although not a signatory, the U.S. sponsored the CBGA – allegedly to promote stability in the gold market – and adheres to it on an informal basis.

Under the five-year terms of the agreement, participating central banks are limited to selling an aggregate total of 500 metric tons (or 16.1 million ounces, if you think retail) of gold in any given year. The current CBGA period expires this September, but the agreement is widely expected to be renewed.

Since 2005, the trend has been notably down, with a particularly steep drop-off from 2007 to 2008. Among CBGA banks, 2007 sales were right at the limit, 15.9 million ounces, but that plunged nearly two-thirds, to 5.8 million ounces, in ’08. And the CPM Group estimates that 2009 will see another CBGA sales decline, to about 5 million ounces.

Central banks not only show increasing reluctance to part with their gold, some are now net buyers. Russia led the way in this department, adding nearly 2 million ounces to its holdings in 2008.

Then there is China. That country has made a lot of noise lately about its waning confidence in the long-term value of its forex holdings, primarily U.S. dollars, and has been aggressively trading them for tangible assets. Many analysts believed that the buying spree would likely include gold, but no one could say for sure. China’s internal financial affairs are rather less than transparent to outsiders.

However, the conjecture is now confirmed. In April, the People’s Bank of China stunned the markets by announcing that over the past six years, it had been quietly adding 14.6 million ounces to its reserves.

China’s announcement had little immediate effect. But considering China’s elevated position in the world economic pecking order, other governments are sure to take notice and follow its example.

How Much for the SOB’s Wedding Ring?

The supply source that’s taken the biggest leap forward in recent times is the recycling business. So-called “scrap gold” includes rings from failed marriages, earrings with missing mates, out-of-fashion bling – and anything else that’s been gathering dust in the jewelry box. Old electronics, too. A ton of discarded cell phones will yield 150 grams of gold, 30 times what a miner gets from an average ton of ore.

People are hip to the rising gold price, and they’re parting with their unwanted baubles en masse. It’s big business. TV ads soliciting scrap abound, including one during the Super Bowl; Internet recyclers have proliferated; and in some suburban neighborhoods, gold has replaced Tupperware as the focal point for social gatherings.

The flood of scrap has hardly been insignificant. CPM reports that it rose an estimated 18.9% in 2008, to 38.5 million ounces, following a 23.3% jump in ’07. Scrap sellers are bringing to market more than half as much gold as all the world’s miners.

The CPM Group does predict that the trend in scrap will start slowing, but still forecasts a rise of perhaps 5% this year, to 40.5 million ounces.

CPM gives two reasons for the projected slowdown. First, so much has already been melted down that sellers may be reaching the point where they will want to hang on to whatever’s left. And second, refineries are running at capacity and have little further capability for turning earrings into ingots.

As long as the price of gold remains high and economic distress continues, people who are hurting will keep swapping metal for dollars. And tons of scrap, melted down and released back to consumers, definitely serve as a drag on the gold price.

How much scrap will be recycled in the next few years is unknown, and so the effect on the market remains to be seen. The safest assumption is that this year will be much like the last, with gold’s ascent comparably retarded — meaning, not much.

Conclusion

While the market will be well supplied with new gold in 2009, whether it will exceed or lag consumption is the $64,000 question. Both jewelry and industrial consumption are on the wane, leaving investment demand as the driver. It is heavy and getting heavier, as more and more people come to believe in the wisdom of having some physical metal in their possession. Or at least investing in a paper proxy such as the SPDR Gold Trust (GLD), which in a few short years has risen from nothing to the sixth largest gold owner in the world.

Gold is increasingly viewed by investors as what it’s been throughout history: a safe-haven asset whose value can be counted on in hard times. Thus we recommend to our subscribers to keep one-third of their portfolio in physical gold. But the real money is made in gold-related investments, such as royalty companies and medium to large gold producers with millions of ounces under their belt. Our current favorite is such a slam-dunk winner that we call it “48 Karat Gold.” Click here to read our report.

Source: Supply Side Economics – How Is Gold Going to Fare This Year?

We’re extraordinarily lucky. If present thinking is correct, the first single-celled living organisms may have appeared as much as 3½ billion years ago, and it would appear that once life arrived, it never went away. That’s a very long time for conditions to have remained favorable enough to keep the chain from breaking.

As the eons unspooled, Earth’s climate varied, sometimes wildly. It has been much hotter than it is today, and much colder. (One current theory holds that the average surface temperature has regularly oscillated between 120° and -50°F.) Nearly all of the changes have been due to variations, some of them cyclical, in the amount of solar radiation reaching the surface of the planet. Through it all, life endured, because of the existence of carbon.

Now, rather suddenly, carbon is the designated boogey man. Individually and collectively, we are told, we must work on reducing our “carbon footprint,” or else something awful is going to happen. The headlines are terrifying: we’ll have hellacious droughts, monster hurricanes, and entire cities disappearing beneath the waves.

Well, perhaps. In a climatic feedback system as complex as Earth’s, anything is possible. More likely, though, is that we’ll see none of the above. Or at least not because of anything humans do or fail to do.

The simple (yes, inconvenient) truth is that scientists don’t even know whether the planet is warming at all, let alone if AGW has any role in causing it. The data are inconclusive at best. Most of those dire predictions you’ve read are based upon computer modeling, and anyone who watches the nightly weather forecast knows how infallible that tends to be.

Yet the truth has not prevented the AGW theory from being presented to the public as fact. Its proponents have so captured the media that Al Gore’s Nobel Prize is a huge story, while the Manhattan Declaration of 2008 gets nary a mention in the press. The latter, endorsed by hundreds of prominent citizens, including two hundred climate scientists, concluded that “current plans to restrict anthropogenic CO2 emissions are a dangerous misallocation of intellectual capital and resources that should be dedicated to solving humanity’s real and serious problems.”

Sadly, that misallocation is about to get a whole lot bigger. If the Obama administration has its way – and it is expected to, since there’s no meaningful opposition – carbon caps will soon be coming to every American town.

If you’re unfamiliar with the concept of a carbon cap, it’s simple. It’s a tax. The president wants to reduce per-capita U.S. carbon emissions to 14% below 2005 levels by 2020, and 83% by 2050. And he’s promoting this as a good idea by suggesting that it will pour $646 billion into federal coffers between 2012 and 2019, through government auctions of the rights to emit greenhouse gases. Those rights would be sold to energy companies, manufacturers, utilities, or anyone else who “pollutes” the air with carbon dioxide. And they could be traded.

Leave aside the question of whether reducing human carbon emissions is truly a valid goal; and whether we need another huge tax; and whether the government will do anything constructive with an infusion of our money, to the tune of nearly two-thirds of a trillion dollars. Instead, just consider the consequences.

The cost of everything will go up, as the affected businesses compensate for their lost revenue. If carbon credits are auctioned at the lower end of the projected range (between $13 and $20 a ton), estimates are that the average price of gasoline will jump by 12 cents a gallon and the average electricity bill by 7%.

Worse, though, is that the pain will be unevenly distributed. As the Detroit News editorialized, the cap-and-trade plan “is a giant dagger aimed at the nation’s heartland — particularly Michigan. It is a multi-billion-dollar tax hike on everything that Michigan does.”

That is, it penalizes states and regions with large manufacturing bases and coal dependence for electricity, and rewards places with larger populations but light industry and cleaner power plants. As Michael Morris, CEO of coal-heavy American Electric Power, put it: “It is a clear transfer of the middle part of the country’s wealth to the two coasts.” Small wonder that politicians from California and New England are such enthusiastic supporters.

For what to expect here, we can look to Europe, where cap-and-trade is firmly established. While it has worked, in the sense of lowering carbon emissions (though not by as much as anticipated), its effects have been stifling. For example, the Washington Post cited “the Dutch silicon carbide maker that calls itself the greenest such plant in the world, but now can’t afford to run full-time; the French cement workers who fear they’re going to lose jobs to Morocco, which doesn’t have to meet the European guidelines; and the German homeowners who pay 25 percent more for electricity than they did before – even as their utility companies earn record profits.”

This is what’s coming to your town, if Congress capitulates to the White House. The bill that will bring us cap-and-trade recently squeaked through the House with just a single vote to spare. It faces an uncertain future in the Senate, where opposition is stiff. Modifications surely will be made. But with Al Franken having cemented the Democratic super-majority, it’s a lock to pass in some form or other.

Ever-savvy, the market isn’t waiting. Although no cap is yet in place, carbon credits have already arrived. There’s even a place to trade them, the Chicago Climate Exchange (CCX), founded in 2003. And companies are busily buying and selling in anticipation.

How does it work? CCX’s website explains: “CCX emitting Members make a voluntary but legally binding commitment to meet annual GHG [greenhouse gas] emission reduction targets. Those who reduce below the targets have surplus allowances to sell or bank; those who emit above the targets comply by purchasing CCX Carbon Financial Instrument® (CFI®) contracts.”

In other words, some outfits are stocking up on purchased credits, against the day when they’ll be required by law. Others are speculating that the value of those credits will go up once the federal cap is in place. And some are making a lot of money simply by selling carbon reductions they’ve already made.

Among the players are expected names from the heavy industry and utilities sectors: DuPont, Ford, Reliant, American Electric Power, Potash Corp., Waste Management, and so on. But it’s a very long list, and on it are tech companies like IBM and Intel; retailers like Safeway; Miami-Dade County, Florida and Sacramento County, California; the University of Idaho and half a dozen other schools; even the Embassy of Denmark.

There’s no secret key to why so many want a piece of this action. It’s going to be a very, very big business. If European standards are applied to the U.S., we’re talking about a quarter-trillion dollars of credit trading a year.

Investors – if they’re well heeled enough and willing to assume a lot of risk — can participate directly in carbon credit trading. Or they can buy stock in the parent of CCX, which is publicly traded in London.

But there are other ways to profit from this unstoppable force.

For example, by investing in select junior exploration companies focused on alternative energies, oil, or uranium. But in these volatile times, it is vital to not only invest in the right companies but to use the right investment strategies. Like the 20-60-20 rule or the Casey Free Ride Formula described in our new, FREE special report Profiting in a New Era. Applying these tactics can make the difference between losing your shirt or winning big –click here to learn more.

Source:  The Carbon Cap: The Newest Form of Taxation

Platinum’s graph looked quite similar to gold yesterday, as the precious metal developed what looked like the gentlest of trends in the black but managed to tack on quite a bit before all was said and done, ending the day at $1129/oz., up $16. Overnight, platinum is way up.

Silver rounded out what ended up being a solid but uneventful day for the precious metals by showing the same slight trend as gold and platinum, ending at $12.87/oz., up 4 cents. Overnight, silver is trending much higher. (Click here for charts)

Gold had kind of a blah day, but I’m sure investors don’t mind too much since it was still able to post a modest gain despite the third straight day of falling crude prices.

Nevertheless, holdings of GLD, the world’s largest ETF backed by gold bullion, declined by 15.27 metric tons yesterday down to 1,094.54 tons. Since June 15th, holdings have fallen by 37.61 metric tons.

Darren Heathcote, head of trading at Investec Australia, said the dip was a reflection of the weak sentiment in last week’s market when bullion slipped to below $910.

So it was not surprising to see some investor interest being unwound,” he said.

He added, however, that he would not read too much into the decline.

“I wouldn’t consider it a change to the overall picture, the overall trend, which I think is still relatively positive for gold,” Heathcote said.

In company specific news, Silver Wheaton Corp. announced that construction of the first sulphide process line at Goldcorp’s gold-silver-lead-zinc Penasquito mine in Zacatecas, Mexico is now complete and commissioning work is advancing on schedule. Production and shipment of first concentrates are still targeted for the second half of 2009.

After a ramp-up period, Penasquito is forecast to produce an average of about 30 million ounces of silver annually over an initial 22-year mine life, of which Silver Wheaton is to receive 25% or in excess of 7 million ounces of silver per year.

Source: The Daily Resource 7/15/09