Commodity Trade Mantra

All Signs Point to Higher Gold Prices in the Months Ahead

All Signs Point to Higher Gold Prices in the Months Ahead

All Signs Point to Higher Gold Prices in the Months Ahead

Is the latest rally in gold prices for real?

Investors can be forgiven for asking that question. Gold prices reached an all-time high dollar price of $1,898 per ounce on September 5, 2011. Then began a relentless four-year, 43% plunge that took gold prices to $1,058 on November 27, 2015.

Of course, gold prices did not go down in a straight line. There were numerous strong rallies along the way.

Gold rallied 13%, from $1,571 in June 2012 to $1,780 in October 2012. Then gold prices rallied 15%, from $1,202 in December 2013 to $1,381 on March 2014. Gold rallied 22.5% again, from $1,058 in November 2015 to $1,366 in July 2016, just after the Brexit vote in the UK.

If you were fortunate enough to buy each dip and sell at each high, lucky you. I don’t know anyone who actually did that. More common behavior is to buy near the interim tops on euphoria, and sell at the interim lows on depression. That’s a great way to lose money, but unfortunately it’s exactly how many investors behave.

With that said, no one can blame investors for being discouraged and skeptical about the action in gold prices. Every rally in gold prices, since late-2011 was followed by a sickening plunge.

Perhaps the worst plunge was the dizzying 24% plunge, from $1,607 to $1,223 per ounce, in a brief 15-week span between March 22 and July 5, 2013. That period included the notorious “April Massacre” when gold prices fell over 5% in just two trading days.

Each time gold experienced one of these major reversals, investors were quick to claim price manipulation by dark forces, usually central banks, using highly-leveraged “paper gold” dumps on the commodity futures exchanges.

Actually there is strong statistical and forensic evidence to support the gold price manipulation claims, as I explain in my 2016 book, The New Case for Gold. China has a keen interest in keeping gold prices low because it is on a multi-year, multi-thousand ton buying spree. If you were buying 3,000 tons in a thin market, you’d want low prices too.

Of course, all of that will change when China reaches its gold reserve target of 10,000 tons — surpassing the United States. At that point, it will be in China’s interest to become more transparent and let the price of gold soar, which is another way of saying the value of the dollar is in free-fall.

China’s endgame may still be a few years away. Meanwhile, there are other more prosaic explanations for the long decline in gold prices from 2011 to 2015.

The best explanation I’ve heard came from legendary commodities investor Jim Rogers. He personally believes that gold prices will end up in the $10,000 per ounce range, which I have also predicted. But, Rogers makes the point that no commodity ever goes from a secular bottom to top without a 50% retracement along the way.

The calculation of a retracement necessarily relies on certain assumptions about which baseline to use for the analysis. For instance, gold prices fell, but traded in a narrow range between $490 per ounce in November 1987, and $255 per ounce in August 1999.

From there, gold prices turned decisively higher and rose 650% until the peak in 2011. So, the August 1999 low of $255 seems like a reasonable baseline for a retracement calculation.

Based on that, gold prices rose $1,643 per ounce from August 1999 to September 2011. A 50% retracement of that rally would take $821 per ounce off the price, putting gold at $1,077 when the retracement finished. That’s almost exactly where gold prices ended up on November 27, 2015 ($1,058 per ounce).

This means the 50% retracement is behind us and gold is set for new all-time highs in the years ahead.

Still, investors have been disappointed so many times since 2011 that they remain skeptical. Why is this rally different? Why should investors believe gold prices won’t just get slammed again?

The answer is that there’s an important distinction between the 2011-2015 price action and what’s going on now. The four-year decline exhibited a pattern called “lower highs, and lower lows.” While gold prices rallied, and fell back, each peak was lower than the one before and each valley was lower than the one before also.

The March 2014 high of $1,381 per ounce was lower than the prior October 2012 high of $1,780 per ounce. The November 2015 low of $1,058 per ounce was lower than the prior December 2013 low of $1,202 per ounce. Meanwhile, the overall trend was down.

Since December 2016, as shown in the chart below, it appears that this bear market pattern has reversed. We now see “higher highs, and higher lows,” as part of an overall uptrend.

The February 24, 2017 high of $1,256 per ounce was higher than the prior January 23, 2017 high of $1,217 per ounce. The May 10, 2017 low of $1,218 per ounce was higher than the prior March 14, 2017 low of $1,198 per ounce.

Of course, this new trend is only five months old and is not deterministic. Still, it is an encouraging sign when considered alongside other bullish factors for gold prices.

The current rally in gold prices began on December 15, 2016 at $1,128/oz. For over 5 months, gold has Adhered to a pattern in which each new high price is above the one before (“higher highs”), and each drawdown settles at a price above the one before (“higher lows”), If this pattern persists, the next high will be above $1,300/oz. Gold could rally further from there based on Fed policy.

The question for investors today is: Where does the gold market go from here?

We’re seeing a persistent excess of demand over new supply. China and Russia alone are buying more than 100% of annual output each year. That’s on top of normal demand by individuals and the jewelry industry. This means that demand has to be satisfied from existing stocks in vaults.

But western central banks have all but stopped selling in recent years. The last large sales were by Switzerland in the early 2000s and the IMF in 2010.

Private holders are keeping their gold also. On a recent visit to Switzerland, I was informed that secure logistics operators could not build new vaults fast enough and were taking over nuclear-bomb proof mountain bunkers from the Swiss Army to handle the demand for private storage.

With gold sellers disappearing and large demand continuing, the price will have to go up to clear markets — regardless of how much “paper gold” is dumped.

Geopolitics is another powerful factor. The crises in North Korea, Syria, Iran, the South China Sea, and Venezuela are not getting better; they’re getting worse. The headlines may fade in any given week, but geopolitical shocks will return when least expected and send gold prices soaring in a flight to safety.

Fed policy tightening is normally a headwind for gold. But, the last two times the Fed raised rates — December 14, 2016 and March 15, 2017 — gold prices rallied as if on cue. Gold is the most forward-looking of any major market. It may be the case that the gold market sees the Fed is tightening into weakness and will eventually over-tighten and cause a recession.

At that point, the Fed will pivot back to easing through forward guidance. That will result in more inflation and a weaker dollar, which is the perfect environment for gold.  Look for another Fed rate hike on June 14, and another gold spike to go along with it.

In short, all signs point to higher gold prices in the months ahead. I look for a short-term rally to $1,300 in the next month, and then a more powerful surge toward $1,400 later this year based on Fed ease, geopolitical tensions, and a weaker dollar.

The rally in gold prices that began on December 15, 2016 looks like one that will finally break the bear pattern of lower highs and lower lows, and turn it into the bullish pattern of higher highs and higher lows. – Jim Rickards

Paul Singer Says It’s Time to Build Up Some Dry Powder

Billionaire hedge fund manager Paul Singer’s firm, Elliott Management, has one of the most impressive long-term track records, generating a compound annual growth rate (CAGR) of 13.5 percent since its inception in 1977, with only two down years.

Elliott Management currently manages close to $33 billion—not including the $5 billion it raised this month in as little as 24 hours. Yes, billion with a b. Singer, suggesting a potential investment opportunity in distressed stocks could soon open up, recently called on investors to commit a fresh infusion of cash. The resultant $5 billion in dry powder, the most ever raised in the firm’s history, is expected to be deployed at some later date.

Singer continues to be a huge advocate for gold. At the event, he mentioned that he still holds the yellow metal, noting its attractive diversification benefits. This is in line with what I frequently say: You’re unlikely to get rich investing in gold, but as a diversifier it helps to reduce some of the volatility in your portfolio. I like to recommend a 10 percent weighting in gold—5 percent in bars and coins, the other 5 percent in gold stocks—with annual rebalances.

Gold posted a “golden cross” last week, which is what happens when the 50-day moving average climbs above the 200-day moving average, often seen as a bullish move.

gold posts a golden cross

 

Gold prices are up about 10 percent year-to-date on a weaker U.S. dollar, which has declined more than 5.5 percent over the same period. – Frank Holmes

India’s Hunger for Gold is Legendary – But who are these Gold Buyers?

India’s Hunger for Gold is Legendary - But who are these Gold Buyers?

India’s Hunger for Gold is Legendary – But who are these Gold Buyers?

The latest report from the World Gold Council says that gold demand from India was what supported global gold demand in the first quarter of 2017. Indian purchases of gold jewellery in the first quarter of 2017 accounted for a little over a fifth of world jewellery demand. That is completely out of proportion to India’s share of world gross domestic product (GDP), which is around 3% or so, in current US dollars. During Q1, 2017, India’s demand for gold jewellery was 92.3 tonnes, compared to 22.9 tonnes for the US. Investment demand for gold in the form of bars and coins was 31.2 tonnes in Q1 2017, compared to 16.2 tonnes for the US.

India’s hunger for gold is not surprising—people have been complaining about the “drain of gold” into India for ages, starting with Pliny the Elder, the Roman writer of the 1st century AD. But where in India does the gold go to? And who are the people who buy all this gold jewellery?

The short answer to the first question is, in one word: Kerala. For a longer answer, turn to Chart 1, which shows the monthly per capita expenditure on gold ornaments among the Indian states. The data have been taken from the National Sample Survey Office (NSSO)’s survey on Household Consumption of Various Goods and Services in India, 2011-12. Only data from the states have been taken here and Union territories have not been included.

The first thing that catches the eye in the chart is how different Kerala is from the rest of India in terms of spending on gold ornaments. For instance, not only does rural Kerala top the rankings for spending on gold ornaments, its per capita spending is six times higher than the state that ranks number 2—Goa. Indeed, rural Kerala’s per capita spending on gold ornaments is far ahead of the total per capita spending of all the other six top states by gold consumption shown in the chart.

India’s Hunger for Gold is Legendary - But who are these Gold Buyers?

Urban India, being richer, spends more on gold ornaments than rural areas. Nevertheless, here too urban Kerala ranks first by a mile among the states. To be sure, Kerala has relatively high per capita income, but it’s certainly not so different from other Indian states as the gold consumption data suggests. Cultural factors must be behind its status as an outlier. It is no wonder then that the Kerala chief minister wants a low goods and services tax (GST) for gold.

At the other extreme are the states with the lowest per capita expenditure on gold ornaments. As the chart shows, the north-eastern states figure prominently in this list—again the reason is likely to be cultural factors rather than poverty. It’s likely though that poverty is the factor behind states like Bihar and Jharkhand having low per capita gold consumption.

What about the second question—who buys all this gold? Well, the rather obvious answer is it’s the rich. Chart 2 has the details. The population is divided into 12 fractiles depending on their consumption. Fractile 12 is the top 5% in terms of consumption, fractile 11 the next 5%, fractile 10 the next 10%, fractile 9 the next lower 10% and so on, with fractile 1 being the lowest 5%. In other words, the fractile classes used are the percentile classes 0-5%, 5-10%, 10-20%, 20-30%, 30-40%, …, 70-80%, 80-90%, 90-95%, and 95-100%. These fractiles are taken separately for rural and urban India.

As the chart shows, the richest 5% in rural India spend 6.2 times more on gold ornaments than the next 5%. In urban India, this multiple is 3.9 times. Sure, even the poor buy some gold jewellery. But note how much more the top 5% spend on gold ornaments compared to the middle percentiles. Clearly, the people who will benefit the most from a low goods and services tax (GST) rate on gold will be the rich.

 

Courtesy: Livemint

What does the Strong Demand for Gold and Silver Bullion Coins tell us?

What does the Strong Demand for Gold and Silver Bullion Coins tell us?

What does the Strong Demand for Gold and Silver Bullion Coins tell us?

I have always considered sales of modern gold and silver bullion coins a bellwether on the general health of the global precious metals market. In reality, though, bullion coin sales comprise only a very small portion of the physical gold and silver markets. According to the World Gold Council, modern gold coins make up only about 13% of investment demand and a little less than 5% of overall demand. Yet, as is often the case in statistical inquiry, it is the small and often unobserved, sometimes even ignored, that can accurately tell the larger story – particularly when it reflects the net effect of human action within the greater economy and financial markets.

So how is it that such a small aspect of the global gold and silver market in terms of the overall volume can at the same time be so important?

In a nutshell, it is because the demand among ordinary private investors is telling us something very important: The level of confidence people have in the economy and the plan being carried out by the central planners in charge. Twentieth-century economist Joseph Schumpeter (1883-1950), most famous for his theory of creative destruction in capitalist economies, said it best: “The modern mind dislikes gold because it blurts out unpleasant truths.” I am quite certain that the “modern mind” to which Schumpeter referred was a collective term for the social and economic planners responsible to this day for the construction and maintenance of the fiat money economy.**

With that for initial spade work, let’s take a look at the demand for modern gold and silver bullion coins to see what they might be “blurting out” at this juncture in economic history. First and foremost, the numbers tell us that though Washington and the mainstream media may have recovered psychologically from the 2007-2008 crisis, the investing public has not. In fact, by implication the numbers tell us that concerns about a repeat, or better put, an extension, of that crisis still run high among investors.

The charts depict two different eras for gold and silver bullion coins – the one before the crisis and the one after. The strong consumption in 2016, in that respect, is decidedly a continuation of a well-established trend that began in 2008. For gold, 2016 was the fifth best year on record in terms of sales and in a virtual dead heat with 2015. For silver, 2016 was the fifth best year on record coming after last year’s record sales. Since 2016 was a relatively calm year in financial markets, the question arises how high demand might go if another crisis were to suddenly ignite.

Another lesson in these charts, and one that should not be overlooked, is that the record performances in both precious metals since 2008 did not occur in an inflationary environment, but in a distinctly disinflationary one. The strong and continuing post-crisis demand, running consistently at five to nine times pre-2007 levels, belies the mainstream media’s unremitting mantra that the precious metals are an inflation hedge and inflation hedge only. In that regard, silver is the big surprise. Prior to the current period, silver was generally viewed as an industrial metal with some investment potential and rarely a safe-haven or crisis hedge. Now investors give silver nearly the same credence they do gold for asset preservation purposes. – Michael J. Kosares

Investors Should Prepare for Flight to Gold – Deutsche Bank

Investors Should Prepare for Flight to Gold - Deutsche Bank

Investors Should Prepare for Flight to Gold – Deutsche Bank

Strengths

  • The best-performing precious metal for the week was palladium, up 4.18 percent. Bloomberg reports that rising automobile demand may be sending palladium futures toward the steepest rally since April 20.
  • Bloomberg’s weekly poll of traders and analysts show the trending heading toward bullishness, with 10 bullish, five bearish and four neutral. Analysts point to concerns over terrorism, probes into President Donald Trump’s links to Russia and doubts that the Federal Reserve will raise rates in June, as factors that may spur investors to choose gold.
  • China’s gold demand in 2017 is still the strongest in four years, reports Bloomberg. Although higher prices have deterred some buyers, dropping gold purchases from 15-month highs, the World Gold Council (WGC) sees demand growing to 900 to 1,000 metric tons for the full year.

Weaknesses

  • The worst-performing metal for the week was gold, albeit still positive with a gain of 0.91 percent.
  • The biggest gold miner ETF, the VanEck Vectors Gold Miners ETF, saw record outflows this week. On Wednesday, investors withdrew $662 million from the fund, making it the worst daily outflow since 2006. Similarly, the VanEck Vectors Junior Gold Miners ETF has had outflows of $804 million since March 31, after record inflows last quarter prompted the fund to change its portfolio structure. Bloomberg reports that the fund is now on track for the biggest quarterly outflow since the fund’s inception in 2009.
  • A handful of gold mining stocks are experiencing challenges this week. Tragically, a fatal accident occurred at Torex Gold’s construction site at the El Limon Sur pit in Mexico. The ongoing ban on exports of mineral concentrate from Tanzania could cut Barrick Gold’s gold production by up to 6 percent this year, as Barrick’s equity interest in Acacia accounts for around 10 percent of its gold production. And Freeport-McMoRan has let go about 4,000 workers after a strike at the company’s Indonesian operations.

Opportunities

  • Bank of America Merrill Lynch published a report this week on the company’s global mining conference in Barcelona. BofAML reports that most gold mining companies are in better condition than last year, due in great part to the better corporate discipline, with more focus on value over risk.
  • Deutsche Bank published a special report on the global gold sector, stating “we feel investors should prepare for a flight to gold” in the uncertain global climate. The report also emphasizes the importance of looking for the gold stocks that offer better value, growth or leverage. Deutsche highlights the top global gold stocks as Newmont, Evolution Mining, St. Barbara Mining, Alacer Gold and Dacian Gold.
  • Dacian CEO Rohan Williams told reporters that the recent deal between Eldorado and Integra signals the beginning of a cycle of mergers and acquisitions (M&A). More optimism for gold comes from Trump’s political troubles after Republicans criticized his budget. The gold price has risen, and gold’s open interest, a tally of outstanding contracts, has climbed to the highest since April 27. The chart below shows that the MACD (the gauge of price momentum) is above the “Sig,” or signal line, which is considered a bullish indicator. Yet another bullish indicator is that gold has experienced a golden cross, which happens when the 50-day moving average crosses above the 200-day moving average.

http://goldseek.com/news/2017/5-30fh.png

 

Threats

  • Sibanye Gold recent acquisition of Stillwater Mining is under review in the courts. Some Stillwater investors contend that they were shortchanged with the purchase price of $18 per share. Sibanye is the U.S.’s only producer of platinum-group metals.
  • South Africa is proposing to change the minimum black ownership of mining assets from 26 percent to 30 percent. Mines Minister Mosebenzi Zwane included this proposal in a mining charter. However, senior party policy officials said there may be negative consequences from such a measure, and that it may deter investment.
  • Tanzanian Mines Minister Sospeter Muhongo was fired after an audit revealed that mineral exports had been understated. Acacia Mining has been investigated by a presidential committee, showing that Acacia reported certain containers held 26,000 ounces of gold, while the committee found those containers to hold 250,000 ounces. The magnitude of the discrepancy implies that the source mines, Bulyanhulu and Buzwagi, would actually be the world’s two largest gold producers. Those familiar with the events have called for an independent review. Acacia stock tumbled around 40 percent this week.

– Frank Holmes

Here’s what will Boost or Smash Gold Prices in a Major Way

Here's what will Boost or Smash Gold Prices in a Major Way

Here’s what will Boost or Smash Gold Prices in a Major Way

Here’s what could make Gold prices shine or lose its luster in the months to come – Sean Williams

Physical gold investors have been taken for quite the ride over the past year. Spot gold prices are up less than 1% on a trailing 12-month basis through May 22nd, but have seen a $237 per ounce variance between their highest and lowest closes over the trailing year.

Since 2016 began, physical gold and gold stocks have been pretty solid investments, with physical gold prices gaining about 19% and numerous gold stocks rising by well over 100%. In fact, the VanEck Vectors Gold Miners ETF, which is a basket fund with holdings in 53 mining stocks, is up by 69% since the beginning of 2016. This outperformance is what’s been attracting investors to gold and gold stocks.

But the question on everyone’s minds is: can it continue?

Though no one knows with any certainty, we can narrow down the factors that are most likely to influence the movement of gold prices in the near term. Here are the yellow metal’s likeliest catalysts in the second half of 2017.

A chart symbolizing rising interest rates  with the line represented as a dollar bill.

1. Federal Reserve Monetary Policy

The Federal Reserve is easily the most front-and-center driver of gold prices. Through its monetary actions the Fed can influence the federal funds target rate, and thus interest rates in the United States. And interest rates are the key to deciphering the age-old trade-off known as opportunity cost.

Opportunity cost describes the action of giving up a near-guaranteed gain in one asset for the opportunity to earn a larger return (with more risk) in another asset. Physical gold has no dividend yield, meaning there are no guaranteed returns with the yellow metal. On the other hand, U.S. Treasury bonds do have a near-guaranteed return. If yields on Treasuries are low (so low, in fact, that real-money gains are minimal after accounting for inflation), investors may be coerced to bypass bonds in favor of gold. This is known as low opportunity cost. If, however, interest rates rise significantly, the opportunity cost of forgoing a healthy return with bonds rises, meaning investors are more likely to sell gold or overlook gold in favor of bonds.

Currently, the Fed is in a monetary tightening phase, which could be seen as bad news for gold. But it’s also lifting interest rates from historically low levels. Even now, after three 25-basis-point increases in the Federal funds rate, the Fed is still a full 200 basis points below its long-term fed funds target of 3%. How the Fed approaches its tightening (i.e., expediency and language) will certainly have some bearing on how gold performs in the second half of the year.

2. U.S. inflation rate

On the complete opposite end of the spectrum are inflation rates, which have a tendency to act as a check for monetary tightening.

Inflation, which measures the rising price of a basket of goods and services, is almost always associated with a growing economy. As the U.S. economy expands, the Fed increases the money supply, which, in turn, dilutes the value of existing money in circulation and makes goods and services, including spot gold, pricier for the consumer.

Generally speaking, higher inflation rates tend to coerce investors to buy gold as a safe-haven investment. There’s only a finite amount of gold on this planet, whereas money can be printed and devalued at the flip of a switch. Thus, the U.S. inflation rate could have some major bearing on how gold performs in the second half of the year. If inflation remains in the mid-2% range (which is below historic norms, but well above normal since the Great Recession), gold could thrive.

President Trump speaking to Department of Homeland Security employees.

3. Trump’s tax plan/economic initiatives

Precious metals usually thrive as a safe-haven investment during times of uncertainty. Topping the list of uncertainties in the second half of 2017 is whether President Trump and Congress can produce a passable tax reform/economic growth plan.

On one hand, higher growth rates derived from tax reform, and economic initiatives would presumably lead to improved economic certainty, which gold investors tend not to like. Even with a possible boost in gold demand from a growing economy, gold investors tend to sell situations where economic growth is picking up.

On the other hand, Trump has shown at times (e.g., healthcare reform) that there’s a definite rift between him and Congress that could make coming to a tax deal difficult in 2017. Any sort of uncertainty or loose ends regarding tax reform would probably be viewed positively by gold investors.

The wildcard here is what might happen with regard to a border adjustment tax. A border adjustment tax would incentivize U.S. companies that export with a tax rebate and punish importers with an added tax. Most pundits have agreed that the border adjustment tax would lead to an appreciation of perhaps 15% to 25% in the U.S. dollar within a couple of years. This matters because the U.S. dollar and gold tend to have an inverse relationship. In other words, if a border adjustment tax becomes law, and gold and the U.S. dollar behave in textbook fashion (which doesn’t always happen), gold prices could take a hit.

A man wearing a British flag shirt and glasses stands in front of Parliament.

4. Brexit uncertainty

If Trump’s tax reforms are tops in terms of uncertainty drivers in the second half of 2017, the uncertainty surrounding Britain’s exit from the European Union (“Brexit”) is a close second.

Last summer, Brits surprisingly voted to leave the EU, which means Britain will have to set up a host of new trade deals with its EU neighbors. But Article 50, which Prime Minister Theresa May recently invoked, has just a two-year time limit. This doesn’t give the U.K. a lot of time to get its financial affairs in order.

Perhaps more importantly, Brexit is exceptionally complex, and there is no precedent to such an event. Removing Britain from the EU means sorting out a number of Britain’s outstanding obligations to scientific research and other social programs collectively funded by the EU. Some pundits have suggested that there’s a real possibility of a mild recession in the U.K. as a result of the uncertainty caused by Brexit.

Gold’s movement could depend on the complexity and length of time Brexit is drawn out.

Gold bars stacked next to each other.

5. Supply and demand for gold

Finally, it’s important for investors to remember that supply and demand still matter.

During the first quarter, investment demand for gold saw a pretty steep drop-off from the prior-year period. According to the World Gold Council (WGC), total investment demand plunged 34% from Q1 2016, with demand from ETFs down a staggering 68%. However, total bar and coin demand rose 9%, with double-digit increases seen in China and India. Though investment demand was down year-on-year, the WGC is quick to note that Q1 2016 offered special circumstances, with gold prices rising at the quickest quarterly pace in 30 years. Take away that increase in demand and Q1 2017 investment demand was still “robust.”

Gold supply will also come into play. Most publicly traded precious-metal miners have significantly reduced their capital expenditures since gold prices peaked in 2011 at $1,900 an ounce, meaning production growth hasn’t kept pace with demand growth. Often that’s a recipe for higher gold prices. But as the price of gold increases (and it’s up $200 an ounce since Jan. 2016), the desire to boost production may rear its head, too.

The interplay of supply and demand could be a catalyst for gold prices in the second half of the year.

 

Fundamentals Build a case for Silver Bull Market while Hedge funds Build Bearish Bets

Fundamentals Build a case for Silver Bull Market while Hedge funds Build Bearish Bets

Fundamentals will help Build a case for Silver Bull Market

Do you think silver is poised to go higher? I sure do. That’s because I’m watching what is going on in the world’s silver ETFs. I’m also watching the mountain of forces that are piling up to push the metal higher.

Look at this chart. It shows all the metal held by the world’s physical silver ETFs (black line). And all the metal held by the world’s physical gold ETFs (blue line) …

I showed you this same chart last week. Since then, silver ETFs have added another 8 million ounces. At the same time, gold ETFs have added only 56,000 ounces.

In fact, since late April, silver ETFs have added 31 million ounces of the metal. Gold ETF holdings over that time frame have zigged and zagged. But those are basically flat.

Kind makes you go “hmm,” doesn’t it?

Why is someone stocking up on all that silver?

I can think of a few reasons why …

  Silver ore in mines is getting less-rich. That makes sense, because miners dig up the rich stuff first. And silver, like gold, is a depleting asset. That’s why primary silver miners’ average yield has fallen from 13 ounces per ton in 2005 to 7.4 ounces per ton in 2016. This is a 43% decline in just 12 years.

  Silver is an industrial metal. Half of silver demand is for industry. It will be affected by China’s economic and industrial outlook. Both of those are improving. Though silver demand dropped last year, it is zig-zagging higher.

  Global silver production keeps falling. In fact, silver production fell more than demand last year. That is probably why prices went up 9.3% last year.

The Silver Institute reported that global silver production peaked in 2015. It takes years to bring a new silver mine online. And let me tell you, there aren’t a lot of new silver projects around.

Looking at that earlier chart of silver ETFs, the recent demand trend looks clear. (Up!) Now ask yourself, “What happens when silver demand goes higher?”

Well, when you put together rising demand and falling supply, you get a deficit.

Last year, the physical deficit was 52.2 million ounces, according to Thomson Reuters. That was the third deficit in a row. And that trend is not about to change anytime soon …

Another Massive Deficit This Year

This year, it should be four years of deficit in a row. Banking giant HSBC has forecast a 132 million-ounce deficit for 2017. That’s more than double last year’s deficit.

Sure, not everyone agrees on the exact amount of silver supply … demand … or silver in storage. That’s what makes a market.

But the forecasts of a deficit are backed up by what we can see on the ground. Chile’s silver production dropped 26% in the first quarter.

Now, some will tell you that the silver market is always in deficit lately. And the market never seems to care.

That’s true … to a point. That’s because the deficit can be made up by above-ground stockpiles. But stockpiles will only last so long.

And that brings me back to that chart I showed you. I think someone is betting that the time for a price squeeze is edging closer.

Solar Demand Could be Key

The difference may be photovoltaic demand. It climbed from 57.2 million ounces in 2015 to 76.6 million ounces in 2016. And the solar buildout is still ramping up.

Forecasts by GTM Research predict that solar installations will double from 2015 to 2021.

I find that solar forecasts that go more than a couple years out are generally unreliable. So far, they’ve always underestimated real demand.

On the other hand, remember that the solar industry is getting more-efficient in its silver use. Still, add it all up, and the demand trend looks big.

That’s longer term. Is there a driver of silver prices in the short term? Yes!

Let me show you one more chart. I snagged this from our friends at BullionVault.com. It shows how hedge funds are betting on silver right now.

Hedge funds are making a lot of bearish bets on silver. But keep in mind that hedge funds are often wrong. What do you suppose will happen if and when they have to cover those bearish bets?

I’d say silver could go ballistic!

So that’s why I think silver could enter a secret bull market. We’re making our bets in Red-Hot Resource Millionaire accordingly. You might want to do the same. – Sean Brodrick

 

Evidence on Gold Price Manipulation is very Clear – Time to Buy is NOW

Evidence on Gold Price Manipulation is very Clear - Time to Buy is NOW

Enough Evidence that Gold Price Manipulation is going on

Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.

There is statistical evidence piling up to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.

I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.

I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period. He was dumbfounded.

He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.

He said statistically that’s impossible unless there’s manipulation occurring.

I also spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on globe price manipulation. She actually testifies in gold price manipulation cases that are going on.

She wrote a report reaching the same conclusions. It’s not just an opinion, it’s not just a deep, dark conspiracy theory. Here’s a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.

Now, where is the manipulation coming from?

There are a number of suspects but you need look no further than China.

China wants to do what the U.S. has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.

The best way to do that is to increase its voting power at the IMF and have the yuan included in the IMF basket for determining the value of the special drawing right (SDR).

China accomplished that last September when the IMF added the yuan to its basket of currencies.

The rules of the game also say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.

The members of the club keep their gold handy just in case, but otherwise, they publicly disparage it and pretend it has no role in the international monetary system. China is expected to do the same.

Right now, China officially does not have enough gold to have a “seat at the table” with other world leaders. Think of global politics as a game of Texas Hold’em.

What do want in a poker game? You want a big pile of chips.

Gold serves as political chips on the world’s financial stage. It doesn’t mean that you automatically have a gold standard, but that the gold you have will give you a voice among major national players sitting at the table.

For example, Russia has one-eighth the gold of the United States. It sounds like they’re a small gold power — but their economy’s only one-eighth as big. So, they have about the right amount of gold for the size of their economy. And Russia has ramped up its gold purchases recently.

The U.S. gold reserve at the market rate is under 3% of GDP. That number varies because the price of gold varies. For Russia, it’s about the same. For Europe, it’s even higher — over 4%.

In China, that number has been about 0.7% officially. Unofficially, if you give them credit for having, let’s say, 4,000 tons, it raises them up to the U.S. and Russian level. But they want to actually get higher than that because their economy is still growing, even if it’s at a much lower rate than before.

Here’s the problem: If you took the lid off of gold, ended the gold price manipulation and let gold find its level, China would be left in the dust. It wouldn’t have enough gold relative to the other countries, and because the price of gold would be skyrocketing, they could never acquire it fast enough. They could never catch up. All the other countries would be on the bus while the Chinese would be off.

When you have this reset, and when everyone sits down around the table, China’s the second largest economy in the world. They have to be on the bus. That’s why the global effort has been to keep the lid on the price of gold through manipulation. I tell people, if I were running the manipulation, I’d be embarrassed because it’s so obvious at this point.

The gold price is being suppressed until China gets the gold that they need. Once China gets the right amount of gold, then the cap on gold price can come off. At that point, it doesn’t matter where the gold price goes because all the major countries will be in the same boat. As of right now, however, they’re not, so China has though to catch-up.

I’ve described some catastrophic scenarios where the world switches to SDRs or goes to a gold scenario, but at least for the time being, the U.S. would like to maintain a dollar standard. Meanwhile, China feels extremely vulnerable to the dollar. If we devalue the dollar, that’s an enormous loss to them.

China has recently sold a portion of its dollar reserves to prop up its own currency, which has come under tremendous pressure. But it still holds a large store of dollar reserves.

If China has all paper and no gold, and we inflate the paper, they lose. But if they have a mix of paper and gold, and we inflate the paper, they’ll make it up on the gold. So they have to get to that hedged position.

China has been saying, in effect, “We’re not comfortable holding all these dollars unless we can have gold. But if we are transparent about the gold acquisition, the price will go up too quickly. So we need the western powers to keep the lid on the price and help us get the gold, until we reach a hedged position. At that point, maybe we’ll still have a stable dollar.”

The point is that is that there is so much instability in the system with derivatives and leverage that we’re not going to get from here to there. We’re not going to have a happy ending. The system’s going to collapse before we get from here to there. At that point, it’s going to be a mad scramble to get gold.

The gold price will go significantly higher in the years ahead. But contrary to what you read in the blogs, gold price won’t go higher because China is confronting the U.S. or launching a gold-backed currency.

The gold price will go higher when all central banks, China’s and the U.S.’ included, confront the next global liquidity crisis, worse than the one in 2008, and individual citizens stampede into gold to preserve wealth in a world that has lost confidence in all central banks.

When that happens, physical gold may not be available at all. The time to build your personal gold reserve is now.

We need to mention Russia here too. Russia is also amassing gold. And since Russia and China aspire to be true gold powers, it’s not enough to have physical gold. It’s also critical to create gold exchanges and gold markets for price discovery and trading.

Currently the gold price is set in two places. One is the London spot market, controlled by six big banks including Goldman Sachs and JPMorgan. The other is the New York gold futures market controlled by COMEX, which is governed by its big clearing members, also including major western banks.

In effect, the big western banks have a monopoly on gold prices even if they do not have a monopoly on physical gold. But that could be about to change.

Russia and China are not only building up physical reserves and exploring for more, they are building trading systems that allow for price discovery and leveraged trading in gold.

It may take a year or so to attract liquidity, but once these new exchanges are fully functional, the physical gold market will regain the upper hand as a price maker.

Then gold will commence its march to monetary status, and its implied non-deflationary price of $10,000 per ounce.

The time to buy is now, before that happens. – Jim Rickards

 

Commodity Cycle in Early Stages of Turning Bullish, Buy & Hold Gold and Silver

Commodity Cycle in Early Stages of Turning Bullish, Buy & Hold Gold and Silver

Commodity Cycle in Early Stages of Turning Bullish

The cycle for any commodity follows the same basic pattern…

When prices are low, production falls. As new supplies diminish, the market tightens and prices move higher. The higher prices incentivize producers to invest in production capacity and increase output. Eventually, the market becomes oversupplied, prices fall, and the cycle starts all over again.

Of course, this is a simplified model of what drives commodity cycles. Booms and busts can be amplified and extended by speculators, by unexpected shifts in demand, or even by interventions from central banks and governments.

Regardless of the causes, commodity markets will always be cyclical in nature. Commodities as a group can be pressured upward or downward by extrinsic forces such as monetary inflation or credit contraction.

However, any individual commodity – whether oil, corn, copper, gold, silver, platinum, or palladium – may be in its own particular stage within the commodity cycle at any given time.

As a resource investor, it’s important to have some idea of whether you’re investing in a commodity at a time in the cycle when it’s favorable to do so. Some technical analysts ascribe four-year cycles to some markets, longer duration cycles to others, and shorter-term cycles that operate within longer-term cycles. The reality is that cycles can’t be counted on to run their course within any prescribed time frame.

There are historical patterns and tendencies, to be sure. Gold, for example, tends to be less correlated to swings in the economy than oil and industrial commodities. Gold can remain in a major trend for years or even decades.

Gold prices crashed from $850/oz in 1980 to $300/oz in 1982. It wasn’t until 2002 that gold crossed above the $300 level for the final time. The new gold bull market rose out of a 20-year base and reached a cyclical high of $1,900 in 2011. A four-year downturn followed, and since 2016 a new cyclical upturn appears to be taking shape.

Commodities Are Moving into a Diminishing Supply Phase

Chart reading is always a tenuous undertaking, but when combined with supply and demand fundamentals, it can help investors identify favorable times to be a buyer or seller. Right now it appears that gold, silver, oil, and other commodities are transitioning one by one into a period in the commodity cycle of diminishing supply.

Oil Market

In the case of crude oil, which is the most economically important and most widely followed commodity, the major storyline in recent months has been a supply glut.

North American shale production has swelled inventories in the U.S. But oil prices have been quietly advancing.

What does the market know that isn’t showing up in all the seemingly bearish headlines for oil? The longer-term supply outlook actually augers for shortfalls… and much higher prices. According to the International Energy Agency (IEA), new oil discoveries in 2016 sunk to their lowest number in decades.

The oil industry slashed spending on developing new supplies in response to low prices. ExxonMobil, for one, cut its capital expenditures by 26% ($10 billion) in 2016.

The IEA warns that in order to offset recent declines and meet rising global demand, the oil industry needs to develop 18 billion new barrels every year between 2017 and 2025. Oil’s recent price range in the mid $40s to mid $50s per barrel doesn’t seem to be incentivizing the necessary new production capacity. Higher prices appear to be in store over the next few years.

Mining Is an Energy-Intensive Business

Higher energy costs would mean higher production costs for the gold and silver mining industry. Mines are already having to process more and more tons of earth to extract ounces of valuable metals.

According to metals analyst Steve St. Angelo, “The global silver mining industry will continue to process more ore to produce the same or less silver in the future. While the cost of energy has declined over the past few years, falling ore grades will continue to put pressure on the silver mining industry going forward.”

Mine Operators

Physical precious metals are, in a very real sense, a form of stored energy. Think of all the energy inputs required to move the earth, to separate relatively tiny quantities of precious metals from tons upon tons of rock and dirt, to refine the raw ore into pure gold, silver, platinum, or palladium, and finally to mint the precious metal into bullion products.

All those energy inputs are represented in the value that markets impute to precious metals. Trends in prices will reflect trends in production costs. And production costs will rise as it becomes harder and more energy intensive to mine metals.

A position in physical gold and silver should be viewed as a core long-term holding. However, there are some times in the commodity cycle that are more favorable than others for buying.

There are times when you may even want to sell a portion of your position. Right now, the cycle appears to be in the early stages of turning bullish for commodity prices – making it a favorable time to be taking out long positions in hard assets. – Stefan Gleason

Temporary Stimulus Policies turn Permanent, Credit & Debt Expansion is Here to Stay

Temporary Stimulus Policies turn Permanent; Credit & Debt Expansion is Here to Stay

Temporary Stimulus Policies, Credit & Debt turn Permanent

Can we finally admit that eight years of following the Keynesian coloring-book have not just failed, but failed spectacularly? – Charles Hugh Smith

What do we call a status quo in which “emergency measures” have become permanent props? A failure. The “emergency” responses to the Global Financial Meltdown of 2008-09 are, eight years on, permanent fixtures. Everyone knows what would happen if the deficit spending, money-printing, zero interest rates, shadow banking, asset purchases by central banks and all the rest of the Keynesian Cult’s program stopped: the status quo falls apart.

Keynesianism Vs The Real World

Let’s start by reviewing the core contexts of the economy.

1. The dominant socio-economic structures since around 1500 AD are profit-maximizing capital (“the market”) and nation-states (“the government”).

2. The dominant economic theory for the past 80 years is Keynesianism, i.e. the notion that the state and central bank must aggressively manage private-sector consumption (demand) and lending via centrally planned and funded fiscal and monetary stimulus during downturns (recessions/depressions).

Simply put, the conventional view holds that there are two (and only two) solutions for whatever ails the economy: the market (profit-maximizing capital) or the government (nation-states and their central banks). Proponents of each blame all economic and social ills on the other one.

In the real world, the vast majority of Earth’s inhabitants operate in economies with both market and state-controlled dynamics in varying degrees.

The Keynesian world-view is doggedly simplistic.  The economy is based on aggregate demand for more goods and services.  People want more stuff and services, and as long as they have the means to buy more stuff and services, they will avidly do so (this urge is known as animal spirits).

The greatest single invention of all time in the Keynesian universe is credit, because credit enables people to borrow from their future earnings to consume more in the present. Credit thus expands aggregate demand for more goods and services, which is the whole purpose of existence in this world-view: buy more stuff.

But credit, aggregate demand for more stuff and animal spirits make for a volatile cocktail.  The euphoria of those making scads of profit lending money to those euphorically buying more stuff with credit leads to standards of financial prudence being loosened.  In effect, lenders and borrowers start seeing opportunities for profit and more consumption through the distorted lens of vodka goggles.

Lenders reckon that even marginal borrowers will earn more in the future and therefore are good credit risks, and borrowers reckon they’ll make more in the future (i.e. the house they just bought to flip will greatly increase their wealth), and so borrowing enormous sums is really an excellent idea—why not make more money/enjoy life more now?

But the real world isn’t actually changed by vodka goggles, and so marginal borrowers default on the loans they should never have been issued, and lenders start losing scads of money as the value of the collateral supporting the defaulted loans (used cars, swampland, McMansions, etc.) falls.

Oh dear! The hangover of credit expansion is brutal, as lenders go bankrupt, wiping out their owners, and borrowers go bankrupt as they are unable to make their payments or sell the collateral to pay off the loan.

Just as credit expansion feeds on itself—everybody’s making a fortune buying and flipping houses, let’s go buy a house or two on credit—the hangover is also self-reinforcing: the value of collateral falling pushes more marginal borrowers into insolvency, and the lenders who made the loans are pushed into insolvency as defaults increase and collateral melts like ice in Death Valley.

In the Keynesian universe, this self-reinforcing contraction of imprudent credit and widespread losses of speculative wealth are Bad Things. Very Bad Things.  Important, Powerful People tend to own issuers of credit (banks), and losses are not something they signed up for.

If all the Little People stop borrowing more money, the Powerful Owners of the credit-issuing machines (banks) can no longer reap enormous profits from issuing more credit, and that is a Very Bad Thing.

As a nasty side-effect of the credit hangover, businesses that depended on people borrowing more money to buy more stuff also shrink, and this contraction is also self-reinforcing: as sales decline, businesses must cut costs to stay solvent, which means laying off employees, abandoning under-utilized offices, closing factories, etc.

The euphoria of credit expansion turns to painful contraction.  Nobody’s happy in the hangover phase, and people naturally cry out, Somebody do something to stop the pain!

The Keynesian answer is simple: the government should borrow and spend lots of money to replace all the money that the private sector is no longer borrowing and spending, and the central bank should lower interest rates and create a lot of new money that private banks can borrow cheaply to loan out to private-sector businesses and consumers.

In the simplistic Keynesian Universe, the credit contraction is like a temporary drought: all the government and central bank have to do to fix the drought is release a flood of new money onto the parched landscape of the credit-starved private sector, and aggregate demand and new loans will blossom like spring flowers.

Horray for central states and banks! Given the power to borrow (or create out of thin air) as much money as they need to flood the private sector with fresh money and credit, the drought ends, animal spirits are revived, people get to buy more stuff by promising to give their future earnings to banks and Powerful Owners of banks are once again earning great gobs of cash from lending to the Little People (i.e. borrowers in danger of becoming debt-serfs, whose earnings go largely to service their debts).

In the crayon-coloring book of Keynesian ideology, this is The Way the Universe Works. The problem is always a temporary drought of aggregate demand caused by a temporary drought of private-sector credit, and the solution is always a state-central-bank issued flood of money and credit: the government borrows and spends more money to replace declining private spending, and central banks make it cheaper and easier for private banks to issue new loans to enterprises and Little People.

That this coloring-book ideology no longer describes the problem or solution is incomprehensible to the Keynesians.  That neither “the market” nor “the government” can solve the current set of problems is equally incomprehensible—not just to Keynesians, but to everyone who unthinkingly accepted that the market and/or the state can always fix whatever problems arise.

Oops! The Flood of Money and Credit Didn’t Fix the Economy

The post-credit/asset bubble crashes in 2000 and 2008 and the state/central-bank responses–fiscal and monetary stimulus, a.k.a. flood the land with borrowed money—seemed to confirm the Keynesian world-view: marginal borrowers, lenders and collateral all went south and the stimulus restored animal spirits, which promptly inflated a new credit/asset bubble.

But this time around, the drought never ended, no matter how much money was poured into the economy, and the earnings of borrowers stagnated or declined. (Recall that debt is borrowed from future earnings; if earnings decline, it becomes much more difficult to service existing debt, much less borrow more.)

Federal debt has more than doubled just since 2009 (and tripled since 2001) as the government flooded the land with fiscal stimulus:

Central banks have flooded the global economy with trillions of dollars, euros, yen and yuan, and continue to do so to the tune of $200 billion per month:

Central banks have dumped over $1 trillion in new monetary stimulus in the first four months of 2017—eight years after the “emergency” stimulus began:

Meanwhile, wages are stagnant or declining for the vast majority of wage-earners—even the highly educated:

Household income has fallen across the board:

Stagnating incomes is not a new issue for the bottom 90%; it’s a structural reality going back four decades:

Clearly, fiscal and monetary stimulus policies that were supposed to be temporary are now permanent.  That isn’t what was supposed to happen.

Earnings were supposed to rise once private-sector credit and consumption returned to expansion.  As we see here, bank credit and consumer credit have surged higher, but the incomes of the bottom 90% have gone nowhere.

Meanwhile, total debt—government, corporate and household—has rocketed higher, more than doubling from 280% of GDP in 2000 to 584% of GDP in 2016:

As if these weren’t bad enough, wealth and income inequality have soared during the era of permanent fiscal-monetary stimulus:

In sum: nothing has worked as the Keynesians expected.  Instead, state/central bank measures that were supposed to be temporary are now permanent, and the expansion of private-sector debt has failed to “trickle down” to earnings.

The Keynesian solution—borrowing from future earnings to “bring consumption forward”—has expanded consumption at the cost of enormous increases in debt throughout the economy, which has exacerbated income-wealth inequality and declining real incomes.

Can we finally admit that eight years of following the Keynesian coloring-book plan have not just failed, but failed spectacularly, and not just failed spectacularly, but made the economy even more vulnerable and fragile, as more and more future income must be devoted to service the skyrocketing debts?

Isn’t it obvious that there are deeply structural problems in the economy that inflating yet another credit/asset bubble won’t fix?

Clearly, the real-world economy does not function like the simplistic Keynesian coloring-book model.

What Comes Next: Contraction

Given the extraordinary failure of both Keynesian stimulus and private-sector credit growth to create a self-sustaining cycle of expansion whose benefits flow to the entire workforce rather than to the top few percent, what can we expect going forward? Can we just keep doubling and tripling the economy’s debt load every few years? What if household incomes continue declining? Are these trends sustainable?

 

Silver Prices Hold at Critical Level Amid Most Bearish Conditions

Silver Prices Hold at Critical Level Amid Most Bearish Conditions

Silver Prices Hold at Critical Level Amid Most Bearish Conditions

Silver Prices slipped from yesterday’s 3-week highs but held firmer than gold to bounce back above $17 per ounce on Wednesday ahead of the release of minutes from the US Federal Reserve’s latest interest-rate meeting.

Physical gold bullion dipped to bounce $4 higher from $1250 per ounce as world stockmarkets held flat with major government bond prices.

Crude prices held firm ahead of Thursday’s Opec oil cartel meeting on output cuts in Vienna, but other commodities also slipped as silver prices retreated over 40 cents from yesterday’s top at $17.31 per ounce.

That pulled the Gold/Silver Ratio of the dearer precious metal’s price relative to silver further down from last week’s 11-month highs above 75 to below 73.5 at this morning’s London benchmarkings.

“Gold has fallen…because rate hike expectations are rising,” says German financial services group Commerzbank’s commodities team.

“According to the Fed Fund Futures, the probability of a Fed rate hike in June is back at a good 80%.”

Those odds stood below 65% only last week according to betting on June interest-rate futures.

With global Dollar quotes for London settlement almost $15 lower per ounce from the same time Tuesday, the Shanghai afternoon gold price benchmark today fixed at ¥278 per gram, some 1% below yesterday’s 3-week high.

That widened the premium, however, for bullion delivered in China, offering new imports an incentive of $8.50 against yesterday’s 1-month low of $7.80 per ounce.

Swiss exports of gold directly to China “nearly tripled year-on-year” in April to more than 40 tonnes, Commerzbank also notes, while exports to Hong Kong – the former key conduit for metal into what is now the No.1 consumer nation – held at a “very low level” beneath 13 tonnes.

“At the same time, China imported large amounts of silver in April,” Commerzbank says, with Chinese customs data reporting a near-25% jump from the same month in 2016 to 298 tonnes.

Looking at silver prices, “$17 looms as a pivot point for the metal,” says an Asian trading note from Swiss refiners and finance group MKS Pamp, “with solid upside potential should the figure hold.”

“I am bullish as long as silver closes above the 400-day moving average [at] $16.91,” said technical strategist Russell Browne at Canada’s Scotiabank in New York overnight – the level which silver prices fell to and bounced from Wednesday.

Chart of 'Managed Money' positioning in Comex silver futures and options contracts. Source: BullionVault via CFTC

Hedge funds and other speculative traders as of Tuesday last week held more bearish bets against silver prices than any time outside the summer 2015 peak according to positioning data collected by US regulators covering the Comex silver futures and options market.

Counted against the same ‘Managed Money’ category’s bullish bets, that helped create its smallest net long position overall since mid-January 2016, back when silver prices began recovering from their lowest level in more than 6 years beneath $13.80 per ounce.

Both gross and net bullish betting on silver prices set fresh all-time highs only 6 weeks ago, in mid-April.

Yesterday saw the giant iShares Silver Trust (NYSEArca:SLV) hold unchanged in size as prices peaked above 3-week highs at $17.30 per ounce.

The SPDR Gold Trust (NYSEArca:GLD) in contrast shed 5 tonnes of gold from the bullion backing its value, taking it down to 847 tonnes – equal to 26% of annual world mining production – as shareholders liquidated 0.6% of the giant gold ETF.

Silver prices “found support [in early May] near $16.00,” says the technical analysis team at French investment and bullion market-making bank Societe Generale, but now “a move beyond $17.06/17.37 is needed for a larger recovery.” – Adrian Ash

Something Changed In The Silver Market In May

Something changed in the silver market in May as U.S. Silver Eagle sales have surged compared to the previous month.  This is quite interesting as precious metals sales and sentiment have declined in the West, especially in the United States, ever since Donald Trump was elected President.

Many precious metals investors thought that if Trump was elected, it would have been very positive for the gold and silver market.  Unfortunately, it seems as if the opposite was (is) the case.  Not only has demand for precious metals declined considerably in 2017 versus last year, so has sales of guns, ammo and survival food-supplies.  I gather many of those who follow the alternative media believe Trump is actually going to make America Great Again.  So, why protect oneself from a collapse?

This is a very bad assumption… as nothing has changed with Trump in the White House.  Furthermore, many analysts are saying that what Trump is doing could actually speed up the collapse of the U.S. economy and financial system.

Regardless, the fundamentals in the U.S. economy continue to disintegrate.  We are seeing economic bubble indicators reach or surpass what took place in 2007, before the bloodbath hit the U.S. Housing and Financial Markets.  However, there is one additional negative factor that wasn’t a problem in 2007 that is now a BLINKING RED LIGHT.

What is this new lousy fundamental?  It’s the U.S. and Global Oil Industry.  Back in 2007, most of the oil and gas companies were making decent cash flow and profits.  Unfortunately, the situation in the Oil Sector is orders of magnitude much worse than what is was in 2007.  Not only are the majority of oil and gas companies losing money, they have been also cutting their oil reserves.

This is extremely bad news for which very few Americans are aware.  Thus, we are now facing an extremely negative DOUBLE-EDGE SWORD of bubble economic indicators on top of a disintegrating oil industry.  Which means… the situation today is much worse than what took place back during the 2008 Global meltdown.

U.S. Silver Eagle Sales Surge In May Due To 3 Reasons

U.S. Silver Eagle sales surged 140% in May versus April… and we still have another week remaining in the month.  According to the recent update by the U.S. Mint, Silver Eagle sales reached 2,005,000 so far in May compared to 835,000 in April:

After seeing this spike in Silver Eagle demand, I called up a few of my contacts in the industry and asked if they could shed some light as to why sales jumped in May.  According to several sources, they stated that the huge increase in Silver Eagle sales were due to three reasons:

  1. There was an extremely large purchase by a single wholesaler in the Northeast.
  2. The small retail buyer came in a big way as premiums were lowered the most in seven years
  3. A group of respected technical analysts gave a buy signal for the Silver Market when silver was trading between $16-$16.25

These three reasons stated by my contacts, are what has likely driven demand for Silver Eagles to the highest level seen so far this year… if we exclude sales in January, which are always elevated as wholesalers are stocking up on the debut of the new coin release.

It seems as if a large buyer in the Northeast believes silver is a good deal at this price.  Furthermore, when the wholesalers lowered the premiums (lowest in seven years), there was an immediate surge in Silver Eagle buying via small retail investors which caused the premium to increase once again.  Also, the silver market underestimates the reaction when certain Technical Analysts put out a BUY SIGNAL.  Many individuals who follow or subscribe to these analysts, are big investors.  So, when they see a buy signal… they do so in a BIG WAY.

That being said, I would like to remind those reading this article (that might be new to the precious metals industry) please make sure you understand the difference between “PREMIUM” and “COMMISSION” when you decide to purchase precious metals.  There are a group of very widely advertised precious metals dealers that may have lowered their premium along with the other dealers, but still charge very high commissions for their products or services.

IMPORTANT NOTE:  The PREMIUM is what the dealer pays the wholesaler for the coin or bar.  The COMMISSION is what the dealer charges his client above the premium.  You need to ask what the commission you are being charged as many new investors are being taken advantage of… but don’t realize it until later, when it is too late.

While two million Silver Eagle sales so far in May are less than they were last year (4,498,500), this surge in demand suggests that the hype surrounding a Trump Presidency may be fading… and quickly.  If we take a look at Silver Eagle sales from FEB to MAY, we can clearly see that something has changed recently:

If the strong demand trend continues for the remainder of May, we could see Silver Eagle Sales reach 2.5-2.8 million.  Again, this is lower than what it was last year, but it is a sign that market is starting to SMELL A RAT.  And that RAT is a totally inflated STOCK, BOND & REAL ESTATE MARKET.

In addition, Silver Eagle sales are now out-performing Gold Eagle sales.  For example, in March when U.S. Silver Eagle sales were 1,615,000, Gold Eagle sales were 56,000 oz.  However, Gold Eagle sales in May are only 42,000 oz, while Silver Eagle sales are over 2 million.  Thus, the market is purchasing 48 times more Silver Eagles than Gold Eagles currently.

Lastly, for those precious metals investors who are frustrated by the disappointing paper Gold and Silver price performance since 2012, the STOCK, BOND and REAL ESTATE markets have never been in such BUBBLE TERRITORY.   For some odd reason, many precious metals investors tend to overlook the $7 trillion in Central Bank assets purchases (that were made public… could be much higher) from 2011-2016, and the whopping $1 trillion purchased in just the first four months of 2017.

It seems as if many Americans are suffering from BRAIN DAMAGE as the MainStream Media continues to put out the most misinformation and propaganda in history.  This causes individuals to lose the ability to think CRITICALLY.  And with that will come a great deal of pain and misfortune when we finally see the collapse value of most STOCK, BOND and REAL ESTATE prices. – SRSroccoReport

When will Equities and Gold Begin to Change Places?

When will Equities and Gold Begin to Change Places?

When will Equities and Gold Begin to Change Places?

With confidence in the post-election “Trump inflation trade” waning, Rudi Fronk and Jim Anthony, cofounders of Seabridge Gold, set out their thesis for the end of the current correction in the gold market.

fronkcover2

On balance, we think the gold correction is over. There are still some small flies in the ointment; the gold stocks are underperforming gold. . .a negative divergence that is often a sign of weakness. . .and the speculative positioning on Comex is neutral rather than bullish. Silver is underperforming when it usually leads to the upside.

On the plus side, the spot gold chart looks good at this point. The price is now above both the 50 dma (50-day moving average) and the 200 dma. The 50 dma crossed above the 200 dma last Wednesday for the first time since falling below it back in November. The long-term downtrend line since 2011 is just $25 away at this point, at around $1,280.

But to understand why the current correction may be over, it is important to understand what drove it in the first place. Gold was in the middle of a standard, run-of-the-mill correction prior to the U.S. election. Comex positioning and sentiment readings were very bullish, and the market was in the process of working off the excesses when the election hit. Within days, a curious new narrative emerged called the reflation trade. The reasoning went like this: President Trump will follow through quickly on his promises of large tax cuts and higher spending on infrastructure and defense, thereby pumping up corporate profits; inflation will accelerate; the Fed will raise rates faster than inflation; and the dollar will soar. The bottom line of this narrative: Buy stocks and industrial commodities, and sell gold. The standard gold correction morphed into something worse.

There are some obvious logical problems with this chain of “logic.” First, the Fed has never pre-emptively raised interest rates faster than inflation. Second, a higher dollar depresses export earnings and reduces inflation by undercutting commodity prices and the cost of imports. We also thought from the very beginning that there was almost no chance such a program could actually pass. It seems we were right about that.

Confidence in the Trump inflation trade is now fading. While it has taken longer than we had thought, the dollar is now weakening as uncertainties over Trump policies and Fed rate hikes have begun to assert themselves. The CME Fedwatch chart (above) is showing that the market now places the odds of a 25 basis point June rate hike (the grey line) at 73.8%, still high but down from 90% a little more than a week ago. The percentage expecting no rate hike in June (the blue line) has nearly tripled in that same time period to almost 36%.

This morning, the Fed’s Jim Bullard stated in prepared remarks for a speech in St. Louis that “financial market readings since the March decision have moved in the opposite direction” of what would normally occur after a rate hike, adding “this may suggest that the FOMC’s contemplated policy rate path is overly aggressive relative to actual incoming data on U.S. macroeconomic performance.” Bullard admitted that U.S. macroeconomic data have been relatively weak, on balance, since the Federal Open Market Committee (FOMC) met in March and raised the Fed Funds Rate. He said that economic growth is unlikely “to move meaningfully” this year, noting that “tracking estimates for second-quarter real GDP growth suggest some improvement from the first quarter, but not enough to move the U.S. economy away from a regime characterized by 2 percent trend growth.”

Bullard also said that inflation and inflation expectations “have surprised to the downside,” noting that “even if the U.S. unemployment rate declines substantially further, the effects on inflation are likely to be small” and that “labor market improvement has been slowing, perhaps close to a trend pace, given the current labor productivity growth regime.”

Bullard has played the role of leading spokesman before. Back in 2014, as the market was plunging, he famously stopped the bleeding when, in a Bloomberg interview, he said that a “logical response” to the tumbling market, would be to “delay the end of QE” and he strongly suggested that “QE4″ would be considered to prevent further market losses. The S&Ps exploded.

The turn down in the data Bullard alludes to is easily seen in Citigroup’s Economic Surprise Index, which nets out the economic reports that exceed expectations and those that fall short. Below is the evidence. Note that the S&P 500 price-earnings ratio has diverged sharply from the economic data.

citigroup

In our view, Bullard has signaled the approaching demise of the Trump inflation trade. The equity markets have not yet got the memo. In the midst of a manic bubble, all news is still good news. . .rate hikes or no rate hikes, inflation or no inflation, accelerated economic growth or not. But the prop under the run up in stocks and the narrative behind the correction in gold are fading. Wile E. Coyote has sprinted out over the edge of the cliff; he just hasn’t looked down yet, in our opinion. When he does, we think equities and gold will begin to change places.

Rate Hikes Help Industrial Metals Rise Fastest – Silver, Copper & Zinc to Benefit Most

Rate Hikes Help Industrial Metals Rise Fastest - Silver, Copper & Zinc to Benefit Most

Rate Hikes Help Industrial Metals Rise Fastest – Silver, Copper & Zinc to Benefit Most

Tom Beck, senior editor of Portfolio Wealth Global, says in times of rate hikes, industrial metals rise fastest, and in today’s world, the type of metals in highest demand by China are going to rise the most.

Zinc Balance

For close to 35 years, we’ve seen a tremendous amount of changes in our world: mobile phones, now turning into smartphones, the Internet, which brought entire industries down and birthed new ones, a tech bubble, a real estate crash, QEs, wars, pandemics, regime changes and a million other variables.

There aren’t many constants in the world of investing, and certainly not many things that rise in value like clockwork. One thing has held true since 1984, and I’m betting it will continue creating millionaires and funding college tuitions for many students whose parents wisely went LONG this trade and never doubted themselves.

Gain

I’d like to make sure you know where Portfolio Wealth Global sees the most upside in this <href=”http: www.portfoliowealthglobal.com=”” exclusive-reports=”” #bull-market”target=”_blank”>commodities cycle.

The Fed is in a tightening period. The reason is they are targeting 2% inflation—historically, low to moderate levels have resulted in the highest equity returns.

High inflation rates distort confidence, slow commerce, and shrink consumer spending. No one wants that.

In times of rate hikes, industrial metals rise fastest, and in today’s world, the type of metals in highest demand by China are going to rise the most.

Major Commodity Futures

Silver is one metal that’s poised to move up—and potentially even double.

Zinc is the only commodity in the world that is trading for less than half of what it did in 1980, and it always outperforms all others, especially when it’s experiencing supply shortages.

Zinc Balance

One mining mogul, Keith Neumeyer, has positioned his personal holdings and the companies he operates right at the center of these two minerals, and in 30 years of resource entrepreneurship, he has never failed.

He is a close contact of Portfolio Wealth Global, and beginning in 1984, he has been in a personal bull market—his net worth and the companies he has built and backed have been absolute market winners.

Silver is the Buy of the Century – Even Better Than an Explosive Gold Rally

Silver is the Buy of the Century - Even Better Than an Explosive Gold Rally

Silver is Even Better Than an Explosive Gold Rally

Greetings from sunny Las Vegas, Nevada!

This week, I’ve been attending the Money Show, a week-long investment conference focusing on a myriad of different wealth-building opportunities.

The conference also gives me a chance to chat face to face with hedge fund and family office portfolio managers, entrepreneurs, and fellow individual investors.

Often these personal conversations wind up being even more valuable than the actual conference material. And today, I want to tell you about one specific conversation that should help you turbo charge your gold investments this year…

“I can guarantee that gold will be worth $10,000 per ounce — or much more!”

That’s what a 19-year veteran of the mining industry with many incredible investments under his belt, told me.

Because of his status in the mining industry I call him “Mr. Gold.” And for privacy reasons, I can’t reveal his real name in this article. But trust me, this guy is the real McCoy of mining — and a proven winner at predicting BIG moves in gold.

Most notably in 2007, he was featured on CNBC to give his opinion on gold prices. At the time, gold was trading for $637/ounce. He predicted gold to go over $1,000/ounce in a 12-24 month period. Of course he was right!1

Today, Mr. Gold had a totally unexpected recommendation for profiting from the gold market…

(Ironically, this prediction lines up with our own resident expert Jim Rickard’s expectation for gold prices.)

Even though the presentation wasn’t scheduled to start for another 20 minutes, Mr. Gold was anxious to get started. It’s fair to say that he was giddy with excitement. He could hardly hold still as he waited to share his favorite investment opportunities.

I happened to be in the room, getting some reading done before the session.

And so, over the next 20 minutes, I got to chat personally with him and pick his brain about what’s really going on in the gold market.

Even Better Than an Explosive Gold Rally…

“I think silver is the buy of the century!” Mr. Gold spouted, his energy levels clearly rising, “…gold and silver stocks will go higher than tech stocks did during the dot com days.”

Got that? Mr. Gold says buy silver!

As he started backing up his claims with hard economic data, personal conversations with his wealthy customers, and visits to remote mining operations. It was obvious he had done his research and knew what he was talking about.

“Do you want to turbo-charge your gold profits this year?” Mr. Gold asked me point blank…

“I’m serious! Do you really want to make the most of what’s going to be an explosive rally in gold?”

It wasn’t a rhetorical question. He wanted an answer.

“Of course!” I told him…

“Then I have two pieces of advice for you.”

Mr. Gold waited for me to pull out my notebook to take down his advice.

  • “Buy silver, not gold.”
  • “And own some off the beaten path junior minors”

And just like that, he turned around and headed to the podium. It was time for his presentation to start…

Silver Is the Currency of the Educated

During his presentation, Mr. Gold posted the following common quote:

“Gold is the currency of kings, silver is the currency of the educated, barter is the currency of the working-class, and debt is the currency of slaves.”

The main reason why silver is the currency of the “educated” is because of the dual role that silver plays in our society.

You see, silver is a precious metal – much like gold. It’s used as a storage of value and typically rises in price during times of uncertainty.

But unlike gold, silver is widely used as an industrial metal as well. Silver has uses in the technology, medical, and even energy and construction industries. So as an economy grows, the demand for silver increases.

This means that you have two ways to win. One, you can win as precious metals rise in price. And two, you can win as economic growth ramps up and demand for silver increases.

Another chart from a different presentation I attended comes to mind…

Silver stronger than gold

Source: The Aden Forecast – April 2017 Issue

Silver prices typically trade alongside gold with a specific ratio. One ounce of silver is usually worth somewhere between 1.2% and 3% of the value of an ounce of gold.

Lately, the value of silver (compared to gold) has fallen to a low level compared to history. But the trend is now reversing. Meaning, silver should rise much faster than gold. In fact, if silver moves back toward the top of its range, the price of silver could move twice as fast (in percentage terms) as the price of gold.

Now I see why Mr. Gold thinks that silver is the buy of the century. Because if gold moves above $10,000 per ounce (a 700% return from today’s price near $1,255 per ounce), silver could give investors a 1400% return!

That’s strong enough to turn a $10,000 investment into $150,000 – not bad!!

In addition to SLV (an ETF that tracks the price of silver), I recommend taking a look at Wheaton Precious Metals (NYSE:SLW) and Silver Standard Resources (NASDAQ:SSRI). These are great investments that will help you take advantage of an explosive increase in silver prices.

I’ll continue to scour the markets for more precious metal-buying opportunities. Here’s to growing and protecting your wealth! – Zach Scheidt

 

Commodities Firms Gain Most as FTSE 100 Keeps Going Strong

Commodities Firms Gain Most as FTSE 100 Keeps Going Strong

Commodities Firms Gain Most as FTSE 100 Keeps Going Strong

It has been another record breaking period for the FTSE 100, with the share index showing an all time high on Monday. The index rose by a full 19 points on the day, closing at 7,454 – a percentage increase of quarter of a percent. While banks made up some of the biggest gainers, commodities firms helped bolster the index as the price of Brent crude oil leapt up over 2 percent to $52.17.

Blur, Business, Chart, Computer, Data, Finance, Graph

The UK General Election Hasn’t Fazed the London Stock Exchange

While most talk in the UK at the moment is about the upcoming general election, this hasn’t stalled the bearish mood on the London Stock Exchange, where investors are encouraged by a better global economy with low interest rates. With a lot of the companies included on the FTSE 100 international businesses, this index is less sensitive to UK politics and the strength of the pound on forex markets.

In fact, gains on the FTSE 100 often correlate to the pound depreciating, as this is a boon for dollar earning businesses on the LSE. It is important to remember that the LSE is the most ‘globalised’ stock exchange in the world – with companies from over 70 countries listed – and so the political and socioeconomic matters that influence the pound do not carry as much weight on its share indices.

Oil Companies Performing Well

Amongst the global concerns contributing strongly to the upswing on the FTSE 100 were BP, which saw a 1 percent rise on Monday, and Dutch Royal Shell, who were up 0.4 percent.

Oil Prices Stabilising

One of the main reasons energy companies and oil firms have been performing so well this week is due to the announcement by the Russian and Saudi energy ministers. The announcement claimed that the OPEC plans to cut oil production and avoid a further supply glut, and this would be continued into 2018. Both OPEC and non-OPEC oil producing nations had agreed to production cuts aimed at stabilising oil prices, and these were first implemented at the end of 2016.

While these measures did help, it became clear a longer agreement was necessary to maximise and maintain the benefits. However, as LaithKhalaf, a representative of Hargreaves Lansdown told the BBC on the matter, ‘the cartel appears to get diminishing returns each time it announces a reduction in output.’ This could mean that the stabilising effects have begun to smooth out and there isn’t such a jump into oil investment each time production limits are extended. It remains to be seen whether future announcements regarding the OPEC agreement will cause similar price changes.

Commodities Prices Driving the Stock Market

It is clear that commodities prices have had a really big impact on the stock market in this period, and that this has been far greater than even the impact of the general election. With the pound not doing anything especially interesting at the time (it rose slightly against the dollar but was down against the euro), oil prices have certainly been one of the most important drivers on the market.

Of course, even on a good day, the LSE has some losers, and the FTSE 100’s growth was tempered a little by the travel companies – both Tui and Thomas Cook were among the worst performers on the record breaking day.

 

Paper Gold Price is not the Real Price of Gold

Paper Gold Price is not the Real Price of Gold

Paper Gold Price is not the Real Price of Gold

The most expensive investment anyone can buy today is paper gold. For $1,260, an investor will get a piece of paper saying he owns 1 ounce of gold. But he is unlikely to ever see that gold. Firstly, most investors who buy paper gold have no understanding of the real reason for holding gold and will therefore never contemplate taking delivery. And even if he did understand the importance of holding real gold, he is quite happy to hold the surrogate alternative which is paper rather than physical. This is of course what the issuer of the paper gold wants. He knows that paper gold buyers have no intention of taking delivery. This is perfect for the seller because he has no intention of making delivery either. And this is how paper markets function.
Buyers and sellers are willing to trade pieces of paper that are said to represent an underlying instrument whether it is a stock, bond, currency or commodity.

Paper gold price at $1,260 is worth ZERO

But paper markets are illusory. They give the impression that the buyers acquire a real share in the underlying instrument. That would be the case if for each unit of for example a currency or gold was backed by real money or real gold. But in today’s false markets that is far from the case. We live in a world of the Emperor’s New Clothes. The people is made to believe that the emperor is dressed in a suit made of gold whilst in fact he is naked. And that is exactly how the gold market functions today. Shorts are always naked which means that there is never an underlying asset backing the gold short sale. What the buyer is getting is a piece of paper with zero intrinsic value.

This is a perfect situation for central banks, banks and major trading houses such as hedge funds. With sufficient capital, they can manipulate any market without ever worrying about delivery. The result is markets which are totally fictitious and bears no resemblance to the instrument that is traded.

The paper gold price is not the price of gold

That is why the price of a paper commodity has nothing to do with the underlying instrument. Paper trading can be leveraged hundreds of times or more and whatever the price the paper market trades at sets the price for the actual commodity. Thus, the paper gold market sets the gold price. The gold price is the paper price that the false gold market trades at. That has very little to do with the price of gold which is what the physical market would trade at if there was not a manipulated paper market. But buyers and sellers are not concerned about the real price of gold. Because they have no intention of owning the physical since they don’t understand its function.

But one day there will be this little boy who will shout out “The Emperor is naked” and then all hell will break lose. At that particular point, all holders of paper gold will ask for delivery and just like the Emperor, they will find out that there is no gold left in the vaults. The manipulators have then lost control of the market and the gold (and silver) price will go “no offer”. This means that gold is not offered for sale at any price because there isn’t any to sell.

Economic power will follow the flow of gold

The short sellers, mainly bullion banks and futures traders, will fail since they can’t fulfil their contract and the buyers will receive no gold. The market then becomes a physical market with price being determined by the holders of physical gold. Economic power will then follow the same route as we have seen physical gold travel in the last 10-15 years. The Silk Road countries such as China, India and Russia will then gradually dominate the financial system with their gold and their currencies.

China bought 171 tonnes in April. Total 727 tonnes for 2017. On course for over 2,000 tonnes in 2017

The financial system of the debt laden West will implode and this is also likely to bring an end to the current economic and cultural cycle in the West. The time this will take depends on many factors and is hard to forecast. von Mises expressed it very well:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion.The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

We have already gone past the point when a voluntary abandonment is possible. Therefore, a total catastrophe seems more likely. With the biggest global debt bubble in history, it could go very fast. Global debt, liabilities and derivatives of over $2.5 quadrillion can implode very quickly. We must remember that global GDP is only $70 trillion and total debt and liabilities are 35x greater.

So gradually economic power will be transferred from the bankrupt Western economies to the countries that patiently have been buying major quantities of gold over a long time. I am not saying that the Silk Road countries will be without suffering during this downturn. The whole world will be severely affected, including China with its massive debts and export dependent economy. But the Silk Road countries will emerge as the dominant power after the initial severe chock.

Switzerland – the foremost gold hub in the world

Coming back to the price of gold, I regularly meet up with our partners in the gold markets, primarily the refiners and the vaults. It is good to be reminded of the massive amount of work and the skill that goes into producing and safekeeping every ounce of gold. But before that the gold must of course be mined which in itself is a very labour and capital intensive industry. Gold mining was up to 1970 dominated by South Africa which then produced over 3/4 of all gold or 1,000 tonnes p.a. Today South Africa only produces 5% of global gold or 160 tonnes. The biggest producer is now China with 450 tonnes.

40-50 years ago, the average gold grade per ton of ore was up to 20 grams. Today it is less than 0.5%. This together with higher energy prices has increased the cost of producing gold dramatically. Refiners receive doré bars from the mines which have an average gold content of anywhere from 10% to 70%. The balance is mainly silver.

The Swiss refiners produce 60-70% of the gold bars in the world. There are four major Swiss refiners, Argor, Valcambi, PAMP and Metalor. Three of these are in Ticino which is the Italian part of Switzerland. The major reason for this location was the Italian jewellery industry which used to dominate global jewellery production for a very long time. This is no longer the case but Switzerland has continued to dominate gold refining. Gold is today a major Swiss industrial sector and accounts for 29% of Swiss exports. Combined with a number of very major gold vaults and a big domestic gold trade, this is a very important industry. This is why Switzerland is unlikely to ever confiscate gold. Why would they kill the Swiss Goose that lays such valuable Golden eggs.

Gold refining is a precision industry. There is zero tolerance to produce a 9999 (99.99%) content gold bar of exactly 1 kilo. Once the gold has been refined and the bars cast and stamped, the final process is to weigh each bar manually and shave off exactly the right amount of a gold flake so that the bar weighs a very tiny fraction over 1 kg. To maintain their reputation, Swiss refiners will always be slightly over. Anything that is a fraction under is obviously rejected and recast.

Anyone who has visited a Swiss gold refiner will realise the amount of work and precision involved in producing every single bar whether is cast or minted. This is why Swiss 9999 gold  has the reputation of being the best in the world.

As I discussed above, the gold price is the paper screen price at which paper gold can be traded, say $1,260. Depending on who the buyer is and the quantity, the wholesale price for this kilo bar might be just $1-2 higher than the paper price. This is just a ridiculously low price difference when you consider the amount of work that is involved in producing this bar.

Switzerland also has a number of major private gold vaults. Being one of the oldest democracies in the world and not having been in a war for 200 years makes Switzerland one of the very safest countries. Politically Switzerland is probably the best country in the world and the only true democracy. This makes Switzerland ideal for vaulting gold and silver. There are a number of secure private gold and silver vaults including the biggest and safest private gold vault in the world which we offer to our clients. It is critical to select the best vaults.  The most important criterion is people, owners and management. Then comes physical and financial security.

Bearing in mind the superior quality of refining and vaulting of gold in Switzerland, it is not a surprise that the country has such a high reputation in this sector. And the day the gold price reflects the real price of gold, the Swiss gold industry can name their price for gold and vaulting. It is certain that this price will be multiples of current levels. – Egon von Greyerz

 

Silver – The Kryptonite to the Banking and Financial System

Silver - The Kryptonite to the Banking and Financial System

Silver – The Kryptonite to the Banking and Financial System

– Rory Hall: Can you name any product, service or any item of any type that is 66% cheaper than it was in 1980? Of course not. There is one item on the planet that is cheaper today than it was in 1980 – silver. Why is that? How can that be?

We have seen several of the too big to jail banks be assessed “fines” for rigging markets and funding terrorist. LIBOR and FOREX just to name the two biggest market rigging schemes conducted by 5 of the too big to jail banking cabal members. This is to say nothing of the drug money laundering and being “fined” for funding terrorist organizations. No one has gone to jail – no one.

On the other hand, Deutsche Bank was “fined” for rigging both the gold and silver markets. The CFTC (Commodities Future Trading Commission) conducted an extensive 5 year investigation into the silver market rigging allegations. The CFTC was unable to find any wrong doing on the part of the bullion banks. Deutsche Bank has settled one class action lawsuit for a poultry $37 million for damages and faces another class action lawsuit that is still ongoing.

I bring these items to the table to demonstrate patterns of corruption, market rigging and bought-and-paid-for “regulators”, judges and government officials that no longer apply the rule of law to the real criminals.

I ask how could a commodity or any product that is bought and sold on planet earth be 66% cheaper than in 1980. The evidence above demonstrates how that is possible. The only remaining question is – why is silver the kryptonite to the banking and financial system? Gold, while the market has been proven to be rigged as well, has at least been able to climb higher than in 1980. The current global “price” of gold does not reflect it’s true value, however, it is still higher than 37 years ago. Silver, not so much.

If they have hit the wall with the amount of silver (contracts) they have…wether Morgan and the other people, nobody knows if it’s Morgan silver or not. They’ve (JPMorgan) been the big reason silvers been destroyed for six years – specifically due to JPMorgan and the U.S. government. It’s all a question now wether they’ve hit the tipping point and hit the wall, as Ted Butler says and he’s correct in that the Morgan cartel and their allies are trapped. How are they going to get out? ~Bill Murphy, The Daily Coin

We recently reported a drop in silver mine production and, a much more significant drop in silver scrap coming to market. These are the two main channels that fill market orders for physical silver demand. Any other product or service, the world over, that is in short supply usually rises in value due to the fact there is less of the product or service than can fill market needs. This, once again, is not the case with silver. Why?

How did you go bankrupt? Slowly, then suddenly.”

The markets start out nice and slow and then it starts to pick up steam and all-of-the-sudden the market will trade differently than it has for years. ~Bill Murphy, The Daily Coin

 

Historically the Best Assurance for Higher Gold Prices – Debt & Inflation

Historically the Best Assurance for Higher Gold Prices - Debt & Inflation

Expect Much Higher Gold Prices in the Next Few Years on Debt & Inflation

– Palisade Research: Gold investors are worried about record high valuations in the S&P 500, despite the fact that gold stocks have shown a negative correlation to the general equities since 2011. The reason for this fear? 2008.


The market crash of 2008 did not just hurt the S&P, it hurt real estate and gold equities. The sell off was brutal. So was 2008 an isolated incident or does a crash in general equities always spell doom for gold prices and gold stocks?

We examined five previous bear markets starting in 1973 in the S&P and looked at the performance of gold prices and gold stocks.

The End Of Bretton Woods & The Oil Crisis: January 1973 – October 1974

The stock market crash of 1973 was spurred by overwhelming public debt and inflation – the result of generous social programs and the Vietnam War. President Nixon abandoned the Bretton Woods system in 1971, and ended the convertibility of the US dollar to gold. The dollar had become overvalued, despite its gold backing decreasing by over 60%. A deteriorating economic situation was exaggerated by OPEC’s oil embargo, initiated when the US declared its support for Israel during the Yom Kippur War.

By the end of this recession, the S&P 500 was down 48% while gold prices gained 139% and gold stocks gained 189%.

The Iranian Oil Crisis & Lingering Inflation: November 1980 – August 1982

The 1980-1982 bear market was incited by a second oil crisis, this time due to decreased production during the Iranian Revolution of 1979. While global supply only decreased by 4%, the first oil shock was still fresh in everyone’s mind and crude oil prices more than doubled. This crisis was followed by the Iran-Iraq War in 1980, where oil production ceased in Iran and significantly reduced in Iraq. The US was also feeling the lingering affects of inflation, and raised rates accordingly.

By the end of this recession, the S&P 500 was down 27% while gold prices lost 46%; gold stocks lost 64%. Gold’s loss in this recession was due to astronomical interest rates, reaching a historical high of 14% from June to October 1981. The drop was also exaggerated by the incredible gain gold prices witnessed leading up to period. Gold prices increased 436% between 1974 and 1980.

Black Monday & Iran…Again: August 1987 – December 1987

After the 1980-1982 bear market, the US had a period of recovery and rapid expansion. The S&P 500 gained 230% from its low in 1982, and uncertainty began to rise. This doubt was once again exaggerated by oil, with reduced demand and increased production resulting in an oversupply in the world market. Oil prices dropped by more than half in 1986 alone, leading to the collapse of OPEC. In October 1987, Iran fired a missile and hit an American supertanker, and the next day another. On October 19, 1987, the S&P 500 dropped more than 20%.

By the end of this recession, the S&P 500 was down 34% while gold prices gained 6%. Gold stocks were down 21%.

The Dot-Com Bubble & 9/11: March 2000 – October 2002

The 1990s saw the exponential growth in computers and internet usage. The Information Age was born. Institutions and retail investors alike began eagerly investing into anything dot-com related, and capital was invested without traditional investment metrics. High-risk stocks also saw an additional inflow of capital due to the due to the Taxpayer Relief Act of 1997.

The telecommunication sector jumped head first into the trend, and upgraded its networks to service the growing internet users. Expansion was funded heavily with debt, however, the investments in infrastructure was simply not justified by projected returns.

Eventually capital dried up, and many telecom companies were forced to declare bankruptcy. Dot-com also fell heavily. The events of September 11 were the nail in the coffin, and the NYSE was forced to suspend trading for several days.

By the end of this recession, the S&P 500 was down 49% while gold prices gained 12% and gold stocks gained 28%.

Global Financial Crisis – October 2007 – March 2009

Our most recent recession and a story that should still be familiar in the minds of our readers – The Global Financial Crisis of 2007 and 2008. It was created by greed and leverage, beginning with the subprime mortgage crisis in the US, before developing into an international banking crisis. Investment banks such as Lehman Brothers simply took on too much risk, and central governments were forced to bail-out the bankers to prevent a full-fledged collapse of the world’s financial system. Nevertheless, the world did see what was dubbed the Great Recession, which also resulted in the European Debt Crisis.

By the end of this recession, the S&P 500 was down 57% while gold gained 26%. Gold stocks did not fare so well, down 46%.

Repeat Of Past Mistakes – Near-Future To ???

During four of the past five recessions, gold was up significantly. Gold stocks were in the green during just two of those occasions. The fact of the matter is that gold stocks are still equities. When equities sell of, investors rush to cash and in many cases gold. This is exactly what happened in 2008, where gold posted a 26% gain. Gold stocks marginally beat the S&P, but still witnessed significant declines.

There is no clear magical formula for a recession, however, it appears there are some common themes. First, what goes up, must come down. There have been run-ups in the stock market prior to each recession, and eventually investors take their gains or simply run out of capital.

Interest rates play a large factor. High interest rates stifle economic growth, but if too high, also suppress gold prices as investors would rather invest in something that pays interest.

Lastly, recessions are initiated or exaggerated by global unrest.

Since the last recession ended, the S&P 500 is up 255%, while gold has gained 33%. Interest rates have also increased, as the Fed maintains a hawkish stance for the near future. So, for the time being, gold prices are likely to remain depressed.

Gold stocks for the year are stagnant. And this may be because gold investors are still scarred by the previous recession, where gold prices gained but gold stocks fell by almost 50%.

It is our opinion that the situation today best mirrors 1973, rather than 2008. 1973 was spurred by overwhelming debt and inflation. It is no secret that the world’s governments will continue printing money to fund growth and to service debt. But like clockwork, eventually something gives. We foresee the debt bubble finally popping, and the coming turmoil exaggerated by the foreign policies of the US Government.

The recession of 1973-1974 saw gold prices gain 134% and gold miners increase 205%. In the next market crash, history is favoring a similar situation and gold will be the safe haven from inflation and uncertainty.

 

Gold and Silver is Always Least Attractive When Opportunity is Best

Gold and Silver is Always Least Attractive When Opportunity is Best

Gold and Silver is Always Least Attractive When Opportunity is Best

JS KimEarlier, in February/March of this year, on my SKWealthAcademy SnapChat channel, I warned daily of potential deep pullbacks in the asset prices of gold and silver that then materialized. In mid-March as gold/silver prices recovered, I wrote a blog article, here, titled, “Expect Divergences, Not Convergences, Between US Stock and PM Asset Prices for the Remainder of the Year.” This too has manifested, almost to perfection, thus far. As you can see from the chart below, after I posted that article, gold and silver mining stocks rose and US stocks fell. Then US stocks rose and gold and silver mining stocks fell. Will this relationship remain for the rest of 2017 as I predicted? Maybe not as perfectly as the below chart illustrates, but I still believe that this relationship will hold true in general for the rest of the year.

However, what is much harder to fathom, are the excessive amounts of pessimism that surround gold and silver assets at this current time, when quite a strong buying opportunity exists. Though the enormous volatility of gold and silver mining stocks this year has of course contributed greatly to this pessimism, as people have a strong distaste for uncertainty, if we step back, just for a second, and look at the greater picture, there should not be, in my opinion, this much pessimism surrounding gold and silver at this time, especially when you compare yields of gold versus US stock markets over a longer period of time. Again, from a close-up view, if we look at spot gold prices, it’s been a rollercoaster ride, though volatility in physical gold prices has been fairly muted this year, due to growing premiums of physical prices over paper prices, which illustrates the necessity of holding physical gold and silver over their banker-controlled paper derivatives. Gold dropped sharply in March, then rose sharply for about four weeks, and then dropped sharply again from mid-April onward, falling roughly $80 an ounce over 18 trading days before stabilizing the last couple of days.

Granted, in a short-time period, that is a lot of volatility with which to deal from a psychological standpoint, but the gold and silver asset price game has always been a game of psychological warfare in the eyes of fiat-currency advocating bankers. That is why raids in gold and silver prices often are executed rapidly and a rollercoaster pattern of up and down in prices often are manufactured over short-periods of time, as bankers design these raids to prevent people from seeing the forest from the trees. However, if we step back from the trees and zoom out, so we are indeed able to see the forest, a number of banker-spread narratives about US stock markets and gold are quickly destroyed and readily evident. If we observe a longer period of time since 2001, it is readily apparent, even at today’s prices, that gold’s cumulative yield has absolutely smashed the cumulative yield of the US stock market S&P500, even though with the heavily pushed agenda of the banking industry, Wall Street, and politicians, one may believe that the yield of the S&P500 has smashed the performance of gold. As you can see, from 2001, even with the recent price raid, gold has risen 390%, nearly beating the 81% yield of the S&P500 by five times.

Furthermore, though the narrative that gold is extremely risky to hold because its price is so volatile and stock markets are much safer because they rise every year is always sold to the public, by observing the above chart, we can easily spot the opposing truth to this false narrative about “gold is risky” and “stocks are safe”. During the last 16 years, the S&P500 suffered 3 bad years of performance while gold only suffered 2 bad years of performance. Furthermore, the bad years of performance for the S&P500 were much more volatile to the downside than the bad years of performance for gold, with the worst one-year performance of the S&P500 clocking in at -39% and the worst performance of gold  11% better at -28%. Though many of you may see the obvious price plunge of gold in the above chart that happened in 2008 and wonder why I did not include 2008 as a poor performing year for gold, this is because less apparent from the above chart, is the actual positive return of gold that year from the measuring period of 2 January 2008 to 2 January 2009.

Finally, gold performed much better over the above time period if denominated in numerous other global currencies other than the USD, and physical gold (especially bullion coins) also performed much better than paper gold prices as represented in the above chart. Thu,s in reality, if you compare the price of physical gold (in currencies other than the USD) to the performance of the US S&P500 stock index, the gold price has exhibited far less volatility to the downside than US stocks and even greater overall cumulative yields than the already wide gap presented above. So, had you bought physical gold during any of the years of the above time period, the only way you could have been really hurt was by first purchasing gold at the absolute peak at the end of 2011 after annoying 10-consecutive years of significant price increases, which would been hard to do even if one was choosing a random year between 2001 and 2016 to buy gold by throwing darts at a dartboard papered with the different years of this time period. In other words, for the many that truly understand the real narrative of reasons to purchase physical gold as opposed to the false narrative promoted by bankers, it is highly likely that every single one of you are still sitting on substantial gains on your physical gold stack today.

If we want a true definition of risky, consider that despite the wide support of Central Banks all over the world, including the Bank of Switzerland, the S&P500 was still only able to manage a yield of 81% over 16 years versus gold’s yield of nearly five times as much of 390%, despite the fact that gold prices are periodically dumped by bankers every year in gold futures markets by flooding these markets with billions of notional amounts of gold futures in condensed time periods sometimes as concentrated as just five to ten minutes. Even worse, as of 9 May, only 10 stocks (AAPL, AMZN, FB, MSFT, GOOGL, PM, V, HD, ORCL, and AVGO) out of the 500 that comprise the S&P500 index account for 46%, or nearly half of all gains of the S&P500 as of that date, while the situation is unbelievably even riskier in the US technology stock index, the NASDAQ. In this index, incredibly only 5 stocks (AAPL, AMZN, FB, MSFT and GOOG) out of the 2,500 stocks that comprise the NASDAQ account for nearly half of all gains as of the end of April.

Yet, the banking industry wants us to believe that a condition in which the performance of a 500 stock index largely relies of the performance of just 10 stocks, and the performance of a 2,500 stock index largely relies on the performance of just 5 stocks, is “safe”, while the physical gold market is dangerous. So let’s return to the charts above. Had one bought physical gold at the start of 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009 and 2010, one would still be sitting on decent to very significant profits as of today. And had one bought gold in 2014, 2015, and 2016, one would still be sitting on small to significant profits today. In other words, in the past 16 years, had one purchased gold at the start of 13, or 81% of these 16 years, one would still be sitting on a gain today. Risky indeed! If these statistics surprise you, it is merely because the mainstream media constantly focuses on short-time spans in which  gold and silver prices drop and almost never report on longer-term trends when it comes to gold and silver. On the opposite side of this equation, the mainstream media always constantly focuses on short-term trends of US stock markets at the latter end of this massive bubble, and not the overall lackadaisical long-term performance of the US stock market.

Furthermore, since gold price short-term peaked on 17 April, and then reversed downward on the back of massive billions of notional amounts of gold futures sold into paper markets, the spreads between paper and physical gold have grown larger at a time when spreads should be falling, if the downward slide in gold prices were indeed occurring within the parameters of free market forces. On 17 April, a 1-oz Credit Suisse gold bar sold at a $33 an ounce premium over spot, and today, as I write this, that same 1-oz Credit Suisse gold bar is selling at a $42 an ounce premium over spot. So we must ask ourselves, “Why is the premium of physical gold over paper gold prices growing as gold prices have been dropping?” Of course, if you’ve been following my articles for a while now, the answer is very simple to extract.

So just as I warned earlier in early March repeatedly that everyone should be hedging against potential big drops in gold and silver asset prices, now that many PM stocks have retreated all the way back to their March price lows, the question is why so few see this as a buying opportunity, while constantly heeding Wall Street’s “buy the dip” plea every time US stocks pull back in price. Again, the psychological games played by the banking cartel in manufacturing a roller-coaster ride in the prices of gold and silver assets obviously plays a large role in people’s wariness of gold and silver. Many have resigned themselves to the false belief that the banking cartel is all powerful and can prevent gold and silver prices from reaching and surpassing their 2008 highs ever again. A quick look at the above gold chart should squash this myth permanently, as if this were the case, gold would have steadily fallen in price since 2001 and would now perhaps be selling for $100 an ounce today instead of $1,226.

Furthermore, I’m speculating that this false belief also originates from a lack of understanding of how the 100% settle-in-physical-gold-only Shanghai gold futures markets is transforming the global banking paper gold game and stripping power from the London and New York gold traders in their ability to sustain depressed gold prices for a long period of time once they have successfully engineered a drop in gold prices (more about this topic coming soon in a future post here, so be sure to bookmark this site). Of course, most will ask the following very fair question: “If they are transforming the paper gold price game, where is the evidence, and why have gold prices been weak as of recent times, and not soaring?” However, most that ask this question are Westerners that lack an understanding of Asian culture and not only the willingness of the Chinese to make this transformation as a slow burn versus a rapid spike, but the desire of the Chinese to avoid major disruptive and dislocative events in their own economy, which a rapid $1,000 increase in the price of gold would engender.

If you understand this, and you may ask a Chinese person to explain this if you do not, this also means one should pay no attention to predictions of $10,000 gold and $500 silver this year, or even $2,000 gold and $100 silver this year, as such predictions are made every single year without bearing fruit, because honestly, there is little to no value in these speculations from the simple, logical perspective that none of us can possibly know the end price of gold and silver, nor the exact moment when and where a pillar of the global financial and monetary system will crumble that may lead to huge spikes in the price of gold and silver. Unknown  and unforeseen black swan events likely will be the root of big upward spikes in the price of gold (escalation of war, collapse of a global bank, etc.), and not the transition of power in establishing gold prices from West to East, as this process will likely be a slow-burn process. This means we may still be a few years away from witnessing the Chinese State really exert any muscle in the global gold price setting process (absent of a surprise, unexpected announcement that reveals China and Russia’s true physical gold and physical silver holdings or an unexpected launch of a gold backed currency). In the meantime, understand that the upward trend in gold prices as illustrated in the above chart is extremely likely to continue, despite the white noise that happens every year with volatile roller-coaster rides in price that are designed specifically to blind us from seeing the overall picture.

Also understand that when pessimism is the highest in PM assets, that high levels of pessimism that coincide with significant drops in price very often equate to great buying opportunities that are often not seized by the general public because of the public’s concentration on the close-up view and not the bigger picture. Very often, bankers paint close-up views of gold and silver that appear highly negative and pessimistic, but in the midst of these short-term interruptions, the long-term view remains very optimistic and remains hidden from view due to a lack of mainstream media coverage of the counterbalancing optimistic view. In some cases, however, the short-term view is very pessimistic, prices have dropped tremendously, and the lower prices do not equate to value or buying opportunity. This case would describe the retail sector of America. This is because the long-term view of the US retail sector provides no counterbalancing view, as is the case with PMs, and remains negative as well.  For most of this year, my social media posts consisted of warnings to assume hedges against drops in gold and silver prices. Now, with the significant drop in valuations, and a re-test of March lows, my warning is not against future drops in gold and silver prices, but rather it is a warning not to miss opportunities that have now arisen.

The Perfect Precious Metals Storm – Made “Entirely” In America

The Perfect Precious Metals Storm - Made In America

The Perfect Precious Metals Storm – Made “Entirely” In America

In yesterday’s “unprecedented catastrophe,” I espoused that “when the powers that be’s’ unprecedentedly destructive acts – in the name of destroying the 99%, for the benefit of the 1% – inevitably, spectacularly fail; the world as we have known it will no longer be recognizable.

Well guess what?  As of today, America – and its rapidly diminishing global role – will never be the same; as quite obviously, the “Deep State” that even I have had trouble acknowledging has once and for all, destroyed it.  And by “Deep State,” I don’t necessarily mean a handful of people controlling the world; but instead, the political, corporate, and financial “leaders” with the most power and wealth to lose from the introduction of an “outsider” – who quite obviously, be they “Democrat” or Republican,” will do anything to protect, no matter how many billions are destroyed in the process.

Starting with this week’s New York Times accusation that Donald Trump fed the Russians top secret information – apparently, based on little if any evidence; and culminating with Trump’s hubristic decision to fire James Comey – who in response, accused Trump of obstructing justice in the Michael Flynn “scandal”; the inevitability of Trump’s impeachment has been dramatically upgraded – perhaps, to imminent.

From the second the historically angry American populace suggested it would eschew Deep State candidates like Hillary Clinton and Jeb Bush, it became crystal clear that all imaginable actions, legal and illegal, would be taken to prevent Donald Trump from winning.  And when, to their shock and chagrin, he won anyway, to succeed.  And by “succeed,” I don’t mean merely rendering him ineffective – as I vehemently predicted two days after the election; but instead, to literally destroy him – by hounding, investigating, and lying about every imaginable issue; until finally, when his defenses were weakened by the policy failures their lack of cooperation ensured; not to mention, the accelerating economic crash he inherited; they’d “get him” on something, be it important or immaterial.

Trust me, Trump didn’t help his cause – by playing into their traps with inane policy decisions; aggressive confrontations – particularly via Twitter; horrifying Cabinet choices – like half of Goldman Sachs, for instance; and an inability to compromise with the expanding band of brigands out for his head.  Attacking foreign heads of state – like those of China, Mexico, Russia, and Germany, to name a few – didn’t give him any points overseas.  And in bombing Syria; threatening North Korea; and God forbid, acknowledging Vladimir Putin’s existence; he gave detractors all the “material” they’d need to “take him down.”  Let alone, as said detractors literally own the mainstream media – which at this point, the average Joe or Jane Sixpack has not a clue, or care, whether it’s output is “fake.”  To them, all that matters is handouts; and if you can’t deliver them – via the promised tax cuts and infrastructure spending which never had a chance to be enacted – they’d be just as happy to let Crooked Hillary have her shot.  Particularly, as the first thing she’ll likely pass if elected are “taxes on the rich” to pay for socialist nightmares like single payer healthcare.  I guess we all new that was coming anyway, just not so fast!

Not that things would have turned out differently if in hindsight, Trump made 180-degree different choices on all fronts.  As per above, America’s Deep State “wanted him dead” (figuratively, of course) from the day he received the Republican nomination.  Which, when he shockingly was elected anyway, simply prompted them to deploy additional “assassins,” from all walks of the political, economic, social, and even military world.  This, despite WikiLeaks, Anonymous, and essentially all classes of “social justice warriors” supporting him, doing everything in their power to defeat said Deep State.  But alas, the world has changed forever, as now that the “impeachment genie” is out of the bottle, it can never be put back.  And unlike Bill Clinton, there is no way Trump will survive the process – which, I might add, will likely make the Clinton, Nixon, and even Andrew Johnson impeachment proceedings appear “civil” by comparison.

So where does that leave us, as a nation?  In a nutshell, several rungs below the top tier on the totem pole it has held since World War II, and rapidly declining.  Per today’s title, America’s destruction has been, for the most part, man-made – not that it, or any empire, can last forever.  Starting with abandonment of the gold standard in 1971, economic, financial, and monetary ruin was a fait accompli; and as the growing world – particularly, “emerging markets” like China – slowly but shortly caught up, America’s fall from said top rung become increasingly irreversible, and imminent.

Technology helped, too – like the “weapons of mass destruction” known as derivatives, that have leveraged America like no nation in history.  This, atop the “high frequency algorithms” and other Wall-Street-created tools to manipulate markets – which, in total, have contributed to not only the greatest capital misallocation in history; yielding across-the-board oversupply that will take years, if not decades to unwind; but the greatest wealth disparity in the nation’s 240-year history.  Which is exactly why the average American has no job and savings – and consequently, voted for Donald Trump, Bernie Sanders, or anyone not named Clinton or Bush.

That said, the entity most responsible for America’s political, economic, social, and monetary demise – and, by virtue of the cancerous spread of its fiat “dollars,” the entire world’s as well – is unquestionably, the Federal Reserve.  Yes, going all the way back to its approval via a lightly attended Christmas Eve Congressional vote in 2013 – as planned at the Deep State’s Jekyll Island proceedings, by traitors like Rockefeller, Vanderbilt, and J.P. Morgan himself.

Throughout the decades, the Fed has used – and ultimately, abused – its power to spread inflation the world round; bringing individuals, corporations, and nations to their knees.  With each dollar printed, America’s historic debt load grew larger – and with it, the world’s desire, and need, to print their own fiat toilet paper to “keep pace.”  Ultimately, the debt became unpayable; and when the resulting economic decay led to crisis, each succeeding Chairman “stepped up” the carnage by printing more; and ultimately, using the “weapons” of zero interest rates (Greenspan) and “QE” (Bernanke) to enslave the world, and create the world’s largest, most dangerous asset bubbles.

Which, of course, could only be “accomplished” if the one asset class with the ability to “call out” its fraud was allowed to express itself; i.e., physical Precious Metals.  Which is why, with increasingly blatant tactics, the “gold Cartel” launched in 1933 via the shadowy “Exchange Stabilization Fund” has done everything in its power to suppress precious metals prices.  Including, via the admissions that all but “those too blind to see” choose to ignore,” mortgaging the nation’s gold reserves; likely, to the Chinese, Indians, Russians, and Arabs.  And in the process, creating precious metals prices so undervalued, they catalyzed record physical demand, whilst permanently destroying the mining industry.  In other words, sowing the seeds for the inevitable supply shortages that not only catalyze monetary panic, but skyrocketing gold and silver prices, by many, many multiples.

As for today, we’ll see if the unprecedented string of “low volatility” the psychotic, world-destroying PPT has created can be saved.  Let alone, the “dotcom valuations” their lunatic manipulations have caused, amidst Great Depression economic conditions.  As for the “Trump-flation” meme they fabricated on Election Night, as an excuse to reverse their previous pro-Clinton narrative – and thus, justify surging stocks and plunging Precious Metals; it’s, as of today, dead.  To wit, the dollar is now below Election Day’s level; interest rates, commodities, and economic activity are plunging; and oh yeah, none of Trump’s key campaign promises have been met.

Conversely, gold has retaken its 200-week moving average of $1,239/oz; with its more important 5½ year downtrend line – from the Cartel’s initial, heinous, September 2011 attacks – back in sight, at roughly $1,285/oz.  As for silver – by far, the tighter market; with by far, more “Cartel leverage” employed; it’s only a matter of time, particularly with its ratio to gold stretched so far, before physical demand swamps the Cartel’s best efforts to prevent its “ultimate quadruple top breakout” above the 1980 and 2011 nominal highs of $50/oz.  Which, when the “perfect precious metals storm – made entirely in America” plays out, will be, in Bill Murphy of GATA’s immortal words, “jacks for starters.”

Moreover, there’s that little thing known as Bitcoin to consider – which as I write, has surged to a new all-time high.  In my very strong view, crypto-currency will fight alongside Precious Metals as “twin destroyer” of the world’s largest, most destructive fiat Ponzi scheme.  Which, now that the economic and political fabric of the nation issuing the world’s “reserve currency” is in tatters, could catalyze a near-term monetary revolution unlike any the world has seen.  In a nutshell, I believe the future of utilitarian money is decentralized crypto-currency like Bitcoin; as much so, as my long-standing view that the “once and future king” of wealth storage will be physical gold and silver.  And the more governments realize Bitcoin’s power, the more they will (futilely) attack it.  Thus, “taking the heat” off gold and silver, and facilitating their own parabolic rises.

To conclude, the world as we know it – at least, the America we have known – forever changed last night.  And with it, the odds of the dollar’s death as “world reserve currency” increased dramatically.  Going forward, the world is going to be a much scarier, more difficult place for most.  However, the one thing I’m sure of, is that if you hold at least a modicum of physical gold and silver – held outside the financial system; no matter where you reside, your financial path forward will be exponentially easier. – Andrew Hoffman

The Manner will be More Shocking than the Rise in the Price of Silver

The Manner will be More Shocking than the Rise in the Price of Silver

The Manner will be More Shocking than the Rise in the Price of Silver

I am convinced that silver will soon explode in price in a manner of unprecedented proportions, both in terms of previous silver rallies and relative to all other commodities. By unprecedented, I mean that the price of silver will move suddenly and shockingly higher in a manner never witnessed previously, including the great price run ups in 1980 and 2011. The highest prior price level of $50 will quickly be exceeded.

By “soon”, I mean that the move can commence at any time, but more likely before many weeks or months have gone by. I know that the price of silver has been declining on a daily basis nonstop for three weeks now, itself an unprecedented move, but I also know the reason for the decline and how the sharply improved COMEX market structure has always guaranteed a rally in a reasonable period of time. The only question is whether on the next silver price rally will JPMorgan add aggressively to its COMEX short positions. I’m suggesting JPMorgan is not likely to add to short positions on the next rally.

At the heart of the unprecedented move higher in the price of silver is the manner in which it will occur. It will be a price move like no other. It will be the greatest short covering rally in history. That’s guaranteed because the COMEX silver short position is the largest and most concentrated short position in history. There is no buying force in the financial markets more powerful than panicky buying by those forced to cover short positions. The largest short position ever holds the potential for the greatest short covering rally ever. For more than 30 years, COMEX silver futures have had the largest short position of any commodity in terms of real world production and inventories. Yet while silver prices have had some notable rallies over the decades, none have included a genuine short covering panic. In fact, the uniquely large and concentrated nature of the COMEX silver short position (meaning it is held by just a few traders) is the mechanism by which silver has been manipulated in price all these years.

The concentrated short position in COMEX silver futures and the price manipulation are one and the same. All price manipulations must come to an end. In silver that means that at some point the concentrated COMEX short position no longer increases, but instead gets covered for the first time on rising prices. The main reason is a subtle yet distinct change in the composition of the big concentrated short position in COMEX silver.

JPMorgan has amassed a physical stockpile of silver of at least 600 million ounces by my calculations at an average cost of around $20 an ounce, all while continuing to make hundreds of millions of dollars in manipulative COMEX short selling. This epic accumulation has changed the composition of the concentrated COMEX short position more than any single factor.

No longer is the largest COMEX silver short subject to extreme financial damage should silver prices explode. Instead, JPMorgan has pulled off the accumulation of the largest silver hoard in world history on declining prices. The bank has never been better positioned for a silver price explosion. In other words, there has never been a better time, from the selfish perspective of JPMorgan, for the price of silver to rip higher or a worse time for the other big shorts. And the recent deliberate price takedown has further reduced JPMorgan’s COMEX short position, greatly enhancing the prospects that JPMorgan won’t be adding to its COMEX short position whenever the next silver rally gets rolling.

Should JPMorgan not add to its COMEX short position on the coming silver price rally, then it will be only a matter of time before the remaining big COMEX shorts wake up to the fact that they are toast. By “a matter of time” I am referring to days and weeks. When silver prices rise sufficiently, the remaining shorts will panic and begin to try to cover their short positions. This buying will send silver prices skyward and then touch off all sorts of other buying, including investment buying and then industrial user buying, perhaps the most potent buying of all. The best analogy I can come up with is an atomic bomb on top of a hydrogen bomb on top of a neutron bomb.

The big shorts, apart from JPMorgan, appear to be mostly foreign banks according to CFTC data. The speculating foreign banks are precisely the type of short sellers most likely to panic when silver prices start to rally and it begins to take hold on them that JPMorgan is no longer the shorts’ protector and short seller of last resort.

Even after the recent selloff, the short position in COMEX silver is still at astronomically high levels relative to all other commodities. The seven biggest shorts (ex JPM) are still short around 350 million ounces (70,000 contracts). It is impossible to imagine such an amount being purchased except at prices $20 to $30 higher, at a minimum.

Then other forces will kick in, such as ETF buying, which has largely been somnolent for the past six years. On a rally where silver prices jump to $20 or $30, it would not be unreasonable to imagine $2 to $3 billion of investment demand coming from investors excited by rising prices. That’s not much of an investment in dollar terms, but it happens to equate to 100 million ounces of physical silver. I have trouble visualizing where that much silver would come from, particularly when this physical demand would likely occur as the seven big banks (dead men walking) are buying back in a panic. Then add buying by industrial users who face delivery delays caused by investment buying.

The whole silver manipulation has become more obvious than ever, particularly this last deliberate selloff. The concentrated short position hit an all-time extreme a few weeks back on a rally to only $18.50 – the largest such short position at the lowest price ever. You have to ask where this thing is headed. How much longer can a manipulation last that is obvious to more observers than ever before? The name of the biggest manipulator is openly called out and the primary regulator can’t address the most basic questions about the illegal nature of the biggest bank in America holding the price of silver down on paper while it scoops up a huge hoard of physical silver. Something has to give soon and when it does, it will go down in history. – Ted Butler

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