Monday, March 16, 2009

Mint Suspends Gold Sales: China Warns on U.S. Dollar and Debt!: UBS Warns $10,000 Gold

Mint Suspends Gold Sales: China Warns on U.S. Dollar and Debt!: UBS Warns $10,000 Gold

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The demand for gold is so strong, and the supply so limited the United States Mint has temporarily suspended the production of both Mint American Eagle Gold Proof and Uncirculated Coins.

According to the US Mint they suspended production...

“...because of unprecedented demand for American Eagle Gold Bullion Coins. Currently, all available 22-karat gold blanks are being allocated to the American Eagle Gold Bullion Coin Program, as the United States Mint is required by Public Law 99-185 to produce these coins “in quantities sufficient to meet public demand . . . .”

The United States Mint will resume the American Eagle Gold Proof and Uncirculated Coin Programs once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products. Additionally, as a result of the recent numismatic product portfolio analysis, fractional sizes of American Eagle Gold Uncirculated Coins will no longer be produced.

I realize that the many investors are taking heart in the fact that the Dow Jones rallied last week and may be hopeful that the worst of the credit crises and recession may be over but its far from over. I’ve been warning that the worst is yet to come and continue to do so.

Rapidly rising food prices coupled with weakening currencies in Eastern Europesymptoms of a much bigger problem. East Europe is buried with trillions in bad debt that threatens to bring not only a new wave of bank failures but also the collapse of several countries. This is literally setting the stage for a monetary collapse that will make the credit and banking crisis look like a walk in the park. Increasing numbers of news reports are beginning to recognize the rising danger, including the New York Times that lead with this danger on its front page last Monday.

Gold possible heading to $6,948 even $10,000 an ounce?

The rising danger or a monetary collapse and a wicked round of inflation has prompted a new $2,500 target price for gold by at UBS Securities. According to analyst Daniel Brebner and others at UBS Securities, the firm’s analytical recently plotted out a number of scenarios using various levels of strength for inflation and the U.S. dollar, and predicted that gold will not fall below US$500 an ounce between now and 2015, and could rise all the way to US$2,500 an ounce.

To get there would require inflation at 1970s levels and a weak U.S. dollar, UBS said. The bottom end of the range would require static inflation and a strong dollar.

There is another possibility UBS raises: what if a new gold standard was adopted to support currencies, particularly the U.S. dollar?

Using the current value of the U.S. monetary base and the country's reported gold holdings, UBS calculated a value for gold of US$6,948 an ounce. In other words, that is the level gold would need to be at to support the value of the U.S. dollar, given the number of dollars in circulation. If China and Japan are included, UBS predicted that the price would be close to US$10,000 an ounce.

But is that really possible? The UBS team noted that a gold standard would theoretically bring some confidence back to currencies and stabilize them. But it would create all kinds of problems by removing flexible exchange rates, and they noted that not much headway has been made in this area.

Regardless there are no shortages of problems ahead. Many are being created by the printing of TENS OF TRILLIONS OF NEW DEBT.

China expresses genuine concern over the safety of the U.S. Dollar and Debt

The danger is so great that it promoted China’s premier to express concern this past Friday about China’s massive holdings of Treasuries and other U.S. debt, appealing to Washington to safeguard their value, and said Beijing is ready to expand its stimulus if the economy worsens.

Premier Wen Jiabao noted that Beijing is the biggest foreign creditor to the United States and called on Washington to see that its response to the global slowdown does not damage the value of Chinese holdings.

“We have made a huge amount of loans to the United States. Of course we are concerned about the safety of our assets. To be honest, I’m a little bit worried,” Wen said at a news conference following the closing of China’s annual legislative session. “I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.”

If you’ve been a subscriber to Gold & Energy Advisor for a little while you’ve no doubt remember the few issues I’ve done in the past entitled “The Death of the Dollar” and “China’s US $ Blackmail” which details how China's growing wealth and military power will help drive gold to $2,500 and platinum to $5,000 per ounce. The U.S. Dollar and our economy are absolutely at the mercy of China.

Premier Wen Jiabao statements should be seen as the first shot across the bow of the economic security of the United States and dollar.

There’s big trouble brewing: Right now the U.S. stock market and the value of the U.S. Dollar are giving many investors hope that the trouble is passing. It isn’t!

There’s a reason there’s a gold coin shortage and even a shortage of bullion that is so severe the U.S. Mint has had to suspend sales of U.S. Gold Eagles. Smart money all over the world is looking past the temporary rays of sunshine and hope and is focused on the bigger long term picture which are being summed up very well by Chinese Wen Jiabao in his warnings to the Obama Administration.

If you’re not holding at least 15% of your available investments in physical gold ( I am now recommending 50%), platinum and or rare numismatic coins as a proxy against a monetary collapse you’re playing with fire. The danger continues to grow.

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