Commodity Trade Mantra

Gold Demand in India is Bound to Rise – Here Is Why

Gold Demand in India is Bound to Rise - Here Is Why

Gold Demand in India is Bound to Rise – Here Is Why

Gold demand in India has been slow to come back after falling sharply last year.

But, a revival back to 800-900 tonnes a year is on the cards for the country, said managing director at World Gold Council India.

Some blame the slump in gold demand on the Indian government’s continuous push for more transparency. Yet, WGC’s Somasundaram PR is convinced the effects are only temporary.

“Government in India is not anti-gold. It has two overall objectives: One is to increase the tax base, and the second is to promote transparency in trade and commerce,” Somasundaram told Kitco News in a telephone interview.

The government has passed numerous new laws in the last couple of years that might have discouraged some consumers from purchasing gold, Somasundaram said.

In the short-term, WGC sees gold demand staying around 650 – 750 tonnes in 2017.

“The demand will come back, but it could take one or two years before it is back up to 800-900 tonnes a year,” he noted.

Consumer purchases of the yellow metal tumbled down 22% to 674 tonnes in 2016, down from 863 tonnes reported in 2015.

During that time in India, one major change included the demonetization of all 500 and 1,000 rupee bank notes. “This helped to bring out a lot of cash people held as part of unaccounted wealth, but created a lot of issues in the process,” he noted.

Earlier, the government also made it public knowledge that only 2% of Indians actually pay income taxes. To address this, India implemented a law, forcing anybody who buys anything for more than $3,000 to provide their tax number.

The latest measure impacting gold buying has been the introduction of 3% GST tax that became effective on July 1 and aims to help with traceability of transactions.

These steps created a fear of buying gold, as people were too scared to give out their tax number, WGC India managing director said.

“I don’t think all the factors that affected demand in 2016 have completely been dissolved.
People are still hesitant to give their tax number for purchases, while cash purchases are still restricted,” he stated.

But, Somasundaram is “very optimistic,” believing that demand will come back and the gold market will be much better off with a more traceable and legal system.

“This drive is going to take gold out of the shadows of black money and help mainstream gold. Our view is certainly that trade will not have any option but to get more organized,” he said.

Accomplishing this won’t be an easy task, as India is still very much a cashed-based economy. A PwC report from 2015 showed that 98% of all transactions in India in volume terms were done in cash.

Plus, about 70% of gold in India is sold through an unorganized segment, head of the WGC India pointed out, adding that on average 10-20% of gold is being smuggled into the country illegally.

But, there are clear signs of improvement. In the last ten years, organized gold trade expanded from 5% to 30% in India, added Somasundaram.

Even before the GST tax was introduced this year, a lot of people saw the benefit of dealing with organized trade versus the illicit segment.

“Consumers were led to believe that they benefited by not paying a tax on gold, but smuggling channels were just lining their pockets. Whatever consumers thought they were saving in tax, they would lose in purity and price,” Somasundaram explained. “With the GST putting additional pressure on the trade system, consumers and traders will be left with no choice but to see the benefits of working legitimately.”

Here Is Why Gold Demand Will Rise

One of the major drivers for demand is the growing middle class and the popularity of gold jewelry during wedding seasons.

“India will be saving one third of its income and part of those savings will flow into gold. When incomes go up, gold demand also goes up. Also, 60% of jewelry demand comes from weddings. We have 10 million weddings every year on average. This is not going to go away in a country where more than 60% of its people are below the age of 25,” Somasundaram said.

Acceptability of gold in banking and financial transactions is also on the rise. “Gold as a means of collateral for a loan is one of the most accepted forms,” he said.

Another interesting fact is that the 250 million people currently living below the savings threshold in India will enter the middle class and become savers in the next five years, according to Somasundaram.

“One gram of gold per person translates into 250 tonnes,” he said.

Currently, total gold holdings in India equal to about 23,000-24,000 tonnes, which translates to about one trillion dollars. – Anna Golubova


When Gold and Silver Prices begin to Reflect Reality, Prices will no longer be in Control

When Gold And Silver Prices begin to Reflect Reality, Prices will no longer be in Control

When will Gold and Silver Prices begin to Reflect Reality?

Value is subjective, reflective of one’s feelings or opinions.  In the minds of those who value gold, throughout the ages and around the world, this precious metal is deemed to have an intrinsic value superior to most other assets.  The well-used adjective, intrinsic, is also subjective, construed as essential, belonging naturally in its association with gold.  In the end, “intrinsic value” is elusive, a figment of one’s mind.

There are many, and we fall in this camp, who associate gold with an inherent preservation of wealth.  This has been true throughout history but with intervening failures during some time frames.  Failure may not be the most apt expression, but many detractors are happy to point out those times when gold did not retain its status as a wealth preserver, and in fact, losses were on the table for many who paid a price higher than for what their gold was sold.  It happens.  The net result of gold being a wealth preserver holds true, but with periodic, and some times substantial, yet temporary, reversals.  This time will be no different.

Price is objective, not dependent upon one’s feelings or opinions for price is an actual number.  The subjective value of gold is somewhat intertwined with the objective price of gold through the natural laws of Supply and Demand.  The latter are a function of what is available [Demand], in relation to the desire to have what exists [Supply],  The desire to acquire can be greater or less than what is available, and that is what eventually determines price.

The natural laws of Supply and Demand have been usurped by the elites in their fervent determination to have a One World Order where the globalists are in charge of everyone and everything.  The United Nations is the political arm of the globalists, while the Bank for International Settlements [BIS] and the International Monetary Fund [IMF] are the controlling financial entities used to dominate sovereign countries, dictating policies and controlling [enslaving through debt] the masses.

The globalists have been manipulating the price of gold since the formation of the US Federal Reserve in 1913.  The formation of the Bretton Woods System, established in 1944, which is also when the IMF was created, led to an international basis for exchanging the currency of one country for any other, and the closing of the gold window by Nixon in 1971 were pivotal events that led up to massive and ongoing manipulation of gold by the central bankers of the world.

The run-up in the price for both gold and silver in 2011 was a precursor of the actual demand for the physical metals.  They represent sound money, and the globalists would not tolerate any competition for their paper fiat Ponzi scheme of creating money out of thin air and demanding interest for the “privilege” of its use.  This is the primary reason why both gold and silver have been “beaten down,” as it were, to current levels over the past 6 to 7 years.

Drive down the price of gold and silver and tire out the public from any desire to own a declining “price” asset.  This has been the ongoing objective of the globalists in order to corral everyone into their digital web of financial control from which there will be no escape.  There is a similar Ponzi scheme going on in the stock market which continues to defy the laws of Supply and Demand, and gravity, as well.

The globalists have destroyed the middle class and elderly savers by driving interest rates to zero, and negative in some parts of the world.  With no way to earn a return on one’s savings, people have been forced into paper stocks, around the world, chasing some kind of return on their money assets [while exposing themselves to tremendous loss of capital when the markets go south with “unexpected” impunity.]  The unexpected part is only for those who fail to use business and financial sense, aka lemmings.

Debt around the world is in the trillions and has never been higher at any time in history.  Even worse, financial derivatives is 10 to 100 times greater [owned by financial banks, for the most part], with no hope of ever being able to control them once market reverse to the downside.  The globalists have created so much debt to save the totally bankrupt banking system.

Financial Armageddon is waiting in the wings.  At some point, it will be unable to be controlled and financial disaster will prevail around the world.  At that point, the price of gold will no longer be in control, and it will become subservient to the value of both gold and silver.  The question all have been asking, especially those owning and holding either or both gold and silver, is when will price begin to reflect reality?

Reality, as most sane people would define it, does not exist while the globalists are  financially in charge, and in charge they are.  The war on cash is another example of how the bankers are preparing to financially fleece as many people as possible.  Control over how much of their own money one can withdraw from a bank has been in place for several years, now.  The destruction of the “dollar” [and the United States], continues unabated. All of the signs are there.

Who will survive?  One group will be the owners of physical gold and silver.  Of course, they will be subject to confiscation, theft, and government control, among others.  That will be a small price to pay for having preserved, and more than likely greatly enhanced the value of their holdings.  Trade and barter have always existed, and the demand for concrete, as opposed to paper or digital [non]-“assets” ensure value will prevail.

When will that process begin? [That never-ending question that has no viable answer.]
It will not happen one day sooner than when it begins, and that is not as nonsensical as it may seem.  Many holders of the physical may feel like the Greek mythological Sisyphus for the past several years. Unfortunately, the duration of globalist control does not appear to be ending any time soon.  How do we know at least that?

To the charts…

The actual monthly close will be on Monday, but a single day is not likely to materially alter the chart interpretation.  The takeaway from this and every other time frame is that a strong rally is not imminent.  In fact, we are more likely to see more of the same.  the potential for positive change always exists, but until we can see such change developing on the charts, more sideways activity will continue.

GC M 29 Jul 17

TRs [Trading Ranges], are the least telling as to direction.  Right now, price is almost at the center of the TR and can go in either direction without changing the TR, at least until there is a decisive breakout, either way.

GC W 29 Jul 17

More of the same…nothing revealing.

GC D 29 Jul 17

Silver remains weaker, relative to gold.  For July to prove its potential for change, price needs to follow through to the upside, or, at a minimum, have a shallow correction.

SI M 29 Jul 17

The comment on volume in the chart is the most positive statement we can make.

SI W 29 Jul 17

Why say more than what the chart clearly reveals?

SI D 29 Jul 17

Submitted by: Edgetraderplus

Silver is 8 times Cheaper than should be – Buy before the Discount Disappears

Silver is 8 times Cheaper than should be - Buy before the Discount Disappears

Silver Prices are 8 times Lower than should be

Keith Neumeyer just made a bold prediction.

Yesterday, he said a key precious metal indicator was going “to collapse.” When it does, early investors will make a killing.

Today’s essay is all about that opportunity. I’ll even tell you the best way to profit from this.

But you should first understand why I’m writing about this.

Right now, I’m at the Sprott Natural Resource Symposium in Vancouver. I’m here to learn from some of the world’s smartest investors…and Neumeyer is at the head of that class.

You see, Neumeyer is a true legend in the natural resource business.

He’s on the board of several major mining companies. And he’s funded two billion-dollar companies of his own. One of them is First Quantum Minerals, a leading copper producer. The other, First Majestic Silver, is one of the world’s largest copper miners.

In other words, he knows as much about the natural resource market as anyone on the planet.

And right now, he thinks silver is a screaming buy. That’s because the gold-silver ratio is far too high.

• The gold-silver ratio is one of the world’s most closely watched indicators…

It measures how many ounces of silver it takes to buy one ounce of gold.

A high ratio means that it takes many ounces of silver to buy an ounce of gold. It means silver’s cheap.

You can see that the gold-silver ratio is at about 75 right now. That’s 50% higher than its average going back to 1950.

In other words, it’s trading at a huge discount to gold.

• But Neumeyer doesn’t think silver will be on sale much longer…

To understand why, look at the chart below he shared yesterday.

It’s almost identical to the chart you just saw. But this one highlights the critical level of 80.

I say “critical” because the gold-silver ratio has only hit this level four times in the last three decades.

Every time it has, silver went on to have a big rally.

After hitting this level in 1990, it went on to surge 47%.

Thirteen years later, the ratio hit 80 again. This time, silver soared 224% over the following three years.

It happened for a third time in 2008. Silver went on to soar 371% over the following three years.

The ratio hit 80 for the fourth and most recent time back in February 2016.

Since then, silver’s risen 9%.

That’s a decent move…but Neumeyer thinks silver’s headed even higher.

That’s because the gold-silver ratio is still far too high. In his eyes, it should be closer to 9:1.

That’s a bold call, to say the least. It means silver is eight times cheaper than it should be.

But Neumeyer didn’t just pick this number out of thin air…

• It’s based on a law of nature…

You see, there are about 17 ounces of silver in the Earth’s crust for every ounce of gold. But only about half of that silver (or about 8.5 ounces) is recoverable.

We know this because modern mining companies dig up about nine ounces of silver for every ounce of gold they mine.

Neumeyer says gold and silver prices should reflect this natural ratio.

There are only two ways this happens: 1) The price of gold could decline relative to silver’s price, or 2) the price of silver could rise relative to gold.

• Neumeyer thinks the second scenario is more likely…

Here’s why…

The silver market is in a deficit. This means people are consuming more silver than is being produced. Not only that, last year was the fourth straight year that demand outstripped supply.

You don’t have to be an economist to know that this is good for the price of silver.

Silver production is falling. Last year was the first time in more than a decade mine production fell.

That’s a big deal.

But Neumeyer thinks silver mine production will fall again this year. In other words, the supply of silver is going to get even tighter. But that’s not the only thing that should take silver prices higher.

Industrial demand for silver is growing. And solar power is a big reason for this.

You see, silver is a key ingredient in most solar panels. In fact, the average solar roof in the U.S. uses around 2,000 grams of silver.

That’s a lot of silver. It’s why many smart people think silver demand will soar…because of solar energy.

In fact, our in-house commodity expert Louis James estimates that the solar industry would require 1.3 billion ounces of silver if just 20% of U.S. households put solar panels on their roofs.

That’s 30% more silver than the entire industry supplied last year. And that’s just one industrial use.

In short, the stage is set for much higher silver prices. This is why Neumeyer told a room full of savvy investors and natural resource executives to buy silver yesterday.

I encourage you to take his advice if you haven’t already.

• You might also want to consider speculating on silver prices…

The best way to do this is by buying silver miners.

These companies are leveraged to the price of silver. In other words, a small rise in silver can cause their shares to soar.

Unfortunately, most people don’t know the first thing about buying quality silver stocks. – Justin Spittler

Oil Prices Distorted by Derivatives, Not Supply and Demand Based Any More

Oil Prices Distorted by Derivatives, Not Supply and Demand Based Any More

Oil Prices not Real as Derivatives Distort Reality

The price of oil might just be the single most important number in the modern economy.

Not only does it determine how much it costs you to drive to work, to pick up your kids, or to go get groceries…

But as the fuel that powers almost all transport of goods worldwide, the more expensive oil is, the more everything in life costs – food, medicine, toys, you name it.

For all these, and countless other, reasons, having an accurate picture of where oil prices will be in three, six, twelve months is invaluable.

So it’s no wonder that every investment bank, research outfit, and energy association out there puts out regular oil price forecasts.

But take a closer look at them, and you’ll quickly notice something isn’t quite right.

Here’s what I mean…

Just recently, French banking giant Societe Generale (SCGLY) put oil prices at $54 per barrel in 2018.

But OPEC, the oil cartel, predicts oil prices at $45 next year. That’s almost 17% lower.

JP Morgan Chase & Co. (JPM), meanwhile, comes in below even that, at $42.

All the while, the World Bank predicts average oil prices in 2018 of $60 per barrel.

There’s a simple reason why these oil forecasts vary almost as wildly as the price of oil itself…

Oil Derivatives Help Traders – Not Investors

In several previous issues of Oil & Energy Investor we’ve discussed the curious world of oil investment derivatives.

This is not a subject for the faint of heart.

It begins with the distinction between oil consignments and futures contracts. The former are made up of actual physical crude oil being traded in the market. These are sometimes called “wet barrels.”

Futures, on the other hand, are contracts that control future volumes of oil. Because they’re not made up of actual shipments of oil, futures are also called “paper barrels.”

This connection between wet barrels and paper barrels generates the first layer of “derivatives” in oil trading. A derivative is a trading instrument whose value depends on something else.

In the wet barrel/paper barrel situation, the underlying oil – the wet barrels – has a value determined by market use. However, aside from introducing a new piece of paper on which trading can take place, the futures contracts – the paper barrels – have no implicit value at all.

In other words, derivatives add to the trading volume but not to the total physical value.

And that’s how, with a bang, a single commodity has spawned a whole new class of things to trade. Of course, that’s only the first level of oil derivatives…

There Are So Many Derivatives Out There, They Distort the Price of Real Oil

On any given day, there are far more futures contracts than consignments of oil being traded.

But traders also take out options (another form of derivative) on those contracts, to hedge against a rise or fall in the underlying value of oil.

The options, in turn, allow buys and sells to be cancelled before the expiration date in the futures contract – the point at which the paper and wet barrels converge, and the buyer of a futures contract ends up actually getting a consignment of oil delivered to their doorstep.

Most forecasters would like to make the forward-looking wet barrel/paper barrel intersection curve be the basis for estimating future oil prices.

Yes, they often couch this in discussions of supply and demand. These are, after all, the market factors that ought to be the basis for price calculations.

But supply and demand are functions of the physical market in oil consignments. That is, they are telling us about actual oil being actually traded…

Not about the trade in paper barrels and other derivatives.

Unfortunately, that’s what really determines the price of oil – financial transactions involving oil derivatives, not the trade in oil itself.

And here, there are several additional levels of derivatives impacting on the perception of price…

“Shorting” Oil is the Main Culprit

The most important are “short contracts.”

Simply put, these are bets that the price of oil will fall. A “long” position, on the other hand, is the opposite – a trade that pays off when oil prices rise.

Especially these days, shorts offer a much quicker route to profits.

It’s for this reason that the expansion of shorts has been the single greatest addition to the number of derivative plays on oil.

The short contract is purchased when oil is at one price and the profit is made by “redeeming” the short when oil registers a lower price.

Yet, it can also be a recipe for a major loss.

If the value of oil spikes, there is theoretically no limit to how much can be lost.

That’s why short traders apply a range of options, to limit their losses.

Shorts are now the most pronounced artificial element preventing the accurate forecasting of oil prices.

Because not only do they drive prices down when there’s a lot of them…

But when prices start recovering, short traders will quickly close their positions, making the rise in price speed up even more – and often overshoot.

And that’s just the shorts. There are even more exotic derivatives out there…

Future Oil Prices are Held Hostage to the Whims of Derivatives, Not Supply and Demand

These have an even less direct connection to the wet barrels, to the actual oil.

They also introduce a disturbing parallel to the “asset-backed” securities largely responsible for the subprime mortgage meltdown a decade ago.

In these cases, there is no reason to have this paper other than to create additional trading markets for the paper itself.

Such paper adds nothing to the value of the oil upon which the entire house has been built. It succeeds only in providing other avenues for the paper traders to make additional profits. At this point, it is all about “spreads.”

It’s like being in Vegas and betting on a football game. You don’t care which team wins, so long as the over/under is hit.

It’s the same with derivatives traders. They don’t care what oil does – whether it moves up, down, or sideways in price. What they care is that the “spread” between some combinations of derivatives prices goes their way.

All told, derivatives add up to between 25 and 50 times the total value of the oil upon which they are (increasingly only tangentially) based.

This makes forecasting future oil prices almost impossible.

When I do so, I generally stick to the physical elements in the market, buttressed by geopolitical and other tangible impact considerations.

That’s what I did in my latest oil price forecast, available here.

That will get you an accurate long-term picture of oil prices.

The practitioners of the derivative “paper chase” would claim they do the same. However, they will always overcompensate for insular or expected factors.

Notice how most forecasters will shroud their projections using the same few factors (e.g., excess supply, shale volume, concerns over OPEC continuing production cuts, civil unrest somewhere, and so on).

The same factors are used to justify forecasts moving in very different directions. What is a complex interchange is diluted to a few simplistic causes. The results are hardly encouraging.

Last week, Argus Energy’s Charles Cherington made a comment that was only partially tongue in cheek. “All forecasters share a common trait: they are wrong,” he said. He then added: “Some are only wrong most of the time and most are wrong all the time.”

Given the machinations of the secondary, tertiary (and beyond) derivatives, that’s no wonder. This is no longer about actual barrels of actual oil.

It’s about how many derivatives you can trade on it. – Dr. Kent Moors


Are You a Real Contrarian Investor or a Fashion Contrarian? Let’s look at the Gold Bugs

Are You a Real Contrarian Investor or Just a Fashion Contrarian?

Mass Psychology & the Contrarian Investor

We are going to use the precious metals to illustrate some of the Psychological principles of being a Contrarian investor. Keep in mind that most contarian investors are not real contrarians but fall under th category of Fashion contrarians.

Contrarian investing is based on taking a position that is opposite to that of the masses. In general contrarian, investors get in an investment too early as their analysis is based on doing the opposite of the masses.  In contrast mass psychology dictates that you wait for the emotion to hit a boiling point, euphoria or panic before a position is taken. Mass psychology involves the actual study of what the masses are doing as opposed to just determining that their current action is wrong and using that information to take a position in the opposite direction.

Contrarians only take a position that is contrary to the masses, and that about wraps up the ideology of being a contrarian today. Very few of today’s contrarians are true contrarians; they fall into the category of fashion contrarians.

Investors that adopt the doctrine of mass psychology correctly look for something more.  Mass psychology takes the principle of contrarian investing and then pushes it to the next level.  Students of Mass Psychology look for extreme type situations. In other words, sentiment should not just be bullish before an opposing strategy is put into play, it should be at the boiling point and only then will the student of mass psychology look for an exit and attempt to take an opposing position to that of the masses. To illustrate this point, we will use the following example.

The commodities sector has several components to it, two of them being the Gold and Silver. Throughout 2002 and early 2003, the hate and disgust for both these sectors were extremely high. Fast forward to 2004 and Gold was being mentioned everywhere; even CNBC had a little ticker that stated what the price of Gold was throughout the day. The hate or disgust for both these sectors was no longer there and even though both these sectors have a long way to go before they are fully embraced by the masses, they did not provide a psychological basis for taking an opposing position to that of the masses in  2004.

Gold went on to soar to untold heights, heights that most would have deemed impossible in 2003. All along the way we continually stated that Gold would continue to trade higher and higher until 2011. We warned our subscribers to bail out of Gold very close to the top.

Even though the masses have still not fully embraced Gold, this concept does not matter in the long run. A more important criterion would be to find out what % of investors has taken positions in these sectors or not. Next one would try to find out what the Gold bugs (the most bullish individuals ever created on earth) are doing. If all the Gold bugs are bullish, then based on the contrarian rules of investing you should take a contrary to a neutral position because all the individuals in your group are now optimistic.

Should one really care what the masses are doing that much or focus on the Gold bugs (the group) that are emotionally tied up with Gold?  The masses in general, will not embrace Gold fully until it becomes fashionable and by then a large portion of the Bull Run will be a thing of the past. In the last Gold Bull Run, the masses did not even know what was going on, let alone take a position in this sector. So one measure would be to determine if all the people who believe in Gold have already taken positions if they have then the market has become saturated. The only way the market can continue its upward run is for momentum players to jump on the bandwagon.  These players have very short time spans of concentration, and thus, they jump in and out very fast. Once they decide to bail out the corrective phase could be very painful as was the case of precious metals topped out in 2011.  The housing collapse and internet bubble serve as two stark reminders of what happens once momentum has run its course.

Mass psychology is the constant analysis of the playing field to determine how the game is being played. Are the rules changing, are the players become more aggressive or docile, is the playing field soft, rocky or worse yet on extremely high and treacherous ground.  One has to take measures at different levels and then compare it the pattern you have already established from past observations.  In this sense, mass psychology is dynamic compared to the methodology most contrarians put into play. Contrarians do not measure their position relative to those of other contrarians; they only measure their position relative to that of the masses, and therefore, they fail to obtain a vital piece of data.  This usually results in pain, misery and taking on substantial losses   In, other words, they do not measure the intensity of emotion in their own camp.

The gold bugs are a classic example of contrarian investing gone wrong. They moved from the Euphoric phase to the having found religion period, to the gnashing of teeth and pure misery phase, as they watched Gold plunge from 1800 ranges down to the 1000 ranges.  They still cannot fathom why this happened, especially in light of the fact that trillions of more dollars have been created since 2011. The Internet boom lasted one-year longer, after all the TA and contrarian indicators were in the extremely bearish zones. Euphoria for this sector was running sky-high.  If one had shorted the markets based on contrarian factors only one would have been blown out of the water and roasted alive.

Gold bugs should have banked some of their profits. Instead, they continued to plough money into Gold and as it pulled back they jumped in joy and added even more. Once the correction moved from the mild to the wild phase, they panicked and started to pray. Today the sentiment is almost as bearish as it was in 2003.  From a long term perspective, a great buying opportunity could be at hand.

Most pure contrarians were caught flat-footed when the Equity markets mounted this huge rally from Oct 2004. Their contrarian indicators suggested that taking a short or neutral position was the right thing to do.  Only 10% of the investors can win at any given time. The moment the number surges past this level (no matter what side of the fence they are on contrarian or the masses side); the markets will adjust to bring this ratio back to its norm.

 Investing based on psychology amounts to not only taking a position against the masses but also against the fashion contrarians.  Once sentiment has reached the boiling point, one should go into cash; risk takers can consider shorting the markets.  Finally, less attention is being given to the precious metals sector, so establishing a position now could be viewed as a prudent long term investment. On the same token, most investors and experts expected the Market to Crash after Trump won and we stated that it would create a buying opportunity just as Brexit did. In fact, since 2013 we have been stating that a stock market crash was a long way in the making and that all strong pullback should be viewed though a bullish lens. – Sol Palha

If You’re Not a Contrarian, You’re a Victim

Many fancy themselves contrarians. Few are in reality.

The embrace of the herd proves too seductive for most — safety, they intuitively sense, lies in numbers.

But there are certainly some contrarian-looking folks on hand.

We observed an eccentric or two yesterday, some with odd crotchets easier witnessed than described.

There was this one fellow who — no — we’d better not say.

But given the price of an admission ticket… these must be wealthy eccentrics.

But to the conference itself…

Several fellows spoke yesterday. These included Rick Rule himself and other CEOs of precious metal companies.

If there was one central nugget to emerge from their briefings, it is this:

Projected mining supplies will struggle to meet rising demand for precious metals in the years ahead.

For example, David Garofalo, CEO of Goldcorp, claimed that the gold sector has seen a one-third decline in its reserves over the past five years.

He further projects that gold production industrywide will decline 15–20% over the next few years.

Heaping Pelion upon Ossa, Garofalo says it takes some 15–20 years to add new capacity.

That is, gold production will decrease, and it could be years and years until new gold reserves come to market.

We thus confront the possibility of “Peak Gold”:

This is exactly the drum senior geologist Byron King of Rickards Gold Speculator has been pounding for quite a while.

Byron noted earlier this year that 2016 was the first year mine production fell since 2008.

And quoting a Thomson Reuters report, Byron notes there are:

Few new projects and expansions expected to begin producing this year, and those in the near-term pipeline are generally fairly modest in scale, hence our view that global mine supply is set to continue a multiyear downtrend in 2017…

Add it all up and you have a recipe for falling production.

Patrick Donnelly, president of First Mining Finance Corp., confirmed yesterday that no major gold deposits have been discovered in the past 15–20 years.

The conclusion seems clear:

Falling gold production and rising demand, all things being equal, translate to higher gold prices.

Possibly much higher prices.

But it’s not just gold facing critical shortages…

Robert Friedland is the founder and executive chairman of Ivanhoe Mines.

A capital fellow, this Friedland. A speaker of the first cut and caliber.

He struck every note precisely in the middle.

He told thumping tales and commanded a crowd of hundreds as easily as gravity commands a cannon ball.

And Friedland says the demand for metals like platinum, copper and cobalt will soon vastly outrun supplies.


Clean energy.

Friedland flashed a picture of a sunny day in Beijing.

It looked like a foggy day in London.

Pollution now chokes the air of China’s major cities so badly a person can barely take the oxygen out of it.

“Airpocalypse” Friedland terms it.

And he said this pollution’s effects cost some $5 trillion every year.

60% of urban air pollution is caused by the internal combustion, he added.

So places like China will be spending mountains of money on clean energy to liberate the lungs and restore the sun to its throne in the sky.

What does that have to do with platinum and copper?

Because the critical components of many clean energy technologies require metals like platinum and copper.

Friedland said mass-produced electric cars will be in operation by 2023 — six years from now.

He said it will be a “massive disruption.”

He compared it to the speed with which the automobile replaced the horse around the turn of the 20th century.

And that of course presents a handsome opportunity for investors…

Friedland said a serious platinum shortage will enter effect by 2020 as surging demand outstrips supplies.

Once again… a recipe for dramatically higher platinum prices.

Related question:

What has been the best-performing metal for the past 12 months, according to Friedland — better than gold or any other metal?


Cobalt is used in lithium batteries for electric cars.

No coincidence it would seem.

Meantime, electric cars also require oodles of copper — a nice point to put somewhere.

For these reasons, Friedland expects metals prices to rise substantially in the coming years.

Yesterday’s presenters hammered the shortage theme time and time again.

And by our lights, their case is compelling…

Tomorrow, the most important ideas from day two…- Brian Maher


Copper Breakout has Profound Implications for Precious & Base Metals

Copper Breakout has Profound Implications for Precious & Base Metals

Copper Breakout has Profound Implications for Precious & Base Metals

Copper has broken strongly higher – a move that has profound implications for precious and base metals: Clive Maund

Over the past couple of days copper has broken strongly higher, and while copper itself may be of little interest to most of us, the implications of this development are profound for the base and Precious Metals sectors. Copper is an important lead indicator, which is why it earned the moniker “Dr Copper,” and since it now looks like it is starting a major bull market, this is a sign that a major bull market is about to begin across the entire metals sector, which as you know is what we are looking for in gold and silver. Silver in particular is gruesomely undervalued and has huge upside potential from here.

On its 8-month chart we can see the impressive breakout move in copper prices of the past couple of days. Everything about this chart is bullish, with the advance being supported by strong volume and positively aligned moving averages.

On the 10-year chart we can see that this move in copper marks its breakout from a large Head-and-Shoulders bottom. Volume and volume indicators have been very positive indeed (including On-balance Volume which is not shown) as this pattern has approached and achieved completion. There is a band of significant resistance not far above in the $2.90 – $3.10 zone and the really big upside action can be expected to take place once the price has succeeded in overcoming this resistance.

Copper closed at $2.87 on the CME (Chicago Mercantile Exchange) on 26th July 17.

Gold and Silver have Nothing to Fear about the US Dollar – Chart Outlook

Supremacy of US Dollar as Global Reserve Currency is Doomed

Supremacy of US Dollar as Global Reserve Currency is Doomed

Because the US dollar has such an important bearing on everything, especially the Precious Metals, it is timely for us to take a close look at it here after its recent steep drop, for as some of you may have seen, a number of indicators pertaining to the dollar suggest that, possibly after some further downside it is likely to bounce, or at least take a rest in a sideways range for a while, before the decline perhaps resumes in earnest.

We’ll start by looking at a couple of these indicators. The latest US Dollar Hedgers chart, which is a form of COT chart, is certainly starting to look bullish, and until these positions ease somewhat, further significant downside for the US dollar in the short-term looks unlikely.

Meanwhile, the latest Dollar Optix, or optimism chart, also shows that pessimism is getting overdone. This doesn’t necessarily mean that the dollar’s downtrend is done, however, as minor rallies can cause this to ease before it then plumbs new lows. These two indicators taken together suggest that a relief rally is likely in the US dollar soon, perhaps after it drops a bit lower first, although they don’t mean that the rally will get very far.

The Weak US Dollar & the Bullish Gold and Silver Scenario

Alright, so how does this square with our stated super bullish position on the Precious Metals, gold and silver? Well, it doesn’t, of course, since a dollar rally normally means that gold and silver will drop back. So what’s going on here? The latest COTs for gold and silver were super bullish, especially silver, which was even more bullish than late 2015, and the key point to make here is that they remain so, regardless of any other considerations or what is going on elsewhere. This being so it means one of two things—either the US dollar and gold and silver are going to rally in unison, unlikely but possible, or after some kind of relief rally or consolidation pattern, the dollar’s decline will resume, perhaps with a vengeance, and as we will see it could possibly accelerate into a crash.

Turning now to the charts for the US dollar itself, we start by looking at its latest 9-month chart. As we had already figured out a month or two ago, it is being forced lower at an accelerating pace by a parabolic downtrend. Now we are arriving at a critical juncture above key support with the key indicators above suggesting a bounce or a pause in the decline. However, should the parabola force a breakdown below the support, a really severe decline or crash will be in prospect.

On the 4-year chart we can see how the parabolic downtrend has forced the dollar down towards the key support approaching the lower boundary of a large bearish Broadening Formation. While several indicators are suggesting that it will take at least a breather here, if it does break down the consequences for the dollar are likely to be dire—and this could be the message of the super bullish gold and silver COTs.

It’s also useful to look at the 4-year chart for dollar proxy, the PowerShares US Dollar Index Bullish Fund, which looks about the same as the dollar index chart, except that we can also look at volume and volume indicators. The Accum-Distrib line in particular is extremely weak, and gives us an additional clue that the dollar may be in the early stages of a really serious decline. Again, this could explain the strongly bullish gold and silver COTs.

Actually, it’s not hard to understand why the dollar could crash soon. Those in control of the U.S. have been struggling to maintain the US dollar’s supremacy as the global reserve currency for years, which has involved the maintenance of a massive military machine spanning the world, with hundreds of overseas military bases designed to project power and impose dominance. Those who have dared to challenge the dollar’s hegemony, by attempting to trade in other currencies, like Qaddafi and Saddam Hussein, have been killed and their countries left in ruins. Now the rising Eastern powers like China are threatening the hegemony of the dollar, but they can’t be attacked because they have nukes and can strike back. Russia has nukes too and so can’t be attacked physically, except perhaps by means of a “1st strike” and its parallel drive to escape dollar hegemony is the reason that it has instead come under economic assault via an artificially low oil price and sanctions, and why the democratically elected government of the Ukraine was overthrown by heavily bankrolled neo-Nazis to install a pro-U.S., anti-Russian puppet government.

The point to grasp in all this is that, to put it crudely, the U.S. has managed to “piss off” most of the world, with its heavy handed approach to maintaining dollar dominance using military force when it can get away with it, the only countries pleased with its efforts being Israel, sidekick countries like Poland and the UK, and client States like Saudi Arabia, who are in for a big shock when they discover, after Iran has been dealt with, that they are no longer important. The East is playing a carefully calculated game to rid itself of US dollar dominance, and those of you who have read “The Art of War” will know that they are not to be underestimated—thus the continued US threat of using brute force, exemplified by the extremely provocative and thuggish NATO military exercises hard up against the Russian border in Latvia and Poland, etc. that took place not too long ago, will be blunted and turned against it. What is likely to happen is that the East will gradually circumvent the dollar until the U.S. economy collapses, no longer able to afford the huge burdens of its massive debts, welfare state and the military drain. This makes the situation very dangerous, because the U.S. will be tempted to use force to maintain its dominance while it can still afford to.

Finally, we will take a quick look at the very long-term 20-year chart for the US dollar index. This chart makes plain that if the US dollar has peaked, and is soon to enter a severe decline, it won’t be the 1st time in the past two decades, as between 2002 and 2008 it suffered a massive drop—and that was long before it was threatened with being delisted as the global reserve currency. This chart also shows that it could drop a long, long way from the bearish looking Broadening Top that may now be approaching completion.

Conclusion: the latest extremely bullish COT charts are not negated by the dollar being oversold here and some of its indicators looking positive. The bigger picture is that the US dollar may be headed for a breakdown and severe decline or even a crash. – Clive Maund

The U.S. Should Relinquish Reserve Currency Status for its Dollar – Here’s Why

Conspiracy theory notwithstanding, claims that the reserve status of the US dollar unfairly benefits the U.S. are no longer true. On the contrary, it has become a burden, both for America and the world. [Let me explain.] – Michael Pettis

Reserve currency status is a global public good that comes with a cost [and] no currency [other than that of the U.S.] has the necessary characteristics to allow it, plausibly, to serve the needs of the global economy – and neither any other country, nor the EU, will be willing to pay the cost. If the U.S. dollar’s status is to decline in the future, it will require that Washington, itself, take the lead in forcing the world gradually to disengage [and,] ironically, that is exactly what Washington should be doing…

The Pros and Cons of Having the US Dollar as the Reserve Currency

During the first few decades of the post-war period, the cost of maintaining the dollar’s status could be justified by the incremental benefits to the U.S. of a stable and growing world economy, within cold war constraints. Beginning in the 1980s, [however,] trade policies abroad have sharply raised the cost to the U.S. while the end of the cold war has limited the benefits.

The cost [to the U.S.] comes as a choice between rising unemployment and rising debt. The mechanism is fairly straightforward. Countries that seek to supercharge domestic growth by acquiring a larger share of global demand can do so by gaming the global system and actively stockpiling foreign currency, mainly in the form of, but not limited to, central bank reserves.

In practice, US dollar liquidity, limited Washington intervention, and the size and flexibility of US financial markets ensure that countries (such as China) stockpile dollars. There is no alternative, and most other governments would discourage substantial purchases of their own currencies. [This] foreign acquisition of dollars, [however,] automatically forces the U.S. into running a corresponding current account deficit. Active trade intervention abroad, in other words, is accommodated by rising trade deficits in the U.S.. This importing of US demand by other countries forces the U.S. economy to respond in one of two ways:

  1. American unemployment must rise as demand is diverted abroad, or
  2. Americans must counteract the employment impact by increasing domestic consumption or investment.

Without government intervention, there is no reason for domestic investment to rise in response to policies abroad. On the contrary, with the diversion of domestic demand private investment may even decline. [As such,] in order to limit the impact on jobs, capital flows into the U.S. must finance additional US consumption. Americans, in other words, must choose between higher unemployment and higher debt. In the past the Federal Reserve has chosen to encourage higher debt.

The Benefits to the U.S. of Reserve Currency Status

Analysts argue that the predominance of the dollar [benefits] the U.S. in two ways:

  1. reduced cost of imports and
  2. lower government borrowing costs.

Both arguments are flawed.

[In the first case,] Americans over-consume and don’t need lower consumption costs, especially at the expense of employment. [Furthermore,] if cheaper consumption is really such a gift, it is hard to explain why attempts by the U.S. to return the gift – by demanding that foreigners revalue their currencies and so reduce costs for their own consumers – are always so indignantly rejected.[In the second case,] creditworthiness matters more than currency status. Reserve status increases US borrowing, and thus undermines the ability of the U.S. Treasury to finance itself cheaply more than would losing reserve status.


The large imbalances that the US dollar foreign reserve system has permitted now destabilise the world. If forced to give up the dollar the world might see global trade reduced somewhat, and it would probably spell the end of the Asian growth model. [On the other hand,] it would also lower long-term costs for the U.S., and reduce dangerous global imbalances.

The U.S. should, therefore, take the lead in shifting to multi-currency reserves, in which the dollar is simply first among equals.

Consistent Declines In Crude Oil Inventories Boosts Oil Prices

Consistent Declines In Crude Oil Inventories Boosts Oil Prices

Consistent Declines In Crude Oil Inventories Boosts Oil Prices

The Energy Information Administration once again helped to lift crude oil market spirits this week by reporting another hefty decline in U.S. commercial crude oil inventories for the week ending July 21.

A day after the American Petroleum Institute estimated inventories had declined by a generous 10.23 million barrels—the largest draw of the year according to the API—the EIA said crude oil inventories diminished by 7.2 million barrels, to 483.4 million barrels. The authority reported hefty inventory draws in the last three weeks as well.

Gasoline inventories were also down last week, by 1 million barrels. This compares with a 4.4-million-barrel draw a week earlier. Gasoline production averaged 10.4 million barrels daily, up from 10.1 million bpd the week before, when refineries ran at 17.1 million bpd. Last week, runs averaged 17.3 million barrels daily.

The week so far has been quite good for crude oil prices. On Monday, at the energy ministers’ meeting in St. Petersburg, Saudi Arabia pledged to cut its crude oil exports to 6.6 million barrels daily starting from next month, and Nigeria said it was willing to cap its output at 1.8 million bpd.

At the same time, Halliburton said that the rate of rig additions in the U.S. shale patch is slowing down as sub-US$50 oil prices weigh on many energy companies. In evidence of what Halliburton said, Anadarko became the first shale player to announce a cut in its 2017 capex program of US$300 million because of the stubbornly low prices.

The combination of these factors pushed Brent crude back up above US$50 for the first time in two months, with WTI trading above US$48 a barrel. Headwinds, however, remain—chief among them the likelihood that some OPEC members will slack off in their compliance with the cut deal, after Ecuador last week announced it was quitting it altogether.

Iraq, for example, said it plans to boost production to 5 million bpd by the end of the year, which is certainly incompatible with adhering to its quota. Libya is also ramping up its production.

Meanwhile, oil in floating storage in the North Sea hit another 2017 high this week, at 12 million barrels, according to energy data provider Kpler – one more sign that there is still quote a lot to do before the glut goes away. – Irina Slav

Will The UAE Further Boost Its OPEC Compliance?

Following Saudi Arabia’s pledge to do the same, the United Arab Emirates announced on Tuesday its plans to reduce oil exports beginning in September of this year.

The announcement was delivered on Twitter from UAE’s Minister of Energy, Suhail Mohamed Al Mazrouei, reiterating its commitment to “share in OPEC production cut.”

As for the UAE’s oil customers, we’re talking about mostly Japan, who receives 62 percent of the UAE’s crude oil exports, according to the UAE Embassy website.

Saudi Arabia pointed fingers at OPEC’s less compliant members over the weekend, which included the UAE, who had agreed to shave 139,000 bpd of production to stay under 2.874 million bpd—down from its reference level of 3.013 million bpd.  Unshockingly, the UAE, which is comprised of individual emirates that are responsible for managing their own oil production and resource development, failed to hit its production promises every month since the deal was signed.

January reduction            55,000   = 40 percent compliant

February reduction         85,000 = 61 percent compliant

March reduction               118,000 = 85 percent compliant

April reduction                  107,000 = 77 percent compliant

May reduction                  114,000 = 82 percent compliant

June reduction                  115,000 = 83 percent compliant

While overall, the UAE is responsible only for a total of 240,000 barrels of over production throughout the entire six-month period, it remains the fifth largest exporter of crude oil in the world, totaling $46.8 billion in sales each year.

What’s obviously missing from the UAE’s promise is its commitment to stick to the OPEC agreement, which deals with production rather than exports. The UAE consumes less than a third of its total crude oil production—so it is unclear, assuming it continues to overproduce, exactly what the UAE intends on doing with the 10 percent it is shaving off its September exports. –  Julianne Geiger

China’s Demand For Imported Crude Oil Set To Rise By 400,000 Bpd

Lower domestic production and continued low oil prices will lead to China’s demand for crude oil imports rising by around 400,000 bpd in 2017, according to a senior manager at Sinopec.

Chinese crude oil imports are expected to exceed 400 million tons this year, and to further rise next year, Zhang Haichao, vice president of Sinopec Group, told Reuters on Tuesday.

The estimate provided by Zhang means that Chinese demand for foreign crude would rise by 400,000 bpd, and for the first time ever, rising imports could make China the world’s top crude oil importer on an annual basis, according to Reuters.

Chinese customs data has revealed that the world’s second-largest consumer of crude oil imported 8.55 million bpd during the first half of the year, or 212 million tons in total – a 13.8-percent annual increase. The growth in imports comes on the back of higher refinery runs after a maintenance period, as well as dwindling local crude production.

The estimates of the Sinopec executive for the increased full-year 2017 imports come despite reports that Chinese refineries are expected to shut nearly 10 percent of the country’s 15.1-million-bpd refinery capacity in the third quarter—the peak demand season, as they continue to grapple with domestic surplus of gasoline and diesel.

But last month, China allowed a second batch of crude oil import quotas for independent refiners and some state-held companies for 2017, setting full-year quotas at a total of 91.73 million tons, or 1.83 million bpd.

At the beginning of this year, analysts predicted in a Platts outlook for 2017 that at an average barrel price of US$55 this year, Chinese crude oil production would continue to drop, by around 5 percent compared to last year. Declining domestic output would raise Chinese crude oil imports in 2017 compared with 2016, analysts said. – Tsvetana Paraskova


Alarming Rise in Global Debt Levels to wake up Gold from Slumber

Alarming Rise in Global Debt Levels to wake up Gold from Slumber

Alarming Rise in Global Debt Levels to wake up Gold from Slumber

Gold for immediate delivery closed at $1,250.06 an ounce Tuesday, down 0.4 percent, having spent the day in a $9 range. It hasn’t moved more than 1 percent a day since early June. Gold’s 120-day historic volatility hit a two-year high above 18 percent around the time Britain voted to leave the EU. It has since fallen to about 10 percent, the lowest since 2005.

While irritating for traders who make a living betting on strong moves, the sleepy gold market also reflects stability in other assets, with measures of global shares at record highs. Investors from currencies to equities have been boxed in between concerns over a weakening dollar and speculation that central banks will tighten money supply. – Bloomberg

Here’s Why Gold Will Break Out Of Its Range Soon

Gold continues to see range-bound trading and this lack of direction is likely to stick at least until the end of the year, this according to one gold-focused research team based in the U.K.

“We expect gold prices to remain in a period of consolidation,” analysts from Metals Focus said in the Precious Metals Weekly report released Tuesday.

“In our view, it will be difficult for prices to ‘escape’ such rangebound conditions before the market benefits from some clarity on details of U.S. fiscal stimulus, probably sometime later this year.”

Despite rallying to four-week highs earlier in the week, gold prices have cooled off Tuesday on profit-taking and the U.S. dollar index lifting on more upbeat U.S. economic data. August Comex gold futures last traded at $1,250.10 an ounce, down 033% on the day.

However, the analysts remain bullish beyond 2017, with several factors working on resuming gold’s “recovery.”

“Crucial to this view is that we are skeptical towards the thesis that fiscal accommodation in the U.S. will see the country’s growth accelerate materially,” they noted, adding that any uncertainty from the Trump administration would also boost safe-haven gold.

What’s more, they pointed out that monetary policies are likely remain “(broadly) highly accommodative,” while nominal and real interest rates would remain “very low,” which would also bode well for the metal.

“The above factors should offer gold a boost later this year, especially given that institutional investment in gold has so far remained light in absolute terms and even more so when it comes to its share of overall investable assets,” they said.

“With equity prices looking increasingly expensive, particularly when compared against gold, the risk-reward arguments should lead to at least a partial rotation back in favor of the yellow metal.” – Sarah Benali

“Mother of All Bubbles” Keeps Gold in Focus

Today I want to discuss reports that global debt levels are at all-time highs, and what this means for your investment decisions going forward. – Frank Holmes

U.S. Dollar in Bear Market, a Boon for Gold

Since the start of the year, the five-year Treasury yield, adjusted for inflation, has risen about 150 percent. Normally this would put remarkable pressure on the price of gold—higher yields raise the opportunity cost of buying gold—but over the same period, the U.S. dollar has steadily weakened and is now officially in a bear market. Because gold is priced in dollars, this has been supportive for prices. Year-to-date, the yellow metal is up more than 8 percent.

crosscurents impacting gold treasury yeild up dollar down


As I said, the greenback’s been on the decline for most of the year so far, but it slumped to a 13-month low against the euro last week following European Central Bank (ECB) president Mario Draghi’s remark that “monetary accommodation” would continue in the European Union (EU) until at least the end of the year.

“We need to be persistent and patient and prudent, because we’re not there yet,” Draghi said, referring to the fact that EU inflation and wage growth have been disappointingly slow, despite the bloc’s economic recovery since the financial crisis. (Indeed, the June purchasing manager’s indexes for emerging European markets were all above the key 50 mark for the first time in recent memory.)

UBS: We’re Still Constructive on Gold

That gold is still holding at its current level—despite rising rates, despite a stock market that continues to rally—is “encouraging.”

That’s one of the key takeaways from a UBS note last week, in which the Swiss financial services firm maintains its constructive view of the yellow metal. Investor demand this year has been slower than expected, but UBS analyst Joni Teves makes the case that expectations of a good monsoon season in India this summer could help push consumption in the world’s second-largest importer of gold to a new record high by the end of the year. With India having imported a phenomenal 525 metric tons in the first half of 2017 alone, Teves writes that “we expect gold demand in India this year to be around historic averages,” which would be very supportive for prices.

ETPs Attracted a Record $245 Billion in the First Half of 2017

Like gold in India, exchange-traded products (ETPs) also had a knockout first half. As Deutsche Bank reports, ETPs attracted a record $245 billion in the first six months of 2017, in what has historically been the weaker half of the year. To put into perspective just how impressive this figure is, $245 billion would be the second-largest full-year record amount following 2016’s $283 billion. We could see ETP inflows climb as high as $500 billion by the end of this year, Deutsche estimates.

exchange traded porducts etps see record 245 billion in inflows in first half of year


Of course, runaway demand for ETPs and other risk assets has contributed to muted interest in gold.

Having said that, though, BullionVault—the world’s number one online precious metals market—reported recently that private gold holdings among its users leaped to a record 38 metric tons, as of the beginning of July. That’s enough gold to make more than 10 million 18-carat wedding rings, BullionVault says, or to supply the microchips for 1.5 billion iPhones. The site points out that investor demand has lately been driven by lower prices, following three months of “light liquidation.”

Global Debt on Alert

All of what I’ve said so far pertains to the near-term. Gold’s medium- to long-term investment case, I believe, looks even brighter. Many unsettling risks loom on the horizon—not least of which is a record amount of global debt—that could potentially spell trouble for the investor who hasn’t adequately prepared with some allocation in a “safe haven.”

According to the highly-respected Institute of International Finance (IIF), global debt levels reached an astronomical $217 trillion in the first quarter of 2017—that’s 327 percent of world gross domestic product (GDP). Notice that before the financial crisis, global debt was “only” around $150 trillion, meaning we’ve added close to $120 trillion in as little as a decade. Much of the leveraging occurred in emerging markets, specifically China, which is spending big on international infrastructure projects.

total global debt stands at all time high


It goes without saying that this is a huge risk. Some are calling this mountain of debt “the mother of all bubbles,” and we all remember how the last two bubbles ended, in 2000 (the tech or dotcom bubble) and 2007 (the housing bubble).

Paying down this debt will not be easy. As Scotiabank mentioned in a note last week: “Higher interest rates are going to make the burden of refinancing the debt considerably heavier, and as more money goes into servicing the debt, it means less money is available to spend on other things, which could lead to less infrastructure spending and increased austerity.”

Add to this the fact that global pension levels are also sharply on the rise, with people living longer and population growth—and therefore workforce growth—slowing in many advanced economies. In May, the World Economic Forum (WEF) estimated that by 2050, the size of the retirement savings gap—unfunded pensions, in other words—could be as much as $400 trillion, an unimaginably large number.

The U.S. alone adds about $3 trillion every year to the pension deficit. I shared with you earlier in the month that the State of Illinois’s unfunded pensions could be as high as $250 billion, putting each Illinoisan on the hook for $56,000.

Central banks’ efforts to promote economic growth through monetary easing haven’t exactly been a raging success, nor can they continue forever. Plus, near-zero interest rates are precisely what encouraged such inflated levels of borrowing in the first place.

You can probably tell where I’m headed with all of this. Another crisis could be in the works. Savvy investors and savers might very well see this as a sign to allocate a part of their portfolios in “safe haven” assets that have historically held their value in times of economic contraction.

Gold is one such asset that’s been a good store of value in such times, and gold stocks have tended to outperform the yellow metal as production costs have fallen, according to Seabridge Gold. I always recommend a 10 percent weighting in gold—5 percent in bars and coins; 5 percent in gold stocks, mutual funds or ETFs.


Are You Ready for the Storm about to Hit the Gold Market?

Are You Ready for the Storm about to Hit the Gold Market?

The best months for Gold are just around the corner

Looking back at gold’s performance since 1979, August and September are big months for the yellow metal. What is the cause? No one really knows but there are some theories that have been thrown around.

The adage “sell in May and go away” is common in the mining sector. Investors are back from vacation and ready to deploy their cash in a big way. Concurrently, the largest financial crashes have occurred in September and October, investors are also buying gold to hedge their portfolios.

Indian wedding season is huge for gold, and if you have ever been to a traditional Indian, its easy to see why India is the World’s largest consumer of gold jewelry. Throw Christmas into the mix, and you have the perfect retail storm.

Lastly, the European Central Bank and 20 other European central banks are currently governed by a Central Bank Gold Agreement, which ensures all banks operate with transparency and do not engage in large uncoordinated gold sales. The Agreement dictates the limit in sales, and resets every September, meaning the market may see less selling activity.

In the 38 years we used for the chart, August had only 14 years of negative returns, while September had 13. Regardless if these theories are true or not, its hard to ignore the decades of data that suggest the best months of gold are yet to come. – Palisade

Time to Get Positioned in Gold Ahead of its Strongest Months

Despite the recent weakness, the price of gold is still up 9% year to date and may be poised for a strong second half of 2017. This is not unusual: the yellow metal also had a strong start in 2016, only to give back some gains but ended the year in an uptrend, setting up a rally as the calendar moved to 2017.

So is there a seasonal pattern to the gold price? To answer that question, we dissected gold’s performance dating back to 1975 and identified some trends investors can use to their advantage.

March/April Are Gold’s Worst Months…Often Followed by Weakness in the Spring and Summer

Source: LBMA

Since 1975, March has been the worst month for gold, followed by April as the second-worst. The months of June and July tend to be a quieter period as investors shift their focus prior to strong later summer and fall months.

September has been the best month for gold over the past 41 years. Coincidentally (or not), September is also the worst month for the S&P 500.

As the chart shows, three-quarters of gold’s top-performing months are in the latter half of the year—a good reason to consider buying in June or July if you want to add physical precious metals to your portfolio.

Bearing in mind the volatile nature of commodities, gold included, an experienced investor will build a position after periods of market weakness. As June comes to a close, we’re near the end of the seasonal weakness for gold—soon to enter its historical prime time from August to October.

Attempting to time the market is an exercise in futility. While it will work for a fortunate few, most investors will end up wasting time staring at charts and reading countless opinion pieces by so-called “experts” and talking heads.

To make gold’s volatility your friend, focus on buying when the market has been down for several days, or even a couple of weeks in a row. Then, perhaps more importantly, focus on enjoying your summer vacation.

The Third Quarter Is the Strongest—So Act Now

Source: LBMA

Since 1975, the second quarter of the year has been by far gold’s worst—with returns dead flat over the 41-year period—and this year has been no exception, with gold down about 1%. On the flip side, the third quarter has been the best, outperforming its closest rival, Q4, by a whopping 40%.

Given the clear seasonal patterns gold has exhibited over the past four decades, investors can use these trends to make strategic purchases when the market is the weakest.

Add Gold to Your Portfolio Now

Based on gold’s seasonal patterns, adding bullion to your portfolio sometime in the next month or two could prove a very smart move.

As stated above, gold is up 9% since the beginning of the year, rivaling the performance of the S&P 500, which makes it one of the top-performing assets.

In comparison, since making multi-year highs in March, the 10-year Treasury yield (which moves inversely to its price) is down 15%, and the S&P 500 has traded mostly sideways despite stronger-than-expected first-quarter earnings. Based on declining Treasury yields and gold’s overall strong performance, investors clearly have taken a more cautious approach the past few months.

With gold rallying close to $1,300/oz. earlier this month, many people have waited patiently for a pullback to invest. But based on the following chart, the current pullback might be temporary:

After gold started this year at $1,150 per ounce, it has moved in a “two steps forward and one back” fashion. Each new, higher support level that is tested and holds gives the market more resilience—and investors more confidence to take a position. It also serves to shake out those who panic and sell at the first sign of weakness, only to buy back in at higher prices down the road.

If this pattern continues through the remainder of 2017, we’ll likely see gold prices well north of $1,300, potentially approaching $1,400 by mid-2018.

Armed with the knowledge that the lows of the year—along with the lowest bullion premiums—usually occur during the late spring to early summer months, an investor can take the contrarian approach and “buy low” right now. – Hard Assets Alliance


Excessive Shorts are the Best Buy Signals for Gold and Silver Prices

Excessive Shorts are the Best Buy Signals for Gold and Silver Prices

Excessive Shorts are the Best Buy Signals for Gold and Silver Prices

The gold futures and silver futures short positions held by speculators have rocketed up to extremes in recent weeks.  These elite traders are aggressively betting for further weakness in gold and silver prices.  But history has proven extreme shorts are a powerful contrarian indicator.  Right as speculators wax the most bearish as evidenced by their collective bets, gold and silver decisively bottom and birth major new rallies.

Futures trading has a wildly-outsized impact on gold and silver prices, especially over the short term.  It is amazing how much volatility futures speculators’ collective buying and selling generates, often drowning out everything else.  Two factors are responsible for this dominance.  The extreme leverage inherent in futures trading and the unfortunate fact the resulting gold and silver prices are the world’s reference ones.

Normal investment capital flows occur with no leverage, the vast majority of stocks and bonds are bought outright.  So buying and selling isn’t multiplied.  Some stock traders use margin, which for many decades has been legally capped at 50% in the US.  So they can borrow up to half their stocks’ purchase prices, or run 2x leverage.  That gives any given capital flows, buying or selling, twice the price impact of outright ones.

But futures speculation allows truly extreme leverage, in a league of its own.  US gold-futures contracts each control 100 troy ounces of gold.  At $1250, that’s worth $125,000.  But the margin requirement, the capital necessary in a trading account to hold that contract, is just $3950 this week.  That enables traders to run leverage as high as 31.6x!  That acts as a strong price-impact multiplier on all their buying and selling.

Silver futures are similar, with US contracts each controlling 5000 troy ounces.  That commands $80,000 worth of silver at $16.  But this week traders are only required to put up $5000 in cash to buy or sell each contract.  That makes for maximum leverage of 16.0x, well under gold’s extremes but still enormous by normal-market standards.  Futures effectively greatly amplify the price impact of relatively-small amounts of capital.

Every dollar of gold and silver buying and selling by outright investors has one dollar of price impact.  But at 32x or 16x leverage, every dollar speculators move into or out of gold and silver futures has the same short-term price impact as $32 or $16 of outright investment!  This extreme leverage grants these futures speculators wildly-outsized influence over price action.  This is incredibly distorting and super-unfair to investors.

But unfortunately that’s the way the markets work these days.  Compounding futures trading’s extremely-disproportional price impact, the resulting gold and silver prices have long been considered the world’s reference ones.  So big gold and silver moves fueled by futures speculators can greatly affect universal sentiment, convincing other traders including investors to follow futures speculators’ lead exacerbating moves.

I sure wish this wasn’t the case.  Without the extreme leverage inherent in futures speculation, gold and silver prices would be far less volatile and more closely reflect global physical supply and demand on an ongoing basis.  But because futures traders’ capital flows are so radically multiplied, all investors and speculators interested in gold, silver, and their miners’ stocks have no choice but to closely follow futures action.

There’s one key way to do that, through the weekly Commitments of Traders reports published by the US Commodity Futures Trading Commission.  Released late each Friday afternoon but current to the preceding Tuesday close, the CoTs detail speculators’ total long and short positions in gold and silver futures.  Analyzing these weekly changes in collective bets and their trading ranges over time is very illuminating.

The CoTs break down all futures traders into three categories, hedgers, large speculators, and small speculators.  The hedgers produce or consume physical gold commercially in their businesses, and use futures to mitigate gold-price risks to their operations.  The speculators take the opposite side of hedgers’ trades, as futures are a zero-sum game.  I lump both large and small speculators together for analysis.

This simple chart superimposes the daily gold price over the weekly total long and short gold-futures contracts held by speculators.  Their long contracts, bullish bets that gold is heading higher, are rendered in green.  And their short contracts, bearish bets that gold is going lower, are shown in red.  It’s impossible to understand short-term gold and silver price action unless you closely follow this weekly data from the CoTs.

The reason I’m writing this essay is the past couple weeks’ gold-futures developments are exceedingly bullish!  Speculators have taken on a massive new leveraged short position in gold as evidenced by the soaring red line.  They are wildly-bearish as a group, totally convinced gold is heading lower in coming weeks and months.  But after every past gold futures shorting extreme, gold has instead blasted sharply higher!

Exiting June, gold was stable in the $1240s with typical dull summer-doldrums sideways trading action.  But as July’s trading dawned on the 3rd, anomalous heavy selling slammed gold.  During that holiday-shortened trading day when many if not most American traders were away on vacations, gold plunged 1.8% to $1219.  There was no identifiable catalyst, like great US economic data or a big US dollar rally, to justify that.

Since the 4th was the Independence Day market holiday, that CoT week ended on the 3rd.  So later that Friday when that CoT report was released, speculators’ extreme gold futures selling was revealed.  In a slow and dead holiday week, they jettisoned 14.9k long contracts while adding 27.7k short ones!  In gold futures, any weekly swing in speculators’ collective bets over 20k contracts is considered very large and notable.

So seeing them dump 42.6k contracts out of the blue in one lazy summer CoT week was staggering.  That is equivalent to 132.6 metric tons of gold, a vast amount.  According to the World Gold Council, the definitive arbiter on global gold supply and demand, worldwide gold investment demand in Q1’17 totaled 398.9t.  That averages out to 30.7t per week.  That CoT week’s extreme gold-futures selling ran a colossal 4.3x that!

Our CoT data extends all the way back to January 1999, now encompassing 967 weeks.  That’s certainly a big sample size over a long secular 18.5-year span.  Specs’ extreme short selling in that CoT week ending July 3rd ranked as the 7th-largest witnessed over that entire span, and almost certainly ever!  It was truly exceptional gold futures short selling, which was disturbingly odd with no discernable catalyst.

Adding both that short-side ramp and the long-side liquidation together, that CoT week’s selling was the 15th biggest on record.  While gold sentiment is almost always weak and bearish in the summer doldrums, such epic gold-futures selling didn’t make any sense.  These speculators usually need some motivating news to get them to trade so aggressively, like major US-economic-data surprises or big US-dollar gyrations.

At that CoT report’s release a couple Fridays ago, I found this selling blitz very interesting.  But one week doesn’t make a trend.  For some unknown reason, gold-futures speculators were whipping themselves into a bearish frenzy right when gold usually sees major seasonal lows.  Unfortunately that tainted the gold outlook for investors, who fell in line with futures speculators to start relentlessly selling GLD shares.

This American GLD SPDR Gold Shares gold ETF is the world’s leading and dominant gold-investment vehicle, acting as a conduit for the vast pools of US stock-market capital to flow into and out of physical bullion.  After that anomalous July 3rd gold futures selling bashed gold below its 2017 uptrend’s support, capital started fleeing GLD.  GLD shares were sold faster than gold itself, fueling a series of substantial draws.

Thanks to the sentiment multiplier effect of that leveraged gold-futures selling, GLD’s holdings fell 0.7% on July 3rd, another 0.7% on the 5th, and 0.6% on the 7th when that CoT report was released.  That was the worst cluster of investor gold selling since this year dawned.  GLD’s managers had to liquidate some of their gold bullion to buy back the excess GLD shares for sale, exacerbating the weakness in gold prices.

But the gold selling still didn’t cascade and snowball like the futures specs expected.  Gold stabilized in the $1210s, low enough to feed bearish psychology but not so ugly as to spawn real panic selling.  With gold essentially flat in the subsequent CoT week ending July 11th, I didn’t expect much from the CoTs.  So boy was I shocked when they showed speculators’ extreme gold futures short selling persisting!

In this latest CoT week before this essay was published, speculators sold 6.0k long contracts while continuing short selling like madmen.  They added another astounding 27.4k short contracts, which proved the 8th-largest on record out of those 967 CoT weeks.  Over the two newest CoT weeks, specs dumped 55.1k gold-futures contracts.  That was actually the second-biggest shorting spree ever over a two-CoT-week span!

With back-to-back weeks of epic short selling, something was definitely up.  Maybe it was benign, as gold sentiment is almost always very bearish during the summer doldrums.  The biggest gold down day in that latest CoT week came on Jobs Friday the 7th, a 1.0% loss.  US jobs growth in June at +222k proved much better than the +179k expected, on top of +47k in past-month revisions.  That is hawkish for Fed rate hikes.

There’s nothing gold-futures speculators fear more than Fed rate hikes, although history is crystal clear that is supremely irrational.  Gold has actually thrived during past Fed-rate-hike cycles!  But this totally-false rate-hikes-doom-gold mindset has driven many past episodes of major gold-futures selling.  The fact today’s started an entire CoT week earlier when there was no economic-data catalyst implies something more.

For many years now, gold futures speculators have wielded their extreme leverage like a weapon with the nefarious intent of actively manipulating gold prices lower.  Seeing such epic gold-futures shorting in back-to-back CoT weeks in this quiet time of the year is highly suspicious.  It really could’ve been a gold-futures shorting attacking slow motion, a sustained attempt to force the gold price lower than fundamentally justified.

Only the speculators who executed these trades will ever know their motivations.  But the hard results are exceedingly bullish for gold.  55.1k gold futures contracts, the equivalent of 171.2 metric tons of gold, sold short in two weeks merely pushed this metal 2.6% lower.  That’s not much considering the deluge of selling, especially near gold’s major seasonal lows when sentiment and technicals are most vulnerable.

If I was short gold futures, I’d be sweating bullets after such near-record gold-futures shorting had such a modest downside impact on gold prices.  There had to be huge buying somewhere in the world to offset that extreme futures supply.  The only other two-CoT-week span in history with more short selling ended in November 2015, where gold plunged 4.3%.  And that was in one of gold’s strongest months of the year seasonally.

This orgy of extreme short selling left speculators’ total gold-futures shorts way up at 189.2k contracts at the end of this latest CoT week.  That’s huge!  Out of those 967 CoT weeks since early 1999, that proved the 6th higheston record.  The top four clustered around the all-time high of 202.3k back in early August 2015.  Number five was 191.6k in December 2015, right before gold’s current bull market was stealthily born.

Speculators haven’t been so short gold futures since mid-December 2015 when gold slumped to a 6.1-year secular low on the Fed’s first rate hike in a decade.  Right from those extreme lows, gold exploded almost 30% higher in the next half-year or so.  Spec shorts this high are exceedingly-rare bull-birthing levels!  After every major spike in gold-futures short selling in history, gold has rocketed higher in major rallies.

I’ve written entire essays on the powerful inverse relationship between gold prices and spec shorting.  Excessive or extreme gold-futures short selling is so immediately bullish for gold for a couple reasons.  Like all traders, futures speculators’ capital is finite.  By the time they ramp their collective shorts back up near historical extremes, their selling is largely exhausted.  They don’t have the firepower to short much more.

Short selling itself is very risky.  Normal sellers first have to own something before they sell it.  But short sellers effectively borrow gold futures contracts from other traders in order to sell them.  Short selling is selling something that isn’t owned, which creates legal obligations to soon repay those debts.  In futures this is accomplished by buying long contracts to offset and close short ones, which is very bullish for gold.

All gold-futures short selling is soon followed by proportional offsetting buying.  So that 55.1k contracts of shorting in the past couple CoT weeks guarantees 55.1k contracts of imminent buying!  Gold’s upside price impact is identical from short-side speculators buying longs to close their positions and long-side speculators adding new longs.  While normal long buying is voluntary, short covering long buying is mandatory.

And once short covering gets underway, it quickly feeds on itself due to that extreme leverage inherent in gold futures.  At 30x, a mere 3.3% gold rally would wipe out 100% of the capital risked by fully-leveraged gold-futures speculators!  So once gold starts powering higher again, they have to cover fast or face truly-catastrophic losses.  Their short-covering buying pushes gold higher, triggering even more buying which snowballs.

The faster gold surges on short covering, the more other speculators are forced to buy to cover their own shorts.  Long-side speculators jump in to buy aggressively when gold rallies too, and they control much more capital.  Their buying amplifies gold’s upside and puts even more pressure on remaining shorts to buy back their shorted contracts to get out of harm’s way.  Nothing’s more bullish for gold than excessive shorts!

So coming out of near-record gold futures shorting over the past couple CoT weeks driving near-record spec shorts, a major gold rally is almost certain.  With spec longs relatively low now and gold moving out of its usualsummer-doldrums weakness into August, this rally ought to prove quite powerful.  Near-record short selling always leads to massive subsequent gold futures buying, which tends to unfold fairly rapidly.

Gold’s 30% rally confirming a new bull market in the first half of 2016 was driven by speculators adding 249.2k long contracts while covering 82.8k short ones.  Today’s buying potential is similar.  To get back to last summer’s 400k-contract long levels when gold was in favor, speculators would have to buy 136.9k long-side contracts.  To return their shorts to normal levels between 2009 to 2012, 123.8k need to be covered.

That adds up to 260.7k contracts of gold futures buying possible if not likely in the second half of 2017!  That’s the equivalent of 810.9 metric tons of gold.  As usual this will start out with short covering, but the resulting gold rally will entice back much more capital from long-side speculators.  This could drive gold another 20% higher from this summer’s levels, which is up around $1500!  That’s seriously-impressive upside.

Interestingly silver’s situation today is even more bullish than gold’s!  Silver has been beaten like a rented mule this year, pummeled lower while gold remained relatively high.  That underperformance was driven by the biggest surge in silver futures short selling ever witnessed!  That catapulted silver shorts way up to a stunning new all-time record high of 93.6k contracts in the latest CoT week before this essay was published.

All the gold futures shorting analysis above applies equally to silver-futures shorting.  When these guys are forced to cover their absurdly-massive shorts, silver is going to soar.  Normal levels of silver futures shorts from 2009 to 2012, the last normal market years, ran 21.5k contracts.  That means buying to cover is way up at 72.1k potential contracts!  That’s the equivalent of 360.5m ounces of silver, vast beyond belief.

According to the venerable Silver Institute, total global silver demand last year was 1027.8m ounces.  So we are talking about imminent near-term short-covering potential exceeding a third of annual worldwide demand!  Silver shot up about 50% in roughly the first half of 2016 on 55.6k contracts of long buying and 30.0k of short covering.  Over 5/6ths of that silver-futures buying is likely coming again in short covering alone!

The short-covering-fueled silver-price gains will entice in heavy silver futures long buying as usual, really amplifying silver’s upside.  So another 50% gain isn’t a stretch at all, which would blast silver up above $23 from its recent lows.  Gold’s own short-covering rally will spark big silver buying too, as gold has long been silver’s dominant driver.  Silver is wildly bullish today given the record shorts in highly-leveraged futures!

Over and over again history has proven the worst time to be bearish on gold and silver is when futures speculators are, as evidenced by high shorts and low longs.  And with their shorts at near-record and record levels today, gold and silver look exceptionally bullish.  We are likely on the verge of major if not massive new bull-market uplegs in these precious metals, which will yield big gains for smart contrarian traders.

These can be played in the metals themselves, their leading GLD and SLV ETFs, or the stocks of their miners.  The latter offer the greatest potential gains by far, as their profits really leverage higher gold and silver prices.  The stocks of the elite gold and silver miners are wildly undervalued and incredibly out of favor today, so their upside potential is truly vast as gold and silver mean revert higher on huge short covering.

The bottom line is speculators’ gold futures and silver futures short positions have soared to near-record and record extremes in recent weeks.  These elite traders are hyper-bearish, and betting heavily for more precious-metals downside.  But gold and silver soon soared on short-covering buying following all past episodes of excessive and record short selling.  There’s nothing more bullish for gold and silver than extreme shorts!

All futures sold short must soon be offset by proportional near-term buying to close out those trades.  It quickly feeds on itself thanks to the incredible leverage of gold futures and silver futures.  The resulting sharp short-covering rally soon entices in new long-side futures speculators and later investors with their vastly-larger pools of capital.  Excessive and record futures shorts are the best gold and silver buy signals available. – Adam Hamilton


Market Forces are Aligning for a Powerful Trend in Gold Prices

Market Forces are Aligning for a Powerful Trend in Gold Prices

Market Forces are Aligning for a Powerful Trend in Gold Prices

Lior Gantz, founder of Wealth Research Group, believes that fundamentals for precious metals have been confirmed and expects a major rally.

I hate false breakouts. They disgust me, and the entire community despises them!

That’s why for the entire duration of the past week, we’ve been checking and confirming this rally from every angle, and I can tell you that the mother of all short squeezes is upon us.

Gold Short Squeeze

My contacts in Asia (India and China), a fund manager in Russia’s gold inner circle, and the people I’ve been using for years in the European capitals of “old money” (Brussels, London, Vienna, and Monaco) have all vetted this short squeeze and indicated that the paradigm has shifted, pursuing the last Federal Reserve minutes and Yellen’s congressional testimony.

I even called in to some of the larger Swiss bullion dealers, as a would-be customer with a large order, and they informed me that if I want physical shipment, “I should experience severe delays.” One dealer said they had been emptying parts of the vaults they hadn’t used in 14 months!

It’s time to position using your best strategy.

For the majority of the past year since our September 2016 flash alert, “Overbought conditions in gold sector signal the top is probably here,” we’ve implored and suggested to take profits on 2016’s thick gains from your winners.

Since that time, we’ve been cautious, restrained, almost bearish at times, only pounding the table on the most obvious opportunities to scoop up the Rolls Royces of this sector for Mitsubishi prices, but now isn’t such a case.

You see, for 11 months, the market has been consolidating, building up bearish sentiment, shaking out all the thousands of so-called gold investors with a “dabbling in the sector” approach, and even the institutional money has been duped into shorting gold in bulk option contracts right as the market turns.

Net Long vs. Gold Price

They are all about to feel what it’s like to have a herd of elephants run over them!

Gold net long positions hitting an extreme low and the last two times this happened, we saw a 10% move, which would bring about $1,400 in a matter of months.

We’re not holding back anymore and we’re not delicately picking up surgical positions any longer. It isn’t a casual event this time around—it’s time to reap rewards!

Understand that what was missing up until now is a confirmation of fundamentals for precious metals. The threat of multiple rate hikes, coupled with low inflation data, was killing the catalysts for gold. That threat has disappeared from the landscape, so get strapped, as the coming months could be a defining moment for our portfolios.

Get busy researching ways to take advantage of this rare period.

Gold Could Go Higher


Would You Like an Additional Zero to Your Net Worth? Buy Gold

Would You Like an Additional Zero to Your Net Worth? Buy Gold

Would You Like an Additional Zero to Your Net Worth? Buy Gold

Tom Beck, founder of Portfolio Wealth Global, explains why he believes market forces are aligning for a powerful gold trend. Not since launching Portfolio Wealth Global in June of 2016 have I been sincerely bullish on precious metals.

Gold Could Go Higher

Gold is an important commodity. No other metal is suited to be money quite as flawlessly as gold. Many societies have tried and failed to use other systems, but gold has never wavered or disappointed.

It does, however, go through cycles, based on how much yield cash savings are generating and how stable the monetary banking structure seems to be.

Trump’s elections, surprisingly, boosted confidence for businesses, and the Federal Reserve’s constant teasing regarding rate hikes had calmed investors into believing that things are normal, but the Fed’s reluctance to carry out their multiple rate hike policy has now revealed their real outlook for the economy to us all.

This has caused the start to a short squeeze!

Gold Short Squeeze

In case you’re unaware of what this means, it simply suggests that all the institutions naive enough to bet against gold are going to sell their bets while the gold price rises at the same time.

If you’ve ever wondered what getting hit by a train head-on feels like, call one of these investors today and ask them how their week was.

But I don’t want us to just see our gold bullion position worth more, since I don’t intend on selling my insurance. Instead, I want us to get maximum leverage from this moment because you never know how long it will last.

That’s why I’ve been in Vancouver, British Columbia, for the past few days meeting with the top echelon of the mining scene—especially the gold rock stars.

Since the start of the year, the five-year Treasury yield has risen about 150%. This would put tremendous pressure on the price of gold, under normal circumstances—higher yields raise the opportunity cost of buying gold—but over this same period, the USD has weakened and is now officially in a bear market.

Because gold is priced in dollars, this has been supportive for gold prices. Year-to-date, gold is up more than 8%.

Crosscurrents Impacting Gold

But, what is truly playing out like in the textbook is that no one is bullish.

This is precisely when you want to be bullish because of this strategy.

If there are any more rate hikes in 2017, the next one won’t be until December. It should be smooth sailing for gold over the next three to four months!

Gold currently has a net long position of only 37,776 contracts. For gold to be trading over $1,250 per ounce with such a small net long position is extremely bullish. At the very beginning of 2017, gold had a slightly larger net long position of 38,923 contracts, but gold was trading for only $1,137 per ounce.

The bottom line is this: The trend is powerful, and you should be ALL IN!


While all are Higher, why are Silver Prices yet below the 1980’s Level? Makes Any Sense?

While all are Higher, why are Silver Prices yet below the 1980's Level? Makes Any Sense?

Why are Silver Prices yet below the 1980’s Level?

Silver is a unique metal which belongs to the category of Precious Metal. Along with Gold, Silver has been used as money for thousands of years. It was the Roman Empire in 330 BCE who first used gold and silver in a widespread currency system. Under the Roman currency system, denarius is the name of a small silver coin and became the main coin of the Roman Empire. Historians say 1 denarius is the daily wage for an unskilled laborer and common soldier or about $28 in bread. Silver and gold continue to be accepted and recognized for what they are, money, until modern times. In July 23, 1965, The Coinage Act of 1965 eliminated silver from circulating United States dime and quarter coins. Then in 1971, President Nixon removed US dollar peg to the gold, effectively ending the gold standard until today.

Is Silver the most undervalued metal?

  • Silver Industrial Application

Unlike Gold which is recognized only for their intrinsic monetary value ,Silver has widespread industrial application in electronics, healthcare, and the more recent photovoltaic for solar energy. The photovoltaic application for solar energy in particular is forecasted to boost the overall physical silver demand in the next several years. According to London-based Capital Economic’s analyst Simona Gambarini, although solar industry only accounts for just 6% of overall physical silver demand, global solar capacity is growing at an average rate of 53% in the last decade, underscoring future growth potential.

  • Silver Demand and Supply Imbalance

Other than the industrial demand for silver, there are also silver demands for jewelry, coins / bars, and silverware. The Silver Institute and Thomson Reuters GMFS issues an annual report on the supply and demand for silver. Latest report below shows there’s 20.7 million ounce silver shortage in 2016.

Silver Demand and Supply

New York-based researcher CPM also said in its “Silver Yearbook 2016” that production of silver output is seen to continue dropping in 2016 due to the depressed silver price while demand keeps rising, as chart below shows:

Silver Supply

US mints, as just one segment representing the demand for silver, has seen its sales exploding since 2008 financial crisis as the chart below shows:

U.S Mint Silver Sales

  • Silver Paper vs Physical Market

With demand outstripping supply for the last few years, how is it possible that silver’s price continue to languish in the past 4 years after reaching $49.8 peak in 2011? One circulating theory is that physical price for silver is controlled by paper-based exchange such as LBMA and Comex with the use of derivatives and contracts. Opinions by some analysts suggest that the Bullion Banks (market maker such as JP Morgan, Scotia Bank) may have tried to contain and control the price of silver by issuing unlimited supply of derivatives which only needs a small percentage of the real underlying physical metal as the collateral. With very little physical silver delivered, the price “discovered” is in fact the price of the derivative itself, not the actual physical metal. This theory looks to have been vindicated as early this year, Deutsche Bank admitted to rigging silver and gold price and settled a lawsuit.

In the exercise below, we will take a look at CME COT (Commitment of Trader) report for silver and copper. Each contract in COT is essentially an agreement between buyer and seller to buy / sell with little actual physical delivery. The total Open Interest then represents the total contract obligation to buy / sell . We will compare the COT Open Interest in silver and copper to draw some interesting observation:

Silver COT

From Silver’s COT above, we see that every Comex contract is a contract to buy / deliver 5000 troy ounces of silver. With Open Interest at 204,637, Comex has an obligation to deliver 204,637 contracts x 5,000 oz / contract which is 1.02 billion ounces of silver. As the report by Silver Institute and Thomson Reuters GFMS earlier above shows, the annual silver supply in 2016 is about 1 billion ounces. This means that the Comex silver open interest represents 100% of total mine supply.

Let’s compare Silver’s Open Interest to another base metal Copper’s Open Interest to see the problem in Silver’s Comex paper market

Copper COT

Total Comex copper open interest is 235,503 contracts. Each contract represents 25,000 pounds of copper, which suggests a Comex delivery obligation of a little more than 5.8 billion pounds of copper. The world produces around 41 billion pounds of copper annually, so the Copper open interest represents only about 14% of total mine supply

A comparison between the open interest in the two metals above suggest there may be an underlying problem in the Silver’s paper market, and should the Bullion Banks unable to keep issuing new contracts to control the price due to the lack of physical silver as collateral and should they be forced to unwound the short positions, we may see silver’s price continue to rise.

Let’s take a look at Comex silver vault below as of July 3, 2017 to see the physical silver they have as collateral:

The latest Comex silver stock report above is showing 37 million registered silver (shaded in orange). The Registered category in silver means the silver is fully available for delivery. The eligible category means the silver meets exchange requirements but it’s not available for delivery to contracts. The emphasis on Comex should be the Registered category as this is the only silver that is available for delivery, but in reality the Combined inventory is what matters as the owners of the Eligible category can be forced into converting it into Registered category if it becomes necessary.

We can calculate the leverage that the Bullion Banks takes when issuing paper contracts in Comex against the underlying physical inventory. As shown above, as of June 27, the COT report shows a total Open Interest of 204,637 contract or approximately 1 billion ounces of silver. If we take 37 million as the actual quantity available for delivery, the leverage is 1 billion / 37 million or 27x leverage. If we take the Combined total inventory as the amount of silver available to delivery, assuming all the Eligible owners are willing to convert their physical silver to Registered Category, then it’s 1 billion / 208 million or 4.8x leverage.

Looking at silver’s historical price and comparing it to other metals and commodities, silver is perhaps the only commodity which still trades below its 1980’s price. All other metals and commodities have traded above their 1980’s price. See chart below for comparisons:

Silver Gold Copper Oil

As can be seen above, Silver remains below 1980 high price of $49.45 (Hunt brother’s cornering of market), while all the other metals and oil have traded above their 1980’s price. We can also see that when the other metals broke above the 1980’s price, they all at least doubled in price. So in the future, if Silver is able to break above the 1980’s high price of $49.45, are we going to see it at least double in price to $100 as well? Only time will tell. – Modestmoney

Gold or Bitcoin – What’s more likely to be Valuable a Hundred Years from now?

Gold or Bitcoin - What's more likely to be Valuable a Hundred Years from now?

Gold or Bitcoin?

Gold bugs are rarely, if ever, bearish on gold. To them, it’s the only real currency in a world of money-printing central banks endlessly devaluing their fiat (that is, paper) currencies. There are few people who believe so fervently as gold bugs.

But bitcoin fanatics come pretty close. These folks believe that this decentralised digital currency is the ultimate means of easily transferring value without the need for centralised entity, intermediary, or central bank. Bitcoin is a libertarian dream.

Now, given that gold bugs and bitcoin fanatics share a common desire – a completely independent store of value – and a common enemy (central banks), you’d think they might be the best of friends. But they’re not.

In fact, they’re more like dogs and cats – or chalk and cheese. They don’t mix well, at all.

I know this because I’m privy to a private mailing list that’s run by an old family friend who’s a consigliere of one of Hong Kong’s wealthiest families. He, along with a couple dozen business and financial gurus and veterans, some with names you recognise, share their investment ideas and opinions on all things related to global finance and investing.

And recently the topic of cryptocurrencies and bitcoin came up. After watching carefully thought-out emails travel back and forwards within the group, I drew a few conclusions.

Gold bugs don’t like bitcoin

Most of the guys (and they’re almost all men) on this email list are grizzled investors, and they like their gold. To be precise, their physical gold. They dismiss bitcoin as a fad, a craze, all hype and no substance.

As I said, bitcoin is frequently compared to gold. They’re the only two widely distributed, decentralised methods of exchanging value as currency. There is no central authority issuance like there is with U.S. dollars or any other fiat currency.

Neither bitcoin nor gold can just be “printed” at the push of a button by an anxious central banker. You have to either earn your gold by mining it – which is what you do to mine bitcoin, but with computers instead of picks and shovels – or you can pay cash for it.

But for the gold bugs, there’s no substitute for being able to see, feel and carry their gold.

Bitcoin? That just exists somewhere on the internet as far as they are concerned.

Most people can’t easily comprehend bitcoin and cryptocurrencies

I remember nearly two years ago talking with Peter about bitcoin. At the time, I said the biggest hurdle I saw between the current state of bitcoin and mass adoption was that it’s not easy to fully explain in less than thirty seconds to the average guy on the street.

That problem still exists today.

Yes, you can just it’s a “digital currency”, and that’s a start. But explaining the fundamentals of blockchain, and the distributed ledger systems upon which it’s built is not straightforward. It usually takes time and effort for people to really understand just how much of a breakthrough bitcoin really is when it comes to a being a trustless mechanism for exchanging value. (Trustless in the context of bitcoin means we don’t need to trust an intermediary to settle our transaction – we can exchange value directly with one another securely thanks to distributed ledger technology.)

Gold is the very opposite of new technology

It’s human nature – and, from an investment perspective, smart – to be skeptical of large world-transformational promises built on a new technology… especially one you don’t understand fully yet.

On the other hand, a gold coin is a gold coin. It’s shiny, heavy, tangible, and it exudes value and permanence.

As one of the guys on the cryptocurrency email thread succinctly put it:

“I prefer a currency that has survived 5,000+ years of wars, empires, the rise and fall of countries, cold spells, hot spells, and has been universally accepted in every country of the world.”

I can’t argue with that.

Gold doesn’t have a point of failure in the way bitcoin does. If the worst happens – by that I mean the kind of scenarios that doomsday preppers hark on about – a lack of internet connectivity removes my ability to do much with my bitcoin.

A gold coin can still sit in my pocket, even while I might be fending off mobs, zombies, nuclear winter, etc.

But the world is changing – away from gold.

Consider this. Gold might have been a bedrock form of currency for thousands of years – but so were the pen and paper, for communication. When I was packed off to boarding school, my only means of correspondence with my parents was through the mail. Even at secondary school, the only way to communicate with the fairer sex (I was at an all-boys school) was through letter writing. And now, it wouldn’t surprise me if my kids never write a single pen-and-paper letter in their lifetimes.

And let’s be honest, the gold bug demographic is typically more towards the senior end of the spectrum. So, will the physical tangibility of gold become less important over time for generations who gradually shift more and more of their entire lives into the digital world?

Bitcoin, cryptocurrencies and blockchain technology

People interchange the words bitcoin, cryptocurrency, and blockchain. The truth is these are all different and similar at the same time. Bitcoin is a cryptocurrency built on a blockchain. Cryptocurrencies, of which there are hundreds, vary hugely in what they do and what problems they purport to solve, but they all (with one or two exceptions) leverage the kind of blockchain technology that bitcoin pioneered.

The word “currency” in cryptocurrency is somewhat misleading, as many of these have very specific security-like characteristics that provide economic ownership of a commercial blockchain. It’s very easy for people to lump cryptocurrencies into a single basket. But that’s like saying that all of the 3,207 NASDAQ-listed stocks are all the same.

So, gold versus bitcoin?

If you were to ask me which I think is more likely to be around a hundred years from now, it’s gold… every time. Nothing has usurped it for millennia as a globally-accepted medium of exchange or store of value, and I don’t think bitcoin will do so either.

Gold can’t be altered. Gold is gold. Once I own it, that’s it. I don’t need to rely on a functioning internet. I don’t need a computer. It’s pure tangible value.

Bitcoin, however, runs on a protocol that can be changed. Without going too much into it, a couple months from now, bitcoin could look completely different.

But I own bitcoin the same way I own gold. Locked up, out of sight, and out of mind. The gold will always be there… as for bitcoin, I can’t say that with 100 percent certainty.

But if you ask me which one is likelier to be up 1,000% three years from now, the answer is bitcoin. It’s still just a $45 billion-dollar market cap.

Gold has stood the test of time and a medium of storing value. For that reason, it deserves a place in your portfolio. Bitcoin’s time on the other hand, is just beginning. Blockchain is the future, and when you have an opportunity to buy the future and tuck it away, you should take it.

Good investing. – Daily Bell

How, What & Why India needs to do to Improvise it’s Gold Market

How, What & Why India needs to do to Improvise it's Gold Market

Indians rush to Buy Gold from Dubai

Indians are back to buying gold from Dubai. After the introduction of a 3% goods and services tax in India, buying gold jewellery in Dubai has become more lucrative.

Jewellers, with a presence in the United Arab Emirates and the Gulf region, said purchase of gold by Indians travelling to Dubai, NRIs and Indian expats living in the region has increased after the new tax regime was rolled out on July 1.
There is a perceptible rise in the sale of gold in the UAE market in the past two weeks and Indians are among the hot buyers, according to Ahammed MP, chairman of Malabar Gold & Diamonds.

“The immediate trigger is the revised tax structure for gold in India. UAE price continues to be much lower in comparison,” Ahammed told ET. He said three categories of Indian buyers are buying more gold in Dubai -those settled in the Gulf, Indian tourists to the Middle East and transit passengers travelling from the US and Europe.

“Singapore and Sri Lanka are also witnessing increased buying interest for gold from Indian travellers,” Ahammed said.

Jewellers estimate the increase at 5-10 per cent. “Shopping for gold in Dubai, especially with a 13 per cent difference, is more lucrative and this will divert some business from India to Dubai,” said Rajiv Popley, director of Popley & Sons. Gold purchased in India is costlier by Rs 3,600 per 10 gm than in Dubai.

The gold price at Zaveri Bazar is quoted at Rs 29,210 per 10 gm, inclusive of import duty and GST, whereas the cost in Dubai is Rs 25,524 per 10 gm. Jewellery will remain costlier in India even after the planned imposition of 5 per cent VAT in the UAE from January 2018. – Sutanuka Ghosal

Government can easily clean up Gold Market in India

The gold market in India is in a mess.  Smuggling continues big time.  Seizure of smuggled-in-gold barely accounts for 3% of volumes each year. Corrosion within the vaults owned and managed by the customs department — where gold is stored — is now in evidence. International buyers of Indian jewellery are wary because of the prevalence of gold adulteration in this country (documentation on all the above can be found at Today, almost 90% of the gold in the markets is adulterated. Surveys in 2006 showed that the adulterated content was around 13% then.  Today it could be significantly higher.

So, can the situation be remedied?

Yes, if there is political will, and the willingness to take a fresh look at gold markets. That is what Turkey did a couple of dacades ago, and quite successfully ( In fact there are three things that the government should do. Immediately.

First, it is imperative that the government reclassifies gold as a financial investment.  True, it comes under the finance ministry today.  This was unlike the past when it used to be considered a commodity and came under the ministry of consumer affairs. But it is still treated as a non-financial instrument. Most poor people, even small businesses, use gold as collateral to borrow urgently needed money.  The growth of gold loan companies provides evidence of this need.  Even SBERBank, the largest bank in Russia – which now has an office in New Delhi — has applied to the government to permit it to enter the gold loan market (

Making it a financial investment allows for the application of the Indian Penal Code provisions (Section 489-A) relating to FICN (fake Indian currency notes). They allow for life imprisonment and make the act of fraud a non-bailable offense (,1860-1951).

No fresh laws have to be written or passed. There is no need to create a new legal structure. Just the re-classification of gold as a financial investment should do the trick. That will give teeth to hallmarking, which is now compulsory for all gold jewelers.

Second, brush the dust off the report the RBI submitted to the government in 2013. Titled Report of the Working Group to Study Issues related to Gold Imports and Gold Loan NBFCs in India,.  it was chaired by K.U.B Rao (hence the report is also popularly referred to as the KUB Rao report). It recommended the formation of a separate body for gold,The Bullion Corporation of India (BCI). This entity would look at all aspects of gold, and create proper rules that could ensure both fair play and growth for the industry. Given that Rs.141,000-340,000 crore worth gold is imported each year (see table), the need for a separate professional body is imperative.  As the BCI would function under the RBI, all the gold stored in customs vaults – from where theft sometimes takes place  – would go to the RBI or get auctioned promptly.

Third, and most important, the government needs to reduce the import duty on gold. Remember,  it used to be just Rs.100-250 per 10 grammes earlier.  Smuggling – if any — had definitely slowed down then.  Unless this is done, smuggling will remain attractive.  It will also help build a channel for smuggling in of drugs and arms.

This author recommends the imposition of 1% duty – but only if gold is purchased by banks and designated bodies.  Anyone trying to import gold through other channels would still be subject to a 10% duty.

These designated bodies then get the imported gold verified by certified gold refineries (because even imported gold can be contaminated).  The refineries in turn would then sell to wholesellers. This category could be defined as people willing to buy more than two tonnes a year, with suitable bank guarantees as well. The refiners and wholesellers would be responsible for ensuring that hallmarking ( is scrupulously followed by the entire trade.  Where there are lapses, the incident would automatically get subjected to FICN related investigations and procecutions.

But won’t the 1% import duty and 4% of GST make the government lose some revenue?  Yes.  But such losses would be notional.  In fact, the government could gain a lot more compared to what the customs department may lose. Our estimates show that the government would lose around 10,000-15,000 crore (see table) compared to what they collect under the 10% import duty.

Even that is a notional loss.  The amount the government could lose if smuggling remains rampant could be a lot more. If duties are not reduced, gold smuggling would also encourage smuggling in of arms which could jeopardize national security.  This is because the profits from gold alone will permit smugglers to create a clandestine channel. This channel would identify transporters, routes, landing points, compliant officials and runner boys for gold marketing. Once a channel is set, it is invariably used for smuggling in arms as well.

That is why, gold import duties need to be reduced. Unless that is done, the adverse effects will make the country pay a very high price. – RN Bhaskar

IBJA submits draft of good delivery rules to government

India Bullion & Jewellers Association (IBJA) has submitted the draft of the `Good Delivery Rules’ for gold and silver bars to the government.The good delivery bar is to be produced by Indian refiners by adhering to quality standards followed by global benchmark LBMA.

The rules on networth and quantity followed by LBMA will be diluted as most gold refiners here lack the economies of scale existing overseas, said Rajesh Khosla, director, IBJA. ET had first reported about an India Good Delivery Gold Bar in its edition of April 24, 2017.

IBJA has called for public comments on the draft over the next two weeks. It could incorporate some of these suggestions and submit an updated draft to the government, which is expected to use part of these inputs in formulating a gold policy.

The idea behind a good delivery gold bar is to harness above ground gold held by individuals and temple trusts, refine these into standard quality gold bars, which could be used by banks to sell them to jewellers, etc. – Ram Sahgal

Proposed Gold Exchange to have its own good delivery norms

In a move that will set the stage for setting up a spot exchange for gold trading, help make gold trade transparent and eveolve an  India-based gold price, the government is considering formulating good delivery standards and responsible gold practices for trading in the precious metal.

So far, in most trading centres across the globe, London Bullion Market Association or LBMA delivery standards are accepted. Even on Indian futures exchanges, it is the LBMA standard gold that is regarded as good delivery to the extent that gold refined by Indian refinery, but not having LBMA recognition, is not acceptable on MCX.

In India, only MMTC-PAMPS refinery has been recognised by LBMA. The government is discussing this issue with stakeholders in the bullion industry, including Indian Bullion Jewellers Association (IBJA), World Gold Council (WGC), Ficci, hallmarking and refinery associations and Indian Gold Policy Centre under IIM-A among others. As per the discussions held so far, a rough road map has been proposed for gold spot exchange, which will be refined further.

Rajesh Khosla, MMTC-PAMPS said, “The good delivery draft has been modelled on international norms for precision and quality set by LBMA, on which there can be no compromise. The Indian elements in this draft deal with finance and production numbers that relate to the Indian environment. The quality standards proposed are global and there is no compromise on that.”

WGC is also preparing feasibility report for spot exchange for gold, which is likely to be out in a month or two. Under the draft norms, refineries will come under the ambit of the Indian good delivery standards proposed by IBJA, if they have four years of experience in refining metals, an annual refined production of 5 tonnes, and a tangible net worth of Rs 15 crore.

IBJA has also proposed specifications for good delivery bars, integrated responsible gold guidance proficiency testing and proactive monitoring and auditing procedures. Responsible norms include procedures to be followed for ensuring gold is not imported from conflict zones or areas where mining is either illegal or the revenue from mined gold is used for illegal or anti-social activities.

Said Surendra Mehta, secretary IBJA, which prepared good delivery norms for gold along with all stakeholders: “Indian good gold delivery rules and responsible gold standards are key to the establishment of a gold spot exchange.” IBJA put the draft on its website and has invited suggestions from stakeholders on the draft rules till August 14. Mehta added, “The rules for good delivery and responsible gold standards will also apply to silver.” Comments on this draft have also been invited from government, BIS, RBI and Sebi among others.

However, according to sources in the know, work for setting up a gold exchange is being executed on several front. Apart from IBJA’s proposed India good delivery norms and WGC feasibility report, a proposal is under discussion in the finance ministry on GST treatment.

According to the proposal relating to GST on gold traded on the proposed spot exchange, trading will not attract GST, only deliveries will. Vaults storing gold will be recognised by the exchange and delivery centres covering major trading and processing areas will also be identified. Deliveries will have gold swap options to facilitate intercity trade. So, if a trader in Chennai sells gold to a trader in Mumbai, then the seller’s account in Chennai will be debited, while delivery will be made from the vault situated in Mumbai.

Trading will be on a nationwide online platform. BSE and commodity exchanges are already deliberating this issue. BSE has also proposed to set up a gold spot exchange in partnership with IBJA.

Discussions held so far on the gold spot exchange have also included issues such as who should regulate the bourse, whether or not all imports should be compulsorily sold on the spot exchange. Some clarity will emerge after WGC comes out with its feasibility study. – Rajesh Bhayani

Having Manipulated & Acquiring Silver Cheap, JPM May Now Let Silver Prices Rise

Having Manipulated & Acquiring Silver Cheap, will JPM Allow Silver Prices to Rise?

Will JPMorgan Allow Silver Prices to Rise Now?

JPM Manipulated & Acquired Silver Cheap for years. Now since they are done, will Silver Prices be Allowed to Rise?

For years, we’ve watched JPMorgan stockpile what is alleged to be physical gold and silver in their Comex vaults. However, something has changed over the past four months and we thought we should bring this to your attention today.

First some background…

During the silver price run-up of 2011, JPMorgan was seemingly caught flat-footed. They appeared to hold a massive paper short position while simultaneously holding no visible physical position. At the time, JPM did not have a Comex silver vault and, as the CFTC-generated Commitment of Traders data showed at the time, the last $10 of price surge was almost entirely due to a “commercial” short squeeze. The most likely “commercial” being squeezed in April of 2011? JPMorgan.

Also in the spring of that year, the was a rapid approval for JPMorgan to start their own Comex silver vault. Evidence of this can be found when we review how this vault came about in March of 2011. This old link details how JPM was suddenly and quickly approved to establish this new Comex silver vault:

After starting from ZERO in 2011, JPM has quickly amassed a horde of Comex silver and now has a virtual stranglehold and monopoly on this “market”. As of last Friday, JPM’s Comex silver vault held 112.5 million ounces versus a total Comex vault of 213.3 million ounces. This means that JPM now holds/controls nearly 53% of all silver backing the Comex silver paper derivative exchange.

To help you better understand the scope of this, check these next two charts (click to enlarge). First, here’s an old Comex silver stocks report from June 3, 2011. Note the following:

  • Prior to JPM’s inclusion in 2011, there had only been FOUR Comex silver depositories.
  • After the first 60 days or so, JPM had only brought in 750,761 ounces, all of it marked “eligible”.
  • The total amount of silver held in all vaults was just 100,535,272 ounces.

This next chart I found on Twitter over the weekend and it comes from the always helpful Nick Laird at It shows in dramatic fashion the rising dominance of JPM and their silver vault on the Comex:

JPM seems to have largely amassed this horde through the steady acquisition of silver through the bi-monthly “delivery” process on the Comex. If we check the records since 2015, we see this play out. While only rarely issuing a contract, the House or proprietary account of JPM has consistently stopped (taken) “deliveries” since March of 2015. See below:

March15: JPM House stopped the position limit of 1,500 contracts. At 5,000 ounces/contract, this represents “delivery” of 7,500,000 ounces.

May15: 808 stops for 4,040,000 ounces

July15: 1,161 for 5,805,000 ounces

Sept15: 370 for 1,850,000 ounces

Dec15: 1,400 for 7,000,000 ounces

March16: 1,076 for 5,380,000 ounces

May16: 1,500 for 7,500,000 ounces

July16: 771 for 3,855,000 ounces

Sept16: 405 for 2,025,000 ounces

Dec16: 1,550 (50 contracts in excess of the 1,500 limit) for 7,750,000 ounces.

Adding this all together gives us a total 2015-2016 stoppage of 10,541 contracts for 52,705,000 ounces of silver. Over the same time period, JPM House issued just 342 contracts for 1,710,000 ounces. So, on a NET basis, the House account of JPMorgan accumulated almost precisely 51,000,000 ounces of silver in their Comex Vault over the time period of 2015-2016.

This hoarding continued into 2017 when JPMHouse stopped a whopping 2,689 contracts back in March. This represents a “delivery” of 13,445,000 ounces and is clearly WELL IN EXCESS of the stated Comex front and delivery month position limit of 1,500 contracts. We wrote about this at the time and even went so far as to file a complaint form through the CFTC website. You can read all about it here:

Well a curious thing has occurred in the time since. After illegally stopping 2,689 contracts in March, the House account of JPMorgan stopped a grand total of ZERO Comex silver contracts in May and, thus far in July, they’ve once again stopped a total of ZERO.

Now why would this be? Does JPM finally feel as if they have enough silver? Did their violations back in March result in a slap in the wrist from the CFTC? Who can say for certain? What’s clear, however, is that with a physical horde of 107,000,000 ounces in their eligible vault, JPM now has enough silver to physically settle and cover 21,400 Comex contracts should they ever begin to get squeezed again as they did in 2011. (This of course assumes that the entire 107MM ounces is owned/controlled by the JPM House account.)

Adding more intrigue to the question, however, is what we’re also seeing in Comex gold. In 2015, the House account of JPM was actually a NET issuer of Comex gold contracts. Some months they issued and some months they stopped (took “delivery”) and the result was an issuance of 1,109 Comex gold contracts for NET loss of 110,900 ounces of gold. This changed in 2016 though as the JPM House account ended up with a NET stoppage of precisely 8,000 Comex contracts for 800,000 ounces.

This continued into 2017 with February seeing 771 stops for a total of 77,100 more ounces. And then a curious thing happened here, too. The House account of JPM had a total of ZERO activity in April. No stops and no issuances. And then, when June came around, it happened again! No June gold stops and no June gold issuances! What the heck??

And so here we are. After being an active collector and hoarder of “physical” gold and silver through the bi-monthly Comex delivery process, the activity of the House account of JPM has suddenly come to a grinding and complete FULL STOP. And the question is: WHY? Why, after participating in every gold and silver “delivery” month for years, has the JPM House account suddenly ceased all activity? Again, are they “full”? Has the CFTC slapped a penalty upon them for repeatedly exceeding delivery month position limits?

Most importantly, what if anything might this mean for price? Has JPM conspired to keep gold and silver prices low for years so that they could acquire metal as inexpensively as possible? Maybe. And, now that they appear to be “done”, might price finally be allowed to rise? Again, maybe.

Unfortunately, all we can do is speculate. The actual answers will very likely never be known as the only thing that remains constant in the world of the paper derivative pricing scheme is the deliberate opacity of the process. – Craig Hemke

China & Russia Energy Business Transactions in Gold Threaten the Petrodollar

China & Russia Energy Business Transactions in Gold Threaten the Petrodollar

China & Russia Energy Business Transactions in Gold Threaten the Petrodollar

Russia’s largest bank, state-owned Sberbank, announced that its Swiss subsidiary had begun trading in Gold on the Shanghai Gold Exchange.

Russian officials have signaled that they plan to conduct transactions with China using Gold as a means of marginalizing the power of the USD in bi-lateral trade between the 2 powerful nations.

The formation of a BRICS Gold marketplace could bypass the US Petrodollar in bi-lateral trade in the energy sector.

According to a report published by Reuters: “Sberbank was granted international membership of the Shanghai exchange in September last year and in July completed a pilot transaction with 200 kg of gold kilobars sold to local financial institutions, the bank said.

Sberbank plans to expand its presence on the Chinese precious metals market and anticipates total delivery of 5-6 tonnes of Gold to China in the remaining months of Y 2017.

Gold bars will be delivered directly to the official importers in China as well as through the exchange, Sberbank said.”

Notably, Russia’s 2nd-largest bank VTB is also a member of the Shanghai Gold Exchange.

There is a transformation underway of the global monetary system.The implications of this transformation are profound for US policy in the Middle East, which for nearly 50 years has been underpinned by its strategic relationship with Saudi Arabia.

The USD was established as the global reserve currency in Y 1944 with the Bretton Woods agreement, commonly referred to as the Gold Standard. The US leveraged itself into this power position by holding the largest reserve of Gold in the world. The “Buck” was pegged at $35 oz, and freely exchangeable into Gold.

By the 1960’s, a surplus of USDs caused by foreign aid, military spending, and foreign investment threatened this system, as the US did not have enough Gold to cover the volume of Buck in worldwide circulation at the rate of $35 oz, the result was and overvalued USD.

America temporarily embraced a new paradigm in Y 1971, as USD became a pure fiat (paper) currency decoupled from any physical store of value sans the GDP of the US, until the petrodollar agreement was concluded by President Nixon in Y 1973.

The quid pro quo was that Saudi Arabia would denominate all Crude Oil trades in USDs, and in return, the US would agree to sell Saudi Arabia military hardware and guarantee the defense of The Kingdom.

A report by the Centre for Research on Globalization clarifies the implications of these most recent moves by the Russians and the Chinese in an ongoing drive to replace the US petrodollar as the global reserve currency.

In March of Y 2017 the Russian Central Bank opened its 1st overseas office in Beijing as an early step in phasing in a Gold-backed standard of trade. This would be done by finalizing the issuance of the 1st federal loan bonds denominated in RMB Yuan and to allow Gold imports from Russia.

The Chinese government wishes to internationalize RMB Yuan, and conduct trade in RMB Yuan as it has been doing, and is beginning to increase trade with Russia.

They have been taking these steps with bi-lateral and native trading systems.

When Russia and China agreed on their bi-lateral $400-B pipeline deal, China wished to, and did, pay for the pipeline with RMB Yuan treasury bonds, and then later for Russian Crude Oil in RMB Yuan.

This breakaway from the reign of the USD monetary system is taking many forms, but one of the most threatening is the Russians trading Chinese RMB Yuan for Gold.

The Russians are already taking RMB Yuan, made from the sales of their Crude Oil to China, back to the Shanghai Gold Exchange to then buy Gold with RMB Yuan-denominated Gold futures contracts or a barter system or trade.

The Chinese are hoping that by starting to assimilate the RMB Yuan futures contract for Crude Oil, facilitating the payment of Crude Oil in in RMB Yuan, the hedging of which will be done in Shanghai, it will allow the RMB Yuan to be perceived as a primary currency for trading Crude Oil.

China is the world’s Top importer of Crude Oil and Russia is the world’s Top exporter, the 2 are taking steps to convert payments into Gold. This is a known fact.

The Big Q: Who would be the greatest asset to lure into trading Crude Oil for RMB Yuan?

The Big A: The Saudis.

The Chinese need the Saudis to sell them Crude Oil in exchange for RMB Yuan. If Saudi Arabia decides to pursue that exchange, all of the GCC petro-monarchies will follow, and then Nigeria, and on and on.

This action fundamentally threatens the Petrodollar.

According to a report by the Russians, significant progress has been made in promoting bi-lateral trade in RMB Yuan, between the 2 nations, as the 1st step towards an even more a ambitious plan, using Gold to make transactions:

A Key measure now under consideration is the joint organization of trade in Gold. In recent years, China and Russia have been the world’s most active buyers of the precious Yellow metal.

On a visit to China last year, deputy head of the Russian Central Bank Sergey Shvetsov said that the 2 countries want to facilitate more transactions in Gold between the 2 countries.

In April, Sberbank expressed interest in financing the direct import of Gold to India, India is a BRICS member.

To be sure a BRICS Gold marketplace could be used to bypass USD in bi-lateral trade, and undermine the control enjoyed by the US petrodollar as the global reserve currency.

Strategic risk consultant F. William Engdahl writes, “In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi [yuan] and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today,”

The take away: Russia and China are creating a new paradigm for the world economy and paving the way for a global de-dollarization. – Paul Ebeling


Why & How to Hedge Growing Risks by Diversifying with Gold Investment

Why & How to Hedge Growing Risks by Diversifying with Gold Investment

Why & How to Hedge Growing Risks by Diversifying with Gold

Today we’ll hear from Axel Merk, President and Chief Investment Officer of Merk Investments and manager of the Merk Funds in an interview with Mike Gleason. Axel breaks down investor complacency, the risk of putting too much money into risk assets and gives advice on the proper weighting of precious metals in your own portfolio.

Mike Gleason: It is my privilege now to welcome in Axel Merk, President and Chief Investment Officer of Merk Investments and author of the book, Sustainable Wealth. Axel is a highly sought-after guest at financial conferences and on news outlets throughout the world, and it’s great to finally have him on with us.

Axel, it’s a real pleasure to speak with you, and thanks for joining us today.

Axel Merk: Great to be with you.

Mike Gleason: Now, as we start off, you recently wrote a piece about complacency in the markets. We are seeing extraordinarily low volatility, and there isn’t a lot of interest in safe-haven investments like precious metals at the current time, at least not in the U.S. Axel, talk about why investors may not be showing enough concern and what this complacency says about where we are in the current market cycle.

Axel Merk: Yes, sure. And I’ll be glad to also link it to why it is that, in that environment, precious metals aren’t as quite as much in favor. There have been many reasons given for the low volatility some of them technical, that with more automated trading, that information might absorb more efficiently and theories like that. They might all have a bit of a factor. The main driver in my analysis is the QE (Quantitative Easing) programs of central banks. When central banks print money, so called risk premia are compressed… meaning junk bonds don’t yield much treasury.

That means peripheral Eurozone debt doesn’t trade at much of a premium versus German bunds. That also means that volatility in the equity market is low. And when volatility is low, evaluations are higher. If you think about it, the way you historically value a stock is through discounting future profits, future cash flows. So, when that discounting is done at a lower rate then the valuations are higher. Low volatility means high valuations.

At the same time, of course, as you pointed out, precious metals have not been exactly in huge demand in that sort of environment. That is because, hey, future cash flows are safe. Now if volatility goes up, then suddenly you’ve got headwinds to those future cash flows. An advantage to having gold that has no cash flow is that we’re merely discounting that change. So, relatively speaking, when volatility goes up, gold is more in favor. That’s one of the reasons why when there’s a so-called crisis in the world, gold tends to do well.

Mike Gleason: Furthering the point now about how the market may be underpricing risk. Let’s talk about what might prompt the next big round of selling on Wall Street. We have the Fed hiking rights and talking about how they’re going to start to unwind the quantitative abusing measures that the markets have been so accustomed to. Eventually, you’ve got to think that the stock markets will respond to that.

Meanwhile, there’s lots of people worried about China and the potential for a debt crisis there. Here in the U.S., the recovery has been anemic at best and we may even be heading in to a recession – particularly if the optimism towards Trump’s plans for tax reform and infrastructure aren’t realized. Europe hasn’t exactly been fixed. There’s a lot going on in the world. What do you think is the next shoe to drop, Axel?

Axel Merk: Well, with hindsight I’ll tell you which one it was that dropped. And the reason I say that is that when something is not sustainable, odds are it will stop. In my view, it is not sustainable that volatility will continue to be that low. In my experience, and I’ve been doing this for a few decades now, the best bubble indicator there is is low volatility which is an expression of the complacency. Be that in the tech bubble. Be that in the housing bubble, or be that in the current environment.

Now to me, the prime driver of that volatility is the Fed. Central banks around the world. In that context, what the Fed has done on the late, they’re pretty much an evil of other central banks to come out of the woods and say, hey, yeah, we can raise rates as well. Then the exact opposite happens when you have Quantitative Easing. You have Quantitative Tightening and that should increase volatility.

Now, we may hear of whatever it is… something blowing up in China. Something blowing up with a new political event, or whatever it might be. We’ll be glad to blame something specific. But I think the ultimate catalyst is going to be the Fed’s moves out of the current environment. That’s also, by the way, why the Federal Reserve is always taking kind of one step forward and half a step back. They’ll say that they’ll engage in Quantitative Tightening, but at the same sentence Janet Yellen said, it’s like watching paint dry on the wall.

I, wholeheartedly disagree that it’s like watching paint on a wall. She puts a damper on the expectations that the Fed is going to get really tough. The Fed is so concerned that volatility is going to surge. And the reason the Fed is concerned about that is because that means that junk bonds are going to plunge in price, and surge in yield. And those are the so called financial conditions that then deteriorate.

The Fed isn’t so much concerned about the plunging stock market, the Fed is much more concerned about access to credit. But in the current environment, those are sort of the same thing. And that’s why the Fed is set to be managing asset prices at the moment.

Mike Gleason: For anyone familiar with you and your commentaries, they know you have lots to say about our overlords at the Federal Reserve. You point out that they often say one thing and do another. How do we use that knowledge to our advantage here, and what do you think they will actually do with respect to rates and Quantitative Tightening, and so forth, and how will these markets and the economy ultimately react?

Axel Merk: Tough question you’re asking me here. What should you do, and what will the Fed do? Ultimately, one of the reasons why we’re talking is because we tend to invest. We tend to invest in stocks. In bonds. In precious metals. So what does it mean for investments? I would allege that most investors are overexposed to risk assets.

Risk assets are everything from stocks to junk bonds or anything that gives you any decent deal. People have been replacing their “safer assets” with something that yields a little bit more. They’re fooling themselves if they think they’re diversified by holding these things because the more you go out on the risk spectrum, the more highly correlated it is, quite likely, to equities.

Equity has been going up. What you should do is if things go up, you should rebalance. But you don’t know what to rebalance to. Many people have been just hoping for the best and it’s been working for them. Some people say, for example, at the bottom of 2008, you should’ve doubled down. Well you can only do that if you took chips off the table so you have something to invest if and when the markets do plunge.

But if you lost half of your net worth, or are going to lose half of your net worth in the next plunge of the market, I think that it is completely irresponsible then to suggest that you should double down because you cannot afford to risk quite as much. I mentioned precious metals in the context of diversifying. The beauty about precious metals, gold in particular, is that the longtime correlation to equities is near zero. And as such, it’s a diversifier.

It’s a diversifier and that when volatility goes up, that is something… and I often call it the easiest diversifier, and as those of you who hold precious metals for a long time know, it doesn’t always move against the equities. But if you wanted to do a perfect diversifier, you’ve got to go through some pretty exotic strategies – long-short strategies – that, by design, have a zero correlation to equities and that’s probably beyond the realm of most investors.

Now, you asked me the second part of the question of what the Fed will do. The Fed doesn’t know what it will do. They made the big announcement about Quantitative Tightening. They don’t call it such. They say they want to reduce the sign of the balance sheet by not reinvesting securities, but they don’t tell us exactly where they are going to go to because they don’t know.

They tell is it’s like watching paint dry, which it isn’t. And I say that because in Europe, they are printing as much, or a little more than they expect to be tightening in the U.S. And they tell you it’s a big deal. So, one or the other is wrong about it.

Basically, they will continue to high grades and reduce the balance sheet if the market allows them to do it. That’s my view anyway. And at the same time, they’re very eager to stay “behind the curve.” A key reason why the markets have been holding up is because the Fed has been so extremely reluctant. And so, we talk about hiking rates, but that’s on a normal basis. I would allege that on a real basis, there hasn’t been any significant tightening because the Fed doesn’t want to undo all the “good” that the Fed thinks they have done in recent years.

(Former Fed Chair Ben) Bernanke used to phrase it quite explicitly. “When you’re faced with a credit bust, you don’t want to tighten too early because otherwise the deflationary and forces take over again.” Now they think they’re over that hump. But still, they’re extremely reluctant. And that’s one of the reasons why assets prices continue to run away. That said, we have seen plenty of cracks here if you just look at the tech sector for example.

Mike Gleason: Switching back to precious metals here. Our view is that the metals markets have grown even stranger and more unpredictable. The advent of high frequency trading and revelations about price rigging are real concerns. We can’t be sure just how real these markets are or when they may start reflecting actual fundamentals. We can only be sure, to the extent markets are artificially controlled, that it won’t last and go on forever.

So, what is your view on the current state of the metals markets, Axel?

Axel Merk: When markets sum is priced, you have an opportunity to buy or sell to express your opinion. All markets are in some ways manipulated. And I’m not necessarily talking about some bad guy sitting on a corner trying to pull the strings. It’s really the dynamics of the system that are pushing and pulling in a certain direction.

Markets always reflect the future expectations of what’s going to happen. That doesn’t mean in the future it will reflect the state then. But in the future, they will again reflect the future expectation. That’s one of the reasons why, of course, investing is so frustrating. Investing ought to be frustrating. When they’re not, when prices go up and up and up, that is when you should get concerned.

It’s one of the reasons why, in the precious metals market, when things move around that I actually prefer that in some ways over the S&P that goes up and up and up. For in the short term you might look like a genius, but at the end of the day I think you might look much smarter if you have your own view.

The thing about these markets that are volatile, and gold has been volatile. It shakes out the weak players. So that means that if you don’t have a conviction of what you want and why you want it, you’re going to change your mind. You’re going to flip-flop and you’re almost certain to lose money.

Think about the equity market. It’s been ingrained now that you’ve got to buy the dips. Buy the dips and buy the dips ever again. That, in my experience, is not a long-term successful strategy when everybody does it. And there’s going to be a lot of crying happening in those markets if and when those markets show an extended period of volatility. A week or two, or even a month is not going to do it, but an extended period of volatility is going to cause quite some carnage in some of those markets.

Mike Gleason: Speaking of that conviction, when it comes to precious metals, you have been a precious metals guy for many years and as we begin to close here, I’d love it if you were to share some more of the reasons why you own gold, why you recommend gold, and ultimately why you think it’s important for people to have precious metals and exposure to that sector?

Axel Merk: Since I started my career I’ve always looked at ways to diversify portfolios. In the early 90s I invested in tech stocks and diversify to other industries. In the later part of the 90s as the tech stocks went higher, I became more of a global investor. Around 2000, we moved towards cash, international cash, and then precious metals management. Then we got quite a name with what we do in the currency space.

It’s not that we love currencies so much, but currencies, for example, is a way that you can again get that diversification portfolio. You can take on a currency risk if you’re concerned about the dollar without taking on interest rate or credit risk or equity risk, for example. And precious metals, similarly, there’s a way that you can diversify your portfolio. I mentioned the low correlation.

And the other one is, of course, aside from low correlation, you want to have a positive return expectation. The funny thing about gold is that historically, if you take a longer-term horizon it’s got a very respectable performance. It’s just that why the heck do you want to own this brick when it doesn’t generate any income, but it costs you to hold it? And of course, the answer may well be the alternative, cash, isn’t so great and that’s why gold isn’t such a bad diversifier.

And so, if you look now in the market where “everything is expensive,” the question is where you want to be? I happen to think the traditional diversification models doesn’t work. A couple years ago I was quoted that you need to have at least 20% in alternatives. I happen to think now that 20% is way too low. And it doesn’t need to be all in gold, of course, but you want to have something that’s not correlated.

Cash by the way is not such a bad idea either… to accumulate cash as equity prices continue to move higher. The question is how much gold one should hold. As you’re probably aware, I cannot give specific investment advice as I’m highly regulated in what I say. But one thing I sometimes say is you should not hold more of anything than you can sleep with at night. And I don’t mean that you should sleep with a brick a gold under your pillow.

But if you cannot stomach the volatility of what you’re owning, then you own too much of it. Beyond that, it’s of course up to anybody else. When you talk about gold mining, you’re taking on significantly more risk. The reason I like gold is because compared to many other things in the precious metals space, gold is less risky and serves the diversification purpose quite well.

Mike Gleason: Well thanks for the fantastic insights, Axel. It was great to finally get you on and we really appreciate your time.

Axel Merk: My pleasure.


Stock Market Meltdown – Real Test for Gold & Cryptocurrencies

Stock Market Meltdown - Real Test for Gold & Cryptocurrencies

Stock Market Meltdown – Real Test for Gold & Cryptocurrencies

In these uncertain times, it pays to have a safe-haven asset on your side. But which one? Gold or Cryptocurrencies!

It seems like every time the stock market climbs to new all-time highs and then begins to consolidate, traders ask themselves, “Is this it? Can the market go any higher? Do we need to start thinking about moving some of our money to a safe-haven asset, like gold, just in case instability sets in?”

So far, the answers to those questions have been “no,” “yes” and “maybe,” respectively.

While those answers may change in the future, one thing that is starting to change now is interest in a new breed of potential safe-haven investments — cryptocurrencies.


Cryptocurrencies, like Bitcoin and Ethereum, are encrypted digital assets that are tracked on a decentralized network — typically a “blockchain” — to prevent double-spending of the assets (If you are unfamiliar with any of these terms, A Brief History of Blockchain: An Investor’s Perspective is a fantastic primer to get you up to speed).

Bitcoin and Ethereum have become hugely popular during the past year, as investors have become increasingly concerned that the current world order and bullish market environment may be disrupted by populist uprisings (like “Brexit,” the election of Donald Trump or the rise of populist parties in Europe), geopolitical instability (like conflicts in the Middle East, increased missile tests in North Korea or Russian activity in Syria, the Ukraine and elsewhere) or the withdrawal of stimulative monetary policy by central banks around the world (like the European Central Bank tapering its quantitative easing program or the Federal Reserve reducing the size of its $4.5 trillion balance sheet).

Just look at how the value of these two cryptocurrencies took off earlier this year.

From late March to early June, the value of Bitcoin rose from a low of $891.33 to a high of $2,980 — a 234% gain (see Fig. 1).

During that same timeframe, the value of Ethereum rose from a low of $16.51 to a high of $412.21 — a whopping 2,397% gain (see Fig. 2).

While seeing the incredible performance of these two cryptocurrencies earlier this year may make them look like the perfect safe-haven investment during a tumultuous market environment, the bullish upswings are only part of the story.

Looking at the same two charts, you can also see that these cryptocurrencies are subject to substantial pullbacks as well.

Bitcoin has dropped from a high of $2,980 to a low of $2,242.62 — a drop of 25% — during the past month. Ethereum has dropped from a high of $412.21 to a low of $169 — an incredible 59% drop — during that same period. This type of price action makes cryptocurrencies look more like penny stocks or small-cap biotech stocks than stable safe-haven assets.

Gold, the Original Safe-Haven

Gold has been bouncing back and forth without really gaining much ground during 2017. The SPDR Gold Trust (ETF) (NYSEARCA:GLD) has reached as high as $123 this year, but it is currently back down at $115 (see Fig. 3).

This price performance may be somewhat disappointing compared to that of Bitcoin or Ethereum — even taking into account their recent pullbacks (so long as you bought the currencies before the big run-up) — but there hasn’t actually been much safe-haven demand for gold this year. After all, the S&P 500 is still near all-time highs.

The real test for gold and the cryptocurrencies is going to come when the stock market enters bear-market territory. Gold provided a solid safe-haven during the financial crisis of 2008 and beyond and will likely do so again during the next recession.

Bitcoin and Ethereum have the potential to do so, but they are unproven and carry additional risks. For example, the business growth and development that is anticipated, and necessary, to push Ethereum higher may stall during the next recession, sending the value of the cryptocurrency lower.

It all comes down to your risk tolerance for your safe-havens. If you want to shoot for the moon, Bitcoin or Ethereum might be for you. If you want stability during uncertain market times, gold is the tried and true bet. – InvestorPlace

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