Gold, Silver surge on FED announcing Quantitative Easing 2.5 | Gold and Silver Blog

Gold, Silver surge on FED announcing Quantitative Easing 2.5 Gold and Silver Blog

Some blacks see racism in 'birther' questions

WASHINGTON (AP) -- Shortly after President Barack Obama declared himself an American-born citizen with papers to prove it, Baratunde Thurston declared himself a disgusted black man.

"I find it hard to summarize in mere words the amount of pain and rage this incident has caused," Thurston said.

"This" would be the nation's first black president standing in the White House, blue power suit and all, going on TV to debunk, in more detail than before, the persistent, he-ain't-really-an-American rumors fanned anew by Donald Trump, the developer and might-be presidential candidate.

Many African-Americans responded to Wednesday's scene with a large sigh. The rumors and the controversy had a particular, troubling resonance for them: They've seen, heard, lived, the legitimacy of black people being called into question so many times before that, they said, they weren't shocked to see it happen to Obama over something as simple as a birth certificate.

But they were sad about it, too, seeing what they felt was a high-level manifestation of the idea that when a black person accomplishes something great there must be something wrong.

"The stress of feeling constantly called into question, constantly under surveillance, has emotional and physical consequences for us," said Imani Perry, a professor at Princeton University's Center for African American Studies. "It also puts us in the position of not being able to be constituents, with respect to our politicians, because we feel we have to constantly protect the president. ... You see people attacking him, and he's the president, what happens to those of us who are not the president?"

This week, black people struggled to deal with what many of them perceived as a racially motivated dis of Obama at the hands of Trump and the "birther" movement. Fleeting thoughts about boycotting Trump's hotels and casinos, or pressuring advertisers to pull away from Trump's "Celebrity Apprentice" reality TV show bounced around Facebook and Twitter, the barbershops, the suites and the corner.

Much of it was just a notion, however. At the end of the day, many blacks said they remained at a loss for how best to process the falsehood that just won't die.

Obama said he had "watched with bemusement" as people kept alive for two years the idea that he might have been born outside the United States and therefore wasn't eligible to sit in the White House. "I've been puzzled at the degree to which this thing just kept on going," Obama said. He added that he understood the copy of the official birth certificate he produced still wouldn't silence all believers in this "silliness."

Ellis Cose, author of an upcoming book that explores anger and race, said there is a sense that Obama has become the lightning rod for a general longing among certain whites to "take America back to a time when people like Obama could not be president." For blacks, that's "clearly an aggravation," Cose said.

"A lot of folks are amused, and a lot of folks are upset about this," Cose said. "In addition to uncertainty about the economy and America's place in the world, a lot of people who grew up in confidence that America was a very white country are having that reality shaken."

Trump, who may or may not seek the Republican presidential nomination, stepped up to a microphone in New Hampshire within minutes of Obama's appearance to claim credit for forcing the president's hand. He said he still wanted to scrutinize the birth certificate to make sure it's legit.

Trump also wants to eyeball Obama's college grades, in search of bogusness around the bachelor's and law degrees the president got from Columbia and Harvard respectively. Trump said he'd "heard" Obama was a poor student unworthy of an Ivy League education, but offered no real proof.

That's what bothers black Americans so much - that sense that nothing they do can ever be considered good enough, said William Jelani Cobb, professor of Africana studies and history at Rutgers University. He recalled being on a flight recently, and expressing amazement when his seatmate, a member of Congress whom he did not name, said he, too, believed Obama was not really an American.

"It's partly American tradition of paranoia, and partly just plain old racism," Cobb said. "Illegitimacy is the rule, not the exception. It's the sort of thing that people come up with regularly when there are African-Americans operating at high levels."

Thurston, co-founder of the political blog Jack and Jill Politics, found out about Obama's action when he checked Twitter on his way to work. He was so disturbed that he sat before his webcam and poured his feelings into a seven-minute video that he then posted. Most of Thurston's ire was aimed at Trump and his glee over what he'd accomplished.

"Black people are taught, 'Your bar is higher. You have to answer harder questions. And you're never really, satisfactorily accepted,'" Thurston said in an interview. "That's a good motivator as a kid, it makes you run fast. But at some point, it's exhausting to carry such historical baggage in your daily life."

---

Ron Paul says Bernanke ducks the issue

Rep. Ron Paul, the Federal Reserve’s most powerful critic, reacts to Ben Bernanke’s press conference. Here’s a lightly edited transcript of his remarks to the MarketWatch Radio Network. Paul is the chairman of the House monetary policy subcommittee, and is thinking of running for president again in 2012.

WASHINGTON (MarketWatch) — I found the press conference to be enlightening in the fact that we heard one, and he held one, and that’s a sign that the Fed knows that they have to be a little more responding to the demand for transparency. When I listened to what had to be said, I wasn’t too enthralled. I’ve heard it all before. Read more on Bernanke's press conference.

It’s smooth talking, to make current policy sound reasonable, and let it go at that. Because they never admit anything. When it comes to prices, it’s never their fault. I mean, how many different things did he mention about why prices go up, why we have inflation? He never admits it’s the inflation of the money supply that’s the problem.
When he was asked about the dollar, he said, “Well you know, the person in charge for the value of the dollar is the secretary of the Treasury.” Well, Bernanke can triple the money supply, and then he wants to duck the issue that he’s responsible.
He says, “Our position is a strong dollar” ... with constant devaluation, even while he spoke it was devaluing. Against gold, it went down 1.5%. It doesn’t make any sense.

It was more justification for a policy that doesn’t work. There was no explanation on how he’s going to get out of this. He did recognize, though, that price increases are significant and could be a problem in the future. It could be a significant problem for unemployment. He said it softly, but there were some words in there that convinced me that he knows that when inflation is admitted – I think it’s already here – but when he really admits it’s here, he’s really in a box. Because what he’ll have to do is raise interest rates, cut back on all the monetization of all this debt, buying all these securities, and then, in a weak economy, he’s in a mess
He works on the Keynesian assumption that prices go up for other reasons than the monetary reasons.
“It’s the supply and demand...Well, third-world nations are starting to buy more oil, that’s why the price of oil goes up.” And it has nothing to do with the inflation of the monetary system.
So, I think he does a good job for what he has to do, and that is try desperately to make a very, very failed system sound plausible. But from my viewpoint, it isn’t plausible, it’s not workable.
And I so strongly oppose centralized economic planning through monetary policy, especially in a small little group that can manipulate interest rates and the money supply and bail out privileged companies that are too big to fail at the same time the little people suffer. They lose their jobs and their mortgages and their houses.
So, to me, we have to have major monetary reform, and a bit of transparency. A pretense of transparency won’t suffice.

Gold futures gain as much as $10 ahead of Fed

SAN FRANCISCO (MarketWatch) — Gold futures gained as much as $10 an ounce Wednesday as investors looked ahead to the Federal Reserve’s monetary-policy decision and Fed Chairman Ben Bernanke’s press conference due later in the trading day for clues on inflation.

“A weakening dollar and rising inflationary concerns have supported the recent rally in gold,” analysts at ICICI Bank said in a morning note to clients. “Investors are likely to look for further cues from [the] U.S. Fed meeting that concludes later today.”

Gold for June delivery (COMMODITIES:GCM11)  touched a high of $1,513.60 an ounce on the Comex division of the New York Mercantile Exchange, though it’s pulled back slightly to $1,512.40, up $8.90.
On Tuesday, prices closed lower for the first time in nine sessions.
The Federal Open Market Committee is scheduled to announce its rate decision at 12:30 p.m. Eastern time. It’s expected to stick to its target federal funds rate of between 0% and 0.25% and its goal of buying $600 billion in Treasury securities by the end of June. Read more about what’s expected from the Fed meeting

For the metals market, overall sentiment is “subdued” as traders await the Fed statement, “which will likely determine mid-term direction given recent dollar-related movements,” analysts at TheBullionDesk.com said in a report issued Wednesday.
At last check, the dollar index (BOARD:DXY) , which measures the U.S. currency against a basket of six rivals, traded at 73.717, down from 73.789 in late North American trading Tuesday. Read the currencies story.
In the short term, both gold and silver are “vulnerable to corrections given the scale of long exposure, particularly if the Fed signals an imminent start of monetary tightening,” they said.
But “we think the Fed is more likely to maintain its current stance,” they said. “And given the broader issues of inflation, heightened Eurozone debt issues and MENA [Middle East North Africa] unrest, we expect dip-buying to underpin precious metals and maintain the current uptrend.”
Silver for May delivery (COMMODITIES:SIK11)  was up 72 cents at $45.77 an ounce. The contract had closed lower on Tuesday to end an eight-session winning streak.
June palladium (NEW:PAM11)  was also up 65 cents at $756.35 an ounce and July platinum (NEW:PLN11)  tacked on $8 to $1,813.40 an ounce, but May copper (COMMODITIES:HGK11)  fell 4.95 cents to $4.27 a pound

Libertarian Ron Paul to make another bid for 2012 Republican nomination

U.S. Rep. Ron Paul, R-Texas, speaks during a news conference Tuesday, April 26, 2011, in Des Moines, Iowa. Paul says he's forming a campaign exploratory committee as he moves closer to again seeking the Republican nomination for president. (AP Photo/Charlie Neibergall)

WASHINGTON - Ron Paul, the anti-war libertarian who's considered the Tea Party movement's "intellectual grandfather," has signalled he's running for U.S. president for the third time in his political career.

The 75-year-old Republican congressman announced in Des Moines, Iowa, that he's setting up an exploratory committee, generally the first step in an official run for president. Paul said he'd decide soon whether to formally enter the race.

"I would be very surprised if I don't make that decision in the month of May," he said.
Paul ran a dark horse campaign in 2008, resulting in a small but devoted support base, particularly among young voters who were particularly stoked by his support for the legalization of marijuana.
Four years later, amid a lingering recession and consternation about the country's gargantuan US$14 trillion nation debt, political observers say Paul's primary messages — smaller government and deficit reduction — could resonate with larger numbers of Republican primary voters.
"The dialogue has moved towards Ron Paul," Cal Jillson, a political science professor at Southern Methodist University in Dallas, said Tuesday.
"For the past 25 years he's been consistently worried about the money supply, deficits, debts and the Federal Reserve. He was all alone for a very long time, but now lots of people in the Republican party and beyond are concerned about those very issues."
Bruce Buchanan, a professor of government at the University of Texas, agreed.
"He represents the kind of fiscal prudence that not only appeals to the Tea Party, but also the broader Republican base right now," Buchanan said.
"If he acquires the kind of funding that he had last time, and the kind of grassroots support, he could do very well. And if the field turns out to be sparse, and people like Sarah Palin don't run, he could pick up a big chunk of their supporters."
Paul, who was the Libertarian Party's presidential nominee in 1988, finished a distant fourth to John McCain in 2008, behind Mitt Romney and Mike Huckabee. But he set fundraising records, bringing in substantial online donations, rivalling Barack Obama's similar triumphs during the presidential campaign.
Paul is strongly opposed to the Federal Reserve and its ability to print money, and successfully pushed Congress to pass a bill forcing it to open its books.
He wants income tax eliminated, wants to wipe out the Department of Education and has voted against raising the debt ceiling. Republicans, he argues, should have allowed the government to shut down in their ongoing fight with Democrats over budget cuts.
He has railed against what he calls "welfarism" at home and militarism abroad, and believes the U.S. should stop sending to troops to meddle in foreign conflicts like the one playing out in Libya.
His anti-military bent might not fly with some Republicans, but other stances cause the party to smile upon him.
He opposes gun control, and even believes pilots should carry firearms in cockpits. He's also strongly pro-life and has called himself an "unshakeable foe" of abortion, although he doesn't think the federal government should legislate abortion policy.
Paul is also opposed to universal health-care, critical of President Obama's health-care legislation due to its scale and scope. But he's also said he'd be willing to "prop up" Medicare and Medicaid with money saved by bringing troops home from foreign bases in places like South Korea.
On other topics, however, Paul could be a tougher sell for Republicans. Among other hot-button issues, he has called the war on drugs "a total disaster" that should be abandoned, and was in favour of a mosque being built near the site of the Sept. 11, 2001 terrorist attacks in lower Manhattan.
On Monday, Fox News's Sean Hannity pressed Paul about his stance on the mosque, asking: "You are not concerned about the families of 9-11 and what happened?"
"This means you blame the religion, you don't want to blame the religion," Paul responded. "The principle here is a private property principle. We shouldn't have governments building buildings and telling people where to build. It should be a private property issue."

His announcement came just a day after the surprise decision by Mississippi Gov. Haley Barbour to drop his plans to make a bid for the White House. Barbour, who had lined up major funding and top Republican strategists for a potential campaign, said Monday he lacked the "fire in the belly" to make a run.

Barbour is apparently not alone in his apathy. A recent New York Times-CBS News poll found that 56 per cent of Republican voters were unenthusiastic about any of the potential nominees.

Paul's entry into the Republican race ends speculation that his son, Sen. Rand Paul from Kentucky, was also eyeing a bid for the nomination. The freshman senator, also a Republican, has said he'd drop any plans to run if his father joined the field.

Paul is reportedly planning to appoint top Iowa Republican strategists in an attempt to win over the crucial primary state. The Iowa primary is the first in the 2012 cycle and most presidential hopefuls spent significant money and time there.

But Jillson predicted Paul's policies are too extreme for him to stand any real chance of winning the nomination.

"His message will resonate but he'll still be seen as a bridge too far," he said. "But he'll certainly be an interesting person to watch, someone who has had a consistent, unwavering message on substantial issues for many, many years."

Barrick buying Equinox Minerals for C$7.3 billion

NEW YORK (MarketWatch) — Canada’s Barrick Gold Corp. said Monday that it would buy copper miner Equinox Minerals Ltd. in a deal valued at C$7.3 billion, continuing the flurry of deal-making activity in the red-hot business of metals production.

Barrick Gold Corp. (NYSE:ABX)   (THE:CA:ABX)  will pay C$8.15 a share in cash for Equinox Minerals Ltd. (THE:CA:EQN)   (AUSTRALIAN:AU:EQN) , (PINK:EQXMF) , representing a 30% premium to the stock’s Feb. 25 closing price — the last trading day before Equinox said it would make a takeover bid for Canada’s Lundin Mining Corp. (THE:CA:LUN)   (PINK:LUNMF)

The acquisition of Equinox would add a high-quality, long-life asset to our portfolio and is consistent with our strategy of increasing gold and copper reserves through exploration and acquisitions,” Toronto-based Barrick Gold said.
U.S.-listed shares of Barrick Gold fell 4% in early trading on the New York Stock Exchange.
The deal comes after Chinese miner Minmetals Resources Ltd. bid C$6.3billion for Equinox Minerals on April 3, after which Equinox said it was approached by “a number of parties.” Adding to the rash of deals, Equinox in March reiterated its offer of C$4.8 billion for Lundin. See story about Equinox offer for Lundin.
As part of the agreement with Barrick Gold, Equinox said Monday it will withdraw its bid for Lundin.
Equinox shares rallied 11% in Toronto trading, while Lundin made fractional gains.
A closing date for the transaction between Barrick Gold and Equinox was not provided, but it’s expected to immediately add to Barrick’s earnings.
Barrick said it has sufficient cash resources and committed financing to fund the acquisition.
Financial advisers to Barrick were Morgan Stanley & Co. (NYSE:MS)  and RBC Capital Markets (NYSE:RY)   (THE:CA:RY) . CIBC World Markets Inc. (NYSE:CM)   (THE:CA:CM) , Goldman Sachs & Co. (NYSE:GS)   and TD Securities Inc. (NYSE:TD)   (THE:CA:TD)  acted as financial advisers to Equinox

Uranium is not going away

Commentary: The contrarian case for Uranium is compelling

BOSTON (MarketWatch) — Uranium prices have slumped. In the wake of the disaster at Japan’s Fukushima Daiichi nuclear plant, the price of a pound of uranium on international markets has tumbled all the way down to about $56.50, compared to $73 in early February. A few years ago it briefly topped $130.

Uranium has tumbled while oil has been booming. Today you can get two pounds of uranium for the price of one barrel of West Texas Light crude.

And yet the world needs energy. More and more of it. According Jonathan Hinze, vice president for international operations at uranium specialists UX Consulting, you need 10.4 barrels of oil to generate the same amount of energy as one pound of uranium. It’s not quite as simple as all that, but the comparison is not a facile one either.
You make money in this business by buying low and selling high. It’s easier said than done, of course. When things are low, nobody wants them.
It’s easy to see a bear case for uranium — or, at least, a case for this sharp sell-off. Fukushima has cast another cloud over the public image of the nuclear power industry. It is harder to sell the idea of more reactors — here or overseas. China has scaled back some nuclear plans and is reviewing safety issues. Germany is speeding up its move away from nuclear power altogether. Japan was forced to raise the level of its nuclear disaster to the same as Chernobyl. The headlines are terrible.
All this is known. It may already be reflected in the price of uranium.

But there is another side of the story.
The world may not like nuclear power, but it probably doesn’t have the luxury of going without it either. Energy needs are soaring. BP’s latest analysis predicts 40% growth over the next twenty years. Forecasts are always questionable. We can argue about the number, but hardly over the direction. We already know the story. In Asia and in other emerging markets, hundreds of millions of people are moving from the peasantry to the industrial middle class. They want cars, air conditioning, flat screen TVs and vacations abroad.
We’re going to need a lot more energy, from pretty much every source we can find. Coal, natural gas, oil, wind farms, solar paneling, and, barring miracles, nuclear reactors. No matter what you think of renewable and clean energy, nobody thinks they can provide all the answers.
The Chinese know this. They have trimmed expansion plans from 90 new reactors to 70, says Hinze, but they are still expanding. The same goes for other countries as well. The Germans are able to be so “green” at home, says UXC’s Jonathan Hinze, partly because they are able to buy some of their energy from nuclear France.
Everybody knows there are serious safety and environmental concerns. But so there are with nearly all sources of energy. Coal and oil are environmental disasters. Even hydro-electric has its issues. Consider the environmental cost of China’s now-infamous Three Gorges Dam.
There are about 450 nuclear plants in the world. Since Three Mile Island, 22 years ago, we’ve had two serious accidents. One, Chernobyl, involved monumental incompetence by a corrupt third world dictatorship. Fukushima was a forty-year old nuclear reactor that was hit by an extraordinary natural disaster. Those of us who grew up with the movie The China Syndrome half expected a catastrophe of Biblical proportions. I’m not making light of Fukushima, but I am arguing for perspective. People are killed down coal mines, or on oil platforms, all the time. It just doesn’t make the news.
The French get three-quarters of all their energy from nuclear power, and they have not had an accident yet (I apologize for tempting fate here, but one has to report these things.)
In a nutshell: There’s a very strong likelihood that the world, in due course, will decide that it needs many more nuclear reactors, and that the benefits offset the risks.
What of uranium?
Nuclear reactors need to replenish about a third of their uranium every twelve to twenty-four months. Currently the world’s reactors need about 70,000 metric tons a year. But the mining industry supplies something over 50,000 metric tons. Most of the rest comes from recycling old nuclear weapons. That’s a program that’s been going on for years. It is due to come to an end in 2013. (although some Russian weapons will still get recycled on an ad hoc basis, says Stephen Kidd, deputy director general of the World Nuclear Association).
As for other supplies? Uranium is abundant in the world, but not in usable quantities, or in a usable state. For the latter it needs to be mined and processed. Uranium was in a bear market through the eighties and nineties, with the result that there was little exploration and production. The world has been ramping up — quickly — in recent years. Major areas of production include Canada, Australia, and Kazakhstan.
According to the World Nuclear Association, the lowest-cost uranium mines — those with operating costs below $30 a pound — can only produce a maximum of about 60,000 metric tons a year. After that the costs start to rise pretty sharply. If you want 75,000 metric tons a year, the last tons will cost you about $60 a pound. In other words, today’s price is in the ballpark of the marginal cost. “There’s probably not a lot of room to go down further from here, given the fundamentals,” says UXC’s Hinze, though he adds that in short-term trading anything can happen.
None of this is conclusively bullish for uranium, naturally. But it is intriguing. No one wants this asset.
If you are a private investor, take a look at Uranium Participation Corporation (PINK:URPTF) , a Canadian closed-end fund that simply holds physical uranium. “It’s not exciting,” says David Wago, analyst at GMP Securities. “It just holds uranium in a warehouse, gathering dust.”
Shares in URPTF have been hit even harder by Fukushima than the price of uranium itself. From an intraday peak of $10 in early February they have plunged to $6.75. There’s little mystery why. Closed-end funds typically attract small scale investors. They are the first to panic and dump stock. That’s why closed-ends typically fall hardest in a rout.
Uranium Participation Corp. on Thursday said the net value of its uranium was 7.94 Canadian dollars ($8.34 U.S.) per share as of March 31. Since then, uranium prices have come down 5.5%. So Uranium Participation’s uranium is worth about $7.88 a share.
And yet the shares now trade for just $6.75, or 14% less. So you’re effectively buying the uranium for $48.40 a pound.
None of this is conclusively bullish. Commodities generally look overbought, and ominously popular. Uranium could keep falling in price. A decade ago it was only $7.50 a share, and the only floor one can ever be completely sure about is $0. Nonetheless uranium at $48.40 a pound may tempt contrarians.

MORE MONEY MOTIVATION

Canadian stocks rise, paced by mining

Canadian stocks were mostly higher on Wednesday, paced by the nation’s mining shares.

The S&P/TSX Composite Index (THE:CA:$ISPTX)  was up 1.2% at 13,907.

The S&P/TSX Capped Diversified Metals & Mining Index (THE:CA:TTMN)  was up 3.15% at 1,463.

The S&P/TSX Composite Index (THE:CA:$ISPTX)  was up 1.2% at 13,907.

The S&P/TSX Capped Diversified Metals & Mining Index (THE:CA:TTMN)  was up 3.15% at 1,463.

Among significant mining movers, Quadra FNX Mining Ltd. (THE:CA:QUX)  was up 10.2% after the company reported strong first-quarter production results, while Pan-American Silver (NASDAQ:PAAS)   was up 3.7% after it said the Bolivian government’s move to seize control of a number of privately operated mines has not affected the company’s San Vicente mine

First Quantum Minerals Ltd. (THE:CA:FM)  was up 7.2%; Thompson Creek Minerals (THE:CA:TCM)   was up 3.8%; Grande Cache Coal Corp. (THE:CA:GCE)   picked up 4.2%; and Taseko Mines Ltd. (THE:CA:TKO)   rose 3.3%.

Gold stocks also moved higher on the session, as gold for June delivery (COMMODITIES:GCM11)  added 80 cents to trade at $1,499.90 an ounce on the Comex division of the New York Mercantile Exchange.

Royal Gold (THE:CA:RGL)  was up 2.7%; Osisko Mining Corp. (THE:CA:OSK)  added 3%; and Franco-

Nevada Corp. (THE:CA:FNV)  was up 2.4%.

In the energy group, Suncor Energy (THE:CA:SU)   was up 3.2%, while Cenovus Energy Inc. (THE:CA:CVE)   added 2.5%.

Among tech firms, Research In Motion Ltd. (THE:CA:RIM)   was up 2.4%, a day after the release of its Playbook computer tablet.

Commodities markets summary

A summary of trading in key commodities markets 

ENERGY
US oil rose on Tuesday and Brent reduced losses in volatile trade as a weaker dollar and a rise in equities markets lift prices that earlier slumped on concern over sovereign debt and uncertain demand prospects.
After tumbling below $120 a barrel for the first time in two weeks, Brent came back as US crude futures turned higher.
The expiring US front-month May contract posted the day's biggest gain, reversing after support firmed above last week's low trade of $105.31 a barrel.
Brent crude for June fell 28 cents to settle at $US121.33 a barrel, after slipping as low as $119.03.
Expiring US crude for May rose $1.03 to go off the board at $US108.15, bouncing early off a $US105.50 low.
US June crude rose 59 cents to settle at $US108.28, recovering after sliding to $US106.01, just above the contract's $US105.98 low from last week.

Brent's premium to the US June contract narrowed 87 cents to $13.05 a barrel, based on settlements, swinging in a range on Tuesday from $12.38 to $14.31.

Solid euro zone economic data helped the euro rebound against the dollar after its worst day in five months.

OPEC Secretary General Abdullah al-Badri, speaking at an oil and gas trade fair in Tehran, said he did not expect oil to fall below $100 this year, even though there was no shortage in the market.

US retail gasoline demand rose last week from the prior week, but high prices kept demand down versus year ago, MasterCard Advisors' SpendingPulse said in a report ahead of weekly oil inventory reports detailing US stockpiles and demand levels.

US crude oil stocks are expected to be up a seventh consecutive week, according to a Reuters survey of analysts on Tuesday. Gasoline stocks were expected to be lower, while distillate inventories were seen unchanged.

PRECIOUS METALS

Gold futures hit an all-time high above $US1,500 an ounce on Tuesday and silver surged on a combination of dollar decline, crude oil gains and worries about sovereign debt problems in Europe.
After being initially pressured by technical selling, bullion rose to a record for a second straight day on market jitters after Standard & Poor's on Monday revised the credit outlook of the United States to negative from stable.

US gold futures activity was quieter than usual as global stock markets steadied following the previous session's equity sell-off on S&P's move. The CBOE gold volatility index, a gauge of bullion investor anxiety, fell two per cent after surging to its highest level in four months on Monday.

US gold futures for June delivery settled up $2.20 at $1,495.10, having earlier hit a record $1,500.50 an ounce.

Spot gold gained 0.11 cents to $1,495.19 an ounce by 3:03 p.m (1903 GMT), bouncing off a high of $1,499.31. Bullion rose for a fifth consecutive session.
Gold benefited as a safe haven from economic uncertainty after fears mounted that Greece will have to restructure its debt, maybe as early as this summer, and S&P threatened to cut the United States' AAA credit rating on Monday.

Silver set a 31-year high of $43.92 an ounce, and was later up 1.3 per cent at $43.90.

Silver has outperformed gold this year, up more than 40 per cent so far against gold's 5 per cent rise. The gold/silver ratio slipped to a 28-year low below 35 on Monday.

Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce, set in 1980, an era of Cold War tension, oil shocks and hyperinflation.

Among other precious metals, platinum slipped 0.4 per cent to $1,766.24 an ounce, while palladium dropped 1.3 per cent to $730.47.


INDUSTRIAL METALS

Copper rose close to one per cent, clawing back some ground after six straight sessions of losses, helped initially by the weaker dollar, then pushed to session highs after stronger-than-forecast US housing starts.

Investors remained nervous about debt problems in the United States and Europe, limiting the red metal's gains.

Three-month copper on the London Metal Exchange traded last traded at $9,340 a tonne at 1649 GMT (1249 EDT) from $9,225 at the close on Monday.
US copper futures were up 3.60 cents, or 0.86 per cent, at $4.23.30 per lb.

World markets bounced back from the previous session's trouncing after better-than-expected earnings results from investment banking bellwether Goldman Sachs.

In the metals markets, expectations of a supply deficit this year and an optimistic long-term demand outlook provided support.

Increasing copper inventories, however, have raised concerns about some short-term demand weakness from China.

Inventories of copper on the London Metal Exchange rose 175 tonnes to 451,950 tonnes, its highest since June, the latest data showed. Inventory levels have been on the rise since December.

Copper was in a $21.50 contango, which is a discount for cash over three-month material, versus
December's $70 backwardation, which is a premium for cash over three-month copper, the latest data showed, reflecting a dearth of nearby demand.

Tin traded at $32,600 from $32,350, while zinc changed hands at $2,330 from $2,325, Monday's close.

Inventories of zinc on the London Metal Exchange rose 21,300 tonnes to 785,600, the most recent data showed, and are now within 2,000 tonnes of 2004 peaks.

Battery material lead traded at $2,552 from $2,528. The price of metal for tomorrow versus next day delivery traded as high as $10, indicating a lack of immediately available supply.

Aluminium recovered to $2,682 from $2,674.

Nickel was bid at $25,500 from $25,500.

Teck shares up on earnings report

Teck Resources earnings more than doubled in the latest quarter helped by surging coal and copper prices, sending the Canadian mining company's shares up more than six per cent Tuesday.

Teck Resources earnings more than doubled in the latest quarter, helped by surging coal and copper prices, sending the Canadian mining company's shares up more than six per cent Tuesday.
The Vancouver-based coal, zinc and copper producer said late Monday that it earned $461 million, or 78 cents per share, during the first three months of 2011, down from $896 million, or $1.52 per share, during the same period last year.
But adjusted for one-time items, the company earned $450 million, or 76 cents per share, more than double the $198 million, or 34 cents per share, for the same time a year earlier.
Sales were $2.4 billion for the quarter, up from $1.9 billion for the same time a year earlier.
Analysts had expected an average of 76 cents a share, on revenue of $2.2 billion according to Thomson Reuters.
The company's shares were up $3.11, or 6.4 per cent, at $51.88 on the Toronto Stock Exchange in mid-afternoon activity.
The better-than-expected results came despite a number of headwinds for the company.
Unusually difficult winter weather conditions hampered rail and port operations, dropping first-quarter sales to 5.0 million tones, down from the average 5.3 million tonnes of sales in the first quarter of each of the last six years.
Coal production during the quarter was also affected by a two-month strike at its Elkview mine earlier this year that resulted in a loss of some one million tonnes. Production resumed on April 8 after a new labour pact was reached.
As a result, the company produced 75,000 tonnes of copper, 4.4 million tonnes of coal and 238,000 tonnes of zinc in the first quarter of 2011, compared with the 72,000 tonnes of copper, the 5.7 million tonnes of coal, and 231,000 tonnes of zinc for the same quarter a year earlier.
Teck's first-quarter coal sales of five million tonnes topped its most recent forecast range of 4.6 million tonnes to 4.9 million tonnes.

A truck is shown at Teck Resources Coal Mountain operation near Sparwood, B.C. The mining giant reported first-quarter results that beat analysts' expectations. (The Canadian Press)

The company also said it now sees 2011 coal sales to be between 23.5 million tonnes and 24.5 million tones, while annual copper sales are expected to be in the range of 330,000 to 340,000 tonnes. It also said it expects "minimal impact" on sales to Japan following last month's earthquake and tsunami.

Traders ballpark new gold ceiling

Gold has breached yet another psychological barrier in its steady march upward. But with all the hot money moving into silver, there are conflicting views about when it may reach the next one, even as confidence in the U.S. dollar continues to erode.
As the key gold futures contract temporarily passed US$1,500 an ounce Tuesday, traders quickly started eyeing the next round number. The thinking is that if investors get used to the idea of US$1,500, a rapid move up to US$1,600 could be made in short order. That view was supported by Standard & Poor’s decision to turn negative on its outlook for U.S. debt.
“It does seem that once you break through a particular level of resistance, it brings new money into the equation and allows continued strength in the gold price,” said Chuck Jeannes, president and chief executive of Goldcorp Inc.
But recent history suggests breaking through has not been that easy.
It took extended periods for gold to get through prior psychological levels like US$1,000 or US$1,200. In each case, it flirted with those highs for many months before finally pushing through.
“If people say US$1,500 is going to be the top, a lot of traders start filling their sell orders there and it becomes a self-fulfilling prophecy,” said Aaron Fennell, commodity futures specialist at ScotiaMcLeod.
“But I think in this case, traders aren’t looking at US$1,500 as the top of the market at all.”
But in trying to predict future performance, he pointed out a broader truth: that despite gold’s spectacular performance, there has been surprisingly little interest in it.
Over the last several months, it is silver, and not gold, that has captured the imagination of investors and gone on an amazing run. Since the start of October 2010, silver has climbed roughly 97%. Gold, by comparison, is up 14%.
“Gold has just grinded higher slowly. It hasn’t really had that much enthusiasm around it,” Mr. Fennell said.
It was the same story on Tuesday. While gold drew a lot of headlines for reaching a landmark price, the June contract ended the day below US$1,500 and up just 0.1% in total. By comparison, silver jumped another 2.2% to US$43.91, the highest closing price since the Hunt brothers tried to corner the market in 1980.
Looking back over the last decade, experts pointed out that gold has never had the kind of massive break-out that silver is experiencing now. Despite the general view that gold prices are “soaring”, the move upward has been quite orderly, with a new high being reached every year. Other commodities like nickel, uranium and potash have had much stronger upward (and downward) moves.
“That’s something I always point out to people who talk about gold being in a bubble. This has been a long-term move,” Mr. Jeannes said.
Given that fact, experts refuse to put too much emphasis on the move to US$1,500, and focusing on long-term fundamentals instead.
“It’s so sentiment-driven that you’ll just be pulling your hair trying to guess what it’s going to do next,” said Pawel Rajszel, an analyst at Veritas Investment Research who is more bearish than most of his peers.
Financial Post

Gold sends Canada stocks higher

Canadian stocks bounce back into the black; gold hits $1,500 mark

CHICAGO (MarketWatch) — Canadian gold miners helped lift the broader market into the black Tuesday as bullion futures advanced into record territory, hitting the key mark of $1,500 an ounce.
The S&P/TSX Composite Index   edged up 0.2%, or 28.9 points, to 13,731.3, swinging back into positive territory after a weak start incited by rising inflation worries.
Toronto’s main metals and mining index  advanced 1.8%, fueled by a 6% jump in shares of base-metals miner Teck Resources Limited . The Vancouver-based company on Monday reported better-than-expected revenue for the first quarter.

 

Also advancing, Canadian gold-mining giant Goldcorp Inc.’s   stock rose 0.5%. Gold for June delivery added $2.20, or 0.2%, to trade at $1,495.10 an ounce on the Comex division of the New York Mercantile Exchange. 

Canada’s energy sector also made a late-day comeback as oil futures turned higher after protests erupted in Nigeria, weakening the U.S. dollar. Toronto’s main energy index   rose 0.1%, adding to the broader market’s gains.
Leading the pack, Calgary-based Suncor Energy’s stock added 0.8%, offsetting declines in shares of Canadian Natural Resources Limited   and Connacher Oil and Gas Limited , which posted losses of 0.3% and 1.4%, respectively.
Concerns of rising inflation pressured Canadian stocks at the market’s open, after Statistics Canada reported a 3.3% rise in inflation in the 12 months to March. The climb puts the country’s year-over-year inflation increase at its highest since September 2008.
The Canadian dollar   strengthened against its U.S. counterpart, rising 0.8% from Monday’s close. In early April, the Canadian loonie reached its three-year best against the U.S. greenback. On Tuesday, one U.S. dollar purchased 95.5 Canadian cents, down from 96.4 cents at Monday’s close.
The jump in the country’s Consumer Price Index, which is used as a gauge of inflation, rose from 2.2% in the 12 months to February.
Among other notable movers, Toronto shares of Research In Motion Limited    fell 2.2%. The Ontario-based BlackBerry maker released its new PlayBook tablet computer on Tuesday

Gold hits record at $1,500 an ounce

Gold futures hit the psychological mark of $1,500 an ounce on Tuesday, shaking off early weakness as the dollar sunk further. Gold for June delivery  GCM11 +0.24% wavered between small gains and losses earlier, but recently added $6.40, or 0.5%, to trade at $1,499.30 an ounce on the Comex division of the New York Mercantile Exchange. It earlier traded as high as $1,500, according to CME, an intraday record for the metal

RIM's PlayBook....2 little 2 late???

TORONTO (Reuters) - Research In Motion 's PlayBook, the long-awaited response to Apple's iPad, goes on sale in the United States and Canada on Tuesday in a launch RIM desperately hopes will win the hearts and minds of consumers.
The stakes could not be higher for the Canadian company, whose BlackBerry smartphone once reigned supreme but has struggled to compete since Apple's iPhone and a slew of devices running Google's Android entered the fray.
The launch has not been helped by reviews, which have panned the WiFi-only tablet computer for lacking RIM's trademark email and organizer applications. However, retailers including Staples and Best Buy say solid pre-orders for this week's launch suggest pent-up demand for a capable alternative to the iPad.
Some 20,000 stores across the United States and Canada will stock the PlayBook at launch, and it will also be sold directly to enterprises.
Some say it is unfair to even stack the contenders up against the iPad, which single-handedly made the tablet market a reality last April. Apple sold almost 15 million iPads in 2010; RIM is expected to move 3 million PlayBooks in a similar window in 2011, according to 18 analysts polled by Reuters.
"It's not going to be in the same league as the iPad," said Al Hilwa, a Seattle-based analyst at IDC. "The question is will it sell more than the Xoom but less than the Galaxy," for example, he said, referring to Android-based tablets from Motorola Mobility and Samsung.
Underscoring the challenges in whipping up the type of buzz typical of an Apple launch, Staples Canada ditched plans to open its doors at midnight for a more sensible 7 a.m. opening.
"We just think it'll make more sense for business customers to come in on their way to work," head of merchandising Pete Gibel said. "Midnight is more of a consumer play."
But analysts say RIM's Playbook should stay in the hunt, even if it gets off to a slow start as it overhauls its creaky platform with the QNX operating system it acquired last year.
Gartner, a research outfit focused on technology, estimates one in 10 touchscreen devices sold in 2015, or some 30 million, will be powered by QNX, which will likely also find its way onto its smartphones in the next 12 months.
That would place it third behind Apple at almost half the market and Android at just under 40 percent, leaving little room for Hewlett-Packard's soon-to-launch WebOS tablet and completely ignoring a possible Windows tablet platform.
CARRIER EXCITEMENT LIMITED
RIM made its name among a white-collar crowd when mobile email was a novelty and has been slow to broaden its appeal.
And in its current setup, the PlayBook's prime audiences are the 60 million-odd active BlackBerry users worldwide and corporate IT managers who appreciate the reliance on a BlackBerry for access to corporate data. RIM expects large businesses to buy shipments in "the tens of thousands."
Without a cellular connection, carriers such as Verizon are unlikely to get too excited as they stand to gain little from selling a tablet without a data plan, although the cost savings may attract consumers.
In Canada, carrier Telus aims to set itself apart by offering PlayBook buyers 45-minute sessions with specially-trained staff to explain the device. But Telus' attention is also split; Motorola's Xoom launches there the same day.
Cellular-connected PlayBooks are due out mid-year.
For the boy in every businessman, RIM has stolen a sheet out of the iPad's playbook, teaming up with Electronic Arts to ship its tablet with the car-racing game 'Need For Speed: Undercover

Search for share prices Search for share prices Sun Apr 17, 2011 7:54AM EDT - Canadian Markets closed RIM says any new smartphone curbs in UAE would apply to others too

DUBAI, United Arab Emirates - The maker of BlackBerry devices says it has been told that any new restrictions imposed by authorities in the United Arab Emirates would apply to other smartphones too.
The UAE telecom regulator has said it may limit access to the highly secure Blackberry Enterprise Server, a system used by many international companies.
Individual customers and organizations with fewer than 20 users wouldn't have access.
Device maker Research in Motion Ltd. (TSX:RIM) said in an emailed statement today that it has been in direct contact with the Telecommunications Regulatory Authority.
It says it's been told any policy change would apply to the whole industry and affect "all enterprise solution providers" — a reference to phones tied to corporate email accounts.
The TRA said Saturday that "all BlackBerry services" would continue for companies and individual subscribers.

Nine major money mistakes that can derail a marriage

In the throes of wedding planning, it's easy to get lost in the minutia of picking table linens, rehearsal venues and the perfect song for your first dance as husband and wife.
But if you want your marriage to last, you should also make time for an open and honest heart to heart over your financial future together.
"Money is one of the top reasons why couples divorce and I think it's often because people don't know how to talk about it," says Cathy Norris, a certified financial planner with Ameriprise Financial Services in Safety Harbor, Fla. "Depending on how their own parents handled finances, some individuals might not be forthcoming or feel that they can be open with their spouse."
Whether it's your first trip down the aisle or a repeat performance, the following nine questions will help prevent some of the biggest money missteps that can derail an otherwise healthy marriage.

Is There Any Debt? Level with each other about any debt you carry, be it credit card balances, student loans or car loans.
Leave nothing undisclosed.
That's important, says Dana Vince, a marriage counselor with Healing Hearts Counseling in Knoxville, Tenn., because it affects your monthly cash flow, the time it will take you to reach your financial goals and how much money you'll have left over for all those vacations you'll want to take before you have children (if that's on the agenda).
"I've come across many couples who keep that [debt] from one another because of guilt or shame, but it has the potential to cause resentment later on because the person making more money might feel it's up to them to pay down that debt," she says.
Perhaps you'll agree to apply combined disposable income towards paying it off, or you decide it's fair to let the person who incurred the debt to pay it off.

Will Pre-Marital Assets Be Joint?
You should also, of course, disclose your assets too.
Chances are you've accumulated significant savings in your retirement and investment accounts, and potentially a little real estate.
Will pre-marital assets remain separate or be combined?
"Couples who are in love sometimes do things out of the feeling that everything should be joint," says John Johansen, a matrimonial forensic accountant and financial planner with The Planning Group for Professionals in New York City. "If they have a brokerage account or own real estate, they might want to add their spouse as a joint tenant, but that's not necessarily a good thing long term."
In the event the marriage doesn't make it, it's best to keep pre-marital assets separate and co-mingle any new assets accumulated as a couple, says Johansen.
You may also wish to keep separate any inheritance or monetary gifts you receive during your marriage, he says.
"It doesn't mean that you're planning for divorce," says Johansen. "It's about full disclosure and honesty, which is what you want in a healthy marriage."

Will You have Children?
You've no doubt discussed parenthood, maybe even identified names for the children, but don't forget to discuss what will happen to your cash flow.
Children are expensive and are likely to dominate your disposable income and eat into your nest egg, especially if one of you stops working to raise them.
That needs to be planned for so you don't spend more on a house, car or other fixed expenses than you can afford on one income.
"Couples don't always think about that because it seems so far down the road, but you should come to some agreement over what will happen when kids come into the picture," says Vince.

Who Will Pay The Bills?
In most marriages, the job of paying monthly bills falls to one person, usually the person with better fiscal discipline.
While that makes sense logistically, Vince says both parties should still participate in creating a monthly budget, and both should know how to pay the bills, if necessary.
If you're equally adept at money management, consider having one party handle the monthly bills, and the other long-term finances, such as retirement and college savings.

Will You Keep Separate Accounts?
Just because you're sharing a roof, of course, does not mean you have to merge your bank accounts.
Learn your fiancé's  expectations and suggest a system that works for you.
While it may seem easier to simply combine accounts, many marriage counsellors recommend keeping a joint account for shared expenses, such as housing, utilities and groceries, and separate ones for fun money—the "you, me, we" system of banking.
Thus you can splurge now and then on frivolous things that need not be justified to your spouse, and no one is forced to "ask permission."
If you opt for a single account, of course, you can still build in flexibility by agreeing to a threshold (say, $200) for expenses that require spousal approval prior to purchase.

What's Your Score?
There is also the matter of credit history.
Your credit score, which tells lenders how likely you are to pay back the money you borrow based on prior payment patterns, is important because it dictates whether you will qualify for things like car and home loans and the interest rates you'll pay.
"You might discover that your fiancé has a lower score due to a health issue that maybe wasn't shared yet, or ability to keep on top of their finances," says Norris.
If one of you has a shoddy payment history, the other may decide to keep their finances separate to avoid inheriting their partner's credit problems.

Who's A Saver Or Spender?
You may already know the answer to this question, having observed your future spouse, but ask him or her for a spending philosophy.
If they're a saver, ask why that's important to them.
Perhaps her parents were always in debt and she wants to avoid the same fate.
Or maybe he sacrificed luxuries for many years, by putting himself through college and saving for a house, and now want to indulge in a less conservative lifestyle.
Be prepared, of course, to discuss your own financial philosophy as well, which will help you better appreciate the boundaries you bring to your marriage.

What's Your Risk Tolerance?
The old adage that opposites attract is as true with personality types as it is with investment styles.
Rare is the couple that agrees entirely on asset allocation for retirement accounts.
Those on the conservative side might prefer dividend-paying, blue-chip stocks that typically produce a steady return, but slow growth.
Aggressive investors, meanwhile, might be willing to roll the dice on start-ups, tech firms and energy stocks that are more volatile, but hold the potential for hefty returns.
Find out the risk tolerance of your other half, be honest about your own, and develop a plan for investing joint assets.
"There's typically one person who ends up taking on that responsibility [of investment planning], but they might invest more aggressively than the other person is comfortable with," says Norris. "Or, they might be too conservative so the other spouse ends up squirreling money away secretly to go off and blow it on gambling."

What Are Your Goals?
You should also share your financial priorities, and set goals to achieve them.
Do you wish to purchase a home,  retire by 55, buy a boat?
For any agreed goals, you should start saving a percentage of your monthly income in a separate account.
You can also agree to funnel any "new money" (year-end bonuses, for instance) into the account for a fixed period of time to help you get there faster.
If your goals diverge, however, it's time to start compromising.
Ask your soon-to-be spouse to rank his priorities in order of importance and you do the same.
Next, decide which are attainable, which need to be downsized and which should be cast aside.
All of this, this does not guarantee that you will avoid arguing over money matters altogether. Most couples do.They will, however, head off some potential problems.
 And above all else, they'll help to establish the foundation of mutual trust necessary for your relationship to thrive.

Charlie Sheen upstaged by Russell Peters at Toronto show, fans say

TORONTO - Charlie Sheen brought his ramshackle "Violent Torpedo of Truth" tour to Massey Hall on Thursday night, but many in attendance felt the troubled TV star was outshone by his onstage interviewer: acclaimed comedian Russell Peters."Russell Peters monopolized the evening," said Jane Baldwin of Toronto, who left the gig before it was over.
"The show wasn't about Charlie Sheen," added Mackenzie Risk, who drove four hours from North Bay, Ont., and left early after paying $100 for a ticket.
"It was, like, Russell Peters and as much as Russell Peters is great and he definitely made the show, it was just all about him."
Sheen has received mixed reviews since his first outing was met with catcalls and walkouts in Detroit on April 2. He has since tinkered with the show, settling on a Q and A format.
But sharing the stage with such a high-profile performer on Thursday may have backfired.
"I couldn't enjoy it and Russell Peters was running the show," said Daniel Cooper of Toronto, who also headed for the exits before Sheen was done.
"I think Russell Peters is a great comedian but Charlie Sheen really flopped. The reason I came here was for Charlie Sheen."
Others seemed to imply that the "Torpedo" tour was simply boring.
"There are a lot better things to do than watch that show," said Toronto resident Richard Shekter, who also left early after shelling out $100 for his ticket.
"I thought it would be more organized and that he would actually be talking. There's nothing happening. They're just making it up as they go along."
"I wasn't expecting much but it was less than I was expecting."
Added Risk: "Charlie Sheen would just sort of answer a question with one word ...any prompt that Russell Peters would give to him the answer would always be 'yes' or 'no.'"
Still, there were plenty of Sheen supporters on hand.
Syed Gardezi of Toronto said the show was "awesome."
"I'm a big fan of (Sheen) so it was a good opportunity seeing him live, closely," she said.
Marva Hutchinson of Toronto said she wanted to see the "Torpedo" tour because she's a big fan of "Two and a Half Men," the hit sitcom that Sheen was fired from last month after a war of words with producer Chuck Lorre.
"I watch episodes (of "Men") every day, at least twice a day, and I'm fascinated with the things that he says, the laughter, the jokes," said Hutchinson, who made her own T-shirt emblazoned with Sheen's face to wear to Thursday's show.
"He's just a happy-go-lucky guy."
Before the Toronto gig, Sheen affably greeted fans while sneaking a smoke break on a fire escape outside Massey Hall.
Wearing a black baseball cap emblazoned with his "winning" catchphrase and flanked by one of his "goddesses," he came outside at least twice for a puff, tossing cigarettes to those who wanted them.
The self-proclaimed "warlock" seemed to be getting his nicotine fix out of the way before heading inside the storied concert hall.
Ontario law forbids smoking in workplaces and enclosed public areas and a government official had warned earlier Thursday that inspectors would be keeping a close eye on the actor, who has smoked during previous shows.
When a reporter asked whether he'd light up onstage in Toronto, Sheen responded: "No way man, they have strict rules."
Since getting the boot from "Two and a Half Men," Sheen has launched a $100 million lawsuit against Warner Bros. and Lorre, and hit the media circuit with bizarre, stream-of-consciousness musings. He's also tried to trademark his catchphrases, which also include "Rock Star From Mars" and "Adonis DNA."
Still, Sheen's odd behaviour didn't deter Amanda Bhaggu from waiting outside the backstage door at Massey Hall for two hours Thursday in hopes of catching a glimpse of the performer.
"He says a lot of crazy things but he is who he is — he doesn't try to pretend he's somebody else and put on a good show for the media. He just says what's on his mind, so I like that about him."
Scalpers outside Massey Hall said they still had tickets to unload even after Thursday's show had started.
Sheen's team would not provide media passes for the Toronto performance, which was to be followed by an official after-party at the club Muzik.
Sheen is set to play Massey Hall again Friday. His tour is set to hit Vancouver on May 2.

Crude Reality: Why High Oil Prices Are Here to Stay

Oil prices swung wildly this week, rising to near 30-month highs after Saudi Arabia sent troops to Bahrain, then plummeting to less than $100 a barrel on expectations that an earthquake-ravaged Japan would demand less oil.
The ride is not over yet, say economists and Wharton professors: There may be ups and downs, but long term, high oil prices are here to stay. On top of volatility caused by natural catastrophes and political upheavals, a tight oil supply and increasing demand promise to keep driving prices up steadily over time. Prices could fluctuate between $60 to $200 a barrel, but probably will not go back to $30 or $50 anytime soon, says Wharton management professor Witold Henisz. Higher prices "are going to be part of the environment for the next few years. There just isn't a lot of surplus oil."
Supply and demand are just part of the equation: Fear of a future squeeze also drives prices higher than they should be. That is not good news for a fragile economy struggling to reemerge from a crippling recession, but most experts are not predicting a double-dip just yet. That would require a sustained period of oil prices north of $125 a barrel -- or another disaster in an oil-rich part of the world.
The fallout from the 8.9-magnitude earthquake and tsunami in Japan has added to oil market confusion. "Oil prices are being pulled in two opposite directions," says Bernard Baumohl, chief global economist at the Princeton, N.J.-based Economic Outlook Group and author of The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities. "The disasters in Japan are pulling prices down in anticipation of slower Japanese growth in the short term, and because their oil refineries are damaged and thus [they] will order less crude oil. Lifting prices higher, however, is the civil unrest in Bahrain now that Saudi Arabia and other Gulf nations have sent troops into Bahrain. The net result will still be higher oil prices because of the fear that Saudi Arabia is now completely encircled by countries that are unstable. Expect oil to remain in triple digits and gasoline prices to stay above $3 for the rest of the year."
Every $10 increase in price per barrel translates into about a 25-cent increase per gallon of gas. Before the Japanese earthquake, the U.S. Energy Information Administration forecast a gallon of gas to average $3.56 in 2011, with a 25% chance that gas could top $4 during the summer.
Every penny increase in gas prices drains $1 billion out of the economy each year, according to Baumohl. At this point, rising oil prices are "not having a material effect on the economy," he says, but "once gasoline prices begin to exceed $4 per gallon, the stress becomes greater." If gas prices increased to $4.50 per gallon for more than two months, it would "pose a serious strain on households and could put the entire recovery in jeopardy. Once you get above $5, [there is] probably above a 50% chance that the economy could face a downturn."
That is not likely to happen unless there is a major disruption in Saudi Arabia, notes Wharton finance professor Jeremy Siegel. Based on the amount of oil the U.S. imports, every $10 increase in the price of oil equates to about a quarter of 1% of the country's gross domestic product (GDP), he says. That isn't enough to send the economy into freefall. "If oil stays at its current level, it won't produce a recession," he predicts.
Even if oil prices do keep rising, the pain probably will not be as severe as the oil shocks of the 1970s, according to Siegel. In the first place, the energy intensity of the U.S. economy -- that is, the energy required to produce $1 of GDP -- has fallen by 50% since then as manufacturing has moved overseas or become more efficient. Also, the price of natural gas today has stayed low; in the past, oil and gas moved in tandem. And finally, "we're closer to alternative sources of energy for our transportation," Siegel says, "which would be accelerated if oil really moved up."
'Oil Has Lagged'
Short term, there is little the government can do to mitigate the impact of rising oil prices on the economy. Wharton experts agreed that rising oil prices are not enough of a reason to tap into the U.S. Strategic Petroleum Reserve, a cache of 727 million barrels of oil stashed in man-made salt domes in Texas and Louisiana. In recent weeks, both Democrats and Republicans have called for the government to consider using some of the reserve to help ease gas prices.
The government "definitely shouldn't do that," even if prices rose above $150 a barrel, says Wharton finance professor Franklin Allen. The Reserve was designed as an emergency fund in the case of a sudden disruption in oil supply, not as a way to mitigate oil prices, he notes. "It's a month supply. If something drastic happened in Saudi Arabia, it would be for that. They shouldn't touch it now."
Fighting rising oil prices with monetary policies is also tricky. The Federal Reserve on Tuesday chose to take no action in response to oil prices, calling the rise "transitory." "Commodity prices have risen significantly since the summer, and concerns about global supplies of crude oil have contributed to a sharp run-up in oil prices in recent weeks," the Fed said in a statement on March 15. "Nonetheless, longer-term inflation expectations have remained stable, and measures of underlying inflation have been subdued."
That is probably the right move, according to Wharton finance professor Richard Herring. "The 1970s taught us that trying to facilitate an oil price increase via inflation just doesn't work. It could lead to stagflation," he says. "If it's a real change in the price of oil, there's not much we can to do combat it."
Herring is surprised that oil prices have not actually gone higher, given continued demand for oil from emerging markets. Over the past decade, rapid growth in Asia has fueled an increased need for all sorts of commodities, from copper and silver to agricultural products. "They've all gone up a lot more than oil," Herring points out. "You could actually make the case that oil has lagged." The long-term demand for oil is unlikely to slow down, he predicts. "Once you start putting two billion more people on the roads, as we are in India and China, even if they use just a fraction of the energy we do, it's bound to be a huge impact on the market."
Oil prices today behave differently than they did 15 years ago, according to Robert Ready, a Wharton Ph.D. student who studies the oil futures markets. In the past, a natural disaster or political turmoil might drive oil prices up momentarily, but there was always enough global supply to compensate; if one oil-producing nation went offline, another would step in to meet global demand.
"In the last 10 years, there [hasn't been] enough oil supply to respond to a change in price," says Ready, who will become a professor of finance at the University of Rochester's Simon Graduate School of Business in July. According to Ready, when discussing oil markets, supply does not refer to how much oil is left in the ground, but how much oil can be produced at any given time. After increasing for several decades, total world oil production has been roughly flat since 2004. Since then, oil prices have behaved differently: They tend to go up and stay up. "In the past, if they went up, you would expect them to go back down -- but they don't go back down anymore," he notes. "At some point, there just wasn't enough production to keep up with increasing demand."
An Unpredictable Future
Embedded in the most recent spike are fears of a future drop in supply, stemming largely from social unrest in North Africa and the Middle East. Chris Lafakis, an economist at Moody's Analytics who specializes in energy, calculates that "the fundamental price of oil should be $93 to $94" based on naked supply and demand. But due to uncertainty in so many oil-producing countries, his forecast for 2011 has the price of oil hovering around $98 a barrel, which includes the fundamental price plus a $5 per barrel "uncertainty premium" that he expects to evaporate when crises resolve.
The problem is that nobody knows when that will be. The political upheaval that began in February in Tunisia and led to the ouster of Egypt's President Hosni Mubarak has thrown a question mark over the entire region. Ongoing rebellion against dictator Muammer Gaddafi has disrupted oil production in Libya, which pumped out 1.6 million barrels each day before the crisis hit. Fears about further instability in the region increased Monday after Saudi Arabia and the United Arab Emirates sent troops to quell protests in Bahrain, increasing tensions with Iran. Saudi Arabia, the world's largest oil producer, is still working to stave off its own protests: a "Day of Rage" scheduled for March 11 fell flat, but another is planned for March 20.
Escalation of unrest could cause prices to spike, according to Lafakis. If oil production were to shut down in Libya, Bahrain and Yemen, for example, the price could jump to $125 per barrel. Take out half of Iranian production, and the price jumps to $150. "And if we lost half of Saudi Arabian production, the price would go to $200 overnight," Lafakis says. "These are low probability events. But they would have catastrophic consequences."
Any predictions about what will happen next are "pure speculation," says Howard Pack, a business and public policy professor at Wharton and co-author of The Arab Economies in a Changing World. "This story is in its early stages," he notes. "It's all very unpredictable." Arab countries are buckling under a bulge of college-educated youth who can't find jobs and are frustrated with stagnant autocracies. But even if popular uprisings overthrow current regimes, new leaders may not know how to move the countries forward. It is not clear, for example, whether Egypt's military will take on the types of economic reforms that the country needs. "These countries with new governments might end up looking more like Eastern Europe from 1990 to 1996 [after the fall of Communism in the region], when GDP went down by 30% to 40%," Pack points out.
The earthquake in Japan has thrown another puzzle piece into the mix. Japan is the world's third-largest oil consumer behind the United States and China, and the world's second-largest net importer. The devastating earthquake and tsunami that hit Japan on March 11 shut down a quarter of the country's refining capacity and 11 of its 54 nuclear reactors, according to Reuters. Workers are still scrambling to stabilize four damaged reactors at the Fukushima Daiichi nuclear complex in northeastern Japan.
In the immediate aftermath of the catastrophe, Japan's demand for oil will probably go down, Pack predicts. But longer term, a backlash against nuclear energy -- in Japan and beyond -- could drive oil prices back up again. "There may be more reluctance to have nuclear power plants," Pack says. "That could have a very big effect on demand."
Oil pundits wonder what is coming next. Wharton's Henisz, who has studied oil company initiatives to improve community relations in several African nations, is keeping an eye on other oil-rich countries. "We're all focused on the Middle East and North Africa, but a lot of the same conditions exist in Equatorial Guinea, Angola and Nigeria," he points out. "I'm not saying they're going to go like dominoes, but it takes uncertainty about [just] one of them to create a real problem."

CALGARY - Trinidad Drilling Ltd. (TSX:TDG) says it will spend $80 million this year on new rigs and other capital projects to meet growing demand for its oil and gas drilling and well services.
The Calgary company said Friday it will spend the money to build two new rigs, continue work on a third rig and for other enhancements to its drilling fleet.
"Demand for high quality, modern equipment has continued to increase and contract terms have now moved to a point where it is attractive for us to build new equipment," Lyle Whitmarsh, Trinidad's president and CEO, said in a release.
"The rigs we are adding to our fleet fit well with our strategy of deep, technically advanced equipment and we expect that they will remain competitive long after their initial contracts expire."
One natural gas rig will be built at a cost of $18 million and will be used in the Eagle Ford shale region in Texas starting later this year.
A second rig will cost $20 million and is being built to work in steam assisted gravity drainage oilsands operations in northeastern Alberta.
In addition, Trinidad is currently building a natural gas powered rig for operations in the Horn River area of northeastern British Columbia, a major Canadian gas exploration and production area.
After the expansion program, rinidad will have 122 drilling rigs — 62 in the United States, 57 in Canada and three rigs in Mexico.
In addition, Trinidad has 22 service rigs, 20 preset and coring rigs and five barge drilling rigs.
In Friday trading on the Toronto Stock Exchange, Trinidad shares rose 14 cents to $9.53, a gain of nearly 1.5 per cent.

Google net rises 17% in first quarter

SAN FRANCISCO (MarketWatch) -- Google Inc. (NASDAQ:GOOG) on Thursday said its first-quarter net income rose to $2.3 billion, or $7.04 a share, from $1.96 billion, or $6.06 a share in the same period a year earlier. The Internet search giant said net revenue for the period ended March 31 rose to $6.5 billion. Excluding one-time items, Google said earnings for the period were $8.08 a share. Analysts polled by FactSet Research had expected Google to report first-quarter earnings excluding items of $8.11 a share, and $6.3 billion in net revenue

Zipcar zooms 60% higher in IPO

SAN FRANCISCO (MarketWatch) — Zipcar Inc. shares shot up more than 60% in their stock-market debut Thursday, marking the latest splash in what is already shaping up to be a strong year for IPOs.

At last check, Zipcar’s newly minted shares (NASDAQ:ZIP)  were up $11 at $29.
Late Wednesday, Zipcar had priced its initial public offering at $18 — above the previously expected range of $14 to $16 a share — to raise more than $170 million.

MarketWatch

Many of Zipcar's hundreds of Chicago-area cars, like this Honda Civic, are parked near mass transit and commuter-rail stations.

About 9.68 million shares were sold in the offering, which was underwritten by Goldman Sachs Group Inc. and J.P. Morgan Chase & Co.
Zipcar is one of many companies going public in a resurgent year for public offerings. According to a report this week from Hoover’s Inc., 28 companies went public in the first quarter, raising $12 billion in market capitalization. That’s more than twice the $4.5 billion raised through IPOs in the first three months of 2010.
Zipcar operates a so-called car-sharing service in 14 cities and at more than 230 college and university campuses across the U.S. and U.K. It offers self-service cars for use by the hour or by the day, and claims 560,000 members. The company has more than 8,000 vehicles, including popular choices like the Mini (PINK:BAMXY)  and Toyota’s (NYSE:TM)  Prius, usually in pairs and located in high-foot-traffic areas and near mass transit
“Zipcar has almost a cult following,” said Scott Sweet, senior managing partner at IPO Boutique. “They’re strategically located in big cities where parking is tough, as well as many universities.”

Zipcar in IPO-market driver's seat

How will the car-sharing firm fare in a high-gas-price environment? Stacey Delo talks to MarketWatch's Dan Gallagher.

To this point, however, profits have been elusive. In the most recent quarter, the company reported a net loss of $1.1 million, on revenue of $52.1 million, compared with a profit of $1.3 million, on revenue of $35.8 million for the year-earlier period, according to an SEC filing. Read related analysis on Zipcar’s valuation .
Matt Therian of the research firm Renaissance Capital explained earlier this week that Zipcar has a relatively “capital intensive” business model, but its strong brand image and its head start in the car-sharing market — where it competes in some markets with for-profit rivals and such nonprofit entrants as Chicago’s iGo and the San Francisco area’s City CarShare, in addition, of course, to traditional rental incumbents like Hertz (NYSE:HTZ)  and Avis Budget Group (NASDAQ:CAR)  — give it an inside track with investors.
“If investors perceive a company as a game changer, they don’t worry so much about a valuation that might look expensive one or two years down the road,” Therian said.
IPO Boutique’s Sweet has compared Zipcar to OpenTable Inc. (NASDAQ:OPEN) , a provider of online restaurant-reservation services that went public in May 2009. Like Zipcar, OpenTable offered a service that was popular with a typically urban and relatively youthful consumer base, and that in turn drove interest among investors. That stock priced at $20. Its intraday high Thursday is $106.10

The U.S. Department of Justice announced on Friday that it conditionally approved Google's acquisition bid for ITA Software Inc., a maker of software used by air-travel Web sites.
The acquisition bid had been opposed by a coalition of businesses, called "FairSearch.org," that included Microsoft, Expedia.com, Kayak and Sabre Holdings (Travelocity), among others. However, FairSearch.org described the DoJ's conditional agreement as "a clear win for consumers and competition in the marketplace." The organization's shift appears due to the stringent conditions that were placed on Google by the Justice Department.
The department is requiring that Google agree to a settlement to proceed with the acquisition of ITA Software. At the same time, it filed a civil antitrust lawsuit to block the acquisition should Google not follow the terms of the settlement.
Google, under the DoJ's terms, will be compelled to continue licensing ITA's QPX software to Websites "on commercially reasonable terms." Google also will have to fund continuing R&D costs and develop ITA's next-generation InstaSearch product, which isn't currently available yet. Lastly, Google will have to set up a firewall to restrict its use of commercially sensitive information gleaned through the ITA software. It also can't restrict airline-provided booking and seating information from reaching competitors.
FairSearch.org, while praising the Department of Justice's settlement terms, indicated that it will continue to serve as a "watchdog" over Google.
"We also urge lawmakers and enforcers in the U.S. and elsewhere to continue investigating the many concerns that have been raised about Google's dominance in search and search advertising, particularly its incentive to abuse that power in new vertical markets to the detriment of consumers," FairSearch.org stated in a press release.
Google simply issued a cheerful blog post, omitting specific mention of the Department of Justice's terms. The company indicated that it would continue to provide the service to ITA's business partners, honoring existing contracts "into 2016" and licensing the software to new customers "into 2016," including other travel sites.
Microsoft, in addition to battling Google through FairSearch.org, has joined as a plaintiff in a European Commission inquiry investigating alleged anticompetitive search-advertising practices by Google in European countries.