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The adjustment to the population over the last decade was the second largest on record. However, the devil is in the details, as the population of 55 and older didn't really increase — they were always there but just not counted. The real concern is with the 16-24 age group. The longer that age group remains unemployed, the higher the probability that they will become long-term unemployable due to degradation of job skills. As we have seen in the recent reports, this age group has a much higher unemployment rate than any other category, and that doesn't bode well for economic strength in future as this group moves into lower wage-paying positions. Recent manufacturing reports show that one of the problems they face is finding "skilled" labor to fill available positions. The shift away from a production and manufacturing base over the last 30 years in the U.S. is now starting to take its toll. The problem, in trying to bring manufacturing back to the U.S., is not just education and skill training but also competitive advantages that the U.S. will have a difficult time overcoming in terms of underlying production and labor costs. Countries like China and Korea have no regulatory, environmental and minimum wage requirements to meet. Those are all additional costs that the U.S. must build into production costs, which limits our competitive potential. Outsourcing is going to be a long-term problem that will be very difficult to reverse.

Gold has followed the now familiar trading pattern of gains in Asia followed by weakness in Europe. While gold has fallen and is weaker in most currencies gold remains higher in euro terms due to euro weakness on the concern of a Greek default. Spot gold bounced back in Asian trading Monday as investors snatched up bargains after a 2% dip the previous session.  The Greek debt debacle is still supporting the price as a deal remains elusive. There continue to be concerns of a “Lehman moment” but markets remain fairly sanguine of a positive outcome despite the continual risk of a Greek default.  Gold remains an essential diversification as central banks keep money loose with record low interest rates and Asian powerhouses China and India still drive demand.  Silver has also fallen this morning. Barclays Capital, who have been quite bearish on silver in recent years, say that they are “expecting prices to rise in the next few sessions, along with gold, pegging silver's next resistance level at $35.70/oz and support near $33/oz.”

One of the most ominous developments for us personally crawled out from under its rock in November. Again without any public debate, DHS unleashed its National Operations Center's Media Monitoring Initiative. Yep, it's exactly what it sounds like: The NOC's Office of Operations Coordination and Planning is going to collect information from news anchors, journalists, reporters, or anyone who may use "traditional and/or social media in real time to keep their audience situationally aware and informed." Thus Washington, D.C. unilaterally grants itself the right to monitor what you say. Doesn't matter if you're the New York Times, Brian Williams, a basement blogger, an online whistleblower, or known government critics like ourselves. They're gonna take note of your utterances and file them away for future use. Journalists are not the only targets, by the way. Also included among those subject to this surveillance are government officials (domestic or not) who make public statements; private-sector employees who do the same; and "persons known to have been involved in major crimes of Homeland Security interest," however large that umbrella might be....The larger speculation is: what's the endgame here?

James Dines has been in the business of making bold calls for over 50 years. In this deep-diving interview, he minces no words about the dire risks the US economy - and the world at large - faces at this juncture. Simply put, he sees the excessive credit in the financial system as having placed the global economy on a collision-course with hyperinflation. Unlike past periods of turmoil, there are no truly 'safe' places for investment capital to hide. Geographic markets and almost all asset classes are positively correlated these days. They share many of the same risks and if a systemic crash occurs, they will crash together. At this point, says Mr Dines, you want to invest in assets that can not be printed away by government desperation. You want to hold hard assets; "wealth in the ground" as Dines says (physical commodities, mining companies, etc). They're your best best to make money faster at a rate faster than inflation is going to happen.

Whether this is a real hack, or merely an attempt by the FBI to pursue its own ulterior motives is unclear (especially with the broad media coverage it is getting and the fact that the YouTube recording of the call is still online), but supposedly the Anonymous hacker group managed to enter and record a 16 minutes conference call between the FBI and Scotland Yard. Per AP: "Anonymous published the roughly 15-minute-long recording of the call to the Internet early Wednesday, gloating in a Twitter message that "the FBI might be curious how we're able to continuously read their internal comms for some time now." The FBI said the information "was intended for law enforcement officers only and was illegally obtained" but that no FBI systems were compromised. Scotland Yard said that they'd seen no immediate information that their operations had been compromised - but that the force was still checking. The bureau said that "a criminal investigation is under way to identify and hold accountable those responsible." It's not entirely clear how the hackers got their hands on the recording, which appears to have been edited to bleep out the names of some of the suspects being discussed. Amid the material published by Anonymous was an email purportedly sent by an FBI agent to international law enforcement agencies. It invites his foreign counterparts to join the call to "discuss the ongoing investigations related to Anonymous ... and other associated splinter groups. The email is addressed to officials in the U.K., Ireland, the Netherlands, Sweden and France, but only American and British officials can be heard on the recording." The message contained a phone number and password for accessing the call." The full recording can be heard below and a standalone mp3 can be found here.

Gold has risen to 8 week highs despite positive manufacturing data, higher factory activity in Germany, China and the US and the hope that a Greek debt restructuring solution is imminent. Demand for physical in Europe, Asia and internationally remains robust which is supporting gold. Investors will today watch the US weekly jobless claims data for the week ending January 28th. Adding to the very gold supportive interest rate backdrop, Japan's finance and economic ministers are putting pressure on the Bank of Japan to consider easing monetary policy even further. Negative yields on some bonds (such as TIPS) are very gold positive as is moves to let investors buy short term bills with negative yields. Gold is also being supported by central bank buying. Russia's gold and foreign exchange reserves rose to $504 billion in the week to Jan. 27 from $499.7 billion a week earlier.

• China’s factories in strong start to 2012 (FT)
• Merkel to court Chinese investors (FT)
• States to decide this week on mortgage deal (Reuters)
• Europe is stuck on life support (FT)
• IMF's Thomsen Says Greece Must Step Up Reform (Reuters)
• Tax cuts expiry to slow US growth (FT)
• Government health spending seen hitting $1.8 trillion (Reuters)
• Romney Win in Florida Primary Shows Strength (Bloomberg)
• EU regulator blocks D.Boerse-NYSE merger (Reuters)
• Greek Bondholders said to get GDP Sweetener in Debt Swap Agreement (Bloomberg)
• S. Korea Plans to Buy China Shares (Bloomberg)

"The Sunshine State is a paradise of scandals teeming with drifters, deadbeats, and misfits drawn here by some dark primordial calling like demented trout. And you'd be surprised how many of them decide to run for public office."--Carl Hiaasen, author and native Floridian

[WARNING: GATORADE AND OTHER FRUITS AND BEVERAGES ARE NOT ADVISABLE NEAR THIS POST]

There continues to be no coverage of silver in the non specialist financial media and little coverage of silver in the specialist financial media. However, both the Financial Times and Bloomberg cover silver today which might be a harbinger of short term weakness. The majority of articles on silver are bearish and most bank analysts remain bearish on silver again in 2012 – as they have been in recent years. Prices will average $37.50/ounce in Q4, according to a survey of 13 analysts by Bloomberg. The lack of coverage of silver and consequent “animal spirits” in the silver market is of course bullish from a contrarian perspective. Analysts look set to get the silver market wrong again as recent rocketing industrial demand for silver, from solar panels to batteries to medical applications and growing investor demand for coins, and small & large bars is “diminishing a supply surplus” according to Nicholas Larkin of Bloomberg.  This has led to silver’s best January gains in 30 years with silver up over 20% from below $28/oz to nearly $34/oz. Barclay's estimates that manufacturers will need a 2.5% increase of the metric tons used last year and investment demand continues to grow due to risks posed by both inflation and systemic risks. Silver supply shortages are something we and other analysts who are bullish on silver have been warning of for some time. This is because the silver market is small versus the gold market and tiny versus equity, bond, currency and derivative markets.  This is why we believe silver should rise to well over its nominal recent and 1980 high of $50/oz in the coming months.

Xinhua, the official press agency of the government of the People's Republic of China reports that a "gold rush" swept through China during the week-long Lunar New Year holiday this year, with demand for precious metals and jewelry surging since the Year of the Dragon began. Data released by China's Beijing Municipal Commission of Commerce shows a 49.7% increase in sales volume for precious metals jewelry and bullion during the week-long holiday (over last year), which lasted from January 22 to 28 over that of last year's Spring Festival. One of Beijing's best-known gold retailers, Caibai, saw sales of gold and silver jewelry and bullion rose 57.6% during the week long New Years holiday  according to data released by the Ministry of Commerce (MOC) on Saturday, Other jewelry stores across the country also saw sales boom during the period, with customers favoring New Year themed gold bars and ingots and other types of Dragon themed jewelries. During the week-long holiday, which lasted from January 22 to 28, the sales volume in just one gold retailer, Caibaiand Guohua, another of Beijing's top gold retailers, reached about 600 million yuan (nearly $100 million). Caibai began selling gold bars as investment items during the 2008 Beijing Olympic Games, but the trend of buying gold or silver bars during the Spring Festival has taken off in the past two years.

He said, “Rising commodity prices, uncertainty in the Middle East, the spreading European debt crisis, increased frequency of “extreme weather events” and U.S. fiscal issues are “persistent” problems that will continue to spur market volatility and sway asset prices in the global economy. This is great news for gold. Goldman Sachs noted in a report on Jan. 13th that futures will advance to $1,940 an ounce in 12 months.  Morgan Stanley forecasts the yellow metal will climb to a record of $2,175 by 2013, said analysts Peter Richardson and Joel Crane in their research report.

Gold rose 2.5% yesterday and broke $1,700/oz to $1,712.80, its biggest one-day gain in the past 4 months, as the US Federal Reserve’s 11 out of 17 members voted that interest rates would likely remain near zero into late 2014. Investors sought safe haven refuge into gold fearing their portfolios would lose value as Central Banks flood the markets with loose monetary policies and more cash for governments that can't seem to manage their balance sheets.  A group of 7 major economies now have interest rates that average .5%.  Silver also rallied up 4%.  Today's Comex February gold option expirations will show more activity in the gold markets. One trader stated that gold's gains on Wednesday could be due to a huge cover on a short position before today's option expiration.

• Angela Merkel casts doubt on saving Greece from financial meltdown (Guardian)
• Germany Rejects ‘Indecent’ Call to ECB on Greece, Meister Says (Bloomberg)
• Obama Calls for Higher Taxes on Wealthy (Bloomberg)
• Fed set to push back timing of eventual rate hike (Reuters)
• Recession Looms As UK Economy Shrinks By 0.2%, more than expected (SKY)
• King Says BOE Can Increase Bond Purchases If Needed to Meet Inflation Goal (Bloomberg)
• When One Quadrillion Yen is not enough: Japan's first trade deficit since 1980 raises debt doubts (Reuters)
• Sarkozy to quit if he loses poll (FT)
• U.S. Shifts Policy on Nuclear Pacts (WSJ)
• ECB under pressure over Greek bond hit (FT)

Investors are waiting on the outcome of a 2 day Federal Reserve meeting which ends on Wednesday.  Here they are following any signs that interest rates will remain low, as that could put pressure on the U.S. dollar. The Tokyo Commodity Exchange, December, gold contracts climbed as high as 4,167 yen/gram, its biggest gain since mid-December. The gains initially propelled cash gold even though trading was slow during the Lunar New Year break. Japan has been notably absent in the gold market in recent years. This may be changing as concerns about the Japanese economy and continuing debasement of the yen may be leading to Japanese diversification into gold.  The scale of domestic savings in Japan remains enormous. This would be a new and potentially extremely important source of demand in the gold market which could help contribute to much higher gold prices. 

Round up for ZH readers ...