Commodity Trade Mantra

The Long-Term Demand Picture Remains Supportive of Gold Prices

The Long-Term Demand Picture Remains Supportive of Gold Prices

The Long-Term Demand Picture Remains Supportive of Gold Prices

Rupert Hargreaves: “We believe that precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,” said Goldman Sachs in a recent report on the dilemma of what investors should do about falling gold price . “They are neither a historic accident or a relic,” the report, titled “Fear And Wealth” continued.

Following the financial crisis, demand for gold skyrocketed as investors looked to protect themselves from the much-feared rampant inflation following QE that was about the grip the world. This inflation never materialized, and now that the Federal Reserve is beginning to wind down its asset buying, demand for gold is evaporating.

However, according to Goldman, investors shouldn’t give up on the asset completely. Sentiment towards gold tends to move quickly, as uncertainty grows/falls. That’s why the asset should continue to hold a place in investors’ portfolios:

“Stated more simply, we are talking about the drivers of ‘risk-on, risk-off’ behavior in markets…This factor matters so much to gold precisely because it is a safe-haven asset. Accordingly, as uncertainty increases, preferences shift towards having more gold in the portfolio, driving prices higher. Fear can spike or fall quickly, and since DM economies tend to have more wealth to reallocate as the world gets riskier, this is both a medium- to short-run driver and more one exposed to the DM growth outlook.”

There’s also the long-run demand picture to consider:

“As more EM economies — including China — are set to grow to these income levels over the next few decades, the underlying long-term demand picture remains supportive of gold prices…While fear can spike or fall relatively quickly, wealth tends to accumulate slowly. This makes wealth an important, but easy to overlook in short-term forecasting, driver of gold.”

Falling Gold Price Reversal

Gold prices have been on the backfoot since reaching records in 2012. For 2012 the price of gold averaged $1,669 an ounce, compared to $1,249/oz year to date.

Analysts at Incrementum AG note blame the recent price weakness on rising global equity markets. In the firm’s 11th annual “In Gold we Trust” report, the analysts point out that today, with the falling gold price and rising equity markets, relative valuation of commodities to equities seems extremely low compared to history. Specifically, in relation to the S&P500, the GSCI commodity index is currently trading at the lowest level in 50 years. Also, the ratio sits significantly below the long-term median of 4.1.

Falling Gold PriceWith gold prices looking cheap on a technical basis, the analysts at Incrementum also like the look of gold from a fundamental perspective. As mentioned above, the post-crisis thesis for gold prices was that central bank money printing would lead to rampant inflation. For the past decade, inflation has remained subdued, but now it looks as if it is picking up again — a positive sign for gold and other commodities investors.

Falling Gold Price

Falling Gold Price

Finally, the case for 5,000 gold prices below, caveat emptor.

Is Higher Inflation Really Bad for Gold Prices?

Peter Schiff News of hotter than expected inflation numbers caused gold to sell off Tuesday. The markets seem to think rising inflation is bullish for the dollar and bearish for gold prices.

But is it really? Is higher inflation really bad for gold prices?

As Peter Schiff points out in his latest podcast, this whole notion is rather absurd.

The news of the day Tuesday revolved around import/export prices.

Import prices were expected to rise 0.5 and were up 0.7. Export prices also came in stronger than expected, rising 0.8 compared to an expected increase of 0.4. Year-over-year, import prices are up 2.7%. This is well above the 2% level the Federal Reserve is looking for.

Of course, the Fed fixates on the consumer price index, but obviously, import/export prices have a major impact on overall consumer prices. In fact, Peter says he thinks the import/export price number represents a better gauge of inflation than the CPI because the methodology is more objective.

The immediate market reaction to the import/export numbers was to buy the dollar and sell gold. But Peter raises an important question: Why is higher inflation bad for gold?

After all, the main reason to buy gold is an inflation hedge. If you think there’s going to be more inflation, you buy gold. But perversely, the way the markets work now, you sell gold if you think there’s going to be more inflation. In fact, you buy the currency of the country that is experiencing more inflation, which is kind of counter-intuitive because inflation by definition is the currency losing value. So, if the currency is losing its purchasing power, why would you want to buy more of it?”

As Peter pointed out, speculation about what the Federal Reserve may or may not do now drives the market more than this fundamental truth. Everybody thinks higher inflation increases the likelihood the central bank will raise interest rates and embark on tighter monetary policy.

It is the expectation that these higher numbers will produce a tighter Fed – that is what rallies the dollar. That is what hurts gold prices. It’s the anticipation of higher rates to fight off the inflation.”

This also explains why we’ve seen some headwinds in the gold market and a strengthening dollar as speculation swirls around who Trump will tap to serve as Fed chair when Yellen’s term ends next year. Many analysts think the president will pick a “hawkish” policymaker” who will hold interest rates higher.

Peter says fixating on the Fed and inflation is a mistake.

Reality is the Fed will ignore the higher inflation numbers and do nothing. Whatever it’s going to do with rates, it’s going to do it regardless of these numbers. And ultimately, if the Fed has to make a choice between fighting inflation and unemployment –  because the Fed believes in this Phillps Curve tradeoff between inflation and employment – the Fed will always choose to fight unemployment or to prop up the labor market and sacrifice its inflation goal. It doesn’t care if inflation goes up. It’s more concerned about employment, or the economy, or maintaining asset bubbles, or propping up the US government and making it so it doesn’t have to default on its debts. The reality is higher inflation is not going to produce a tighter monetary policy.”

Peter compared inflation to a fire. The Fed is going to have to ignore the fire. That means it will get worse. The fire will get bigger because the central bank thinks putting it out will do more harm than letting it burn.

If traders understood this – that higher inflation just means that it’s going to get even worse – then they would be dumping the dollar. They would be buying gold.”

The real interest rate equals inflation minus the nominal interest rate. So, even if the Fed pushes up nominal rates, the real rate can continue to fall in a high inflation environment. Peter said even if the Federal Reserve does push interest rates higher, it probably won’t be able to keep ahead of the inflation curve.

So, the markets have got it completely wrong when it comes to how to react to inflation. Inflation is good for gold prices and bad for the dollar. So, when you see these kind of selloffs like we saw today – these are buying opportunities. This is an opportunity to buy from people who don’t know what they’re doing because they’re just focusing on this short-term relationship that is wrong.”

Gold is Very Much Relevant Says Goldman Sachs

Goldman Sachs says precious metals remain a “relevant asset class” sought as a safe haven in response to “fear” in developed-market economies, while purchases tend to be tied to growing wealth in emerging-market economies.

The bank released a report Tuesday, titled “Fear And Wealth,” that was not a traditional investment-bank gold forecast but assessed the factors that tend to influence demand in both developed and emerging economies. This combination of fear and wealth accounted for a greater-than-400% rise in gold prices over the two decades since the metal bottomed in the late 1990s, Goldman said.

“We believe that precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,” the bank said. “They are neither a historic accident or a relic.”

The physical properties of an ideal long-term store of value — durability, portability, divisibility and intrinsic value – explain why precious metals were initially adopted and why they remain relevant today, Goldman said.

The so-called fear factor tends to be more important in the short to medium term in developed nations, Goldman said. While real interest rates and economic expectations play a role in gold demand, so do debasement, sovereign balance-sheet, geopolitical and other market risks.

“Stated more simply, we are talking about the drivers of ‘risk-on, risk-off’ behavior in markets,” Goldman said. “This factor matters so much to gold precisely because it is a safe-haven asset. Accordingly, as uncertainty increases, preferences shift towards having more gold in the portfolio, driving prices higher. Fear can spike or fall quickly, and since DM economies tend to have more wealth to reallocate as the world gets riskier, this is both a medium- to short-run driver and more one exposed to the DM growth outlook.”

The global financial crisis highlighted the purchasing that occurs based on fear, Goldman said.

“The re-emergence of structural tail risks in developed markets led to a significant rotation towards more defensive portfolios and a reassessment of central bank’s gold-selling policies. This has been manifested in higher retail and ETF [exchange-traded-fund] purchases — still more than twice as high in 2016 as in 2006 — and DM central banks halting all sales of gold stocks since 2009.”

Nevertheless, the bank said, with the global economy strengthening and more rate hikes expected from the U.S. Federal Reserve in 2018 and 2019, “we expect that the fear factor will moderate over the next 12 months, likely driving a moderate rotation out of gold for DM investors.”

Meanwhile, gold demand in emerging economies tends to rise when wealth does likewise. Rapid accumulation of gold tends to occur when per-capita gross domestic product reaches roughly $20,000 to $30,000, Goldman said.

“As more EM economies — including China — are set to grow to these income levels over the next few decades, the underlying long-term demand picture remains supportive of gold prices,” Goldman said. “While fear can spike or fall relatively quickly, wealth tends to accumulate slowly. This makes wealth an important, but easy to overlook in short-term forecasting, driver of gold.”

A boom in income and savings in emerging-market economies since 2000 created new consumers for gold demand, Goldman said. In fact, the bank pointed out, China’s and India’s combined share of the gold jewelry market increased from 25% to over 60%.

China’s jewelry and investment demand is around 0.5 gram per person per year, Goldman said. “Our modeling, based on the historical experiences of 29 countries at various stages of development since the early 1990s, suggests that this is still very far from peak annual demand,” the bank said.

As for other precious metals, Goldman said silver primarily moves in response to gold prices and industrial demand.

“In the medium term, divergence between the two prices is primarily driven by changes in industrial demand for silver and to a lesser degree, silver supply. This means that silver tends to outperform gold during the expansion phase of the business cycle when industrial demand growth is strong,” the bank said.

“It should be noted however that since 2011, silver industrial demand diverged from the global business cycle due to the substitution for base metals (initiated by the 2011 silver price spike), but we expect this disconnect to be temporary.”

Meanwhile, due to less safe-haven investment demand and the potential for physically tight markets, platinum group metals tend to be priced like other industrial commodities.

“The price of a basket of PGMs must reflect the price of the incentive mine project necessary to balance the market,” Goldman said. “The ratio of individual PGM prices then has to be determined as a function of relative on-ground stocks and market balances.” – Allen Sykora

Gold Prices To Hit Records Highs Within Two Years

As gold prices retreated below its key psychological level of $1,300 in after-hours trading Monday, one precious metals expert remained optimistic, saying that the metal could hit new all-time highs by 2020.

“By 2020–2022 we would see record high gold prices in terms of nominal annual average prices,” the managing director of CPM Group Jeff Christian said in an interview with Macro Voices. “For the annual average price to be $1,650 or $1,700, that means that you’re going to have gold prices knocking on the door of $2,000.”

In the short-term, Christian said good things are in store for the yellow metal, with prices going as high as $1,360 an ounce.

“Over the next few months the price is probably going to move back up toward $1,340 to $1,360 – into late November and December,” Christian said. “Then getting into 2018, depending on what happens in the global financial markets, we think that the gold price will probably continue to rise at perhaps a slightly faster rate than it has risen in the last couple of years.”

As Asian markets opened, spot gold on Kitco.com was last seen trading at $1,293.50, down 0.08% on the day.

Christian is not as excited about silver, adding that his outlook for the white metal has a “firm ceiling” at around $19 over the next several months.

“We’re looking for silver to move sideways,” he said. “Silver is a financial asset, to some extent, like gold. But it’s much more of an industrial metal and an industrial commodity . . . One of the things that you see is that investment demand really drives prices higher or lower, and investors are much more focused on gold right now, it seems, than they are on silver.”

In terms of future drivers for the metals, the search for a new Federal Reserve Chair should not have much of an impact, according to the expert.

“Concerns over who comes in at the Fed will ruffle the markets, and you’ll see the usual little volatilities as people jockey, but that’s largely meaningless to the bigger issue, which is that the Fed probably will continue to suffer from a diminution of respect on a global basis,” Christian said.

This distrust of what the Fed is doing to the U.S. economy could translate into higher gold prices, he explained. “Part of our view of gold prices rising over the next five years is predicated on the view that there’s going to be concerns about the future of monetary management in the United States and on a global basis.” – Anna Golubova

 

Electric Vehicles Electrifying Copper – The Metal of the Future

Electric Vehicles Electrifying Copper - The Metal of the Future

Electric Vehicles Electrifying Copper – The Metal of the Future

As many of you know, copper is often seen as an indicator of economic health, historically falling when overall manufacturing and construction is in contraction mode, rising in times of expansion.

That appears to be the case today. Currently trading above $3 a pound, “Doctor Copper” is up close to 28 percent year-to-date and far outperforming its five-year average from 2012 to 2016.

Copper is far outperforming the five year average

Several factors are driving the price of the red metal right now. Manufacturing activity, as measured by the purchasing manager’s index (PMI), is expanding at a pace we haven’t seen in years in the U.S., eurozone and China. The U.S. expanded for the 100th straight month in September, climbing to a 13-year high of 60.8.

Speculators are also buying in response to word of copper shortages in China, despite September imports of the metal rising to its highest level since March. The world’s second-largest economy took in 1.47 million metric tons of copper ore and concentrates last month, an amount that’s 6 percent higher than the same month in 2016.

Why Copper Is the “Metal of the Future”

Why are we seeing so much copper entering China? One reason could be battery electric vehicles (BEVs), which require three to four times as much copper as traditional fossil fuel-powered vehicles.

China is already the world’s largest and most profitable market for BEVs, and Beijing is now reportedly working on plans to curb and eventually ban the sale of fossil fuel-powered vehicles, according to the Financial Times. This would place the Asian giant in league with a number of other powerful countries similarly crafting bans on internal combustion engines within the next 25 years, including Germany, France, Norway, the United Kingdom and India.

Because of the sheer size of the Chinese market, this move is sure to delight copper bulls and investors in any metal that’s set to benefit from higher BEV production. That includes cobalt, lithium and nickel.

According to Bloomberg New Energy Finance, BEVs will account for 54 percent of all new car sales by 2040. That year, China, Europe and the U.S. are expected to make up 60 percent of the global BEV fleet.

This could have a huge effect on copper prices over the next 10 years and more. With fewer and fewer large deposits being discovered, demand should accelerate from 185,000 metric tons today to an estimated 1.74 million tonnes in 2027, according to the International Copper Association.

Electric vehicles expected to drive copper demand

These are among the reasons why Arnoud Balhuizen, chief commercial officer of Australian mining giant BHP Billiton, called copper “the metal of the future” in an interview with Reuters last month.

“2017 is the revolution year [for electric vehicles], and copper is the metal of the future,” Balhuizen said, adding that the market is grossly underestimating the red metal’s potential as BEV adoption surges around the world.

Cobalt Gets Its Day in the Sun

And let’s not forget cobalt. The brittle, silver-gray metal, used to extend the life expectancy of rechargeable batteries, is up more than 81 percent so far in 2017 and 109 percent for the 12-month period. Performance is being driven not only by growing BEV demand but also supply disruptions in the Republic of the Congo, where more than 60 percent of the world’s cobalt is mined.

“It’s a really bright future for cobalt,” Vivienne Lloyd, analyst at Macquarie Research, told the Financial Times. “There doesn’t seem to be enough of it.”

Before now, there was very little mainstream interest in cobalt as an investment, but that’s changing as rapidly as world governments are joining the chorus to move away from fossil fuels. One sign of that change is the London Metal Exchange’s (LME) upcoming cobalt contracts, one for the physical metal and another for the chemical compound cobalt sulphate. This will allow investors to trade the underlying metal and participate in the electric vehicle “revolution,” as Balhuizen calls it.

In the meantime, investors can participate by investing in a producer with exposure to cobalt—among our favorites are Glencore, Freeport-McMoRan and Norilsk Nickel—or a natural resources fund.

Gold Closes Above $1,300 an Ounce

Gold also looks constructive as we head into the fourth quarter and beyond, according to a number of new reports and analysis last week.

UBS strategist Joni Teves finds it “encouraging” that gold has managed to recover this year off its 2016 lows. Although a likely December rate hike could be a headwind, Teves points out that the metal performed well in the months that followed the previous three rate hikes. What’s more, gold has rallied in each January since 2014. We could see a similar bump in price this coming January.

Not only is gold trading above its 50-day moving average again, but for all of 2017, it’s been following a nice upward trend as the U.S. dollar dips further.

Gold following a nice upward trend as US dollar weakens further

A weaker greenback, of course, is bullish for all commodities, including copper. According to Bloomberg strategist Mike McGlone, unless the dollar unexpectedly recovers in the near term, commodities, as measured by the Bloomberg Commodities Index, could gain as much as 20 percent between now and year’s end.

Meanwhile, BCA writes that major risks in 2018—inflationary expectations stemming from President Donald Trump’s protectionism, tensions between the U.S. and China, and continued strife in the Middle East among them—could keep the shine on gold.

The research firm reminds investors that gold has historically done well in times of economic and geopolitical crisis, outperforming the S&P 500 Index, U.S. dollar and 10-year Treasury by wide margins. Because the metal is negatively correlated to other assets, it could potentially serve as a good store of value if equities entered a bear market.

Such a bear market, triggered by tighter U.S. monetary policy, could take place as early as 2019, BCA analysts estimate. Gold would then stand out as a favorable asset to hold, especially if inflationary pressures pushed real Treasury yields into negative territory.

A Fear Trade Lesson from Germany

This is the lesson Germany has learned over the past 10 years, as I shared with you last week. Before 2008, Germans’ investment in physical gold barely registered on anyone’s radar, with average annual demand at 17 metrics tons. The country’s first gold-backed exchange-trade commodities (ETCs) didn’t even appear on the market until 2007.

But then the financial crisis struck, followed by monetary easing and low to negative interest rates. These events ultimately pushed many Germans into seeking a more reliable store of value.

Now, a new report from the World Gold Council (WGC) shows that German investors became the world’s top gold buyers in 2016, ploughing as much as $8 billion into gold coins, bars and ETCs. Amazingly, they outspent Indian, Chinese and U.S. investors.

Gold investment in Germany hit a new high in 2016

Analysts with the WGC believe there is room for further growth, citing a recent survey that shows latent demand in Germany holding strong. Impressively, 59 percent of German investors agreed that “gold will never lose its value in the long-term.” That’s a huge number, suggesting the investment case for gold remains attractive. – Frank Holmes

Where the Next Major Banking Crisis Will Begin

Where the Next Major Banking Crisis Will Begin

Where the Next Major Banking Crisis Will Begin

Ray Dalio just bet $1.1 billion against Italy.

Specifically, he shorted (bet against) five Italian banks and one insurance company last quarter. And he did so to the tune of $770 million.

Dalio also bet $311 million against Italy’s largest utility company.

This is a big deal.

You see, Dalio is one of the world’s most respected investors. He manages $160 billion at Bridgewater Associates, the world’s biggest hedge fund.

• But Dalio didn’t reach the top of Wall Street by accident…

He got there because he can spot massive threats and opportunities long before other people do.

For example, Dalio predicted the U.S. housing bubble would burst in 2007. Not only that, he said the crash would spread to the banking sector.

At the time, many people thought this was a crazy idea. But Dalio was right.

That year, the U.S. banking sector imploded. This triggered the worst financial crisis since the Great Depression. The average U.S. stock plummeted 57% over the next two years.

• In short, it pays to watch what Dalio’s doing…

So in a minute, I’ll tell you why Dalio made this giant bet. I’ll also show how you, too, can profit from Italy’s problems.

But you first need to understand what those problems are…

Italy’s banking system is a ticking time bomb.

Its banks are sitting on $356 billion worth of non-performing loans (NPLs).

These are loans borrowers have stopped paying. They’re considered “sour loans” because banks often don’t end up collecting them. They take huge losses instead.

To give you a sense of how serious this is, consider this: NPLs make up 18% of all loans issued by Italian banks. For perspective, NPLs accounted for 5.3% of all loans issued by U.S. banks at the height of the Great Recession.

As if that weren’t enough, these sour loans are valued at around 20% of Italy’s annual economic output.

It’s an incredibly fragile situation, to say the least.

• European regulators are now scrambling to prevent a banking crisis…

The Italian government, for one, has pledged to bail out the banking system if necessary.

This is when the government gives banks money to keep them from crashing. Taxpayers end up footing the bill.

The European Central Bank (ECB) is also trying to help. On October 3, it announced plans to impose strict capital requirements for European banks.

In short, it wants Italian banks to set aside billions of euros to cover losses from NPLs.

• These regulations are intended to shore up Italy’s fragile banking system…

They were supposed to make people feel safer. But that’s not what happened.

Instead, the ECB rattled investors’ nerves. In fact, Italian bank stocks plummeted on the news.

? Since the start of October, the FTSE Italia All-Share Banks Index is down 5%.

? UniCredit, Italy’s largest bank, has fallen 6%.

? UBI Banca, another major Italian bank, has plunged 11%.

? And BPER Banca is down 15%.

These are staggering declines for such a short period. Still, you might not be worried about this.

And that’s because most U.S. investors don’t own any Italian banking stocks. But you must realize something…

• Italy’s not the only European country drowning in bad debt…

German and French banks together have around $272 billion worth of bad loans on their books.

And Europe as a whole has about $1 trillion worth of NPLs.

In other words, a banking crisis in Italy could spread across Europe like the black plague.

If that happens, European bank stocks won’t just tumble. They’ll go down in flames.

So, lighten up on European bank stocks if you own any. You should also buy gold if you haven’t already.

• That’s because gold is the ultimate safe-haven asset…

It’s preserved wealth for centuries, through history’s most violent financial crises.

And that’s why Dalio thinks every investor should keep between 5% and 10% of their money in gold.

And those who don’t own gold? Well, Dalio thinks they’re clueless. He said in 2015:

If you don’t own gold, you know neither history nor economics.

But Dalio doesn’t just encourage investors to own gold. He buys it with his own fund’s money.

In fact, Bridgewater bought more than $100 million worth of SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) during the second quarter.

These are the world’s largest gold funds. They’re easy ways to gain exposure to gold. But that doesn’t make them the best.

• If you really want to protect your wealth, I recommend that you own physical gold…

This is gold that you can hold in your hand. It’s a much more secure way to own gold than GLD, IAU, or any other “paper gold” fund. – Justin Spittler and Joe Withrow

 

Here’s why I believe Gold Prices won’t just get Slammed Big-Time Again

Here's why I believe Gold Prices won’t just get Slammed Big-Time Again

Gold Prices won’t just get Slammed Big-Time Again

Gold could be in a long-term trend right now that spells dramatically higher prices in the years ahead.

To understand why, let’s first look at the long decline in gold prices from 2011 to 2015.

The best explanation I’ve heard came from legendary commodities investor Jim Rogers. He personally believes that gold prices will end up in the $10,000 per ounce range, which I have also predicted.

But Rogers makes the point that no commodity ever goes from a secular bottom to top without a 50% retracement along the way.

Gold prices bottomed at $255 per ounce in August 1999. From there, it turned decisively higher and rose 650% until it peaked near $1,900 in September 2011.

So gold prices rose $1,643 per ounce from August 1999 to September 2011.

A 50% retracement of that rally would take $821 per ounce off the price, putting gold at $1,077 when the retracement finished. That’s almost exactly where gold prices ended up on Nov. 27, 2015 ($1,058 per ounce).

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

Why should investors believe gold prices won’t just get slammed again?

The answer is that there’s an important distinction between the 2011–15 price action and what’s going on now.

The four-year decline exhibited a pattern called “lower highs and lower lows.” While gold prices rallied and fell back, each peak was lower than the one before and each valley was lower than the one before also.

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

The Feb. 24, 2017, high of $1,256 per ounce was higher than the prior Jan. 23, 2017, high of $1,217 per ounce.

The May 10 low of $1,218 per ounce was higher than the prior March 14 low of $1,198 per ounce.

The Sept. 7 high of $1,353 was higher than the June 6 high of $1,296. And the Oct. 5 low of $1,271 was higher than the July 7 low of $1,212.

Of course, this new trend is less than a year old and is not deterministic. Still, it is an encouraging sign when considered alongside other bullish factors for gold.

Where does the gold market go from here?

We’re seeing a persistent excess of demand over new supply. China and Russia alone are buying more than 100% of annual output each year.

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

With gold sellers disappearing and large demand continuing, the price will have to go up to clear markets.

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

Finally, the Fed will not raise rates in December, contrary to market expectations.

Eventually, the markets will figure this out. Right now, markets are giving about an 86% chance of a rate hike in December based on CME Fed funds futures. That rate will drop significantly by Dec.13 when the FOMC meets again with a press conference.

As market probabilities catch up with reality, the dollar will sink and gold will rally.

In short, all signs point to higher gold prices in the months ahead. I look for a powerful surge toward $1,400 by the end of this year based on Fed ease, geopolitical tensions and a weaker dollar.

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

There is Nothing Stopping a Rally in Oil Prices Now

There is Nothing Stopping a Rally in Oil Prices Now

There is Nothing Stopping a Rally in Oil Prices Now

Oil supply disruptions, high OPEC oil cut deal compliance rates, an extra-violent hurricane season, and the threat of new U.S. sanctions against Iran have fed optimism in oil markets over the past couple of months. Yet there’s bad news for bulls: a growing number of experts and industry insiders warn that the lower-for-longer scenario is nowhere near its end.

Earlier this week, Deloitte Services released a survey of 250 U.S. oil industry executives that revealed two-thirds of them expected oil benchmarks to remain below $60 through 2018. In fact, the majority of executives polled said they didn’t expect crude oil prices to rise above $70 before the end of the decade. Also, 60 percent said they expected the number of drilling rigs in the country to decline next year, and half said that capital spending will likely fall in 2018.

The president of Facts Global Energy consultancy shared a similar message Wednesday. Speaking at the Reuters Global Commodities Summit, Jeff Brown said that global inventories were still quite high, and there was no meaningful reason for them to decline by any significant amount over the next year or two. This means there is no big upward driver for oil prices.

In its latest Oil Market Report, the International Energy Agency also displays cautious optimism. OECD crude oil inventories are still 170 million barrels above the five-year average, which OPEC took as its target in the production cut deal. Although it’s a substantial reduction from the 318-million-barrel overhang at the start of 2017, there’s still excess oil in the world—and it will weigh on any possible price increase in the short term.

Of course, forecasts of growing U.S. production apply their own pressure on oil prices, and for the time being, forecasters seem to be in agreement that U.S. oil production will indeed continue to grow even if industry executives expect to see fewer rigs. The technology-enabled efficiency improvement drive in the shale patch is still gaining momentum, after all, and it’s only reasonable to expect more news in this area, particularly about further cost-cutting and lower breakeven oil prices.

Separately, efficiency, in a wider sense, also undermines the prospects of a rosy future for oil prices. Efficiency and technology are the twin factors that consistently push down oil demand, but oil bulls seem to ignore them, the chief economist of asset management firm Tressis Gestion told CNBC recently.

“The bulls of the oil market are missing the elephant in the room, which is efficiency and technology. It takes away every year—no matter what they say—it takes away estimates of growth of demand in the region of around 500,000 to 600,000 barrels per day,” Chief Economist for Tressis Gestion Danielle Lacalle said.

To top it all, last month OPEC exceeded its own stated production target, pumping 32.75 million bpd—25,000 bpd above its quota—mostly because of production increases in exempt Libya and Nigeria, but also because Iraq pumped more as well.

So, we have growing U.S. production, regardless of where oil prices are going. We have OPEC struggling to maintain compliance, and possibly doomed to make the production cut deal indefinite since every higher figure reported pushes benchmark oil prices down immediately. And we have general tech-enabled efficiency driving down demand, despite relatively optimistic global oil demand forecasts from various authorities.

There really isn’t much to support the argument for oil prices climbing significantly higher for the time being, except perhaps new U.S. sanctions against Iran. That event would tip the scales in a more favorable direction for oil prices, and this fact could just make the sanctions more likely. – Irina Slav

 

Can India, a Growing Auto Market, Overtake China In The Electric Vehicles Revolution?

Can India, a Growing Auto Market, Overtake China In The Electric Vehicles Revolution?

Can India Overtake China In The Electric Vehicles Revolution?

India faces a wide chasm between Prime Minister Narendra Modi’s campaign to make sure all new vehicles sold in India are electric by 2030 and actual sales numbers.

While India has followed China’s lead to reduce air pollution and oil import dependency in its booming cities, it’s still far away from sales figures that carry any weight. According to International Energy Agency, China registered 336,000 plug-in vehicles last year while India only saw 450 of these new vehicles hit its roads.

One major Indian automaker, Mahindra & Mahindra, wants to change course by committing to invest $600 million in the technology. Electric versions of its current crossover SUVs will be scheduled in the near future. The company plans to eventually boost its EV production to 5,000 units a month.

Mahindra had just lost a bid for a 10,000 EV contract with the government’s Energy Efficiency Services Limited agency to its main Indian competitor, Tata Motors. Mahindra was awarded part of the contract after lowering prices to match Tata’s lowest bid; the company admitted it won’t make any profits off the sales of its eVerito electric sedan to the Indian agency.

Tata was able to win the majority of the contract even though it has yet to manufacture any EVs.

Mahindra has been in the segment for a few years with its e20 and e20 Plus small electric hatchback models, the eVerito electric sedan, the eSupro electric van, and the e-Alfa Mini three-wheeler. Sales have been slight, as reflected in the 450-unit sales total for 2016.

Maruti Suzuki has offered electric models to the Indian market. Same goes for BMW with its i8 plug-in hybrid high-performance car. And Volvo has the XC90 plug-in hybrid. For now, China remains a much more important market for BMW, Volvo, and other global automakers.

General Motors, which plays a significant role in the China market through a joint venture with a local automaker, will pull out of India by the end of this year.  The company will also cancel most of a previously planned $1 billion investment to build a new line of low-cost vehicles in India

It would take GM a $500 million change in the second quarter to restructure operations in India, Africa, and Singapore.

Mahindra supports the government’s push for eliminating fossil fuel powered vehicles and EV development for the national market. The company’s subsidiary, Mahindra Electric, will operate as a separate entity supplying components to the Mahindra & Mahindra company, which will manufacture the EVs. The company currently operates a battery manufacturing plant and hopes to set up another larger facility soon.

India has seen a growing new vehicle market, with about 2.5 million petroleum-powered vehicles being sold annually in recent years. The serious challenge lies in making the monetary investments and attracting the engineering and design talent needed to build and market Electric Vehicles.

Finding uninterrupted electricity supplies to charge the EVs presents another challenge to selling these vehicles to skeptical consumers. The country still sees power outages in fast-growing cities where residents crank air conditioners at full blast.

India’s national government and electric utilities—along with automakers building EVs—face a high hurdle for EV charging stations. The country has a nearly non-existent charging infrastructure and must invest heavily in chargers to sell the technology to consumers, and to stakeholders in key industries.

India is expected to be a growing auto market, where the ratio remains low—only 18 cars per 1,000 citizens compared to nearly 69 in China and 786 for the U.S. That data comes from a study by India policy think-tank NITI Aayog and the Colorado-based Rocky Mountain Institute.

Mahindra and Tata are betting on EVs taking off as consumers begin buying their first vehicles and convert over from two-wheelers to four-wheelers. Higher demand and production will lead to component costs going down and profits up for these automakers.

Tata has participated in trial runs of its electric buses, and is preparing to meet its obligation to the Energy Efficiency Services Limited agency. Tata sees vast opportunities selling electric cars to the government and electric trucks and buses for mass transportation.

Mahindra committed to ramping up EV production nearly tenfold to 5,000 units manufactured per month within the next two to three years. – Jon LeSage

 

Is U.S. Demand for Physical Gold and Silver a Barometer for the Entire Industry?

Is U.S. Demand for Physical Gold and Silver a Barometer for the Entire Industry?

Is U.S. Demand for Physical Gold and Silver a Barometer for the Entire Industry?

Recently, the western banking cartel media has been out in full force to mislead everyone regarding a narrative of falling and “soft” demand for physical gold and silver, as they typically frame the market in the US as representative of the global market when this is patently false. Furthermore, the usual suspects, like Goldman Sachs bankers, have piled on to this misinformation by calling for a plunge in gold prices, but more on that later. First let’s discuss the misleading statistics being disseminated by the mainstream financial media regarding physical gold and physical silver demand. Last month Reuters reported plummeting silver Eagle coin sales for Q3 at 3.7 million ounces, and attempted to frame weak US physical silver demand as weak overall silver demand by calling the silver coins data “the lowest in 10 years”. Furthermore, they attempted to frame physical gold demand as weak by referring to the Q3 2017 American gold eagle coins sales of 38,500 ounces as a 80% plunge from the same quarter, prior year. If you were to read just this one article to gauge physical gold and physical silver demand worldwide, you would likely believe that demand was dead and that no one was interested in buying physical gold or silver anymore, as the Reuters journalist literally provided zero context to these numbers. As I’ve repeatedly stated for the past 10 years, anyone can use statistics to present a biased and false picture of reality by stripping presented data of any context. This is precisely what the Reuters journalist did.

Furthermore, Bloomberg hopped on the “no one wants to buy physical gold and silver” Reuters bandwagon as well with a similar narrative of gloomy gold demand by reporting last week that “sales of gold coins [in the United States] in the first nine months of the year shrank to the lowest in a decade.” As well, various mainstream US financial websites prominently reported that demand for US Mint produced gold bullion has fallen off a cliff this year, with the first 5-months of 2017 only generating 185,500 ounces of gold sales, yielding a projected 2017 annual figure of only 445,200 AuOzs sold.

And while all of the above figures are factual and true, they are entirely misleading when it comes to global physical gold and silver demand as all the data are provided out of context, and within a very narrow lens that presents US gold bullion and silver bullion sales as the most important data in the entire world. In fact, American physical gold and silver consumption is irrelevant to global physical gold and silver demand as these figures pale in comparison to aggregate physical gold and silver consumption in China, India, and Japan. Though aggregate gold demand in all three of these countries far outweighs aggregate gold demand in the United States, and gold demand on the Asian continent is far more representative of total global demand, I can use one country, China, without even discussing the details of the enormous physical gold demand in India and Japan this year, to prove my point. Before I continue with a discussion of Chinese physical gold demand this year, let me just briefly note that for the first seven months of this year, India’s gold imports more than doubled over the prior year to 550 tonnes. With another 150 to 200 tonnes of gold estimated to be illegally smuggled into India, a conservative figure for India gold demand this year amounts to about 637.5 tonnes, or more than 20.5M AuOzs, for the first 7 months of this year. Recall that annual sales of gold bullion in the United States from the US Mint for the entire year are projected to be 2.4% of the 7-month Indian demand, yet Reuters and Bloomberg journalists discuss US Mint bullion sales in American media, providing zero context of global demand, as if they are the barometer for the entire global industry.

In China, gold and silver panda coin sales only make up a small portion of the overall demand for physical gold and silver as in 2016, only 1M China gold panda coins and 8M China silver panda coins were minted. For this reason, let’s compare physical bullion bar consumption in China to US Mint gold bullion sales, though I want to stress that we are not comparing apples to apples when doing so. Of course, the US mint figure does not include coin and bar sales of independent US bullion dealers, as there is no reliable source that aggregates these numbers in the United States every year. Still, since most “gold” sales in the United States occur in the form of paper gold and the GLD ETF, I’m going to assume that independent dealer sales of physical gold are not going to inflate the US mint number that significantly. In China, the best source of aggregated individual retail purchases of gold bullion bars is provided by the Shanghai Gold Exchange (SGE), as various Chinese banking sources have confirmed that the PBOC, the Chinese Central Bank, does not buy any of its gold on the SGE, and that all withdrawals represent private demand in China.

In the first 8 months of this year, according to data provided by the SGE, the Chinese withdrew an aggregate of 1.29 M kgs of physical gold. Annualized, this figure amounts to approximately 62,230,302 ounces of physical gold. Because recycled gold has to flow through the SGE, this figure is actually slightly higher than real demand, but even if we consider 5% of all withdrawn SGE gold to be recycled gold, and subtract an estimated 5% from this number, then annualized wholesale demand for physical gold in China would still be an estimated more than 59M AuOzs. Note that this figure only represents the official amount of physical gold being withdrawn from the SGE and does not represent wholesale and retail gold bullion purchases from banks, independent dealers and from neighboring countries like Hong Kong, as many Chinese often buy gold when in Hong Kong and then import it back into China. Thus, even if we add a 20% premium to the US annualized physical gold purchase number above to represent all physical gold purchased outside of the US mint, we are speaking about a minimum of 59M AuOzs purchased in China this year versus 445,200 * 1.2 = 534.2k AuOzs purchased in the United States.

In other words, US demand for physical gold is likely less than 1% of Chinese demand and less than 2.5% of Indian demand, yet US financial media has repeatedly framed physical gold and silver demand as cratering for the duration of this year thus far, by deceptively only reporting cratering numbers for physical gold demand in the United States. Even taking into account the 1.4 billion people that live in China versus the 325M people that live in the United States, we are talking a giant discrepancy in physical gold demand as there are only 4.3 times more Chinese than Americans, yet physical gold demand is not 4.3 times more, but 110 times more. In addition, the Economic Times, the Financial Express, and the World Gold Council all have pegged private physical gold ownership in India at more than 643M AuOzs, and Koos Jansens of BullionStar has produced similar estimates for private physical gold ownership in China. While I have read articles regarding how estimates are calculated for private gold ownership in India and China and found them to be credible, I have not yet discovered any estimates about private gold ownership in the United States to be credible, so it’s difficult to know how private US gold ownership stacks up to India and China other than to estimate that it is a fraction of the ownership in these two countries.

Finally, the same shenanigans that happen with US financial media reporting regarding physical gold sales happen with their reporting of physical silver sales as well. YTD, up until August, the SGE reports that retail withdrawals of silver have amounted to 990,105 kg, or about 31.8M AgOzs. Annualized this amounts to roughly 48M AgOzs and again if we estimate 5% of this figure to be recycled silver, then Chinese wholesale demand for silver for 2017 will still amount to more than 45M AgOzs. The US Mint reported that silver bullion sales for the first 5-months of the year were 11.2 M AgOzs, or less than 27M AgOzs annualized. In the case of silver, since the Chinese population is 4.3 times larger than the American population, the per capita sales of silver is weaker in China than in the US. However, it is still extremely misleading for Reuters to try to paint a collapsing demand of physical silver by reporting, as they did last month, that “third-quarter sales of American Eagle silver coins fell to the lowest in 10 years.”

In China, the retail demand for physical silver will likely not be the driving force for silver usage for the next 5 to 10 years, but it will be industrial demand that drives overall physical silver consumption patterns. China currently plans to clean up one of its most persistent problems, heavily polluted air in its major cities, by aggressively pursuing a plan of solar energy to replace less green energy sources. Just last month, Xin Guobin, the Vice-Minister of Industry and Information Technology, stated that China had begun“relevant research” to establish a timeline to phase out petrol and diesel vehicles in the Chinese market and a desire to add 20 gigawatts of solar power annually nationwide. In order to achieve this, China would need to utilize about 56M AgOzs a year to produce 20 gigawatts of solar power. Furthermore, other countries outside of China have also stated a desire to rely on solar energy much more heavily over the next 5 years, also increasing global demand for silver. With the declining silver prices in the past few years, one would be mistakenly led to believe, based upon what every student learns in Economics 101 class in business school, that supply has been exceeding demand by a healthy margin every year for the past 5 years. However, this is not the case. For the last several years, according to the Silver Institute, global silver supply, every year, has been insufficient to meet global silver demand. In addition, global silver mine production decreased in 2016 for the first time since 2002 from a base of about 1 billion AgOzs of production per year in years past to just 885.8M AgOzs. This year, global silver mine production is once again expected to fall again for the second time in the last 15 years. With many of the world’s largest silver mines suffering depleting reserves at a rapid pace and many of the world’s largest silver mines suffering shorter LOMs, I suspect that global silver mine production may have peaked last year at a time when global demand will be significantly increasing.

But don’t let the above facts get in the way of incessant price suppression schemes executed against spot prices of gold and silver via the paper gold and paper silver markets by the Rothschild Central Banks and the large Wall Street commercial banks. In fact, just on schedule, as I was looking for the latest Goldman Sachs banker propaganda to prop up digital currencies and to take down gold prices, the bankers certainly did not disappoint. Yesterday, Goldman Sachs bankers Sheba Jafari and Jack Abramovitz stated they now expect gold to retreat back to $1,100 an ounce from its current price of around $1288, a very transparent effort to help out the still very large commercial banking short gold positions still held that are firmly in the red at the current time. By the way, Sheba Jafari is the Goldman Sachs analyst that has also continually projected significantly higher prices for BTC every time the BTC price has significantly corrected at any point this year. In other words, Jafari seems to always state gold negative, and BTC positive positions, as one would expect a banker to do. There is little doubt that all the Western financial media attention given to BTC has diminished the luster of physical gold this year. Given that commercial banks still have large short gold and short silver positions outstanding at the current time, and given that their analysts are trying to manufacture another retreat in prices, price behavior in gold and silver may be volatile from now until the end of the year. However, even if they are successful in manufacturing another volatile drop in spot prices so they can profitably exit their current gold and silver shorts, I do not expect such a drop to have a long life span, as such a drop, if it happens, will have been entirely artificially manufactured and be viewed as just another opportunity by the Chinese, Russians, Indians, and Japanese to scoop up more physical gold/silver at bargain prices.

As an interesting final note, the Russian Central Bank has now followed the PBOC in banning all exchanges that allow trading of cryptocurrencies that have no intrinsic value. It seems to me that lines in the sand are being drawn between the Western Central Banks that clearly desire to take the world to a 100% digital cryptocurrency platform to replace their currently failing 98% digital fiat currency system and the BRICS nations that clearly desire physical gold to be an integral component of their currency system moving forward, with perhaps a slight speed bump in India, as Indian PM Narendra Modi seems to temporarily have been captured by Western banking interests in pushing a digital currency agenda. In my humble opinion, the best way to prepare for the coming massive global asset bubble collapse is still to purchase physical gold and silver at these insanely low prices at the current time. – JS Kim

Is Dr. Copper Getting Started on Another Decade-Long Bull Run?

Is Dr. Copper Getting Started on Another Decade-Long Bull Run?

Is Dr. Copper Getting Started on Another Decade-Long Bull Run?

Copper prices surged above $7,000 a metric ton for the first time since 2014 as metals rallied on stronger Chinese factory data and Federal Reserve Chair Janet Yellen warned that U.S. inflation may accelerate. The red metal jumped as much as 4.3 percent on the London Metal Exchange, while nickel climbed for a seventh session, the longest run since August.

Industrial metals have gained amid sustained optimism about the strength of Chinese consumption and signs that inflation is picking up in other major economies as global growth rebounds. Copper for three-month delivery climbed 3.7 percent to settle at $7,134.50 a ton at 5:51 p.m. in London. Lead, nickel and aluminum also closed higher while tin was unchanged. Zinc declined.

No one knows where the next move will be, but I see more supportive factors than downsides for base metals.

Why Copper is the Best Metals Trade Right Now

Gold is waking up.

After cratering from more than $1,350 to a low of $1,270 in just four weeks, gold futures finally bounced this month. The fourth quarter has been kind to the metal so far as it briefly pushed back above $1,300 to start the trading week. The Midas metal is giving back some of those gains early this morning. It’s down about $12 so far today…

But gold’s not the metal that’s catching my eye this week.

Right now, I’m all about industrial metals.

A global economic recovery is starting to lift metals from their lows. Steel, nickel, aluminum and iron ore have all perked up recently. Palladium— an important component in catalytic converters— is streaking above $1,000 this week for the first time in 16 years.

One of the big catalysts behind the rally we’re seeing in industrial metals is strong data out of resource-hungry China.

China brought in more than 100 million tons of iron ore last month, Investor’s Business Daily notes. That’s 16% more than the country imported in August. Demand is much stronger than analysts anticipated. Copper imports also continue to surge.

Trumponomics are also helping metals catch a bid. The White House is now “requiring the use of North American-made steel, aluminum, copper and plastic resins in cars and trucks sold under North American Free Trade Agreement rules, as it seeks to give U.S. industry a boost,” Reuters reports.

The results speak for themselves. It’s been a bumpy ride, but the metals and mining sector is finding new life during the second half of 2017. Since the beginning of the third quarter, these stocks are outperforming the S&P 500 by a significant margin.

Why Copper is the Best Metals Trade Right Now

The SPDR S&P Metals and Mining ETF is up more than 9% since July 1st. Meanwhile, the S&P 500 is up just shy of 5.5%.

Then there’s copper. The metal posted new 2017 highs yesterday, extending its breakout. It’s now sitting on year-to-date gains of almost 30%.

Back over the summer, we told you copper’s bounce off its summer lows was legit. Now it’s extending its comeback move.

You’ll recall that copper died a slow death after topping out in 2011. A nasty six-year bear market sliced its spot price in half. But as we revealed earlier this year, Copper’s prospects have changed dramatically. The post-election rally back in November was the spark that helped copper snap its nasty downtrend. After seven months of choppy consolidation, copper jumped back near its March highs by the summer, signaling to us that it was ready to make a play at a huge breakout.

Now Dr. Copper is back on the move – and we’ve already reserved our seats on the bandwagon. I don’t know if copper is just getting started on another decade-long bull run or if it’s just enjoying a short-term rally. Either way, we’re willing to ride the new trend to gains.

You had a shot to grab onto shares of Freeport-McMoRan Inc. (NYSE: FCX) back in July just before copper rocketed higher. You’re already up nearly 15% on FCX since we first mentioned the trade.

As we mentioned back in the summer, buying FCX is like buying a call option on copper without the high commission. When copper jumps, the miner tends to magnify the move.

That’s exactly what’s happening right now. FCX is leaping back toward the top of its range:

A break above $15.75 could give FCX the momentum it needs to tackle its January highs. Hang on tight! More gains are on the way…- Greg Guenthner

This Major Political Shift Could Rock Copper Markets

Indonesian officials said this past week they are close to an agreement on the major Grasberg mine. Which would see a price set for the government’s legislated purchase of a 51 percent interest in this world-leading operation.

And elsewhere, more major developments emerged for the global copper market. With a leading presidential candidate in the world’s top producing nation saying he wants to overhaul the local mining sector.

That’s Chile, which is gearing up for a presidential election in November. And this week, center-left candidate Alejandro Guillier laid out a 10-point plan for mining reforms — which could mean major changes coming for the Chilean copper sector.

Most of Guillier’s proposed changes are positive. With the candidate pledging to make royalties and environmental impact procedures more amenable for the mining sector.

Guillier also said he would move to streamline the permitting process for major mining projects — by creating a new office dedicated to the review of proposed large-scale operations.

But the biggest change proposed by Guillier would shake Chile’s copper sector to its foundation. By repealing a secret and controversial piece of legislation that has dogged the local mining sector for decades: the Copper Reserve Law.

Under that rule, Chilean state copper miner Codelco is required to transfer a portion of profits each year to fund Chile’s armed forces. With the law having been criticized for a lack of transparency, being outside of the control of Chile’s parliament.

Guillier said he would push for a complete repeal of the law. Which could open the door to Codelco keeping a larger portion of its profits — and thus having increased funds for expansions and new project developments.

That in turn could lead to increased production from Chile as a whole. Guillier also said he wants to do the same with lithium, by creating special state agencies to support development of new projects. Watch for results of the presidential election in November and December.

Here’s to change coming. – Dave Forest

 

Do You Think Gold And Silver Prices Are Manipulated? Aren’t Your Lives Too?

Do You Think Gold And Silver Prices Are Manipulated? Aren't Your Lives Too?

Do You Think Gold And Silver Prices Are Manipulated? Aren’t Your Lives Too?

Almost everybody complains or laments how both gold and silver are being manipulated, and they are, going back at least to the 1920’s and 1930’s and not just recently.  Curiously, very few are even aware, let alone consciously complaining, about how manipulated their lives and those of everyone around them have been and continues to be.

It has been a few months since our last commentary.  We used to present one each week, but over the last several months, it makes less and less sense to provide one.  The lies by all governments and the media are too many and too constant, and too many people remain cluelessly content in their chosen ignorance to resist and force changes.

In the United States, shortly after Trump’s upset election and in what appeared to be  genuine but naive speech promising to Make America Great Again, the sycophant NeoCons, AKA the Deep State, the second most dangerous faction in this country, second only to the hidden-from-sight elites that they so willingly serve in order to bring about the One World Order, staged a coup against the elected president.

Trump promised to Drain The Swamp, but the Swamp has shamelessly enveloped him to prevent populism from becoming more popular.  Let us repeat, the NeoCons staged a coup in this country, and a good number of people support all anti-Trump efforts without even realizing how insidious the NeoCons are and how they have been selling this country into the ground.

Massive loser, Hillary Clinton, still expounds how she lost the election, blaming mostly Russia, without the slightest grasp of reality that she was solely responsible for her ignominious defeat.  Still, she has a voice and a large following despite the corrupt nature of the Clintons since their Little Rock, Arkansas days, when Bill was a penniless governor.
Now, after a trail of dead people over the past few decades that used to be loosely associated with the Clintons, they have become billionaires.  Seems like most people to not care how that came about.

It is impossible to get people to wake up to the George Orwell 1984 clarion call, now in the present tense.  Snowden’s exposure of the NSA and the massive spying the government illegally uses to invade everyone’s privacy did little to cease and desist the appalling misuse of government.  If that wake-up call of how government treats people as the enemy failed to spark any revolt against the abuse of power, expect more of the same, and worse, which is what is happening.

People do not care that the government is run by unknown foreigners who quietly control and pull all the strings for corporations, medicine, education, media, the entire judiciary, etc, etc, etc.  The American flag is the corporate government flag and not the Constitutional flag most assume it to be.  The Constitution, and the flag it represents, are dead.  They do not exist in the corporate federal government.

Why was Lincoln killed?  Why was JFK killed.  Why does hardly anyone realize why Martin Luther King was killed?  Hint: he represented a reformation that was the antithesis of the direction the elites wanted this country to follow.  King was uniting people.  He was preaching the value of individuals and how they relate to others. It was a form of populism that could not be tolerated.  It was also against the purpose of the Pope and the Catholic church to keep people subjugated to a false religion run by Rome.

Why has the UN invaded this country using programs like Agenda 21, Agenda 2030?  Why are most people unaware of what is going on as the UN is setting them up to no longer own property in their own country?

We are not even covering just the tip of the iceberg that is sinking this country faster than when the Titanic went down.  It has become too overwhelming to present even simple premises that are entirely false in their nature but advanced as true by the mainstream media.  There are dozens of topics, issues that need to be addressed like the poisoning of our children with vaccines filled with harmful chemicals, chemtrails in the skies polluting the air we all breathe, the use of foreign-controlled debt instruments, passed off as “money” in this country; the fact that there is no law in this country that requires anyone to file taxes with the IRS, yet people volunteer themselves into financial servitude for the elites.

Our voice is too small to fight against the tsunami forces of the elites to make a difference, except for ourselves, for we have a fairly informed understanding of the evil forces that control the world.  It is easier to explain the manipulation of the precious metals markets than it is to expose the manipulation of everyone’s everyday life, and we have not even touched upon the stupidity of Europeans, the Eurozone, the destructive politicians who serve the elites and not the people in that part of the world.

If countries like Germany and Sweden want their rape-ugees, they can have them.  It is all a part of the plan of the elites to rid people of their individualism, and it looks like most Europeans are more than willing to be compliant.

All politicians and bankers lie.  Charts do not.  Charts even help read the manipulated lies that are forced into the markets to keep them suppressed.  One problem with charts is that many do not understand them, including a lot of technical analysts who misuse them, and as a result, the message gets lost because of incompetents and many choose not to put any weight on their reliability.

One can take the facts from charts and draw their own conclusion[s] and not have to rely on others, including what we see.  Most do not look at annual or quarterly charts, but they can and do tell a compelling story.

For the first time since the 2011 top in gold, the annual chart shows a higher high, higher low, and a higher close in 2016.  This adds to support the growing reliability that 2015 is the low of the correction.  There is still work to do, but it is a factual message from that time frame.

On the Quarterly chart, since the free fall of prices in 2013, price has moved sideways.  [We market the 4th Q low as 2016 when it should read 2015.]  There was every opportunity and likelihood that price would move lower after the low close of 2015.  Yet, price did the opposite.  This is another fact worth considering.  What happened to the momentum of the sellers in control since the 2011 highs?  This is an important change in market behavior.  It does not mean a bull market is underway, but it tells us price stopped going lower.

The monthly chart amplifies the importance of the 2015 low.  It did not fill the gap from the rally high back in 2008.  The low of 2015 left a small space that did not fully retrace that important high.  The space is referenced as Bullish Spacing.  You can also see how small the December 20125 bar was.  Sellers could not extend the bar lower.  Why?  Buyers were present and showing an ability to stop the downside momentum.

Price has since been moving sideways, actually continuing the sideways decline that started in 2013.  Has the gold market been manipulated since the highs.  Consensus overwhelmingly says yes.  Still, one can read the overall manipulation and see how it has changed.  Price is still being suppressed, but with less and less success.

Look at the two volume bars marked 1 and 2 on the monthly chart.  The downside effort was greater for bar 2, but the lack of downside movement tells you that buyers were more than meeting the effort of sellers.  Large volume almost always indicates smart money is controlling the activity.

While there is no reason to say a bull market in gold is underway, we can conclude that the character of the market has changed and continues to change, and that change has become more positive.

The September rally retested and ultimately failed to hold the sell-off from the high volume November decline.  Sellers were defending their position from that level.  It appears that the steadily higher selling volume starting in September has been unable to push price lower.

A few months ago, and before then sellers could push price lower with impunity dumping massive amount of paper contracts during overnight hours when trading was relatively thin.  These days, sharp drops do less damage and are more quickly recovered.

It is not so obvious, but it appears that sellers are being absorbed by buyers who are not yet sufficiently strong enough the totally reverse the downward, now sideways, momentum.

When a change in trend occurs, it shows up on the lower times frames first.  We could be seeing such a shift on the daily chart that is not yet apparent on the higher time frames.  The explanation of the October trading is such an example.

Silver is much weaker than gold, and the chart makes that very clear.  We tend to favor silver over gold, at present, mostly because the gold:silver ratio is very high favoring gold. Many times, silver will lead gold in an up market.  When that happens, the gold:silver ratio retracts.  Currently, it is running around 76:1.  It takes 76 ounces of silver to buy one ounce of gold.  That ratio can come back into the 40s or 30s in a strong up move where it takes less ounces of silver to buy the same ounce of gold.

For now, the most positive chart development on these higher time frames is the labored correction of the last five  Quarters, seen in the oval below.  However, silver remains in a relatively weak condition, fundamentals notwithstanding.

As is presented on the weekly, lower lows and lower highs are not conducive to a sustained move to the upside.  Simple facts that lead to the same conclusion.  Many may tout silver as being a huge upside potential.  The charts do not support that premise, at present.

AS already mentioned, changes in trend show up on the lower time frames first.  The weekly shows a weak formation.  The daily is giving a different read, for the near term and not yet confirmed.

While the paper market remains under pressure, this is a massive gift for those buying and accumulating physical gold and silver.  Both metals have no third-party counter risk, and both are the only true form of money in existence.  Always remember, fiat currencies are a form of debt, and debt can never be money.  That is one fact that should be preeminent in one’s mind.

Buy the physical, and do not keep it in a bank or safe deposit box.  It will be confiscated. If you do not hold it, you do not own it, and owning  paper substitute means nothing.

– Michael Noonan

Gold Prepares Ground for a Prolonged Period of Upside Movements

Gold Prepares Ground for a Prolonged Period of Upside Movements

Gold Prepares Ground for a Prolonged Period of Upside Movements

With gold breaking higher from trendline support there are signs that we could have seen the market bottom out. However, with key resistance up ahead, this view has some hurdles to overcome first. – Joshua Mahony

Gold has been gaining ground over the past week, with the price rising from a crucial area of support. The long-term picture portrays a market that could be on the cusp of a prolonged period of upside, given the continued uptrend that has been in place since the market bottomed out in December. The creation of higher highs and higher lows evident on the weekly timeframe highlights the fact that the weakness we saw throughout September is likely to be a retracement of the rally from $1205. With the price having retraced 61.8% of that $1205-1357 move, there is a good chance we are seeing the beginning of the next leg higher for gold prices.

The weekly chart below highlights the existence of a crucial trendline confluence, which appears to have provided sufficient support for the market to push higher from here. With the price having engaged the $1296 resistance level this week, it is worth noting that the $1296-1303 zone represents a crucial area that needs to be broken to provide greater confidence that this move will sustain.

Gold weekly price chart

On the daily chart, it is clear that the $1296-1303 zone is going to be an important one, with the 50-day simple moving average (SMA) accompanying those previous peaks to form a notable hurdle that needs to be overcome. A move through $1303 would point towards a period of further upside.

 

Gold daily price chart

Looking at things from a shorter-term perspective, the four-hour chart clearly highlights a break from the downtrend of September. Here the price is breaking trendline resistance, before pushing above the $1282 and $1290 swing highs. We are now clearly forming higher highs and higher lows, which means that intraday retracements could be viewed as gold buying opportunities, as long as the price does not break below the most recent swing low. On this occasion, that level is $1284. Taking a look at the wider picture, there is a good chance that any such break out of this recent uptrend could point towards the market turning lower in a more meaningful manner from the $1284-1303 zone. As such, watch out for the continuation or breakdown from this current bullish reversal as a sign of whether we are set to push through resistance or respect it for another move lower.

 

Gold 4 hour chart

 

Silver Market to Witness Explosive Demand on Global Consumption Growth

Silver Market to Witness Explosive Demand on Global Consumption Growth

Silver Market to Witness Explosive Demand

Silver is an element which possesses highest electrical and thermal conductivity as compared to other metals. Silver is harder than other metals such as gold. It is obtained from ores and native form. Lead, copper, copper-nickel and lead-zinc are the principal ores from which silver is extracted. It is also very malleable and ductile. It is considered as one of the precious metals and is used to make ornaments, silver coins, jewelry and utensils among others. Silver is used in various industrial applications such as electroplating and as a catalyst in some of the chemical reactions. Silver compounds such as silver nitrates are used in various applications such as biocides and disinfectants. Some of its compounds such as silver iodide, silver chloride, silver nitrates are also used in paints and coatings especially for anti-microbial coatings.

The growing consumption for silver is mainly driven by huge demand from the industrial applications market. The industrial application involves auto catalysts, super capacitors and water purification among others. Jewelry is anticipated to be the second largest application for the silver market. Silver is majorly used in ornaments, coins and tableware. Silver finds application in dentistry where it is used as filler. It is also used in the development of photos. Silver is also used in electronics, optics & mirrors and medical applications among others. It is also used in high capacity batteries, cell phones and thick film PV in smaller amounts.

Investments have been one of the major opportunities for the growth of the silver market over the past few years and the trend is expected to continue into the forecast period. Silver iodide is used for producing artificial rain. Silver nitrates are used in photography and silver plating and intermediate in silver based chemicals. Silver is also used in mirror and coatings. Silver coated mirrors have been one of the oldest applications in the market. In spite of so many applications, fluctuating prices can act as a major restraint for the silver market in upcoming years. Additionally, silver get easily tarnished when in contact with hydrogen sulphide, ozone or air with sulphur content.

In terms of demand, North America was the leading region in silver market. Growing demand for silver from industrial applications has been the major driver for the growth in the market. The U.S. and Mexico are the major consumers of silver in North America region. The major application for silver market in the U.S. is for photography followed by industrial applications. North America was followed by Asia Pacific where the demand for silver is anticipated to grow in the upcoming years. The demand is huge owing to huge silver fabrication market in India and China. Additionally, due to increasing number of high-net-worth individuals (HNIWs) in this region there is more investment in silver. There is huge investment in silver from countries such as China, Japan, India, Malaysia and South Korea among others.

Europe is expected to be lucrative market for silver in near future. The demand is likely to grow from industrial applications such as photography, high capacity batteries and chemicals intermediate among others. The demand for silver is huge from European countries such as Germany, the UK, France, Italy, Spain and Russia among others. The Rest of the World market is expected to show greater potential for silver market in upcoming years. Latin America and Africa is anticipated to be the major markets for silver in near future. – Yogesh

 

Cryptocurrencies will Never Replace Gold for a Number of Good Reasons

Cryptocurrencies will Never Replace Gold for a Number of Good Reasons

Cryptocurrencies will Never Replace Gold for a Number of Good Reasons

Still in the Early Innings of Cryptocurrencies

Speaking of the future, I spoke on the topic of the blockchain last week at the Subscriber Investment Summit in Vancouver. My presentation focused on the future of mining—not just of gold and precious metals but also cryptocurrencies.

Believe it or not, there are upwards of 2,100 digital currencies being traded in the world right now, with a combined market cap of nearly $150 billion, according to Coinranking.com.

Obviously not all of these cryptos will survive. We’re still in the early innings. Last month I compared this exciting new digital world to the earliest days of the dotcom era, and just as there were winners and losers then, so too will there be winners and losers today. Although bitcoin and Ethereum appear to be the frontrunners right now, recall that only 20 years ago AOL and Yahoo! were poised to dominate the internet. How times have changed!

It will be interesting to see which coins emerge as the “Amazon” and “Google” of cryptocurrencies.

For now, Ethereum has some huge backers. The Enterprise Ethereum Alliance (EEA), according to its website, seeks to “learn from and build upon the only smart contract supporting blockchain currently running in real-world production—Ethereum.” The EEA includes several big-name financial and tech firms such as Credit Suisse, Intel, Microsoft and JPMorgan Chase, whose own CEO, Jamie Dimon, knocked cryptos a couple of weeks ago.

To learn more about the blockchain and cryptocurrencies, watch this engaging two-minute video.

Understanding blockchain in two minutes

Will Bitcoin Replace Gold?

Lately I’ve been seeing more and more headlines asking whether cryptos are “killing” gold. Would the gold price be higher today if massive amounts of money weren’t flowing into bitcoin? Both assets, after all, are sometimes favored as safe havens. They’re decentralized and accepted all over the world, 24 hours a day. Transactions are anonymous. Supply is limited.

Have gold and bitcoin peaked for 2017

 

But I don’t think for a second that cryptocurrencies will ever replace gold, for a number of reasons. For one, cryptos are strictly forms of currency, whereas gold has many other time-tested applications, from jewelry to dentistry to electronics.

Unlike cryptos, gold doesn’t require electricity to trade. This makes it especially useful in situations such as hurricane-ravished Puerto Rico, where 95 percent of people are reportedly still without power. Right now the island’s economy is cash-only. If you have gold jewelry or gold coins, they can be converted into cash—all without electricity or WiFi.

Finally, gold remains one of the most liquid assets, traded daily in well-established exchanges all around the globe. Every day, some £13.8 billion, or $18 billion, worth of physical gold are traded in London alone, according to the London Bullion Market Association (LBMA). The cryptocurrency market, although expanding rapidly, is not quite there yet.

I will admit, though, that bitcoin is energizing some investors, especially millennials, in ways that gold might have a hard time doing. The proof is all over the internet. You can find a number of TED Talks on bitcoin, cryptocurrencies and the blockchain, but to my knowledge, none is available on gold investing. YouTube is likewise bursting at the seams with videos on cryptos.

Bitcoin is up 350 percent for the year, Ethereum an unbelievable 3,600 percent. Gold, meanwhile, is up around 10 percent. Producers, as measured by the NYSE Arca Gold Miners Index, have gained 11.5 percent in 2017, 23 percent since its 52-week low in December 2016.

Look Past the Negativity to Find the Good News

The news is filled with negative headlines, and sometimes it’s challenging to stay positive. Take Friday’s jobs report. It showed that the U.S. lost 33,000 jobs in September, the first month in seven years that this happened. A weak report was expected because of Hurricane Irma, but no one could have guessed the losses would be this deep.

The jobs report wasn’t all bad news, however. For one, the decline is very likely temporary. Beyond that, a record 4.88 million Americans who were previously sitting out of the labor force found work last month. This helped the unemployment rate fall to 4.2 percent, a 16-year low.

Have gold and bitcoin peaked for 2017

 

There’s more that supports a stronger U.S. economy. As I shared with you last week, the Manufacturing ISM Purchasing Managers’ Index (PMI) rose to a 13-year high in September, indicating rapid expansion in the manufacturing industry. Factory orders were up during the month. Auto sales were up. Oil has stayed in the relatively low $50-a-barrel range, which is good for transportation and industrials, especially airlines. Small-cap stocks, as measured by the Russell 2000 Index, continue to climb above their 50-day and 200-day moving averages as excitement over tax reform intensifies.

These are among the reasons why I remain bullish.

One final note: Speaking on tax reform, Warren Buffett told CNBC last week that he’s waiting to sell assets until he knows the plan will go through. “I would feel kind of silly if I realized $1 billion worth of gains and paid $350 million in tax on it if I just waited a few months and would have paid $250 million,” he said.

It’s a fair comment, and I imagine other like-minded, forward-thinking investors, buyers and sellers will also wait to make huge transactions if they can help it. Tax reform isn’t a done deal, but I think it has a much better chance of being signed into law than a health care overhaul. – Frank Holmes

Why Cryptos Won’t Kill Gold

Cryptocurrencies have shown a lot of resiliency. Every time doubters proclaim Bitcoin is on the mat for good, it manages to claw its way back up.

Bitcoin went into a freefall after the Chinese government announced plans to ban cryptocurrency trading on all domestic exchanges. But early Monday, the digital currency hit its highest level since early September.

The steady climb of Bitcoin and its meteoric rise this year have led to some speculation that digital currencies may usurp gold. There have been headlines proclaiming cryptocurrencies are killing the yellow metal. But there are some fundamental reasons cryptos will never replace gold.

recent Forbes article pointed out some important characteristics of gold that will prevent Bitcoin and other cryptocurrencies from ever being able to completely push it out.

Most of the focus now is on Bitcoin. But as Forbes points out, there are somewhere in the neighborhood of 2,100 digital currencies traded in the world right now, with a combined market cap of nearly $150 billion, according to Coinranking.com. We are in the early stages of the crypto revolution. We have no idea which cryptos will ultimately shake out as winners and losers. Betting on any one crypto at this point is risky.

Although bitcoin and Ethereum appear to be the frontrunners right now, recall that only 20 years ago AOL and Yahoo! were poised to dominate the internet. How times have changed! It will be interesting to see which coins emerge as the ‘Amazon’ and ‘Google’ of cryptocurrencies.”

On the other hand, gold has a history of preserving and even growing wealth that goes back centuries.

Gold also has physical characteristics cryptos lack.

Fundamentally, Bitcoin and other cryptocurrencies are nothing more than an electronic medium of exchange. They strictly function as a form of currency. They have no intrinsic value. In fact, they don’t even exist in the material world. Gold has value beyond the fact that it is money. It is highly valued as jewelry, and it is increasingly being used in technological applications from medicine, to electronics, to energy production.

Most importantly, gold does not depend on the internet or electricity to work. That could be significant in the event of a major disaster, as the Forbes article points out. If the power grid goes down, or the internet is out, your $1 million of Bitcoin won’t do you much good.

Unlike cryptos, gold doesn’t require electricity to trade. This makes it especially useful in situations such as hurricane-ravished Puerto Rico, where 95% of people are reportedly still without power. Right now the island’s economy is cash-only. If you have gold jewelry or coins, they can be converted into cash—all without electricity or WiFi.”

Forbes offers another important reason we probably shouldn’t say last rights over gold just yet.

Finally, gold remains one of the most liquid assets, traded daily in well-established exchanges all around the globe. Every day, some £13.8 billion, or $18 billion, worth of physical gold are traded in London alone, according to the London Bullion Market Association (LBMA). The cryptocurrency market, although expanding rapidly, is not quite there yet.”

None of this is to say there is no place for cryptocurrencies in the modern world. The development of a decentralized, anonymous system of exchange that doesn’t rely on government is nothing short of revolutionary. And a lot of people have made a lot of money in cryptocurrencies. It’s just that cryptos lack some important features gold and silver posses. Bitcoin is not a replacement for gold. Although they share some similar characteristics, they are fundamentally different things.

Of course, you don’t have to choose one over the other. You can buy Bitcoin and gold. You can even buy gold and silver with Bitcoin. In the world of investing, it’s never wise to put all of your eggs in one proverbial basket.  Diversifying your cryptocurrency portfolio with precious metals can help mitigate some of the potential downsides and put you in an overall stronger financial position. – Peter Schiff

 

Here’s what will Propel Gold Prices to Levels which Few can Imagine Today

Here's what will Propel Gold Prices to Levels which Few can Imagine Today

Here’s what will Propel Gold Prices to Levels which Few can Imagine Today

Inflation is coming and it will have a major effect on the world economy and financial markets. This is one of the factors that will drive gold to levels which few can imagine today. Later in this piece, I am discussing 10 Factors which will make gold surge.

NO FEAR

Markets are expressing no fear and seem very comfortable at or near all-time tops. There is no concern that stocks are massively overvalued or that bond rates are at historical lows and only have one way to go. Nor is anyone worried that house prices are at levels which most people can’t afford. Money printing and interest rate manipulation has created such cheap financing that most people don’t look at the price of the property but only at the financing costs. In many European countries, mortgages are around 1%. At that level the monthly cost is negligible for many people. Neither the banks nor the borrowers worry about interest rates going back to the teens as in the 1970s.

So whilst we are waiting for markets to wake up from the dream state they are in now, what signals should we look for and what about timing.

These are the areas that we see as critical and below are our near term and long-term views on:

  • Interest rates / bonds
  • Inflation, Commodities, Oil, CRB.
  • Dollar
  • Stocks
  • Gold

INTEREST RATES – ONLY ONE WAY TO GO

Interest rates are critical to a world with $250 trillion debt plus derivatives of $1.5 quadrillion and global unfunded liabilities of 3/4 quadrillion. Minor increases in rates will have a catastrophic effect on global debt. Derivatives are also extremely interest rate sensitive. Also, derivatives represent an unfathomable amount that will blow up the global financial system when counterparty fails.

The very long interest rate cycle bottomed a year ago. Since the dollar debt is the biggest, dollar rates are the most important to the world. The US 10-year Treasury bond bottomed in July 2016 at 1.3% and is now 2.3%. US rates have turned up from a 35-year cycle bottom and are likely to go considerably higher into the teens or more like in the 1970s. This could be a very slow process but we could also see a rapid rise. As the 10-year chart shows below, there was a rapid rate rise into December 2016. The 10-month correction finished in early Sep 2017 and a strong uptrend has now resumed.

The long-term trend from 1994 on the chart below, shows the July 2016 bottom. The 23-year downtrend shown from 1994 actually goes back to 1987. This 30-year trend will be broken when the rate goes above 2.6%. With the 10-year at 2.35% currently, we are not far from a break of this trend.

In summary interest rates bottomed in 2016, right on cue as that was the end of the 35-year cycle. The trend is now up for a very long time. This is initially linked to a rise in inflation and will later on be fuelled by a collapse of bond markets and hyperinflation.

INFLATION – ON THE RISE

There are many ways to measure inflation. We can take the official government figures which are manipulated and lagging the real economy. US CPI bottomed in 2015-16 at 0% and is now 2%. If we take the Shadowstat figures, real US inflation is nearer 6% and in a clear uptrend.

But there are better global indicators for inflation that can’t be manipulated. The CRB (Commodities Research Bureau) index crashed by 50% from 320 in 2014 to 160 in early 2016. That was a significant bottom and the CRB is so far up 15%.

The S&P GSCI Commodity index is heavily linked to energy and shows an even stronger inflationary trend with a rise of 43% since Jan 2016.

Finally, we have oil as an important inflation indicator. Brent Oil bottomed at $27 in Jan 2016 and is now $56, a rise of 107%.

So whether we take US CPI, various Commodity indices or oil, the trend is clear. They all bottomed around the beginning of 2016 and are now in clear uptrends. This is a strong signal that inflation has bottomed and is likely to increase substantially in the next few years, eventually turning into hyperinflation.

US DOLLAR – DOWNTREND WILL ACCELERATE

The US dollar has been in a strong downtrend since 1971 when Nixon ended the gold backing. This was a disastrous decision for the world’s financial system and for the US economy. It has led to a total collapse of the dollar and a financial system based on debt only. The US economy as well as the world economy now rests on a bed of quicksand. The primary reason why the dollar has not totally disappeared yet is the Petrodollar system. This was a clever devise by Nixon’s team in 1974 to agree with Saudi Arabia to sell oil in dollars and to invest the proceeds in US treasury bonds and in the US economy. Saudi Arabia would also buy US weapons and receive protection by the US military. This is what has created a massive demand for dollars globally. But this will soon come to an end with China and Russia introducing an alternative to oil trading in dollars. This will eventually lead to the total demise of the dollar.

But in spite of the Petrodollar, the US dollar has collapsed against all currencies since 1971. Against the Swiss Franc, the dollar is down 78%. The DMark/Euro has risen 123% against the dollar since 1971. Only in 2017, the Euro has risen 14% against the dollar and this despite of all the problems in Euroland.

We might see temporary dollar strength for a while after the strong fall this year. But the downtrend is very clear and the dollar will at some point within the next few months accelerate down very strongly. The Petrodollar is soon dead and so is the US dollar. The consequences will be disastrous for the US economy and will also lead to a rapid acceleration of US and global inflation.

STOCKS – BUBBLE CAN EXPAND BUT WILL BURST

Most stock markets in the world are at or near all time historical high. The significant exception is Japan which peaked in 1989 at 39,000 and is now, 18 years later, at half that level.

The most massive credit expansion and money printing in history has done very little for ordinary people but it certainly has fuelled stock markets around the world. On most criteria, stock markets are massively overvalued, whether we take price earnings ratios, market value to GDP, to sales or margin debt. Stock markets are now in bubble territory and very high risk.

But there is a big BUT! Because bubbles can get much bigger than we can ever imagine. The trend is clearly up and there is nothing today indicating that this trend has come to an end. Normally at market peaks, we see broad participation from retail investors. Normally stocks only turn when everybody has been sucked in. But we are certainly not hearing ordinary investors talking about how much money they are making today in tech stocks like they did in 1998-9. The Nasdaq is up 5x since 2009 just as it was at in the 1990s. The big difference today is that smaller investors are not participating. That may be one of the reasons why this market will go a lot higher. Stock markets peak with exhaustion and we are still not at that stage.

Higher rates will initially make investors more bullish about a strengthening economy. And as bonds decline with higher rates, investors will switch from bonds to stocks. Eventually higher rates will kill the economy and stock markets. But not yet. So we may still see much higher stocks for yet some time and well into 2018. There will of course be corrections on the way there.

But there is one major caveat. This latest phase of the long bull markets in stocks has lasted for 8 years already and on most criteria, it is very overbought and high risk. When the market turns, we will see the biggest bear market in history. The coming fall will be much greater than the 1929-32 crash of 87%. Thus, Caveat Emptor (Buyer beware)!

In summary, stocks can go a lot higher but risk is extremely high.

GOLD – LONG TERM UPTREND WILL ACCELERATE

So with rising stocks, rising interest rates and a falling dollar how will gold do? That is a very easy question to answer. Just like with commodities, as I have discussed above, gold and silver resumed the long-term uptrend in January 2016. There are a number of factors that will fuel gold’s rise to levels that very few can imagine today.

10 REASONS WHY GOLD WILL SURGE:

  1. Failure of the financial system, with massive money printing and currency debasement
  2. Gold will follow inflation which will increase strongly eventually leading to hyperinflation
  3. Real interest rates will be negative which favours gold. This was the case in the 1970s when gold rose from $35 to $850 despite rates in the mid teens.
  4. The death of the Petrodollar and the dollar
  5. China’s accumulation of gold on a massive scale and potentially introducing a gold for oil payment system
  6. Western Central Bank’s empty gold vaults. CB’s have leased or covertly sold a major part of their gold. That gold is now in China and will never come back
  7. Government and bullion bank manipulation of gold will fail
  8. The paper gold market will collapse leading to gold going “no offer” which means gold can’t be bought at any price
  9. Inflation will increase institutional gold buying substantially. Gold is today 0.4% of global financial assets. An increase to 1% or 1 1/2% would make the gold price go up manifold.
  10. With relatively low global demand today, annual goldmine production of 3,000 tonnes is easily absorbed. With falling production, the coming upturn in demand can only be met by much higher prices.

The above 10 factors are neither based on hope, nor fantasy. It is not a question if they will happen but only WHEN. In my view, these events will take place within the next 5 years and most probably faster than that. The compound effect of these 10 factors should push gold prices up at least 10-fold.

We must remember that 1976-80 gold prices went up 8.5x from $100 to $850. This time the situation is much more explosive so a 10 fold increase is not unrealistic.

So if you don’t own physical gold or silver, buy some now at these ridiculously low prices and store them safely outside the banking system. If you do own sufficient physical precious metals, just relax and enjoy life, knowing that you are well protected against coming catastrophes. – Egon von Greyerz

 

Here’s The Fundamental That Will Push The Silver Price Up Much Higher

Here’s The Fundamental That Will Push The Silver Price Up Much Higher

The Fundamental That Will Push The Silver Price Up Much Higher

Precious metals investors need to understand the coming silver price surge will not occur due to the typical supply and demand forces.  While Mainstream analysts continue to generate silver price forecasts based on supply and demand factors, they fail to include one of the most important key forces.  Unfortunately, the top paid Wall Street analysts haven’t figured it out that supply and demand forces don’t impact the silver price all that much.

For example, I continue to read articles by analysts who suggest that industrial demand will impact the silver price in the future.  They believe that rising industrial silver demand should push prices higher while lower demand does the opposite.  However, according to my research, I don’t see any real correlation.  So, why should industrial demand impact the silver price in the future when it hasn’t in the past?

If we look at the following chart, there doesn’t seem to be a correlation between global industrial silver demand and the silver price:

Here we can see that industrial silver demand only increased 17 million oz (Moz) in 2011 compared to 2008. However, the price more than doubled from $14.99 to $35.12.  On the other hand, as the silver price fell in half in 2015 versus 2012, industrial silver demand only declined by 30 Moz (600 Moz down to 570 Moz).  Thus, rising or falling industrial silver demand isn’t a factor that determines the silver market price.

Also, many analysts have suggested that a falling silver price would generate more industrial consumption.  Unfortunately, as the silver price peaked and declined in 2011, so has industrial demand.  Now, some readers may believe that the decline in industrial silver consumption is due to less silver being used in photographic applications.  While this is partially true, if we remove photographic silver usage from industrial demand, we can plainly see that industrial consumption of 529 Moz in 2007 was higher than the 517 Moz in 2016:

Regardless, forecasts for industrial silver consumption have been consistently wrong.  In an article I wrote back in 2014, I stated the following on industrial silver demand:

I have always stated that industrial silver demand, especially solar power demand, will not be much of determining factor in setting the price in the future.  Wall Street analysts continue to regurgitate that industrial silver demand will grow for the next 5-10 years.  Hogwash.

When the peak of global oil production takes place within the next several years, this will impact Global GDP growth.  Matter-a-fact, world economic activity will contract along with the decline in global oil production.  Which means, demand for silver in industrial applications will decline as well.

Here is a chart showing the forecasted growth of industrial silver consumption from a report by GFMS done in March 2011, for the Silver Institute:

GFMS Analysts projected that industrial silver demand would rise to 650 Moz by 2015.  However, If we look at the first chart above, global industrial silver fabrication declined over the past five years falling to a low of 562 Moz in 2016.  Even though silver consumption in Solar PV manufacturing may increase for a few years, I believe overall industrial silver consumption will continue to decrease, especially when the markets crack and U.S. and global oil production decline.

Global Silver Scrap Supply Running Low Even At Higher Prices

Global silver scrap supply has hit the lowest level in a decade.  According to the data in the 2017 World Silver Survey, global silver scrap supply peaked in 2011 at 260 Moz and fell to a low of 140 Moz last year.  That’s a 46% decline in just five short years:

The last time global silver scrap supply was this low was in 1990 when the market only recycled 135 Moz of silver.  And get this… the price of silver was $4.82 in 1990.  So, with a price nearly four times higher in 2016, silver scrap supply is about the same as it was in 1990.  Which suggests, the market has already recycled a lot of its easy and accessible silver scrap supply.

Understanding the changing dynamics of industrial silver consumption and silver scrap supply is essential for determining long-term valuations of the metal rather than short-term yearly price signals.  Which means, industrial silver consumption and scrap supply haven’t really impacted the silver price as much as the price of oil.

As we can see in the chart above, the price of silver paralleled the spikes in the oil price.  Thus, the silver price was based more on the volatile oil price rather than supply and demand fundamentals in the silver market.  However, it is important to know how the individual silver supply and demand sector fundamentals are changing over an extended period.

For example, Net Government silver sales supplemented the market for many years:

While Central Banks sold a lot of silver into the market, the extra supply didn’t impact the silver price as much as the surging oil price.  Although, the important factor to understand about the liquidation of Central Bank silver stocks is that most of this supply has already been sold into the market.  According to the data from the 2017 World Silver Survey, Central Banks didn’t sell any silver into the market over the past three years.

Here are three important takeaways from the chart above:

  1. Central Banks supplemented the market with much-needed silver, but this supply is now mostly depleted
  2. Central Bank silver sales should not be a fundamental used to determine a short-term silver price, rather how the lack of future government supply will impact the market.
  3. Central Banks held a great deal of old official silver coins as stocks for decades.  The United States had the most, but this was liquidated decades ago.  The remaining official stocks were held by a few Central Banks, such as China, Russia, and India.  These three governments were the primary source of Central Bank silver sales for the past two decades.  However, that supply has been severely depleted and will no longer supplement the market in the future as it did in the past.

Again, I look at Central Bank silver sales as a fundamental that provides information about the long-term dynamics of the overall market, not to be used for short-term price movements.

Putting Silver Market Fundamentals Into Perspective

To understand what will happen to the future silver market and price, we need to analyze the role that the fundamentals play correctly.  While most Mainstream analysts focus on supply and demand factors to determine short-term silver prices, I study them to figure out how the entire market is changing over the long-term.

As I have stated in many articles in the past, industrial silver consumption is not a fundamental that determines the silver price; rather it reveals to me how the global economy is disintegrating.  Furthermore, Central Bank silver sales and scrap supply should not be used to forecast short-term silver price movements.  On the other hand, these two fundamentals provide data that suggests silver supply from reliable sources have been seriously depleted.

Unfortunately, some of my readers are frustrated that these fundamentals haven’t pushed silver much higher prices already.  So, when I continue to write articles showing how these silver market fundamentals are changing, they criticize by saying,” those fundamentals don’t mean anything or impact the price.”  While that may be true currently, it won’t be the case in the future.

Frustrated precious metals investors need to realize the following three important key factors:

  1. The Silver Market fundamentals are pointing to a perfect storm in the future as reliable past supplies can’t be counted on in the future.
  2. Most of the physical silver investment is held in tight hands.
  3. The disintegrating Energy Industry is the most critical factor and the UNKNOWN fundamental that will impact the value of silver in the future.

Of the three key factors above, the third one (the UNKNOWN Disintegrating Energy Industry) will impact the future value of the silver the most.  However, most of the individuals in the precious metals community are still unaware of how energy will affect the silver price and market in the future.  Instead, many in the Alternative Media continue to focus the silver market in regards to the economic and financial industry.

I will be putting out some articles shortly showing just how bad the situation in the U.S. and Global Oil industry has become.  When the U.S. and Global Oil Industry really starts to disintegrate, it will destroy the value of most Stocks, Bonds and Real Estate.  Thus, the precious metals, especially silver…. will experience a price rise never witnessed before in history. – SRSroccoreport

 

Inflation Is Much Higher Than Officially Announced – Do You Yet Want More?

Inflation Is Much Higher Than Officially Announced - Do You Yet Want More?

Inflation Is Much Higher Than Officially Announced

What the Federal Reserve is actually whining about is not low inflation — it’s that high inflation isn’t pushing wages higher like it’s supposed to.

It’s not exactly a secret that real-world inflation is a lot higher than the official rates–the Consumer Price Index (CPI) and Personal Consumption Expenditures PCE). As many observers have pointed out, there are two primary flaws in the official measures of inflation:

1. Big-ticket expenses such as rent, healthcare and higher education–expenses that run into the thousands or tens of thousands of dollars annually–are severely underweighted or mis-reported. While rents are soaring, the CPI uses an arcane (and misleading) measure of housing costs: owners equivalent rent. Why not just measure actual rents paid and actual mortgages/property taxes/home insurance premiums paid?

Healthcare is 18% of GDP but only 8.5% of CPI. To those exposed to the actual costs of healthcare, 8.5% of the CPI is a joke.

The same can be said of higher education: households paying tuition and other college costs are exposed to horrendously high rates of inflation, as illustrated in this chart:

Then there’s the hedonic adjustments that are made to reflect improvements in quality, features, safety, etc. So the price of computers is discounted to reflect the increase in memory, etc. compared to previous models. This is a can of worms, as anyone shopping for a new car or truck can attest: yes, the vehicles have more safety features, but the sticker price is much higher. Do we knock $10,000 off the “price” because of these additional features? Why should we, when consumers have to pony up $10,000 more than they did a decade ago?

More honest and accurate estimates of real-world inflation that include the big-ticket categories of housing, healthcare and higher education reckon annual inflation is around 7% or even as high as 10% in high-cost metro areas, not 2%. This sets up a very peculiar cognitive dissonance in the financial media.

On the one hand, government agencies are bending over backward to under-report inflation. On the other, the Federal Reserve is whining that inflation is too low and their efforts to push it higher have failed. Heck, folks, the solution is obvious: just report real-world inflation without the hedonic adjustments and other shuck and jive, and when the rate of inflation comes in at a hot 7% instead of the official 2%, the Federal Reserve can declare victory.

Why does the Fed want higher inflation? The general explanation is higher inflation benefits bankers, borrowers and the expansion of credit that underpins our consumerist economy.

The idea is that as wages rise with inflation (assuming wages are rising, which they’re not for the bottom 90%), households will have an easier time servicing existing debt and getting new loans.

The payments due on existing debt become easier to make as inflation expands everyone’s paychecks. (Note that this expansion doesn’t mean the purchasing power of the wage has increased; it’s an illusory expansion that serves the credit industry.)

Banks benefit because they earn fees on originating new loans and rolling over existing debts into new loans.

But the supposed benefits of high inflation are undercut if wages don’t rise as fast as prices. As many observers have noted, wages for the bottom 90% have not kept pace with higher costs. For the bottom 90%, rising rents, higher property taxes, higher health insurance premiums, higher healthcare co-pays and deductibles, soaring college tuition and so on, have squeezed household budgets while household income has stagnated.

No wonder the government wants to mask the real rate of inflation. If it was widely understood that inflation is reducing our purchasing power at an annual rate of 7% while wages are rising at 1% or 2% if at all, people might realize the Fed and other authorities have stripmined the many to enrich the few.

So what the Federal Reserve is actually whining about is not low inflation–it’s that high inflation isn’t pushing wages higher like it’s supposed to. In the simplistic models of conventional economics, inflation is supposed to be a monetary function, i.e. a generalized secular dynamic that pushes everything higher–not just prices, but wages, too.

Alas, the world isn’t as simple as the economists’ models. So what we have instead is stagnating wages and soaring wealth-income inequality.

No wonder so many people reckon this was the real plan all along: it’s worked brilliantly for the eight years of “recovery”, greatly enriching the few at the expense of the many. – Charles Hugh Smith

 

Gold and Silver Bounce On Short Covering, Is Safe-Haven Demand or Speculation Driving It?

 Gold and Silver Bounce Up On Short Covering, Is Safe-Haven Demand or Speculation Driving It

Gold and Silver Bounce Up On Short Covering

Gold and silver prices were ending the U.S. day session higher, boosted by short covering in the futures markets and by some safe-haven buying interest amid stepped-up geopolitical worries. December Comex gold was last up $8.70 an ounce at $1,283.70. December Comex silver was last up $0.13 at $16.925 an ounce.

There were some significant geopolitical events occurring over the weekend. While the world stock markets have so far mostly shrugged them off as nothing new or major, the gold and silver markets did get some safe-haven buying support.

Thousands of Spaniards on Sunday protested any secession of Catalonia, after that region voted to be independent recently. The U.S. and Turkey saw a diplomatic row escalate over the weekend when both countries put restrictions on visas for the other country. The Turkish lira dropped sharply Monday on the situation.

The U.S.-North Korea war of words continued during the weekend, with both sides spouting off. President Trump said in a tweet there is only “one thing to do” with North Korea.

Trump also got into a Twitter tussle with U.S. Senator Bob Corker. Corker said the White House is like “adult daycare.” There are growing notions that the Trump White House is increasingly chaotic.

All of the above support ideas of continuing safe-haven demand for gold and to a lesser degree silver.

The U.S. dollar index was lower in early-afternoon U.S. trading, on a normal corrective pullback after hitting a 2.5-month high last Friday. The other key outside market on Monday sees Nymex crude oil futures prices firmer. Oil bulls are fading, however. There are worries recent hurricanes that struck the U.S. will curtail petroleum refining capacity, which means less demand for crude until those refineries are 100% back on line.

The U.S. government was closed for the Columbus Day holiday Monday. However, most markets were open.

Live 24 hours gold chart [Kitco Inc.]

Technically, December gold futures prices closed near mid-range. Bears still have the overall near-term technical advantage. A four-week-old downtrend is still in place on the daily bar chart. Gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears’ next near-term downside price breakout objective is pushing prices below solid technical support at $1,250.00. First resistance is seen at today’s high of $1,288.00 and then at $1,293.00. First support is seen at today’s low of $1,277.70 and then at $1,270.00. Wyckoff’s Market Rating: 4.0

December silver futures prices closed near mid-range today on short covering. The silver bears still have the overall near-term technical advantage. Prices are still in a four-week-old downtrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $17.50 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.00. First resistance is seen at today’s high of $17.03 and then at $17.295. Next support is seen at today’s low of $16.765 and then at $16.50. Wyckoff’s Market Rating: 4.0.

December N.Y. copper closed up 5 points at 302.95 cents today. Prices closed nearer the session high today. The copper bulls have the firm overall near-term technical advantage. Copper bulls’ next upside price objective is pushing and closing prices above solid technical resistance at the September high of 317.85 cents. The next downside price objective for the bears is closing prices below solid technical support at 290.00 cents. First resistance is seen at last week’s high of 305.60 cents and then at 307.50 cents. First support is seen at 300.00 cents and then at 297.50 cents. Wyckoff’s Market Rating: 7.0. – Jim Wyckoff

Is Silver Turning Around?

Technical analyst Clive Maund discusses movements in the silver price.

There was more evidence of a turn in silver than gold on Friday, when a more obvious reversal candle appeared on its chart. On the 6-month chart we can see that a long-tailed candle occurred that approximates to a bull hammer where the price closed not far off the day’s highs on the biggest volume for over a month. After its recent reaction this certainly looks like a reversal, especially as the downtrend channel has been converging. The earlier overbought condition has more than fully unwound and the price has dropped back into a zone of support.

There was an even more pronounced reversal candle on Friday in silver proxy iShares Silver Trust. . .

Like gold, silver is marking out a giant Head-and-Shoulders bottom pattern, but in silver’s case it is downsloping as we can see on its 8-year chart below, which reflects the fact that silver tends to underperform gold at the end of sector bear markets and during the early stages of sector bull markets. Prolonged underperformance by silver is therefore a sign of a bottom. This chart really does show how unloved silver is right now, but although the price has drifted slightly lower over the past several years, volume indicators have improved, especially this year, a positive sign. A break above the neckline of the pattern, the black line, will be a positive development, and more so a break above the band of resistance approaching the 2016 highs. Once it gets above this it will have to contend with a quite strong zone of resistance roughly between $26 and $28. Silver is among the most unloved of all metals, a situation that is not expected to continue, partly because silver bugs are manic-depressive and they have been depressive for a long time, meaning that it surely won’t be all that long until they are on the rooftops singing Happy Days are Here Again.

As with gold, silver’s COT structure has improved in recent weeks as the price has dropped, and although readings are still far from levels that can be described as outright bullish, they are considerably better than those for gold, which could be a sign that silver is set to outperform gold at last. . .

Extreme lows in the silver/gold ratio are reliable indicators of either a sector bottom or they can occur during the early stages of a sector bull market, as can be seen on the long-term silver over gold chart shown below, which goes back to late 1997. When a low in this ratio occurred in 2003, the sector was already in a bull market, but as we can see, it had much further to run. The next major low followed the 2008 market crash. More recently the ratio plumbed very low levels again at the end of 2014 and early in 2016, which marked the sector bottom after the brutal bear market from the 2011 highs. Right now it is only a whisker above these lows, which is a strong sign that another bull market is just around the corner.

Are Gold and the Dollar Rallying Together?

Technical analyst Clive Maund examines the relationship between the dollar and precious metals.

The last gold Market update almost a month ago called the intermediate top within a day, as you may recall, and the subsequent Gold and U.S. Dollar called the rally in the dollar the day before it started. Having seen a significant reaction back by gold, the question now is “Has it run its course?” The short answer to that is yes, although calling a bottom here is complicated by the fact that gold’s COTs have not eased as much on the reaction as we might have expected, and the dollar Hedgers’ chart is still flat out bullish for the dollar. What this means is that we may need to see some bottoming action by gold, even if it soon breaks out of its rather steep short-term downtrend, and another possibility that we will examine is that the dollar and gold rally in tandem, a rare circumstance that could be occasioned by an extreme development such as an attack on North Korea, although if this happens the peoples of Seoul and Tokyo will doubtless have more important things to think about than the price of gold.

On gold’s latest 6-month chart we can see how the reaction of recent weeks has retraced about 50% of the prior rally, as tensions with North Korea have temporarily eased. This reaction has more than fully corrected the overbought condition resulting from the rally, and has brought gold back into a zone of significant support just above its rising 200-day moving average, and with moving averages in bullish alignment, conditions generally favor a reversal and rally. The “spinning top” candlestick that occurred on Friday on increased volume may mark the turn, although the candlesticks that occurred on the charts for silver and silver proxies look like more convincing reversals.

An important factor having a bearing on the outlook for the precious metals was the nice reversal in copper on Thursday after a significant reaction, with it gaining nearly 3%…

Given that copper tends to lead other metals as it did on the last rally, this could well be followed by gold and silver reversing to the upside after their reaction back to support, despite the dollar looking like it has further to rally. Another positive factor for gold and silver is that there was a full moon late last week and the Precious Metals often reverse on either the new or full moon, although astrologically silver is ruled by the moon and gold by the sun, which may explain why the Incas, famous for their gold, worshiped the sun – which makes a lot more sense than many of the other things that get worshiped. If you think that is wacky, try this for size—eclipses are thought by many astrologers to be a baleful omen, and you may recall that on August 21st a total eclipse of the sun slashed right across the U.S. from coast to coast. Soon after, the country was clobbered by a succession of natural disasters, in addition to Donald Trump’s Tweetstorms, with three massively destructive hurricanes impacting Texas, then Florida, and lastly Puerto Rico. Coincidence? I think not.

On gold’s 8-year chart it continues to look like it is in the late stages of a giant Head-and-Shoulders bottom pattern. The buildup in volume over past 20 months certainly looks positive, especially over the past several months, all the more so because it has driven volume indicators higher, notably the Accum-Distrib line, which is not far off making new highs—exceeding its level at the 2011 peak. Once gold breaks above the resistance level approaching $1400 it will be on its way, although it will then have to contend another important band of resistance in the $1510 – $1560 range.

The latest COT chart for gold shows that, while positions have certainly eased on the reaction of recent weeks, they have not eased by as much as one would expect, which sounds a cautionary note and suggests that a rally now may be stunted, and followed by more basing action before a larger uptrend can gain traction. This accords with what we are seeing on the dollar charts, especially the latest dollar Hedgers’ chart.

The Market Vectors Gold Miners, GDX, which functions as a gold stocks index, is marking out a giant Head-and-Shoulders bottom that roughly parallels the one completing in gold itself. The fact that the price is still well below the strong resistance at the top of this reversal pattern means that prices for many gold (and silver) stocks are still very favorable. The volume pattern during the build out of this base pattern is very bullish, with big volume on the rise out of the low (Head) of the pattern, tailing off steadily as the Right Shoulder has formed.

The dollar looks like it has put in an intermediate bottom. On the 1-year dollar index chart shown below, we can see that it has broken out of its downtrend by a significant margin and looks like it may be marking out a Head-and-Shoulders bottom, although it is still too early to be sure. If it is then we will see a shallow dip to mark out the Right Shoulder of the pattern before it then turns higher.

The latest dollar Hedgers’ chart certainly looks bullish, with the large Commercial Hedgers having cleared out their short positions…

Chart courtesy of www.sentimentrader.com

Although we cannot reconcile this positive dollar outlook for the medium-term (long-term outlook remains bearish) with a positive outlook for the precious metals sector, there are times when the dollar and gold and silver rally together. This could happen for example if some drastic action is taken with respect to North Korea.

 

Pullback in Gold Prices – An Opportunity to Buy Low before a Major Rally Again

Pullback in Gold Prices - An Opportunity to Buy Low before a Major Rally Again

Pullback in Gold Prices – An Opportunity to Buy Low before a Major Rally Again

Gold prices suffered a sharp pullback this past month, spawning bearish sentiment.  Futures speculators fled on surging Fed-rate-hike odds and new stock-market record highs.  That pounded gold prices lower despite strong investment demand.  This healthy sentiment-rebalancing retreat has left gold prices ready to rally again.  Both its technicals and seasonals are very bullish, and futures speculators’ selling overhang has considerably abated.

On September 7th, gold powered 1.1% higher to $1348.  That was exactly a 1.0-year high, gold’s best level seen since before Trump’s surprise election victory and the resulting extreme Trumphoria stock-market rally.  But since gold prices had surged 4.9% higher in less than two weeks, greed was mounting again.  So a couple trading days later, gold prices started selling off sharply and birthed this past month’s pullback.

As is usually the case in gold, the pullback spark was multifaceted.  When gold prices had peaked, futures-implied Fed-rate-hike odds for its mid-December meeting were under 32%.  But they shot up to 42% on Monday September 11th, when gold’s initial 1.5% drop kicked off this pullback.  That day saw a strong relief rally in the stock markets, following a weekend where North-Korea and hurricane-Irma fears failed to materialize.

North Korea didn’t launch another ballistic missile or detonate another nuclear bomb for its Founder’s Day holiday, the anniversary of Kim Jong-un’s grandfather founding the modern country in 1948.  And Irma’s eye veered south over Cuba before slamming Florida, dissipating enough of its energy.  Thus Florida was thankfully spared from being razed like some of the Caribbean islands that bore Irma’s full force.

So the S&P 500 surged 1.1% that day, hitting its first new record high in five weeks.  That lifted perceived Fed-rate-hike odds.  As the anti-stock trade that often moves counter to stock markets, gold fell sharply on heavy gold futures selling.  That was pretty much the whole story of this past month’s entire pullback, a parade of new stock-market record highs and higher Fed-rate-hike odds fueling big gold futures selling.

Thus by this week, gold prices had retreated 5.7% to $1271 in less than a month.  During that span, no fewer than 11 new all-time-record-high S&P 500 closes were witnessed.  That’s actually the biggest cluster seen in the entire post-election Trumphoria rally!  And futures-implied Fed-rate-hike odds for its December meeting skyrocketed from 32% to 83% in that gold-pullback span.  No wonder gold suffered heavy selling.

Big pullbacks always weigh on sentiment, breeding bearishness.  So traders are now naturally quite pessimistic on gold’s near-term outlook.  But that’s the very reason pullbacks and corrections exist, to rebalance sentiment.  That keeps bull markets healthy.  The excessive greed seen at major interim highs threatens to suck in too many buyers too soon, exhausting near-term buying.  That can prematurely kill bulls.

Major mid-bull selloffs work to bleed away this topping greed.  This is especially true for the gold futures speculators who dominate gold’s short-term price action.  As a herd they tend to get excessively long in strong gold rallies leading to interim highs.  Pullbacks and corrections force these momentum players to start unwinding those overweight upside bets.  Their selling quickly feeds on itself in this hyper-leveraged market.

That ultimately generates fear, restoring psychological balance.  This paves the way for buyers to return and drive gold’s next rally higher.  That’s where we are today.  The past month’s sharp gold pullback has likely largely run its course, close to a major bottoming.  This is evident in gold’s technicals, the collective gold futures positions held by speculators, and gold’s seasonals.  Gold’s technicals keep this pullback in perspective.

Pullback in Gold Prices - An Opportunity to Buy Low before a Major Rally Again

While a sharp 5.7% drop in just 18 trading days feels miserable, it was no big deal in the grand scheme.  Gold’s current bull was born in late 2015, fueled by huge investment demand following the first stock-market corrections in years.  This gold bull’s first upleg powered 29.9% higher in just 6.7 months into July 2016.  Then gold corrected, which is perfectly normal and expected after all uplegs in healthy bull markets.

But thanks to the extreme Trumphoria stock-market rally ignited by Trump’s surprise win, this gold bull’s first correction snowballed to monstrous proportions.  Gold is often hostage to stock-market fortunes, as they effectively control gold investment demand.  When stock markets are high, investors feel no need to prudently diversify their stock-heavy portfolios with counter-moving gold.  Thus gold languishes in stock euphoria.

That anomalously-large gold correction finally bottomed in December 2016 after a brutal 17.3% loss in just 5.3 months.  Nevertheless that remained short of new-bear-market territory at -20%, so gold’s young bull remained very much alive and well.  This gold bull’s second upleg has powered higher on balance all year, up 19.5% at best over 8.7 months in early September.  This current upleg has proven very impressive.

Gold has carved a well-defined uptrend this year, despite major obstacles.  They include the seemingly-endless parade of Trumphoria-fueled stock-market record highs, the Fed’s third and fourth rate hikes of its current cycle, and gold’s usual summer-doldrums low which I warned about in advance.  Despite all that, gold kept marching higher.  This second upleg’s uptrend is truly outstanding given 2017’s stiff gold headwinds.

As I discussed back in early August, gold usually enjoys a major autumn rally between mid-summer and late September.  This year’s proved quite strong, with gold prices powering 11.2% higher in just 2.0 months by early September.  That catapulted gold prices above its uptrend resistance, and generated plenty of greed.  As of early September, gold’s 17.2% year-to-date gain trounced the S&P 500’s 10.1%.  Gold is thriving this year!

Again mid-upleg pullbacks are essential to keeping sentiment balanced, ultimately both prolonging and enlarging uplegs.  Pullbacks are sub-10% selloffs within ongoing uplegs.  Corrections are 10%+ selloffs between uplegs within ongoing bulls.  Bull markets without pullbacks and corrections, like these surreal stock markets today, are very dangerous.  Suppressing selloffs only delays then later exacerbates them.

Despite gold’s sharp 5.7% pullback in the past month, this current upleg’s technicals are still very bullish.  Gold remains well within its upleg’s strong uptrend, well above lower support.  And other than the weeks straddling that early-September interim high, this week’s $1270s levels are still among the best seen this year.  On top of that gold remains above its trend-defining 200-day moving average, which continues to rise.

So from a pure technical perspective, the bearish gold sentiment these days is totally unjustified.  Rather than fearing gold prices are heading much lower, smart speculators and investors should be salivating at buying relatively low within a strong bull-market upleg.  Sharp mid-upleg pullbacks nearing trend support offer the best buying opportunities seen within bull markets outside of the major-correction lows between uplegs.

Most if not nearly all of the gold selling driving this recent healthy pullback came from futures speculators.  These traders run extreme leverage that can exceed 25x!  Such vast risk forces them to be short-term momentum players.  This is evident in this chart showing speculators’ total long and short contracts per the weekly Commitments of Traders reports rendered under gold.  These guys have been heavy sellers.

Pullback in Gold Prices - An Opportunity to Buy Low before a Major Rally Again

Because of gold futures’ extreme leverage, their speculators punch way above their weight in terms of bullying gold’s price around.  It’s impossible to figure out why gold’s price does what it does without first understanding what’s going on in gold futures.  Last week I wrote an essay on gold uplegs’ three stages that dives into gold-futures trading in depth.  You may need that background to understand this critical chart.

Speculators’ collective gold futures positions are only reported once a week, current to Tuesdays.  Gold peaked at $1348 on Thursday September 7th, which was part of the CoT week ending the next Tuesday the 12th.  Total spec gold futures longs had surged to 400.1k contracts that day, an 11.5-month high.  400k+ is high absolutely too, as the all-time record peak seen in early July 2016 was 440.4k contracts.

That left gold prices with a futures selling overhang in early September.  With these traders largely fully deployed on the long side, they didn’t have much more room to buy.  But they had lots of room to sell if something spooked them.  And there’s nothing gold futures speculators fear more than Fed rate hikes.  So as the December rate-hike odds rocketed higher in September, these hyper-leveraged traders were quick to sell.

In the first CoT week after that peak, they dumped 23.2k long contracts.  In the second CoT week, which is the latest as this essay is published, they jettisoned another 25.1k.  Anything over 20k in a single CoT week is huge.  So speculators’ gold futures selling has been fast and furious.  The 48.3k long contracts they cast into the markets were the equivalent of 150.2 metric tons of gold!  That’s far too much to digest quickly.

According to the World Gold Council’s latest fundamental data, global gold investment demand in the first half of 2017 totaled 699.6t.  Divide that by 26 weeks, and it works out to 26.9t per week.  So there’s no way the gold futures speculators’ colossal 75.1t-per-week selling can be absorbed.  That’s far too much gold too fast for investment demand to offset.  Thus gold prices fell sharply as supply temporarily overwhelmed demand.

Such extreme selling rates are just as unsustainable from the futures speculators’ side.  Out of 978 CoT weeks since early 1999, only 21 or 2.1% have seen spec long-side selling exceed 48.3k contracts in a 2-CoT-week span.  Such extreme selling soon peters out, which helps gold prices bottom.  There’s no way that 24k-contract-per-CoT-week spec-long-selling pace can be maintained for long, as long selling is self-limiting.

Speculators’ gold futures longs are finite.  Even in the deep gold despair of late 2016 following that epic Trumphoria-driven gold prices correction, they bottomed around 254k contracts.  They were sitting at 351.8k back on September 26th, the latest CoT data when this essay was published.  Since then gold prices fell still-another 1.8% at worst as of Tuesday this week.  So the next CoT report Friday afternoon will show more selling.

If speculators dumped another 20k long contracts, that only leaves 78k over this gold bull’s rock-bottom support.  And those levels are seldom seen within uplegs, only between uplegs at the bottoms of major corrections.  So a case can be made that the lion’s share of the gold futures selling that drove this past month’s pullback is likely over.  While speculators could sell more, they’ve probably already dumped enough.

Total spec longs certainly aren’t low, but they don’t get low within bull-market uplegs.  And spec shorts aren’t high, but they don’t get high without some super-bearish catalyst to drive risky short selling.  With those December Fed-rate-hike odds already up at 83%, that eventuality is nearly fully priced in.  Those futures-implied Fed-rate-hike odds seldom exceed the mid-80s until a week or so before a hiking FOMC meeting.

Another reason this past month’s gold futures selling has likely largely run its course is investors are still aggressively buying gold.  Futures speculators dominate gold’s short-term trends with their epic leverage, but investors with their far-larger pools of capital drive broader upleg and bull-market trends.  While futures speculators rushed to sell last month, stock investors flooded into gold ETFs led by the GLD SPDR Gold Shares.

Again in last week’s essay on gold uplegs’ three stages I explained the crucial GLD mechanics and gold-price impact in depth.  In a nutshell, when stock investors buy GLD shares faster than gold itself is rising it forces this ETF to shunt that excess demand and capital into physical gold bullion.  In September while gold prices plunged 3.1%, GLD’s holdings surged 5.9% or 48.2t higher!  That reveals very-strong investment demand.

GLD hadn’t enjoyed a bigger monthly holdings build, and thus seen more stock-market capital inflows, since June 2016.  That was when gold was in favor as this young bull’s first powerful upleg was starting to top.  So to see gold investment demand soaring back toward those levels despite rocketing Fed-rate-hike odds and the biggest Trumphoria cluster of stock-market record highs was remarkable and very bullish.

If investors are already flocking to gold despite these lofty stock markets, imagine how gold investment demand will soar when they inevitably roll over.  Remember this entire gold bull was ignited back in late 2015 and early 2016 on the first stock-market corrections in 3.6 years.  The next stock-market correction, which is long overdue, will lead to another scramble by investors to prudently diversify their stock-heavy portfolios.

Gold’s seasonals also argue that its pullback is likely largely over, with a major rally imminent.  This chart individually indexes gold prices to a 100 baseline within each bull-market year from 2001 to 2012 and 2016.  Then all these annual indexes are averaged together to discern bull-market seasonal tendencies.  It’s perfectly normal and expected for gold prices to suffer a major seasonal pullback in late September and October.

Pullback in Gold Prices - An Opportunity to Buy Low before a Major Rally Again

In modern bull-market years, gold’s autumn rally tends to top in late September.  Specifically it peaks on last month’s 15th trading day on average.  That translates this year to Friday September 22nd.  Instead gold’s seasonal peak came a couple weeks earlier last month.  That may have simply been because gold was overbought, having surged 11.2% in 2.0 months which is much better than the 6.9% autumn-rally average.

After that autumn-rally interim high, gold tends to suffer a seasonal pullback in bull-market years ending in late October.  That averages out to this month’s 16th trading day, or Monday October 23rd this year.  But since this year’s typical seasonal pullback was pulled forward 11 trading days, it’s not unreasonable to expect it to end proportionally early.  That would peg today the 6th as the potential seasonal bottom for gold!

This duration-shifted rationale is flimsy alone, but it gains weight due to the magnitude of gold’s seasonal pullback this year.  Gold only tends to retreat 2.2% on average in this late-September-to-late-October span.  But this year it has again fallen 5.7% in that rough timeframe, 2.6x the seasonal average.  Selloffs generally have a size-and-time tradeoff.  The bigger and sharper they are, usually the shorter their duration.

Remember selloffs within healthy ongoing uplegs exist to rebalance sentiment.  Greed can be bled away slowly with a gradual shallow pullback, or blasted away rapidly with a sharp deep pullback.  And there’s no doubt this past month’s one was the latter in seasonal terms.  It should’ve done more than enough work to eradicate early September’s excessive greed and inject fear back into gold-futures speculators.

The really exciting thing is gold’s October seasonal bottom is the last one before this metal’s strongest seasonal rally of the year.  On average gold’s winter rally propels it 9.5% higher in bull-market years by late February.  That 9.5% winter rally well outguns the 6.9% average autumn rally that recently ended, and dwarfs the 3.8% average spring rally.  We are right at gold’s most-bullish time of the year seasonally!

Gold has real potential to enjoy a monster winter rally this year, especially if these insane stock markets start to roll over under the Fed’s just-unleashed quantitative-tightening juggernaut.  Just like back in early 2016, gold investment demand will skyrocket again when the long-overdue stock selloff starts generating some fear.  This year has again proven gold prices can rally without weaker stock markets, but they really accelerate it.

And the Fed’s likely December rate hike is nothing to fear despite futures speculators’ paranoia.  Gold actually thrives during Fed-rate-hike cycles.  It averaged gains of 26.9% in all 11 since 1971 before this current one.  During the last one between June 2004 to June 2006, gold soared 49.6% higher despite 17 consecutive rate hikes totaling 425 basis points!  In the current cycle to date, this week gold was still up 20.1%.

Despite all the bearishness out there thanks to this past month’s sharp pullback, gold is readying to rally.  Its technicals continue to look very bullish, gold futures speculators’ extreme selling can’t be sustained, investors are still buying big, and gold’s biggest seasonal rally of the year is imminent.  These coming major gains as this upleg resumes can be ridden in physical gold bullion or that leading GLD gold ETF.

But far greater upside is coming in the gold miners’ stocks with superior fundamentals.  They enjoy big profits leverage that really amplifies rallying gold prices, starting at 2x to 3x for major gold miners and going even higher for smaller ones!  The gold miners’ stocks have naturally fallen sharply with gold over the past month.  They remain radically undervalued even at today’s gold prices, let alone where gold is heading.

The bottom line is gold prices are readying to rally.  The sharp pullback it suffered over the past month is normal and healthy, serving to rebalance sentiment.  Despite the falling prices and resulting bearishness, gold prices remain well within the bull-market upleg’s strong uptrend channel.  The futures speculators responsible for gold’s selloff can’t keep jettisoning long contracts at the extreme and unsustainable rate seen last month.

Meanwhile stock investors continued aggressively buying gold, driving GLD’s biggest monthly holdings build of this gold bull’s second upleg.  Their investment demand will explode when these crazy stock markets inevitably roll over.  On top of all that, gold is on the verge of starting its biggest seasonal rally of the year.  This past month’s sharp pullback created a fantastic opportunity to buy low before gold starts surging again. – Adam Hamilton

 

Pay Greater Attention to Gold – Here comes a Perfect Storm for Higher Gold Prices

Pay Greater Attention to Gold - Here comes a Perfect Storm for Higher Gold Prices

Here comes a Perfect Storm for Higher Gold Prices

Why Peak Gold Is Making the Perfect Storm for Rising Gold Prices From Birch Gold Group.

Another significant buy signal is emerging for gold.

Experts believe we’re quickly approaching ‘peak gold,’ meaning production could soon hit its permanent ceiling and begin declining – while demand continues to grow.

If the peak gold hypothesis is proven true, then gold prices could likely soon reach record highs. Here’s everything you need to know, and how you can take advantage of this historic event in the gold market…

Running Out of Gold

All natural, nonrenewable resources are alike when it comes to production efficiency. The supply lifecycle of any such resource looks something like this:

1) Discovered – When a resource is found to have economic value, its supply is tapped for the first time.

2) Supply Rush – After the resource is first discovered, its massive reserves are easy to mine and harvest, which results in a supply rush (e.g. the American gold rush).

3) Booms & Busts – As a market forms around a resource after the initial supply rush, production goes through booms and busts. Harvesting the resource in question grows harder with time, but technological advances intervene. Production maintains a steady upward trajectory in the long-term, with many ups and downs in the short-term.

4) Peak Production – Eventually, increased production efficiency from technology isn’t enough to negate the reality of the resource’s dwindling finite supply. Once production reaches this ‘peak,’ it cannot increase any further.

5) Production Decline – After production hits its peak, it steadily falls as the finite resource supply comes closer to being exhausted.

6) Exhaustion – Finally, the resource’s supply is entirely tapped. Production slowly comes to a complete stop.

But what does all this mean for the price of a resource? Well, supply/production is only one half of the equation.

The other half is demand. And that’s where things get especially interesting.

That’s because supply/production of a natural, nonrenewable resource is a zero-sum game. It spikes strongly in the beginning, grows steadily until hitting its peak, and then declines to nothing.

But demand is a totally different story. As supply/production slows down, scarcity grows and demand tends to speed up in response.

Only one thing can happen when supply/production fall while demand rises: Gold prices go through the roof. And that’s exactly what will happen when ‘peak gold’ finally arrives…

When to Expect ‘Peak Gold’ to Hit

How soon should we be looking for peak gold to manifest itself? If you’re thinking along the lines of 5, 10, or 15 years… think again.

According to mining industry experts, peak gold could be just around the corner.

Randall Oliphant, chairman of the World Gold Council, predicts today’s environment of rising demand and stagnating production could be ushering peak gold in right now. In fact, Oliphant believes 2017 will be proven as the year of peak gold within the next 12-24 months.

Bloomberg reports:

The world may have already produced the most gold in a year it ever will, according to the chairman of the World Gold Council.

Production is likely to plateau at best, before slowly declining as demand rises, especially given global political risks and robust purchases by consumers in India and China, Randall Oliphant said in an interview Monday.

Oliphant’s concerns over peak production echoed similar comments at the conference, being held this year in Colorado Springs. David Harquail, chief executive officer of Franco-Nevada Corp., said earlier Monday that the gold industry continues to be in an ex-growth phase where new mining projects are simply replacing older assets that are running out of ore.

How High Could Gold Prices Rise?

If experts are correct in their peak gold predictions, production will likely plateau in the months to come, before beginning to falter and decline. Meanwhile, global demand is on the rise, with no signs of slowing down.

As a result, Oliphant is making a conservative estimate that gold prices will reach at least $1400 in the next year. But from a longer term perspective, prices could climb far higher.

Add to all this the growing volatility in international politics, and the increasing flight to safe-haven assets, and you can clearly see a perfect storm brewing for gold prices.

This could be a prime opportunity for investors who act soon enough. Oliphant concurs, saying, “All this uncertainty seems very fertile ground for people to get into gold.”

Gold Is ‘Worthy Of Greater Attention’

Even though gold prices have dropped well below the $1,300 level, it is still doing well and is in need of more in-depth analysis, says Bloomberg Intelligence’s Mike McGlone.

“With the record-setting stock market barely beating gold, the metal may be worthy of greater attention,” noted the commodity analyst in a report Wednesday.

He pointed out that while both gold prices and the S&P 500 Index are up about 20% since the beginning of the Federal Reserve’s tightening cycle in 2015, most of the news headlines have been focused on stocks rather than the precious metal.

“Despite all of the attention on stocks, gold prices may be looking ahead to a more favorable endgame at a steep discount to historical highs with inflation brewing, a potential dollar peak and the lowest CBOE Volatility Index ever,” McGlone said. “The higher stocks go, the greater the reversion risk, apparently supporting gold prices.”

But, the biggest risk facing gold prices right now is a “sustained dollar recovery,” which is partly to blame for September’s move below the $1,300 level in the first place. The U.S. dollar is estimated to be one of the “primary” drivers directing gold prices for the rest of the year.

As of now, the precious metal is projected to hold support above the $1,250-$1,260 an ounce, which is the “most widely traded range for the past 12 months,” according to McGlone.

As of Thursday afternoon, December Comex gold is trading at $1,273.80, down 0.23% on the day, S&P 500 is at 2,551.53, up 0.54% on the day, and the U.S. dollar index is at 93.95, up 0.47% on the day. – Anna Golubova

Gold-Backed ETF Holdings Climb Again in September on North American Demand

After surging in August, gold continued to flow into ETFs last month, signaling continued strong demand for the yellow metal – specifically in North America.

According to the World Gold Council, gold-backed ETF holdings increased by 22.4 tons in September. This follows on the heels of a 31.4 ton increase in August.

With the price of gold surging in early September, the combined liquidity of gold ETFs rose sharply month-over-month to $1.51 billion per day, an increase of 20% versus the year-to-date average liquidity of $1.26 billion per day.

North American ETFs drove the increase with other regions seeing slight outflows. After taking in 27.8 tons of gold through funds listed in the region in August, North America upped her game in September with investors adding 35.0 tons. This more than compensated for European fund outflows of 12.0 tons. Asian funds also saw slight outflows of 1.7 tons. ETFs in other regions saw slight inflows.

Analysts say a weakening euro against the dollar last month helped drive the outflow in European markets. Nevertheless, European funds continue to lead inflows on the year. The European market accounts for close to 56% of all 2017 ETF gold inflows at 120 tons.

Global gold-backed ETFs collectively hold 2,357 tons of gold. Funds have added 191.9 tons of gold on the year, equivalent to $7.5 billion. This represents an increase of 7.7% of global AUM from December 2016.

Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.

ETFs are backed by physical gold held by the issuer, and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times in the same day. Many speculative investors appreciate this liquidity.

There are good reasons to invest in ETFs, but they aren’t a substitute for owning physical metal. In an overall investment strategy, SchiffGold recommends buying gold bullion first.

When considering gold-backed ETFs, you should always keep in mind that you don’t actually own the gold. Buying the most common ETFs does not entitle you to any actual amount of the precious metal. – Peter Schiff

 

King Dollar Doomed – Massive Collapse Looms as Rally Fizzles, Rush to Gold

King Dollar Doomed - Massive Collapse Looms as Rally Fizzles, Rush to Gold

King Dollar Doomed – Massive Collapse Looms

The euro and the yen have quietly usurped the dollar as the world’s favorite haven. Investors have been increasingly turning to the euro and yen to fund carry trades, leading to the greenback’s underperformance during bouts of risk aversion since 2014. Foreign-exchange havens including gold outperformed the dollar on a volatility-adjusted basis when the bank’s Global Financial Stress Index showed market dislocations over the past three years. Before 2014, the three-month risk reversal for haven exchange rates relative to the U.S. currency as a percentage of implied volatility — another measure of volatility — was consistently negative.

Principal component analysis, a way to isolate the drivers of a given trend, shows that the yen tends to consistently appreciate when sentiment in the U.S., euro area and China sours, while gold looks like a good hedge on developed-market stress. The dollar, meanwhile, tends to sell off during deteriorating sentiment toward the U.S. economy — food for thought if there’s a redux of the debt-ceiling debacle at the end of the year.

Dollar Rally Fizzles Despite Strong Data

Stronger than expected U.S. data helped the greenback shake off its initial weakness to end the New York trading session much closer to its highs than lows. The dollar did not manage to turn positive against the euro, sterling and the commodity currencies but it enjoyed some gains versus the Japanese Yen and Swiss Franc. The dollar should actually be trading much higher given the unexpected strength of the non-manufacturing ISM report. Service sector activity grew at its fastest pace in 13 years as Hurricane Harvey caused a sudden slowdown in supplier delivery times.  Most importantly, the employment component of the report increased which indicates that instead of losing jobs, the services sector, which is the largest part of the labor market added jobs at a faster pace in the month of September.  According to ADP, corporate payrolls rose by only 135K compared to 228K the previous month but while job growth slowed, investors had braced for an even softer report.  So the fact that it was in line is good news for the dollar.  These 2 reports will leave investors hoping for stronger job growth.  Economists are currently calling for an increase of 80K jobs in September, down from 156K jobs in August. To put this into perspective, after Hurricane Katrina, the Bureau of Labor Statistics reported a loss of -35K jobs but it was later revised to an increase of 67K jobs.  It is difficult to say how much of an impact the hurricanes had on job growth but a rebound and upward revision is certain for the following month so investors could choose to discount and look beyond September’s soft report.  Regardless, with ISM surprising to the upside, we expect the dollar to hold onto its gains ahead of the jobs report.

Despite the US dollar’s strength, the euro ended the day higher against the greenback thanks to stronger than expected Eurozone PMIs. Like the manufacturing sector, service sector activity was revised higher for the Eurozone, offsetting the decrease in retail sales. Catalonia announced that it will take steps on Monday to declare independence from Spain despite King Felipe’s rare speech calling the situation extremely serious and accusing pro-independence leaders of having unacceptable disloyalty towards the powers of the state. The Spanish government could still take steps to prevent independence and we think they will but for the time being, investors are looking beyond these dangerous political risks to the next European Central Bank meeting.  We still think EUR/USD could still take another hit from the political crisis in Spain but as the monetary policy decision nears, buyers will swoop in quickly.  Tomorrow’s ECB “minutes” should support the euro as the central bank made it very clear last month that the bulk of policy decisions will be made in October.

Sterling was one of the day’s best performing currencies.  After falling for the past 3 days straight, we’ve finally seen a positive one courtesy of the UK PMIs services report.  As we wrote in yesterday’s note, services PMI may not follow manufacturing lower because retail sales and consumer confidence improved last month.  Thankfully that was the case as the uptick in the index to 53.6 from 53.2 helped to stem the slide in the currency.  It also allowed the composite index to tick up to 54.1 from 54 instead of falling like economists anticipated. Still, according to our colleague Boris Schlossberg, “the underlying data suggested that troubles exist in the largest sector of UK economy. Markit noted that, “Service providers commented on subdued business-to-business sales and delayed decision-making on large projects in response to Brexit related uncertainty. Reflecting this, latest data indicated that overall new business volumes expanded at the slowest pace since August 2016.”

All 3 of the commodity currencies appreciated against the greenback today with the Australian dollar leading the gains despite stronger U.S. data and weaker Australian data. According to the latest report, service sector activity slowed in the month of September with the PMI index dropping to 52.1 from 53.  Yet investors found relief in the World Bank’s upgraded GDP forecasts for China.  The organization raised its China growth forecast by 0.2% from 6.5% to 6.7% in 2017 as they feel that the “economic outlook for the region remains positive and will benefit from an improved external environment as well as strong domestic demand.” The Australian dollar will remain in focus this evening with retail sales and the trade balance scheduled for release.  The recent slowdown in manufacturing activity suggests that trade activity may have slowed and according to PMI services, retail sales contracted for the sixth consecutive month on growing competition from online and offshore sellers.  They also felt that spending was being dampened from slow wage growth and rising housing/energy costs. None of this is good news for AUD/USD and could drive the currency pair lower once again.  The New Zealand dollar shrugged off yesterday’s decline in dairy prices to trade higher.  New Zealand data was mixed with commodity prices rising but house price and job advertisement growth slowing. NZD/USD is testing the 200-day SMA.  While this may be a natural support level, the positive bias in the U.S. dollar could drive the currency pair below this key technical level.

Last but certainly not least USD/CAD ended the NY trading session below 1.25. This is significant because it marks the 6th consecutive trading day that the pair has struggled around this key level. With each passing day, the risk of a deeper correction grows but at the same time the longer USD/CAD remains below 1.25, the stronger a breakout will be.  Speculators are aggressively short USD/CAD so  a short squeeze is still a risk.  Looking ahead Canada is scheduled to release its trade balance tomorrow and the drop in the IVEY PMI index suggests that the deficit could widen. – Kathy Lien

A Massive Collapse Of The US Dollar Looms

Countries around the world would soon stop trading commodities like oil in the US dollar, something we’re already seeing with China, Russia, Iran, and Venezuela, all of which are preparing non-dollar, gold-backed mechanisms of exchange.

This trend, according to Katusa in a must see interview with Future Money Trends, will only continue to weaken the U.S. dollar going forward and the result will be a massive capital flight to gold in coming years:

I think we’ll have a near term bounce on the US dollar… then it’s going to be very weak… and then it’s going to go much, much lower… With China and Russia working together to de-dollarize the US dollar starting with oil, which is the biggest market… and then all the other commodities.

You’re going to start seeing a massive unwind of these US dollars in the emerging markets. 

When that money comes back… which it will… and the world starts cluing in that the emerging markets need gold to convert the Yuan and the Ruble and all these different factors, you’re going to see a massive rush for gold.

 

Katusa notes that he is preparing to “load up” on gold-based assets as the dollar strengthens and puts additional pressure on gold prices, but says that by next year major fund managers will start moving capital back into precious metals in response to dollar weakness, global de-dollarization and economic crisis:

Everybody wants to rush in when something’s exciting… but you take your position before the massive flow of money… I think we have a near term dead cat bounce for the US dollar… which will mean we’re going to have a little bit of weakness here in gold in the near term… the next six months is my time to load up.

…And when the funds flow come in… it’s going to be the equivalent of Niagra Falls coming through your garden hose.

The geo-political realignment taking place now stands to upend the financial and economic systems as we know them. This shift will not come without crisis and panic. The time to position yourself in gold-based assets is now. – Mac Slavo

Cracks in Dollar Are Getting Larger

Many Daily Reckoning readers are familiar with the original petrodollar deal the U.S made with Saudi Arabia.

It was set up by Henry Kissinger and Saudi princes in 1974 to prop up the U.S. dollar. At the time, confidence in the dollar was on shaky ground because President Nixon had ended gold convertibility of dollars in 1971.

Saudi Arabia was receiving dollars for their oil shipments, but they could no longer convert the dollars to gold at a guaranteed price directly with the U.S. Treasury. The Saudis were secretly dumping dollars and buying gold on the London market. This was putting pressure on the bullion banks receiving the dollar.

Confidence in the dollar began to crack. Henry Kissinger and Treasury Secretary William Simon worked out a plan. If the Saudis would price oil in dollars, U.S. banks would hold the dollar deposits for the Saudis.

These dollars would be “recycled” to developing economy borrowers, who in turn would buy manufactured goods from the U.S. and Europe. This would help the global economy and help the U.S. maintain price stability. The Saudis would get more customers and a stable dollar, and the U.S. would force the world to accept dollars because everyone would need the dollars to buy oil.

Behind this “deal” was a not so subtle threat to invade Saudi Arabia and take the oil by force. I personally discussed these invasion plans in the White House with Kissinger’s deputy, Helmut Sonnenfeldt, at the time. The petrodollar plan worked brilliantly and the invasion never happened.

Now, 43 years later, the wheels are coming off. The world is losing confidence in the dollar again. China just announced that any oil-exporter that accepts yuan for oil can convert the oil to gold on the Shanghai Gold Exchange and hedge the hard currency value of the gold on the Shanghai Futures Exchange.

The deal has several parts, which together spell dollar doom. The first part is that China will buy oil from Russia and Iran in exchange for yuan.

The yuan is not a major reserve currency, so it’s not an especially attractive asset for Russia or Iran to hold. China solves that problem by offering to convert yuan into gold on a spot basis on the Shanghai Gold Exchange.

This straight-through processing of oil-to-yuan-to-gold eliminates the role of the dollar.

Russia was the first country to agree to accept yuan. The rest of the BRICS nations (Brazil, India and South Africa) endorsed China’s plan at the BRICS summit in China earlier this month.

Now Venezuela has also now signed on to the plan. Russia is #2 and Venezuela is #7 on the list of the ten largest oil exporters in the world. Others will follow quickly. What can we take away from this?

This marks the beginning of the end of the petrodollar system that Henry Kissinger worked out with Saudi Arabia in 1974, after Nixon abandoned gold.

Of course, leading reserve currencies do die — but not necessarily overnight. The process can persist over many years.

For example, the US dollar replaced the UK pound sterling as the leading reserve currency in the 20th century. That process was completed at the Bretton Woods conference in 1944, but it began thirty years earlier in 1914 at the outbreak of World War I.

That’s when gold began to flow from the UK to New York to pay for badly needed war materials and agricultural exports.

The UK also took massive loans from New York bankers organized by Jack Morgan, head of the Morgan bank at the time. The 1920s and 1930s witnessed a long, slow decline in sterling as it devalued against gold in 1931, and devalued again against the dollar in 1936.

The dollar is losing its leading reserve currency status now, but there’s no single announcement or crucial event, just a long, slow process of marginalization. I mentioned that Russia and Venezuela are now pricing oil in yuan instead of dollars. But Russia has taken its “de-dollarization” plans one step further.

Russia has now banned dollar payments at its seaports. Although these seaport facilities are mostly state-owned, many payments, like those for fuel and tariffs, were still conducted in dollars. Not anymore.

This is just one of many stories from around the world showing how the dollar is being pushed out of international trade and payments to be replaced by yuan, rubles, euros or gold in this case.

I believe gold is ultimately heading to $10,000 an ounce, or higher.

Now, people often ask me, “How can you say gold prices will rise to $10,000 without knowing developments in the world economy, or even what actions will be taken by the Federal Reserve?”

It’s not made up. I don’t throw it out there to get headlines, et cetera.

It’s the implied non-deflationary price of gold. Everyone says you can’t have a gold standard, because there’s not enough gold. There’s always enough gold, you just have to get the price right.

I’m not saying that we will have a gold standard. I’m saying if you have anything like a gold standard, it will be critical to get the price right.

The analytical question is, you can have a gold standard if you get the price right; what is the non-deflationary price? What price would gold have to be in order to support global trade and commerce, and bank balance sheets, without reducing the money supply?

The answer is, $10,000 an ounce.

I use a 40% backing of the M1 money supply. Some people argue for 100% backing. Historically, it’s been as low as 20%, so 40% is my number. If you take the global M1 of the major economies, times 40%, and divide that by the amount of official gold in the world, the answer is approximately $10,000 an ounce.

There’s no mystery here. It’s not a made-up number. The math is eighth grade math, it’s not calculus.

That’s where I get the $10,000 figure. It is also worth noting that you don’t have to have a gold standard, but if you do, this will be the price.

The now impending question is, are we going to have a gold standard?

That’s a function of collapse of confidence in central bank money, which is already being seen. It’s happened three times before, in 1914, 1939 and 1971. Let us not forget that in 1977, the United States issued treasury bonds denominated in Swiss francs, because no other country wanted dollars.

The United States treasury then borrowed in Swiss francs, because people didn’t want dollars, at least at an interest rate that the treasury was willing to pay.

That’s how bad things were, and this type of crisis happens every 30 or 40 years. Again, we can look to history and see what happened in 1998. Wall Street bailed out a hedge fund to save the world. What happened in 2008? The central banks bailed out Wall Street to save the world.

What’s going to happen in 2018?

We don’t know for sure.

But eventually a tipping point will be reached where the dollar collapse suddenly accelerates as happened to sterling in 1931. Investors should acquire gold and other hard assets before that happens. – Jim Rickards

 

Gold and Silver In an Age of Negative Interest Rates & Madness of Managed Markets

Gold and Silver In an Age of Negative Interest Rates & Madness of Managed Markets

Gold and Silver In an Age of Negative Interest Rates

Time is the soul of money, the long-view — its immortality. Hard assets are forever, even when destroyed by the cataclysms of history. It is the outlook that perpetuated the most competent and powerful aristocracies in continental Europe, well up through World War I and, in certain prominent cases, beyond; it is the mindset that has sustained the most fiscally serious democratic republic in the Western world, that of Switzerland (as demonstrated in this article). In this view, the stewardship of money, formerly known as “banking,” is a serious matter of serious wealth management and not a weird-science lab experiment of investment products ultimately designed for hedge fund managers’ tax arbitrage schemes.

More than ever the focus on hard assets is a dire call to arms given the deformed market culture of central banking monetary magic. Despite the early promise of the Trump presidency to reinvigorate the economy, the United States remains mired in economic stagnation built up over so many years of debt-driven policies, easy-money policies, and the ZIRP fiasco fostering a bizarre-world situation in which the actual economy is doing poorly while the market is soaring. In such an environment, the allure of the centuries’-old tried and true has never had more appeal.

In a word, the hard asset vision is about building wealth outside the stock market. It refers to three main strategies overall:  1) land ownership and/or farmland, forestry and agriculture 2) gold, other precious metals, and certain base-metal commodities 3) The (Old Masters/Classic Modern) art market. Where this last is concerned, we mean art as investment and not art-as-commerce, such as that which contaminates today’s insipid and overpriced world of ‘Balloon-Dog’ bad art. The auction world of Rembrandt and Picasso; of El Greco and Gerhardt Richter has been on a tear, is smashing records, and cannot be ignored as an excellent safe-haven vehicle, as outstanding works of art traditionally always have been.

To begin with, physical gold and precious metals remain an investment enigma despite being market-leading performers for the past seventeen years. Gold is a must-have portfolio asset amid the aggressive debt levels and monetary debasement that have so unhinged the market. Silver, for its part, in addition to its prestige status, also has innumerable industrial applications and throughout the precious-metal bull market since 2000.

Russia, in this context, is leading the charge in the long-view outlook. For the past three years, the Bank of Russia has been the world’s number one stacker of gold, and, thus far in 2017, has taken the lead position among international central banks in buying the commodity. At its current pace, Moscow will unseat China for the number five spot of gold-holding nations by the first quarter of 2018. Currently, the gold-to-GDP ratios of the world’s leading powers are: Russia 5.6%; the Euro Zone 3.6%; the U.S. 1.8% and China 1.5%.

Yet countries buying up gold versus investors who do so are two different worlds. Ninety-five percent of the world’s gold is held as a wealth store.

In other commodities, zinc and copper have been the big movers. Zinc, the key galvanizing agent, claimed the status of the best performing metal last year. Copper began its resurgence in 2017, and in late August of this year, a host of commodities broke out of multi-month consolidation patterns. Nickel and cobalt are also coming into the spotlight as metals essential to the rapidly growing lithium ion (Li-ion) battery sector.

The art world lags not too far behind that of precious metals in terms of history’s preferred storehouses of value as protection against uncertain times. Art as investment has long been a favored strategy of the European elite since, effectively, the High Middle Ages and has never gone out of style. In modern times, the phenomenon of an ever-growing collectors’ base and less supply of museum quality works has been accepted as a meaningful way to protect investors’ cash during economic difficulty. Though continually eclipsed in the media by the brasher contemporary art market, Old Masters (and Classic Modern—the great 20th century works) have shown stable, often spectacular, results over the past ten years with both categories reaching record-breaking highs.

Art, to be a safe haven, must be an investment and not a whim — just as it was for the Liechtenstein family who acquired Leonardo da Vinci’s Ginevra de Benci so many centuries ago. In the wake of the World War II near-bankruptcy of that eponymous principality (whose monarchs were not and are not supported by taxes), that painting was the first of the major, big-ticket art sales of the 20th century, when it was sold to Paul Mellon and The National Gallery of Art in Washington DC. Ginevra continues to hang there today (and to date, is the only Leonardo painting in possession of the United States).  While the average investor may not be in a position to store wealth in a Renaissance master or a Picasso, there are always the underrated gems or the new discoveries that can and will bring in the most unexpected of windfalls decades down the line.

Finally, farmland is seen by many as an excellent addition to a precious-metal portfolio. As Jim Rogers predicted in early September, fortunes will be made in agriculture “and when an industry breaks full faith, even mediocre people make a lot of money” in that sector. Hard asset investors continue to include farmland in their portfolios “for a combination of income generation, diversification and inflation-hedging”. Historically, farmland, like forestland in continental Europe or Latin America, has been a unique asset class demonstrating low-correlation to traditional asset classes, and which performs well as inflation rises.

Cash reserves, land as cash, the endless applications of Nature’s resources to industry; the prestige, privacy, and long-term value of beautiful art: such has been the outlook of the hard-asset philosophy. Today, that cult of independently-minded investors will laugh all the way to the bank — precisely by avoiding the paths laid out, and so horribly deformed, by those very banks. – Marcia Christoff-Kurapovna

Gold and Silver – The Monotonous Madness of Managed Markets

Michael Ballanger: So there you have it. A clear breakout to all-time highs confirmed by every measure everywhere with momentum charging ahead and high-fives and champagne corks flying about with reckless abandon and serial glee. To quote Chuck Prince, who left Citigroup in 2007 with an exit bonus of around $12.5 million, $68 million in stock and options, $1.7 million pension, an office, a car and a driver for five years during which time Citigroup shed $64 BILLION in valuation, “As long as the music is playing, you’ve got to get up and dance.” So when John Paulson’s pit bull Marcelo Kim got up at the Denver Gold Show and assailed the gold mining executives for $85 billion in wealth destruction since 2010, perhaps it might have been instructive to remind him that one executive alone in the banking business (Prince) blew 75% of that on his own.

Now add up the other guys like Bear Sterns and JP Morgan and the rest of the money-centre banks and they make the Gold Miners look like rocket scientists. Oh, and don’t forget to mention that the gold mining industry has to cope with serial intervention and malevolent manipulation affecting the product they sell while the banking industry consistently rips off millions of consumers with nary a crook landing in jail. And—let us not forget who it was that asked Goldman Sachs to design a product specifically for him that was actually intended to fail, to die, to go-to-zero, so he could SHORT it. It was John Paulson. Does anyone hear get the impression that it might be a good time to trot out the word “hypocrisy”?

I have followed Art Cashin for years and as the director of floor operations for UBS, he is one of two people often contributing to CNBC content that I actually admire and enjoy (the other being Rick Santelli). Last night after the close, Art actually told Kelly Evans that “I’ve been doing this for fifty years and I’ve never seen anything like it so it is rather odd.” Wait a minute. “RATHER ODD”? Now, Mr. Cashin—was it not “rather odd” that the global banking industry went from devastation to celebration in a mere five years as the Fed, the Bank of Japan, the European Central Bank and the Swiss National Bank all conspired to buy every toxic bond on the planet with fictitious money?

Was it not “rather odd” that stocks are not allowed to correct despite national disasters like three hurricanes into the U.S. within a four-week period? Was it not “rather odd” that gold and silver have never followed through once in the past four years after a technical “breakout”? This entire travesty of commerce referred to lightly as a “market” has gone from “rather odd” since the end of the GFC in March 2009 to “exceedingly corrupt” here in Q4 2017. However, at the end of the day, it has come down to doing one’s utmost to avoid LOSING money and that is the sole reason I write this missive.

Silver Year to Date

One month ago tomorrow, I posted this chart with the sage advice that one must REDUCE RISK. Now, while I abhor commentaries that constantly remind the reader of one or more decent “call(s)” on any particular market, most fail to include the prior ten that were poor, so what I want to make perfectly clear is that I did NOT sell all of my holdings in gold miners nor gold miner ETFs. In retrospect, THAT should have been the “call.” However, I sold only the call options and the leveraged positions in SIL (Global X Silver Miners ETF) and JNUG (Direxion Daily Gold Miners Bull 3X ETF). Granted, I am now flat SIL and holding fully-paid-for JNUG, with the $13.55 ACB for the latter certainly little solace now that it has been crushed from $25 to under $18. Similarly, I should not have simply exited the SIL positions; I should have shorted it or at least bought a few put options to take advantage of the impending top that was so very clear.

Shifting to the present, it is obvious that market participants have indeed had to experience additional pain since my last post last week. I thought the Commercials would behave a little better into the end of the month but, alas, they really didn’t and just kept pressing their luck covering a paltry amount in the week ended September 22. Last Tuesday marked the second week of short covering with an even greater 19,750 contract reduction in the aggregate but it is still way too high for a meaningful bottom to be in place.

Silver Chart

As you can see, we are still long way off the net Commercial short position reported on July 18 at 73,635 for gold as it traded at around $1,232. While that figure has started to reverse downward, I need to see a great deal more covering before I want to go long and since I have tended to be painfully early in the past, I am going to err on the side of caution and capital preservation this time around. One thing for sure is that “seasonality” has not worked worth a pinch of whale blubber as the two strongest months of September and October have proven 50% faulty with twenty-eight days left for October to validate the trade. Perhaps the Indian wedding season has been postponed and perhaps the global demand for jewelry has been vaporized due to the hurricanes but more than likely, some twenty-something desk trader was promised a new iPhone if he could find a way to keep gold and silver under $1,250 and $16.00 through Diwali and Christmas.

Gold COT Chart

As for the current state of the junior exploration sector, the one stock dominating the airwaves in the past three months has been Novo Resources (NVO.V), which has seen a meteoric rise in price since last July when it exploded out of the gates after reporting results from a small bulk sample that sent the market into a major “tizzy.” In the printed material, the company is attempting to draw a corollary to the Witwatersrand Basin of South Africa, the largest gold bearing region in the world with some fifty tons of gold (as opposed to “ore”) having been extracted from the area. The gold in Witwatersrand was situated in conglomerates and the basis of the excitement is that Novo’s “Purdy’s Reward” project apparently has the same “nugget effect” in situ gold mineralization as the monster in South Africa. Now, to date, a relatively small bulk sample and a highly-effective video shown at the Denver Gold Show has propelled from a 52-week $0.66 low to well over $8.00, creating an (undiluted) market cap of in excess of $1 billion. Now, IF this turns out to be “real” and all of the hype and fist-pumping bears out, it will mark the first major “new discovery” story (it really isn’t) in years and based upon the price action, it will be a shot of adrenalin for a largely moribund exploration market.

However, if it turns out to be, err, shall we say, “a disappointment,” the resulting losses are going to be the fodder upon which books are written, lawsuits are launched, and sectors (like junior gold exploration) get ignored for at least half a decade. I have no means of determining the outcome so I congratulate all that took the (early) plunge and wish the rest of you the very best of fortune as the larger bulk sample ultimately reveals how this story unfolds. At a $1 billion (plus) market cap, there is not only no room for error or disappointment; there is a prerequisite for world-class grades and ounces. In the meantime, the momentum crowd is having a field day and since “the music is playing, you got to get up and dance.”

Novo Resources

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