Precious Metals Rise Immediately on Higher than Expected UK Inflation

From GoldCore:

Silver and particularly gold rose sharply on the release of the higher than expected UK inflation data. It showed that UK inflation quickened to 26 month highs at 4.0%. Currency debasement and higher food and energy prices are leading to an inflation surge in both developed and emerging markets.

Gold in British Pounds - 1 Day (Tick)

The extent of the surge is being masked as the figures in the UK and internationally underestimate real inflation. Increasingly many economists are concerned that official statistics are misleading and hide the true increase in the cost of living (see ‘Official statistics hide true increase in cost of living' in News today). A double-digit jump in food prices pushed China's inflation higher in January - seeing consumer prices rise 4.9 percent, driven by the 10.3 percent jump in food costs.

The Chinese inflation data appears to be even more misleading and manipulated than that in western economies. Many governments are attempting to manage consumers perceptions regarding the significant increase in the cost of living as fiat currencies are debased.

Silver is now less than 2% from its 30 year nominal high of $31.25/oz seen at the start of the year and looks set to challenge and surpass this level in the coming days due to continued robust physical demand (both investment and industrial) and the fact that the futures market is seeing some big money go long again after the recent correction.

Silver remains in backwardation with spot trading at $30.68/oz while the July 11 contract trades at $30.55/oz and the December 14 at $30.40/oz.

News:

(Bloomberg) -- Soros Cuts Stake in Monsanto, Leaves Gold Shares Unchanged
Billionaire investor George Soross hedge fund cut its stake in Monsanto Co. and left its bet in gold unchanged, according to a quarterly filing with the Securities and Exchange Commission.

The $27 billion Soros Fund Management, based in New York, cut its shares in the St. Louis, Missouri-based agricultural company to 3.29 million shares from 6.52 million in the previous quarter, according to the regulatory filing. As of Dec. 31, the shares were worth $229 million.

Soros, who called gold "the ultimate asset bubble," left his gold bet little changed.

(Bloomberg) -- Paulsons SPDR Gold Holdings Unchanged at 31.5 Million Shares
Paulson & Co.s SPDR gold holdings were unchanged at 31.5 million shares as of Dec. 31 compared with three months earlier, according to a U.S. Securities and Exchange Commission filing.

(Bloomberg) -- Soros Raises SPDR Gold Holding 0.5% in Fourth Quarter (Update2)
Investor George Soros increased his SPDR Gold Trust share holding by 0.5 percent in the fourth quarter and John Paulson kept his investment unchanged, filings with the U.S. Securities and Exchange Commission show.

Soros Fund Management LLC held 4,721,808 SPDR Gold Trust shares as of Dec. 31, compared with 4,697,008 shares at the end of the third quarter, according to the filing. Soross call options on 705,000 shares in the trust as of Sept. 30 were not listed in the latest report. Paulson & Co.s holding, the largest in the SPDR fund, was 31.5 million shares.

A decade-long surge in gold has attracted investors seeking better returns than equities or bonds, and helped boost holdings in exchange-traded products backed by the metal to a record in December. The metals climb last year to an all-time high was more than triple the gain in global equities, and bullion beat shares in five of the past six years.

"Investment demand remains the most important driver for the gold market," said Daniel Brebner, an analyst at Deutsche Bank AG in London. "The entrance or exit of large funds in and out of exchange-traded products can give an idea of the conviction by these investors as to the prospects for gold."

Investors in 10 gold-backed exchange traded products own metal valued at $88.6 billion as of yesterday, according to Bloomberg calculations, even after cutting assets in tons by 4.5 percent since Dec. 20 when holdings peaked. Immediate-delivery gold traded at an all-time high of $1,431.25 an ounce on Dec. 7 and erased more than 4 percent since then to $1,365.47 today.

Soros, Paulson
Michael Vachon, a spokesman for Soros, declined to comment on gold investments and the filing, when asked before its release. Armel Leslie, a Paulson spokesman, declined to comment.

Soros Fund Management LLC manages about $27 billion. The companys SPDR Gold Trust holding was worth $655 million as of Dec. 31, the filing showed, representing 8.5 percent of the $7.7 billion total in the SEC filing.

The firms holdings in the iShares Gold Trust of 5 million shares, also backed by the metal, remained unchanged as of Dec. 31 from the preceding quarter.

Soros described gold at the World Economic Forums meeting in Davos, Switzerland, in January last year as "the ultimate asset bubble." In a Nov. 15 speech in Toronto the 80-year-old said conditions for the metal to keep rising were "pretty ideal" and at this years Davos forum he said the boom in commodities may last "a couple of years" longer.

(Bloomberg) -- Gold Advances in Asia as Chinas Inflation Fuels Hedge Demand
Gold advanced in Asia on speculation rising inflation across the globe will fan demand for the metal as a store of value after Chinas consumer prices exceeded the governments 2011 target for a fourth month.

Immediate-delivery bullion rose 0.3 percent to $1,365.43 an ounce at 1:46 p.m. Singapore time after falling as much as 0.2 percent. Gold for April delivery was little changed at $1,365.70 after weakening as much as 0.3 percent to $1,361.30 an ounce.

"The market is directionless given that theres no immediate incentive to influence traders," said Paul Yamamura, Tokyo-based trader with Sumitomo Corp. "Gold prices may gain steam after some consolidation on inflation fears."

China last week joined India, Indonesia, Thailand and South Korea in boosting interest rates as Asian policy makers sought to cool the economies leading a global rebound. Chinese consumer prices advanced 4.9 percent in January from a year earlier after a 4.6 percent gain in December, todays report showed.

(Financial Times) -- Largest bond fund cuts US government holdings
The worlds largest bond fund sharply cut its exposure to US government-related debt in January, before US bond yields rose this month to their highest level in almost a year.

Pimcos Total Return Fund, run by Bill Gross, a founder of Pimco, reported that its holdings of US government-related securities fell from 22 per cent in December to 12 per cent in January.

The proportion of US government-related holdings, which includes US Treasuries, is at the lowest level held by the $239bn fund since January 2009 when it held 15 per cent of its assets in the category.