Bitcoin’s all grown up.
The digital currency splashed into the deep end last night when bitcoin futures debuted on the CBOE Global Markets exchange.
Most seasoned traders concluded that the advent of bitcoin futures would unravel the insane crypto rally we’ve witnessed over the past 12 months. Futures traders would eat the “amateurs” alive and slam the price lower once shorting bitcoin became an option, they said.
But so far, they’ve been dead wrong…
Bitcoin futures blasted higher right out of the gate last night. They triggered not one but two trading halts as it marched to overnight gains of more than 25% on the CBOE. Reports of the CBOE site going down started flooding in during the first hour of trading. Coinbase, a popular bitcoin trading site, also crumbled under the pressure last night.
Bloomberg noted that while bitcoin is notoriously volatile, futures traders should “help tame swings by improving liquidity and making it easier to bet on declines.” But in true bitcoin fashion, no dips have materialized just yet.
“It is rare that you see something more volatile than bitcoin, but we found it: bitcoin futures,” one Shanghai-based consultant told Bloomberg.
Bitcoin trading is totally bonkers. And it doesn’t look like it’s going to calm down anytime soon. It’s morphed from an underground tech-geek trade to the biggest market mania we’ve seen in decades. Bitcoin news is pushing stock market stories below the fold. Despite the market’s incredible performance this year, equities are starting to take a back seat to cryptocurrencies.
Then there’s gold.
Bitcoin is stealing gold’s thunder as the holiday season approaches. Doomsday preppers used to stock up on gold and canned goods. Now they’ve cleaned all the gold out of their bug-out bags and replaced it with bitcoin. Debates over stores of value in the event of societal collapse have shifted from gold to bitcoin. Bitcoin searches are more popular on Google than gold. No one seems to care about the Midas metal anymore.
Bitcoin’s rise has taken the wind out of gold’s sails. As interest in bitcoin skyrocketed this fall, gold futures started to trend lower. As bitcoin broke above $5,000 earlier this year, gold prices were topping out at $1,350. Since early September, gold futures have leaked lower by almost 8%, pushing to new four-month lows late last week. Bitcoin has rocketed to $16,000 over the same timeframe.
While new, smaller cryptocurrencies and “initial coin offerings” continue to gain attention, the market’s more speculative gold mining stocks are taking a beating. The VanEck Vectors Gold Miner ETF (NYSE:GDX) can’t keep its head above water. GDX is down more than 15% over the past three months.
Bottom line: Bitcoin is killing gold right now. We have no idea how long crypto-mania will last. But if the excitement surrounding bitcoin continues through the holiday season, we suspect things will get worse for gold before they get better… – Greg Guenthner
For gold investors, the major thorn in our side continues to be the USDJPY so we need to discuss it again.
Over the past weekend at TFMR, we had a discussion about how so many well-intentioned people could have been so wrong about “the metals” over the past five years. It included this sentence: “What we failed to predict was the successful, collective manipulation of nearly all “markets” by the CBs, their primary dealers and their willing/sycophant media through HFT.”
That one sentence could be the subject of a full post or podcast but, for now, let’s just focus upon the market manipulation through HFT. As you know by now, the USDJPY is just about the single most important general input for HFT buy/sell decisions. Whether it’s S&P futures, bond futures or Comex Gold, the direction of the USDJPY generally impacts all of these “markets” more than anything else. The chart below plots the inverse of USDJPY (JPYUSD) with gold futures. Note clear correlation that began in 2008.
In observing the central bank market manipulation…when we see the same pattern again and again…and this pattern is followed by the desired equity or bond market reaction…then you know something is up. How many times have we captured screenshots of the BoJ, Fed, SNB or whomever buying the USDJPY in size at just the right moment to create and paint a double bottom on the chart? From there, how many times have we watched a near perfect and uninterrupted, 45-degree angle recovery ensue?
Here are just a couple of egregious examples that I just chose at random from my desktop folder that holds about 40 charts. (I’ve only been keeping them since late summer.)
Well, since we just used the term “egregious”, let’s apply it again to the charts below. Recall that things were sailing along surprisingly well last Monday. Over the previous week, the USDJPY had failed to hold support near 113 and again near 112 and it had fallen to near and just below the very-important 111 level. Then, as we chronicled that day, a sudden spike occurred on NO NEWS and not even any rumors. Just a spike from out of the blue that drove the pair immediately back above 111.
And what followed over the next five days? Well, outside of the sudden plunge on the now disproven stories from Brian Ross at ABC News, the USDJPY has followed the same glide path all the way back to 113. Also, IT’S VERY IMPORTANT TO NOTE where USDJPY reopened Sunday afternoon…RIGHT ON the glidepath. Remove the reaction to Friday’s unexpected headlines and it’s a near-perfect, 45-degree angle for nearly FIVE FULL DAYS.
(And in case you’re wondering which tail wags which dog, note the turn in USDJPY last Monday clearly preceded the turn in the S&P.)
How is this even possible? It’s not…well, at least not in the traditional and “free market” sense…the pre-2008 and pre-2012 sense. All of these things used to move somewhat independently as human, carbon-based traders made rational investment decisions based upon a number of inputs. However, in 2017, where 90% of all trading is now done through HFT….well, the results are pretty clear. The Central Banks and their Primary Dealer trading desks manipulate the key inputs and HFT does the rest. This is why yours truly and so many other “experts and mavens” have been confounded for the past five years. It’s not nefarious intent and it’s not because gold bugs are cruel, heartless charlatans who are intent upon stealing as many dollars as possible from the easily-duped. Instead, it is a failure to anticipate the levels to which The Central Banks would successfully go to keep their system alive.
Understanding this is why you consistently hear me cite the refrain of PHYSICAL DEMAND. It is only through a renewed crisis of confidence that this system can be broken…at least as it pertains to the precious metals. Physical gold demand will bust The Bullion Banks by breaking their just-in-time and unallocated delivery system. Physical demand will force price to be discovered through the exchange of physical metal, not the alcehmized digital garbage that permeates the system today.
We’ll leave you today with stories from each end of The Bank monster. The first, and one that we’ve been following closely since last March, is the continued run-up to renewed war on The Korean Peninsula. WHILE NO ONE IN THEIR RIGHT MIND IS CHEERING THIS ON, it is important to be prepared for all of the unknown unknowns that would come with such a catastrophe, one of them being financial calamity that could again shatter confidence in the current system.
And the other story deals with gold alchemy and the continued shunting of physical demand into sham/scam paper investments. It seems the World Gold Council is hungry to increase their fees. They are apparently planning to offer a whole new “gold” ETF, perhaps designed to compete with the IAU. Ask yourself, from where will this fund get the 200-300 metric tonnes of gold needed to fund its “inventory”? Once again, The Banks will simply perform the alchemy of leveraging current unallocated stockpiles into more and more digital “gold”.
Again, true physical gold demand is the only antidote to the poison created by the Central Bankers and the Bullion Banks. Sadly, 2018 promises another surge in war, debt, negative interest rates and de-dollarization. Will these events finally prompt enough physical demand to break The Banks? Only time will tell. – Craig Hemke
The divergence from the USDJPY correlation illuminates The Bullion Bank effort to smash price below the 200-day MA and flush out as many Spec longs as possible before the next rise. We saw this is May and in July and we are seeing it again now.
I have no doubt that what you are about to read is correct.
Since last Monday, when the USDJPY was forcibly rallied from below 111, the total change in this all-important HFT driver is 130 “pips”…from 110.90 to 112.20. After discovering and then closely following the yen-gold correlation for over three years, we’ve learned that a one point move in the USDJPY generally correlates to a $10-12 move in the price of Comex Digital Gold. The current 130 pip move should thus translate into roughly a $15 drop in Comex gold. Considering that price was $1298 last Monday, the current price should be around $1283. Instead, I have a last of $1267. Why the 2X difference?
It’s simple. Over the past several days there has been a concerted and coordinated effort to rig price below the 200-day moving average. And why have The Banks taken this action? In order to engender the same type of Spec long liquidation seen in May and July of this year and displayed on the chart below from October 24:
The CoT survey of last Tuesday gave two alarms that allowed The Banks to trigger this current action.
Judging that the CoT was ripe to be flushed, The Banks took action, striking yesterday at 9:07 am EST. Note the 12,000 contract dump that finally shoved price well-below the 200-day. The selling action that took gold prices another $10 lower in the three hours that followed was brought upon by Spec long liquidation upon seeing price fall below this critical technical indicator.
Today, price continues to meander lower, even though USDJPY is down, because of this continued Spec long liquidation. Just as we saw in May and just as we saw in July.
Given the false pretenses surrounding this current manipulation, I have no doubt that another bounce and rally is coming…in both Comex Gold and Comex Silver.
Let’s start with Comex Gold. Note that the May and July lows came with an RSI of near 30 and price about $40 below the 200-day. A similar low next week would peg price near $1240.
Personally, I have a hard time believing that price will fall that far before bouncing but, if it does, there’s a another good reason to expect a floor there…the 200-week moving average. On three occasions earlier this year, price has fallen to this key long-term indicator and on all three occasions, price quickly reversed.
In Comex Digital Silver, the picture is just as clear. There can be no doubt that the Banks have aggressively capped CDS at it’s own 200-week moving average on every attempt to move higher over the past 18 months. As you can see below, this is clearly NOT random, free, fair and natural price action:
However, another look at the same weekly chart reveals the resilience that CDS has shown every time it reached down toward $16. Additionally, check the massive, long-term reverse head-and-shoulder pattern that is forming:
So, quite obviously, there is another tradable low coming. Will it lead to the final breakout move toward $1400 and $22? Maybe. However, this next low is coming and why wouldn’t it? Consider just this brief list that will impact the demand for gold exposure in 2018:
Given all of the uncertainty that lies ahead for 2018, prices for Comex Digital Metal are headed higher not lower. Prepare now for your next tradable opportunity in both Comex metals and the mining shares. – Craig Hemke
For at least the past decade the behavior of the people who trade gold futures contracts – and thereby determine the metal’s price – has been generally predictable: The “commercials” – big banks and companies that buy gold to do things with it – have suckered the speculators – mostly hedge funds who chase trends – into going very long and very short at exactly the wrong time.
Which means the price action in gold six or so months in the future was broadly predictable. When the speculators were way long, it was going down and vice versa.
But this year the action – as portrayed in the commitment of traders report (COT) – has departed from the script. After taking on near-record long positions early in the year, the speculators have barely scaled them back from levels that are extremely bearish for gold. Meanwhile gold, instead of tanking as recent history says it should, has been treading water.
And now both the speculators and the commercials have started ramping up their current bets, with speculators going from very long to even more long and commercials going from very short to even more short.
Here’s the same data in graphical form. Where historically the silver bars on top (speculator longs) and the red bars below (commercial shorts) would be expected to converge at the middle of the chart, they’ve diverged and stayed far apart. So the speculators have not been washed out and instead are becoming even more bullish.
If history still matters (a big if in today’s world) the COT trends point to a bad six or so months for precious metals. Though – and this might be the rationale for many speculators – the global financial system has become so fragile that betting on a crisis that sends capital pouring into safe havens is now a permanently good idea.
In that case the solution for individuals is easy: Just buy silver and let nature take its course. – John Rubino
Remember, weak hands buy at market tops and sell at market bottoms. It’s the nature of human behavior. Strong hands buy at bottoms and sell at tops.
For both gold and silver, the speculator longs are still excessive. You don’t have bottoms in anything while the weak hands are still long. So we need a shakeout in the COTs for the weak hand speculators.
I see lows coming soon and then a big moves up. Gold and silver prices crashing lower from here would be the best move investors could want.
Silver prices continue to struggle and continue to test the lows. The longer-term chart looks fine but on the emotional short-term charts, the struggles continue. There are many questions that arise from the recent activity. Is silver being more punished by Bitcoin than gold? If economic growth is so good, where is the demand for the industrial metal silver?
Silver’s performance has been less that mediocre for many reasons. The lack of economic growth is one and the commercials are selling silver relentlessly. There is a huge short interest in silver for no apparent reason other than the commercials think they can bully the metal lower.
The bullion banks are super keen to keep the price of silver well below the 200-day moving average. Why? No more reason other than greed and profit. But this should not dissuade investors.
When general market conditions become as slow as they are now, it forces the commercials to do dumb things and the size of their short position here is dumb. They may be right in the short run but with the bear market in metals over, expect a big rally in silver prices and the perfect trap for the commercials to get pounded. The $15.67 area should hold, and higher silver prices are coming.
Silver prices have increased less rapidly than exponentially increasing national debt for 25 years, and are currently selling for multi-decade lows compared to national debt. National debt will increase 8 – 10% per year and silver prices will rise more rapidly in coming years.
Silver prices are currently near a two-decade low when compared to the S&P 500 Index. Silver prices will rise and the S&P will correct, possibly soon.
All indicators show that gold and silver prices can see a strong rally take hold over the coming weeks.
Currently precious metal fans might be feeling down about silver. At present the gold-silver ratio is around 79. The 100-year average is 40. The industrial precious metal is arguably due a much needed catch-up given its serious underpricing.
Inflation, weak fixed income performance and a growing asset price bubble. Are you ready for that?
If not, you need to seriously start accumulating physical silver (and gold) to stay protected. Stock markets are on the verge of a major collapse while Gold and Silver prices prepare to take off to never ever before seen levels….. soon.
There is a Disinformation War taking place in the silver market as certain industry analysis is confusing individuals by purposely disregarding the tremendous impact of rising investment demand. Not only do I find this troubling, but I am also quite surprised how much the silver industry pays attention to this faulty analysis. So, it’s time once again to set the record straight.
Setting the record straight has now become a new mission for me at the SRSrocco Report because the amount of disinformation and faulty analysis being published in the mainstream and alternative media is quite disturbing. I decided it was time to say enough was enough, so I started by destroying the myth about the 1 million tons of gold hidden in the Grand Canyon in my recent article, THE BLIND CONSPIRACY: The Gold Market Is Heading Towards A Big Fundamental Change.
If you haven’t read that article and are still confused on whether or not there are billions of ounces of gold hidden in the Grand Canyon, I highly recommend that you do. Now, if you read the article and still believe the U.S. Government decided to make the Grand Canyon a national park to protect all that gold, then you have my sympathies. However, the reason certain individuals in the U.S. Government decided to make the Grand Canyon a national park because it was probably a GOOD IDEA to keep a beautiful part of the country off-limits from those who had no problem with destroying the banks of the Colorado by trying to extract gold at a pathetically low uneconomical yield.
If you have seen some of the episodes of the Discovery Channel’s Gold Rush show, the result of gold dredging operations isn’t pretty. Here is a picture of the beautiful landscape outside of Dawson City in the Yukon that shows the effects of placer mining and gold dredging. Now, how many families in the U.S. and abroad would have taken their kids on vacation to the Grand Canyon if it looked like this? I am quite amazed at the lack of dignity and respect by individuals who only seek at the almighty Dollar.
(aerial photo of Dawson City, Yukon – picture courtesy of Peter Mather)
To tell you the truth, I am glad that Teddy Roosevelt had the foresight to dedicate the Grand Canyon as a national monument back in 1908. At least some politicians had the wisdom to keep OFF LIMITS parts of the country, so we weren’t able to destroy it by mining it for ultra low-grade gold or bulldoze it, pour concrete and build another million suburban homes.
Okay, let’s get back to subject at hand… Silver Market Disinformation.
The motivation to write this article came from several of my readers who sent me an interview by CPM Group’s Jeff Christian, at the San Franciso Gold and Silver Summit. In the video, Jeff claims that there has been a silver market surplus for ten years and those industry analysts, who have reported deficits, “Are simply wrong.” Jeff goes onto to say, “they have been wrong the entire time they have been on the silver market.”
Jeff continues by explaining that to analyze the silver market correctly, you must look at surplus and deficits based on total supply versus total fabrication demand. Furthermore, he criticizes industry analysts who may be promoting metal by throwing in investment demand to arrive at a deficit. He says this is not the proper way to do “commodities research analysis.”
Jeff concludes by making the point, “that if you keep silver investment demand as an “off-budget item,” then the price matches your supply-demand analysis almost perfectly.” Does it? Oh… really?
If we look at the CPM Group’s Supply & Demand Balance chart, I wonder how Jeff is calculating his analysis on silver prices –
This graph is a few years old, but it still provides us with enough information to show that the silver price has nearly quadrupled during the period it experienced supposed surpluses. According to the CPM Group’s methodology of analyzing total fabrication demand versus supply, how on earth did the silver price rise from an average of $5.05 during the deficit period to an average of $19.52 during the surplus period? I arrived at the silver prices by averaging the total for each time-period.
Again, Jeff states during the interview that their supply-demand analysis, minus investment demand, provides an almost perfect price analysis. According to the CPM Group’s 2016 Silver Yearbook, the total surplus for the period 2008-2016 was approximately 900 million oz. With the market enjoying a near one billion oz surplus, why would that be bullish for a $20 silver prices?? It isn’t… and I will explain why.
As I have mentioned in many articles and interviews, the price of silver has been based upon the price of oil which impacts its cost of production. If we look at the following chart, we can plainly see how the silver prices have corresponded with oil prices going back until 1900:
You will notice the huge price spike in the 1970’s after Nixon dropped the Gold-Dollar peg causing inflation to run amuck in the United States. Now, the oil price didn’t impact just silver; it also influenced the value of gold:
As with the oil-silver trend lines, the gold and oil price lines remained flat until the U.S. went to a 100% Fiat Currency system in 1971. So, if we decided to throw out all gold and silver supply-demand forces, we can see that these precious metals prices paralleled the oil price. Now, the reason the price of silver shut up to an average of $19.52 from 2006-2017 was due to its average cost of production. Today, the market price of silver is $16.42, and the average cost of primary silver production is between $15-$17 an ounce. According to my analysis of the top two gold mining companies, their cost of production is about $1,150. Hence, the 71-1 Gold-Silver price ratio.
Did Jeff Christian include the cost of production in his analysis of the silver price? How many silver mining companies are producing silver for $5 an ounce and making an $11 profit? Or how many silver mining companies are producing silver at $35 and losing nearly $20 an ounce? I will tell you… ZERO.
The only way an individual would believe that the primary silver mining companies are producing silver at $5 an ounce is if they believe in the investor presentations that report CASH COSTS. Anyone who continues to use CASH COST accounting needs to get their head examined. It is by far the most bogus metric in the industry that has caused more confusion for investors than anything else… well, if we don’t include faulty analysis by certain individuals.
I find it utterly amazing that the CPM Group entirely omits silver investment from their fundamental analysis. Here is a chart of their total world silver fabrication demand from their 2016 Silver Outlook Report:
If you are a silver investor, your demand doesn’t count. It doesn’t matter if you purchased 100 of the half a billion oz of Silver Eagles sold by the U.S. Mint since 1986. How many Silver Eagles have been sold back, melted down and returned to the market to be used for industrial applications?? According to the 2017 World Silver Survey (GMFS), total Official Silver Coin sales were 965 million oz (Moz) since 2007. If we add Official Silver Coin sales for 2017, it will be well over one billion. I highly doubt any more than a fraction of that one billion oz of Offical Silver Coins were remelted and sold back into the market.
Moreover, what term do we give to companies who produce Silver Eagles or private silver rounds?? Aren’t companies fabricating silver bars and coins? While it is true that physical silver bar and coins can be sold back into the market, a lot of new demand is coming from fabricating new silver bullion products.
CPM Group only values silver as a mere commodity for the sole purpose of supplying the market for industrial, jewelry, silverware, photography and photovoltaic uses. I gather 2,000+ years of silver as money no longer matters. Yes, I would imagine some precious metals investors are feeling a bit frustrated as they watch Bitcoin go vertical towards $12,000. But a word of caution to Bitcoin investors who are dreaming about sugar plums dancing in their heads and dollar signs in the eyes.
Now, when you see an article titled, Signs Of A Market Top? This Pole Dancing Instructor Is Now A Bitcoin Guru; it might be prudent for you to recall a memorable part of the move in The Big Short:
There is a wonderful scene where a pole dancer is explaining to a fund manager how she’s buying five houses.
A lowly paid pole dancer who survives on unpredictable tips should not be able to afford multiple houses, but this was the sub-prime USA where the ability to repay a loan was apparently not a prerequisite.
What a coincidence… ah?? Pole dancers buying five homes and becoming a Bitcoin Guru. What’s next? LOL.
Regardless, the notion by CPM Group that investment demand shouldn’t be included in supply and demand forecasts suggests that the gold market has experienced a total 418 million oz (Moz) surplus since 2006. Yes, that’s correct. I calculated total global gold physical and ETF investment demand by using the World Gold Council figures:
The reason for the drop-off in net gold investment in 2013-2015 was due to Gold ETF liquidations. For example, 915 metric tons (29 Moz) of Gold ETF inventories were supposedly liquidated into the market. Even though the gold market experienced a record 1,707 metric tons of physical bar and coin demand in 2013, the liquidation of 915 metric tons of Gold ETF’s provided a net 792 metric tons of total gold investment. Please understand, I am just using these figures to prove a point. I really don’t care if the Gold ETFs have all their gold. I look at Global Gold ETF demand (spikes) as an indicator for gauging the amount of fear in the market.
The CPM Group does the same sort of supply and demand analysis for gold. They omit investment demand from the equation:
(CPM Group Chart Courtesy of Kitco.com)
Again, according to the CPM Group, gold bar and coins aren’t fabricated. They must be produced by Gold Elves in some hidden valley in the Grand Canyon. No doubt, under the strict control by the NSA department of the U.S. Government.
For anyone new to reading my work… I am being sarcastic.
Moreover, the significant change in gold investment demand is a clear sign that investors are still quite concerned about the highly inflated bubble markets. If we go back to 2002, total gold investment was a paltry 352 metric tons compared to 358 metric tons of technology consumption and 2,662 metric tons of gold jewelry demand. However, in 2011, the gold market experienced a massive 1,734 metric tons of total gold investment versus 2,513 metric tons of jewelry and technology fabrication.
What is significant about this trend change? In 2002, global gold investment was a mere 10% of total gold demand. However, by 2011, gold investment demand surged to 41% of the total, not including Central Bank demand. Even in 2016, global gold investment demand was still 40% of the total. As we can see, investors still represent 40% of the market, whereas they were only 10% in 2002.
Precious metals investors need to understand there is a huge difference between Gold and Silver versus all other metals and commodities. The overwhelming majority of commodities are consumed while gold and to a lesser extent, silver, are saved. And, they are being purchased as investments and saved for an excellent reason.
The world continues to add debt at unprecedented levels. In just the month of November, the U.S. Government added another $137 billion to its total debt. This doesn’t include the $610 billion of additional debt added since the debt ceiling was lifted on September 8th. So, the American public is indebted by another $747 billion in less than three months.
Getting back to silver, according to the GFMS team at Thomson Reuters, who provide the World Silver Survey for the Silver Institute, the market will experience a small annual silver surplus this year for the first time in several decades:
The reason for the surplus has to do with a marketed decline of silver investment demand this year. With the election of President Trump to the Whitehouse and the “Pole Dancing Guru” Bitcoin market moving up towards $12,000, demand for the silver investment fell by 50% this year. However, I don’t look at it as a negative. Oh no… it’s an indicator that the market has gone completely insane.
This reminds me once again of the movie, The Big Short. In the movie, the main actor bets big against the Mortgaged-Backed Securities. Unfortunately, just as the housing markets start to crash and the mortgage-back security market begins to get in trouble, the bets that the main actor in the movie made, began to go against him. That’s correct. His short bets against the market should have started to gain in value, but the banks wanted to dump as much of that crap on other POOR UNWORTHY SLOB INVESTORS before they would let it rise.
We are in the very same situation today. However, the entire market is being propped up, not just the housing market.
It is impossible to forecast more realistic gold and silver prices when 99% of the market is invested in the wrong assets. So, for the CPM Group to value gold and silver based on their fabrication demand totally disregards 2,000+ years of their use as monetary metals.
Thus, it comes down to an IDEOLOGY on why Gold and Silver should be valued differently than mere commodities, or even most STOCKS, BONDS, and REAL ESTATE. Valuing gold and silver can’t be done with typical supply and demand fundaments. The only reason I analyze supply and demand fundamentals is to understand what is happening to the market over a period of time.
For example, if we look at total global silver investment demand and price, there isn’t correlation:
But, if we look at what happened to silver investment demand since the 2008 Housing and Banking collapse, we can spot a significant trend change:
As we can see, world physical silver bar and coin demand nearly quadrupled after the 2008 Housing and Banking collapse. This is the indicator that is important to understand. While silver investment demand after 2008 has increased partly due to the higher price, the more important motivation by investors is likely a strategic hedge against the highly-leveraged fiat monetary system and stock market. – SRSroccoreport
Dictatorship (noun): Definition #3: absolute power or authority (Websters);
Def. #2: absolute, imperious or overbearing power or control (Random House);
Def. #3: Absolute or despotic control or power (American Heritage);
Def. #3: Absolute or supreme power or authority (Collins English Dictionary);
Def. #1: A type of government where absolute sovereignty is allotted
to an individual or small clique (Wikipedia).
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained, you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” Sun Tzu, The Art of War
In recent weeks, the War on Gold, which is a subset of the broader War on Human Freedom, has sharply intensified, with massive, multi-billion dollar naked short price raids now being launched on a weekly and even daily basis by the criminal, state-sponsored price manipulators. This escalation proves the supreme importance to the Deep State financial elite of the maintenance of their gold price dictatorship, which is a vital component of their long term, systemic campaign of financial plunder.
The elitists have no problems whatsoever with stratospheric stock and bond prices; 5,000 year low interest rates; $450 million Da Vinci’s; $250 million private homes; $50,000,000 annual salaries for circus masters, whose role in keeping the masses distracted and dumb is vital; $1.9 million Aston Martins; $100,000 Air Jordan sneakers, or any of the other prices that have now gone into outer space.
But there is one thing they will not accept: an honest, free market price for gold. Because while all debauchery under the sun is permitted and encouraged in the Castle of Fraud and Corruption they have constructed and in which they revel, one thing is strictly prohibited: the utterance of truth. Being monetary truth when free to speak, gold is their deadliest enemy. Therefore, it is silenced, in the same way truth tellers are silenced in all dictatorships.
The vast majority of people, aside from a small, enlightened minority who refuse to poison their minds by ingesting mainstream media (MSM) fake news, propaganda and brainwashing, do not yet realize what they are up against in the wars that have been declared against them, and are therefore at serious risk. For those who wish to survive the wars, there has never been a greater need to know the enemy and know yourself.
As the gold price war becomes manic, so has the MSM’s anti-gold propaganda campaign, with their attempts to smear gold now a clinical obsession.
In a prime example of their over-the-top anti-gold propaganda, on 10 November 2017, the Financial Times, a long-time Deep State bullhorn and puppet, ran an article entitled, “Gold is the new cocaine for money launderers.” In this screed, the author beat the dead horse of the NTR Metals gold import scheme. This operation, whose total dollar yield was an infinitesimal fraction of the massive sums stolen by the financial Deep Statists in their forty year gold price manipulation crime, was already the subject of an over-dramatized Bloomberg Businessweek propaganda piece published on 9 March 2017, entitled “How to Become an International Gold Smuggler.” Apparently, the MSM is running so short of new material with which to try to demonize gold, that it is now forced to recycle old, stale non-stories to keep the smear machine going.
In the article, the MSM propagandist states such things as: 2017 has seen, according to his one time Goldman Sachs source, a “dramatic crash in [physical gold coin] demand,” that interest in gold coins is linked to “political conservatism, or anarcho-libertarianism” and “end of the world right wing sentiments,” that gold has been implicated in a “conspiracy to commit money laundering,” that gold is “financed by people in the narcotics trade,” that it comes from “illegal mines and drug dealers in Peru, Bolivia and Ecuador,” that “the federal authorities assume the NTR Metals [case] represented only a fraction of illegally sourced and financed gold,” that therefore the US attorney is broadly investigating the gold industry, that gold is “produced by exploited workers,” that “crude [gold] extraction techniques create serious and lasting environmental damage,” that gold plays an important part in “tax evasion,” that it is related to American gun sales, which the author abhors; that “drug dealers [use] gold imports as a way of laundering their proceeds,” and that “they came to realize that illegal gold [is] an intrinsically better business” than drug dealing; to name but a few of the aspersions cast against gold in the short article. As we can see, when it comes to their smear jobs, the MSM flings at the wall all the mud it can fit in its hands, hoping that some of it might stick.
As is always the case with the MSM’s consistently negative, biased and dishonest reporting on gold, no mention was made in the article of the Deep State financial elite’s criminal gold price manipulation fraud that has been perpetrated non-stop for nearly forty years and that has resulted in a massive, $1,000,000,000,000.00+ theft from its victims. This is because the MSM is the Deep State’s in-house public relations agency, whose job is to whitewash the elitists’ crimes, no matter how egregious they are.
But buried in the article was an important clue that the Deep Statists are concerned they are losing the War on Gold, which we will further explore later in the article. It turns out that the Deep Statists’ paranoia about and rage toward gold might be entirely justified, because more than ever in the past 37 years, gold is poised to tell the world what it knows, and this will absolutely annihilate them.
Many people are completely baffled as to why, with so many serious fiscal, financial, monetary, economic, social, and geopolitical problems in the world, the Deep Statists remain so mono-maniacally fixated on demagogically denigrating gold and controlling its price.
The answer is that the Deep Statists cannot, under any circumstances, allow the price of gold to replicate the surging price of Bitcoin and other cryptocurrencies. If the gold price genie were to get out of the bottle, becoming international news in the process no matter how much the MSM might try to suppress it, it would spur a gold buying stampede that would cause a flood of money to pour out of bank accounts and into physical precious metals. $325+ billion worldwide now resides in cryptocurrencies, a highly specialized and complex product class. In the right set of circumstances, many multiples of that amount could incrementally flow into gold, a simple product that has been innately understood for millennia by human beings all over the globe.
Already fragile, the banking system cannot withstand a large scale withdrawal of funds. Being finite and in short supply, incremental demand for physical gold would result in immediate and sustained price gains, creating a positive feedback loop in the market place. As people watched the price go up, more and more of them would want to jump on the band wagon and participate in the gains, which is exactly what has happened in the cryptocurrency market.
If interest in gold goes mainstream, then basic supply fundamentals indicate the price would have to rise by thousands of dollars per ounce to even approach what might be considered overbought and/or bubble territory. Which is exactly what has happened to Bitcoin, whose price has exploded to over $10,500 as of today, 29 November 2017.
In the United States, the latest Federal Reserve Board tally of Household and Non-profit Organization (much of which is private) wealth totals $96.2 trillion. If a miniature, 1% sliver of this amount, $962 billion, attempted to find its way into the physical gold market, it would represent incremental demand, at $1,300 per ounce, of 740 million ounces. Not even a small fraction of this incremental demand would be available in the physical gold market at this time, given that it already operates at a supply / demand equilibrium. The gold price would have to surge in order to flush out supplies from current gold owners, whose hands have proven to be, and are likely to remain strong. We believe it would take years for incremental demand of this magnitude to be filled, even at much higher prices. Please keep in mind that this example relates to the United States, alone; there are additional, vast stores of private wealth all over the world, all of which would almost certainly be activated in unison by a run to gold.
With the right spark, the same viral, Social Media-enhanced demand that has come to cryptocurrencies could come to gold. The Deep Statists know it, and the ghostly whites of their eyes now glow eerily and blinkingly across the dark battlefield of Liberty, in the senseless war they provoked and are going to lose.
While there are now hundreds of cryptocurrencies, physical gold is physical gold, and cannot be replicated or conjured out of nothing. There will be no endless stream of new ICOs for genuine, physical gold, because gold is what it is and always will be. This means that funds flowing into gold will be forced into the one and only physical gold market that already exhibits tight, inflexible supply. This further means that the upward price pressure on gold could become volcanic if a run starts.
A steadily increasing number of people will want to get in on the “new Bitcoin,” a bizarre paradox given that gold is as old as time, and will soon realize that gold possesses virtues Bitcoin does not, given that it is real, not digital and abstract; that owners can personally possess and store it in physical form; that it will survive any kind of electric grid or Internet disruption that might occur; that it cannot ever be hacked; that it is the epitome of private, quiet wealth; that it is actually quite beautiful to behold; and that it was not and cannot be made by man, only by God, who does not appear to have any interest in making any more of it.
To date, in order to prevent a surge in physical gold demand from happening, the Deep Statists have created various forms of transparently fake gold, such as electronic gold futures, options and non-auditable ETFs and EFPs. These fake gold products have siphoned funds away from real, physical gold, which cannot be created out of the nothing the way the imposter electronic gold products can be. Increasingly, people are learning that there are no substitutes for physical gold.
More, we find it interesting that while there have been certain highly publicized condemnations of cryptocurrencies, such as J. P. Morgan Chase CEO Jamie Dimon’s comment that Bitcoin is a “fraud,” the financial authorities in the west have done little to nothing to shut down the crypto market. They seem to be just fine with $10,500 Bitcoin, but will stop at nothing to prevent $1,300 gold. Today’s (29 November) market action is a case in point.
The reason is that monetary elitists fully approve of cryptocurrencies, because this the new form of fiat currency the western banks intend to issue. Mass adoption of cryptocurrencies is the necessary forerunner to the elimination of cash, a well-known and important agenda for the financial elite. By issuing their own cryptocurrencies, and/or co-opting Bitcoin and other private cryptos via regulation and edict, central bankers can continue their tradition of controlling the money supply. A population that has learned the value of owning and become adept at trading physical gold would prevent central banks from continuing to use fiat currencies as economic, political and societal control mechanisms. It should be no surprise that they loathe gold so much; in its honesty and integrity, it is the exact antithesis of everything they stand for, are, and do.
Some people argue, “Even if people run to gold, their funds will still remain within the banking system, so the bankers aren’t worried about this happening.” In our opinion, this is wrong.
Fiat currency used to buy precious metals will move from personal and business bank accounts, to gold dealer accounts, to gold wholesaler accounts; and then to a variety of sovereign mint, gold precious metals refiner, gold miner and other gold supplier accounts, a large percentage of which are international.
A bank that hosts a deposit account used to purchase physical gold has no assurance whatsoever that the buyer’s funds will transfer into another personal or business account managed by it. In all likelihood, the funds will disappear from the host bank and not return. Ultimately, the likelihood is also high that a portion of the funds, potentially significant, will disappear from the country’s banking system altogether, given the global nature of gold mining, refining, minting and fabrication. Therefore, bankers regard a run to gold as a severe, direct threat to them, which is why they do everything in their power to discredit it and crush its price. They are attempting to prevent a run on their banks.
Over the past several years, the Deep Statists have gone to extraordinary lengths to internationally legalize bank “bail-ins.” They did not do this casually, by accident, or for fun; they did it because they know that when the system fails, a time-bomb guaranteed to detonate given the system’s very design, they will be able to make an unprecedented fortune by expropriating customers’ deposits via the elaborate bail-in mechanism they have engineered. They will use the phony pretext of “rescuing” and “resetting” the financial system for the public good to justify this action. If, before they spring the bail-in trap, depositors have already withdrawn their funds to purchase physical precious metals held outside the banking system, those funds will no longer be available for bail-in looting. The bankers cannot steal bank balances that have disappeared.
The cryptocurrency phenomenon, now an international sensation, has stunned them into the awareness that people all over the world have a deep, abiding, instinctive desire to own honest money of limited supply that will serve as a reliable store of value, and that cannot be hyper-inflated into oblivion for the private gain of plunderers and profiteers, the chief problem with corrupt, endlessly counterfeited fiat currencies controlled by self-interested, opportunistic, predatory central bankers and their controllers, the Deep State financial elite. – By Stewart Dougherty – Part 1
Magicians use distraction, deflection and misdirection to conduct their tricks. They get their audiences to look to the left while they perform their magic undetected on the right. So do con artists and swindlers.
George H. W. Bush, in a speech delivered to a joint session of Congress on 11 September 1990 entitled “Toward a New World Order,” headlined a geopolitical theme that has garnered a great deal of attention ever since. And while Bush was not the first person to use the term, it struck a global nerve when he invoked it.
Bush’s speech about the New World Order deflected and misdirected the people’s attention to the left, and prevented them from seeing the real action that was taking place to the right: the imposition of a New World Central Banking Order throughout the west. This multi-country, supranational, autonomous, all-powerful, privately-controlled, for profit, non-auditable, monopolized, collusive, monetary leviathan has become what we call the Western Central Banking Dictatorship (WCBD).
This dictatorship, and we are not being pejorative, we are simply applying the standard definition of the word to what central banking actually is, operates throughout the broadly defined “west,” which includes: the United States, Canada, Mexico, the European Union, the United Kingdom, Japan, India, New Zealand and Australia. Certain African, Asian and South American countries also play lesser parts in the regime. Dictatorially ruled by this private monetary system are the hundreds of millions of citizens who must use Euros, Yen, Rupees, and United States, Canadian, Australian and New Zealand dollars to function in their daily lives, as these fiat currencies are all 100% controlled by the regime, and are subject to whatever actions, no matter how experimental or extreme (such as Quantitative Easing and negative interest rates), the controllers, in their sole discretion, decide to take.
One of the seven core principles of Inferential Analytics, the forecasting method we have developed and use, is that all phenomena represent Life Forces, and that all Life Forces ceaselessly work to expand, evolve, empower themselves, and conquer new terrain.
Some of the most powerful Life Forces on earth are the “isms.” One of today’s most rapidly evolving “isms’ is crony communism, the national operating system now metastasizing throughout western nations to replace its dying predecessor, crony capitalism. In this expanding system of crony communism, the cronies loot the capital that was produced by the dying capitalistic system, while the masses descend into communistic impoverishment, entrapment and despair. Crony communism is a system in which the forces of diabolism, greed and evil usurp and exploit state power for their own enrichment, empowerment and dominance, at the direct expense of the communized masses.
Relentlessly increasing wealth concentration combined with spreading impoverishment and paycheck to paycheck living are two glaring signs among many others that the Life Force of crony communism has entrenched itself throughout the west, and that it is evolving and advancing.
The enabling institution for the spread of crony communism is the WCBD, which is owned and operated by the Deep State crony elite, both of which are Life Forces of plunder and human exploitation.
To those who pay attention to fiscal, monetary, economic and financial realities, it is becoming clear, despite the current frenzy of propaganda to the contrary, that the existing system is failing. In the United States, to focus on one national example, massively underfunded pensions will collapse without equally massive bailouts; every government entitlement program is bankrupt, a fact publicly admitted by the programs’ respective government overseers; structural deficits are uncontrollable under current law and can only be contained if government promises are broken at extreme expense to the economy and people; debt at all levels is exploding and structurally, must continue to explode; mass financial stress is directly observable in such forms as street-level, in one’s face homelessness, fast-spreading tent cities, and teeming under-bridge communities; paycheck to paycheck and government welfare payment to government welfare payment living is now the norm for the vast majority of the population (for example, 78% of full time workers in the United States now live paycheck to paycheck; the financial condition of part time and unemployed persons is even more dire); the savings rate has plunged as people struggle to make ends meet or engage in financially disastrous “Eat, Drink and Be Merry” binge spending programmed into their brains by the MSM, which repeatedly tells them that things have never been better and they should go shopping; overall savings are non-existent or meaningless for the vast majority of the population; among many other signs of fiscal and financial decline.
The WCBD, which includes all western central banks, the World Bank, the IMF, the ESF and their consolidating organization, the intensely secretive, predatory, and frigid BIS, is fully aware that the system is failing. The United States Federal Reserve System alone employs hundreds of Ph. D. economists and statisticians, and it is literally impossible they do not comprehend that trillions more fiat currency units must be created out of nothing to keep the monetary system functioning. Further, it is impossible that these Ph. D.s and their management do not realize that ultimately, the very design of the fiat monetary edifice means that it must erupt into a hyperinflationary bonfire, exactly as it has repeatedly done throughout history. Every “fix” now being implemented, most particularly the new, frenzied fixation on GDP growth, is an urgent attempt deflect attention away from the structural impossibilities of the monetary system, and to buy time.
For years, people have realized that certain vital government statistics, such as employment, inflation, retail sales and GDP are manipulated to tell a comforting narrative that all is well in the land. Confidence is everything in debt-dependent, fiat currency-based, consumer-expenditure-addicted economies. But for some strange reason, very few people question the most important statistic of all: money supply. This is remarkable in light of the fact that long after the emergency measures taken to re-start the system during the Great Financial Crisis (GFC), we learned that the Fed had created, in total secrecy, trillions of dollars’ worth of currency swaps that were extended to foreign central banks in order to bail out the financial system. This was so far outside the Fed’s “Dual Mandate” that it beggared belief they had actually done it, let alone without any public or even intra-governmental disclosure whatsoever.
We believe that such secret GFC money creation is just the tip of the iceberg, and that the revelation of actual, as opposed to deliberately misstated money supply would dumbfound even the most sophisticated of financial observers and require a recalculation of virtually every financial and economic metric. All of which would massively deteriorate. We believe that this is one black swan among dozens that could ignite a broad-based flight into physical gold, as people rushed to monetary high ground for financial and personal safety.
On 27 June 2017, during the British Academy President’s Lecture Q&A Session in London, Janet Yellen made the following, now famous statement in answer to a question:
“Would I say there will never, ever be another financial crisis? You know, that would probably be going too far, but I do think we are much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be.”
Many observers chalked up this comment to central banker self-congratulation and boastfulness. Or, they assumed that Ms. Yellen was making a campaign statement to land a second term as Fed Chair. We viewed it differently.
We do not believe Yellen ever had any intention of serving a second term as Fed Chair, and that her “candidacy” was theater. Yellen, Fischer and Dudley, all of whom have gotten or are getting out, realize that the monetary and financial systems are rigged to the breaking point, and that when they fail, the fallout will be uncontrollable. They know the systems are rigged, because they rigged them, and don’t want to be anywhere near them when they blow apart. This helps explain the documented elitist fascinations with long range Gulfstream jets and New Zealand, among their numerous other escape vehicles.
If Yellen had said she was not interested in serving a second term, this would have indicated that something is seriously wrong, a message central bankers never send beforehand. Having admitted, as she has, that she and many of her colleagues no longer understand inflation, an appreciation of which is absolutely critical to the entire process of central banking, she also admitted that, like Fukushima, the monetary system is melting down and out of control. Therefore, she played the game of running for a second term, even though it was just an act.
In the second to last paragraph of her 20 November 2017 resignation letter, Yellen wrote:
“I am enormously proud to have worked alongside many dedicated and highly able
women and men, particularly my predecessor as Chair, Ben S. Bernanke, whose
leadership during the financial crisis and its aftermath was critical to restoring the
soundness of our financial system and prosperity of our country. I am also gratified
by the substantial improvement in the economy since the crisis. The economy has
produced 17 million jobs, on net, over the past 8 years and, by most metrics, is
close to achieving the Federal Reserve’s statutory objective of maximum employment
and price stability. Of course, sustaining this progress will require continued
monitoring of, and decisive responses to, newly emerging threats to financial and
economic stability.” [Our italics.]
This statement was an Inferential Analytics trigger, because we noted that she did not say, “if” there are “newly emerging threats to financial and economic stability.” [Cryptocurrencies/Bitcoin are seen as threat per Trump’s statement that Homeland Security was monitoring Thursday’s Bitcoin sell-off]
A second IA trigger was pulled when Jerome Powell, during his opening comments to the U.S. Senate Banking Committee reviewing his Fed Chair nomination, said the following on 28 November 2017:
“We must be prepared to respond decisively and with appropriate force to new and
unexpected threats to our nation’s financial stability and economic prosperity.”
Please note two things: 1) Like Yellen, he did not say “if” there are “new and unexpected threats to our nation’s financial stability and economic prosperity;” and, 2) the nearly identical language used by both.
To us, both Yellen and Powell are warning that “newly emerging financial threats to financial and economic stability” and “economic prosperity” are on the horizon. People might comfort themselves by saying, “That is always the case,” which is true. Endogenous and exogenous risks to complicated systems always exist. The problem is that when these threats manifest themselves, what can they do about them at this point, other than print massive quantities of new currency units, a so-called medicine that has become more toxic than the disease it attempts to cure.
Central bankers go to lengths to paint a rosy picture, because belief is everything when people are living in a fantasy, which an economy that is more than $200 trillion in debt all told, is. We therefore find it extraordinary that Yellen, on her way out, and Powell, on his way in are painting a dark picture by talking about “threats to financial and economic stability.” They would not be using these words if they did not know that something serious is on the horizon. They know, because the threats are of the WCBD’s direct making.
Regarding the specific comment Yellen made in London, we believe she was saying that the Fed in particular, and the WCBD in general, have now transferred the mechanisms perfected over the past 40 years to control precious metals prices, to western stock markets, in order to control their prices. The only difference being that while they have used sophisticated, computerized price manipulation techniques to push precious metals prices down, they are using the same techniques to push stock prices up.
Why? For four primary reasons: 1) To prevent the pension system from collapsing, which would bring down the entire economy and banking system with it; 2) To generate badly needed income and capital gains tax revenue; (Please keep in mind that most employee stock option gains are taxed as individual income, and result in top income tax rates being imposed; full, uncapped Medicare taxes being paid by both employee and employer; and, the Obamacare 0.9% Medicare surtax being collected. Therefore, such stock option gains represent a trifecta tax bonanza for the government. Additionally, capital gains over a minor threshold amount, which is not indexed to inflation, are now subject to the Obamacare 3.8% surtax, which the proposed “Repeal and Replace” House and Senate legislation never rescinded, evidence that the government is dependent upon the surtax revenue and will not let it go. As we can see, Republican legislators spoke with a forked tongue; while they said they hated Obamacare, they forgot to mention that they love its tax revenue and have no intention of parting with it); 3) To foster the “Wealth Effect,” and thereby stimulate consumer spending, which is critical to employment, corporate profits, corporate profit taxes and state sales taxes. In deliberately creating a consumer spending, as opposed to a production economy, the government and the citizens have become slaves to a low-to-zero savings, binge spending, consumer impoverishment economy, which is a Castle in the Air and a mirage that will fade; 4) To facilitate a high-intensity, big-dollar insider trading, front running and looting spree, via the dissemination of inside information to the elite regarding upcoming WCBD policy decisions and government economic reports, all of which move markets in predictable, sizable, and enormously profitable ways for those who can exploit them in advance. The surge in wealth inequality is not natural, and not an accident.
In addition to precious metals price controls and the legalization of bail-in banking, numerous other developments, such as the accelerated push to eliminate cash all suggest that the people are being elaborately set up for epic financial slaughter by the Deep State plunderers. The Deep Statists are intent on eliminating financial sanctuaries that are outside their bail-in dragnets. In past situations of this kind, gold has performed admirably in protecting wealth and, far more important, human lives.
We mentioned in Part 1 that there is a clue in the Financial Times article that demonstrates the statists’ fear that they cannot prevent broad scale interest in gold from developing among the people. The FT article argued that due to dealer commissions, physical gold is more expensive than its electronic counterpart. It also stated that physical coin dealers are dangerous because they are “exploitative” and “shady.” The conclusion the author reached for his dear readers to follow was this: “More gold will be traded electronically,” because if one is going to buy gold, electronic products are the better deal.
This is exactly what the increasingly concerned Deep Statists are trying to steer people into doing: buying electronic, not physical gold. They appear to realize that they might not be able to control the gold price for much longer, and that if the price gets away from them, the Cryptocurrency Effect will be activated in gold. If that happens, a price Vesuvius lies ahead. The volcano, they cannot stop. All they can do is misdirect the people’s money into their phony electronic gold products, to sterilize and control those funds. Then, when the price does explode, they will force customers to accept involuntary cash settlements and close out the electronic acounts. The customers will get fiat currency at the precise time when it is plunging in value, and the statists will keep any physical gold they might have purchased with customers’ funds.
As Sun Tzu said, in war, you must know the enemy and yourself if you intend to win. We hope that our article has helped readers know the enemy a bit better. The next task is to know yourself; to ask yourself, “Given what I know, what should I do?” In our opinion, and this is just our personal point of view, not an investment recommendation, which we are not licensed to provide, the fact that the Deep State elitists are stopping at nothing to discourage you from buying physical gold is the precise reason why you should buy it. And if this article has resonated with you, then you probably also believe, as we do, that the time to financially prepare yourself is getting short. The current intensity of price maneuvering and manipulation in a broad variety of markets implies that the center is losing hold, and that something wicked this way comes.
For the first time since the onset of the credit crisis, we believe the market is beginning to price in a higher probability that the Fed is finally in the position to raise rates both continually and more frequently. The prevailing view is that central bank rate hikes are the natural enemy for gold prices. Analyzing rate cycles and gold prices from 1971, we find that gold prices tend to do better in hiking-cycles than cutting-cycles. We find that the positive performance during hiking-cycles can be explained with the three drivers identified in our gold price framework. Given the outlook for these three drivers, gold will likely do well over the coming quarters even as the Fed keeps raising rates.
In recent years, the Fed has persistently indicated that it was going to hike rates several times per year over the next few years until rates are “normalized”. So far, the Fed has fallen short on delivery, having hiked only once in 2015, once in 2016 and so far twice in 2017. While that doesn’t sound like a lot, compared to its peers, the Fed is a hawk.
However, for the first time since the onset of the credit crisis, we believe the market is beginning to price in a higher probability that the Fed is finally in the position to raise rates continually and more frequently until we are back to a “normal” rate environment. This outlook is increasingly reflected Fed funds futures (see Figure 1).
Moreover, such an aggressive1 Fed rate path is unlikely to happen with other central banks continuing to push an accommodative monetary policy as it was the case over the past two years. In our view, the ECB would likely have to react and shift to a more hawkish policy as well, something they would rather avoid.
It seems to be the consensus view that central bank rate hikes are the natural enemy for gold prices. Higher rates, so the argument goes, would diminish the incentive for investors to hold gold as gold “pays no interest”, which then in turn should lead to lower gold prices. This view is not only just too simplistic in our view, it is also inconsistent with historical performance.
First, gold does pay interest, if it is lent out (the interest rate on gold is called the gold lease rate). The same logic applies to fiat currency. A USD100 bill pays no interest either. In order to generate interest, fiat currency has to be lent out, which can be done by putting it into a bank savings account (effectively lending the money to the bank and becoming a creditor).
Second, and this is the much more important point, interest rates alone are only small piece of the puzzle when it comes to the drivers for gold prices. In our gold price framework piece (see Gold Price Framework Vol. 1: Price Model, October 8, 2015), we identify three main drivers for the gold price: Central bank policy, longer dated energy prices and changes in central bank gold holdings. Interest rates play a crucial role in the first category. But it is not nominal rates that drive the price, but real-interest rates.2 Consequently, even when nominal interest rates rise, gold prices are not necessarily negatively affected. In fact, if inflation expectations rise more than expectations for nominal rates, changes in real interest rates would even be a positive driver for gold prices. We have seen this effect to the extreme in the late 1970s and early 1980s when the Fed relentlessly raised rates to double digits, but inflation was high and rising, and as the market continued to price in years of ongoing double-digit inflation, gold prices kept rallying (see Figure 2). Only when the Fed, under Chairman Volker, decided to break the inflation cycle by ramping up rates to nearly 20%, inflation started to slow down. Real interest rate expectations subsequently increased and gold prices eventually declined. But even as gold prices receded almost 50% from the highs in the early 1980s, they ended up >800% higher than where they were at the beginning of the cycle.
To get a better understanding how gold performs in different interest rate environments, we analyzed performance of gold in USD over the 46 year period since the demonization of gold in 1971. In a first step, we divided this entire time-period into hiking-cycles and cutting-cycles, where a new cycle starts every time a change in the fed funds rate occurs that has the opposite sign of the most recent change. For example, the most recent cuting-cycle began in September 2007 when the Fed lowered the Fed funds rate to 4.75% from previously 5.25%. The Fed then kept on lowering rates until December 2008 when the Fed funds rate hit 0.25% where it remained for seven years. In December 2015, the Fed raised rates again for the first time, which is when the cutting-cycle ended and the new hiking-cycle began. Using this methodology, we identified 23 hiking- and 23 cutting-cycles since 1971 (see Figure 3).
On average, hiking-cycles lasted 10 months while cutting-cycles lasted 14 months. We find that gold performed equally well in both hiking- and cutting-cycles with an average annualized performance of 7.80% (see Table 1). One can argue that the strong average gold price performance during hiking-cycles is skewed to the upside by the high-inflation, high-interest rate period of the 1970-1980s which we highlighted above. But even if we exclude this period and start measuring from 19903, gold did even better during periods of rising rates with an annualized performance of around 4.85% in hiking-cycles vs. 4.0% during cutting-cycles.
Moreover, if we just slightly shift the way we measure the performance by including the performance of the month in which the Fed changes direction to the previous cycle4, things look even better for rate hike environments. Measured this way, gold had an average annualized return of 9.1% in hiking-cycles vs. just 6.8% in cutting-cycles. Measuring the performance this way from 1990 onwards showed a 7.23% return during hike-cycles and 2.55% during cut-cycles.
We also analyzed how gold performed in the months where the rate change occurred. We identified 98 rate hikes and 91 rate cuts since 1971. On average, months with a rate hike showed an annualized gold price performance of 15.4% vs an average 8.3% for months with a rate cut. And when measured from 1990, hike months have yielded an average return of 8.1% while cut months only one of 4.5%.
We then did the same analysis measuring gold’s performance for the months following a rate change rather than the month of the change itself. In this case, gold increased by 15.0% on average on an annualized basis after the Fed cut rates, and 16.7% after a hike. And measured only from 1990, gold had an average annualised increase of 22.7% after a hike month, while it “only” rallied 14.5% after cut months.
On net, we can conclude that rate hikes – contrary to common beliefs – don’t normally impact the gold price negatively at all. In fact, historically gold has done better during and immediately after both specific rate hikes and hiking-cycles than during and after rate cuts and cutting-cycles.
In order to better understand why gold prices – contrary to common belief – tend not to be depressed by rising rates, we analyzed the 10 cycles since 1992.5 Using our proprietary gold price framework, we attributed the change in price to the three main drivers we identified in our model: Central bank policy (real interest rates/QE), longer dated energy prices and changes in central bank gold holdings. In the five hiking cycles, gold prices were down in one instance, essentially flat in two and up substantially in the remaining two (see Table 2).
The first hike cycle with flat gold price performance that we analyzed started in February 1994 and lasted until June 1995. During that period, the Fed raised the Fed funds rate from 3% to 6%. However, real-interest rate expectations remained stable around 3.6%.6 Longer-dated energy prices, as measured by the 5-year forward price of Brent, also remained stable (between USD16.86/bbl to USD17.11/bbl) and central banks globally neither added nor sold any significant quantity of gold. They key in this cycle thus was that real interest rate expectations did not materially go up, despite a relatively quick rise in nominal rates by 3%.
The second hike-cycle with flat gold price performance started in June 1999 and ended in December 2000. During that time, the Fed raised rates from 4.75% to 6.5%. Gold increased slightly from USD262/ozt to USD272/ozt. Despite the hike in nominal rates, real-interest rate expectations decreased during that period from 3.91% to 3.30%, meaning the real-interest rate environment was positive for gold. Also, longer-dated energy prices increased slightly from USD17.92/bbl to USD18.57/bbl. However, these tailwinds from real interest rate expectations and energy prices were offset by net gold sales from central banks of 530 tonnes during that period, which resulted in the net flat gold price performance.
Between March 1997 and August 1998, the Fed hiked rates from 5% to 5.25%. Gold prices declined 24% during that period from USD363/ozt to USD276/ozt. Real-interest rate expectations fell during that period from 4.43% to 3.42% but this positive gold price driver was offset by a decline in longer dated energy prices from USD19.15/bbl to USD17.05/bbl, and central banks selling 156 tonnes of gold. Overall, our model would have predicted such an environment to be neutral to very slightly positive for the gold price. Thus, our model does not predict this realized price decline very well. However, we find that if we add one more variable to the model, the model is able to predict this brief period more accurately. That variable is the Asia USD index. Spring 1997 marks the onset of the Asian crisis that began in Thailand and quickly spread across the region, impacting Asian economies, currencies (hence the collapse in the Asia USD index) and eventually the buying power of the people living in these countries, which have traditionally been large buyers of gold. Hence, we believe that absent this singular event, gold prices returns would probably have been flat or even positive during this particular hiking-cycle as well.
The first hiking-cycle with positive gold price performance that we analyzed started in June 2004 and ended in September 2007. During that time, gold prices went from USD396/ozt to USD744/ozt, an increase of 88%, all while the Fed hiked rates from 1% to 5.25%. Importantly, real-interest rates increased only marginally, from 2.15% to 2.26%. At the same time, central banks sold nearly 1550 tons of gold, which had a negative impact on the price by around USD45/ozt, according to our model. What drove the gold price rally was the sharp price increase in longer-dated energy prices from USD26.50/bbl to USD71.50, an increase of 270%. According to our model parameters, this translated into a gold price increase of USD375/ozt.
The second gold price rally in a rising interest rate environment started in December 2015 as the Fed departed from eight years of near-zero interest rates and increased rates by 25bps. Two more hikes followed since, lifting the Fed funds upper target rate to 1.25% where it currently stands. During that time, gold prices rallied 19%. This time it was a combination of all three drivers that pushed prices higher: TIPS yields declined from 0.75% to currently 0.45% and while the Fed is no longer increasing its asset holdings, the ECB, BoJ, BoE and SNB resumed and accelerated their respective asset purchase programs. Longer-dated oil prices rose from USD56.30/bbl to USD58.30/bbl and central banks added 930 tonnes of gold.
On net, we find that central bank rate hike cycles don’t automatically translate to gold bear markets. Quite the contrary: historically, gold prices have done better on average when the Fed was hiking rather than cutting rates. Gold has managed to rise in hiking-cycles when one or more of the price drivers we have identified (real interest rates, long-dated energy and central bank net purchases) created strong tailwinds for gold, countering any potential headwinds from rising nominal policy rates. Looking at these three drivers, we don’t see much reason why gold prices should decline for the remainder of the current hiking-cycle either.
As we have outlined before in detail (see Gold is breaking free from Fed rate expectations, 20 March 2017), real interest-rate expectations are unlikely to increase much from current levels. In fact, given the Fed’s own assessment of where terminal rates will end up, the most bullish scenario (for real interest rates) would be one where TIPS yields increase by 0.5% to 1%. For that to happen, the Fed would have to be able to continually raise rates for three more years without triggering a recession, making this the longest recession-free period in US history. The more bearish (and in our view more likely) scenario is that the US economy will encounter a recession along the way, forcing the Fed to cut rates to zero again and – because there is not enough room to cut rates by the average 5% that is typical in a recession – launching another round of unconventional monetary policy to resume growing its balance sheet.
Similarly, longer-dated energy prices have little downside from here and much more upside over the long run. Spot oil prices have rallied sharply in recent weeks as the overhang in global petroleum inventories is finally drawing down. But longer dated prices have remained fairly stable around USD55-60/bbl, the low end of what we think is needed to encourage new investments in production, and to replace depleted sources to secure future supply over the long run. And that is without taking inflation into account. Further, we expect that central banks remain net buyers of gold for the foreseeable future. Central banks in the western hemisphere largely stopped selling gold a few years ago while emerging market central banks keep adding metal, particularly China and Russia, but others as well.
Taking all this into account, this likely means that the downside risks to gold are limited in the current hiking-cycle. Similarly, absent an acceleration in inflation we also don’t see a near-term catalyst for a sharp rally either, but over the long run the risks are clearly skewed to the upside in our view.
WHAT IS INFLATION?
The original definition of inflation is an increase in the amount of money in circulation. Today the term inflation is mostly used to refer to the rate at which the price level, however defined, is rising. For example, a good that costs $100 today and $110 a year later experienced inflation of 10%. When referring to the original meaning, economists therefore often use the term ‘monetary inflation’ to distinguish from ‘price inflation’. Economists create weighted baskets of goods and services to estimate overall consumer price inflation. For example, the consumer price index (CPI) reflects the price development of a basket of goods and services that aims at replicating the typical consumer’s cost of living.
WHAT IS THE CURRENT INFLATION RATE?
There is no straightforward answer for this. Price inflation can be estimated in many different ways. The two most widely accepted price inflation indices are PCE (personal consumption expenditure) and CPI (consumer price index). The former is used by the Federal Reserve when setting US monetary policy and the latter applies to cost of living adjustments for US Social Security and certain other federal government benefits. We find that CPI inflation expectations have been a key driver for gold prices. CPI inflation also usually tends to be higher than PCE inflation. CPI (urban consumers) inflation in October 2017 came in at 2.0% year-over-year up from 1.6% a year ago.
WHAT IS THE NOMINAL INTEREST RATE?
Nominal interest rates are simply the interest paid on an investment in percentage terms. For example, a bond that sold for $100 and pays a $2 coupon per annum has a 2% interest rate. However, the value of a bond deviates from its face value over time when overall interest rates change. When interest rates decline, (all else equal) the bond above would increase in value as it now pays a higher interest than bonds that are issued today. Therefore, in financial markets one would usually refer to the yield of a bond—which is simply the return on the bond(coupon / price)—for comparison purposes. If the bond is trading at par (price is the same as the face value), the interest rate and the yield are the same. What makes things more complicated is that the two terms are often used interchangeably. In that case, the term interest rate is usually used to describe the yield of a fixed income instrument. Most people are not active investors in bonds (although they might be via their pension funds) and know interest rates only from their bank account. The interest paid on a savings account is equivalent to its yield and is a nominal interest rate.
WHAT IS THE REAL INTEREST RATE?
In contrast to nominal interest rates, real interest rates also take the level of price inflation into account. Broadly speaking, real interest rates = nominal interest rates + price inflation. Hence real interest rates measure the return on an investment in actual purchasing power. Why do real interest rates matter? For example, when interest rates are at 5% p.a. but inflation is 10% p.a. , after one year the lender has earned 5% in nominal terms, but he actually has lost value. More specifically, with an initial investment of $100 he would end up with $105 after one year. But those $105 would only buy him 95% of the goods and services the original $100 bought a year ago. Thus when price inflation is higher than the nominal interest rate on savings accounts, savers are de facto paying to lend out their money to the bank. Currently the national average money market account rate is 0.2% while inflation is 2.0%, hence savers lose 1.8% of their purchasing power per year if price inflation stays at this level.
WHAT IS THE FED?
The Fed is short for the US Federal Reserve, which was established in 1913 by the US Congress. The Fed is headed by the Board of Governors of the Federal Reserve, consisting of 7 presidential appointees serving 14 year terms. It’s most important body however is the Federal Open Market Committee (FOMC). The Current chairwoman of the Fed and FOMC is Janet Yellen.
The Fed has several functions. It acts as the lender of last resort to financial institutions that temporarily lose access to the capital markets in a crisis. It exerts other banking functions such clearing the transfer of funds from one bank to another. It also acts as the US government’s bank and sells and redeems government securities. However, what receives the most attention is that the Fed determines monetary policy, that is, the level of nominal interest rates. The monetary policy decisions of the Fed, such as setting interest rates, are made by the FOMC.
WHAT IS THE FOMC?
There are 12 voting members of the FOMC: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York and the presidents of four other regional Reserve Banks (on a one-year rotating basis). There are eight scheduled FOMC meetings per year. When the FOMC sets interest rates, it actually sets the lower and upper bounds of the federal funds rate, the rate at which banks either lend out or borrow reserves in order to meet statutory reserve requirements.
WHAT IS THE FEDERAL FUNDS RATE?
The federal funds rate is the overnight interest rate at which a depository institution (a bank) lends funds to another depository institution. The Fed only sets a target band; the banks can in theory charge each other what they want. However, in practice the rate at which banks lend to each other is always within this band. The Fed uses open market operations to ensure that the fed funds rate stays within the target band. This means that it buys and sells securities (normally US Treasuries) from its member banks and replaces them with Federal Reserve credit. The upper band is called the discount rate. Even though the Fed prefers that banks to borrow from each other, the fed funds rate should in theory not be able to exceed the discount rate as otherwise the banks may simply borrow directly from the Fed itself. What makes the fed funds rate so important is that it necessarily influences all other interest rates as well. Hence by setting the fed funds rate target, the Fed is able to influence credit conditions throughout the economy.
WHAT IS FORWARD GUIDANCE?
At the end of an FOMC meeting, the Fed announces its outcome and releases a statement that aims to provide the public with information about the FOMC members’ views in regards to current macroeconomic conditions as well as their expectations thereof. Among other data, the Fed publishes a so called dotplot which shows where the FOMC members believe the Fed funds rate will be at the end of each year for the next few years and over the long run. The median projection is regarded as the Feds forward guidance for the interest rate path. Often the market is more interested in the Feds forward guidance than in the most recent monetary policy decision itself. For example, when the Fed announced its third rate hike in 11 years on March 15, 2017, the market reaction implied that the Fed had become more dovish rather than hawkish. The reason for this was that the Fed left its interest rate projections largely unchanged while the marked had expected the adoption of a more hawkish outlook.
WILL THE FED RAISE INTEREST RATES?
At the moment it seems likely that the Fed will continue to raise rates. Since the Fed began to depart from zero interest rates in December 2015 it has raised rates three times by 25bps (0.25%) each. According to the Fed’s own dotplot forecasts the Fed is anticipating raising rates to 2.85% by the end of 2020. However, the market is not expecting the Fed to be able to raise rates as quickly as the Fed’s forward guidance suggests.
WILL REAL INTEREST RATES RISE?
Unlikely. We believe the Fed will only continue to raise nominal interest rates as long as the US economy keeps expanding and inflation remains above the 2% target. This suggests that at the end of the current hiking cycle, realized real interest rates will not exceed 1%. However, we are currently already in the second longest period of economic expansion in US history. Should the US economy slow down or even fall into recession, the Fed would more probably have to cut rates rather than raise rates, in our view. We would expect real-interest rates to go sharply lower in such a scenario. – Stefan Wieler
The gold market is heading towards a big fundamental change that few are prepared. While many analysts in the alternative media community suggest that the gold price is manipulated due to Fed and Central bank intervention, there is another more obscure rationale that is the likely culprit. I call it, “The Blind Conspiracy.”
But, before I get into the details of this Blind Conspiracy, there are a few very troubling developments in the alternative media community that I would like to discuss first. The bulk of these concerns has to do with the increasing amount of faulty analysis and misinformation as well as the peddling of lousy conspiracy theories on the internet.
Why is this a big problem? Because a lot of readers are being misguided as to the true nature of the serious predicament we are facing. Half of the emails that I receive are from readers who are bringing up doubts based on other analysts’ faulty analysis and misinformation. Thus, it takes a great deal of effort to provide the real facts and data to counteract the damage being done by certain individuals, even those with good intentions.
Furthermore, an increasing number of so-called precious metals analysts have switched over to Bitcoin and other cryptocurrencies, believing that gold and silver will no longer function as monetary metals. However, some of these analysts suggest that silver will still be valuable because it will be used as critical raw material in advanced products in our new HIGH-TECH WORLD. I find this idea of a future modern high-tech world quite amusing when we can’t even maintain the failing complex infrastructure we are currently using.
According to the Amercian Society Of Civil Engineers, ASCE, they just came out with their grade this year for U.S. infrastructure. Does anyone want to guess what overall grade we received here in the good ole U.S. of A? The ASCE gave us a D+:
Well, at least a D+ isn’t an “F” grade. Here is the ASCE’s Infrastructure Report Card Grading Scale for receiving a “D”:
“D” GRADE = POOR, AT RISK
The infrastructure is in poor to fair condition and mostly below standard, with many elements approaching the end of their service life. A large portion of the system exhibits significant deterioration. Condition and capacity are of serious concern with strong risk of failure.
The ASCE U.S. Infrastructure Report also provides separate grades for different aspects of U.S. infrastructure. For example, the U.S. Energy Infrastructure received a “D+” as well. This is a brief description of the Energy Infrastructure:
Much of the U.S. energy system predates the turn of the 21st century. Most electric transmission and distribution lines were constructed in the 1950s and 1960s with a 50-year life expectancy, and the more than 640,000 miles of high-voltage transmission lines in the lower 48 states’ power grids are at full capacity.
Moreover, the report states that $4.5 trillion needs to be invested 2016-2025 to raise the U.S. infrastructure to a “B’ Grade. However, only $2.5 trillion has been budgeted. Thus, we are $2 trillion short of the total amount needed. Regardless, I doubt we will be able to spend anywhere close to the budgeted $2.5 trillion over the next decade for our infrastructure. Unfortunately, I see the U.S. Government and private sector running into serious financial trouble by 2020 as the massive amount of debt and derivatives finally take down the system.
So, the question remains. How are we going to move into a new HIGH-TECH world if we can’t even maintain our current infrastructure?
The notion that we can bring on some new “Energy Technology” fails to consider the tremendous amount of raw materials, manufacturing, transportation, and logistics to repair and maintain our current infrastructure. You see, we have much bigger problems than just replacing an energy source or technology. But, to understand that principle, you must look past superficial thinking and “Silver-Bullet energy technologies.”
Now, if you hear certain analysts suggesting that gold and silver will no longer be used as money in the future because cryptocurrencies will take over the monetary role in our new high-tech world, you may want to contact them and provide the link to the U.S. Infrastructure D+ Grade Report.
If I collected an ounce of gold for every email that I have received about patently false gold myths and conspiracies; I could buy one hell of a lot of silver….LOL. Gosh, if I went back to my email folder and added up all the emails on this subject, it would number well over 500 in my ten years publishing articles in the alternative media community. However, I continue to receive the same type of emails because individuals are still being misled.
Before I begin, let me say that I focus my work on disproving the faulty analysis by other individuals, and not directing anything negative towards the person. I am adamantly against the idea of “targeting the messenger.” Rather, I like to target the faulty message. So, there is nothing personal in my attempt to set the record straight.
Let me start off by saying…. THERE AREN’T MILLIONS OF TONS OF HIDDEN GOLD in the world. Anyone who continues to believe this needs to pay close attention to the following information.
One of my readers sent me the following recent YouTube video by Bix Weir, titled “Vast Gold Riches Hidden In The Grand Canyon“:
In the video, Bix quotes a New York Times article published on June 19, 1912, that proclaimed vast gold riches in the Grand Canyon. According to Bix, this massive gold find is what prompted the starting of the Federal Reserve because billions of ounces of new gold from the Grand Canyon dumped into the market would destroy the monetary system.
While this may sound plausible to the layman, if we carefully read the article and do some additional research, we will come to a much different conclusion than what Mr. Weir is suggesting.
First, Bix makes a grave error during the interview when he states “billions of ounces of gold,” rather than “billions of Dollars of gold.” Here is the segment of the article:
There’s a big difference between a billion ounces of gold and a billion dollars worth of gold. For example, the market price of gold in 1912 was $20.65 an ounce. If we assume that $2 billion worth of gold was extracted from the Grand Canyon, it would equal approximately 100 million oz of gold. If we take it a step further and convert it to metric tons, it would equal 3,110 metric tons…. a figure much much lower than one million tons stated by Mr. Weir.
Second, the article provides us with an idea of the very low quality of the gold found in the silt on the banks of the Grand Canyon:
As we can see, the individual in charge of the mining operation in the Grand Canyon stated that the value of gold was worth 50 cents per yard. When gold miners refer to a “yard,” they mean a cubic yard or a volume that equals 1.3 tons. With an ounce of gold worth $20 in 1912, 50 cents a yard is a tiny amount of gold. Thus, 50 cents worth of gold in a yard is approximately 0.025 oz or one-fortieth of an ounce of gold.
Let’s compare the supposed vast Grand Canyon gold riches worth 50 cents a yard to the gold mining that took place in Alaska during the same period. According to the data provided by the U.S. Bureau of Mines in 1912 Report:
This chart represents “Placer” gold mining in Alaska, which was the same type of gold mining that took place on the banks of the Grand Canyon. Placer gold mining is the process of washing gold from gravel, sand or silt. Lode mining is extracting gold ores from veins in rock. Here we can see that the average value of gold recovered in Alaska in 1912 was $2.10 per cubic yard. Now, why on earth would anyone want to go to the remote location in the Grand Canyon and mine gold for 50 cents a yard when you could receive four times as much in Alaska??? Please, someone forward that information to Mr. Weir.
Third, the notion of extracting Billions of Dollars of gold from the Grand Canyon fails logistics miserably. Let’s overlook Mr. Weir’s error in quoting billions of ounces of gold rather than billion dollars of gold and consider the tremendous logistics of mining that amount gold out of the Grand Canyon. According to the same U.S. Bureau of Mines 1912 Report linked above, Alaska produced a total of 7.4 million oz of gold worth $154 million between 1880 and 1912:
So, in over three decades of mining placer gold in Alaska, the total amount was $154 million. Furthermore, the value of the gold per yard was likely much higher between 1880-1900. Regardless, it took a great deal of human resources, energy, and capital to produce the $154 million worth of gold and the most ever produced in one year during that time-period in Alaska, was 1,066,000 oz of gold in 1906 valued at over $22 million.
Which brings us to the next logical conclusion…. was it ever possible for anyone to produce billions of dollars worth of gold valued at 50 cents a yard in the Grand Canyon when a small percentage of that amount ($154 million) took over three decades to produce in Alaska? Hell, even during the mighty California Gold Rush of 1848, the peak year of 3.9 million ounces in 1852 was only worth $80 million. However, the average annual gold production for the California gold rush was only 1.3 million ounces per year valued at $26 million. It would take a great deal of time mining gold during the famous California Gold Rush to equal just $1 billion.
Even at $1 billion, that is only 50 million oz of gold or a measly 1,555 metric tons of gold. Again, nowhere near the one million tons of gold suggested by Mr. Weir.
Lastly, the supposed vast gold riches in the Grand Canyon came to a dismal end. That’s correct. If we spent a few minutes doing a bit of research on the internet, we would find out The Rest Of The Ugly Story.
(American Placer Gold – Spencer Mining Operation 1911, Grand Canyon)
According to Arizona State history of gold mining at Lee Ferry in the Grand Canyon, the American Placer Gold company needed coal to process the gold. Unfortunately, the only coal seam was 28 miles away. So, the gold mining investors decided to incorporate a steamboat to transport the coal:
Investors decided a 92-foot steamboat would improve coal transport and gold production; it was ordered and assembled by late February 1912. Dubbed the Charles H. Spencer, the steamboat performed the way it was supposed to, but it burned most of the coal it transported in the process. Spencer also had trouble with his amalgamator and by 1912 his investors had seen enough and shut the project down. Spencer left, and his boat sank to the bottom of the Colorado River. The Charles H. Spencer is now on the National Register of Historic Places as a shipwreck in Arizona.
Just consider for a moment the type of intellectual thought process taken by these investors who couldn’t understand that the steamboat would consume most of the coal during its 28-mile trip.
Thus, the LIFE & DEATH of the Great Vast Gold Riches in the Grand Canyon came to an abrupt end, not because there were billions of ounces of gold that would destroy the global monetary system, but rather due to the typical mistake made by investors. And that is… the belief that utterly incompetent management and miners could extract low-quality gold that is uneconomical to produce.
So, if we look at the New York Times article that Mr. Weir quotes as his source of billions of ounces of gold, we can logically assume that it was likely written by the company spokesman to get more POOR UNWORTHY INVESTOR SLOBS to purchase the American Placer Gold stock before it went belly-up. It’s called the PUMP and DUMP…. a shady stock marketing technique that has been going on for hundreds of years.
If we can have an open mind and the ability to discern fact from fiction or lousy conspiracy theories, we can finally put an end to the notion that the world has a Million Tons of Hidden Gold in the world.
Now that we have dispensed with certain conspiracies that don’t pass the smell test, there is a real one that very few are aware. I call it the BLIND CONSPIRACY. The interesting thing about this conspiracy is that nobody really knows about it. However, it behaves like a conspiracy because many individuals and parties are manipulating the market which is providing a false sense of security to the average investor.
Thus, investors with a false sense of security, continue to invest in STOCKS, BONDS, and REAL ESTATE at amazing inflated values. Today, the Dow Jones hit a new record high of 24,272 points:
If you look at this chart of the Dow Jones Index, it is starting to resemble the Bitcoin chart. However, Bitcoin’s graph is moving up at a level ten times more insane than the Dow Jones Index:
While the Dow Jones Index increased 4,200 points, or 21% since the beginning of 2017, the Bitcoin price has surged more than $9,000, or a staggering 1,125% increase. Furthermore, the Bitcoin price doubled in just the past month. This is completely insane. Even though a lot of Bitcoin enthusiasts are shouting for $20,000 and $100,000 Bitcoin, if we are ever going to get there, there needs to be a serious correction first. However, we may have already seen the top of Bitcoin at $11,400.
Folks, nothing goes straight up and then continues even higher. I would be very cautious about investing in Bitcoin at this time. Both the stock market and cryptocurrencies are extremely overbought… to say the least. On the other hand, gold and silver have been selling off over the past several days and are even closer to their lows and cost of production.
Getting back to the Blind Conspiracy and the Big Fundamental Change in the gold market, investors are entirely in the dark about the dire energy predicament we are facing. I continue to receive emails from individuals in various industries that tell me the “Situation is MUCH WORSE than you realize.” Also, there are good CLUES published in the media if you are IN-TUNE to this information.
According to this jewel, titled Oil Major: 70% Of Crude Can Be Left In The Ground, by Nick Cunnigham:
“A lot of fossil fuels will have to stay in the ground, coal obviously … but you will also see oil and gas being left in the ground, that is natural,” Statoil’s CEO Eldar Saetre told Reuters in an interview. “At Statoil we are not pursuing certain types of resources, we are not exploring for heavy oil or investing in oilsands.
If heavy oil and oil sands are to be left unproduced, then a lot of oil will need to stay in the ground. According to the USGS, about 70 percent of the world’s discovered oil reserves are in the form of heavy oil and bitumen. Much of that comes from Venezuela – one of the last places in the world that an oil company wants to do business in these days – and Canada.
Last year, Statoil abandoned Canada’s oil sands, selling off its assets to Athabasca Oil Corp. But Statoil is hardly alone in the exodus. ConocoPhillips unloaded a whopping $13.3 billion of oil sands assets to Cenovus Energy earlier this year. Shell sold off $4.1 billion in oil sands assets to Canadian Natural Resources. Meanwhile, ExxonMobil wrote off 3.5 billion barrels of oil sands from its book in February, admitting that they were unviable in today’s market.
ConocoPhillips’ CEO said that it would no longer invest in any oil project that needs a breakeven price of $50 or higher, according to the FT.
If the Major Oil Industry believes that upwards of 70% of the oil reserves should be left in the ground, how much do we really have left to produce?? Furthermore, it was quite surprising to see that the ConocoPhillips CEO said they would no longer invest in oil projects with a breakeven above $50. Folks, there aren’t many oil discoveries available with a price tag less than $50 a barrel.
Again, the clues are all around. Let me repost the completely awful financial results by the second largest natural gas producer in the United States. Chesapeake Energy produced the second highest amount of natural gas during the first nine months of 2017 at 2.9 billion cubic feet per day compared to ExxonMobil’s 3.1 billion cubic feet per day. So, what benefit did Chesapeake receive for producing the country’s second largest amount of natural gas? Take a look at the Q3 2017 Cash Flow Statement:
After everything was considered, Chesapeake’s operations provided $273 million in cash (shown in the highlighted yellow). For those who are not familiar with Cash Flow Statements, we subtract capital expenditures from cash from operations to arrive at their FREE CASH FLOW. Unfortunately for Chesapeake, they spent a staggering $1.6 billion (highlighted in blue) on drilling and completion costs (capital) to produce their natural gas and oil. Thus, Chesapeake’s Free Cash Flow was a negative $1.3 billion.
That would have been terrible news if it wasn’t for the sale of properties of worth $1,193 million ($1.2 billion.. two lines below the highlighted blue line). Which means, the financial wizards at Chesapeake used asset sales to help pay for their natural gas drilling capital expenditures. How long can Chesapeake sell properties to fund their drilling costs??
Are we starting to get a PICTURE here? Regrettably, even highly trained energy analysts do not understand that the oil and gas industry is cannibalizing itself just to stay alive. If investors do not understand just how bad our energy situation has become, they are BLINDLY investing in the worst assets (STOCKS, BONDS & REAL ESTATE) that derive their value from the burning of ENERGY.
This is the BLIND CONSPIRACY. It’s taking place right in front of our eyes, and virtually no one sees it.
We are going to experience a Massive Fundamental Change in the gold market because investors will finally begin to understand what a true store of wealth is versus one that is an ENERGY IOU. Stocks, Bonds, and Real Estate get their value from burning energy IN THE FUTURE, while a gold or silver coin bought today, received its value from burning energy IN THE PAST. That is a big difference that investors, even precious metals investors fail to realize. – SRSroccoreport