In global reserve currency transition gold may move to center stage-OMFIF

Author: Dorothy Kosich via Mineweb
Posted: Tuesday , 15 Jan 2013


A report by the Official Monetary and Financial Institutions Forum (OMFIF) suggests that demand for gold will increase as central banks of emerging market economies become increasingly interested in gold in the transition from one global reserve currency system to a greater number of other currencies.

In an international monetary system where the U.S. dollar is considered the only real reserve currency, the role of gold has been limited. However, the OMFIF report suggests, “The role of gold is likely to be bigger in the transition period to a multiple reserve currency system than when system is in existence.”

The report, which was commissioned by the World Gold Council, suggests central banks will trade gold more actively. Nonetheless, the OMFIF stressed repeatedly that “gold will not replace fiat currencies” and that “the Gold Standard will not return.”

The newspaper China Daily recently observed that China has almost doubled its gold reserves in the past five years and is now the sixth largest holder of monetary gold. China also holds the world’s largest forex reserves, which were worth more than US$3.31 trillion at the end of last year.

“Driven by China’s desire to increase its financial clout, the Chinese renminbi is likely to emerge gradually as a genuine international currency as the country has been easing restrictions on its use in transactions and investments abroad,” China Daily suggested.

Nevertheless, as China weighs its options for joining the dollar and the euro in the reserve asset game, “gold—the official asset that plays no formal part in the monetary system yet has never really gone away—is poised, once again, to play a pivotal role,” said OMFIF Advisory Board Chairman Meghnad Desai.

In his forward to the report, “Gold, the renminbi and the multi-currency reserve system,” Desai suggested, “If the spectre of collapse continues to haunt the main reserve assets, and on the expectation that the renminbi will take time to get into its stride, the world will rush to safe havens. Gold may be the only one with the requisite size, clout and—dare I say it—history to help ward off the strains that will beset the world monetary system.”

“It would be wise to draw up contingency plans for such eventualities,” he advised.

“Many dismiss gold as a relic of the past or as an inadequate hedge against inflation,” he noted. “But from an asset management point of view, as well as a basis of political analysis, gold has a lot going for it; it correlates negatively with the greenback, and no other reserve asset seems safe from the coming dollar shock.”

The report advises the concentration of gold’s ownership will move gradually from the central banks of the industrialized west towards the emerging market economies, especially in Asia. For instance, if Germany’s Bundesbank considered rebalancing its gold reserves through selling gold directly to the People’s Bank of China, the OMFIF suggests it would have “widespread repercussions.”

Desai observed, “The Chinese authorities’ own evident leaning towards building up stocks of monetary gold, reflecting a cultural attachment to precious metals that goes back millennia, is itself a powerful factor in the equation.”

Large Chinese banks, which are building vault space to accommodate private sector gold activities, “will increasingly offer storage facilities to central banks form developed and emerging market economies to offset the west’s traditional dominance in this field,” the report forecasts. “Issues of convenience, reliability and cost will generate greater interest in central banks holding gold away from the traditional centres, mainly the Federal Reserve Bank of New York and the Bank of England.”

Desai favors extending the IMF’s Special Drawing Right (SDR) to include the R-currencies—the renminbi, rupee, real, rand and ruble—with the addition of gold. “By moving counter-cyclically to the dollar, gold could improve the stabilizing properties of the SDR. Particularly if the threats to the dollar and the euro worsen, a large SDR issue improved by some gold content and the R-currencies may be urgently required.


2013 Gold & Silver Outlook


January 11, 2013 •  via


This analysis is excerpted from part of yesterday’s subscriber update in which we presented our outlook for gold, silver and GDX/HUI. When making forecasts and writing outlooks, analysts must look at a multitude of things. We usually begin by examining the macro landscape via intermarket analysis. How are the various markets trending? Which are lagging? Where are the divergences? As we begin 2013, there has been an important shift in regards to precious metals that few analysts have picked up on. The rest of our analysis filters down from this discovery.

We are speaking of the decoupling that has taken place between the equity market and the precious metals complex. This is significant because it began nearly 17 months ago. (Decouplings of three or six months are not significant). Since the euro crisis in summer 2011, the equity market has rallied nearly 30% and reached a five-year high. During the euro crisis both gold and gold shares were trading at all-time highs. GPX, an index of precious metals prices, was at an all-time high. Since that time, the gold stocks are down by more than 30%. This is what a decoupling looks like. It’s not obvious over short periods but over long periods of time.

This decoupling means that precious metals cannot begin an impulsive sustained bull move if the equity market continues to move higher. The equity market has to struggle with resistance and begin a mild cyclical bear move. While over the near-term precious metals can confirm a higher low, the 2013 success of the sector depends on the struggles of conventional stocks. What would make stocks struggle?

That is where the fundamentals come into play. At present, capital is moving out of bonds and into stocks. The consensus conventional view for 2013 is one of continued growth with a chance of increase but no threat of inflation. Yet, if interest rates rise the debt burden would increase dramatically due to the current huge debt load but low cost of service. If the cost of servicing $15 Trillion in debt is 2%, then a rise to 3% equates to an extra $150 Billion in interest expense. In other words, interest rates cannot be allowed to rise materially. At some point rising interest rates would become bullish for precious metals and bearish for the stock market. Moreover, if interest rates cannot effectively be managed downward, then that would be even more bullish for precious metals and bearish for conventional assets like bonds and stocks.


s important to note that both the economy and the equity market have little margin for error. The economy has picked up statistically in recent quarters and is getting some help from emerging markets. Yet, it is only churning along (like a camel in the desert) due to massive deficits and continuous debt monetization. At the same time, the equity market (S&P 500) is now at a five-year high and very close to massive resistance. In any event, it is very clear that the decoupling will continue. You must decide if and when the markets will shift.

Turning to the technical outlook, we find gold well entrenched in a consolidation. While momentum is turning higher, gold is unlikely to breakout anytime soon due to the strong resistance at $1,750-$1,800. If gold is able to firm up here and now then it has a good shot to rally back to $1,750-$1,800 over the next few months. If we get the bullish scenario and a fundamental catalyst shift then expect gold to break past $1,800 in Q3. That would mean that gold consolidated for two years which would be its longest consolidation on record. The longer the consolidation, the more explosive the breakout. A breakout in the second half of 2013 (with momentum already rising) would bode extremely well for 2014.

Silver is in a much larger and slower consolidation. It will take longer to evolve but eventually build stronger momentum than gold. The initial upside target is obviously $35. Assuming gold breaks past $1,800-$1,900 then silver should break past $35 and at least test $44, the August 2011 high. It is very encouraging to see the silver stocks outperforming silver (bottom row).


Turning to the shares, we love the clarity from the monthly candle chart. It details just how important the key levels are. Note the strength of support at $40. In addition, we see that while the market has been weak, it has failed to close below $45 in each of the past three months. If GDX is able to close at or above $46 this month then we believe the secondary bottom is in. In that case, look for GDX to test $52 (extremely important pivot point). As we’ve written in recent updates, the $52-$55 area for GDX stands between the current market and an impulsive advance that could last a few years.

Over the short-term it appears that the gold stocks are forming rounding bottoms. These are slow bottoms that take time to form. At the same time, the action in gold and silver is looking more and more constructive. Generally speaking, we see precious metals starting the year well and potentially finishing the year very well. However, do realize that while this could be the low for 2013, it could be many months before precious metals experience their next breakout. Conventional investments still have momentum and it will take some time for that relationship to shift. The bad news is, you are going to have to continue to be patient. The good news is we see this being the most explosive breakout since 2005 and you have plenty of time to try and identify the mining stocks poised to be big winners when this cyclical bull begins in earnest.If you’d be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.

Good Luck!

Eric Sprott – Silver Remains The Best Investment Of The Decade – Video

Sprott warns of history’s biggest Ponzi scheme

Marc Howe | January 6, 2013 via


Eric Sprott, the chairman of Sprott Asset Management, says the US is currently mired in the “biggest Ponzi scheme of all-time,” and claims that the recent release of Fed minutes was simply a ploy to restrain inflation.

Speaking to King World News Sprott says that the purpose of the release of Federal Reserve meeting minutes evincing a desire to end QE3 before the end of the year was simply for the purpose of “keep[ing] the real indicators of inflation at bay.”

Sprott nonetheless believes that money printing by Western central banks will continue unabated, as will its deleterious effects upon the economy and a concomitant rise in prices for precious bullion:

If everyone continues to print like they have, and there is certainly no sense that anyone is stopping, in fact, there is even more printing now than the last time we spoke and by a large factor, the price of gold and silver have to go to new highs here. That’s fully what I expect to see happen this year.

The veteran investor further claims that 2013 could be the year that “the biggest Ponzi scheme of all-time” finally unravels, following almost five years of stimulus in the US and more than a decade of similar measures in a stagnant Japan.

Silver prices will go crazy as demand overwhelms supply: Embry

Marc Howe | January 2, 2013  Via


John Embry, chief investment strategist with Sprott Asset Management, believes silver prices will go “ballistic” as demand massively outpaces supply while investor demand builds due to dwindling above-ground sources.

Speaking to King World News Embry notes that over the past half century billions of ounces in above ground silver have been consumed, with the precious metal serving as both as investment holding and key industrial material.

According to Embry demand far exceeds the amount of silver coming out of the ground or silver being recycled, and prices are set to go “crazy” as the skewed supply-demand relationship unfolds.

Although Embry remains immensely optimistic about gold and foresees a raging bull market in both gold and silver, he also expects the gold-silver ratio to decline as is typical during strong periods for precious metals.

Festive season saw ‘unimaginable’ buying of bullion by public

Marc Howe | December 31, 2012 via


The president of one of America’s oldest precious bullion dealers says retail investors purchased gold and silver in unprecedented volumes during the Christmas holiday period.

Bill Haynes, president of CMI Gold & Silver told King World News that the Arizona bullion veteran did more business during the 3 day holiday week than during any single week in years, with one purchaser spending $6.8 million on a single transaction.

Haynes says fear of economic upheaval in the Western world is augmenting, leading to an “unimaginable” buying of physical gold and silver, and foresees further price breakouts to the upside.

Haynes further counsels canny investors to ignore the advice of leading financial institutions or popular pundits who claim that the bull market in gold will swiftly hit a ceiling:

each and every time the establishment and the mainstream media will declare a top and tell people to get out of their gold. I have one long-term customer that made the mistake of telling his financial firm that he purchased a large amount of physical gold. This financial firm is a household name that all KWN readers globally would recognize. Eric, this firm has literally called him every week and instructed him to sell his gold.

The Federal Reserve Has No Practical Option To End QE – Jim Sinclair

Jim Sinclair Jan 3rd 2013:


Such an announcement has been part of QE either from MSM or some Fed board member since it began. The implication of stopping QE is so dire to the economy that it is in a practical sense impossible. When gold was being sold by central banks during the 1970s market announcements were made constantly with the bias to depress metals.


There is no way that the implications and consequences of what has been done up to now can be talked or manipulated away. There is no practical way that QE can cease here or in Euroland without a total and final collapse of the financial system. Just go back to the IMF report on OTC derivatives I posted this morning. If QE ceases, the US bond market collapses and the Fed must debt monetize all required debt, which means if QE stops, it starts up again immediately and in a crisis mode.


I have to admit that if you have been a reader here for any length of time you should know this without asking me. The pressure that people unload on me during any gold reaction is downright mean.


The statement that QE can stop is simply MOPE. QE cannot stop or the world ends as you know it.


Please print this out and post it on your computer because every time the long cycle guy repeats his year old bear gold price prediction or the Fed says anything about stopping QE, you all go wild. It is embarrassing really.


If you do not understand what you are in, why are you in it?


Truman said it all when he said if you can’t stand the heat, get out of the kitchen.


The Federal Reserve has no practical option to end QE without ending the economic world for decades to come. Should that actually occur in some parallel universe, only gold will protect those citizens from the collapse of the by-default reserve currency. I am sure i have written this at least 200 times.

Why Inflation is the Economy’s Hidden Iceberg in 2013

DECEMBER 31, 2012
BY MARTIN HUTCHINSON, Global Investing Strategist, Money Morning
Even though Ben Bernanke’s Fed has kept interest rates close to zero, inflation hasn’t been a big problem since the 2008 financial crisis.

Despite what many observers have expected inflation has remained quite tame.

However in 2013, that may be about to change. One factor that might cause a surge in inflation is the fiscal cliff.

That’s because Bernanke is already buying $1 trillion of Treasury and housing agency bonds each year ($85 billion per month) against a budget deficit that is about the same level.

That means the inflow of funds to the economy from the Fed and the outflow of money to fund the government’s spending are about balanced.

However, if we go over the fiscal cliff the Federal deficit immediately falls to about $300 billion per annum. At that point, Bernanke would be injecting an extra $700 billion a year into the economy – which would have a corresponding inflationary effect.

The Case for Higher Inflation

But that’s only part of the inflationary story.

Central banks around the world are also expanding their money supply. China has become more expansive, the European Central Bank is buying bonds of the continent’s dodgier governments and Britain like the United States is monetizing nearly all the debt it creates to fund its budget deficit.

The big change in 2013 is now in Japan, where the new Abe government has told the Bank of Japan it wants much more buying of government bonds, to push the inflation rate up to 2%.

And just as Bernanke’s money creation increases inflation internationally, Japan’s new monetary push creation will likely increase inflation here in the United States.

In this case, theexcess money creation will get transmitted to inflation mostly through commodity prices.

The Thomson Reuters/Jeffries CRB Continuous Commodity Index closed recently at just over 300, about double its value ten years ago. And after a period of weakness in 2011-12, the index has recently showed renewed strength.

Now I admit, doubling in ten years may not sound very impressive, but that’s a rate of increase of 7% per annum. It only follows that if the basic elements of everything we consume are increasing in price at 7% per annum, then impossible to believe prices overall will rise by only 2% in the future.

In one respect, we’ve been lucky when it comes to natural gas prices. Thanks to new “fracking” techniques the U.S. natural gas prices have been cut in half over in the last four years.

This has given both consumers and producers a boost, and kept inflation down. But the bad news is that natural gas prices appear to have bottomed out around April 2012, and are now well above their low. Going into 2013, higher natural gas prices may well be inflationary as well on the commodities side.

Why You Can’t Trust the Inflation Figures

An additional factor tending to increase inflation is the tendency of official statistics to under-report it. This has not gone as far as in Argentina, where real inflation runs around 30% while official figures report inflation of 10%. Still, the official U.S. price indexes have since 1996 been distorted by “hedonic” prices, which adjusts prices downwards for the supposed “hedonic” advantage of chip capacity and speed enhancements in the tech sector. The effect of this appears to be about 1% a year, and it can be adjusted for.

However, a second fudge is about to be introduced. It’s the “chain weighted” price indexes that both political sides have agreed to use to calculate social security and other payments.

The problem with chain weighting is that it assumes that consumers change their consumption patterns optimally according to price movements. In practice, actual human consumers cannot do this because they do not know in advance what relative price movements are coming. If they did it would be the equivalent of a ballplayer batting 1.000.

Here’s why. ..

Consider an economy with two substitutable products-call them widgets and grommets. Initially both have the same price, but everyone buys widgets, which are slightly superior.

Then let’s assume the price of widgets doubles in year 1. Everyone may switch to grommets, but these have not increased in price, and so the chain-weighted price index remains static.

Then in year 2, let’s say the price of grommets doubles while that of widgets remains at the new higher level – so everyone switches back to widgets. But since these have not risen in price in year 2, the chain-weighted price index again remains constant.

So after 2 years, the prices of widgets and grommets have both doubled, but the price index hasn’t moved at all. As I said, chain-weighting is a nothing more than a government fiddle.

The bottom line is that there’s a substantial chance of a sudden upsurge in inflation in 2013, though the government statistics may reflect it only very grudgingly.

That will increase the costs of everything we buy, whatever the official statistics say.

As investors, we should avoid long-term bonds (even Treasury Inflation Protected Securities, which work off the official fudged price index) and keep a substantial portion of our wealth in gold and silver. 

Paper-Gold Fraud Now Out In The Open

Posted: 18 Dec 2012 11:11 AM PST Via: Bullionbulls Canada

How do you “stretch” an ounce of gold? Obviously if you want an answer to that question you ask the bankers.

Bankers have earned their generalized contempt in our societies, going back literally thousands of years. Formerly known as the “money-changers”, their Original Sin is well-known to anyone who has studied the history of these professional thieves.

As money-changers, they would graciously offer to “hold” peoples’ (heavy, bulky) gold for them; and exchange that for their convenient, light-as-a-feather “gold certificates.” Always the banksters would end up issuing far more certificates for gold than they actually had the gold to cover – and “fractional-reserve banking” was invented.

Eventually the insatiable greed of the banker would result in him issuing such an enormous surplus of “gold certificates” versus the actual gold he held that this money-dilution would be noticed by the general population. The bankers’ gold-scam would then quickly collapse and vast numbers of ordinary people would be wiped out (and so “capital punishment” was invented).

Thus ask a bankster how to stretch an ounce of gold, and (for thousands of years) his answer would be automatic: sell “paper gold.” Flash-forward two thousand years or so, and we see the banksters looking to fall back on their oldest crime to attempt to wallpaper over some of their newer ones.

We have a huge gold deficit (and silver deficit, as well) in the world today. New, incremental demand for gold grossly exceeds annual incremental mine-supply. This has become a permanent deficit, which by itself is absolute proof of market-manipulation.

The virtues of (actual) “free markets” are well-known to anyone familiar with basic market dynamics: they self-correct. If supply exceeds demand, the price falls to a sufficient level to discourage more supply and encourage more demand – until those simultaneous dynamics achieve equilibrium: supply and demand matching, with prices stable.

Conversely, where demand exceeds supply; prices must rise sufficiently so that more supply is encouraged and more demand is discouraged, until once again equilibrium is achieved. Thus a permanent supply-deficit is ipso facto proof of price-suppression.

The problem with the price-suppression of any kind of physical “good” is always the same, one inevitably runs out of inventory as the repressed supply and excessive demand caused by artificially low prices means that buyers will always outnumber sellers.

In the case of the banksters’ perennial gold-suppression scheme; their supply-deficit dilemma has caused them to recently focus on one target: the population of India. As the world’s most consistently voracious consumers of gold, permanently under-pricing gold has caused a predictable effect. There is a large “gold deficit” in India, as India must import vast quantities of gold each year to satisfy the excessive demand for gold caused by selling it at give-away prices.

As is generally the case, the Corporate Media has totally perverted its own explanation of this scenario. India’s large gold-deficit is being called a “current account deficit” – i.e. a paper deficit. This is absurd on multiple levels.

Silver Deceptions Loom Large

Posted by Wealth Wire – Wednesday, December 19th, 2012

There are two misconceptions about the silver market that are still held by many investors in the precious metals community. One is the notion that the world produces large annual silver surpluses and the other is the low cost of mining silver. Some have argued that the investors have been deceived by certain aspects of the silver industry to believe these two fabrications.

Before we get into destroying the myth (once and for all) behind the so-called silver surpluses, here is the definition of surplus:

sur·plus – the amount that remains when use or need is satisfied.

For silver to be in a true surplus, all use and need must be satisfied. However, according to GFMS and the World Silver Survey, investment demand is not a part of that calculation. This is how GFMS figures their annual silver surplus-deficit.

Mine Supply + Scrap – (Fabrication – Coin & Medal) = surplus / deficit

If we input the 2011 figures from the 2012 World Silver Survey published by the Silver Institute, this is the result:

761.6 mil oz + 256.7 mil oz – (876.6 mil oz – 118.2 mil oz) = +260 mil oz

So, in 2011, the silver market produced a record 260 million ounces of silver surplus… or so they say. In the article Silver Surplus: What Silver Surplus?, the author took the silver surplus-deficit chart from a previous article of mine and presented the data in way I had not realized.

The World Gold Council puts out a supply-demand table for gold every quarter. In the Q3 2012 table below you will see included in the demand portion of the calculations are investment bar & coin, ETF & similar and official sector purchases. The highlighted yellow rows show the total gold supply and demand. The OTC investment and stock flows are used to balance out the small surplus or deficit each quarter.

There is speculation that a great deal more “unofficial gold” has been moving from west to east in 2012 that is not being accounted in the official World Gold Council statistics. While this may be true, at least table below gives us a guideline how “official” supply and demand figures are calculated.

steve 12 1

If we look at the 2011 column we will see that total gold supply was 4,505 metric tonnes while total demand was 4,585.7 metric tonnes, including a deficit of 80.6 metric tonnes. Thus, the world suffered a 1.7% gold deficit in 2011.

Now, if we look at the supply and demand figures for silver from the Silver Institute, we can see that investment demand does not constitute a “need” or “use” in their calculations:

steve 12 2

steve 12 3

The highlighted yellow rows reveal how supply and demand are made to balance out each year. However, the surplus is figured by omitting all investment demand. If we add up the 2011 “Coin & Medals” and “Implied Net Investment” , we get a total of 282.2 mil oz. This is not the exact surplus figured above which was 260 mil oz… but at least it’s in the ball park.

Basically, implied net investment is used to balance out silver supply and demand. But, that doesn’t mean that it denotes a surplus. As I stated in my article The Forces That Will Push Silver Over $100, of the 164 million ounces of implied net investment in 2011, the 2012 World Silver Survey attributed 96 million ounces of that total was in the form of physical bar investment.

If we add up coin & medal demand of 118.2 mil oz (this is official coins such as Silver Eagles & Maples and etc.) plus the 96 mil oz of physical bar investment in 2011, we get a total of 214.2 mil oz. GFMS would like the world to believe that there was a 260 mil oz silver surplus in 2011, whereas if we subtract 214.2 from that figure we end up with a paltry 45.8 mil oz remaining.

Don’t get me wrong, I am not saying that this 45.8 mil oz is a surplus, but at least it’s a more realistic figure. We don’t know for sure how much of that remaining amount may have gone to official sector purchases or exchange warehouse investments, such as the Comex.

By updating the 2011 Silver Surplus put forth by GFMS, we have the following:

GFMS 2011 Silver Surplus = 260 mil oz / 1040.6 mil oz = 25% surplus of total supply

Updated 2011 Silver Surplus = 45.8 mil oz / 1040.6 mil oz = 4.4% surplus of total supply

Well, there you have it. If we determined the annual silver surplus-deficit the same way as the World Gold Council calculates gold, there would be no so-called huge silver surpluses. However, the silver industry and investors have been indoctrinated to believe that silver is just a mere slave to fulfill the demands of its industrial masters. Institutions, individual investors or the public who have the “need” or “use” to acquire silver as investment — need not apply.

Putting the So-Called Enormous Silver Surplus into Perspective

On Dec 13, Jeff Christian of CPM Group was interviewed on BNN stating, “that due to enormous silver surpluses in 2013, the price of silver would outperform gold on the way down.” Already, GFMS is forecasting a 300 million oz surplus for 2012 (according to their formula). This can be seen by their “From Deficit to Surplus” chart in their 2012 Silver Institute – interim report released in November (with my annotations):

steve 12 5

By looking at the chart above, we can see how the surpluses have been trending higher. Again, these are annual silver surpluses calculated by the formula developed by GFMS, removing all silver investment demand. The two red arrows show the increased gap in these so-called silver surpluses from 2010 to 2011. GFMS calculated the annual silver surplus to be 189 million oz in 2010 and 260 million oz in 2011. Interestingly, as the silver surpluses increased nearly 71 million oz the following year, the average annual price of silver rose from $20.19 (2010) to $35.12 (2011).

Mr. Christian believes that there will be “Enormous” silver surpluses in 2013, which would impact the price of silver in a negative fashion. While I agree that it is possible that industrial silver demand may indeed decline in 2013, we really have no idea of what the silver investment demand will be like — especially when QE4 starts in January and the Fed can purchase $45 billion in U.S. Treasuries a month.

It is quite possible that the surpluses of silver may increase in 2013. However, to say these surpluses with be enormous, no longer makes sense once we allow investment demand to be a part of the surplus-deficit equation as a real “use” and “need” by the investing community.

Now that we have solved the myth of huge silver surpluses, let’s examine how the industry has deceived the investing community into believing silver mining costs are low.

If Silver Mining Costs are so Low, Where’s all the Profits?

The biggest deception put forth by the precious metals mining industry is the use of CASH COSTS in determining the actual cost of mining silver (or gold for that matter). According to the 2012 World Silver Survey, the cash cost for mining silver in 2009 was $5.02 an ounce, $5.47 in 2010 and $7.25 in 2011. With that sort of cost structure, the silver miners should be laughing all the way to the bank.

Now, I am not the only one who believes cash costs are bogus in determining the real cost of mining silver or gold. Finally, we are getting mainstream analysts stating the same thing. According to the article Cash Cost Fairytales and the need for management discipline in the gold sector:

“Today,” he says, “with high gold prices they are booking profits yet they still mark themselves on this cash cost measure. Of course governments are the only people that believe that gold companies are producing gold at $1000-plus margins and in their view this is a windfall profit the company is reaping at the expense of the state. Companies need to talk in terms of total cost to produce an ounce of gold.”

Aldis continues that, if one looks across the 65 largest gold companies it monitors, the all-in cost to produce an ounce of gold this year is about $1300.

The only area I would differ with the quote above is the claim that only foreign governments believe in cash costs put forth by the mining companies. I still come across a good percentage of investors (and some analysts) who still believe it only costs $10-$16 an ounce to produce silver.

Before we get into the costs of mining silver, let’s take a brief look at gold. This is also a good time to explore the recent statement by Paul Van Eeden, “that the fair value for gold is about $900 an ounce.” Paul calculates his fair value for gold by looking at the U.S. money supply and inflation growth. So, according to Van Eeden, gold is now overvalued by nearly $800 an ounce.

Now, if you were a simple precious metal investor without an in-depth knowledge of the gold market, this sort of analysis may keep you up late at night. On the other hand, if your business was mining gold, then you would realize just how silly Mr. Van Eeden’s values appear to be.

As the article stated above, “all-in costs to produce gold from 65 miners is about $1,300 an ounce.” To get my own version of the actual all-in costs to mine gold, I gathered the data from Q3 2012 on the top 5 gold miners (Barrick, Newmont, AngloGold, GoldFields & GoldCorp) and put it in the table below:

steve 12 6

Here we can see that not only did total revenues decline $1 billion year over year, but net incomes fell 39% from $3.1 billion in Q3 2011 to only $1.9 billion in Q3 2012. If we take the total net income of the group in Q3 2012 and divide it by their total gold production, we get a $348 net income gain per oz of gold (shown as Net/ Gold Prod. in the table).

Before I get any hate mail from mining accountants or investors, let me explain my method. While I realize that net income may not be the best way to calculate the exact cost of mining gold, the end result comes a great deal closer to the $1,300 an ounce figure stated in the article above and is more realistic than the bogus cash cost metric.

Moreover, I decided to break it down even further. I went back to the Q3 2012 reports and tallied up all the copper and by-product revenue. I estimate that 85% of the total revenue came from gold sales alone. Thus, if we subtract 15% (copper & by-product credits) from the net income we would end up with an estimated “Gold only” net income of $1.61 billion. This would be the result:

$1.61 billion net income / 5.45 million oz = $295 gold net income gain per oz.

If we subtract the $295 from the average price of gold (kitco) in Q3 2012 of $1654.80, we end up with $1359.80 all-in cost per ounce. Again, I realize the total sales of gold during the quarter were different from what was actually produced, but at least we get a good ball-park figure in the profitability of the gold mining sector through these top 5 gold miners.

So, for the world to realize Mr. Van Eeden’s fair value of gold at $900 an ounce, the gold miners would have to lose $400-$500 an ounce (as well as their $200-$300 profit). When I first wrote about this in several of the precious metal blogs, one of the members forwarded my post to Paul and he replied by saying “it means you change the cut-off grade. The whole industry can, and will adjust.”

I was completely astounded by his solution. How much can the miners change their cut-off grade and make money at $900 an ounce? If we look at Barrick’s Annual Reports, their average reserve ore grade has fallen substantially over the past several years (figures in ounces per tonne and at year end – Dec 31st):

Barrick’s Proven Reserve Average Ore Grade

2008 = 0.057 oz/t

2009 = 0.052 oz/t

2010 = 0.048 oz/t

2011 = 0.045 oz/t

In just three years, Barrick’s average reserve ore grade has declined 21%. If we look at their average ore grade for Q3 2012, it was 0.054 oz/t — the quarter they posted a 55% decline in net income compared to the same period last year. Furthermore, Barrick’s cost of sales increased from 38% in Q3 2011 to 50% this past quarter. So, how much can they really adjust their cut-off grade and remain profitable?

With the understanding that break-even for the majority of gold miners is now $1,300+ an ounce, how can the market value gold at $900 an ounce? Of course, some say that demand is an important factor as well, but given the rapidly disintegrating financial system around us, who really thinks gold demand is going to fall anytime soon?

If the 39% decline of net income in the top 5 gold miners Q3 2012 y-o-y was bad, just take a look at the beating the top 10 primary silver miners received during the same period:

steve 12 7

Updated 2011 Silver Surplus = 45.8 mil oz / 1040.6 mil oz = 4.4% surplus of total supply 

(companies included were Pan American Silver, Coeur, Hecla, First Majestic, Silver Standard, Silver Corp Metals, Endeavour, Fortuna, U.S. Silver & Alexco Resources). Fresnillo was not included due to the fact that more of their revenue comes from gold than silver and Hochschild only reports their financial results on a bi-annual basis.

Here we can see that the top primary silver miners net income declined 78% y-o-y, twice the percentage of the gold miners. Not only did the primary silver miners total revenue fall from $954 million in Q3 2011 to $895 million Q3 2012, it did so while the group produced an additional million ounces of silver.

For those readers-investors who believe the silver miner’s total revenue may have declined due to some in the group holding onto more of their silver production… let me share with you this tidbit. The top 5 primary silver miners in the group had total production of 16.5 million oz during Q3 2012. However , their combined sales that quarter of silver was also 16.5 million oz — basically a wash.

So, the reason for the huge decrease in net income y-o-y was due to both the increased cost of sales as well as the much lower price paid for silver. By using the same approach as we did in the gold table, the top 10 primary silver miners net income per ounce declined from $12.06 oz in the third quarter of 2011 to only $2.53 an ounce this last period.

Furthermore, I decided to add up the same top 5 primary silver miners by-product credits which turned out to be 28% of total revenue. To be conservative I reduced the net income by 25% giving an estimated total silver net income of $39.7 million. This was the net effect:

$39.7 million / 21 million oz = $1.89 silver net income gain per oz

Again, this is my approach for getting a more “common sense” break-even cost for these primary silver miners. If we take the average price of silver in Q3 2012 of $29.91 (Kitco) and subtract the $1.89 silver net income we end up with an all-in cost of $28.02 an ounce. Even though the miners receive different realized prices than the average stated Kitco price in the example above, it turns out to be a very close indicator.

For instance, here is a sample of the average realized price of silver paid by top primary silver miners during Q3 2012:

Q3 average realized silver price

Pan American Silver = $29.27

Coeur d’ Alene = $30.09

First Majestic = $30.48 (silver eq.)

Silver Standard = $29.37

Average price = $29.80

All of the figures presented above show that the break-even cost for mining silver is a great deal higher than the reported cash costs. Here we can see that the primary silver miners’ profits have declined substantially as the average price of silver fell from $38 (Q3 2011) to $30 an ounce (Q3 2012). Moreover, four of the top 10 primary silver miners reported a negative income loss during the third quarter of 2012. It’s safe to assume that if the price of silver fell to $25-$27 an ounce while costs remained the same, the majority of these miners would suffer net income losses.

Why Those Analysts Who are Bearish on Silver Will Get it Wrong

The problem facing the precious metal investor today is the seemingly contradictory analysis on the future price of silver. Some are saying the price will be head much higher in the next few years, while others believe the top has already been seen.

Jeff Christian gave his 2011 forecast on silver during a roundtable discussion on FSN Newshour on March 4, 2011 (at the time the price of silver was $34.50 an ounce):

* The price is going to be where it is now

* The price of silver will fall sharply during the 2nd & 3rd quarter of 2011, perhaps down to $22-24

* Then basically stay above $22 for the next couple of years, and then move up towards $30 over the next ten years.

Here is a three year chart of silver with a highlighted red zone where I believe the majority of the top primary silver miners would report net income losses:

steve 12 8

Silver did not reach the $22-$24 level and did not take 10 years to move upwards to $30 as Mr. Christian forecasted. To be fair, Mr. Christian was correct, silver did suffer a downward correction in the 2nd & 3rd quarter. However, the average price of silver in 2011 was $35.12 — a great deal higher than Mr. Christian’s ten year forecast.

Another analyst, Ned Schmidt has stated several times that the fair value of silver is $16 an ounce. He goes on to say that a pure silver mining company is mining silver at $16 an ounce so at $29 they are making big profits. Furthermore, Ned believes that due to the huge amount of silver supply that will come on the market at the end of the year and in 2013 will make silver a risky investment. I disagree with the forecasts of these two analysts.

Before I explain my forecast on the future silver market, it is also fair to say that many of the analysts’ extremely bullish silver price projections in 2012 did not come true.

That being said, I believe the future price trend for silver is higher, not lower. Mining costs for silver are going to continue to rise during this decade. Mr. Christian forecasted that silver would trend toward $30 in the next ten years. If this was the case, the majority of the primary silver producers would be suffering net income losses for the remainder of the decade as the all-in cost of mining silver would reach $30 an ounce in the next year or two.

Both Mr. Christian and Mr. Schmidt believe huge silver supply and surpluses will make silver a risky investment in the future. While I believe there will be more silver supply coming on the market in the next few years, I don’t believe this is necessarily bearish.

First, I proved in the beginning of the article that the so-called “Enormous” silver surpluses are more a product of accounting than they are a reality. In 2011, there wasn’t a real 260 million ounce surplus of silver. Once we included investment demand (as is done by the World Gold Council in determining their surplus-deficit for gold), the remainder was only 46 million ounces. And, of this remaining 46 million ounces, we are not sure how much went to other investment vehicles not detailed by the Silver Institute and 2012 World Silver Survey.

Second, the low cost of mining silver is more a myth than an actuality. Mr. Schmidt believes that the fair value of silver is $16 and a pure silver miner can make profits at this level. Even though this may be true for a few of the primary silver miners, it is not true for the majority of the group. If it was, then the top 10 primary silver miners would be showing huge net income gains in Q3 2012, instead of 6% net income margin to total revenues.

Third, increased future silver supply is not a guarantee that silver will become a risky investment. The biggest problem I have with this sort of forecast is that the current global financial system is disintegrating rapidly, while the orthodox analysis remains the same.

There are literally $trillions of dollars of global capital and investment funds looking for a home. The current state of the world’s bond markets are a complete mess. At some point in time the $trillions of debt disguised as wealth will start to evaporate, thus starting a stampede into safer physical assets.

For the sake of augment, if there was a supposed 100 million oz surplus of silver in 2013, at $40 an ounce we would have the following:

100 million oz silver X $40 = $4 billion

$4 billion is less than 1% of the forecasted Fed purchases of U.S. Treasuries in 2013

$4 billion is 0.02% of the total U.S. Retirement Market (Q3 2012)

$4 billion is 0.005% of the total Global Assets under management (2011)

As we can see, it wouldn’t take much of a shift in the investment funds above to absorb a 100 million ounce silver surplus.

Lastly, to really understand where the price of silver is heading into the future, one has to throw out business-as-usual-orthodox analysis. I believe you have to think outside-the-box to understand how silver will be valued in the future.

It has been investment demand that has been the predominant force in determining the market price of silver since 2004. I believe we are just beginning to see how big silver investment demand will become in the future.

*Post courtesy of Steve St. Angelo, Independent Researcher. Comments are always welcome at

A guide to Physical Gold Investing

Many people have heard about the benefits of gold. They know it is a preferred safe haven. They know people use it to protect against inflation. And they realize that they also should invest a portion of their wealth in bullion. What isn’t as clear is what is involved in building and managing a physical gold portfolio.

Spot prices and costs

Investing in physical gold is often oversimplified, and the misconceptions can begin with pricing.

A spot price by definition is the cost of immediate delivery and is a way to gauge how reasonable the ask or retail price is. The retail price is an amount that includes a mark up, or premium. Unfortunately, some investors only realize that spot prices are not what one pays for gold when they go to make their first purchase.

In addition to the premium, there are numerous other expenses investors should be prepared to pay, including shipping, handling and insurance. There may also be processing fees or small lot fees for small purchases. In some instances, prices may be higher for individuals who choose to pay with a credit card. Then again, gold prices are sometimes lower for those purchasing larger quantities.

Choosing physical gold

Physical gold investors are generally looking for items that are 0.999 fine. Several products fit this description and one of the most preferred is gold coins, such as the South African Krugerrand or the American Gold Eagle.

Another option is gold rounds, which are similar to coins, but are not legal tender. Both gold coins and gold rounds come in various sizes, usually ranging from 1/10 ounce (oz) to 1 oz, though other less common sizes are also available.

Gold bars are also a popular bullion option. They also come in a variety of sizes, and given that the choices can range from a 1-gram bar to 400-oz bar, this category of products can accommodate a wide range of investors.

When the objective is to the get the most metal for the least money, it’s generally best to shop for gold rounds and gold bars, which tend to be cheaper than gold coins of the same weight. The premium for gold coins is higher because of the credibility that they receive from being fabricated by government mints and because of the design detail on them.

Another factor that may need to be considered is the amount to be invested. Large investments may be best made in bars since larger sizes are available. Further, it is often easier to manage large products than it is to manage an array of smaller gold items.

However, physical investors need to also give forethought to occasions when they may want to sell their gold. Large products will require liquidating a larger portion of one’s gold portfolio and such products may be more difficult to sell in some instances. Individuals making ongoing or significant investments may therefore want to consider purchasing gold in various weights.

Where to buy gold

Physical gold can be purchased from government mints, private mints, precious metal dealers and even jewelry stores. Before making a purchase, investors should remember to be careful to avoid numismatic coins or other gold items geared toward collecting and gift giving. These products are for play in a different ball game and are not what the average gold investor needs.

When choosing where to buy gold it is again best to give thought to reselling it. Some businesses that sell gold will also buy it back. Some will even buy gold that they didn’t sell, but may pay lower prices for it than for items they sold.

Furthermore, premiums and fees are not one size fits all. Different sellers may offer the same items at different prices so investors should take the necessary time to find the best deal.

Gold futures market

A futures contract is an agreement to buy or sell gold on a date in the future for a price that is determined when the contract is initiated. The futures market is often referred to as an arena for paper trading. Generally, the bulk of the activity is just that as metal is not actually exchanged and settlements are made in cash.

However, the futures market can also be an arena for purchasing physical gold. That is not to suggest that it is the best source of metal for all investors. Obtaining gold through the futures market requires a large investment and involves a list of additional costs. The process can be complicated, cumbersome and lengthy, which is why this option is considered best for highly experienced market participants.

Gold ETFs and other alternatives

Investors should clearly understand that investing in gold exposure is not the same as purchasing physical metal. The popularity of ETFs underscores how easily people can begin with one objective and end up heavily invested in products of a different nature.

Gold ETFs provide exposure to metal prices by offering investors the opportunity to purchase shares that represent a quantity of gold. Neither that nor the fact that an ETF is physically backed brings an individual any closer to gold ownership. A gold ETF is not a vehicle to acquire gold.

There are, however, some programs designed to allow investors to build gold portfolios without requiring that they take possession of the metal or arrange for its storage and protection. Before investing in such a program, investors should become very familiar with the terms.

For one thing, it is important to ensure that participants are indeed allowed to take possession of their metal. Since it is not uncommon for the rules to include withdrawal minimums, investors should make sure they are comfortable with any such requirements. Other important details to pay attention to are the cited risks and costs as well as the circumstances under which the gold is kept and the process for confirming its existence and taking possession of the metal.

Storing gold

Determining the best storage option involves weighing risks against costs. Paying for secure storage eats into profits from the metal’s gains, so some people choose to store their gold at home or in their office. In theory, that is the riskiest option as it involves the highest potential for loss due to theft or disaster. But in many instances these risks are not substantial enough to justify the cost of other storage options.

Investors who have significant quantities of gold or whose circumstances involve elevated security risks should consider securing the metal in a depository or safe deposit box. Investors who do so should note that rates vary, so bargain hunting can pay off.

Selling gold

Just as buying gold often provides investors with a pricing wake-up call, investors who decide to sell their gold are also sometimes surprised at the prices they receive. That is because the buyback price, or bid, is lower than the asking price. The difference between the two is referred to as the spread and it is a loss that the seller initially bears.

For example, if an investor pays $1,733 for a 1-oz Canadian Maple Leaf and decides to sell it back the same day, the buying price may only be $1,693.

Furthermore, there are usually other costs involved with selling gold, including shipping, insurance and liquidation fees. Some businesses have minimum purchase requirements, and depending upon payment arrangements, it may be necessary for the investor to pay bank wire fees or postage to receive a check.

Individuals who want to sell their gold quickly may consider “we buy gold” businesses as a convenient alternative. While these businesses can serve as a quick source of liquidity, they are usually not the best option. Generally, their underlying business strategy involves making lower-than-average offers.

The reality is that given the spread and the costs associated with acquiring and selling gold, a sharp price move is generally needed to turn a profit. Investors are encouraged to consider building positions in physical gold as a long-term investment.


Securities Disclosure: I, Michelle Smith, do not hold equity interests in any companies mentioned in this article.


Silver extremely low because of paper market — Embry


Sprott Asset Management’s chief investment strategist, John Embry, said Tuesday that with China’s silver demand rising sharply and money printing to infinity being Western central bank policy, silver’s price remains ridiculously low.

In an interview with King World News, the expert added he didn’t see “anything changing the upward course of gold and silver,” which he thinks are going to reach record highs early in 2013.

Silver’s performance since spring 2011 has been dull at best and discouraging at worst. Overall, the commodity has lost 34% of its value since peaking at the very end of April 2011.

But Embry and other experts believe it may not be long before silver begins to shine once again.

Jim Sinclair Dec 20th

You cannot fix the problems of the Western Economic system by breaking the telltale thermometer, which is the price of gold.


There is not one professional who does not know sales in extreme volume at a time of low activity internationally have but one purpose, and that is to reduce the price of gold.


Charts and TA in such a manipulated, manufactured market, as understood by you, are totally useless. This is a move of desperation by the Fed via the gold banks based on the false premise that attacking symptoms without meaningful economic intervention is going to cure the problem.


Gold is going to $3500 and above. The US dollar is headed to .7200 and lower.


We are once again giving away greatness by driving gold into the coffers of Asia at bargain process that a powerful academic bureaucrat has selected. It is just that simple.


Nobody said survival from the onslaught of the demons would be easy, but it will be successful.



All that glitters in 2013 is gold – PwC predicts soaring prices

Gold is the favoured commodity of 2013 with more than 80% of gold executives expecting to see a rise in the price of gold, which will drive increased spending on exploration and merger and acquisitions says the latest PricewaterhouseCoopers (PwC) Gold Price Report released Thursday.

After analyzing the 46 largest Toronto-listed gold mining companies, the firm found that more than 20 of these miners have cash reserves greater than $500 million.

“Gold miners are adamant about proving to the market that they’re once again a good investment – not just for the interim, but for the long-term,” says John Gravelle, Mining Leader for Canada and the Americas, PwC.

“Receiving investors’ approval will involve establishing cost effective management strategies, increasing dividend payments and responsibly investing in production growth – all on the back of a strong gold price.”

Gravelle says there’s been a shift in focus with gold executives concentrating on the bottom line, particularly on the rate of return of per ounce produced.

According to the report, the long-term price of gold used by gold miners has increased 6% from last year and 29% from two years ago to $1,400 per ounce.

Seniors vs. juniors/mid-tiers

When it comes to development and exploration spending, PwC found that 100% of senior gold companies used cash for such activities and they plan to continue to do so next year. Meanwhile, 89% of mid-tier gold companies will use cash for project development and 83% will use cash to fund exploration activity in 2013.

“Larger mining companies may be more watchful with their spending, but they haven’t forgotten about their exploration budgets. Expect increased exploration spending next year by senior and mid-tier miners, and well-funded juniors,” says Gravelle.

Gravelle adds, “While senior gold producers will use their cash to fund recently increased dividend commitments, they will carefully invest in projects that will produce superior rates of return.”

Some senior gold miners may also use their cash for strategic M&A activity.  About 20% of senior gold companies plan to spend their money on acquisition related activities in 2013, while 33% of junior/mid-tier companies expect to spend their cash on acquisitions – this is double the number of companies that spent money on M&A activity in 2012 (14%).

“The equity market for junior gold companies appears to have finally reached the point where there is more upside than downside. Junior gold miners should therefore anticipate increased M&As,” says Gravelle.

China’s gold rush

While Canada tops the list with the most active gold buys in 2012 with 243 transactions worth $4.8 billion, China continues to keep an eye out for gold mines to acquire. In 2011 Chinese buyers acquired four of the top gold deals. This year, they were again responsible for four out of the top 10 gold deals announced.

“Chinese state owned entities remain interested in expanding their gold mining assets outside of China to secure steady access to gold in the future,” says Gravelle.

In the last few years, China has heavily invested in the African mining industry. “There are a number of examples of controlling investments by Chinese and Indian companies into gold, coal, and other commodity projects in Africa. Chinese investors come with significant financial support, facilitating the development of capital intensive mines,” concludes Gravelle.

The full report can be downloaded here.



The Silver Series: Supply and Demand (Part 2)


Click here for Part 1, The History of Silver. Also view Endeavour Silver’s Education Hub for more information.

In 2011, there were 1040.6 million troy oz of silver produced. Of this, 84% was used by industry and the remaining was used as an investment.

Interestingly, traditional uses of silver only account for about a third of silver fabrication. These include jewelry, coins, medals, and silverware. Most silver is actually consumed in over 10,000 modern industrial applications.

The vast majority of silver supply comes from recycling, net government sales, and mine production. In terms of mine production, the majority of silver comes as a by-product of mining other metals. In addition, about half of all mined silver comes from Latin America.

Although all silver ever mined can fit in a 52m cube, the vast majority of silver has been consumed. While the actual amount is unknown, some experts believe as much as 90-95% of all the silver ever mined has been ‘lost’ to landfills. For this reason, there is likely less silver available above ground than gold (98% of all gold is accounted for today).


Visual Capitalist


Wednesday, November 28th via

LBMA: Chairman Says Chinese Gold Allocation to Rise


November 12, 2012 •


Today’s AM fix was USD 1,735.75, EUR 1,365.44, and GBP 1,091.39 per ounce. Friday’s AM fix was USD 1,732.75, EUR 1,362.23, and GBP 1,085.55 per ounce.

Silver is trading at $32.65/oz., €25.80/oz. and £20.65/oz. Platinum is trading at $1,570.00/oz., palladium at $610.60/oz. and rhodium at $1,090/oz.

Gold Price Fixes/Rates Volumes – (Bloomberg)

Gold fell $1.80 or 0.10% in New York on Friday and closed at $1,731.00. Silver hit a low of $32.057 and a high of $32.775 but finished with a gain of 0.46%.

Gold is 0.25% higher this morning after posting the biggest weekly gain (+3.3%) since late August on safe haven buying driven by worries about the US fiscal cliff and economy.

President Obama is meeting with leaders this week and is expected to speak on the subject on Wednesday. $600 billion in tax increases and budget cuts are set to start in January which is making markets nervous and leading to diversification into gold.

Gold and especially silver buying in India has been robust for the Indian Dhanteras festival.

The Times of India reports that high prices have “done little to mar the spirit of buyers who are splurging on the yellow metal like never before. In fact, people were seen queuing up in jewelry shops across the city to buy gold, silver and other precious metals.”

White, not yellow, was the preference this Dhanteras and there was “big buys of silver on strong festive demand.” Dhanteras, the 13th day of the Hindu calendar month of Ashwin, is considered auspicious to buy precious metals.

The London Bullion Market Association (LBMA) gold conference has begun in Hong Kong and already there have been important stories with ramifications for the gold, currency and wider markets.

There is a real possibility of market moving stories coming from the gold industries leading conference.

News that China will inevitably increase central bank purchases of gold for its reserves was highlighted by the LBMA chairman in Hong Kong.


Chairman of the LBMA David Gornall told the conference, “When comparing China to the US, it would seem that in China, gold asset allocation can only go in one direction. The country has only 2% of its reserves in the form of gold compared with the US at 75%.”

The People’s Bank of China hasn’t disclosed any changes to its gold holdings since 2009, when it said they had risen a whopping 76% to 1,054 metric tons. While the US, Germany, Italy and France keep more than 70% of reserves in gold, China’s share is less than 2%.

“Prices have recently been supported by official sector buying,” Gornall said today, without listing any central bank. “Will the gap between the amount of gold held in reserve by the developing markets and that of the developed world close?”

Brazil, South Korea and Russia have all added gold reserves this year data from the International Monetary Fund show. Nations bought 254.2 tons in the first six months and may increase to 500 tons this year, the World Gold Council said in August, exceeding the 456 tons added in 2011.

China has the world’s largest foreign-exchange reserves, totaling $3.29 trillion in September, according to data by Bloomberg.

“Emerging-market economies from the G-20 countries are looking to elevate their gold holdings,” Ashish Bhatia, manager of government affairs at the producer-funded World Gold Council, said in an interview in Hong Kong yesterday. There’s “renewed interest from central banks on the demand side.”

U.S. holdings, the world’s largest, totaled 8,133.5 tons, or 76.6% of reserves, according to the World Gold Council data for this month. Germany, no. 2, had 3,395.5 tons, representing 73.9% of reserves, it said. China’s gold represented 1.8% of its total reserves.

XAU/CNY Currency, 2 Years – (Bloomberg)

The Chairman and President of the Shanghai Gold Exchange told the LBMA gathering that the Shanghai Gold Exchange will launch an interbank market early next month that will initially begin with spot contracts and will gradually offer forward contracts.

All banks trading on the China Foreign Exchange Trading System and National International Funding Centre will eventually be able to trade in the market, including foreign banks, Wang Zhe, chairman and president of the Shanghai Gold Exchange (SGE).

This move may further enable China to overtake India as the world’s biggest owner of gold.

According to the Hong Kong Census Bureau, in September Chinese gross imports soared by 30% reverting to the long-term trendline of 65 tons in gross imports per month, and rising to a total of 69.7 tons. Year to date China has now imported a very large 582 tons of gold, more than the official holdings of India at 558 tons.


According to Reuters reporting from the LBMA, the People’s Bank of China general director, Xie Duo, announced that the central bank has no specific time frame on issuing more gold import licenses to banks, but is keen to further open up the market to the international community.

China’s Agricultural Bank, plans to launch trading of precious metals overseas in the next year or two. China’s Agricultural Bank competes with peers including Industrial and Commercial Bank and China, China Construction Bank, Bank of China and Bank of Communications, among others, in attracting retail investors.

The bank sells physical gold and silver, and offers a gold accumulation plan that allows investors to contribute a small amount of money each month and take physical delivery after a period of time.

XAU/INR Exchange Rate, 2 Years – (Bloomberg)

Marc Faber gave a great presentation to the conference. He warned that a deflationary debt implosion will come. Not a question of when – but problem is knowing when.

He warned that Bernanke can drop as many dollar bills into this room as he likes, but he can’t know what we will do with them. He said that QE may be boosting China rather than the US.

He said that problem is not just Bernanke but the Federal Reserve and that numerous US Fed members make Mr. Bernanke “look like an inflation hawk.”

Faber estimates inflation is now 5%-10% and is much higher than bogus official estimates. With his customary wit, he said that ‘only at the Fed don’t they eat or drive.’

He remains bullish on precious metals and told the conference that he “would rather be long precious metals than industrial commodities.”

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Cross Currency Table – (Bloomberg)


(Bloomberg) – India’s Gold Sales on Dhanteras Seen 30% Higher From Year Ago

Sales of jewelry, coins were “very good” during Dhanteras yesterday, Mohit Kamboj, president of Bombay Bullion Association says by phone.


People accept that gold is the best commodity to invest in regardless of price levels: Kamboj

Demand may climb as much as 15% this quarter as festivals, price decline boost ornaments, coin, bar sales, Rajesh Mehta, chairman of Rajesh Exports Ltd., said on Nov. 9. Dhanteras is considered by the majority Hindu population as an auspicious day to buy the precious metal.

(Bloomberg) – Gold ETF Sales Not Going to Happen on Major Scale, Barrick Says

People see gold as being a percentage of their portfolio and they want to hold it for the long term, Jamie Sokalsky, CEO of Barrick, says in an interview in Hong Kong today.

“It seems to be a core holding,” Sokalsky says. “It’s sticky. It doesn’t have the characteristic of a speculative-type of investment,” Sokalsky says. “I don’t see a huge risk that there’s going to be a selloff in the ETFs and it’s not in a bubble,” Sokalsky says.

(Bloomberg) – Bank of America Sees Silver Averaging $39 an Ounce in 4Q 2013

“Easy monetary policy will be a substantial incentive for investors to increase their precious metal holdings in 2013,” bank says in report dated Nov. 9.

Where Now for China’s Gold Market?

BY  via Resource Investor

November 12, 2012 •


The annual conference of the London Bullion Market Association – the “premier professional forum for the world’s bullion market” as Haywood Cheung of the 100-year old Chinese Gold & Silver Exchange put it this morning – is taking place right now in Hong Kong.

The timing could hardly seem more urgent. Hong Kong has always had great importance to the global precious metals market – particularly since the 1970s, as several speakers noted on Monday, day one of the LBMA’s two-day 2012 conference. But while Hong Kong’s dominance as Asia’s bullion hub may yet be challenged (it beat off “stiff competition” to be this year’s Asian LBMA venue, Cheung writes in the South China Morning Post; Singapore removed general sales tax from gold last month, and now its gleaming new freeport vaults are already booked out, with a second facility being discussed), it’s Hong Kong which remains “the gateway to China”.

And China remains the big prize for the record 700+ delegates from 279 different miners, refiners, banks, dealers and secure logistics providers gathered here from 39 countries.

“China’s appetite for gold has increased rapidly,” explained Albert Cheng, managing director for the Far East at market-development organization the World Gold Council after lunch today, “with gold demand growing by an average 24% per annum since 2007.

“China’s share of global gold demand doubled from 10% in 2007 to 21% in 2011.” And as Cheng’s chart shows above, China in fact overtook world #1 consumer India in the first half of 2012.


None of this happened by accident. Not according to keynote speaker Xie Duo – general director of the People’s Bank of China. Listing China’s #1 position in both gold mining production and now consumer demand, “Gold plays a very important role in the formation of the financial market system,” he explained – repeating what PBoC governor  Zhou Xiaochuan told the LBMA’s 2004 conference in Shanghai, and then reminding the grand ballroom of the plan which Zhou then set out:

#1. Transform gold from a commodity to a financial investment market: The Shanghai Gold Exchange now boasts 33 financial members, and 3 million individual clients. Meantime, more than 30 commercial banks are active end-to-end in gold, offering both physical and paper gold, and acting as “an important channel for Chinese citizens to be involved.”

#2. Transform it from an immediate-delivery to derivative market: Deferred settlement was launched on the Shanghai Gold Exchange in 2004, in a bid to allow greater trading volumes without being hit by shortages . From 2008 to 2010, it accounted for over 60% of the SGE’s volume, rising to 73% in 2011. Compared to other “spot” contracts worldwide, said Xie, it’s now the most heavily traded, with turnover of 6,000 tonnes last year.

#3. Transform China’s trading from a domestic to an international market: Twenty-four hour trading is crucial today, the PBoC general director said. So in 2005 the SGE launched its night-time session, to overlap with the afternoon in London’s physical market and morning trade in New York’s Comex gold futures. Now that period – from 21:00 to 02:30 – accounts for a third of total SGE volume. It’s particularly welcome for those foreign banks which have become members of the exchange, starting with HSBC in 2008.

All this adds up to “big progress in the Chinese gold market,” Xie said. “But there is still a long way to go.” And which way is that? Remember, we are in China.

“Frankly speaking, this success is the result of free choice by the market and the support of policy,” Xie went on. “The government took effective measures to guarantee smooth development.”

In particular, late last year it banned the “illegal” gold market, closing down all trading centers outside the officially recognized and managed Shanghai Gold Exchange and the Shanghai Futures Exchange (SHFE). The concern was that “the gold price rise had led to a surge in domestic demand, and that led to margin-trading businesses using overseas derivatives contracts as the underlying asset. That was very risky because of the leverage. So the government is fighting the underground market.”

Laying out his own “proposal” for how China’s gold market should develop from here, Xie made this concern – the level of risk worn by China’s citizen traders – the basis for 3 steps in his 5-step plan. In fact, together with the parallel aim of “guid[ing] investors to trade on the legitimate platforms”, keeping a tight rein on free-market provision of gold products pretty much sums it up:

  1. Ensure development of mature market
  2. Perfect the laws, rules and relative policies
  3. Perfect the mechanism of risk aversion and investor protection
  4. Strengthen the market system & accelerate innovation
  5. Promote further opening to the outside world

That last point is for “later on”, Xie added, with China’s gold market only “fully opened” to foreign players once the other planks are assured. No, this doesn’t yet cut both ways; the giant ICBC bank gained approval to buy a major investment bank’s operations in Argentina. Yes, the Communist Party may have long considered it “glorious to get rich”, but its brand of capitalism remains very alien to the developed West’s idea of financial fun.

Seeing the trouble that has caused, however, you might forgive China’s leaders for wanting to marry strict regulation with a boom in financial services. Gold investors everywhere might want to thank the bureaucrats’ strong hand, too.

“Is China’s gold investment demand sustainable?” asked Albert Cheng of the China/Asia panel this afternoon. Yes, replied Zheng Zhiguang, general manager of precious metals at ICBC. Because over the next 10 years, there will be “very stable, progressive economic development. So household incomes will continue to grow. It’s in the government’s plan.”

Put another way, and again looking at the question of a “hard landing” for Chinese consumers and therefore their double-digit gold demand growth rate, “Beijing has tremendous means to achieve its growth targets,” said Professor Yu Yongding, a former PBOC member and now at the Institute of World Economics and Politics, just before the conference’s morning break.

Western gold owners should hope he’s right.

Practical Bull David Morgan Battles Precious Metal Bears Video

China will back the yuan with gold: Leeb

Marc Howe | November 8, 2012


Storied investor Stephen Leeb says he is bullish on gold in the long-term due to surging demand from the Middle Kingdom and his belief that China plans to back its official currency with the precious metal.

Speaking to King World News Leeb advised investors to increasing their holdings of gold during any price dips in the near future as the precious metal’s long-term prospects will be bolstered by Chinese demand.

According to Leeb recent data indicates that China has “year-on-year…increased their purchases of gold by a staggering three-fold,” which Leeb believes is part of a concerted effort by China to acquire “something tangible they can trade for commodities.”

Leeb points to the insufficiency of China’s existing infrastructure despite the country’s immense amount of capital spending over the past decade which many believe has led to staggering GDP imbalances, while also noting that China has 1/15th the railway mileage that the US does on a per capita basis.

The renowned investment guru further claims that China plans to revive the gold standard:

China wants gold so they can continue with their plans. They want their currency backed up in gold and they are going to continue to buy it. So gold may weaken, but if it does people should buy it. Once gold starts taking out the all-important $1,800 level, you are not going to have a chance to get into the market. It will not let you in.

Leeb is also bullish on silver, saying that it is the only investment rivaling gold right now and projecting a rise in prices to between $150 and $200.

Chinese eyes sparkle over silver

Updated: 2012-11-06 11:18

By Tom McGregor (


Gold usually enjoys the spotlight in the metals market. The preciousmetal is considered a safe haven to purchase when the globaleconomy faces a slowdown or amidst political turmoil. Meanwhile,silver frequently gets overlooked.

However, demand for silver has gotten more alluring for Chineseinvestors, and some metals experts have forecast a renewed silverboom in the country.

The Beijing Antaike Information Development Co, an informationcenter on the Chinese metals and industrial markets, has recentlyissued its report on silver prices. Analysts forecast that China’s silverdemand could rise by as much as 10 percent in 2013.

“Where’s the demand for silver coming from?” According to Resource Investor news website, “around 33 percent is from jewelry and coins, with the remainder in use for photography, solarand electrical appliances, said Antaike analysts.”

Related: Silver demand expected to jump 10% in 2013

Resource Investors added, “this is a record level for Chinese silver demand – and good newsfor silver investors, since China is the world’s second biggest user of the metal.”

China’s enthusiasm for silver surged to higher levels of excitement. Yang Guohui at HunanYishui Rare & Precious Metals Recycling Co told Bloomberg earlier this month that, “I’m bullishon silver, so I personally have stockpiled three tons at home.”

Some Chinese investors have begun to place their bets on silver rather than with gold. Silver ismuch cheaper and plays a more pivotal role in the economy as essential component elementsfor the manufacturing of electrical appliances.

Retail sales of silver jewelry have risen in popularity too. Shi Heqing, Antaike analyst, disclosedin his report that silver jewelry in the country had jumped 19.3 percent during the first eightmonths as compared with the previous year.

Shi forecasted that silver’s demand could rise to 7,700 metric tons next after witnessing a 6-8percent increase in 2012.

Strong consumer demand for silver jewelry appears sustainable since there’s a growing middleclass in the country and Chinese consumers have larger disposable incomes while shoppersare getting more accustomed to pay for luxury goods.

Additionally, silver is a necessary ingredient for building solar panels. The world has taken astronger interest in alternative sources of energy and show greater appreciation for eco-friendly companies. Solar energy reduces China’s dependence on coal and oil for electricityuse in households, and reduces carbon emissions.

Beijing has set an ambitious goal, shooting for 21 gigawatts of solar-power installation by 2015,which compares with an installation of 2.6 gigawatts in 2011, as disclosed by Bloomberg.

Other factors have sparked rising silver prices. “After the US Fed’s QE1, (December 2008 –March 2010) silver rocketed 53 percent almost twice the jump as gold.” According toBloomberg, “and for QE2, (ending June 2011), silver rose 24 percent. Morgan Stanley predictsthat silver again will return more than gold after QE3 was announced in September.”

The Fed’s quantitative easing was intended to create more American jobs, but the nation’sunemployment rate has continued to hover at around 8 percent or above since monetarypolicies were implemented.

The measures have ignited higher rates of global inflation and boom times for commoditiesmarkets speculators who trade oil, minerals and precious metals.

The Shanghai Gold Exchange has also experienced large spreads between overseas domesticprices due to government taxes and transportation costs. The spread averages $40 perkilogram, but in May 2011 it had risen to over $200/kg.

Global supply of silver has increased as well. “On the supply front mine production increasedfor the ninth consecutive year in 2011 to 761.6 million, a modest increase of 1.4 percent, dueto gains from the by-product of gold, lead and zinc,” according to Angel Broking of Commodities& Currencies news.

Therefore, silver miners have increased supply while selling at higher prices. Yet sooner orlater price parity would return. Rising supply cannot sustain higher prices for the long termdespite rising demand from China. This would be something for silver investors to ponder in theyears ahead.

The views do not necessarily reflect those of China Daily.

Big Money Is Bullish On Gold

October 29, 2012

Big money managers are bullish on gold according to the pros interviewed in Barron’s latest fall survey.  A resounding 69% of big money managers are bullish on gold and 22% forecast that precious metals will be the best performing asset class over the next six to twelve months.

Courtesy Barron’s

The big money is bearish on Federal Reserve strategy with over 60% of poll respondents disapproving of the Fed’s current interest rate policy.  Reinforcing their low opinion of Fed strategy, an overwhelming 78% of the pros believe that additional Fed easing policies will be counter productive.  Summing up the general opinion on Ben Bernanke’s money printing schemes, one money pro said “The Fed is well past the point of interest-rate policy having any meaningful impact on the economy.  Bernanke & Co. now risk damage to both the dollar and the Fed’s own balance sheet.  This is the biggest misallocation of capital in the history of mankind.”

Not surprisingly, the overwhelming consensus (89%) of the big money pros think that treasuries are severely overvalued.  Although the pros don’t see interest rates rising significantly in the next six months, Barron’s notes that even a small increase in interest rates would result in losses to bondholders.  The Fed has manipulated interest rates to such a low level, that few money pros see any value in treasuries.  One money pro noted that without massive security purchases by the Fed, the 10 year bond would currently yield 5%, representing a real yield of 2% plus 3% for inflation.   Absent Fed efforts to suppress free market yields on treasuries, bondholders would be faced with shocking losses as interest rates rose.

The big money bearish sentiment on Bernanke and bullish forecast for gold tells us that the pros don’t expect implementation of sound monetary policy by the Fed any time soon.

The History of Silver (Part 1)




The Silver Series: The History of Silver (Part 1)

For more information on silver, also view Endeavour Silver’s Education Hub

Today, silver has thousands of modern industrial uses and is considered a store of wealth. However, the story of this legendary precious metal begins with its use by ancient civilizations.

Silver has many attributes that made it so valuable to early peoples. It is malleable, ductile, lustrous, resilient, antibacterial, and rare. It was used to purify water and for ornate artwork – but more importantly it was perfectly suited to be a currency.

For over two thousand years, silver was used everywhere from Ancient Greece to the Spanish Empire as currency.

By 1967, all silver coins were removed from circulation in the US. And although no longer used, silver is the most widely used material for coinage in history.

Enjoyed the first installation of the Silver Series?

Check out our completed series on Gold


Visual Capitalist


PPMI Week In Review

October 26, 2012
“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.

The Week in Review
1. It was an extremely volatile week in the stock markets as many companies continued to turn
in disappointing earnings results. Multi-national companies appear to be responsible for the
majority of the lackluster earnings reports, most likely as a result of Europe’s continued troubles
and the ongoing economic slow-down in China.
2. Data on initial claims for unemployment in the US continues to be volatile. Claims dropped
23,000, but once again, due to an upward revision in the previous week’s number the decline
sounds better than the deeper data actually suggests. US Consumer sentiment hit a 5 year
high in October according to the Thomson Reuters/University of Michigan survey. The upcoming
“fiscal cliff” may soon put the brakes on the rebounding US consumer however.
Survey director Richard Curtin said “Unless the legislation is carefully managed by whoever
wins, the debate could produce the same depressing effect on consumer confidence as last
year’s debt ceiling fiasco.”
3. With only 11 days to go until the election in the US, Governor Romney and incumbent president
Obama are both ramping up their last minute pitches to the populace in an attempt to
win their vote. Most polls now show that the race will be extremely tight, leading to great
uncertainty over the outcome. Many companies have been holding back on their spending
plans due to the uncertainty over the election and the upcoming, and as yet unaddressed, “fiscal
cliff”. Chief Executive Officers of more than 80 US corporations added their names to a
statement that was issued to the US Congress calling on them to “Fix the Debt” this week.
4. Spanish unemployment hit a record high of 25% in the third quarter and more layoffs are expected
as the country begins to implement its austerity programs to meet the demands placed
upon them by Brussels. Silvio Peruzzo, an economist at Nomura in London, said “There is a
debate over the optimistic growth outlook for next year by the government, which is given
little credibility. Weaker growth than expected, coupled with austerity, could easily see unemployment
hit 26 percent next year.” Current estimates are that the number of jobless in
Spain now stands at 5.8 million.
5. On Thursday the International Monetary Fund warned that Portugal’s bailout plan now faces
increased risks due to lower than projected tax revenues, resistance to implementing necessary
austerity measures, and a likelihood that Portugal will remain in recession next year.
Unemployment in Portugal is also at record highs. In a staff report the IMF also stated that
Portugal’s national debt “will now peak at a higher level (124 pct of GDP in 2014) and –
should outturns again prove worse than expected – the room for further accommodation of
shortfalls would be limited.”
6. A preliminary report by the International Monetary Fund states that Greek debt will be above
120 percent of GDP in 2020 and that Athens will need additional reforms before any additional
bailout payments can be made. One anonymous Eurozone official said “It is clear that
Greece is off track and there is no chance they will cut the debt to 120 percent of GDP in
2020 as envisaged. It will be rather 136 percent, and this would be under a positive scenario
of a primary budget surplus, a return to economic growth, and privatization. New prior actions
will be needed, on top of the existing 89 [reforms required as a condition of the bailout]”.
Athens has been pushing for a two year extension on their debt repayments and reports
are beginning to appear that the extension may be granted to them.
7. In Asia, fears are growing in Japan that a recession may be imminent. Falling exports, slowing
growth in China as a result of the ongoing dispute between the two nations, and the ongoing
debt crisis in Europe are all acting to slow Japan’s economy.
8. Crude oil took a beating this week, dropping well below the $90 a barrel mark into the mid
$80’s despite threats from Iran to cut oil exports if sanctions continue.
9. The euro saw a volatile week, but on an overall basis it continued to drop against the dollar.
The Japanese yen dropped against the dollar for much of the week but turned around by Friday
and was trending upward.
Friday to Friday Close
October 19th October 26th Net Change
Gold $1724.00 $1712.00 (12.00) – 0.70%
Silver $ 32.10 $ 32.07 (0.03) – 0.09%
Platinum $1613.00 $1540.00 (73.00) – 4.53%
Palladium $ 623.00 $ 595.00 (28.00) – 4.49%
Dow Jones 13343.51 13096.86* (246.65) – 1.85%

Previous year Comparisons
Oct 28th 2011 Oct 26th 2012 Net Change
Gold $1746.00 $1712.00 (34.00) – 1.95%
Silver $ 35.25 $ 32.07 (3.18) – 9.02%
Platinum $1650.00 $1540.00 (110.00) – 6.67%
Palladium $ 665.00 $ 595.00 (70.00) – 10.53%
Dow Jones 12231.11 13096.86* 865.75 + 7.08%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1700/1680/1650 31.70/31.50/31.00
Resistance 1725/1750/1780 32.30/32.50/33.00
Platinum Palladium
Support 1525/1500/1480 580/560/550
Resistance 1560/1580/1600 600/625/640
Volatility should be expected to continue. On Thursday Peter Schiff, head of Euro Pacific Capital,
gave an interview on CNBC in which he said “Gold’s got only one direction to go, and that’s
higher.” When asked whether a much higher price would prevent people from buying the metal,
Schiff said cheap money policies from major central banks would eventually trigger hyperinflation
leading to the collapse of the US dollar and people would have no choice but to buy gold.
Mr. Schiff said “I think gold is going to go up against all currencies… central banks around the
world are being too loose. The dollar index is going to be cut in half at a minimum. If we don’t
change our policies, the dollar index could go much lower.” Mr. Schiff went on to say “One day
we’re going to look back at $1,700 with nostalgia. People are going to be shocked at how inexpensive
gold was when it could be snapped up for such a bargain price.” Germany’s Audit Court
has demanded that the Bundesbank audit its foreign held gold reserves. In a letter to the German
parliament’s budget committee the Bundesbank said “We have been in discussions with the Federal
Reserve Bank of New York about the Bundesbank’s holdings of gold. The discussions have
been fruitful and the Federal Reserve has expressed a commitment to work with the Bundesbank
to explore ways to address the audit observations, consistent with its own security and control
processes and logistical constraints.” As part of the Bundesbank’s agreement with the Audit
Courts, some of Germany’s gold reserves will be repatriated back to Germany, including some of
what is held at the New York Federal Reserve. It seems the Netherlands is also uneasy about its
own gold reserves. Nearly 300 “concerned Netherlands citizens” have demanded “full openness
on the quantity and storage location of the Netherlands’ physical gold, and on the extent and nature
of the gold claims.” Tom Lassing, one of the petition signers, said “The last years have seen
a loss of trust in the financial system and we have been fooled a lot, so I say: Just let the central
banks like DNB [De Nederlandse Bank in Amsterdam] show the gold is really there.” Brazil increased
its gold reserves by 1.7 tons last month for the first time since December 2008. Turkey
and Ukraine also both added to their own gold reserves. Dan Smith, a commodities analyst at
Standard Chartered Plc in London said “We expect strong buying by central banks to continue.
They will be encouraged by lower prices and continued worries about inflation and currency
risks.” According to the World Gold Council, Nations around the world have bought 254.2 tons
of gold in the first half of 2012 and expectations are that they may add close to 500 tons for the
year. As Europe’s sovereign debt crisis continues to unfold, and central banks across the planet
continue to run their fiat currency printing presses at full speed, precious metals are obviously
looking more and more attractive to these same central banks. As fiat currencies devalue amid
the printing spree, more and more investors seem to be following the central banks lead by adding
additional physical precious metals to their own portfolios. After all, if central banks are
adding to their own holdings on each price dip, it only makes sense that they must believe prices
should be heading higher from their current levels. Remember that precious metals should be
viewed as a long-term investment and that the key to profitability through the ownership of
physical precious metals is to actually own the physical products and to hold them for the long
term. Always remember that you should never overextend your ability to maintain ownership of
your precious metals over the long term.
Trading Department – Precious Metals International, Ltd.
This is not a solicitation to purchase or sell. © 2012, Precious Metals International, Ltd.



Don’t Fear a Normal Gold Correction

Via: International Business Times

BY Frank Holmes | October 29 2012 12:52 PM

I spent the latter half of last week at the New Orleans Investment Conference, talking with investors, mining companies and analysts about the state of the gold industry. The annual conference falls at an interesting time of the year, as the price of gold typically corrects in October. In fact, going back 30 years, the historical seasonality of gold has been to rise during September, with a subsequent correction in October.

This fall, gold has followed this historical trend, with the metal climbing throughout the month of September to reach a high of $1,790 an ounce on October 4, only to have a normal correction to $1,701 by October 24. This decline typically comes ahead of the Love Trade fueling demand prior to the Hindu festival of lights, Diwali, which begins in November.

Miners, Show Me the Money!
At the conference, I’ve been discussing the multiple forces squeezing the profits and earnings out of gold miners, causing equity investors to become the Rod Tidwells of the gold world, getting miners energized to “Show me the money!” In my opinion, this phenomenon highlights the importance of selectively choosing among those gold companies that exhibit the best relative growth and momentum characteristics to help obtain outstanding investment results.

My workshop presentation in “The Big Easy” integrated preeminent thinking from multiple gold experts, including research firm CIBC, Gold Fields and the World Gold Council, about how gold companies’ performance has been neither “big” nor “easy.” There’s been a decline in production per share, an 80 percent increase in the average cost per ton of gold over the past six years, and a 21 percent decline in global average grades of gold since 2005. Cash taxes per ounce of production have increased dramatically, and, according to CIBC World Markets, the replacement cost for an ounce of gold is now $1,500, with $1,700 as a sustainable number. Cash operating costs eat away the most, at $700 an ounce, while sustaining capital, construction capital, discovery costs, overhead and taxes eat up $800. At the October 24 gold price of $1,700 an ounce, only $200 is left over as profit, says CIBC.



Gold companies have had their share of challenges in the past. Prior to the huge run-up in gold prices in the late 1970s, forward price-to-cash flow ratios crashed from a high of about 22 times to just under 9 times. Eventually, as gold climbed to its high, multiples spiked back up to 21 times.


Miners also didn’t increase the supply of the precious metal in the 1970s. Back then, there were only a few major players in the gold game. South Africa was a significant gold-producing country, as well as Russia and North America.

However, following years of a gold bull market in the 1970s, production climbed. In fact, Pierre Lassonde, chairman of Franco-Nevada and a living legend in the mining and resource world, says it took seven years for the gold industry to respond after the rise in the price of gold. Ironically, as the price kept falling over the next 20 years, production doubled, says Lassonde.

Beginning in 2000, gold companies have experienced a similar phenomenon, with production remaining flat, even declining in some years. In 2008, mine supply of gold fell to levels not seen since the early 1990s.

Now, after a seven-year lag, the industry has responded as we’re beginning to see some growth in supply.

From 2006 through 2011, production throughout the entire gold industry has increased about 3 percent, says CEO Nick Holland of Gold Fields. During his keynote presentation at the Melbourne Mining Club in July, he indicated that most of the growth was not coming from the major producers. In more mature markets, such as South Africa, Australia, Peru and the U.S., annual production decreased by about 5 million ounces since 2006. Emerging markets on the other hand—China, Colombia, Mexico and Russia—added about 7.6 million ounces over the last six years, Holland says.

Of gold finds that contain at least 2 million ounces of gold, research from the Metals Economics Group (MEG) finds that there have been 99 significant discoveries between 1997 and 2011. Only 14 of the 26 major gold producers made these major gold discoveries. “Today, the major producers and their majority-owned subsidiaries hold 39 percent of the reserves and resources in the 99 significant discoveries made in the past 15 years.” This amounts to less than half of the yellow metal needed to replace the gold companies’ production from 2002 to 2011, says MEG.

According to Lassonde, this is the “elephant in the room,” as new finds have become elusive. The chart below from CIBC shows that there was only one major discovery that was more than 3 million ounces in 2011. Over the past seven years, there have been only nine major discoveries of gold.

Lassonde doesn’t think we have hit “peak gold,” but believes the gold industry needs a “3D seismic” event similar to what occurred in the oil industry before we see considerable finds.

For as many challenges as gold companies face today, they have rarely experienced such a well-diversified consumer base and diversified demand for their product: It’s “the best we could ask for,” says Lassonde.

A newer trend that I’ve discussed is the reemergence of emerging markets central banks as buyers of gold, as they have been “relearning that all paper currencies are suspect,” says Lassonde. Today, he says “cash is trash,” with the value of euro, dollar and yen in question.

He believes this source of demand could be long-lasting and quite significant if you look at emerging market countries’ gold holdings as a percent of total reserves. In 2000, the European Central Bank decided that the right proportion of gold to own should be 15 percent. Pierre says if you apply that figure to the potential gold holdings of the emerging market central banks, they would need to accumulate 17,000 tons of gold. At a purchase of 1,000 tons a year (or about 40 percent of today’s production), these central banks would have to buy gold for the next 17 years!

Another growing source of demand has been from the Fear Trade’s scooping up of gold exchange-traded funds (ETFs). Eight years after the products were launched, 12 gold ETFs and eight other similar investments are valued at around $120 billion and hold 2,500 tons of gold, says Nick Holland.

I believe the Fear Trade will continue buying not only gold but also gold stocks, as the group is driven byHelicopter Ben’s quantitative easing program. In the latest Weldon’s Money Monitor, Greg Weldon discusses the consequences of the Federal Reserve’s debt monetization and liquidity provisions, showing the “somewhat frightening pace” of expansion in money supply.

Weldon says that over the last four years since August 2008, the U.S. Narrow Money Supply, or M1, which is physical money such as coins, currency and deposits, has increased 73 percent, or more than one trillion dollars. This is about as much as it expanded in the previous forty years!

Don’t let the short-term correction fool you into selling your gold and gold stocks. The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, I believe these are the positive dynamics driving higher prices for gold and gold stocks.

U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients.


For more updates on global investing from Frank and the rest of the U.S. Global Investors team, follow us on Twitter at or like us on Facebook at You can also watch exclusive videos on what our research overseas has turned up on our YouTube channel


All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The following security mentioned was held by one or more of U.S. Global Investors Funds as of 9/30/12: Gold Fields Ltd


Copyright U.S. Global Investors Inc.. All rights reserved.

Gold no longer has to be golden: British team finds way to change the precious metal’s hue

  • Process could be used to make banknotes more difficult to forge
  • It can be applied to any metal and change it to any colour


PUBLISHED: 15:01 GMT, 25 October 2012 |

British scientists have managed to upstage King Midas by changing the colour of gold.

While the mythical king turned everything he touched to gold, the researchers transformed the precious metal by altering the way it absorbs or reflects light.

So gold no longer has to be golden – it can be red or green, or a multitude of other hues.

All that glisters: Gold has here been treated to spell out the words 'nano meta' - pictured here through an optical microscopeAll that glisters: Gold has here been treated to spell out the words ‘nano meta’ – pictured here through an optical microscope

The technique involves embossing tiny raised or indented patterns onto the metal’s surface.

It can also be applied to other metals, such as silver and aluminium, and opens the way to colouring metal without coatings or chemically treatments.

Applications may include anything from manufacturing jewellery to making banknotes and documents harder to forge, say the scientists.


Professor Nikolay Zheludev, who leads the University of Southampton team, said: ‘This is the first time the visible colour of metal has been changed in this way.

‘The colours of the objects we see all around us are determined by the way light interacts with those objects. For instance, an object that reflects red light but absorbs other wavelengths will appear red to the human eye.

‘This is the fundamental principle we have exploited in this project. By embossing metals with patterns only around 100 nanometres across, we’ve found that we can control which wavelengths of light the metal absorbs and which it reflects.’

Hi-tech: A researcher uses one of the nano-fabrication machines used in the processHi-tech: A researcher uses one of the nano-fabrication machines used in the process

The shape and height, or depth, of the patterns determines exactly how light behaves when it strikes the metal and what colour is created.

Different parts of the same surface can be made to reflect light differently. A silver ring, for example, could be decorated with a rainbow of multiple colours.

Metal elements with optical properties that would be almost impossible to forge can also be incorporated into documents as security features.

Prof Zheludev added: ‘We’ve filed a patent application to cover our work, and we’re currently talking to a number of organisations about taking our breakthrough towards commercialisation.’

Details of the research have been published in the journals Optics Express and the Journal of Optics.

The scientists received funding from the Engineering and Physical Sciences Research Council as part of a £5million project looking at photonic nanostructures.

Read more:

Silver Demand In China For Wealth Protection to Climb to Record 7,700 Tons


“The Federal Reserve on Wednesday stuck to its plan to keep stimulating US growth until the job market improves even as it acknowledged some parts of the economy were looking a bit better.  In a statement after a two-day meeting, the central bank repeated its vow to keep rates near zero until mid-2015 and its pledge to keep supporting growth while the recovery strengthens.”

That means keeping rates close to zero until mid 2015 and to provide necessary means to support growth while the US economy recovers.

This morning the UK Q3 GDP figures are out at 0800 GMT.

Bloomberg reports that Chinese silver demand is set to climb nearly 10% next year as investors look to preserve their wealth.

Although China as the 2nd largest world economy may be in an economic slump, investors are seeking out silver as a value alternative investment.  Silver climbed 15% this year and ETF’s holding silver have gained 6.5%. Research from Beijing Antaike said that 33% of the country’s demand comes from jewellery and coins, the rest for use in photography, solar panels electrical appliances.

“Many producers and investors have hoarded the precious metal in the form of ingots or unwrought silver.”

After the US Fed’s QE1, (December 2008-March 2010) silver rocketed 53%, almost twice the jump as gold, and for QE2, (ending June 2011) silver rose 24%. Morgan Stanley predicts that silver will again return more than gold after QE3 was announced this September.

Chinese national statistics show that jewellery sales rose 19.3% for the first eight months compared to last year.

“I’m bullish on silver, so I personally have stockpiled 3 tons of it at home,” Yang Guohui, president at Hunan Yishui Rare & Precious Metals Recycling Co., said in Xiamen on Oct. 17. Yishui is based in Yongxing County, Hunan province, where about 20 percent of China’s silver is from, according to Huang Xiaoming, head of the local precious metals management bureau.

The spread that Chinese investors pay to the overseas prices is $40/kilogram which is due to government tax and transportation costs.  In May 2011, this grew to over $200/kilogram on the Shanghai Gold Exchange amid mass speculation.

Chinese solar power may increase demand. The government is growing the number of installations from 2.6 gigawatts in 2011 to 21 gigawatts by 2015.

Metal output from China who is the 3rd leading producer could reach 13,000 tons this year from mining, smelting, refining and recycling, according to Wang Jian, deputy head of the China Nonferrous (1258) Metals Industry Association.



Is Mitt Romney a Threat to the Gold Price?


October 24, 2012 •  Via


As the US presidential election draws closer, many continue to wonder how the outcome will affect financial markets. Among gold market observers, there has been speculation about how the metal might react if Mitt Romney wins. Many have hypothesized that the more conservative Romney might tackle unsustainable government spending, leading to an improved economy and thus a falling gold price. But a close examination of his views reveals that even if Romney is elected, it would be wise to hold on to your bullion.

While there are certain details that the two candidates disagree on, there is a strikingly large amount of common ground. Sadly, none of it seems to be good in regards to the dollar. Both candidates point out the need to reduce the deficit, but provide little detail on exactly how that will be achieved. In response to the coming fiscal cliff they both want to extend tax cuts (Obama for the middle class and Romney across the board). Reducing taxes is good for economic growth, but the effect is negated without a reduction in spending; absent these cuts, government debt will continue to grow.

Romney has been critical of Obama’s fiscal record – and rightly so. But despite his vow to be more fiscally conservative, his budget mentality sounds eerily similar to Obama’s. Romney has called for a stunning $2 trillion increase in military spending yet has failed to identify any significant cuts, and has explicitly pooh-poohed talk of Social Security and Medicare reform. The budget is in dire need of cuts, yet Romney’s policies seem to involve more spending and little cutting.

Much has been made of vice presidential candidate Paul Ryan’s deficit cutting credentials. Many liberals have criticized the “Ryan plan” as being too draconian and aggressive. His plan is already a stretch in that many of the assumptions that it is based on are highly improbable (the inflation and unemployment assumptions are particularly hard to fathom). Even in the event that these projections are achievable, the plan still only hopes to reduce the current rate of increase in spending. Combine this with the $4.5tn in tax cuts that he calls for, and it looks if anything as if deficit spending will increase under a Romney/Ryan administration.

Regardless of whether Obama or Romney wins, the one thing that is certain is that the next president is going to be a neo-Keynesian. Obama’s economic philosophy has been on display for the last four years and leaves little confusion as to what he believes in. And while Romney has been critical of the Fed and made friendly noises in the direction of the sound money element within the Republican Party, there is little evidence that he really grasps the severity of the current economic situation. Would he appoint a Federal Reserve chairman who favored a strong dollar, and was willing to reduce the Fed’s bloated balance sheet? Who was willing to return interest rates to sensible levels that gave savers a real return on their money? It seems awfully hard to imagine.

Even if this unlikely scenario were to pan out, appointing a more aggressive Fed chairman who raised interest rates would encourage short-term economic contraction, and massively increase the federal government’s interest expenses. Is it remotely realistic to assume that a first-term president would support this, and be willing to let a cleansing recession play out on his watch? Not a chance.

Romney also mentioned in a recent debate that if he were elected president, he would label China a currency manipulator on his first day in office. While China does manipulate their currency via their soft peg to the dollar, it’s somewhat hypocritical to accuse them of currency manipulation barely a month after the Fed unveiled its policy of perpetual money printing. More serious is the fact that he appears sanguine about the possibility of a trade war with the nation’s biggest creditor. This will mean continuing efforts to devalue the dollar relative to the yuan, with all the bullish gold price and inflationary implications that entails.

A key reason why gold and other precious metals are such good assets to own today is that the US economy is past the point of no return. There are no solutions that will calmly undo the damage and make everything OK again. If spending levels were cut drastically and quantitative easing brought to a halt, as favored by fiscal conservatives, the economy would contract severely and America would be facing a Greek situation. On the other hand, if we pursue the neo-Keynesian, interventionist policies favored by the establishment and liberal-left, then the country continues along a path to potentially serious inflation.

Human nature, history and current political dynamics point to the latter as being the more likely course of events, though we can but hope that our leaders see the error of their ways. Obama or Romney? As far as gold is concerned, it doesn’t matter. The deficit spending and money printing will continue, and along with them, higher and higher gold prices.

Silver Sales 50 Times Higher Than Gold

Via Wealthwire.

Silver is still headed up.
Moving up slightly to $31.90 on Wednesday morning, the precious metal eyed a statement from the Federal Reserve coming later in the day following a two-day policy meeting.
Investors have been buying up the resource as a safe haven in the sluggish economy. The Fed’s announcement of the third round of easing gave it even more of a boost.
And on Friday, the U.S. Mint announced that boost was more than for gold. Way more.
The data showed gold sales for the year were 525,000 ounces, while silver sales were 2,449,000 ounces just for the month of October. For the whole year, silver sales were 28,244,000 ounces – fifty times higher than gold.
Silver is cheaper than gold but has a tendency to follow the same upward trends, making it an attractive alternative for investors.
In many cases, it’s even been known to outperform gold. And it’s been looking particularly good to investors as of late.
Of course, if this sales pace keeps up, the price of silver is certain to rise. $50 silver is right around the corner.
According to Silver Doctors, silver sales at this pace could hit between 33 and 55 million by the end of the year.
But the U.S. Mint may not be able to keep pace with these sales, particularly if silver surpassed $50 an ounce. It’s silver-to-gold mining ratio is only 9 to 1. The sales ratio is 53.8 to 1.
Still, it appears to be headed straight for that price. And when this supply squeeze does come, it will become even more valuable. Those who managed to get their hands on it in the early stages will be the lucky ones.

Has QE3 fatigue set in to the gold market?


GRONINGEN (MINEWEB) –  The current nervousness and fatigue among gold investors is understandable but, for both UBS and Standard Bank there are reasons to still be bullish.

After eight weeks of consecutive increases, gold’s net speculative length fell last week. A decline, Standard Bank attributes to “Investor uncertainty over the ability of QE3 to support prices and/or the longevity of Fed’s open-ended commitment to easing.”

Indeed, the bank wrote in yesterday’s daily commodities note that this uncertainty is “weighing on gold”, adding that it expects this week’s data from the CFTC to show further weakening, although, it cautioned, “we should see some stability as the gold price moves towards $1,700.”

While the bank believes that the $1,700 level should hold, it says there is likely to be resistance to higher prices between $1,741 and $1,756.

“We were not keen buyers of gold at $1,780; however, we would be at $1,700. At $1,780, we estimated that gold was pricing in too much QE already, even when compared to its behaviour during previous rounds of easing by the Fed. Should gold drop to $1,700, it would likely reflect only two months of QE from the Fed – a level we deem reasonable,” the bank writes in a commodities strategy note out on Friday.

But, it adds, “the fact that the gold physical market in Asia has improved markedly from three weeks ago provides us with some comfort that there could be better support for gold going forward.”

It does not believe that the physical market will push prices higher, in fact, buying interest remains historically weak for this time of year but, it says, prices closer to the $1,700 level might entice “much greater buying from the physical market”.

In its latest daily commodities note, UBS’s Edel Tully writes that within the gold market, nervousness and fatigue among investors is understandable “especially after gold’s tamer-than-expected response to QE3 and the generally weak price action after a poor attempt to reach the key $1800 mark in early October.”

Gold’s performance of late, UBS writes has been a function of it having to compete with other assets for funds post QE3. Indeed, it writes, “It makes perfect sense that gold would outperform other risk assets in anticipation of QE, but underperform during the aftermath…On the surface, a global economic recovery would offer downside risks for gold prices inasmuch as the potential for policy normalisation starts creeping into market expectations.”

But, while both UBS and Standard Bank are not surprised that gold has been performing poorly this month, neither is bearish on the metal.

UBS says that while there is indeed a possibility of a faster pace for economic growth, the improvement is unlikely to be considered fast enough to warrant policy normalisation just yet.

“Our economists believe that global growth, production and trade are bottoming out, but they also expect economic activity going forward to be restrained by a combination of de-leveraging in developed markets, decelerating growth in some emerging markets, and overall policy uncertainty.”

Adding that, such an outcome reinforces the view that the current accommodative environment is likely to remain in place. “Further, the market appears to be underestimating the benefits of QE3 on gold and the Fed’s overall easing bias, particularly the potential for QE4 to replace ‘Operation Twist’ when the latter expires at the end of the year.”

The second reason UBS remains bullish on the yellow metal is its strong positive correlation with risk.

This correlation means that “an improvement in risk appetite on the back of the tentative turnaround in global economic data would in fact benefit the metal.”

As Tully points out, “There are two stories at play here – a short-term case of frustrated investors, disappointed that gold hasn’t rewarded them with a +$1800 price tag, but against this is another player, with a more strategic view who is either 1) not willing to sell into current weakness and/or 2) using the pullback to add to length. The tug-of-war between the latter and the former in the short term probably means some more downside, but ultimately higher gold prices are only a matter of time away.”


Via Mineweb

PPMI Week in Review

October 19, 2012
“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.
The Week in Review
1. A series of disappointing earnings results, including a sizeable miss by tech giant Google,
worked to apply the brakes to the US stock markets this week.
2. Initial claims for unemployment in the US spiked higher this week by much more than
economists expected, perhaps justifying claims that last week’s drop to four year lows was a
result of manipulation of the data. The Labor Department is warning that data released over
the last two weeks appeared to be distorted by a change in the way one state was reporting its
claim figures.
3. The Philadelphia Fed manufacturing index, a measure of regional manufacturing activity,
rose in October for the first time following five months of negative readings. The index
moved to 5.7, compared to September’s -1.9. Any reading above zero indicates that manufacturing
activity is expanding. The sovereign debt issues that continue to plague Europe and
a sluggish economy in China may continue to put a drag on US manufacturing as a result of
declining exports.
4. Election season is in full swing with only 18 days until the US elections. Polls show a tight
race between Governor Romney and president Obama and the lack of a clear front-runner
continues to be a drag on markets as many investors appear to be taking the “wait and see”
approach. The US Congress still appears to be at a standstill as far as addressing the upcoming
“fiscal cliff” goes. Details continue to emerge on what the full effect of allowing the tax
cuts and other legislation to expire would mean to the US economy as well as the global financial
system as a whole. No matter which candidate wins the election, it may now be too
late for Congress to act to prevent the damage going over the “fiscal cliff” would cause.

5. Spain continues to hold out on formally asking for a bailout which would trigger bond buying
by the European Central Bank. Spanish Prime Minister Mariano Rajoy said, regarding
whether Spain would finally make the request, “The decision is not taken yet. What is important
is that if I need to take it, I will take it.” A finance ministers’ meeting that is due to
take place on November 12 may be the next potential window for deciding the fate of any
bailout for Spain, as well as further decision on Greece, which continues to struggle to implement
the conditions of its last bailout agreement.
6. US existing home sales dropped in September and there is another potential hammer blow to
the US housing industry on the horizon. Short sales, where banks agree to sell the home for
less than the outstanding value of the mortgage, have been outpacing foreclosures and helping
move the “shadow inventory” of distressed homes through the market. If the “fiscal
cliff” goes unaddressed, as nearly everyone suspects it will, there is a piece of legislation that
will expire along with it: the Mortgage Forgiveness Debt Relief Act and Debt Cancellation.
That Act made the amount of debt forgiveness from a short sale non-taxable. Expiration of
that Act means that short sales could come to a sudden halt as the tax burden on the seller
would simply be too great.
7. A group of hackers purportedly backed by Iran has claimed that they are responsible for the
recent series of “Denial of Service” type cyber-attacks against major banking institutions.
The group has stated that the attacks are in response to the anti-Islam film that has been used
as an excuse for so much violence in the Middle East and claims that the attacks will continue
until the film is removed from the Internet as a whole.
8. In a relatively quiet week, at least in regards to news out of the Middle East, crude oil maintained
its lower $90 a barrel price. Economic data out of China that met market expectations
helped support the price on hopes that demand in China might be better than previous projections.
9. The euro was climbing against the dollar during the first part of the week, but reversed
course Thursday and began dropping once again. The Japanese yen began dropping against
the dollar as Asia opened in the early morning hours Wednesday and continued its drop for
the rest of the week.
Friday to Friday Close
October 12th October 19th Net Change
Gold $1759.00 $1724.00 (35.00) – 1.99%
Silver $ 33.66 $ 32.10 (1.56) – 4.63%
Platinum $1655.00 $1613.00 (42.00) – 2.54%
Palladium $ 639.00 $ 623.00 (16.00) – 2.50%
Dow Jones 13328.85 13321.76* (7.09) – 0.05%

Previous year Comparisons
Oct 21st 2011 Oct 19th 2012 Net Change
Gold $1635.00 $1724.00 89.00 + 5.44%
Silver $ 31.20 $ 32.10 0.90 + 2.88%
Platinum $1500.00 $1613.00 113.00 + 7.53%
Palladium $ 618.00 $ 623.00 5.00 + 0.81%
Dow Jones 11808.79 13321.76* 1512.97 + 12.81%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1710/1700/1680 31.90/31.30/31.00
Resistance 1750/1775/1800 33.00/33.35/33.50
Platinum Palladium
Support 1600/1570/1550 620/600/580
Resistance 1640/1670/1700 640/660/700

Volatility should be expected to continue. The current selloff taking place in the stock markets
may result in an excellent buying opportunity in precious metals as the usual suspects use the
selloff as a smokescreen to manipulate the metals prices further. Egon von Greyerz, founder and
managing partner at Matterhorn Asset Management in Switzerland, said in an interview with
King World News this week “It’s ridiculous, Eric, what is happening now. There is an incredible
amount of intervention and manipulation (in the gold and silver markets). I know you’ve had
these superb interviews with the “London Trader”, but just looking at the screen, at every important
level, the gold and silver prices are being attacked and there is selling taking place. Every
time COMEX opens, it’s the same thing – you see selling. So there is clearly short-term manipulation,
but it makes no difference whatsoever. If you look at the gold price, in combination with
world liquidity, you see that gold is going up hand-in-hand with increased liquidity. That will
continue, Eric, and since the money printing will accelerate, it’s very clear the gold price will
also accelerate.” In a separate interview with King World News, John Embry of Sprott Asset
Management listed two factors at work on precious metals prices right now: “[Speaking of the
massive short position currently held by the bullion banks] They [the commercial bullion banks],
will move heaven and earth to protect this short position. As a result, I think we are going to battle
here. But the great news is, unlike the old days when they could really smash gold, this
physical demand is building up underneath the market, so the downside has been contained.”
Mr. Embry continued, saying “The other point here is the US election is coming up very shortly,
and the effort is to hold things up and make them look way better than they really are. The economic
numbers are being falsified. I think all markets of any significance are being rigged, but
none more so than gold. If gold exploded in price that would mean that everything else they are
reporting is exposed as being a lie. But once the election is behind us, I think there is going to be
a big move in gold. I would be very surprised if we aren’t comfortably at record highs well before
the year ends.” Europe continues to struggle under its increasing debt burden and there is no
apparent solution in sight. Spain continues to hold out on asking for an official bailout from the
EU, and without that formal request, no aid in the form of bond purchases by the ECB will be
forthcoming. In the US, there is a feeling that the tipping point has been reached in the “fiscal
cliff” debate. President Obama announced this week that he would veto any attempt to extend
the tax breaks and prevent the automatic budget cuts that are set to automatically kick in if his
demands for increasing taxes on the wealthy are not met. Even if Governor Romney manages to
win the election, he would not take office until January and there is little evidence that the animosity
being shown between the US Congress and the current administration would change as a
result of a Romney victory. Those wise investors who have not over-extended their ability to
remain in this market will easily weather this current round of precious metals price manipulation,
using it as an opportunity to purchase additional product for their portfolios since the longterm
outlook for precious metals remains unchanged. Remember that precious metals should be
viewed as a long-term investment and that the key to profitability through the ownership of
physical precious metals is to actually own the physical products and to hold them for the long
term. Always remember that you should never overextend your ability to maintain ownership of
your precious metals over the long term.

10 nations that control the world’s gold


It is now more obvious than ever that gold is becoming the new global reserve currency. Continuous and aggressive central-bank actions from the United States and Europe are driving the demand for gold. Investors have not yet seen any of the real hyperinflationary pressures that seem likely down the road.

Gold’s substantial rise in price should speak for itself. In dollar terms, gold returned 11.1% in the third quarter and was up by 16% year-to-date through the end of the quarter. The World Gold Council said that gold has a low stock-market correlation through time. That was not the case in the third quarter. Gold still outperformed almost all the major equity markets in the largest gold-holding nations in 2012.

24/7 Wall St. analyzed how the gold rankings compare to each major nation’s gross domestic product and how those figures compare to the top 10 holders of gold. What is surprising in some cases is how countries with the largest GDP are not necessarily the largest holders of gold. Two small nations, the Netherlands and Switzerland, are major holders of gold. Under the terms of the Central Bank Gold Agreement among major European states, many countries are supposed to be selling gold but are not.

The United Kingdom’s $2.43 trillion in GDP is the world’s seventh largest, but its gold holdings of 310.3 tonnes rank only 17th in the world and account for only 15.9% of its total foreign reserves. Does the old term “pound sterling” mean that the British banks really care more about silver? Another standout exception is Brazil, which has tiny gold reserves compared with its GDP. Its $2.5 trillion in GDP ranks sixth in the world, yet it holds only 33.6 tonnes of gold, or 0.5% of foreign reserves. Brazil ranks a surprising 52nd in the world among gold holders.

The International Monetary Fund is the third-largest official holder of gold, with more than 2,814 tonnes. The European Central Bank ranks right behind India, with 502.1 tonnes and 32.3% of its total foreign reserves held in gold. Central bank buying of gold was recently undertaken by Russia, Turkey, Ukraine and the Kyrgyz Republic. Turkey went as far as raising the gold reserve requirements for its commercial banks.

Crash memories not about losses

MarketWatch senior columnist Chuck Jaffe joins Markets Hub to explain why memories of the crash of 1987 are still so vivid, but not the losses.

The World Gold Council report shows low borrowing costs and the support of financial markets spur gold accumulation. Gold is no longer just an inflation hedge; it is the key protection against a global race to devalue currencies, even if consumer prices are somewhat stable. Bonds pay historically low rates and stock market volatility has spooked many investors, so gold is becoming the true safe haven.

Major central banks are growing their balance sheets by purchasing trillions of dollars in paper assets. The World Gold Council said that research showed that a 1% change in money supply, six months prior, in the United States, Europe, India and Turkey tends to increase the price of gold by 0.9%, 0.5%, 0.7% and 0.05%, respectively. The Council also said that inflation is still several years off and many central banks have been more worried about deflation. Investors would be well advised to heed a warning from bond king Bill Gross, who told global investors to have exposure to hard assets, which will rise in value with inflation.

24/7 Wall St. has listed the 10 nations with the largest gold reserves, along with the percentage of total foreign reserves held in gold, each nation’s 2011 GDP and how it ranks in the world, and the local stock market performance. We have added analysis about how the potential unraveling of the euro could play into the future buying or selling of gold by European nations. For nations outside Europe, we have provided some historical context and predicted the path that their central banks are likely to follow in the years ahead.

10. India

  • Gold reserves: 557.7 tonnes
  • Percentage of total foreign reserves: 10%
  • GDP: $1.82 trillion (10th highest)
  • Stock performance: Bombay BSE up 7.6% in Q3, up 21% YTD

While India ranks 11th on the World Gold Council list, it is 10th if you remove the International Monetary Fund. India has been a steady buyer of gold over time. That is likely to continue as the government needs to support its currency, even if the economy is volatile. India became an aggressive buyer in 2009, when it spent almost $7 billion to buy 200 tonnes of gold, which the IMF sold to raise capital. For the economy to support 1.2 billion people, the central bank must hold gold and hard assets. The Indian population is a large consumer of gold for jewelry and there is high demand for the precious metal to store wealth. India will thus continue to buy gold in the years ahead.

9. Netherlands

  • Gold reserves: 612.5 tonnes
  • Percentage of total foreign reserves: 59.8%
  • GDP: $838 billion (17th highest)
  • Stock performance: AEX up 5.1% in Q3, up 3.4% YTD

It is surprising that the Netherlands has so much gold. But it is also important to recall that the country is a former colonial power and has a long history as a very wealthy nation. Its population of 16.7 million ranks 63rd among all nations, while its GDP is the 17th largest in the world. As with some European nations, the Netherlands did not sell all the gold provided for by the Central Bank Gold Agreement. Now that the Netherlands is under some of the same pressure as many other European nations, it is unlikely to be a big seller of gold. It may need that gold to protect itself if the euro comes unraveled.

8. Japan

  • Gold reserves: 765.2 tonnes
  • Percentage of total foreign reserves: 3.2%
  • GDP: $5.86 trillion (3rd highest)
  • Stock performance: Nikkei 225 fell 1.5% in Q3, up 4.6% YTD

Japan has to hold large amounts of gold. The Bank of Japan has held interest rates at almost zero for about two decades. It recently sold gold so that it could pump about $200 billion worth of yen into the economy as stimulus after the tsunami and nuclear disaster threatened to send Japan back into recession. At some point in the future, Japan may need to buy that gold back to support its large monetary base. Until then, the yen remains one of the stronger global currencies, which makes exports more expensive. Japan’s population of 127 million is aging rapidly and birthrates are extremely low.

7. Russia

  • Gold reserves: 936.7 tonnes
  • Percentage of total foreign reserves: 9.6%
  • GDP: $1.85 trillion (9th highest)
  • Stock performance: MICEX down near 4% in Q3, negative YTD

Russia continues to buy gold as its global economic ambitions grow. A previous 24/7 Wall St. analysis showed that Russia’s reserves were 784 tonnes in early 2011 after it bought 120 tonnes in the first 10 months of 2010, more than 100 tonnes in 2009 and close to 70 tonnes in 2007. The World Gold Council reported that Russia has added more gold, so that reserves likely will rise yet again. Russia is extremely wealthy in natural resources, and President Vladimir Putin and his allies want it to become more of an economic superpower. With a population of 142 million and Russia’s GDP of $1.85 trillion, its holdings of gold are likely to surge.

6. Switzerland

  • Gold reserves: 1,040.1 tonnes
  • Percentage of total foreign reserves: 11.5%
  • GDP: $660 billion (19th highest)
  • Stock performance: Swiss Market up 7% in Q3, up 9.4% YTD

Switzerland is the world’s private banker and so must be a top holder of gold. Still, it is amazing to consider that its population is barely 7.9 million and it ranks 95th in the world for population. Also, its dollar-adjusted GDP of $660 billion ranks only 19th. Switzerland sold gold from 2003 to 2008, right before the huge run up in gold prices. If Switzerland needs to devalue its currency to remain competitive, it can always sell more gold. Unless global banking disappears entirely, the Swiss will remain one of the largest holders of gold in the generations ahead.

5. China

  • Gold reserves: 1,054.1 tonnes
  • Percentage of total foreign reserves: 1.7%
  • GDP: $7.3 trillion (2nd largest)
  • Stock performance: Shanghai Composite 6.6% lower in Q3, 5.4% lower YTD

China’s economy has stumbled to the point that its official growth rate of 7.4% in the third quarter may feel like a recession. China has the ambition of becoming the largest economy in the world. It already is considered the world’s manufacturer. China must have hard assets along with its U.S. Treasury bondholdings to keep its currency pegged to the U.S. dollar. It has the world’s largest population, with more than 1.3 billion people, yet its GDP of almost $7.3 trillion is still not even half that of the United States. Whenever the yuan truly floats, China will have to have more hard assets and more transparent economic readings to support it. China added some 454 tonnes of gold between 2003 and 2009. When it finally adjusts its official gold holdings in the coming months, they are likely to be higher again.

4. France

  • Gold reserves: 2,435.4 tonnes
  • Percentage of total foreign reserves: 71.6%
  • GDP: $2.77 trillion (5th largest)
  • Stock performance: CAC rose 4.9% in Q3, up 6.1% YTD

France finds itself in an interesting position. Socialist president Francois Hollande is on a quest against many of the austerity measures implemented by his predecessor, Nicolas Sarkozy. France does not want to lose its “second-best economy” status in the euro zone, behind Germany. It will have to pay for the new economic measures and this poses a particular problem because the extremely wealthy, who are being targeted for high taxes, may continue to leave the country. France may ultimately need to sell gold. Although it is part of the Central Bank Gold Agreement as a gold seller, it may need a cushion in case the euro faces an outright breakup.

3. Italy

  • Gold reserves: 2,451.8 tonnes
  • Percentage of total foreign reserves: 72%
  • GDP: $2.2 trillion (8th largest)
  • Stock performance: Borsa Italiana MIB rose 5.7% in Q3, flat YTD

Italy is a financially troubled nation, and it is truly too big to bail out. By many measures it is the greatest economic risk to the rest of Europe and the balance of the major world economies. Italy’s 61 million population ranks 23rd in the world, but its dollar-adjusted GDP of almost $2.2 trillion ranks it as the 8th largest economy. The Italian government was also part of the Central Bank Gold Agreement, but there is a real conundrum now. Italy could sell gold to raise capital, but then it would lose its cushion if the euro unravels. It is almost impossible to imagine that Italy would be a buyer of gold because it has too many pensioners and benefits to pay for as is.

2. Germany

  • Gold reserves: 3,395.5 tonnes
  • Percentage of total foreign reserves: 72.4% of foreign reserves
  • GDP: $3.6 trillion (4th largest)
  • Stock performance: DAX rose 12.4% in Q3, up 22.3% YTD

Despite forced gold sales from ECB nations in the past, Germany likely has to maintain its underlying asset base as it is the anchor of the euro. The euro after all, is a watered-down version of the deutsche mark. Germany’s population of 81 million ranks 16th in the world, but its $3.6 trillion adjusted GDP ranks fourth. What could happen if Germany started accelerated gold sales to buy up even more paper assets from the PIIGS (Portugal, Italy, Ireland, Greece and Spain) and more paper assets of their banks? The initial reaction might be positive for the euro-zone economies. However, Angela Merkel and her successors might be left with high inflation without hard assets as a cushion. Germany is supposed to be a gold seller under the Central Bank Gold Agreement, but it is likely to hold what it can as a buffer in case the euro breaks up or in case it needs to raise quick bailout cash for the PIIGS.

1. United States

  • Gold reserves: 8,133.5 tonnes
  • Percentage of total foreign reserves: 75.4%
  • GDP: $15 trillion in GDP (the largest)
  • Stock performance: S&P 500 up 5.7% in Q3, up 14.5% YTD

It should be no surprise that the U.S. is the largest holder of gold as the dollar is the global reserve currency and the U.S. has by far the largest GDP of any nation. The growth of the Federal Reserve’s balance sheet can only be sustained without dire consequences if it is backed by hard assets like gold. Imagine if the conspiracy theorists are right and that Fort Knox and other repositories do not have gold in them. It is this gold, the massive U.S. GDP and America’s underlying wealth of natural resources that keep the dollar as the world’s reserve currency. If the World Gold Council is right in its assessments of inflation and gold, then the U.S. is likely to hold its reserve currency status for quite some time, even if credit rating agencies continue to downgrade the country.

Gold to $10,000 – Never say never

Long term gold price targets get more and more optimistic with some respected analysts seeing $10,000 gold ahead – this may seem unlikely but only a few years ago $1,000 gold seemed out of sight!

Author: Lawrence Williams
Posted: Thursday , 18 Oct 2012  via


A remark on another website by Mark O’Byrne caught my eye –“Longer term, respected analysts are calling for gold prices above $5,000/oz and much higher forecasted prices such as between $5,000 and $10,000 per ounce are not raising eyebrows as much as they have in the past.” Indeed with even many of the ultra-conservative bank and fund analysts suggesting that gold will reach $2,000 or even higher within the next year, or even the next few months, certainly $5,000 or even $10,000 should not seem out of sight in some unspecified timeframe.” 

If one tracks the price of gold during its current bull run it has risen around 600 percent in 13 years – at the same pace of increase it could thus reach $12,250 in another 13 years – or by some time in 2025! Thus is it ridiculous to suggest that this huge valuation on an ounce of gold is achievable? Never say never! When I started managing and writing for Mineweb back in 2006 even $1,000 looked completely out of sight and people like Rob McEwen who then were predicting that level were perhaps considered at the extreme end of the spectrum. Yet within 3 years the $1,000 level was achieved and now it is a further 75% higher than that a further three years on. Nowadays, McEwen is predicting $5,000 gold – should that still be considered over extreme?

The big question obviously is how long the bull run will continue. There are those who reckon that gold is in a bubble – perhaps it is. But bubbles can increase enormously in size before they pop and gold could still be in the early stages of this, and unlike a bubble it is never seriously likely to return to the starting point of its huge rise. The gold price has expanded in a direct relationship with money supply growth (which suggests that it is, in reality, only moving counter to the decline in currency values caused by currency printing.

Take Ben Bernake’s famous quote of 2002 “Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

Even though he may have seemed to have been against it at the time, that is precisely what Bernanke has done. He has effectively devalued the dollar through QEs 1-3 so it cannot be seen as surprising to anyone that the gold price has risen against the dollar – or conversely that the dollar has fallen in value against gold. Bernanke is a good economist and he sees the only way of getting the U.S. out of its enormous debt crisis, and ward off deflation, is ultimately to inflate its way out of the problem in a controlled manner – however long it takes and regardless of any unintended consequences – or unknown unknowns as Donald Rumsfeld would have called them. The real question is can he continue to manage the downgrading of the dollar without the U.S. economy descending into hyperinflation, while at the same time pretending he isn’t doing that to try and preserve some semblance of value for the greenback vis a vis the other major currencies?

Perhaps luckily for Bernanke, those Central Banks controlling most of the currencies against which the dollar is valued on the markets have followed suit and are doing precisely the same thing. So the dollar index is not falling against its peers, but the dollar has been falling against gold, perhaps the one monetary unit out there which can show the true picture (in theory as long as the gold price in dollars is itself not being manipulated to make things look better than they actually are).

Governments don’t like gold because it shows up their economic policies for what they are and defines the devaluations of their currencies in a way no other measure can. There are those who believe that governments, central banks (however independent they may be in theory) and their banking allies combine to suppress the gold price to muddy the waters in this respect – and, as we have pointed out here given that governments manipulate currency parities to suit their economies (note the Chinese, Swiss and Japanese among others), if gold is viewed as a currency then there’s no reason why this should not be manipulated to the presumed advantage of the Central Banks too.

But there’s only so much governments can do – hence the seemingly inexorable rise in the gold price over the past decade – a rise that is likely to continue in the years ahead – so again $10,000 gold has to remain a possibility however unlikely this may seem at the moment – not in

$2,300 Gold, Here We Come

By Jeff Clark, Senior Precious Metals Analyst

While many of us at Casey Research don’t like making price predictions, and certainly ones accompanied by a specific date, it’s hard to ignore the correlation between the US monetary base and the gold price.

That correlation says we’ll see $2,300 gold by January 2014.

There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let’s zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008.

Here’s the performance of the gold price compared to the expansion of the monetary base since January 2008.

(Click on image to enlarge)

You can see the trends are very similar. In fact, the correlation coefficient is an incredible +0.94.

Since the Fed has declared “QEternity,” it’s logical to conclude that this expansion of the monetary base will continue. If it grows at the same pace through January 2014, there is a high likelihood the gold price will reach $2,300 at that point. That’s roughly a 30% rise within 15 months.

And by year-end 2014, gold could easily be averaging $2,500 an ounce. That’s 41% above current prices.

Some may argue that there’s no law saying this correlation must continue. That’s true. And maybe the Fed doesn’t print till 2014. That’s possible.

But it’s not just the US central bank that’s printing money…

  • European Central Bank (ECB) President Mario Draghi has declared that it will buy unlimited quantities of European sovereign debt.
  • Japan’s central bank is expanding its current purchase program by around 10 trillion yen ($126 billion) to 80 trillion yen.
  • The Chinese, British, and Swiss are all adding to their balance sheets.

The largest economies of the world are all grossly devaluing their currencies. This will not be consequence-free. Gold and silver will be direct beneficiaries – as will mining companies – starting with rising prices.

There are other consequences, both good and bad, of gold hitting $2,000 and not stopping there. We think investors should be prepared for the following:

  • Tight supply. As the price climbs and attracts more investors, getting your hands on bullion may become increasingly difficult. Delivery delays may become commonplace. Those who haven’t purchased a sufficient amount will have to wait in line, either figuratively or literally.
  • Rising premiums. A natural consequence of tight supply is higher commissions. They won’t stay at current levels indefinitely. Premiums doubled and more in early 2009, and mark-ups for silver Eagles and Maple Leafs neared a whopping 100%.
  • Swelling profits for the producers. If margins on gold production average $1,000 per ounce now, what will earnings be like when they average $1,500? At $2,000? Gold can rise much faster than operating costs, so this could happen. Imagine what this could do to dividend payouts, especially those tied to the gold price and/or earnings.
  • Tipping point for a mania. There will be an inflection point where the masses enter this market. The average investor won’t want to be left behind. Will that happen when gold hits $2,000? $2,500?

The message from these likely outcomes is to continue accumulating gold – or to start without delay. Waiting will have consequences of its own.

People say that there’s nothing certain in life except death and taxes. In my view, $2,300 gold is a close second.

PPMI Weekly In Review

“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.


The Week in Review
1. US Initial claims for unemployment benefits came in at a four year low this week, falling in
line with last Friday’s surprisingly upbeat August Payroll’s report. Dow Jones reported that
“A labor Department economist said one large state didn’t report additional quarterly figures
as expected, accounting for a substantial part of the decrease.” Conspiracy theorists are having
a field day with accusations of manipulation of the jobs data for political purposes. A
dramatic improvement in the jobs data would be a serious boost to the Obama campaign’s
bid for re-election.
2. The Thomson Reuters/University of Michigan’s initial reading on US Consumer sentiment is
at its highest level in five years, coming in well above the initial forecasts by economists.
The boost appears to have come from the latest jobs data which showed a drop in the unemployment
rate and a more positive outlook on the jobs market.
3. Producer prices in the US rose more than expected in September, driven by higher energy
prices. It is expected that the price increase will not be passed on to customers which means
inflation should remain under the US Federal Reserve’s 2% target for the time being, adding
support for the continuation of the latest round of Quantitative Easing. If the cost increases
continue unabated, producers may have no choice but to pass them on to consumers.
4. The US Congress continues to do nothing about the approaching “fiscal cliff” and is now being
chastised by the International Monetary Fund’s deputy managing director, Zhu Min. Mr.
Min said “It’s very clear that if the whole tax package moves off the table it will immediately
bring the U.S. into a recession, which will have a huge negative impact on the whole world.”

5. On Wednesday, Standard & Poor’s cut Spain’s credit rating to BBB-minus, just one notch
above junk status, with a negative outlook. In their statement, S&P said “In our view, the
capacity of Spain’s political institutions (both domestic and multilateral) to deal with the severe
challenges posed by the current economic and financial crisis is declining.” S&P is
forecasting a recession of 1.5% in 2013 for Spain and said that “growth prospects look fairly
dim.” Analysts seized on the ratings cut as a potential factor that may finally push Spain to
make a formal request for a bailout to the EU.
6. Geopolitical tensions between Syria and Turkey continue to escalate, with Turkey intercepting
a Syrian Air passenger plane and forcing it to land in Turkey this week. Turkey’s Prime
Minister Recep Tayyyip Erdogan said the plane was carrying munitions and equipment that
was bound for the Syrian forces loyal to Syrian President Bashar Assad. The plane originated
its flight in Russia, and the incident has increased the friction between Turkey and Russia
as a result. Turkish officials removed some of the plane’s cargo and then allowed it to
continue to Damascus after several hours with all passengers and crew aboard.
7. The International Monetary Fund cut its growth forecast for China and India this week and
predicted “less buoyant” growth in the near to medium term for Asia as a whole, citing concerns
that the Eurozone debt crisis might continue to expand and that the looming “fiscal
cliff” issue in the US going unresolved as the main risks to growth in Asia.
8. On Tuesday, the US government filed a civil mortgage fraud lawsuit against Wells Fargo.
The suit alleges more than 10 years of misconduct related to government insured Federal
Housing Administration loans, saying the FHA paid hundreds of millions of dollars in insurance
claims for thousands of defaulted mortgages due to false certifications by the bank.
9. Escalating tensions between Syria and Turkey continue to push Crude oil prices higher. The
incident with a Russian flight to Syria appears to have increased fears over a additional destabilization
in the Middle East. Continued tensions between Iran and Israel are also among
the factors pushing prices higher.
10. The euro spent much of the week declining against the US dollar, but reversed direction on
Thursday and gained back much of the week’s initial losses. The Japanese yen appears to be
ending the week slightly higher against the US dollar.
Friday to Friday Close
October 5th October 12th Net Change
Gold $1780.00 $1759.00 (21.00) – 1.18%
Silver $ 34.55 $ 33.66 (0.89) – 2.58%
Platinum $1705.00 $1655.00 (50.00) – 2.93%
Palladium $ 660.00 $ 639.00 (21.00) – 3.18%
Dow Jones 13610.15 13314.98* (295.17) – 2.17%

Previous year Comparisons
Oct 14th 2011 Oct 12th 2012 Net Change
Gold $1682.00 $1759.00 77.00 + 4.58%
Silver $ 32.15 $ 33.66 1.51 + 4.70%
Platinum $1550.00 $1655.00 105.00 + 6.77%
Palladium $ 620.00 $ 639.00 19.00 + 3.06%
Dow Jones 11644.49 13314.98* 1670.49 + 14.35%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1750/1720/1700 33.50/33.00/32.80
Resistance 1775/1790/1800 34.20/34.50/35.00
Platinum Palladium
Support 1650/1620/1600 630/620/600
Resistance 1670/1700/1725 660/680/700
Volatility should be expected to continue. The state of the global financial system continues to
appear worse and worse. The International Monetary Fund has cut its growth forecast for Asia
and India and is now publicly acknowledging that a failure to act by the US Congress to address
the “fiscal cliff” will have far-reaching and devastating effects on the global marketplace. The
fundamentals supporting higher precious metals prices continue to appear strong. In an interview
with King World News this week, John Embry, of Sprott Asset Management, said “We are
literally witnessing a war between the physical buyers (Eastern central banks), and the paper manipulators
(commercials or bullion banks), and that is why there is such a fierce battle being
waged in gold between $1,735 and $1,800.” Embry continued, saying “This is one of those moments
in the gold market where there is a distinct possibility that we will see a commercial signal
failure. A commercial signal failure is an extremely rare event, but we could well be setting up
for just such an occurrence right now. The commercials are massively short gold at the moment,
and each time they attempt to drive the price of gold lower, there is a solid wall of physical buying
they are running into. I just don’t think they anticipated this. Meanwhile, the Eastern buyers,
such as China, are delighted the commercials keep trying to push gold lower.” James Turk,
one of our favorite analysts, in a separate King World News interview agreed, saying “This is a
battle between the sellers of paper gold and the buyers of physical gold. We could soon be seeing
a massive short squeeze in gold and silver.” Mr. Turk went into further detail, saying “Gold
and silver are getting very close to an all-important upside breakout, Eric. When gold breaks
above $1780 and silver hurdles over $35, both metals will rocket higher. I think we are getting
very close to that moment, and I expect that the jump in precious metal prices will be something
spectacular. This will be a move which probably scares the dickens out of the central planners.
It’s no wonder they are doing everything they can to keep the precious metals under these critical
resistance levels. But the metals keep bouncing back, which is a key observation to make here.”
Mr. Turk continued, saying “We know the paper sellers are there because Comex open interest
has exploded over the past several weeks. This has occurred because the manipulators are attempting
to contain all of the buying by the specs and hedge funds. But we also know that the
physical buyers are there too because each time the shorts trigger a raid to try forcing prices
lower, the physical buying picks up. The upshot of all this is that the shorts are caught, at least
so far. They have not been able to engineer the lower prices they are looking for to buy back
their short positions and walk away with their profits like they have done so many times in the
past. So the question becomes, what if they can’t get the price for gold and silver any lower?
The shorts will need to buy back at whatever price they can to limit their losses. It is this panic
buying that will launch the precious metals like a rocket when $1,800 and $35 are finally hurdled.”
Wise investors have been using these engineered temporary price pullbacks in precious
metals to add more physical precious metals to their portfolio looking for protection from the
massive money printing now taking place, devaluing fiat currencies across the globe. Remember
that precious metals should be viewed as a long-term investment and that the key to profitability
through the ownership of physical precious metals is to actually own the physical products and to
hold them for the long term. Always remember that you should never overextend your ability to
maintain ownership of your precious metals over the long term.

Guggenheim On Gold And The ‘Unsustainable’ Return To Bretton Woods

Via Scott Minerd of Guggenheim Partners, via Zerohedge

Bretton Woods is a resort in the mountains of New Hampshire that was made famous by a series of meetings of world leaders and economists in 1944. Nine months before the last of Hitler’s V-2 rockets struck Britain, 730 delegates from the 44 Allied Nations congregated in Bretton Woods to create a new world order, including a monetary system that could resolve the festering economic consequences of the First World War and the Great Depression.

Under the Bretton Woods Agreement, the world’s currencies would be pegged to the U.S. dollar and central banks would be able to exchange dollars for gold at a set price of $35 per ounce. It was this arrangement that firmly established the U.S. dollar as the global reserve currency. The system worked relatively well for almost three decades (1944-1971). During that time, Bretton Woods’ member states achieved increasing levels of trade, economic cooperation, and initially, a period of relative price stability.

The trouble with the system was that global central banks had pegged their currencies at low levels to support exports to the U.S. This led to the accumulation of massive dollar reserves in the hands of foreign central banks.These dollars were used to buy interest-bearing U.S. Treasuries. The structural imbalance, which resulted in ever growing dollars reserves, created problems that would ultimately compromise the very existence of Bretton Woods.

Today, global central banks are once again managing the exchange values of their currencies relative to the dollar to ensure export competitiveness. Just as pressure mounted as a result of the accumulation of large Treasury reserves by foreign central banks under Bretton Woods, today, ever-expanding dollar-denominated reserves on central bank balance sheets around the world threaten global price stability and even dollar hegemony. Though a reversal of this unsustainable pattern is not imminent, the ultimate consequences could be even more severe than the precedent set 41 years ago.

By understanding the demise of Bretton Woods, we gain a better handle on how today’s global monetary arrangement may result in a period of relative price stability in the short-run followed by a rapid depreciation in the purchasing power of currencies on a global scale. An historical perspective provides the framework to better understand the current monetary system and the impact these policies have on investment portfolios.


The Golden Years of Bretton Woods

At the outset of Bretton Woods, the value of the United States’ gold reserves relative to the monetary base, known as the gold coverage ratio, was approximately 75%. This helped to support the dollar as a stable global reserve currency. By 1971, the issuance of new dollars and dollar-for-gold redemptions had reduced the U.S. dollar’s gold coverage ratio to 18%.



The consensus view during the early years of Bretton Woods was that the dollar was as good as gold. Gold has no yield so central banks held interest-bearing Treasuries on the assumption that they could always be converted to gold at a later time. By the early 1960s, there was widespread recognition that the U.S. could never fulfill its commitment to redeem all outstanding dollars for gold.

Despite this disturbing fact, central banks did not call the Fed’s bluff by selling their dollar reserves. They had become hostage to the system. By the end of the decade, the problem had intensified to the point that if any central bank attempted to convert its dollars to gold, its domestic currency would rapidly appreciate above the levels that were pegged under Bretton Woods. This would lead to severe economic slowdowns for any country who challenged the U.S.

Throughout the 1960s, foreign central banks implicitly imported inflation as a result of maintaining the exchange value of their currencies at the artificially low rates set in 1944. The overvalued dollar led to trade deficits versus a sizable trade surplus for the United States. Because of the undervaluation of non-U.S. currencies, Bretton Woods member states were forced to expand their money supplies at rates that compromised price stability. As foreign exporters converted dollars back to their local currencies, the dollar reserves on central bank balance sheets continued to grow.

This surplus of dollars held by central banks, and subsequently invested in Treasury securities, reduced the United States’ cost of borrowing and allowed the country to consume beyond its means. Valéry Giscard d’Estaing, then finance minister of France referred to the situation as “America’s exorbitant privilege,” but he was only half right. As Yale economist Robert Triffin noted in 1959, by taking on the responsibility of supplying money to the rest of the world, the U.S. forfeited a significant amount of control over its domestic monetary policy.


The End of the Golden Years

When Triffin introduced his theory to the world, he accurately predicted the collapse of Bretton Woods and the end of an era of U.S. trade surpluses. Triffin told Congress that, at some point, foreign central banks would become saturated with Treasury securities and seek to redeem them for gold. However, because this would appreciate their currencies and slow growth, it was difficult to envision a set of circumstances that would lead foreign central banks to stop accumulating more dollars.

By the middle of the 1960s, the U.S. was escalating the war in Southeast Asia while expanding social welfare programs under Lyndon Johnson’s Great Society. As the U.S. pursued a policy of both ‘guns and butter,’ its trading partners questioned the country’s willingness to restore fiscal balance. Over time, the U.S. trade surplus deteriorated as America imported more than it exported. Further, the increasing trade deficit in the U.S. accelerated the accumulation of dollar reserves around the world. As a result of the massive growth in reserves, the Bretton Woods nations saw domestic inflation rise by an average of 5.2% during the 1960s, relative to U.S. inflation, which was 2.9%.

European countries began to consider that the price of dollar-denominated inputs such as oil would fall dramatically if their currencies were revalued upward. By abandoning Bretton Woods, they could reduce their domestic inflation by reasserting control over their domestic money supply. However, the possibility of an exit from Bretton Woods had not been contemplated in the original 1944 plan.



How would member states leave Bretton Woods? The answer could be found in Trffin’s prediction. Forced to swap dollars for gold, the U.S. would have to admit that it could no longer keep its pledge to exchange gold for $35 per ounce. Between Bretton Woods’ establishment in 1944 and its demise in August 1971, the U.S. exported almost half of its gold reserves. In the 12 months leading up to the end of Bretton Woods, the Fed lost nearly 15% of its total gold reserves; a rate at which the U.S. would have depleted all of its reserves in a short time. This led then-President Richard Nixon to abruptly end the dollar’s gold convertibility by ‘closing the gold window.’

While the United States’ trading partners immediately reaped the benefits of reduced inflation and cheaper imports, the end of gold convertibility for the dollar would set in motion a decade of subpar growth and high inflation. In the early 1970s, members of the Organization of the Petroleum Exporting Countries (OPEC) saw the purchasing power of their dollar-denominated oil receipts rapidly erode. They seized the opportunity to raise prices. Between 1973 and 1980, oil prices would rise by more than 1,000%. As a result, during the 1970s, countries that had pursued relatively weaker currencies under Bretton Woods began to seek relatively stronger exchange values to constrain their energy costs. The resulting fall in demand for the dollar led to a drastic reduction in its purchasing power.



Bretton Woods II: The Sequel

The early success of Bretton Woods, which relied upon weak currencies to successfully promote exports looks surprisingly similar to the policies being practiced by central banks around the world today. Some have referred to the current policies in foreign exchange markets as Bretton Woods II. Although not officially acknowledged, central banks are once again tacitly pegging their currencies to the dollar. As the U.S. is expanding its monetary base through quantitative easing (QE), other countries have few options but to join this race to the bottom. This situation is as unsustainable today as it was in the 1960s. (For a more in-depth discussion, read one of my previous commentaries, The Return of Beggar-Thy-Neighbor.)

Once global growth begins to accelerate and capacity utilization increases, economic bottlenecks will cause the price of inputs, such as energy, to rise. There will then be another inflection point when countries will realize that by allowing their currencies to appreciate, reduced import prices will spur productivity and domestic growth. This will happen when it becomes apparent that the savings resulting from lower input prices exceeds the export losses associated with a stronger currency. Though the timing of this event is difficult to forecast, its occurrence will likely cause Bretton Woods II to collapse.





Investment Implications: A Green Light for Gold

Gold was an important component of the Bretton Woods system. As a monetary anchor, it provided stability for the dollar as a global reserve currency. With the demise of gold convertibility under Bretton Woods, global price stability began to unravel. After being depegged from its official price of $35 per ounce in 1971, gold rose by more than 2,000% over the next 10 years. Investors migrate to gold when currencies no longer function as good stores of value.

The U.S. gold coverage ratio, which measures the amount of gold on deposit at the Federal Reserve against the total money supply, is currently at an all-time low of 17%. This ratio tends to move dramatically and falls during periods of disinflation or relative price stability. The historical average for the gold coverage ratio is roughly 40%, meaning that the current price of gold would have to more than double to reach the average. The gold coverage ratio has risen above 100% twice during the twentieth century. Were this to happen today, the value of an ounce of gold would exceed $12,000.


The possibility of an upward revaluation of the official price of gold should not be minimized. Although I do not anticipate or advocate a return to the gold standard, an upward revaluation of gold by one of more central banks is possible. If the Federal Reserve, for instance, announced that it stood ready to purchase gold at $10,000 per ounce, the gold-coverage ratio of the dollar would return to 75%, roughly where it stood at the beginning of Bretton Woods. This could restore confidence in the value of the dollar if its ultimate role as a reserve currency were to be challenged.

Gold’s industrial use only represents .03% of global GDP. Therefore, its upward revaluation would not cause a significant economic shock associated with rising input prices. Likewise, a higher price would probably not affect the behavior of the world’s largest holders, which are central banks and sovereign wealth funds.

Prescient investors should consider making allocations to gold and other precious metals as a hedge against the erosion of purchasing power of the dollar as well as for the potential upside from positive market price appreciation or a possible intervention at the policy level. Despite the sizable appreciation in gold prices in the last decade, gold is far from overvalued. This makes gold a low-risk investment and leads me to believe that gold will never again trade below $1,600 an ounce.

The Precarious Balance Continues

Almost 70 years later, the global monetary system is still living in the long shadow of Bretton Woods. Triffin’s views are as relevant today as they were when they were first published more than half a century ago. The current paradox in the global monetary system is as unsustainable as it was under the original Bretton Woods Agreement. The exact timing of an inflection point for Bretton Woods II remains unclear, and although it is not imminent, its eventual occurrence is virtually certain. As was the case in the 1960s, a reversal of the acquisition of Treasuries by foreign central banks will cause a major shift in global capital flows and insecurity about the value of dollar-based assets, particularly Treasuries.

The most likely outcome will be renewed support for precious metal, which functions as a store of value and a hedge against currency depreciation. In contrast to the 1960s, bullion is free to float at market prices and gold markets have already begun discounting a future set of circumstances which is much different from today. The time to buy insurance on the end of Bretton Woods II is before the inevitable occurs.

None of this should come as a surprise given the unorthodox growth of central bank balance sheets around the world. The collapse of Bretton Woods in 1971 caused a decade of economic malaise and negative real returns for financial assets. Can anyone afford to wait to find out whether this time will be different?

Is Silver the New Gold? (Infographic)

The Silver Bomb

 | via silverseek

Tuesday, October 9th

The value of silver has skyrocketed in recent decades –leading many investing experts to believe that silver’s price could outpace gold for the first time in history.

This infographic covers silver’s meteoric increase and the factors that have led to silver’s exploding value. In short, it’s not speculation: silver is a commodity that’s being influenced by old-school supply and demand. We also take a nod to the future to see where silver’s price may be headed based on the most up to date demand data.

In short, silver is a limited commodity that’s in short supply…and high demand.


Gold Can Save Us From Disaster – Steve Forbes

Silver Top Commodity in Q3

Tuesday October 9, 2012, 4:00am PDT
By Michelle Smith – Exclusive to Silver Investing News

Silver has a reputation for volatility due to its history of violent price swings. That is unattractive for those without the stomach to tolerate sudden, sharp declines. But it is often forgotten that the pendulum swings in both directions. When silver makes moves to the upside it has the ability to outperform its peers, which can prove rewarding for silver investors. One need look no further than 2012′s third quarter (Q3) for a prime example. Silver exited the period bearing the crown of best performing commodity.

Central bank policies in Q3 gave the metals markets a boost, but the rewards were not distributed equally. Since gold undoubtedly has more clout than its peers, it receives the most attention — and silver is commonly said to take direction from its more popular yellow sibling. That makes it all the more impressive that the white metal outran gold during Q3.

Since the inception of the now-popular quantitative easing (QE) schemes in the US, silver has shown a tendency to react more positively than gold. In the 15 months following the first round of quantitative easing, silver rose about 53 percent, which, according to Bloomberg, is twice the rise that gold saw. During QE2, the metal gained 24 percent, or three times as much as gold.

With an anticipatory rally that started in the month ahead of the recent announcement for QE3 and continued after the aggressive policy was unveiled, silver has continued the trend of outperforming its peers.

Silver followed gold’s lead, but true to form, it outperformed gold on a percentage basis, said Scotiabank.

Silver climbed 35 percent above its June low, just above the $26/oz level, Scotiabank said in its October metals report. Platinum and palladium rose an average of 26 percent compared with gold’s 13 percent rise.

Though the momentum in the metals markets has declined following QE3-induced rallies, silver is still posting stronger short-term gains than gold. Looking at the markets on a 30-day basis, on Friday silver was up about 6.6 percent compared to gold’s 4.9 percent.

Both markets are now struggling to break above resistance levels that are proving to be extremely resilient. For gold, the problem is encountered at the $1,800 level and for silver it is the $35 level.

Some market participants have expressed concern about the extent of silver’s recent rally, and have suggested that the market could be overbought. But there is still a significant amount of optimism about the metal, and many are betting on further gains.

The US is not the only nation to have announced policies that are largely interpreted as bullish for metals. The European Central Bank unveiled Outright Monetary Transactions (OMTs), a bond-buying program designed to help ailing Eurozone nations such as Spain. Japan, China and even Australia have also taken action to influence economic conditions.

Given the widespread risks — such as inflation and currency debasement — that are perceived to surround most major currencies, and the risks in the economies with which they are associated, investors are expected to continue looking favorably to the metals markets.

Going into October, hedge funds were reportedly the most bullish on silver in seven months. Net speculative silver on the COMEX was continually increasing, having reached a 12-month high, and steady additions to silver ETFs were continuing.

“We expect silver to follow gold’s lead and as we remain bullish for the latter, we are bullish for the former,” Scotiabank said.

PPMI Week In Review

October 5, 2012

“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.

The Week in Review

1. In the United States, all the excitement centered on the debate between president Obama and
his challenger in the upcoming election, Mitt Romney. The general consensus is that Mr.
Romney easily defeated president Obama in their first debate, appearing to be better prepared
for the event. The incumbent president immediately launched a PR campaign to try to minimize
the damage.

2. Initial claims for unemployment benefits rose by 4,000 again last week and the previous
week’s data was revised upwards by 4,000 claims. Friday saw the release of the September
jobs data report, which showed the economy creating only 114,000 net new jobs. Despite the
paltry gain in new jobs, the unemployment rate was lowered to 7.8 percent. The shrinking
labor participation rate appears to still be the driving factor behind the lower unemployment
rate: people have simply given up looking for work and thus no longer “count” as unemployed.

3. Spain continued to create confusion in Europe as Spanish Prime Minister Mariano Rajoy denied
reports that he would seek a full bailout for Spain by this weekend. Spanish finance
minister Luis de Guindos, speaking at the London School of Economics on Thursday evening,
said “Spain doesn’t need a bailout at all”. The comment triggered laughter and giggles
throughout the room apparently. Spain appears to be fighting a losing battle with its economy.
Wildly unpopular austerity measures have led to massive protests, sometimes turning
violent, and a skyrocketing unemployment rate, particularly among the youth.

4. Greek leader Antonis Samaras told German business daily “Handelsblatt” that Greece is effectively
running out of cash. Mr. Samaras said “The key is liquidity. That is why the next
credit tranche is so important for us.” When asked how long Greece could manage without
additional funds, Mr. Samaras said “Until the end of November. Then the cash box is
empty.” Mr. Samaras also said at a press conference on Thursday that he is still hoping that
the European Central Bank would agree to give Greece more time to repay its debt. ECB
president Mario Draghi reiterated on Thursday that the ECB has no plans to extend the time
for Greece to repay its debt.

5. Tensions flared in the Middle East again this week as mortars from Syria fell on a Turkish
border town, killing several Turkish citizens. In retaliation, Turkish military sent guided artillery
into a neighboring Syrian town, killing some Syrian soldiers. The Turkish parliament
approved a bill that would allow cross-border operations into Syria. In the resolution authorizing
the troop deployment, Turkish officials said events have “reached a point that constitutes
serious threat and risk to our national security. Therefore, it has become necessary to be
able to respond to further risks and threats in a timely and immediate manner.”

6. In Asia, the Bank of Japan held rates at current levels and decided not to ease monetary policy
further despite the fact that the BOJ lowered its assessment of the economy due to weakening
exports and a drop in production. A week-long holiday in China, and holidays in Japan
and South Korea meant other news out of those areas was relatively sparse.

7. Bond giant PIMCO placed a “Viewpoints” article titled “GOLD – The Simple Facts” on their
web site this week. The article begins with three bullet points which layout the fundamentals
for owning gold, but the second and third points easily make the case for silver as well. In
short, the article makes the case for why current gold prices should be considered “cheap”
and lays out reasons why investors should own gold and other precious metals as part of a
wise investment strategy. The article is a must read and can be found by clicking this link:
PIMCO Article

8. Crude oil, which had dropped below $90 a barrel this week was sent back into the $90’s following
the border clash between Syria and Turkey. A refinery fire at an Exxon Mobile facility
in Texas also helped push prices higher as fears of a supply disruption took hold of the

9. The Japanese yen moved lower against the dollar this week. The euro climbed higher against
the dollar this week, appearing to be driven by hopes that Spain would be asking for a full
bailout by the weekend. Emerging details regarding the ECB’s bond-buying policy for troubled
peripheral Eurozone countries also helped boost the beleaguered currency.

Friday to Friday Close
September 28th October 5th Net Change
Gold $1774.00 $1780.00 6.00 + 0.34%
Silver $ 34.58 $ 34.55 (0.03) – 0.09%
Platinum $1665.00 $1705.00 40.00 + 2.40%
Palladium $ 638.00 $ 660.00 22.00 + 3.45%
Dow Jones 13437.13 13617.22* 180.09 + 1.34%

Previous year Comparisons
Oct 7th 2011 Oct 5th 2012 Net Change
Gold $1634.00 $1780.00 146.00 + 8.94%
Silver $ 30.98 $ 34.55 3.57 + 11.52%
Platinum $1485.00 $1705.00 220.00 + 14.81%
Palladium $ 585.00 $ 660.00 75.00 + 12.82%
Dow Jones 11103.12 13617.22* 2514.10 + 22.64%
*Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1760/1730/1700 34.25/34.00/33.50
Resistance 1800/1825/1850 35.20/35.50/36.00
Platinum Palladium
Support 1650/1620/1600 650/620/600
Resistance 1730/1750/1775 675/700/720

Volatility should be expected to continue. Global events still support the fundamentals for owning
physical precious metals. Europe continues to be mired in its sovereign debt crisis, currently
centered on Spain. Spain continues to balk at officially requesting a full bailout from the European
Union, which is the first step required for the ECB to initiate their bond-buying program.
The fact that Spanish finance minister Luis de Guindos’ comment that Spain did not require a
bailout elicited laughter and giggles at the London School of Economics shows exactly what
people believe about whether they require a full bailout or not. While Spain continues to consider
its own bailout options Greece, the original “bailout nation”, is once again running out of
money and time. German Chancellor Angela Merkel is supposed to make her first visit next
week to the debt laden region since the financial crisis began in 2009 in what many are assuming
is a tacit show of support for the current Greek government’s efforts to stick to the reform measures
agreed to as a condition of the bailout funding Greece received. In response to news of her
visit, Greek labor unions have called for work stoppages and a protest rally outside of Parliament
during her visit. The Independent Greeks, a right-wing anti-bailout party, plans to demonstrate at
the German embassy “to express in front of Chancellor Angela Merkel our opposition to Greece
becoming a German protectorate.” In the US, the September Jobs Report was mediocre at best.
Many openly speculated that the drop in the unemployment rate was due to sheer manipulation
of the numbers and was not due to any real improvement in the labor market. As the election
season goes into high gear this month, we expect accusations of economic data manipulation to
be thrown about on an ongoing basis. It has even been suggested that the Republican controlled
US Congress, which has still done nothing to address “the fiscal cliff” that nearly every analyst
agrees will drag the country into full blown recession once again, is deliberately trying to slow
the US economy down as the election looms. Food and energy costs are climbing, in some areas
of the United States, gasoline prices jumped by as much as 20 cents per gallon overnight on
Thursday. Refinery problems in the US are expected to keep gasoline costs high even if the price
of Crude oil declines. In the Middle East, fears are growing that the skirmish between Syria and
Turkey, set off when Syrian mortars fell on a Turkish border town this week, may escalate and
ignite violence across the whole region. Central banks across the globe continue to print money
in one fashion or another in what is being called the “race to debase”. The result is that the fiat
currencies of these central banks would now seem to be traveling a path to a worth of zero. In
this environment, investment demand for physical precious metals is increasing rapidly. Given
that gold and silver are finite in their above ground supplies, a drastic increase in demand, driven
by investors, central banks, and the start of festival and wedding season in India, may lead to rapidly
skyrocketing prices. Remember that precious metals should be viewed as a long-term investment
and that the key to profitability through the ownership of physical precious metals is to
actually own the physical products and to hold them for the long term. Always remember that
you should never overextend your ability to maintain ownership of your precious metals over the
long term.

Bullion – The Trouble Barometer

October 9, 2012 • Reprints Via ResourceInvestor

Last week Jack Welch sparked off a debate regarding the measurement of government statistics, it was the release of the US’ nonfarm payroll data which got him, and some others, more than a little annoyed.

The issue of how to calculate vital government statistics has become a growing sticking point in recent years, and not just in the US. In the UK, the measure of inflation is increasingly suspect, particularly as the calculation of RPI is about to be changed, while in the US the official inflation rate is way off the “real” inflation rate. It’s not just economic data which is affected by political targets, the UK measure of child poverty was badly manipulated by the Labour government in order to appear as if they had met one of their campaign promises.

These issues, why they happen and how they can be resolved is definitely an article for another time however it is becoming increasingly clear to a growing number of people that those who govern do not carry the same interests of those who are governed.

The Golden Barometer

During times such as these we should place our faith in something which has historically transcended government statistics as well as political goals and semantics. For this reason many are turning to gold as their trustworthy protector from government efforts to misreport statistics affecting our daily lives by their dangerous policy making and financial stresses.

Many will struggle to understand how we can trust the gold price when it has shown volatility since the 1970s and is deemed by many to be in a “bubble.” A new paper by Erb and Harvey shows the real price of gold is now at a historical high across all 23 countries studied. They find that while the nominal price of gold has been volatile it has shown a strong trend since the 1970s, however the inflation-adjusted price of gold is volatile without a trend.

They have not just looked at countries which are deemed to be “unsafe” or financially volatile, countries such as Denmark, New Zealand and Switzerland are covered and are also found to be experiencing historically high real gold prices.

The authors state “If the real price of gold is a barometer of perceived troubles then there is trouble everywhere. Or alternatively, gold is expensive everywhere.” They go on to ask “is the high real price of gold a barometer of the ability of investors to ‘see though’ inaccurate official inflation reports? Or is the high real price of gold a barometer of irrational pessimism?”

With only 23 countries studied, it is irrational to argue that this is an indication that gold is what everyone is rushing into as they panic about the state of the global economy. But, it is a good place to start.

Why the Rise in the Gold Price?

Gold has always been desired in terms of jewelry and adornments, it has always been precious. So we cannot argue that it is “just expensive.”

“Irrational pessimism” is something which many commentators blame the increase in the gold price on. This is partly understandable when you see markets still rushing into currencies whose governments are no longer bothered about pleasing the currency markets.

We now live in a world where countries are no longer proud to have strong currencies. A strong sovereign currency was something which once upon a time was something which countries and their governments aimed for.

However, stable and strong is no longer something which is seen as particularly desirable. Now countries want weaker currencies in order to try and maintain or increase exports, and in light of the financial crisis try and keep it weak in order to prevent deflation at home.

Markets no longer seem to be punishing countries for their potentially fatal policies. Instead, market perceptions in regard to currencies are the ability and ease of which a government demonstrates its ability to maintain an elastic money supply and printing money.

Irrational pessimism would suggest that there is no possibility governments are suddenly going to come to their senses and realize that they are facing a problem which can’t be fixed through loose monetary policies. Whilst it may seem to most of us that the impact of these policies are under-appreciated and enormous, it seems that some, in at least 23 countries, are learning that this crisis may well be something which can’t be fixed by contemporary government thinking and it will affect everyone.

These countries which are driving the demand for gold and, therefore, the real gold price are beginning to realize that banks, central banks and governments have operations which rather than create wealth, are instead destroying what little wealth still exists. Anyone that understands even a shred of monetary history knows debasement when it stares them in the face this obviously.

Gold & Fiat Money

Gold is a money which cannot be created by government monopoly. Even when it is no longer accepted as legal tender, it cannot be destroyed and therefore it is never totally controlled by those who govern us.

The economies of the US, the UK, Western Europe and Japan are beginning to finally collapse having been run on fiat distortions for long enough. The Brics are also beginning to show some cracks, they’re not wide enough to do any damage as their distortions haven’t been going on long enough, but they’re there, digging away at the stability of the economies.

While government statistics are something which markets react to at the slightest change, and the media goes crazy about, it is the people within the countries who feel the pinch, regardless of what the statistics say. They are the ones who are really hit by the real inflation rates, by the interest rates and by the quantitative easing. Therefore turning to gold bullion investment, during this endless crisis seems like an excellent way of signaling to governments and the markets that their statistics and currencies count for very little anymore and in fact, gold is where the value is. Once more we should remember the difference between value and price.

QE Riding Into the Sunset or a Brick Wall?

October 9, 2012 • Reprints

A month ago, I presented the case for why Fed Chairman Bernanke would have strong motivation to launch another round of quantitative easing (QE) before the election. In short, it would save him his job. Now, I didn’t predict with certainty that he would do so – only the few men at the FOMC knew that for sure – but it seemed likely. Shortly thereafter, Bernanke not only announced more stimulus, but promised to keep it flowing to the tune of an additional $40 billion a month until conditions improve. As I had written, this is essentially the election platform of the Obama-Bernanke ticket: we will keep the party going indefinitely.

Unfortunately, though these are two powerful men, they are not above the law of economics. While critics have dubbed this program “QEternity” or “QE-Infinity,” it will end much before that. We are witnessing a massive bubble in US government debt, and we’ve reached the point where no one in charge believes it will ever end – an excellent contra-indicator.

Rather than going on for eternity, this third round of QE is only hastening the day when there is a flight of confidence from the dollar and US Treasuries. This will cause a sharp rise in market interest rates and surging consumer prices across America. If you think $4 a gallon gas is bad, wait till you see it going up by 25¢ or more per week.

At this point, the Fed Chairman will have a choice to make: keep printing, which will push the dollar into uncontrollable hyperinflation, or begin tightening, which will bankrupt the US government and banking system.

I have long written about this Sophie’s choice confronting the Fed, but so far the printing option has been too easy. With the world only slowly abandoning the dollar as the reserve currency and the euro crisis offering a distraction, the Fed has been able to more than double the money supply without US consumers seeing out-of-control price hikes at the store. Not that there hasn’t been inflation – look at housing, gas, or the stock market – but it hasn’t reached crisis proportions. When prices start rising fast enough for the average person to figure out he’s being screwed, then there will be riots in the streets.

The good news for precious metals investors is that either scenario is bullish for gold and silver.

If the Fed pushes this insanity to the point of hyperinflation, precious metals will quickly be seen as a form of money that can purchase the same amount of goods week-after-week, month-after-month.

If there is tightening, prices might stabilize, but the federal government and its banking cartel will likely go bankrupt in tandem. That means no bailout money will be forthcoming, no FDIC insurance can be paid, and banks may go on holiday for lack of reserves. This is what happened in Iceland in 2008, when its big banks had debts 10X the size of the country’s GDP. There was no way for the government to offer a bailout, so the whole edifice came crashing down. While the 320 thousand citizens of Iceland didn’t make a big dent in the currency markets during this transition, you better bet the 320 million citizens of the United States will.

As we’ve seen in cases like Argentina’s in the ’90s and Hungary’s in the ’40s, when the banking system freezes, hard assets trade at a premium. Gold and silver coins may be at a disadvantage in terms of convenience in an era of credit cards and Paypal, but what happens when those funds are no longer available? Already, regulations and lower profit margins have driven banks to add fees to debit card transactions. Not to mention that every digital transaction is traceable by the tax authorities.

If everyone starts to carry rolls of cash everywhere, it’s not a big leap to carry coins. A silver coin the size of a dime is currently worth about $3.50. Two could buy you lunch.

While I believe a tightening and national default would put the US on the road to recovery, the transition period will be messy. Bread lines, rampant foreclosures, and a spike in crime are likely results. In this situation, gold and silver may be the only things people can count on. In fact, they are likely to not only hold their value, but dramatically appreciate as millions of people flood the metals market and the dollar economy deleverages. In plain English: maybe it will only take one of those dime-sized silver coins to buy lunch. Maybe that coin will buy lunch for you and a friend.

Bernanke and his Wall Street supporters see cheap money until the horizon – but that horizon is really a painted brick wall. So it’s not QE-Infinity, it’s QE until the Fed either recognizes the brick wall and slams on the brakes, or doesn’t and crashes into it. Either way, the only way to get off this locomotive is to invest in hard assets.

Bullish Call: Silver Could Hit $50 by End of Year – Bloomberg

Do Western Central Banks Have Any Gold Left???

— Posted Tuesday, 2 October 2012 |  Source:

By Eric Sprott & David Baker, Sprott Asset Management

Somewhere deep in the bowels of the world’s Western central banks lie vaults holding gargantuan piles of physical gold bars… or at least that’s what they all claim. The gold bars are part of their respective foreign currency reserves, which include all the usual fiat currencies like the dollar, the pound, the yen and the euro.

Collectively, the governments/central banks of the United States, United Kingdom, Japan, Switzerland, Eurozone and the International Monetary Fund (IMF) are believed to hold an impressive 23,349 tonnes of gold in their respective reserves, representing more than $1.3 trillion at today’s gold price. Beyond the suggested tonnage, however, very little is actually known about the gold that makes up this massive stockpile. Western central banks disclose next to nothing about where it’s stored, in what form, or how much of the gold reserves are utilized for other purposes. We are assured that it’s all there, of course, but little effort has ever been made by the central banks to provide any details beyond the arbitrary references in their various financial reserve reports.

Twelve years ago, few would have cared what central banks did with their gold. Gold had suffered a twenty year bear cycle and didn’t engender much excitement at $255 per ounce. It made perfect sense for Western governments to lend out (or in the case of Canada – outright sell) their gold reserves in order to generate some interest income from their holdings. And that’s exactly what many central banks did from the late 1980’s through to the late 2000’s. The times have changed however, and today it absolutely does matter what they’re doing with their reserves, and where the reserves are actually held. Why? Because the countries in question are now all grossly over-indebted and printing their respective currencies with reckless abandon. It would be reassuring to know that they still have some of the ‘barbarous relic’ kicking around, collecting dust, just in case their experiment with collusive monetary accommodation doesn’t work out as planned.

You may be interested to know that central bank gold sales were actually the crux of the original investment thesis that first got us interested in the gold space back in 2000. We were introduced to it through the work of Frank Veneroso, who published an outstanding report on the gold market in 1998 aptly titled, “The 1998 Gold Book Annual”. In it, Mr. Veneroso inferred that central bank gold sales had artificially suppressed the full extent of gold demand to the tune of approximately 1,600 tonnes per year (in an approximately 4,000 tonne market of annual supply). Of the 35,000 tonnes that the central banks were officially stated to own at the time, Mr. Veneroso estimated that they were already down to 18,000 tonnes of actual physical. Once the central banks ran out of gold to sell, he surmised, the gold market would be poised for a powerful bull market… and he turned out to be completely right – although central banks did continue to be net sellers of gold for many years to come.

As the gold bull market developed throughout the 2000’s, central banks didn’t become net buyers of physical gold until 2009, which coincided with gold’s final break-out above US$1,000 per ounce. The entirety of this buying was performed by central banks in the non-Western world, however, by countries like Russia, Turkey, Kazakhstan, Ukraine and the Philippines… and they have continued buying gold ever since. According to Thomson Reuters GFMS, a precious metals research agency, non-Western central banks purchased 457 tonnes of gold in 2011, and are expected to purchase another 493 tonnes of gold this year as they expand their reserves.1 Our estimates suggest they will likely purchase even more than that.2The Western central banks, meanwhile, have essentially remained silent on the topic of gold, and have not publicly disclosed any sales or purchases of gold at all over the past three years. Although there is a “Central Bank Gold Agreement” currently in place that covers the gold sales of the Eurosystem central banks, Sweden and Switzerland, there has been no mention of gold sales by the very entities that are purported to own the largest stockpiles of the precious metal.3 The silence is telling.

Over the past several years, we’ve collected data on physical demand for gold as it has developed over time. The consistent annual growth in demand for physical gold bullion has increasingly puzzled us with regard to supply. Global annual gold mine supply ex Russia and China (who do not export domestic production) is actually lower than it was in year 2000, and ever since the IMF announced the completion of its sale of 403 tonnes of gold in December 2010, there hasn’t been any large, publicly-disclosed seller of physical gold in the market for almost two years.4 Given the significant increase in physical demand that we’ve seen over the past decade, particularly from buyers in Asia, it suffices to say that we cannot identify where all the gold is coming from to supply it… but it has to be coming from somewhere.

To give you a sense of how much the demand for physical gold has increased over the past decade, we’ve listed a select number of physical gold buyers and calculated their net change in annual demand in tonnes from 2000 to 2012 (see Chart A).

Numbers quoted in metric tonnes.
† Source: CBGA1, CBGA2, CBGA3, International Monetary Fund Statistics, Sprott Estimates.
†† Source: Royal Canadian Mint and United States Mint.
††† Includes closed-end funds such as Sprott Physical Gold Trust and Central Fund of Canada.
^ Source: World Gold Council, Sprott Estimates.
^^ Source: World Gold Council, Sprott Estimates.
^^^ Refers to annualized increase over the past eight years.

As can be seen, the mere combination of only five separate sources of demand results in a 2,268 tonne net change in physical demand for gold over the past twelve years – meaning that there is roughly 2,268 tonnes of new annual demand today that didn’t exist 12 years ago. According to the CPM Group, one of the main purveyors of gold statistics, the total annual gold supply is estimated to be roughly 3,700 tonnes of gold this year. Of that, the World Gold Council estimates that only 2,687 tonnes are expected to come from actual mine production, while the rest is attributed to recycled scrap gold, mainly from old jewelry.5 (See footnote 5). The reporting agencies have a tendency to insist that total physical demand perfectly matches physical supply every year, and use the “Net Private Investment” as a plug to shore up the difference between the demand they attribute to industry, jewelry and ‘official transactions’ by central banks versus their annual supply estimate (which is relatively verifiable). Their “Net Private Investment” figures areimplied, however, and do not measure the actual investment demand purchases that take place every year. If more accurate data was ever incorporated into their market summary for demand, it would reveal a huge discrepancy, with the demand side vastly exceeding their estimation of annual supply. In fact, we know it would exceed it based purely on China’s Hong Kong gold imports, which are now up to 458 tonnes year-to-date as of July, representing a 367% increase over its purchases during the same period last year. If the imports continue at their current rate, China will reach 785 tonnes of gold imports by year-end. That’s 785 tonnes in a market that’s only expected to produce roughly 2,700 tonnes of mine supply, and that’s just one buyer.

Then there are all the private buyers whose purchases go unreported and unacknowledged, like that of Greenlight Capital, the hedge fund managed by David Einhorn, that is reported to have purchased $500 million worth of physical gold starting in 2009. Or the $1 billion of physical gold purchased by the University of Texas Investment Management Co. in April 2011… or the myriad of other private investors (like Saudi Sheiks, Russian billionaires, this writer, probably many of our readers, etc.) who have purchased physical gold for their accounts over the past decade. None of these private purchases are ever considered in the research agencies’ summaries for investment demand, and yet these are real purchases of physical gold, not ETF’s or gold ‘certificates’. They require real, physical gold bars to be delivered to the buyer. So once we acknowledge how big the discrepancy is between the actual true level of physical gold demand versus the annual “supply”, the obvious questions present themselves: who are the sellers delivering the gold to match the enormous increase in physical demand? What entities are releasing physical gold onto the market without reporting it? Where is all the gold coming from?

There is only one possible candidate: the Western central banks. It may very well be that a large portion of physical gold currently flowing to new buyers is actually coming from the Western central banks themselves. They are the only holders of physical gold who are capable of supplying gold in a quantity and manner that cannot be readily tracked. They are also the very entities whose actions have driven investors back into gold in the first place. Gold is, after all, a hedge against their collective irresponsibility – and they have showcased their capacity in that regard quite enthusiastically over the past decade, especially since 2008.

If the Western central banks are indeed leasing out their physical reserves, they would not actually have to disclose the specific amounts of gold that leave their respective vaults. According to a document on the European Central Bank’s (ECB) website regarding the statistical treatment of the Eurosystem’s International Reserves, current reporting guidelines do not require central banks to differentiate between gold owned outright versus gold lent out or swapped with another party. The document states that, “reversible transactions in gold do not have any effect on the level of monetary gold regardless of the type of transaction (i.e. gold swaps, repos, deposits or loans), in line with the recommendations contained in the IMF guidelines.”6 (Emphasis theirs). Under current reporting guidelines, therefore, central banks are permitted to continue carrying the entry of physical gold on their balance sheet even if they’ve swapped it or lent it out entirely. You can see this in the way Western central banks refer to their gold reserves. The UK Government, for example, refers to its gold allocation as, “Gold (incl. gold swapped or on loan)”. That’s the verbatim phrase they use in their official statement. Same goes for the US Treasury and the ECB, which report their gold holdings as “Gold (including gold deposits and, if appropriate, gold swapped)” and “Gold (including gold deposits and gold swapped)”, respectively (see Chart B). Unfortunately, that’s as far as their description goes, as each institution does not break down what percentage of their stated gold reserves are held in physical, versus what percentage has been loaned out or swapped for something else. The fact that they do not differentiate between the two is astounding, (Ed. As is the “including gold deposits” verbiage that they use – what else is “gold” supposed to refer to?) but at the same time not at all surprising. It would not lend much credence to central bank credibility if they admitted they were leasing their gold reserves to ‘bullion bank’ intermediaries who were then turning around and selling their gold to China, for example. But the numbers strongly suggest that that is exactly what has happened. The central banks’ gold is likely gone, and the bullion banks that sold it have no realistic chance of getting it back.


ECB Data as of July 2012. Bank of Japan data as of March 31, 2012.

* European Central Bank reserves is composed of reserves held by the ECB, Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Malta, The Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.
** Bank of Japan only lists its gold reserves in Yen at book value.

Our analysis of the physical gold market shows that central banks have most likely been a massive unreported supplier of physical gold, and strongly implies that their gold reserves are negligible today. If Frank Veneroso’s conclusions were even close to accurate back in 1998 (and we believe they were), when coupled with the 2,300 tonne net change in annual demand we can easily identify above, it can only lead to the conclusion that a large portion of the Western central banks’ stated 23,000 tonnes of gold reserves are merely a paper entry on their balance sheets – completely un-backed by anything tangible other than an IOU from whatever counterparty leased it from them in years past. At this stage of the game, we don’t believe these central banks will be able to get their gold back without extreme difficulty, especially if it turns out the gold has left their countries entirely. We can also only wonder how much gold within the central bank system has been ‘rehypothecated’ in the process, since the central banks in question seem so reluctant to divulge any meaningful details on their reserves in a way that would shed light on the various “swaps” and “loans” they imply to be participating in. We might also suggest that if a proper audit of Western central bank gold reserves was ever launched, as per Ron Paul’s recent proposal to audit the US Federal Reserve, the proverbial cat would be let out of the bag – with explosive implications for the gold price.

Notwithstanding the recent conversions of PIMCO’s Bill Gross, Bridegwater’s Ray Dalio and Ned Davis Research to gold, we realize that many mainstream institutional investors still continue to struggle with the topic. We also realize that some readers may scoff at any analysis of the gold market that hints at “conspiracy”. We’re not talking about conspiracy here however, we’re talking about stupidity. After all, Western central banks are probably under the impression that the gold they’ve swapped and/or lent out is still legally theirs, which technically it may be. But if what we are proposing turns out to be true, and those reserves are not physically theirs; not physically in their possession… then all bets are off regarding the future of our monetary system. As a general rule of common sense, when one embarks on an unlimited quantitative easing program targeted at the employment rate (see QE3), one had better make sure to have something in the vault as backup in case the ‘unlimited’ part actually ends up really meaning unlimited. We hope that it does not, for the sake of our monetary system, but given our analysis of the physical gold market, we’ll stick with our gold bars and take comfort as they collect more dust in our vaults, untouched.

By: Mr. Eric Sprott Chairman, Sprott Money Ltd , CEO, CIO & Senior Portfolio Manager & Mr. David Baker, Sprott Asset Management

2 See notes in Chart A.
5 Mine supply estimate supplied by World Gold Council; YTD gold mine production data suggests that total 2012 gold mine supply will come in lower around 2,300 tonnes, ex Russia and China production. In addition, Frank Veneroso has recently published a new report that warns that the supply of recycled scrap gold could drop significantly going forward due to the depletion ofthe inventories of industrial scrap and long held jewelry over the past decade.

QE3 Infinity beginning to work its magic for gold as Bernanke defends policy

Frik Els | October 1, 2012 via


Gold for delivery in December made a dash for $1,800 an ounce in early dealing on Monday, reacting to disappointing manufacturing news out of China which could lead to greater stimulus for the second largest economy in the world and boost gold in the process.

Gold climbed $17 or just shy of  1% from Friday’s close to $1,791.90 an hour into the trading day. The metal touched an-intraday high  of $1,794 shortly after the open, but could not hold on to the gains, ending the day little changed.

Gold is still up 15% since hitting 2012 lows below $1,550 in Mid-may and within reach of its February 28 high for the year when it closed just under the psychologically important $1,800 level.

On Friday, the metal closed out the September quarter with its biggest quarterly gain since 2010 as QE3 Infinity – as the open-ended third round of quantitative easing in the US has been dubbed – increases the metal’s allure as an inflation hedge and storer of wealth amid currency depreciation.

Unlike earlier rounds, QE3 is open-ended and the US Federal Reserve under chairman Ben Bernanke announced it would only halt the program if they are satisfied with the recovery in US jobs and economic growth. The Fed also extended its near-zero interest rates until the middle of 2015 and is keeping in place ‘Operation Twist’ first started in September last year.

Martketwatch reports Bernanke on Monday had to defend the QE3 decision stressing that the US central bank has not abandoned its stated mandate to maintain price stability in the country:

“We expect inflation to remain low for the foreseeable future,” he said.

“The Federal Reserve’s price stability record is excellent and we are fully committed to maintaining it,” he said.

Bernanke stressed that the Fed’s pledge to keep rates low until mid-2015 was not a forecast of a weak economy over the next three years.

Instead, the message is “as long as price stability is preserved, we will take care not to raise rates prematurely,” he said.

The first two round of quantitative easing have been  a massive boon for gold. The price of gold had almost doubled on the back of QE1 which kicked off in December 2008 and QE2 which was first mooted in August 2010.

PPMI Week In Review

September 28, 2012
“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.
The Week in Review
1. It was a week of conflicting economic activity reports, particularly in the United States.
2. Weekly initial claims for state unemployment in the US dropped to their lowest levels in two
months. The final reading of the Thomson Reuters/University of Michigan’s consumer sentiment

hit its highest level in four months, but still came in under economist’s expectations.
It appears much of the increase was attributed to higher stock prices and a perceived improvement
in the US housing market. US consumer spending rose in August by the most in 6
months, but the news it not necessarily good. Much of the rise was due to higher gasoline
prices that consumers were forced to pay at the pump.
3. In Asia, economic slowdown continues to spread. Japanese factory output declined along
with South Korea’s. In China, a sizeable drop in industrial production shows the economy is
still slowing. As the Chinese government approaches a once-a-decade leadership transition,
it seems that the likelihood of additional monetary stimulus is becoming more certain. This
week the People’s Bank of China injected 365 billion yuan into money markets, the largest
such injection in history. The intent of the massive cash infusion was to prevent a potential
short-term “liquidity crunch” at commercial banks. Tensions continue to escalate between
China and Japan. In China this week there were reports that several Japanese owned businesses
had literally been destroyed.
4. Spain remains at the forefront of the news out of Europe. Thursday the Spanish government
announced its budget for 2013 which was well received by investors. The results of the
“stress test” on Spanish banks were due to be announced on Friday. The test was conducted
by an independent consultant and hopes are that the results will be accurate, unlike previous
stress tests in the past. The “stress test” results will help determine the how much of the
$100 billion euro bank bailout funds set aside for Spain will actually be required to recapitalize
the Spanish banking system. Many analysts feel that the results of the audit could
lead the way to Spain officially asking for a bailout, which it has thus far been reluctant to
5. If Spain does indeed ask for a bailout, allowing the European Central Bank to purchase Spanish
bonds and thereby lower its borrowing costs, Italy will most likely be pushed right back
to the forefront of the news if its own bond yields spike again, which many analysts expect
would occur. The Italian government has already announced this month that they expect
twice as much contraction in the economy as previously forecast. Economists are already
throwing the phrase “too big to bail out” around regarding Italy, which seems to consistently
be the first step toward receiving an EU bailout, of late.
6. In France, President Francois Hollande unveiled a 2013 budget containing a series of tax
rates on the business and the wealthy that were staggering. The budget contains a 75 percent
tax rate for earnings over 1 million euros.
7. Crude oil was under pressure this week and remains in the low $90 a barrel range on
Friday. The apparent continued slowdown in the Chinese economy may continue to drag the
price of crude lower.
8. The euro continued to move lower against the US dollar this week despite a temporary boost
after Spain’s budget announcement. The Japanese yen spent much of the week moving
higher against the dollar but is drifting lower on Friday.
Friday to Friday Close
September 21st September 28th Net Change
Gold $1778.00 $1774.00 (4.00) – 0.22%
Silver $ 34.60 $ 34.58 (0.02) – 0.06%
Platinum $1635.00 $1665.00 30.00 + 1.83%
Palladium $ 670.00 $ 638.00 (32.00) – 4.78%
Dow Jones 13579.47 13400.03* (207.65) – 1.53%
Month End to Month End Close
August 31st September 28th Net Change
Gold $1685.00 $1774.00 89.00 + 5.28%
Silver $ 31.40 $ 34.58 3.18 + 10.13%
Platinum $1535.00 $1665.00 130.00 + 8.47%
Palladium $ 625.00 $ 638.00 13.00 + 2.08%
Dow Jones 13090.84 13400.03* 309.19 + 2.36%

Previous yearComparisons

Sep 30th 2011 Sep 28th 2012 Net Change
Gold $1620.00 $1774.00 154.00 + 9.51%
Silver $ 30.10 $ 34.58 4.48 + 14.88%
Platinum $1520.00 $1665.00 145.00 + 9.54%
Palladium $ 612.00 $ 638.00 26.00 + 4.25%
Dow Jones 10913.38 13400.03* 2486.65 + 22.79%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1750/1725/1700 34.25/34.00/33.60
Resistance 1780/1800/1825 35.00/35.25/36.00
Platinum Palladium
Support 1650/1620/1600 620/600/580
Resistance 1700/1720/1750 650/670/700

Volatility should be expected to continue. The fundamentals supporting precious metals ownership
continue to grow stronger and stronger. A bailout for Spain appears to be a near certainty
now, and once that happens the focus and contagion will shift to Italy once again. If Italian bond
yields spike once more then the contagion will most likely continue to spread throughout Europe.
In South Africa, strikes have put a halt to close to 40% of the gold output at the nation’s mines.
AngloGold, the world’s third largest gold producer announced Wednesday that all of its South
African mines have stopped production. In Asia there is increasing evidence that slowdowns in
the economies across the region are accelerating. Factory outputs in China, South Korea and Japan
all decreased significantly last month. Amid all the turmoil, precious metals appear to be reentering
the spotlight as a focus for investors. James Turk, discussing the recent price movements
in gold and silver with King World News this week said “It’s a real battleground out there,
Eric. It started at the beginning of last week when gold was looking like it would break through
$1780 while silver was already climbing through $35. But then the shorts started throwing everything
they could at that price advance and stopped both precious metals. Hitting a wall like
that caused a reversal, but support quickly showed up in the $1750s and around $34. The same
thing happened twice last week, but the week ended for the precious metals in a stand-off. Then
today the battle started again when the shorts started pounding gold and silver here in Europe.
But just like last week, the buyers of physical metal showed up when gold dropped into the
$1750s…” Mr. Turk continued, saying “The bottom line is that despite the volatility, nothing has
really changed. The gold and silver charts look really good, and the fundamental factors driving
them higher remain bullish. The interrelated bank solvency and sovereign debt crises have not
been solved. Central banks haven’t stopped their money printing. Economic activity in most of
the world continues to slide. None of these factors offer a pretty picture, which explains why the
precious metals are in an uptrend and in my view are going to climb much higher as we head toward
the end of the year. Throughout this uptrend in precious metals that began over a decade
ago, we’ve seen a lot of battles like this, Eric. The important point though is that the uptrend
shows the physical buyers of gold and silver gaining the upper hand, while the shorts and central
planners are losing this war.” As the tide of fiat currencies being printed by central banks across
the world approaches flood stage, precious metals seem to once again be coming to be viewed as
the only “hard asset” that will retain a store of value as these currencies head towards a worth of
zero. Wise investors, recognizing the perils of just such an economic environment, have continued
to accumulate additional physical precious metals products every time a temporary price dip
in this now 13 year old bull market has presented them the opportunity to do so. The key to accumulating
precious metals is to never jeopardize your ability to maintain ownership of your
products by overextending yourself. Remember that precious metals should be viewed as a longterm
investment and that the key to profitability through the ownership of physical precious metals
is to actually own the physical products and to hold them for the long term. Always remember
that you should never overextend your ability to maintain ownership of your precious metals
over the long term.
Trading Department – Precious Metals International, Ltd.

Solar Industry Pushes Up Silver Demand

Posted by Brianna Panzica – Tuesday, October 2nd, 2012 via Wealthwire


Silver, a safe haven in times of economic uncertainty, differs from its sister metal gold in a number of ways. For one thing, it’s cheaper. For another, it has numerous applications in industrial sectors. And this is reason for demand to go up – way up.

Silver has long been used as currency, in jewelry, and for silverware. Until the mid-1960s, it was still used heavily in U.S. coins.

But in the 19th century, silver found itself in another industry – photography.

Silver was used in photography film, and demand peaked in the 20th century when photography accounted for 50% of silver demand.

Now, however, the use of film photography has slowed as quickly as it began. In just the nine years between 2000 and 2009, it went from accounting for roughly 25% of demand to about 10%, as you can see in the chart below:

Silver Industrial Demand Projection

And that will only continue to drop.

But silver demand is far from slowing. As one industry moves away from silver usage, another moves toward it.

And right now, that industry is the solar industry.

Photovoltaic panels generally use about 20 grams of silver each to generate power from the sun – significantly more than certain electronics. A cell phone uses 0.2 to 0.3 grams, and a laptop uses between 0.75 grams and just over 1 gram.

Solar panel demand is going to increase. Germany is currently the world’s largest user of solar power, with 27.3% of the world’s total panel installations, though Germany has been cutting back on subsidies in the midst of the economic crisis. But other countries are picking up the slack.

In its post-Fukushima state, Japan has decided to step up renewable power, offering 42 JPY, or $0.53, per kilowatt hour for 20 years.

It’s expected to double its 2011 capacity of 1.3 gigawatts this year, and by 2020 it could have 28GW.

Since 2000, solar demand for silver has skyrocketed. In 1999, it was virtually zero, and this year it’s expected to surpass 60 million troy ounces, as the chart shows:

Silver Solar Demand

But not all types of solar panels use silver. “Thick film” panels, the most common, demand silver heavily, but “thin film,” the kind made by companies like First Solar (NASDAQ: FSLR), use cadmium telluride instead.

Thin film panels are cheaper than thick film, but they are not quite as effective. In last year’s total installations, thick film accounted for 91%, and analysts expect these type will continue to lead the market.

Of course, this would also depend on the price of silver. Panel prices have been falling lately, spurring more installations, but if demand pushes up the price of silver, panels might once again become expensive.

For now, however, silver demand in the solar industry is projected to increase. It’s been pushed way up in the past eleven years, and it’s replacing the dwindling demand in the photography industry.

Silver is still in high demand; industry shifts haven’t changed that. And now, as the Fed initiates QE3 and continues to print free money, silver is one of the best places to be.

*Charts courtesy of Hang the Bankers

PPMI Week In Review

September 21, 2012
“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.
The Week in Review
1. “I think everyone should own gold everyone should own silver. To me, it is the true buy-andhold
asset right now.” Those are the words of Joe Terranova, on CNBC’s “Fast Money”
show Wednesday evening. QE to infinity appears to have set the stage for massive rallies in
precious metals prices and all indications are that this is only the beginning.
2. Mohamed El-Erian, CEO of bond giant PIMCO, in discussing the US Federal Reserve’s QE
to infinity policy with CNBC this week said “Not only will they tolerate higher inflation, not
only will they wish for higher inflation, but they actually may target higher inflation.” El-
Erian continued in his “Squawk Box” interview, saying “This is true for all central banks –
the ECB, the Fed, the Bank of Japan, the Bank of England. We are so deep into unfamiliar
territory, so deep into experimental mode, that we don’t know what the consequences will be.
Whoever comes afterward will have to clean up the mess.”
3. The unemployment picture in the US remains one of stagnation. A decline of 3,000 claims
was announced for last week, but the prior week’s figures were revised upwards by 3,000
claims. The four week moving average, considered to be a much better data point on the
status of the jobs market, climbed higher by another 2,000 claims.
4. Anti-America protests continue around the world in response to a poorly made and privately
produced anti-Islam film. The Pakistani government had apparently set aside Friday as a
holiday so that people could protest against the video, but at least one such demonstration
became fatal when police opened fire on protesters who were setting fire to a movie theater.
At least one bystander was killed in the incident, bringing the death toll up to at least 31 people,
including the Americans killed in the initial attacks. Countries were bracing for addi-
tional protests and potential attacks after Friday prayers. Cartoons mocking Islam published
in a French magazine on Wednesday were expected to exacerbate the problems.
5. In Asia, tensions flared between China and Japan over Japan’s nationalization of islands in
the China Sea. The islands, called the Senkakus by the Japanese, have long been a source of
dispute between the two countries and Japan’s purchase of the islands from a private individual
sparked a series of violent anti-Japanese protests in China this week. The US went to
great lengths to point out this week that the islands were covered under a 1960 security treaty
between Japan and the US.
6. Only marginally mentioned in the news Thursday, US Federal Energy Regulatory Commission
threatened to suspend JPMorgan Chase’s right to sell electricity into the energy market
at market-based rates. If the suspension goes forward, JPMorgan would be forced to sell
power at or below cost. The FERC said that JPMorgan submitted misleading information or
omitted facts completely in its dealings with the commission on at least four occasions over
the last 11 months. The California System Operator Corporation alleges that JPMorgan may
have pushed the price of electricity in California and the Midwest up by roughly $73 million.
7. Spain is reportedly in discussions with European Union authorities over terms of additional
reforms that would be required in order for Spain to secure a bailout. Details will be supposedly
unveiled next Thursday, just prior to the announcement of the results of the three month
review that has been ongoing to determine exactly how much European Stability Mechanism
funds will be needed to recapitalize the crippled Spanish banking system. Disappointing
economic data across the Eurozone as a whole continued to put a drag on economist’s recovery
projections for the region.
8. Crude oil had a rough week this week, broaching a renewed discussion on high frequency
trading as it dropped $4 in minutes. Announcements later in the week that inventory rose and
that Saudi Arabia intended to increase supply helped to push oil prices back into the low $90
a barrel range.
9. The euro dropped against the dollar again this week amid rumors that European Union
authorities were in discussions over a bailout plan for Spain. The Japanese yen drifted lower
for most of the week, but reversed course Thursday after the Bank of Japan announced it was
embarking on its own round of quantitative easing.
Friday to Friday Close
September 14th September 21st Net Change
Gold $1772.00 $1778.00 6.00 + 0.34%
Silver $ 34.65 $ 34.60 (0.05) – 0.14%
Platinum $1715.00 $1635.00 (80.00) – 4.66%
Palladium $ 695.00 $ 670.00 (25.00) – 3.60%
Dow Jones 13593.37 13607.68* 14.31 + 0.11%

Previous year Comparisons
Sep 23rd 2011 Sep 21st 2012 Net Change
Gold $1659.00 $1778.00 119.00 + 7.17%
Silver $ 31.02 $ 34.60 3.58 + 11.54%
Platinum $1617.40 $1635.00 17.60 + 1.09%
Palladium $ 635.75 $ 670.00 34.25 + 5.39%
Dow Jones 10771.48 13607.68* 2836.20 + 26.33%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1750/1725/1700 34.40/34.00/33.75
Resistance 1790/1800/1820 35.00/35.25/36.00
Platinum Palladium
Support 1620/1600/1575 660/640/625
Resistance 1650/1690/1700 680/700/725
Volatility should be expected to continue. Mainstream media has coined a new phrase: “QEfinity,
and beyond!” regarding the US Federal Reserve’s new round of open-ended quantitative
easing. The ramifications of the program are now starting to be picked apart and discussed
openly, and the same terms keep showing up in each of the discussions that take place: Gold and
Silver. The race to debase fiat currencies has begun in earnest now, the Bank of Japan announced
its own QE program shortly after the US Federal Reserve announced theirs, and Brazilian
finance minister Guido Mantega told the Financial Times on Thursday “Japanese companies
were complaining about their strong exchange rate. If a weaker dollar leads to rising trade competition,
then that will also force Brazil to adopt measures to stop the real strengthening.” Keith
Barron, a consultant and gold mining entrepreneur, told King World News this week “I don’t
think they can ever stop printing money now. They are down the road of no return. I’ve seen
this happen in Russia. I’ve seen it happen in Brazil. I lived in Brazil and saw it happen twice.
The currency went to zero.” Mr. Barron continued, saying “The whole world is in an incredible
slump. The only way they can get out of this is by printing tremendous amounts of money, and
producing a lot of liquidity. Bernanke has said publicly that he knows when to turn the faucet
off, and it’s not going to produce inflation. I don’t think he’s that clever. You can go back
through 100 years of monetary history, and see that other people who thought they were clever
like Bernanke, turned out not to be. It resulted in things like the Weimar inflation in Germany.
We’re headed down that path. It is extremely bullish for precious metals. This is why we’ve
seen gold and silver react so strongly to the Bernanke news.



The only way they can stop this
now is by shutting the door and bringing out a new currency.” Ben Davies, CEO of Hinde Capital
told King World News on Thursday “The ECB, even in this last meeting, has effectively reduced
its criteria again on collateral. They are effectively saying, ‘We’ll take everything, including
the kitchen sink into the ECB, if it allows us to backstop the system’. So in that situation,
collateral is running out. We noticed this also in the US. Smaller banks are now allowed to have
gold as a zero risk-weighted provision. I think that’s a tacit admission that gold is the only really
remaining collateral at this point, and people realize the only volatility in gold is primarily driven
around currencies.” Davies continued, saying “I think September 12th might well have marked
the day the world embarked on serial debasement of the reserve currency, and set the train in motion
for a really gigantic move in gold over the next five years. There is no limit to the price.”
Owning physical precious metals in this environment is being touted by analysts as “a vital way
to protect and diversify your portfolio” and the rush to accumulate physical product appears to be
underway by wise investors across the globe. As the global financial crisis evolves, opportunities
to buy on price dips may become few and far between. One analyst on CNBC, discussing silver,
said he would “buy here, and buy higher” in the current environment. Remember that precious
metals should be viewed as a long-term investment and that the key to profitability through the
ownership of physical precious metals is to actually own the physical products and to hold them
for the long term. Always remember that you should never overextend your ability to maintain
ownership of your precious metals over the long term.
Trading Department – Precious Metals International, Ltd.

Jim Sinclair – JS Mineset Newsletter Sep 21 2012



The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from.


Let’s review what has transpired and begin to look at what will happen:


  1. OTC derivative manufacturers and distributors sold fraudulent paper to almost every entity as clients of the Western world financial system. Inherently the OTC derivatives manufacturers and distributors had part of the transaction on their books. No problem as long as the entire scam was a “Daisy Chain,” a connected set of transactions that has the appearance of risk but when all netted out equals almost zero.
  2. Until Lehman was flushed, and flushed it was, most all OTC derivatives could have been netted to zero in a derivative resurrection bank. Losers would have rejoiced and winners would have declared war. However when Lehman was forced into bankruptcy it broke the “Daisy Chain” (a chain of near risk-less transactions when netted) of the OTC derivatives scam. At this point winners had won huge and loser had lost huge and there was no longer a means of repair to the quadrillion dollar scam. The problem has no practical solution other than transferring all losing paper to the balance sheet of the Federal Reserve where then it was anticipated no non-government “mark to market” audit would ever occur. It was the perfect hole to stick the junk into.
  3. The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.
  4. The Bank of international Settlements, seeing this outrageous number, changed their computer method of valuation to maturity assuming no failures and reduced the size of OTC derivatives of all kinds to a more acceptable but still huge number of $700 trillion notional value.
  5. In the first and second round of QE the Federal reserve purchased OTC derivatives including the variety called securitized mortgage debt to remove them from the balance sheets of the Western world financial system, thereby improving the Western world’s financial institutions balance sheet and preventing an international industry wide bankruptcy. That means the Federal Reserve has impaired its balance sheet in order to repair some of the balance sheet integrity of the Western world financial system. The amount they have purchased is significant, but not compared to total outstanding above more than one quadrillion dollars.
  6. The reason for QE to infinity, QE3, is the failure of business activity in the Western world to pick up with early huge monetary stimulation so as to repair the balance sheet of the Western financial world financial system. The unseen crisis is the hidden weakness of the Western world financial system thanks to FASB (The gatekeepers of world accounting) which allows financial institutions internationally to hide their losses by valuing their paper at whatever the bank wants it to be with no reference to seek a market value, primarily because there is none to seek.
  7. The crisis not seen by Fed observers is the true balance sheet condition of the loses on the trillions of dollar of worth-less paper fraudulent paper because numbers are given but no independent mark to market audit has been or is likely performed.
  8. As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.
  9. The end game problem is an extended recessionary business conditions going into 2015 to 2017 wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.


Therefore the end game is the perception of the weakness of the lender of last resort, the Federal Reserve’s Balance sheet, as it impacts confidence the US dollar and US interest rates.


Now you know what brings about the end game.


In the future I will do small simple articles dealing with the impact on markets of a to be Bankrupt Central Bank, the US Federal Reserve.The end game could come sooner, but only if there was an independent “mark to market” audit of the Federal Reserve inventory of worthless paper which remains unlikely no matter who wins the election in November.


Those of you invested in gold and silver vehicles of all kinds (with the exception of ETFs and futures) rest well this weekend. $3500 will easily be a place gold trades. The Canadian dollar and blasphemy to the euro snobs, the Swiss franc, remain go to vehicles for cash positions. Yes cash because you to not have to pay to own them as you do with a sovereign paper with negative interest.


Your watchman,

Jim Rogers Update

Jim Cramer: Gold is the Only Currency

Posted by  – Thursday, September 20th, 2012 via Wealthwire


Central bank easing has incredible impacts on gold prices — and now that quantitative easing policies are being adopted in countries all over the world, you can expect more gains for gold ahead…

Frank Holmes, CEO with U.S. Global Investors, backs this argument, along with esteemed former hedge fund manager Jim Cramer.

In the United States, the Federal Reserve has resorted to an open-ended quantitative easing plan, while the Bank of England is about to follow suit with their QE policies; the Bank of Japan announced yesterday their decision to expand their system of quantitative easing; and the European Central Bank has suggested a motion to purchase bonds in order to help debt-ridden nations and attempt to give the euro a boost.

Every time something like this has happened in history, gold prices inevitably surge against the fiat currencies…

Just take a look at the past several years of gold’s historic bull run, tied directly to quantitative easing and the depleting value of the previously dominant monetary bases: both the decline of the dollar and the euro.

Smart investors are preparing for the value of their money to shrink: They’re hedging inflation with gold.

From the sounds of things, we’re in store for a serious gold upswing in the next few months, especially.

“If you go back 35 years, gold historically rises between August and February,” Holmes said. “So you have that wind at your back.”

Jim Cramer recently spoke with journalist Debra Borchardt about his confident gold bull mentality. Borchardt asked Cramer how high he anticipated gold to climb as a result of our international “race to debase” with every country deflating the values of their fiat currencies…

Cramer responded that gold is the only currency anyone can truly trust, especially because of its “tremendous scarcity.”

He went on to say the supply and demand situation alone is enough to send gold prices to $2,000.

Rogers says you should invest in gold instead of merely trading it. Instead of going for miners, you should go for the real thing: gold bullion. He went on:

… I am a big believer in physical gold, but the average investor doesn’t have the money to buy physical gold. I am not as suspicious of the ETFs. There is a lot of gold out there. You’ve got to pay up. The ETF had worked very well. That would be a first class debacle if that happened.

I’ve been very wise to it, that’s why I say, I’ve checked with gold dealers. I can’t own things now, but the one that I always used…

Jim, you’re crazy to recommend the GLD, but that has been the sales pitch now for years from the gold dealers and I’m not buying it.

Nonetheless, Holmes asserts his strong belief that gold stocks are gong to “put on a great performance” within the next 12 months of this quantitative easing madness.

Silver to blow through triple digits: Leeb

Marc Howe | September 18, 2012 via

Storied money manager Stephen Leeb says silver is set to blast through the $100 threshold and gold will reach $10,000 due to rabid money printing by indebted governments.

In an interview with King World News Leeb says the Japanese have joined the US and EU in a race to print money and “see who can debase their currency the fastest.”

The inflation that excessive money printing triggers will lend huge tailwinds to commodities prices, with gold and silver spearheading gains.

Leeb also points out the unsettling ambiguities in Bernanke’s plans for a third round of quantitative easing, failing to provide a timeline for monetary expansion measures. According to Leeb the Fed chairman is “going to continue this policy well after the economy recover(s)” in order to spur consumer spending with inflationary expectations.

A final factor spurring inflation and a precious metal price surge will be China’s stimulus spending on infrastructure projects, including $2 trillion over the long-term on a smart grid.

This is going to be a world in which the tailwind on commodities is going to be enormous. The big winner in all of this is going to be gold and silver. Silver will blow right through $100 and continue higher.

I have been saying to your readers that gold will hit $10,000. Well, Barron’s ran something over the weekend saying it could happen. Gold is rapidly becoming the premier currency of the world and this trend will continue.

Read more>>

Silver ponzi scheme fleeces investors of $65 million



A silver ponzi scheme run out of South Carolina fleeced precious metals investors of USD$65 million over a three year period.

Forbes magazine reports
 that Ronnie Wilson’s Atlantic Bullion and Coin, Inc. managed to convince investors to put approximately $65 million into silver bars from January 2009 to February 2012, as spot prices gained due to concerns over the global economy’s health in the immediate wake of the GFC.

According to the authorities, however, Atlantic Bullion was running a brazen ponzi scheme which purchased a barely nominal quantity of silver while using the proceeds of subsequent subscribers to provide returns to earlier investors.

Following exposure of the Ponzi scheme court-appointed receiver Beattie Ashmore discovered that out of thousands of silver bars that Atlantic should have amassed with investor proceeds only 85 1000-ounce bars had been purchased, with a mere 64 still remaining.

Instead, Atlantic Bullion’s owner Ronnie Wilson had used the money for his personal and business interests, with assets recovered by the Ashmore including six vehicles, eleven properties and a small trove of art works and firearms.

In an odd twist however, Ashmore, who as court-appointed receiver was entrusted with management of Atlantic Bullion’s assets, was able to obtain a Ponzi-sized return on the sale of bullion that the company did purchase by patiently waiting through recent spot price gains until the Federal Reserve’s announcement of its bond-buying program on September 12.

Ashmore recovered $675,000 for the scheme’s victims from sale of the silver as prices surged, realizing gains a solid 25% in advance of appraisals conducted on the day of Wilson’s arrest.

Wilson pleaded guilty in August to two counts of male fraud and faces a maximum prison sentence of twenty years for each offense.

Jim Rogers: It’s Going To Get Really “Bad After The Next Election”

By Terry Weiss, Money Morning

In a riveting interview on CNBC, legendary investor Jim Rogers warned Americans to prepare for “Financial Armageddon,” saying he fully expects the economy to implode after the U.S. election.

Rogers, who for years has been an outspoken critic of the Feds policies of “Quantitative Easing,” says the world is “drowning in too much debt.” He put the blame squarely on U.S. and European governments for abusing their “license to print money.” In the U.S. alone, the national debt has surged to nearly $16 trillion, that’s more than $50,000 for every American man, woman and child.

“[They] need to stop spending money they don’t have,” Rogers said. “The solution to too much debt is not more debt… What would make me very excited is if a few people [in the government] went bankrupt…” Rogers added.

Rogers also charged Obama and German Chancellor Angela Merkel with promoting dangerous policies that create the illusion the economy is stable… but are really only intended to buy time before their upcoming elections.

Do these charts and graphs prove that the Obama Administration’s current economic path is headed for disaster?

“Mrs. Merkle has an election next year,” Rogers said. “Mr. Obama has an election in November. The Americans and the Germans – they want to do everything they can to hold the world up until after the next election.”

“It’s going to be bad after the next election.”

How bad? Worse than Rogers predicts, according to a new investigation.

In a newly released documentary that went viral last month, a team of influential economic experts say they have discovered a “frightening pattern” they believe points to a massive economic catastrophe unlike anything ever seen in the history of the world.

The work of this team of scientists, economists, and geopolitical analysts has garnered so much attention, they were brought in front of the United Nations, UK Parliament, and numerous Fortune 500 companies to share much of their findings.Click on the short video above to see the eerie pattern.

And according to these experts – who have presented their findings to the United Nations, the UK Parliament and a long list of world governments – the catastrophe may happen well before Americans hit the polls in November.

“What this pattern represents is a dangerous countdown clock that’s quickly approaching zero,” said Keith Fitz-Gerald, the Chief Investment Strategist for the Money Map Press, who predicted the 2008 oil shock, the credit default swap crisis that helped bring about the recession, and the Greek and European fiscal catastrophe that is still wreaking havoc until this day.

“The resulting chaos is going to crush Americans.”

Another member of this team, Chris Martenson, a global economic trend forecaster, former VP of a Fortune 300, and an internationally recognized expert on the dangers of exponential growth in the economy, explained their findings further:

“We found an identical pattern in our debt, total credit market, and money supply that guarantees they’re going to fail,” Martenson said. “This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.”

“And what’s really disturbing about these findings is that the pattern isn’t limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well.”

According to Martenson, these systems could all implode at the same time.

“Food, water, energy, money. Everything.”

Dr. Kent Moors, one of the world’s leading energy analysts, who advices 16 world governments on energy matters and who currently serves on two State Department task forces on energy, also voiced concerns over what he and his colleagues uncovered.

“Most frightening of all is how this exact same pattern keeps appearing in virtually every system critical to our society and way of life,” Dr. Moors stated.

How will this “pattern” affect your way of life? What steps can you take to protect yourself? Click here to find out.

“It’s a pattern that’s hard to see unless you understand the way a catastrophe like this gains traction,” Dr. Moors says. “At first, it’s almost impossible to perceive. Everything looks fine, just like in every pyramid scheme. Yet the insidious growth of the virus keeps doubling in size, over and over again – in shorter and shorter periods of time – until it hits unsustainable levels. And it collapses the system.”

Martenson points to the U.S. total credit market debt as an example of this unnerving pattern.

“For 30 years – from the 1940s through the 1970s – our total credit market debt was moderate and entirely reasonable,” he says. “But then in seven years, from 1970 to 1977, it quickly doubled. And then it doubled again in seven more years. Then five years to double a third time. And then it doubled two more times after that.

“Where we were sitting at a total credit market debt that was 158% larger than our GDP in the early 1940s… By 2011 that figure was 357%.”

Dr. Moors warns this type of unsustainable road to collapse can be seen today in our energy, food and water production. All are tightly connected and contributing to the economic disaster that lies directly ahead.

Keith Fitz-GeraldGermany’s military held a secret investigation into this unsustainable pattern and concluded it could lead to “political instability and extremism.” See the investigation here.

According to polls, the average American is sensing danger. A recent survey found that 61% of Americans believe a catastrophe is looming – yet only 15% feel prepared for such a deeply troubling event.

Fitz-Gerald says people should take immediate steps to protect themselves from what is happening.

“If our research is right,” says Fitz-Gerald, “Americans will have to make some tough choices on how they’ll go about surviving when basic necessities become nearly unaffordable and the economy becomes dangerously unstable.”

“People need to begin to make preparations with their investments, retirement savings, and personal finances before it’s too late,” says Fitz-Gerald.

Is Silver Fast On Its Way To $50 & Beyond?




September 17, 2012 • Reprints via Resource Investor


There is not just a similarity in how gold and silver trade at the same time period, but also how they trade at similar milestones, despite the fact that those milestones are sometimes reached at different times. This can cause silver or gold to be the leading indicator, depending on the particular milestone. The 1980 peak for both gold and silver is definitely an important milestone. For this 1980 milestone, gold is undoubtedly the leading indicator (since gold has already passed its 1980 high), so it could help us to project what silver might do around this milestone.


Market conditions often cause silver to fall behind gold, for quite some time, where after, silver normally catches-up in a big way. The fact that silver is still caught-up in a trading range lower than its 1980 high, at least four years longer than gold already, provides a classic opportunity for silver to follow that “catching-up pattern” and zoom to multiples of its 1980 high. In my opinion, silver will do just that and move much faster than gold in percentage terms, over the next months.


With gold having passed $1,700 (twice the 1980 high of $850) already, given the above analysis, it stands to reason that $100 (twice the 1980 high of $50) silver could be virtually guaranteed.


Below, are two charts that show how gold and silver reacted before and after again reaching their respective 1980 highs:




Gold and silver made similar patterns before and after reaching their respective 1980 highs. From the charts, you can see there is a similarity in how gold and silver approached their 1980 high. Both made a triangle-type pattern just before they reached their respective 1980 all-time highs. When price came out of those triangle patterns, it rallied strongly to the 1980 highs, which started the formation of flag-type (pennant) patterns.


Gold passed its 1980 all-time high during 2008, while silver is yet to do so. By looking at the pattern of how gold passed its 1980 high, we can predict how silver might do it as well. If silver continues to follow the pattern that gold formed, then we can expect a massive spike towards the $50 and beyond, very soon. We are very likely in that move to $50, given that the silver price has broken out of the pennant to the up-side. My long-term silver fractal analysis report provides more details on what levels silver is likely to reach over the next years.


The $50 level can be compared to the water level, when you hold a beach under water and it starts moving upwards. When it passes the water level, it will move faster since it will now only have air as resistance, instead of water.


For more of this kind of analysis on silver and gold, you are welcome to subscribe to premium service.


Silver best-performing commodity in a decade according to Lloyds TSB Private Banking

Silver has been the best-performing commodity over the past decade, according to Lloyds TSB Private Banking.

Between 2002 and 2012 silver prices increased 572%, the metal having been seen as a safe haven for investor while also in high demand for industrial uses.

Three quarters of commodities tracked have more than doubled in value in the last 10 years with other notable gains as follows: gold +428%; tin +414%; copper +406% and lead +344%.

The research also reveals that overall, commodity prices have risen by 161% since 2002, compared with a 35% return from UK equities.

At a sector level, precious metals has been the best performer (+358%) followed by energy (+268%) although over the last year, commodity prices have fallen by 13% in response to the uncertain global economic outlook.

Precious and base metals have seen the biggest falls (both -19%) while the energy sector recorded the only increase (+3%).

Just six of the 20 commodities tracked by Lloyds have increased in value over the last 12 months, with Soya beans the top performer (+24%).

Ashish Misra, head of investments at Lloyds TSB Private Banking, comments: “Looking forward, commodity prices are likely to be driven by the level of demand from emerging economies such as China and India.”

PPMI Week in Review

The Week in Review via PMI Limited
1. What an incredible week! The US Federal Reserve more than lived up to everyone’s expectations,
announcing a new round of Quantitative Easing, and going even further to state that
this one would consist mostly of Mortgage Backed Securities, would be open ended, and
would continue even after the economy showed signs of true recovery.
2. The US Consumer sentiment reading for early September is at its highest level in four
months, despite a rise in consumer prices and a drop in factory production. The Thomson
Reuters/University of Michigan report cautioned that the upswing was likely temporary and
due to a bounce following the presidential candidate conventions. Expectations that the Federal
Reserve might “come to the rescue” with additional easing may have boosted consumer
confidence as well.
3. Initial claims for state unemployment hit a two month high last week, though some of the
increase is being attributed to the remnants of hurricane Isaac, which continued to douse
parts of the US. Rising food and energy costs pushed wholesale inflation figures higher as
well sparking fears of inflation pressures. Higher costs to manufacturers may slow down hiring
or trigger a new round of factory layoffs if they continue
4. The Middle East literally exploded in violence this week, nearly all of it aimed at the U.S.
An obscure and apparently poorly made anti-Islam film triggered riots in Libya which resulted
in the death of four Americans, including the US Ambassador to Libya and two former
Navy Seals who were acting as a security detail. The protestors lit the American consulate in
Libya on fire. Other countries, including Germany and the U.K. are being drawn into the
fray as their embassies, in multiple countries, also faced angry protestors following prayers
on Friday.
5. In Asia, Japan cut its economic outlook for the second month in a row and went further,
warning that “Japan’s economic recovery appears to be pausing due to the global slowdown.”
India’s Prime Minister unveiled a controversial plan to try to head off a credit downgrade this
week, increasing the price of diesel in India by 14 percent. Taimur Baig, Chief Economist at
Deutsche Bank, told CNBC on Friday “I think this [fuel hike] is symbolically quite important.
Though it will not have a huge impact on the subsidy bill, investors will react positively
as they had given up hope of reforms from this government.” Indian stock markets rallied on
the news.
6. In the US, the federal budget deficit topped $1 trillion for the fourth year in a row according
to the Treasury Department. The fact that the Obama administration has run deficits in excess
of $1 trillion dollar every year it has been in office is weighing down the incumbent
President’s election hopes. Mr. Obama said in 2009 that he would cut the deficit in half.
7. Europe remains at the center of a financial storm. Spain continues to face mounting pressure
from Eurozone finance ministers to formally request a bailout now that the European Central
Bank has unveiled its bond buying program. In Greece, the International Monetary Fund
Managing Director, Christine Lagarde, said lenders may agree to some sort of time extension
for the debt straddled country, saying “There are various ways to adjust: time is one and that
needs to be considered as an option” at a news conference following a meeting of Eurozone
finance ministers in Cypress.
8. Crude oil pushed its way back into the upper $90s once again as global demand projections
rose and the market digested the news that the US Federal Reserve was embarking on an
open ended round of Quantitative Easing. The unrest erupting across the Middle East may
work to keep upward pressure on oil prices as well as concerns of a supply disruption may
begin to mount.
9. The euro pushed higher against the dollar this week. The announcement by the US Federal
Reserve on Thursday that they would be doing an open ended round of quantitative easing
helped push the dollar lower against multiple currencies. The Japanese yen hit a 7 month
high against the dollar this week and rumors were abounding that Japan would intervene
once again to try to push exchange rates lower.
Friday to Friday Close
September 7th September 14th Net Change
Gold $1738.00 $1772.00 34.00 + 1.96%
Silver $ 33.70 $ 34.65 0.95 + 2.82%
Platinum $1590.00 $1715.00 125.00 + 7.86%
Palladium $ 655.00 $ 695.00 40.00 + 6.11%

Dow Jones 13306.64 13565.73* 259.09 + 1.95%
Previous year Comparisons
Sep 16th 2011 Sep 14th 2012 Net Change
Gold $1812.00 $1772.00 (40.00) – 2.21%
Silver $ 40.80 $ 34.65 (6.15) – 15.07%
Platinum $1820.00 $1715.00 (105.00) – 5.77%
Palladium $ 730.00 $ 695.00 (35.00) – 4.79%
Dow Jones 11509.09 13565.73* 2056.64 + 17.87%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1750/1725/1700 34.30/34.00/33.80
Resistance 1780/1800/1820 35.00/35.50/36.00
Platinum Palladium
Support 1680/1650/1600 685/660/640
Resistance 1720/1740/1775 710/725/750

Volatility should be expected to continue and perhaps increase dramatically. This week, even
more so than last, has shown why accumulating additional precious metals product during quiet
periods like we’ve seen for much of this year might be considered a wise decision when viewed
through the long-term lens that should be used when investing in precious metals. The US Federal
Reserve’s announcement that this latest round of Quantitative Easing would be open ended,
and would continue on even after the economy shows signs of an accelerating recovery sent precious
metals prices climbing higher again. It is literally, “QE to infinity” just as Jim Sinclair has
been predicting for so long, the race to debase fiat currencies seems to have begun in earnest. On
Wednesday, the German Constitutional Court announced that the European Central Bank’s plan
to perform Quantitative Easing on the euro was indeed legal. Japan is expected to intervene in
an effort to debase its own currency as the dollar continues to collapse, driving up export costs
and further slowing Japan’s already faltering economy.


James Turk, one of our favorite precious
metals analysts, said in an interview with King World News this week “Keep accumulating gold
and silver on a cost averaging basis because the currency cliff is fast approaching. I would add
there is a lot of money out there that is waiting for a pullback, but given what is happening
around the world, I don’t think there is time to wait for a pullback.” Mr. Turk continued, saying
“But what the Fed always tries to do is control expectations. They place greater emphasis on the
notion that inflation is not a result of how much currency is actually in circulation or how rapidly
the quantity of currency grows, but rather, whether people think inflation will worsen. Like
many things that come from central banks, it is a silly notion. It is another one of those things
that seem okay in theory and the halls of academia, but never works out in the real world. The
reason, as Milton Friedman and others have pointed out, is that a currency’s purchasing power
will be eroded if the quantity of money increases… and QE – or whatever the Fed chooses to call
it – does exactly that.” In the US, now that QE to infinity is a reality, the focus should shift back
to the looming fiscal cliff which the US Congress has done nothing to address. Major media outlets
have paraded guests on the airwaves all year saying allowing the US to “fall off the fiscal
cliff”- when Bush era tax cuts expire at the end of the year – would drag the struggling US economy
right back into recession. Now that the hour is approaching and the US Congress has made
zero progress on addressing the issue, these same pundits are saying they expect absolutely nothing
to be done by the end of the year, leaving the issue to be addressed next year.


As the rhetoric
ramps up during the election season, we expect both consumer confidence and the approval rating
of the US Congress to plummet. As central banks across the globe embark on a coordinated
plan to debase their currencies, and the stock markets in each respective country surge in elation
over the sheer amount of money printing taking place, precious metals are once more in the spotlight
as the only viable currency that actually has, and maintains, an actual physical value, not
just an arbitrary number printed on a piece of paper, backed by only government promises. Now,
more than any other, would seem to be the time to be an owner of physical precious metals. Remember
that precious metals should be viewed as a long-term investment and that the key to
profitability through the ownership of physical precious metals is to actually own the physical
products and to hold them for the long term. Always remember that you should never overextend
your ability to maintain ownership of your precious metals over the long term.

Silver offers investors the best protection available against QE3 dollar debasement

Peter Cooper | September 16, 2012 – 8:50pm via Silverseek



Silver prices are really going to be on a roll until at least next Spring after Ben Bernanke unleashed his latest round of money printing QE3 last week which echoed the ‘unlimited’ bond buying promised by the ECB the week before.

It’s coordinated ‘QE to infinity’ as Mr. Gold Jim Sinclair correctly forecast the week before. ArabianMoney like ‘The Economist’ magazine is a bit taken aback at the timing and intensity of QE3. We thought Mr.Bernanke might keep his powder dry for a while longer. He did not.

Mr.Bernanke clearly knows a lot more than he is letting on and it is not good news. He is reacting to the nasty known-knowns coming up, namely: the US ‘fiscal cliff’ at the year-end with lower spending and higher taxes; the Chinese economic slowdown or crash that is happening now; and the interminable eurozone sovereign debt crisis with Greece not likely to get a third bailout and Spanish bonds about to be tested to destruction.

Debtor’s prison

To that list you can add the world’s third largest economy Japan and the UK, both in dire economic straits and both vying for the prize of world’s most indebted nation. But what on earth does this mean for investors?

First, the US dollar is toast. The long dollar rally is over. Mr. Bernanke has seen to that with his money printing and commitment to keep interest rates at rock bottom for at least another three years and longer if necessary.

Secondly, inflation is going to rise further for energy, food and all commodities. It’s the old inflationary adage of too much money chasing too few goods. Plus most commodities are priced in dollars so they are directly linked to Fed money printing.

Thirdly, stock markets are somewhat underpinned by this flow of money but are sitll vulnerable as it begins to erode the profitability of many businesses. They will find it hard to pass on inflation of basic commodity prices like oil to consumers and suffer a profit squeeze. That does not just mean manufacturers, think airlines or road hauliers, it is the same thing.

Fourth, this leaves bond markets vulnerable to the downside. The money printing that causes inflation will eventually undermine the credit markets it is supposed to support. Why as an investor would you leave your money in bonds paying miserable returns when you could buy barrels of oil that are inflating in price?

What to buy now

Put this altogether and ArabianMoney comes to the conclusion that real assets are by far your best investment option in this environment, and anything related to them in the stock market. A bond market crash is an accident waiting to happen but has been delayed by QE3.

Every month our sister publication the ArabianMoney investment newsletter makes detailed recommendations of actual stock and other investment ideas that follow through on this basic vision (for a free issue in September only email us:

Of all the real assets we have the most confidence in silver because it is the precious metal that always outperforms gold over time, and gold is surely the most obvious defense against a falling US dollar and bond market crash, something that QE3 has made inevitable. We tipped silver as the asset class of the year for 2012 (click here) and reckon it will not disappoint us now.


Submitted by SD Contributor AGXIIK: Via Silver Doctors


If silver hits $75-100, or scoots well into triple digits then more than just hard core silver stackers will take notice.  We will finally see a real stampede as the general public begins entering the market.

As silver moves through $75 an ounce and the general public finally takes notice, MOPE will be flowing like crap down a sewer to dissuade people from buying.

I don’t believe Joe 6-Pack will understand what is happening if silver takes out $49 any more than they did when it hit $49 in May 2011.
The only ones who noticed or seemed to understand were people like us and the Cartel and for very different reasons.
If silver hits $75-100, or scoots well into triple digits then more than just hard core silver stackers will take notice.  We we finally see a real stampede as the general public begins entering the market.

Since the Great Smackdown of 2011, the price has consistently dropped for well over a year along with several spikes that got physical buyers on the wrong side of the trade and scared the average investor.  MOPE will be flowing like crap down a sewer to dissuade people from buying, with the usual pundits saying that this is a bad time to invest in precious metals.

The public notice of silver has been nearly nonexistence in the last 2-3 years.  Gold has gotten much more attention by the financial media during that time period.   If people are fearful of silver due to its volatility it will take serious and consistent price rises to get the attention of the retail investor to rotate their cash into silver. This will force prices even higher in spite of the inevitable small retracements in the price.

The Rhino Horn of the coming parabolic silver run could and should then take silver to unprecedented heights as the scarcity and demand run in tandem during  a monumental increase in price. The Casey chart of silver price increases and decreased would indicate a 300% increase over the last retracement of price to $26 an ounce.

I would not be surprised to see $75 as a resting point before even great price escalation.  As Chris Duane notes in his 14 reasons to buy silver, the real inflation rate of 400% or so will be reflected in these prices. A feeding frenzy could take place as  food and fuel inflation in 2013 shock the bejaebbers out of the US and Canadian citizenry. There will be many people who see their inflation eroded cash evaporating and while the rest of the world faces famine, with videos plastered all over the media, the average person will react with a fear factor that compels them to buy precious metals to save themselves from the increasingly painful effects of food price increases into the 20-30% range and gasoline up maybe $2-3 dollars a gallon.

People are not stupid.  They may be slow to realize the effects of inflation as they scrape by filling the grocery cart and the fuel tank.
Unlike those early to enter the massive bull run, those  who have not boarded the silver bullet train will scrounge up any funds available to buy an increasingly scarce supply of precious metals, hoping to avoid being the last passenger on this train.

Those who got IN first got  the best deal.  I fear that everyone else will not fare as well.

Important Silver Updates. By Gregory Mannarino

A billionaire’s bet on inflation – Frank Giustra interview

Via [Post reprinted from Tommy Humphrey’s]

We had the opportunity to sit down with Frank Giustra last week, the lion behind Lionsgate Films, and an early architect of countless resource companies—most notably Wheaton River Minerals (now known as the $33B Goldcorp, which spun out the $12B Silver Wheaton), Petro Rubiales (now the $7B Pacific Rubiales), and Urasia Energy.

By all accounts Giustra is brilliant, connected and wealthy. He made headlines in 2007 by pledging over $100 million and half of his future earnings to establish a charitable foundation with President Clinton. Outside of philanthropy however, Giustra has been reluctant to draw attention to himself, and rarely speaks publicly about investing.

In 2002 however, he moved heavily into gold and published, “A Tarnished Dollar Will Put the Shine on Gold”, when it was trading under $300 an ounce. Ten years later and with gold now priced over $1600/oz., it still occupies the largest percentage of his investment portfolio, and his views remain the same.

In discussing gold during the interview he said, “I believe it’s going a lot higher…it’s going to have a parabolic spike, caused by some event or some loss of confidence…a US dollar crisis would be a perfect example. That will cause gold to go through the roof, and then everybody will want to own it…I don’t think we’re even close to that yet…Gold will probably have a much greater run than some of the other hard assets–because it’s also a currency.” (19:16)

On the subject of inflation he remarked, “It’s easier to make money with inflation than with deflation. All you need to make money with inflation is money…Those that influence policy are usually the ones that have access to money, or can borrow it very cheaply… They have a conflict of interest… [Inflation is] where a lot of people are getting rich, and the public is being educated—quote “educated” to accept that type of [inflationary outcome].” (11:10)

When asked about the parallels between today’s Western societies and previous civilizations, he replied that a strong example would be, “Sixteenth century Spain. In just over 100 years, it went from an almost nothing nation, to a great empire, and back to a nothing nation. They became a consumption economy…They waged a number of wars with almost everybody on the planet…because they felt they were a superior nation…[and] that’s what’s happening in America today…There’s no way out except currency debasement.” (15:30)

With respect to the mining shares, he said, “The resource market is in the worst state I’ve ever seen it in…people usually connect irrational and stupid market behavior with peaks of markets, but it takes place at the bottom of markets too. And it’s just as bad [at bottoms]…fear is a much stronger emotion than greed…[There are] companies developing world-class assets trading at pennies on the dollar.” (21:50)

Additional topics discussed included agriculture, success, and mentorship (31:07).

Giustra’s predictions for the western world economies are sobering, but his view of the resource sector is optimistic, and his case for inflation is impossible to ignore. We feel this interview is required listening for all those who seek and desire wealth.

So without further comment, here is billionaire mining and entertainment mogul Frank Giustra in conversation at the Vancouver Club last week. Special thanks to Cambridge House and VC for putting us up, and to Frank for joining the program.

Jim Rogers: QE3 Has Already Begun

Posted via Wealth Wire by  – Tuesday, September 4th, 2012


“I do not know if they [the Fed] will announce it… I know they are going to print more money. They already are.  If you look at their balance sheets, you will see that something is happening, assets are building on their balance sheets and they are not coming from the tooth fairy.”

 – Jim Rogers

Rogers recently made this statement to India’s Economic Times. He continued by asserting his belief that the Fed is “a little embarrassed” to officially confirm their engagement in QE3 after QE1 and QE2 failed.

Furthermore, Rogers says he is confident that they are all going to print money even though it is the wrong thing to do. Unfortunately, it is “all they know how to do,” according to Rogers.

Last week, Bernanke gave no direct indication of a coming QE3 at the Jackson Hole speech, but no one was surprised. Instead, Bernanke used his energy and speaking time attempting to explain the ways in which QE1 and QE2 were effective.

We’re not sure who’s buying those lines, but we know Mr. Rogers isn’t one of those suckers.

Presumably, America’s central banks are secretly printing money already to avoid “getting egg on their face again.”

Meanwhile, the eurozone crisis and our own debt dilemmas remain stagnant. It’s truly mind-boggling that the Federal Reserve is still attempting to solve the debt problem by instigating more debt by giving consumers a false sense of confidence by printing more ‘Monopoly Money.’

Investors finding trouble with the Western stock markets – the Euro Stoxx 50 index is down 3.1pc from its year-high in March after falling 18.8pc – are turning towards other emerging markets for solace, especially Asia.

Still, India and China both have some serious risk-factors associated with them…Rogers is short on India and says China is headed towards a “hard landing.”

Once again, investors are seeing why gold and other precious metals are the only real safe havens in these unfavorable present-day market conditions. Gold is hovering around the $1,689 range and is likely to crawl up again once governments across the globe reinstate stimulus measures.

But don’t look to the central banks to help out with the mess the global community is in. They will just print more money as gold prices rise in response.

Oil prices are predicted to rise based on supply limitations as well. If our nation does end up going to war with Iran, expect oil prices to surge to unprecedented levels.

Keep your eyes on commodities and precious metals, not the Fed. You already know what they’re doing – we’ve all already seen it twice before.

Your Window to Buy Gold Below $1,700 Is Closing

Posted by Wealth Wire – Tuesday, September 4th, 2012


Even the hardiest investors have been lamenting that gold prices have been stuck in a rut for a long time. Others with less experience have watched the market waiting for something to happen….

And as always, many bailed out of the market entirely, licking their wounds.

But some, including me, have been stocking up.

We’re convinced prices won’t stay down forever.

In fact, I think there’s a good reason to buy gold if you can, and as soon as possible.

Here’s why:

Based on the data I chart below, I believe the window of time to buy gold for less than $1,700 an ounce is very limited.

I examined gold’s three largest corrections since the bull market began in 2001, including how long it took to recover from those corrections and establish new highs.

The conclusion that emerged is that the current lull in gold prices will almost certainly end soon, if it hasn’t already.

Gold set a record on September 5, 2011 at $1,895 an ounce (London PM Fix) and to date has fallen as low as $1,531 (December 29, 2011), a decline of 19.2%. Gold has tested that level several times since but never broke below it.

In order to determine how long it might take to breach $1,895 again, I measured the time it took to mount new highs after big corrections in the past.

The following chart details the three largest corrections since 2001, and calculates how many weeks it took the gold price to a) breach the old high, and b) stay above that level.

In 2006, after a total decline of 22.6%, it took a year and four months for gold to surpass its old high. After the 2008 meltdown, it was a year and six months later before the metal hit a new record. The 16.2% drop in 2003 lasted seven months, and another two months before the price stayed above it.

You can see that our correction has lasted just shy of a year. If we matched the recovery time of 2006, gold would hit a new high on Christmas Eve (Merry Christmas!).

But here’s the thing: that’s how long it would take gold to breach $1,900 again – it will take a couple months or more for the price to work up to that level, meaning the remaining time to buy gold under $1,700 will likely be measured in days or weeks, not months.

This is bolstered by the fact that the price moved up strongly last week.

And just as importantly, we’re on the doorstep of the seasonally strongest month of the year.

This is an educated guess, of course, but what the data make clear is that all corrections eventually end – even the bloodbath in 2008.

The current lag will come to an end too, and we’re certainly closer to the end of this corrective period than the beginning.

This has direct investment implications.

First, once gold breaches its old high, you’ll probably never be able to buy it at current prices again in this cycle.

That’s a rather obvious statement, but let it sink in.

The next few days or weeks will likely be the very last time you can buy gold below $1,700. You’ll have to pay a higher price from then on.

And think about this: it’s entirely possible that by this time next year you will never again be able to buy gold for less than $2,000 an ounce – unless maybe it’s in “new dollars” or some other currency that circulates with fewer zeros on the notes.

Second, the data can help you ignore the noise about gold’s bull market being over and other nonsense spewed from mainstream media types.

If gold doesn’t hit $1,900 until December, you’ll know this is simply normal price behavior and that they’re overlooking basic patterns in the data. And when the price nears that level again and they’re caught off guard by it, you’ll already be positioned.

There are three intelligent ways to buy gold, understanding them means you are there in good time for the turn around.

Regardless of the date, we’re confident that a new high in the gold price will come.

The highs will come because many major currencies are unsound, overburdened with debt, and being actively diluted by governments.

Indeed, the ultimate high could be frighteningly higher than current levels.

As such, we suggest taking advantage of prices that won’t be available indefinitely. I think we all need some of nature’s cure for man’s monetary ills.

The window of time to buy gold at current prices is closing. I suggest taking advantage of the sale while you still can.

*Post courtesy of Jeff Clark at Casey Research.

Silver Likely to Make “Massive Move”

Posted by Wealth Wire – Wednesday, August 22nd, 2012


The silver chart has formed a big pennant like that of the gold chart. What this indicates is that the silver price will likely make a massive move soon. Technically, this move can be up or down. Note that this update is from my premium service originally published on 6 August 2012.

Below is a silver chart with the pennant:

mool 8 1

The technical and fundamental evidence that I have collected, and look at, tells me that the price is likely to go upward out of this pennant formation.

On the chart above, you can see that the price has actually broken out (upward) of the pennant. We have to give it some time before we can say that it is a valid breakout. Also, I have drawn a blue line, which could become another area of resistance.

If we were to consider a move down, then a first target of $15 and one lower at $5 would come into play, based on the patterns. A price of $5 (and even $15) does not make any economic sense, given the amounts of fiat money currently available.

However, there is a real threat of deflation, currently, and the effect of this has to be considered when looking at the future silver price. In my opinion, we do have a perfect setup for a massive deflation which will destroy a lot of debt-based value.

Stock market values have been driven for years by this debt-based value, and will, therefore, be very badly devalued. Many believe that such a fall in stock market values will take down the silver price. I do not agree, and have given many reasons why.

Here, I would just like to point out that the current threat of deflation is due to the massive debt levels, and the inability to service those debt commitments. You can just look at the example of Spain or Greece.

Silver is a real store of value and that is its most significant function. The current crisis will cause a massive rush to that which can store value that will not be destroyed by the debt-collapse. Silver is just about the opposite of debt.

Previously, I wrote about how this debt-based monetary system has created what I call a “mirror-effect”, whereby, silver (and gold) is pushed down in value, to a similar extent as to which paper assets such as general stocks are pushed up in value. This mirror-effect clearly shows up on the long-term charts of gold, silver and the Dow.

Below, is a long–term silver chart (real and nominal) from 1850 to present (generated at

mool 8 2

I have drawn a vertical red line, approximately where silver was demonetized (1870s). Notice how the real price of silver collapsed after the red line, from about $30, until it bottomed in 1931 at $4.29. It then traded side-ways (from the big-picture view) for many years, until it spiked from about the early 1970s, making a peak in 1980, where after, it bottomed again in 2001.

Technically, the bottom in 2001 was the completion of what would be a remarkable double bottom reversal, with the first bottom being in 1931. After a double bottom formation, there is often a big rally, and that is exactly what happened next. If this pattern continues to follow the pattern of a valid double bottom, it will reach levels that will exceed the 1980 high by at least one multiple, but probably by many more.

The interesting thing about this possible double bottom is the fact that the two bottoms came 70 years apart. This 70 years period also appears on the long-term Dow chart. Below is a Dow chart (from from 1900 to present:

mool 3

On the chart, I have indicated a 70 year period from when the Dow peaked in 1929, to the peak in 1999. The reason for using the 1999 peak instead of the 2007 peak, is the fact that the 1999 peak represents the real peak, since the Dow/Gold ratio peaked in 1999 (like it did in 1929).

Notice the dates of the peaks and how they fit in with that of the bottoms of the real silver price, as well as the similar 70 year periods between. In my opinion, the occurrence of the 70 year period on both charts, in the context as explained above, provides additional evidence of the link between silver’s demonetization (or suppression) and the massive debt bubble of this century – as explained in part 1 of this article.

While the Dow is inflated to the peak in 1929, silver is suppressed to its low in 1931. And again, the Dow is inflated to its peak in 1999, while silver is suppressed to its bottom in 2001.

So, the peaks and troughs, as presented in the above charts, are the manifestation (in visual form) of the debt-based monetary system causing paper and related assets to rise, while suppressing silver. Another way of looking at it is that the debt-based monetary system is fuelling speculation in paper assets by using energy diverted from precious metals.

Silver (like gold) stands in direct opposition to the current monetary system (they are inescapably linked). The fall (and falling) of this system is the rise of silver as money; therefore, massive increases in what silver can buy in real terms.

Looking at a bearish pattern to find critical levels

Below, is 6-year chart of silver, highlighting bearish fractals:

mool 8 4

I have highlighted two fractals by indicating 4 similar points on both. Based on this comparison, we could now be at a very critical area. A break-down below the support (about $26), could mean that the current pattern could follow the 2007/2008 pattern, and take price much lower. This is presented not because I believe that price will break lower than the support, but to show why I think we are at a critical level, and why we should be watchfull.

Pattern Previously Covered

Here, is a follow-up on my previous article about the similar flag-type formations on the silver chart. Below is a graphic which compares the current pattern on silver (from about the beginning of 2011 to present) to a 2007 pattern:

mool 8 5

This comparison is still very much valid; only if price goes lower than $26 could it become invalid. In fact, there is a good chance that price has broken out to the upside.

On both charts, I have suggested how the flag patterns might be similar, by marking similar points, from 1 to 6 (and alternatively from a to h). Based on this comparison, it appears that the silver price might now have found that point 6 or h (at the end of June), and is about to increase significantly.

We could be at very volatile area due to the possible breakout, since this is often the case after a breakout – so be aware! I am of the opinion that silver should make its move higher between now and the end of this month, if this comparison is to be confirmed.

Follow-up on Gold/Silver Ratio

In my last gold update, I covered the Gold/Silver ratio, and explained why I think the Gold/Silver ratio will soon fall straight down. Below is an updated Gold/Silver ratio chart:

mool 8 6

On the chart I have indicated a trading channel in which the ratio has been moving for the last five months. It appears now to have finally broken down, out of the channel. This could be a very strong signal that silver and gold prices are about to rise significantly. Again, here we have to watch for a possible retest of that break-down area, before the ratio falls straight down.


Silver appears to have broken out of the pennant or flag-type formation, and could now finally be setting-up for a massive rise in price. We should, however, be very watchful, due to the fact that we are at a critical area in price and time. There is a big threat of deflation, but, in my opinion, it is this very deflation (brought about by the collapse of the debt bubble) that could be driving silver prices higher.

*Post courtesy of Hubert Moolman, a gold and silver analyst, specializing in fractal analysis as well as the fundamentals of gold silver. He offers a newsletter service, which provides research to investors from various countries, including: USA, UK, Europe, India and Australia. His work is regularly published on the established precious metals sites. 

You can read more at and reach him at

David Morgan Interview on Silver, Precious Metals & More – Radio Nugget Interview

David Morgan and The Morgan Report

Seduced by silver at the tender age of 11, David Morgan started investing in the stock market while still a teenager. A precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems ahead and reasons for investing in precious metals.


click on link to listen to interview


To download the free mp3 file: click here.

Platinum surges after South Africa mining massacre


As a result of the spike in the platinum price, investor interest in North American platinum producers has begun to pick up, says Canaccord.

The price of platinum continued to surge after the shocking massacre of miners at Lonmin PLC’s South African platinum mine near Rustenburg, writes Canaccord Wealth Management in itsMorning Coffee newsletter. Last Thursday, 34 striking miners were gunned down at the mine when they stormed a police line. Ten other people, including two police officers, died in violence earlier last week.

The strike was sparked by a demand for better wages. However, it appears that the issues run deeper than that. The traditional union in the area, the NUM, is a key ally of the African National Congress (ANC). Its backing is critical for President Jacob Zuma in his fight to retain his position in the ANC’s party elections this December. Miners accuse leaders of the ANC of abandoning their grassroots concerns, focusing instead on politics. So they turned to an alternative union to fight in their corner.

A key detail in this is the civil war that appears to have started between the two unions. While the price of platinum has spiked over the last couple of days, there could be more to come. [at US$1,492.50 an ounce on Monday, the price of platinum had jumped from US$1,395.00 last Wednesday].

Lonmin, which produces 12% of global platinum, has shut-in all production and given the enormity of [last week’s events], this situation will likely not be resolved quickly.

As a result of the spike in the platinum price, investor interest in North American platinum producers has begun to pick up. Stillwater Mining Co. (NSYE: SWC,Stock Forum) and North American Palladium Ltd. (TSX: T.PDL, Stock Forum) are the only two North American based platinum/palladium producers, withETFs Physical Platinum Shares (NYSE: PPTLStock Forum) giving investors an ETF option.

Trading at $1.71 on Monday, North American Platinum has a market cap of $298.2 million, based on 174.4 million shares outstanding. The 52-week range is $3.94 and $1.47. Stillwater, which traded at $10.15 on Monday, has a market cap of $1.17 billion, based on 115.1 million shares outstanding. The 52-week range for the stock is $15.95 and $7.31.

Given the severity of the news, one gets that feeling that this dispute will not be short-lived, Canaccord writes.

Jim Rogers Says Silver is Better Investment than Gold

By Jared Cummans

Jim Rogers is easily one of the most famous investors of all time. His astounding track record has led him to become one of the most successful traders ever, earning deep respect throughout the financial world. Better yet, Rogers is not the least bit shy about speaking his mind, whether he is right or wrong. Some of his previous statements included the fact that anyone who doesn’t invest in commodities is a fool, that gold will surely drop 20% from its current levels, and now, Rogers has stated that silver is a better investment than gold.

Gold investing has long dominated the precious metals space, as investors have used this ultra-popular metal as both a trading/speculative instrument as well as an integral part of a longer term strategy. While silver still has a large presence in the financial world, it is not often that a big name steps into the limelight and touts this white metal over its gold counterpart.

Rogers’ Reasoning

Rogers noted that for the time being, silver presents itself as a better play, as it has been a slightly better performer over the past five years. “Consider this: Silver is the only major commodity not to have reached a new all-time high in this bull market; silver is still cheaper than it was 32 years ago, prices are astonishingly depressed” writes Peter Cooper. Also, historically, gold has a history of being worth anywhere from 12 to 15 times silver; that figure is currently showing gold as being roughly 50 times more valuable than its counterpart metal.

Rogers also urges that silver’s volatility may make it the perfect option come fall when it is widely expected that the Fed will be announcing yet another quantitative easing program that could create a mad rush into silver. Of course, that is not to say that it will not be a bumpy road along the way. Silver has not maintained quite the composure of gold through the years, as it is known to exhibit massive movements, so the next few months will likely be more of the same.

Does China Plan a Gold-backed Renminbi?

 | August 19, 2012

We expect the Chinese central bank to continue gradually accumulating gold, and we think that it might be planning a gold backing for the renminbi. If that were to happen, international acceptance would soar. Not for nothing was the enormous amount of gold reserves in the United States (N.B. the US reserves were at 29,663 tonnes in 1953) along with military dominance a central reason for the US dollar becoming the global reserve currency.

Since the Chinese current account surplus has been on a steady decline, the widely held opinion of the massive undervaluation of the Yuan seems to become more susceptible to questioning as well. Therefore, a quick internationalisation would make perfect sense from a Chinese point of view. Officials have also confirmed this hypothesis. The Head of Research at the People´s Bank of China recommends investing in gold in order to protect and diversify China´s currency reserves95. Zhang Jianhua said that gold was the only safe haven for risk-averse investors, whereas other forms of investment from government bonds to property were losing value”. It was necessary for the Chinese government to further optimise the portfolio structure of its currency reserves. He advised buying gold on relative weakness.

A former central banker claimed that US Treasuries were not safe in the medium to long term. In addition, China will launch a new investment fund that will invest parts of the more than USD 3,000 in currency reserves in energy and precious metals. PBoC advisor Xia recommends holding only USD 1,000bn in currency reserves, with the rest to be earmarked for strategic investments. He goes on to suggest a gradual increase in gold reserves and recommends pursuing a “buy the dip” strategy over an extended period of time. He also advises PBoC to add silver to the official reserves. At the same time, an official of the Chinese Chamber of Commerce said China should step up its gold reserves to as much as 8,000 tonnes. Ji Xianonan, head of the Chinese State Council´s State-Owned Enterprise Supervisory Board, has recently suggested that China ramp up its gold reserves within the next three to five years to 6,000 tonnes. Within ten year´s time, China would want to own 10,000 tonnes of gold. This means that China would have to buy almost 40% of annual production until 2020. The significance of such statements can hardly be overestimated. Experience shows that they tend to be accorded with the government and party leaders.

According to the statistics of the World Gold Council, the Chinese central bank did not make any purchases in 2010 or 2011. Official reserves were last reported in June 2009 at 1,054 tonnes. The gold imports from Hong Kong amounted to more than 100 tonnes in April alone; in the year to date, 240 tonnes of gold have been imported. There is a clear upward trend in place: between May 2010 and April 2011 China imported 66 tonnes, and a year later imports were at 489 tonnes – an increase of 640%99. In total, imports in 2011 amounted to 427 tonnes (as compared to 118 tonnes in 2010). We expect not only Chinese private investors but also the PBoC to continue stepping up their accumulation of gold reserves massively. We believe that China holds definitely a far higher volume of gold reserves than the officially confirmed 1,054 tonnes.
Chinese gold imports from Hong Kong (in tonnes)

chinese gold imports from hong kong 2009 2012 gold silver insights

Sources: Datastream, Bloomberg, Reuters, Erste Group Research

Felix Somary´s account of the Chinese mentality of 1913 makes for a fascinating read, “In Europe nobody would understand the Chinese mentality back then; Europe was at the peak of its power, full of confidence in the present and the future, amused at people who would reject banknotes and who would suspiciously put metal money on a scale to verify its weight. The consensus was that they were trailing us by five generations – when the truth is, they were one generation ahead. They had experienced the fortune of billions on paper under Mongolian emperors – war conquests and road construction – and they had then seen the bitter ending of it all. This experience had stayed with them throughout the centuries.”

By Ronald-Peter Stoeferle, Precious Metals Analyst, Erste Group Research.

This article is an excerpt from Erste Group Research and their July 11, 2012 Gold Report titled ‘Gold Report 2012 – In GOLD we TRUST´.

Is China Preparing a Gold Standard?

Posted by  – Tuesday, August 21st, 2012 via Wealthwire


The renminbi is the official currency of China used as legal tender in China’s mainland. But what will happen to the renminbi if China does begin backing the currency with gold? Will it branch out into other foreign economies as a reserve currency for them as well? Perhaps…

Some sources believe the international acceptance of the currency would soar to unprecedented levels if China does initiate a new gold standard. It’s the same reason the U.S. dollar became a global reserve currency decades ago.

Officials, investors, and financial planners have advised everyone in China to buy gold on relative weakness because it is the only safe have for risk-averse investors, according to Zhang Jianhua from People’s Bank of China. Since 2011, Jianhua has been preaching his message, declaring that no other assets are safe in these volatile market conditions. Hard currency, gold in particular, is the only choice to hedge risks.

He advised the Chinese government to buy gold on dips, saying, “The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimize its foreign-exchange portfolio and purchase gold assets when the gold price shows a favorable fluctuation.”

And that’s exactly what Chinese people and China’s government have been doing – stockpiling gold. From May 2010 to April 2011 China imported approximately 66 tonnes of gold. Fast forward to April of 2012 and imports were at 489 tonnes. That’s an increase of 640%. Meanwhile, several sources indicate their belief that China is holding much more gold than they are officially confirming – they have confirmed 1,054 tonnes so far.

Take a look at this chart to get a clearer idea of just how drastically Chinese gold imports from Honk Kong have increased from September 2009 to March of 2012.

gold tonnes
*Sources: Datastream, Bloomberg, Reuters, Erste Group Research, image courtesy of GoldSilverWorlds.

If China does, in fact, move towards a gold standard, it will be great for all you gold bugs. Despite a weakened gold demand from India driving overall weakness in gold’s figure, China is about to beat India “for the first time on an annual basis as the largest gold market in the world, with demand reading at least 850 tons and possibly more than that,” said Marcus Grubb, managing director at the World Gold Council.

With one of the world’s biggest gold reserves and exponential increases like the ones shown in the graph above, there’s no doubt that it’s likely only a matter of time before you’ll officially receive news about China’s gold-backed renminbi…

Russia Accumulates gold, China silver imports rise

Russia continues to accumulate gold in its large foreign exchange reserves. The reserves include monetary gold, special drawing rights, reserve position at the IMF and foreign exchange.
Russia’s central bank increased its gold holdings to 30.1 million troy ounces as of August  1st, from 29.5 million troy ounces a month earlier, according to a statement published on its website today.
The gold reserves were valued at $48.7 billion at the end of last month, Bank of Russia said in a statement.
Russia’s gold and foreign exchange reserves rose to $510.0 billion in the week to August 10 from $507.4 billion a week earlier, central bank data showed last Thursday.  Russia’s gold and foreign exchange reserves were $498.6 billion at the end of 2011.
This means that Russia now nearly has some 10% of its foreign exchange reserves in gold bullion.


From Goldcore:

Today’s AM fix was USD 1,624.00, EUR 1,308.94, and GBP 1,030.26 per ounce.
Yesterday’s AM fix was USD 1,615.25, EUR 1,306.84 and GBP 1,028.04 per ounce.

Silver is trading at $28.95/oz, €22.40/oz and £18.44/oz. Platinum is trading at $1,495.75/oz, palladium at $604.70/oz and rhodium at $1,025/oz.

Gold rose $4.80 or 0.3% in New York yesterday and closed at $1,620.70/oz – its highest level in three months (since June 19). Silver dropped than rallied back to $28.83 ending the day with a gain of 2.64%.

Gold Spot $/oz and 200 Day Moving Average –  August 2009 to Today – (Bloomberg)

Gold continues to be supported by the real risk of EMU break up and further weakness in the euro, dollar and other currencies. Gold continues to consolidate below its 200 day moving average at $1,644/oz.

Technically, gold needs to close above the 200 DMA. Should this happen we could see quite significant short covering and more speculative elements on the COMEX may sense blood and come in on the long side in a more aggressive manner thereby propelling gold well above its recent trading range.

Platinum hovered just above the 2 month high hit on Monday over supply concerns from South Africa.  Lonmin is the world’s number three producer and accounts for 12% of global platinum output. Industrial unrest has spread to other platinum mines in South Africa which produces between 70% and 85% of the world’s platinum (different estimates).

44 people died after violence and a massacre at Lonmin’s Marikana mine, and the company is now waiting before firing the 3,000 workers as previously planned, as the mine owners realized it would escalate the situation.

Gold bullion prices inched up despite trading volume for US gold futures being on track to hit a 2012 low. Silver surged almost 3% and there was speculation that platinum’s rally may have made some of the silver shorts close some of their massive concentrated short positions.

Platinum has surged 7% in the last 3 sessions bringing its year to date gain to 7% outperforming gold and silver so far in 2012.

Russia continues to accumulate gold in its large foreign exchange reserves. The reserves include monetary gold, special drawing rights, reserve position at the IMF and foreign exchange.

Russia’s central bank increased its gold holdings to 30.1 million troy ounces as of August  1st, from 29.5 million troy ounces a month earlier, according to a statement published on its website today.

The gold reserves were valued at $48.7 billion at the end of last month, Bank of Russia said in a statement.

Russia’s gold and foreign exchange reserves rose to $510.0 billion in the week to August 10 from $507.4 billion a week earlier, central bank data showed last Thursday.  Russia’s gold and foreign exchange reserves were $498.6 billion at the end of 2011.

This means that Russia now nearly has some 10% of its foreign exchange reserves in gold bullion.

Russia’s Gold Holdings From 1993 to June 2012 – (Bloomberg)

Since 2006, Russia has been gradually accumulating gold in order to diversify and protect from devaluation of their dollar and euro foreign exchange reserves and as part of a long term plan to position the Russian rouble as an international reserve currency.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

(Bloomberg) – Silver Imports By China In July Rise To 272 Tons
Silver imports by China were 272 metric tons in July, according to data released by the customs agency today. That compares with 223 tons in June. Platinum imports were 7.4 tons in July, compared with 6.1 tons a month earlier, data showed. Palladium imports were 1.97 tons, data showed.

(Bloomberg) — IShares Silver Trust Holdings Unchanged at 9,733 Metric Tons 
Silver holdings in the IShares Silver Trust, the biggest exchange-traded fund backed by silver, were unchanged at 9,733.39 metric tons as of Aug. 20, according to figures on the company’s website.


Aug. 20    Aug. 17    Aug. 16    Aug. 15    Aug. 14    Aug. 13

2012       2012       2012       2012       2012       2012


Million Ounces    312.936    312.936    312.936    312.936    311.579    313.226

Daily change           0          0          0  1,356,958 -1,647,762          0


Metric tons      9,733.39   9,733.39   9,733.39   9,733.39   9,691.18   9,742.43

Daily change        0.00       0.00       0.00      42.21     -51.25       0.00


Watch Out For A Silver Breakout Higher

Jeb Handwerger | Monday, August 20th


An old melody advises us to look for the silver lining whenever dark clouds appear in the blue.  There is economic and political upheaval all over the world, especially in the South China Seas.  This may directly affect the world’s supply of industrial metals such as graphite, rare earths, molybdenum and tungsten.

Today we direct our attention to an area where silver is shining.  Poor man’s gold may come into prominence shortly and provide our subscribers with possible profits.

The silver battlefield is filled with bulls and bears fighting for dominance.  Recently, the poor man’s gold has dropped to the $26 area.  The struggle continues between the opposing sides.  The bulls and bears are keeping their eye on this critical support level at 2011 lows.

We sense that the bulls will prevail at this mark.  The reasons to buy silver now is compelling.  The U.S. dollar may have already reached an interim top as investors realize that the employment situation in the U.S. is still a concern and that the Federal Reserve will need to implement some form of QE3 to devalue the dollar to pay off soaring deficits and promote inflation possibly announced at the end of this month in Jackson Hole.

The bears disagree and claim that silver will be pushed back beneath this level as silver plunges to new lows as the Fed continues to keep its trigger off of the QE3 bazooka and wait until after the election.  Silver is holding the line making a rounded bottom.  Notice the rounding bottom signaling a potential breakout as sellers become exhausted.


On the supply side, silver production comes mainly from Peru and Mexico where miners are facing significant challenges including violence.  Newmont is having to deal with violent protests in Peru which reminds us of what Fortuna Silver had to deal with in Mexico.  Right now, Pan American Silver is suspending investment in its flagship Navidad Project due to the rising resource nationalism in Argentina.  Pan American paid $500 million for the asset in 2009.  This project may be the richest undeveloped silver deposit in the world.

Similarly, Bolivia and Evo Morales is considering nationalizing South American Silver’s(SAC.TO) large undeveloped silver project amidst violent indigenous protests.  The company describes it as “one of the world’s largest undeveloped silver deposits.”  The company is planning to invest over $50 million into the project.  At the same time the Bolivian peasants have violently kidnapped five workers from the project.

Such turmoil in Peru, Mexico, Argentina and Bolivia may add to the world’s already existing shortage of silver.  This supply crunch is combined with rising political uncertainty in Egypt, Syria and Iran and economic malaise in the EU and the United States which is causing investment demand for silver to rise exponentially.

All signs are pointing to a possible global inflation which could propel silver prices higher.  We have record deficits in the U.S. where many citizens are looking to protect their savings from a potential devaluation to pay down record debts.  With the recent Obamacare Supreme Court Ruling entitlement spending will soar.

Former Federal Reserve Chairman, Alan Greenspan noted in 2010 that “Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits…or significant inflation… can close the deficit.”

Remember, in response to Keynesian pump-priming inflation threatens to make silver increasingly attractive as a safe haven.  There is always the presence of increased industrial demand for the poor man’s gold.  Silver is being used increasingly in high tech applications from batteries to solar panels.

Last month the silver etf’s added 293 metric tons of this valuable metal to their holdings which represents their highest inflows since September.  The bears claim that silver’s proximity to the $26 line is a negative signal and are pushing below their 50 and 200 day moving averages on the way to $18.

Recall that silver is volatile and moves up or down more than other commodities such as gold.  On the other hand, QE3 if it is implemented will encourage monetary easing internationally and thus will boost silver prices.

After QE2 we called the silver breakout to the day on 8-25-10.

Silver soared from $18 to close to $50 outpacing other commodities.  If QE3 is carried out, silver could experience a similar type of move.  In such an event, the specter of inflation may trigger silver’s rapid ascent into new all time highs.  We regard silver as a long term holding which may be ready to move into new all time highs past $50 depending in part on the Fed’s next move.

Heard the rumour China is buying 6,000 tonnes of gold? It may not be as crazy as it sounds

Frik Els | August 17, 2012

Hedge fund gurus George Soros and John Paulson and central banks around the world are jumping back into the bullion market.

At MarketWatch, Myra P. Saefong, speaks to Kevin Kerr, president of Kerr Trading International, Brien Lundin, editor of Gold Newsletter and Mark O’Byrne, executive director at GoldCore about “unconfirmed speculation” that China – the world’s number one producer and second-placed consumer (at the moment) – is gearing up to buy up to at least 5,000 to 6,000 tonnes starting before the end of the year.


There is also “the potential for greater demand from unreported purchases by the People’s Bank of China, should they decide to again report an increase in their gold holdings,” [O’Byrne] said.

[Kerr said] “If China buys this much gold, that would exceed annual, global production of gold, he said. “We do not have enough gold for China to buy that much, and it will take China time to purchase this amount of gold.”

“There’s a significant discrepancy between domestic gold demand in China and the level of Chinese gold imports and production, and apparently this gap is being made up by central bank gold purchases,” said Lundin.

$2500 Gold? very possible in less than 6 months

English: A bag of money, US dollars, spinning ... 

English: A bag of money, US dollars, spinning in a vortex of color, representing chicanery or misrepresentation of cost or economic information or data, but could represent outright financial fraud. (Photo credit: Wikipedia)

I’m not a fan of financial or monetary charts.  Given that the data on which these charts are based are typically received from the government, and given that the government routinely lies about economic data, I can’t see how anyone can reasonably place significant reliance on charts.

I prefer to try to identify fundamentals. I look for long-term trends whose power I deem to be irresistible.  Insofar as I can identify such trends, they may not tell me what the price of gold, or the unemployment rate, or the inflation rate, will be next week, but they’ll give a clue as to whether those numbers will be up or down a year from now.  I’m more inclined to invest intrends that should be good for the next several years than I am to speculate (bet) on technical changes that might be reported in the next week.

But here’s a chart published by Chris Martenson, CEO & co-founder of Peak Prosperity and a long-time gold bug.  The chart makes sense to me and is compelling.  I’ve seen other chartists talk about “flag” formations in the past.  They explained that the price of gold has been making a “flag” for the past year, and that such “flags” typically precede a major price change.  The price change could be a big increase or a big decrease, but in the case of gold, a big increase is expected.


Until now I didn’t have enough brains or background to appreciate the “flag” argument–largely because I only saw “flags” one “flag” at time.  But his chart shows a history of five “flag” formations in the past four years.  That “history” makes the flag concept more easily understood and convincing.

This doesn’t mean that I now trust all charts and technical analyses of the price of gold.  But I look at this chart and say, “Yeah, this makes some sense”.  I not only see the flags’ “history,” I see that current flag is a monstercompared to the previous four.  The sheer magnitude of the current flag suggests that a huge price change is possible for gold.  Mr. Martenson’s predicted $2500 gold is clearly possible and might even be understated.

More, when you see the previous four flag formations and subsequent jumps in the price of gold that took place in less than three years, it implies that after a flag formation finally breaks, the next big high in the price of gold will be reached, on average, in about six months.  That implication proves nothing, but it does suggest that if and when the current “monster” flag breaks, we could see $2500 gold in less that six months.  If so, that’ll be an exciting time for those of you who own gold.

Here’s the chart:




Alfred Adask

Gold and Silver Shine on Weak U.S. Dollar

Posted by Wealth Wire – Monday, August 20th, 2012


Gold, silver and crude oil prices are closely related to the movement of the U.S. dollar.  After a healthy consolidation, gold began to move up in August 2012.  At the same time, deteriorating expectations for crop yields in the American Midwest moved corn and soybean prices to new highs.  Higher food prices in late 2012 or early 2013 could have far reaching and geopolitically destabilizing effects likely to weigh on stocks, putting the shine back on precious metals.  Whilebillionaires George Soros and John Paulson are buying gold, silver has been in backwardation in recent weeks and silver held in ETFs rose to $16.2 billion according to Bloomberg.

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While increasing risk of geopolitical instability, including fear of a U.S. or Israeli war with Iran, account for rising crude oil prices and renewed interest in precious metals, the proverbial elephant in the room remains the U.S. dollar vis-à-vis a crumbling Euro.  Precious metals mining stocks hit a low in mid May when the U.S. Dollar Index (USDX) shot up +5.5% (4.33 points) from 78.71 on April 27 to 83.04 on May 31.  By July 24 the USDX had made a 2-year high of 84.10 as Spanish bond yields soared against a backdrop of continued worries over the European debt crisis.  The U.S. dollar then slid -2.25% (1.89 points) to 82.21 on August 2, bouncing back to 82.60 by August 17 with a flat 50-day moving average as precious metals prices and mining stocks rose.

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Gold mining stocks, in particular, have suffered due to higher costs related to higher energy prices and lower ore grades, which have compressed cash margins and pushed out returns on capital investments.  Gold demand, however, has not abated and higher production costs effectively put a floor under the price of gold.

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The key international measure of the U.S. dollar’s value is the price of crude oil.  Recessions, depressions and economic slowdowns in the U.S., U.K., Europe, China and Japan have softened demand for crude oil, moderating crude oil prices and making the U.S. dollar stronger than it would have been otherwise.

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Weaker fuel consumption in the U.S. has been offset by steady global demand and fears of war in the Middle East which could disrupt oil shipments through the Strait of Hormuz in the Persian Gulf.

Although crude oil prices could moderate in the near term if tensions in the Middle East are resolved, it is more likely that the region will become more chaotic due to higher food prices in late 2012 or early 2013.  Further, it is far more likely that conflict between the U.S. or Israel and Iran will escalate.  In the long term, oil prices will rise due to growing global demand and higher production costs, i.e., for heavy sour crude, shale oil, etc.

Weak U.S. Dollar Fundamentals

The U.S. dollar is fundamentally weaker than it appears to be based on the USDX.  Economic growth in the U.S. is extremely weak, despite massive government deficit spending.  U.S. federal government debt of roughly $16 trillion, chronic budget deficits of more than $1 trillion per year and unfunded liabilities of more than $62.3 trillion are unsustainable compared to the U.S. Gross Domestic Product (GDP) of $15.29 trillion (2011 est.), which includes government deficit spending.  On a Generally Accepted Accounting Principles (GAAP) basis, which accounts for unfunded liabilities, the U.S. federal deficit would be approximately $5 trillion.  The U.S. debt to GDP ratio is approximately 100%, which is worse than that of Spain.  Further, the U.S. remains embroiled in foreign wars and continues to prosecute a global “War on Terror” at a total combined cost of several trillion dollars to date.

The Federal Reserve has purchased a large portion of U.S. Treasury bonds since 2008, making the demand for U.S. debt appear stronger than it would have otherwise and artificially suppressing treasury bond yields.  The Federal Reserve’s asset purchases (buying toxic mortgage backed securities, quantitative easing I and II and “operation twist”, etc.) represent “money printing”.  Money printing weakens the currency and causes prices to rise, which punishes savers, workers and consumers in general.  The U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) has shown little change but pre-1980 measures of inflation are as high as 9%.

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U.S. domestic price inflation is evident to consumers in terms of food and energy prices, if not in the CPI.  The rising cost of living in the U.S. must be contrasted with declining real income and high unemployment.  Unemployment in the U.S. indicates a long-term, structural decline in the U.S. job market.  Specifically, the civilian population employment ratio has declined for more than a decade.

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By all rights, the U.S. dollar should be far weaker, but, to quote Sir Winston Churchill, “the dollar is the worst currency, except for all the alternatives.”  The USDX is a weighted geometric mean of the U.S. dollar’s value compared with the euro (57.6% weight), the Japanese yen (13.6% weight), the British Pound sterling (11.9% weight), the Canadian dollar (9.1% weight), the Swedish krona (4.2% weight) and the Swiss franc (3.6% weight).

  • Euro (EUR) – The saga of European sovereign debt, the threat of default, austerity versus economic growth, rating cuts, last minute rescues and civil unrest continues unabated.  The Euro is, in fact, extremely weak which makes the U.S. dollar appear unnaturally strong.  The European Central Bank (ECB) has little choice but to create more Euros to bail out the system.
  • Yen (JPY) – Japan’s recession after a tragic series of economic shocks, i.e., the 2011 tsunami and Fukushima nuclear disaster resulted in an inflow of yen back into Japan, increasing demand in the foreign exchange market.  The strengthening yen necessitated massive interventions by central banks to weaken the currency in order to stabilize trade.
  • Pound sterling (GBP) – The U.K. is mired in a deep recession and the Bank of England is engaged in a series of monetary injections that have weakened the pound.  There is no visible light at the end of the tunnel.
  • Canadian dollar (CAD) – Because Canada’s economy is intertwined with that of the U.S., the Canadian dollar has remained more or less at parity with the U.S. dollar, although it has historically been the weaker of the two.
  • Krona (SEK) – Sweden’s economy depends on exports and her largest trading partners are in the European Monetary Union, e.g., Germany, Finland, France, Netherlands and Belgium.  If the krona appreciates, Swedish exports will fall.
  • Swiss franc (CHF) – The Swiss National Bank has pegged the Swiss franc to the Euro depriving investors of a traditional safe haven.

The Most Favored Nation

China is struggling to maintain its exports and GDP growth in the face of economic deceleration while battling inflation and the fallout of regional real estate bubbles.  The Renminbi (RMB) is closely linked to the U.S. dollar and is managed downward by the People’s Bank of China (PBoC) in order to support Chinese exports.

Due to the relative weakness of other currencies (mainly the EUR, GBP and RMB), the U.S. dollar’s recent strength is illusory.  While a weaker U.S. dollar would aid U.S. exports and reduce the U.S trade deficit, high inflation would also punish savers, workers and consumers in general.  A solution to the European sovereign debt crisis, a larger and longer term refinancing plan by the ECB, or signs of economic recovery in the Eurozone, would send the U.S. dollar down sharply.  Additionally, strong growth in the BRIC countries or an economic recovery in China would greatly increase upward pressure on global commodity prices.  Conversely, a continued slowdown in China, which is more likely, will reduce demand for base metals which is bullish for silver because most silver is produced as a byproduct of base metals mining.

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Platinum group metals (PGM) could fall as a function of weaker automobile demand if the Chinese economy continues to slow but Chinese automobile sales are up 22.6% year over year.  Weaker automotive demand could be offset by safe haven investment demand for platinum and, in the short term, PGM prices are rising sharply due to ongoing mine labor problems in South Africa.

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China, together with the other BRIC countries (Brazil, Russia, India and China), South Africa and Iran, is slowly but systematically preparing to move away from the U.S. dollar.  At some point, the currently gradual movement of global trade away from the U.S. dollar will reach a critical mass and accelerate.  The loss of its world reserve currency status is an existential threat to the U.S. dollar.  For the time being, however, it is not in the interest of any of the major players, i.e., China, to dump the U.S. dollar.  Despite poor economic conditions in the U.S., U.S. consumers are more addicted than ever to cheap imports from China.

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China is a major producer and importer of gold and Chinese companies are aggressively buying crude oil and natural resources around the world but, according to the PBoC, Chinese currency reserves grew 1.9% to $3.24 trillion as of June.

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The PBoC and other central banks purchased 400 tonnes of gold in the 12 months ended March 31, 2012 compared with 156 tonnes during the same period in 2011, according to the World Gold Council.

Gold, Silver, Crude Oil

Given the weak fundamentals of the U.S. dollar and the fact that its weakness has been masked by a variety of factors, prices could increase too quickly for policy makers, i.e., Federal Reserve Chairman Ben Bernanke, to respond.  The U.S. dollar is vulnerable in the face of potential Eurozone stabilization, stronger than expected demand from BRIC countries, or geopolitical disintegration linked to higher food prices.  Additionally, further intervention by the Federal Reserve could send the U.S. dollar sharply downward and cause a disruptive spike in global commodity prices.  Pressure on the Federal Reserve to engage in further monetary easing, e.g., quantitative easing III (QE3), or an equivalent program, is growing.  Gold, silver and related mining shares will rally heading into late 2012 and are likely to break out dramatically as current trends develop.

*Post courtesy of Ron Hera at Hera Research who cover key economic data, trends and analysis including reviews of companies with extraordinary value and upside potential.

Watch Out For A Supply Shortfall In Silver

Jeb Handwerger August 20, 2012 via Seeking Alpha

An old melody advises us to look for the silver lining whenever dark clouds appear in the blue. There is economic and political upheaval all over the world, especially in the South China Seas. This may directly affect the world’s supply of industrial metals such as graphite, rare earths, molybdenum and tungsten.

Today we direct our attention to an area where silver (SLV) is shining. Poor man’s gold may come into prominence shortly and provide our subscribers with possible profits.

The silver battlefield is filled with bulls and bears fighting for dominance. Recently, the poor man’s gold has dropped to the $26 area. The struggle continues between the opposing sides. The bulls and bears are keeping their eye on this critical support level at 2011 lows.

We sense that the bulls will prevail at this mark. The reasons to buy silver (AGQ) now is compelling. The U.S. dollar (UUP) may have already reached an interim top as investors realize that the U.S. employment situation is still a concern and that the Federal Reserve will need to implement some form of QE3 to devalue the dollar to pay off soaring deficits and promote inflation– possibly announced at the end of this month in Jackson Hole.

Click to enlarge

The bears disagree and claim that silver will be pushed back beneath this level as silver plunges to new lows as the Fed continues to keep its trigger off of the QE3 bazooka and wait until after the election. Silver is holding the line making a rounded bottom. Notice the rounding bottom signaling a potential breakout as sellers become exhausted.

On the supply side, silver production comes mainly from Peru and Mexico where gold (GDX) and silver (SIL) miners are facing significant challenges including violence. Newmont (NEM) is having to deal with violent protests in Peru which reminds us of what Fortuna Silver (FSM) had to deal with in Mexico. Right now, Pan American Silver (PAAS) is suspending investment in its flagship Navidad Project due to the rising resource nationalism in Argentina. Pan American paid $500 million for the asset in 2009. This project may be the richest undeveloped silver deposit in the world.

Similarly, Bolivia and Evo Morales is considering nationalizing South American Silver’s (SOHAF) large undeveloped silver project amidst violent indigenous protests. The company describes it as “one of the world’s largest undeveloped silver deposits.” The company is planning to invest over $50 million into the project. At the same time the Bolivian peasants have violently kidnapped five workers from the project.

Such turmoil in Peru, Mexico, Argentina and Bolivia may add to the world’s already existing shortage of silver. This supply crunch is combined with rising political uncertainty in Egypt, Syria and Iran and economic malaise in the EU and the United States which is causing investment demand for silver to rise exponentially. All signs are pointing to a possible global inflation which could propel silver prices higher. We have record deficits in the U.S. where many citizens are looking to protect their savings from a potential devaluation to pay down record debts. With the recent Obamacare Supreme Court Ruling entitlement, spending will soar.

Former Federal Reserve Chairman, Alan Greenspan, noted in 2010 that “Only politically toxic cuts or rationing of medical care, a marked rise in the eligible age for health and retirement benefits…or significant inflation… can close the deficit.” Remember, in response to Keynesian pump-priming, inflation threatens to make silver increasingly attractive as a safe haven. There is always the presence of increased industrial demand for the poor man’s gold. Silver is increasingly being used in high tech applications from batteries to solar panels.

Last month the silver ETFs added 293 metric tons of this valuable metal to their holdings, which represents their highest inflows since September 2011. The bears claim that silver’s proximity to the $26 line is a negative signal and are pushing below their 50 and 200 day moving averages on the way to $18.

Recall that silver is volatile and moves up or down more than other commodities such as gold. On the other hand, if QE3 is implemented, it will encourage monetary easing internationally and thus will boost silver prices.

After QE2 we called the silver breakout to the day on 8-25-10. Silver soared from $18 to close to $50 outpacing other commodities. If QE3 is carried out, silver could experience a similar type of move. In such an event, the specter of inflation may trigger silver’s rapid ascent into new all time highs. We regard silver as a long term holding which may be ready to move into new all time highs past $50, depending in part on the Fed’s next move.

Disclosure: I am long GDXSLV.

Sprott, the Chinese and big money are in – Ray’s Gold and Silver August Update


This is a August update from Ray Crowley at Physical Precious Metals.

I had sent out a mass email update a couple months ago when silver was below $27 stating bargain basement pricing as I felt it was the bottom and it has yet to test that level since then.  We are still trading sideways at the $28 marker which has maintained this gift of cheap cheap cheap opportunity.

Silver has been trading tight in the 27 to 28 dollar range for months now and has been long consolidating with gold building this strong wall of support. Silver and gold are not likely to stay at this waterline for much longer. Precious metals could run as soon as this month, my favorite analysts feel that these prices won’t last as we look towards the seasonal fall traction, Indian gold buying season, and especially with the next round of worldwide stimulus peaking it’s head. More economic trials ahead is now commonly reported and whichever scenario comes into effect next, you can be confident in the performance of historical money.


Some facts to consider:


– Silver’s upside potential is massive compared to gold. Silver supply has been largely consumed, gold is stored.


– The cost of production for silver is above silver price for many producers.


– Ore grade of precious metals worldwide is decreasing.


– Availability of physical silver supply has tightened as investors of physical increase demand. Generally speaking, silver investor confidence is reaching all-time-highs.


– Silver coin demand is exploding exponentially more than gold coin demand.


– The market is manipulated with paper shorts which allows us to buy physical at subsidized pricing.


– Eric Sprott Canadian billionaire has recently added over 200 million dollars worth of silver to the Sprott silver fund.


–       Sprott states he is convinced gold will be at new all time nominal highs by the end of 2012


  If there is war in the Middle East, Sprott says, “Oil would go crazy, gold would go crazy, anything physically real would be in demand.


– Chinese billionaires have been adding massive amounts of gold in the past months.


– Jim Rogers says if he could only invest in one precious metal this summer it would be silver.


– Many other big money investors such as George Sorrows and John Paulson and Paulson & Co  have substantially increased their gold positions by 25 to 50 percent recently.


– Central banks worldwide steadily increase gold holdings every month.


– Once the money managers, JP Morgan and ETFs duck out of their short positions and go long there will be nothing in the way of new highs, this is entirely possible in the near future.


– More inflation of the things that we need and deflation of the things that we don’t need, precious metals triumphs through.


– When Pan Asian Gold Exchange comes into effect it will contribute to a more free market in the metals giving further upside momentum.


– When silver was a less industrial metal the silver to gold ratio was 12 to 16:1, it has been 50 to 60:1 and we see more and more demand by investors of the physical increasing and progressively the gap tightening.


– Increasing number of investors are demanding gold in allocated accounts.


– Physical gold is now declared a tier 1 asset by banks. Physical gold counts as capital the same as a treasury bond. Demand for physical metal will increase substantially from this ruling.


– The NY Fed has released an essay titled “The Key to The Gold Vault Describing gold as a ‘phenomenal asset’ ”


–  Arguably the best level headed silver analyst David Morgan has called this as the bottom in silver.


–       The next round of quantitative easing is likely just around the corner and proves very good for precious metals.

Are you brave enough to be a contrarian and to buy low and sell high?

Better a month too early than a minute too late!

Will you stand on your sideline and watch the smart money buy now and wait for higher prices to buy half way through the next run?… Or will you buy now and be patient knowing that you hold the most reliable form of wealth at a bargain price?


Those who have yet to add more physical precious metals to holdings may want to seriously consider adding at this cheap price, especially if you have yet to take a position. It is not only a safety net against a volatile world, it not only preserves but it increases purchasing power in this climate of devaluing currencies, debt and economic crisis. Gold and silver being the number one inflation hedge, deflation or stagflation, wars breaking out, whatever the scenarios ahead precious metals will reward those who are able to identify and execute. Gold and silver will be the only monetary asset left if the sovereign debt issue cascades into a global crisis. Don’t ignore gold and other real assets in your investment portfolio. The age of austerity continues to make owning these resources more and more attractive with precious metals at the top.


Feel free to call or email for quotes and questions.





Ray Crowley

Account Representative



4-758 Alexander St.| Vancouver BC,  V6A-1E3

O: 604.568.6098   | Fax: 604.215.9910   | Toll free:1.888.631.4838

Silver Hoarding: Investor Holdings Spike to Record

Posted by  – Thursday, August 16th, 2012 via Wealthwire


Analysts and investors are becoming increasingly bullish on silver as the summer winds down. As central banks around the globe are expected to bolster growth via new QE and related monetary policies, a silver rally appears to be inevitable.

For the past three months, silver held in exchange-traded products has consistently climbed its way up to a valuation of $16.2 billion, according to Bloomberg’s data.

While hedge funds remain the least bullish in nearly four years, one has to ask if this is merely an attempt to control silver prices in a time when nearly everyone else is assuming that the allure of precious metals will only increase in the months and years to come…

If the Federal Reserve does follow through with further quantitative easing, all we have to do is rewind back to the years 2008-2011 and learn from the recent history to know what will happen to silver prices.

From December 2008 to June 2011, precious metals prices tripled on behalf of two solid rounds of quantitative easing.

Imagine what a third dose of easing will do to consumer mentality and the price of silver and gold. It’s an unprecedented event for sure, but the prices have nowhere to go but up – and they’re expected to do so rather sharply.

From Bloomberg:

While the metal is trading 44 percent below the 31-year high of $49.845 set in April 2011, it averaged $30.37 since the start of January, on track for the second-highest annual level after last year’s $35.27.

And hedge funds are likely to get more bullish – more than doubling their net-long position or betting on higher prices, to 9,323 futures and options in the two weeks to Aug. 7 – and as economic pessimism abounds silver demand continues to increase.

Historically, silver has been a volatile metal, but investors shouldn’t be swayed by the price swings too terribly. Generally speaking, silver investor confidence is reaching all-time-highs.

“People like me who have tremendous confidence in silver and are invested in the market see it rising once the easing begins,” said Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management, who helps oversee about $1 billion of assets. “I expect an acceleration in the fear trade. Most of the hedge funds who sold will be back once the market gathers momentum.”

Silver guru, David Morgan, speculates on where silver will go from here in its undervalued state… find out when the next major upswing is coming by watching the video below:

If you have to own one precious metal buy silver not gold

Peter Cooper | August 15, 2012 – 9:21am via Silverseek

Veteran investor and an early spotter of the commodities bull market, Jim Rogers says if he could only invest in one precious metal this summer it would be silver. Why is that?

Silver prices are more volatile than gold. And over the past five years gold has actually been a slightly better performer. The central banks hold gold, not generally silver.

Money printing

As an investor you always look at two things: upside and downside potential. So if you are optimistic about the outlook for precious metals – and with all the central banks of the world with their fingers on the button to let the printing presses roll this is a logical conclusion – then does gold or silver have the most upside?

It does just have to be silver. Consider this: silver is the only major commodity not to have reached a new all-time high in this bull market; silver is still cheaper than it was 32 years ago, prices are astonishingly depressed.

Then you can consider the impact of an economic slowdown on silver. Yes its industrial use will go down but so will its production because that is linked to the output of copper and zinc mines.

Investment demand for precious metals will take over in any case from industrial demand. And once the gold price heads up then silver will follow. You get 50 times more silver for your money than gold.

Historically it was 12 to 15 times the amount of silver for gold, so that also looks like a correction just waiting to happen. Why is it that silver has become so cheap by historical standards?

It goes back to the price collapse of 1980. Prices then got to such a huge spike due to the cornering of the market by the Hunt Brothers that production was ramped up and huge stocks were accumulated. The Hunts market manipulation invited a similar response from global central banks.

Once silver prices slumped from $50 there was a 20-year bear market with enough oversupply to keep prices down for two decades. Silver’s recovery since the millennium has been spectacular, from $3 an ounce to almost that previous all-time high 15 months ago.

Autumn season

But the best is yet to come. Will it be this autumn when the central banks turn on the printing presses to maximum to save the world economy? The Fed with QE3 and the others following?

Or will there be a 2008-style financial market crash with Greece as the next Lehman? That would be bad for precious metal prices as it was in 2008, although they made a spectacular recovery very swiftly.

You never can be guaranteed success in investment. Patience and a lack of borrowing always buys you time and that is the greatest asset of all. But we think those who stick with silver over gold will get their pay day soon.

Your Financial Bomb Shelter

By Jeff Clark, Senior Precious Metals Analyst via Casey Research

They raised the price of my favorite ice cream. Actually, they didn’t increase the price, they reduced the container size. I can now only get three servings for the same amount of money that used to give me four, so I’m buying ice cream more often.

And now gasoline is going up. Food costs in general are edging up. My kids’ college expenses. Car prices, insurance premiums, household items – a list of necessities I can’t go without. Regardless of one’s income level or how tough life might get at times, one has to keep spending money on the basics. (This includes ice cream for only some people.)

According to the government, we’re supposedly in a low-inflation environment. What happens if price inflation really takes off, reaching high levels – or worse, spirals out of control?

That’s not a rhetorical question. Have you considered how you’ll deal with rising costs? Are you sure your future income will even keep up with rising inflation? Be honest: will you have enough savings to rely on? What’s your plan?

If price inflation someday takes off – an outcome we see no way around – no one’s current standard of living can be maintained without an extremely effective plan for keeping up with inflation. It’s not that people won’t get raises or cost of living adjustments at work, nor that they will all neglect to accumulate savings. It’s that the value of the dollars those things are in will be losing purchasing power at increasingly rapid rates. It will take more and more currency units to buy the same amount of gas and groceries and tuition. And ice cream.

I’m not talking science fiction here. When the consequences of runaway debt, out-of-control deficit spending, and money-printing schemes come home to roost, it’s not exactly a stretch to believe that high inflation will result. We need a way to diffuse the impact this will have on our purchasing power. We need a strategy to protect our standard of living.

How will we accomplish this?

I suspect you know my answer, but here’s a good example. You’ve undoubtedly heard aboutthe drought in the Midwest and how it’s impacted the corn crop. The price of corn has surged 50% in the past two months alone. Commodity analysts say the price could rise another 20% or more as the drought continues. Every corn-based product on the grocery shelf will soon take a lot more dimes and dollars to buy. But wait – what if I used gold to buy corn?

(Click on image to enlarge)

While the price of gold constantly fluctuates, you would have experienced, on average, no inflation over the last 30 years if you’d used gold to purchase corn. Actually, right now, it’d be on the cheap side.

When you extrapolate this to other food items – and virtually everything else you buy – it’s very liberating. Think about it: gold continues its safe-haven role as a reliable hedge against rising inflation. I believe that those who save in gold will experience, on average, no cost increases in the things they buy and the services they use. Their standard of living would not be impacted. I think this kind of thinking is especially critical to adopt when you consider that supply and demand trends for gas and food dictate that prices will likely rise for a long time, and perhaps dramatically.

So how much will you need to make it through the upcoming inflation storm and come out unscathed?

Like all projections, assumptions abound. Here are mine for the following table. I’m assuming that:

  • The price of gold, on average and at a minimum, tracks the loss in purchasing power of whatever currency you use, and that it does so from current prices. Given gold’s history, this is an easy assumption to make.
  • Gold sales, over time, capture the gain in gold and silver so that your purchasing power is preserved. (This doesn’t mean I expect to sell at the top of the market; I expect we’ll be selling gold as needed – if gold has not itself become a widely accepted currency again.)
  • We pay taxes on the gain. This will decrease our net gain, but there should still be gains. In the famous Weimar Germany hyperinflation, gold rose faster than the rate of hyperinflation.

To calculate how much we’ll need, I looked at two components, the first being average monthly expenses. What would we use our gold and silver for? From corn to a house payment, it could be used for any good or service. After all, virtually nothing will escape rising inflation. Here are some of my items: groceries, gas, oil changes and other car maintenance, household items, eating out, pool service, pest service, groceries and gas again, eating out again, vitamins, movie tickets, doctor appointments, haircuts, pet grooming, kids who need some cash, gifts, and groceries and gas yet again. Groceries include ice cream, in my case. How many ounces of gold would cover these monthly expenses today?

And don’t forget the big expenses – broken air conditioner, new vehicle, vacation… and I really don’t think my daughter will want to get married at the county rec hall. How many ounces of gold would I need to cover such likely events in the future?

The point here is that you’re probably going to need more ounces than you think. Look at your bank statement and assess how much you spend each month – and do it honestly.

The other part of the equation is how long we’ll need to use gold and silver to cover those expenses. The potential duration of high inflation will dictate how much physical bullion we need stashed away. This is also probably longer than you think; in Weimar Germany, high inflation lasted two years – and then hyperinflation hit and lasted another two. Four years of high inflation. That’s not kindling – that’s a wildfire roaring through your back yard.

So here’s how much gold you’ll need, depending on your monthly expenses and how long high inflation lasts.

Ounces of Gold Needed to Meet Expenses During High Inflation
Monthly expenses in US dollars Monthly expenses in gold, oz* Inflation Duration
6 months 1 year 18 months 2 years 3 years 4 years 5 years
*Based on $1,600 gold price


If my monthly expenses are about $3,000/month, I need 45 ounces to cover two years of high inflation, and 90 if it lasts four years. Those already well off or who want to live like Doug Casey should use the bottom rows of the table. How much will you need?

Of course many of us own silver, too. Here’s how many ounces we’d need, if we saved in silver.

Ounces of Silver Needed to Meet Expenses During High Inflation
Monthly expenses in US dollars Monthly expenses in silver, oz* Inflation Duration
6 months 1 year 18 months 2 years 3 years 4 years 5 years
*Based on $28 silver price


A $3,000 monthly budget needs 1,285 ounces to get through one year, or 3,857 ounces for three years.

I know these amounts probably sound like a lot. But here’s the thing: if you don’t save now in gold and silver, you’re going to spend a whole lot more later. What I’ve outlined here is exactly what gold and silver are for: to protect your purchasing power, your standard of living. It’s like having your own personal financial bomb shelter; the dollar will be blowing up all around you, but your finances are protected.

And the truth is, the amounts in the table are probably not enough. Unexpected expenses always come up. Or you may want a higher standard of living. And do you hope to leave some bullion to your heirs?

It’s sobering to realize, but it deserves emphasis: if we’re right about high inflation someday hitting our economy…

Most people don’t own enough gold and silver.

If you think the amount of precious metals you’ve accumulated might be lacking, I strongly encourage you to put a plan in motion to save enough to meet your family’s needs. We have top recommended dealers in BIG GOLD, ones we’ve vetted that are trustworthy and have highly competitive prices. We also recommend a service that will deduct whatever amount you chose from your bank account and buy bullion for you automatically. And now, given how concerned we’ve been about the inflation that’s coming, we’ve actually started our own service. You can check it all out in the current issue of BIG GOLD, risk-free. I can tell you that purchase premiums are incredibly low, due to a proprietary system that bids your order out to a network of dealers that compete for your business. We’re already using it, and the response from other investors has been tremendous.

Whatever plan you adopt, my advice is to make sure you have a meaningful amount of bullion to withstand the firestorm that’s almost mathematically certain to occur at this point. And now you know exactly how much gold you’re going to need.

Do You Have Guts to Buy Low & Sell High? Louis James


August 13, 2012 • Reprints


It’s so outrageously simple that few investors can actually do it: buy low and sell high. The manic highs and lows of the market are actually good news for those investors who have mastered the discipline of buying low and waiting, according to Louis James, the senior editor of the International Speculator and Casey Investment Alert. In this interview with The Gold Report, James talks about how not to be fooled into timing the market and how he finds value in precious metals by scouring some knock-out jurisdictions like Mexico and China.

The Gold Report: In a recent Casey Research article you asked investors if they are brave enough to buy low. It’s difficult to be a true contrarian and have the guts to buy when everyone else is selling. What guidelines do you give people who need reassurance in markets like these?

Louis James: It’s good news and bad news. There really aren’t reassurances. No matter how far down something has gone, until it hits zero, it can still go down farther. The good news is that precisely for this reason, markets tend to overdo things. They are volatile. They fluctuate. They get manic and go too high, and get depressive and go too low. But that’s actually good for those with the discipline to buy.

So, when’s the right time to buy? The answer is that there is no right time. You don’t try to time the market. That’s the fool’s game. You look for value. If something you’d be happy to own at $1/share is now at $0.50/share – that’s a great buy. Can it go lower? Yes. But it can also go higher and is a better deal than when you first liked it. If you buy value, you increase the odds of coming out ahead of the game, regardless of whether or not the stock goes down before it goes up.

I hate to say it, but really there’s a reason why it’s hard to buy low and sell high. It’s so logical. It’s so simple. But so hard for most people to do.

TGR: Money manager Adrian Day recently suggested in an interview that investors should buy quality juniors and hold them for what could be a painful six months before things start moving up. How long do you think investors have to make the plunge before what you’ve called “stupid prices” are gone?

LJ: I just said I wouldn’t try to time the market, so the real question, if there are six months of pain ahead, is why would I buy today? The answer is that we don’t know if it’s going to be six months of pain ahead. The global economic situation is surrounded by a swirling cloud of black swans. Which one of these is going to land first and upset the apple cart? It could be any of them, and it could happen tomorrow. That’s the reason not to wait six months or whatever number of months you think it is. Things could reverse very sharply, sending certain assets upwards again, particularly precious metals… (click link above to read more)


Bulls Still In Control, But Time Is Running Out


August 13, 2012 • Reprints via resource investor

In last week’s article “Three Weeks Left” I outlined a brief synopsis of what I was expecting based on how the daily cycles were unfolding. So far markets are playing out pretty much as anticipated.

This week I’m going to go a bit more in depth and tie cycle’s analysis with the upcoming fundamental calendar, namely the next two FOMC and Jackson Hole meetings.

As you may recall from the last article, the dollar index is in the process of moving down into an intermediate degree bottom, which in turn is triggering a rally in virtually all risk assets, most noticeable in the energy and grain sectors as the CRB exploded out of its three year cycle low.

I think we will probably see the dollar continue to drift generally lower for most of the remainder of this month, possibly even into the Jackson Hole meeting (Aug. 25-27), as traders continue to hope for the next round of QE.

When the Fed fails to deliver, which they almost certainly will, we should see the market start to move down into its daily cycle low, which coincidentally is due almost exactly on the Sept. 12-13 FOMC meeting.

The September FOMC meeting will be the opportunity for the Fed to shorten the stock market intermediate cycle and possibly abort most of the move down into the yearly cycle low due in October. However I think the Fed is probably going to balk at the September meeting also, and when they do it will initiate the real move down into the normal timing band for an intermediate and yearly cycle low in late October, or early November.

I suspect that the Fed will finally cave at the October meeting and begin an open ended QE with the misguided goal of achieving a nominal GDP target and lowering the unemployment rate. The one caveat would be that the Fed meeting in October would call for a slightly short stock market daily cycle, which is not unusual if the market is experiencing a hard decline.

Gold: Lover or Fighter?


August 13, 2012 • Reprints via resource investor

If there is one lesson that investors have learned in recent years, it is don’t fight central banks. The rally seen in equities since the lows of 2009 is now considered one of the most hated rallies in history. Analysts and pundits can debate macroeconomic conditions until blue in the face, but when central banks inject trillions of dollars into the financial system, the general trend tends to be higher. Precious metals have also benefited from monetary easing programs, but they are now finding out how hard it is to fight central banks.

While some people have a love or hate relationship with gold, the precious metal itself is much closer to a lover than a fighter. Since 2009, the price of gold has rallied from about $850 to $1,600 an ounce today. Through programs such QE1, QE2 and zero interest rates, gold was able to reach a nominal record high just above $1,900 last year. Meanwhile, silver reached as high as $49 in April 2011. However, both precious metals have struggled recently as central banks rely more on jawboning and confusion, rather than official stimulus programs.

Despite weaker-than-expected economic reports, the Federal Reserve has not launched another massive bond buying program. In the central bank’s most recent Federal Open Market Committee statement, it noted the elevated unemployment levels and decelerated economic activity, but simply said it “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” Across the pond, Mario Draghi, president of the European Central Bank, recently declared that the central bank is “ready to do whatever it takes to preserve the euro, and believe me, it will be enough.” Many interpreted the statement to signal that immediate action were to come from the ECB, but no such action has been taken.

Instead of trying to decode jawboning or fight central banks’ inaction, gold has simply waited patiently on the sidelines. As the chart above shows, the precious metal has been trading in a relatively tight $100 range between $1,540 and $1,640 for the past three months. In fact, gold has become so boring recently, the open interest in gold futures is at its lowest in nearly three years. However, investors should not forget that many central banks around the world are still interested in gold. Last year, central banks purchased more than 400 tonnes of gold, the most in nearly five decades, according to the World Gold Council. In July, South Korea, the world’s seventh largest forex reserves holder, reportedly bought 16 tonnes of gold.

Although precious metals appear to be out of favor by its narrow trading range, history shows that central banks are likely to resume large money printing programs sooner, rather than later. Operation Twist has already been extended through the rest of this year, and the Fed is currently experimenting with repurchase agreements, which are collateralized loans to primary dealers in order to inject more liquidity into the financial system. Last week, the central bank added $210 million in reserves by repos and followed it up with another $600 million this week. Zero Hedge notes that “repos are liquidity injecting, and while the Fed may promise these are merely test runs, everyone knows they are anything but, and are merely a telegraphing to the banks of what is in store.”

If you would like to receive professional analysis on miners and other precious metal investments, we invite you to try our premium service free for 14 days.

Disclosure: Long EXK, AG, HL, PHYS

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Pressure Continues to Build Under the Price of Silver


August 13, 2012 • Reprints via resource investor

In May, I presented what appeared to be an extremely bullish divergence between the price of silver and its Accumulation-Distribution Line (ADL). I asked whether the price of silver would rise to meet its ADL or would the ADL fall to match the price? Two and a half months later, there has been absolutely no resolution to this situation. The divergence remains, and if anything, has actually increased slightly.

For a technical definition of what the ADL is and how it’s calculated, see the original post. But in layman’s terms, the bullish divergence is often thought of as underlying positive market sentiment not yet reflected in the price. Imagine the price of silver as a beach ball resting in the deep end of an empty swimming pool. With no water in the pool there is no additional pressure required to hold the ball at the bottom. Now think of the ADL as the water level as the pool is filled. As the water rises, it becomes increasingly difficult to keep the ball submerged. If the pressure becomes great enough to overcome the forces acting upon the ball, the ball will rise quickly to the surface.

Indicators like the ADL can be misleading because they are highly dependent on the choice of starting points. Subtle divergences can often be influenced, or even created, by cherry picking the range. However, there is nothing subtle about this particular divergence. Going back to the limit of this charting source still shows that something has fundamentally changed with the recent trading in the silver market. Isn’t it interesting to note that the long term ADL itself appears like a more natural price curve? Perhaps $49 is where the price really would be if the market were not contending with out-sized naked short positions and black box OTC derivatives action.

Stay tuned. Things could get very interesting this fall.

PPMI Week In Review

The Week in Review

1. The Olympics in London and the start of vacation season across Europe seem to have led to a
relatively light week for news, especially out of Europe. The underlying problems facing the
global economy remain however, despite the lack of reporting by the mainstream media.

2. The Department of Labor released jobless claims data a day early this week, thanks to a
software glitch. Initial claims for unemployment fell unexpectedly last week, surprising
economists who had expected an increase. Data feeds for unemployment are still suspect
after July’s wildly inaccurate numbers, which were supposedly so erroneous due to unexpected
changes in auto plant shutdowns.

3. News broke this week that the US Treasury, acting without Congressional authority, guaranteed
over $2.4 trillion of money market funds, in relative secrecy and with US taxpayer
money, following the Lehman Brothers bankruptcy. The Treasury had previously kept the
names of the funds that participated in the program secret but Linus Wilson, an assistant professor
of finance at the University of Louisiana at Lafayette, filed a Freedom of Information
Act request which exposed the details of the operation.

4. US wholesale inventories saw their largest drop in close to a year in June indicating that
weak demand may be triggering a cut back in stocks at many businesses. A 1.4% decline in
sales at wholesalers, the largest decline since March, 2009, surprised economists who were
expecting a slight increase in sales. The decline adds credence to the fear that an economic
slowdown, led by weakening consumer demand, is under way in the US.

5. Nouriel Roubini, nicknamed “Dr. Doom”, took to twitter on Monday to say “(The) 2013 perfect
storm scenario I wrote on months ago is unfolding”. In May, Mr. Roubini said stalling
growth in the US, the debt woes plaguing Europe, a slowdown in emerging markets, especially
China, and conflict in Iran would all converge to create a “perfect storm” for the global
economy in 2013. Jobs data released on Friday in the US showed economic growth was
weak for the fourth straight month in the US; The debt crisis in Europe continues to drag on
and there is, as yet, no solid solution proposed to end it; Data released this week out of China
indicate that the economy there is slowing faster than expected; and conflicts, not just isolated
to Iran, but across the whole Middle East, are on the rise.

6. The ongoing drought across the US may lead to the lowest crop yield in 17 years, with the
crop estimated to be about 30% smaller than initial projections made at the start of planting.
The corn most severely affected by the drought is that which is used for animal feeds, and
there is little alternative means for feeding livestock as prices skyrocket since grasslands
have also been scorched by the heat. Economists are forecasting higher meat, dairy and egg
prices as the effects of the drought make their way through the food chain. The effects will
be felt globally as well, as US exports of feed crops may be curtailed due to the crop losses.
The weather is also wreaking havoc globally, not just in the US as rain in Brazil is damaging
sugar crops, and hot weather in Russia is taking a toll on wheat crops there.

7. The recent decline in oil prices had the effect of reducing import costs last month and the resulting
easing of inflationary pressures may give the US Federal Reserve slightly more leeway
to implement another round of monetary easing. The pressure on the US Federal Reserve
to embark on another round of Quantitative Easing has been growing of late as unemployment
has continued to climb, the global economy has been cooling, and the disaster in
Europe continues to grow. So far the Fed, led by Chairman Ben Bernanke, has resisted the
pressure, but global events may be approaching the point where the Fed’s hand is forced.

8. Crude oil was at $92 a barrel on Friday, with the release of poor economic data out of China
putting additional downward pressure on the price. The International Energy Agency and
OPEC both lowered their demand forecasts for next year which may keep the downward
pressure on oil prices as well.

9. The euro was dropping against the dollar again by the end of the week on weak economic
data out of the Eurozone and news that the ECB may reactivate its bond purchasing program.
The Japanese yen was up and down during the week but appeared to be set to close higher
against the dollar for the week on Friday.

Friday to Friday Close
August 3rd August 10th Net Change
Gold $1606.00 $1619.00 13.00 + 0.81%
Silver $ 27.80 $ 28.06 0.26 + 0.94%
Platinum $1410.00 $1400.00 (10.00) – 0.71%
Palladium $ 580.00 $ 582.00 2.00 + 0.34%
Dow Jones 13096.17 13139.24 43.07 + 0.33%
Previous year Comparisons
Aug 12th 2011 Aug 10th 2012 Net Change
Gold $1740.00 $1619.00 (121.00) – 6.95%
Silver $ 39.10 $ 28.06 (11.04) – 28.24%
Platinum $1800.00 $1400.00 (400.00) – 22.22%
Palladium $ 748.00 $ 582.00 (166.00) – 22.19%
Dow Jones 11269.02 13139.24 1870.22 + 16.60%
Here are your Short Term Support and Resistance Levels for the upcoming week.

Gold Silver
Support 1580/1560/1540 27.20/27.00/26.50
Resistance 1610/1625/1640 27.80/28.40/29.00
Platinum Palladium
Support 1380/1350/1330 570/550/530
Resistance 1420/1450/1500 595/615/640

Volatility should be expected to continue. Barely mentioned by most US mainstream media outlets,
the Financial Times of London broke a story this week stating that the Commodity Futures
Trading Commission was set to drop its four year old investigation into the manipulation of silver
prices. No other stories appeared, and CFTC Commissioner Bart Chilton was quick to say
that the Financial Times story was “premature” and “inaccurate in many respects”. Ted Butler,
one of the most outspoken voices regarding the manipulation of silver prices over the years,
wrote a “must read” article at SilverSeek regarding the FT’s story called The CFTC Silver Investigation
(click the link to read the article). The subject matter of Mr. Butler’s article is simply too
extensive and too important to do it an injustice in an attempt to summarize it here. While skyrocketing
corn and soybean prices are expected to produce cheap beef, pork and poultry prices
near term as farmers sell animals to market early to cut down on feed costs, the long run picture
will be an eventual inflation in the prices of these products, especially beef and pork, that may
last as long as three years. That three year estimation of higher prices is predicated on the
drought not advancing into next year’s growing season. As food costs escalate, consumer spending
on durable goods might scale down further as a larger portion of consumer budgets are diverted
to offset the higher grocery bill. China’s data released this week appears to show an
economy that is slowing faster than originally projected, leading to speculation that the Chinese
government may be acting sooner, rather than later, to take further monetary easing steps to try to
re-start the flagging Chinese economy. The US stock market has been on an unsustainable rally,
apparently trading on just the slightest glimmer of hope that the US Federal Reserve may initiate
another round of Quantitative Easing. In Europe, the news stream seems to have tapered off; the
Olympics have temporarily taken focus of the growing sovereign debt problems in the Eurozone.
The Olympics will be coming to an end soon and Europeans will once again wake up to face the
stark reality that there is still no solution to their spiraling debt crisis. More and more, it seems
that the global financial system is becoming dependent on the machinations of the Central
Banks. As these same Central Banks re-start their printing presses to try to stave off what seems
to be becoming an eventual global bankruptcy, fiat currencies cannot possibly maintain any store
of value. In the US, Congress has taken off for five weeks of vacation without making any progress
on resolving the upcoming “fiscal cliff”. If left unaddressed, that “fiscal cliff”, promises to
place severe economic stress on citizens and businesses in the United States. In this environment,
maintaining ownership of your existing precious metals products in your portfolio, and
even accumulating more product as you see any buying opportunities to do so may be viewed as
a wise decision. Analysts such as Ted Butler are reiterating their belief that both gold and silver
are setting up for a violent explosion to the upside in the near future as global events continue to
lend support to the fundamentals that should support higher precious metals prices. Be prepared
to move swiftly, yet without overextending yourself, should prices begin to skyrocket as these
analysts expect. Remember that precious metals should be viewed as a long-term investment
and that the key to profitability through the ownership of physical precious metals is to actually
own the physical products and to hold them for the long term. Always remember that you should
never overextend your ability to maintain ownership of your precious metals over the long term.

End Of An Era For Gold Investors?

by Alfred Adask of


Michael Allen recently penned an article entitled “End of an Era for Gold Investors” in which he opined that gold had probably peaked and its price would decline over the next decade. One of our readers of saw Mr. Allen’s article and was so frightened by its predictions that he considered selling all of his gold. So he sent a copy of the article to me, and asked for my opinion.

To say that I disagree with Mr. Allen’s prediction is an understatement. Mr. Allen’s article has inspired some fear that I believe is unwarranted and even irrational.

• For example, according to Mr. Allen, “The real price of gold is near the highest price it has been since the price was allowed to float in 1969.”

Say whut? In terms of inflation-adjusted dollars, today’s price of gold ($1,600) is less than half the price peak ($850) seen in A.D. 1980. That implies that today’s price of gold should at least double before we see a significant correction.

In fact, Mr. Allen does not claim gold is near its highest price based on inflation-adjusted dollars. Instead, he bases his statement on a graph comparing the price of gold to the Consumer Price Index (CPI).


That’s an interesting comparison, but Mr. Allen apparently assumes that the CPI is areliable economic indicator.

I disagree with that assumption.  I believe the CPI has been routinely suppressed in order to minimize cost-of-living increases for things like So-So Security.

When I look at the same graph, it doesn’t tell me that the price of gold is the highest it’s been in 32 years—it tells me that the CPI has been falsely suppressed by at least 50% or more over the past 30 years, and people receiving pensions adjusted for the CPI have been persistently robbed during that time.

•  “The last time gold was this high, the metal spent the next 12 years declining and did not hit bottom until it has lost 82% of its value in real terms. There is no really good reason to believe that the same exact pattern will be repeated this time, but we can be fairly certain that many of the factors that drove gold to the current heights are either unsustainable or that there exist other hedging instruments that are both cheaper and more effective.”

Mr. Allen at least raises the possibility that the price of gold might fall another 82%.  My response?  When donkeys fly.  You and I will not live to see the day when the price of gold is again below $400.

As for the “many factors” that drove gold to the current heights—couldn’t they also be viewed as the “many factors” drove the dollar to its current lows?  Is gold being measured in terms or dollars or are dollars being measured in terms of gold?  Is gold up?  Or is the fiat dollar down?

The fundamental reality is not that gold is up, but that the dollar (persistently inflated by government for at least 60 years) is down and going lower.

In the comparison between gold and dollars, gold is the unchanging standard.  One ounce of gold 1,000 years ago, was also one ounce of gold in A.D. 1980, and is still one ounce of gold today, and will be one ounce of gold 100 years from now.  The gold doesn’t change.  The value of fiat dollars change.  The apparent changes in the price of gold reflect the actual changes in the value of the fiat dollar.

Mr. Allen apparently agrees with that interpretation since he suggests that there may be “hedging instruments” that are “cheaper and more effective” than gold.   A little further on in the article, he claims to be he’s “hedging” “traditional investments” like stocks and bonds.

I don’t use gold to hedge stocks or bonds.  I use gold to hedge fiat dollars which I regard as certain to continue to bleed value until the fiat dollar dies.

But if there are “cheaper and more effective” hedging instruments to protect us against the stock and bond depreciation, I’d like to know what they are.  Derivatives, perhaps?  Spanish or Greek bonds?

Gold has been the only real money for thousands of years.  If there’s a “cheaper and more effective hedge” against fiat dollar inflation, it must be a recent invention that has little or no historic track record.

•  “Gold might still go higher, but it is no longer a one way ticket. In the next decade, investors will need to hold a wider variety of alternative assets to hedge their traditional investments, and they will need totrade more frequently than in the past decade.”

First, the author talks about gold no longer being a “one way ticket . . . in the next decade.”

I agree.

Within the next ten years, gold will probably go into the “mania phase” of most bull markets and the price might spike upward to $10,000 or even $25,000 dollars.  The “mania phase” will end, and the price of gold will suddenly plummet back from $10,000 to, maybe, $5,000 . . . or it might plummet back from $25,000 to $8,000.

But after gold spikes to its ultimate (and irrational) high, I believe it will “plummet” back down to a price that is almost certainly two or three times higher than it is today.  If so, those who invest in gold now can expect to see their investment at least double and probably triple over the “next decade”.

More, insofar as the author couches his prediction in terms of the “next decade,” he’s ignoring whatever may happen in the next 3 to 5 years.  I doubt that any reasonable student of the price of gold believes that there won’t be significant profits to be made in gold over the next 3 to 5 years.  After that, gold may spike irrationally and then plummet.  But until that irrational spike, gold will not only provide a hedge against inflation (which our government is desperate to cause) and perhaps even against the potential collapse of the dollar—gold may provide a profit potential.

I.e., if the price of gold has been artificially suppressed over the past decade, then today, the “real” price of gold on an un-manipulated (free) market might be $2,500, $3,500 or even $5,000 rather than $1,600.  I believe that price manipulation is taking place but, sooner or later, that manipulation will end.  When it does, all of the former price “energy” that’s been suppressed will suddenly explode and the price of gold will jump up to its true “free market” price.  That jump won’t be the result of the “mania phase” in the bull market.  That jump will be a reaction to ending price manipulation and represents a real “profit potential” in gold.

If the price of gold has been artificially suppressed, then gold isn’t merely a hedge against inflation (a means to merely preserve your wealth against dollar depreciation)—it’s an “investment” that has a real profit potential simply because gold is currently undervalued and will inevitably rise to a true, free market price at some future date.

• Second, Mr. Allen’s “traditional investments” are equities (stocks and bonds) and trading “more frequently” will generate more commissions for stock brokers.

From the stock broker’s perspective, the problem with gold bugs is that they buy and holdgold.  When they hold any investment, they aren’t “trading frequently” and therefore aren’t generating “more frequent commissions” for stock brokers.   Gold has been the single best investment over the past decade.  Nevertheless, stock brokers and investment counselors seldom promote gold because it doesn’t generate much churn.  No churn, no commissions.

Mr. Allen seems sympathetic to stock brokers who sees gold as a fundamental threat to their commissions and therefore dissuade people from investing in gold.  If so, his article may be less investment advice than a sales pitch to buy stocks and other “traditional investments”.

•  “Unlike other assets, gold has no intrinsic value.”

The subject of “value” is always subjective and debatable.  But I don’t recall ever before reading anyone else’s opinion that gold has no “intrinsic value”.

Physical gold is one of the few investments that has “tangible” and therefore “intrinsic” value.  It’s the equities (paper debt instruments; “traditional investments”) that are mere promises to pay and have no “intrinsic value”.

Mr. Allen’s comment seems incomprehensible.

•  Speaking of inflation (hedging the fiat dollar) as a reason to buy gold, Mr. Allen writes:

“Inflation. The presumed correlation to inflation is the most popular reason to buy gold, and yet, it’s the most ridiculous reason of all. There are actually two reasons that this is ridiculous. The first is that it isn’t even remotely true, and the second is that you don’t need to hedge against inflation if you own stocks.”

Really . . . ?

Mr. Allen’s assertion that there’s not even a “remote” correlation between inflation and the price is gold is absurd.

might agree that the correlation between the price of gold and government-issuedinflation indexes don’t have much of a correlation, but that’s because the government routinely falsifies its reports of the current degree of inflation.  Government may contend that inflation is only 2.5% while John Williams ( argues that inflation is 10%.  Under such circumstances, I’d tend to believe Williams’ numbers before I believed the government’s.

I might also agree that the relationship between the price of gold and government-reported inflation rates doesn’t show a high correlation because the price of gold has been artificially suppressed.

But it’s undeniable that there was a time when an ounce of gold was priced at $20.  Since then, inflation has caused the purchasing power of the dollar to fall by about 97% and the price of gold to rise to $1600.  To argue that there isn’t even a “remote” correlation between the price of gold and inflation is silly.

I’ve hosted the Financial Survival radio show for years.  The program always reports on a number of daily economic indicators including the price of gold and the US Dollar Index.  The correlation is not absolute, but probably 90% of the time, when the US$ Index goes up, gold goes down. When gold goes up, the US$ Index goes down.  There’s an undeniable “teeter-totter” correlation between the US$ Index and gold.  Again, arguing that there’s no correlation between the price of gold and inflation is absurd.

•  The author’s recommendation that we can rely on stocks as a hedge against inflation strikes me as improbable.  In A.D. 2000, the dollar (as measured on the US Dollar Index) was rated at “125”.  Today, on the same Index, the dollar is running about 82.  Thus, as measured on the US$ Index, inflation has caused the dollar’s purchasing power to fall by at least 34%.

During that same 12 years, the Dow Jones Industrial Average rose from 10,767 to 13,096—or about 22%.  That suggests that the Dow didn’t even keep up with inflation over the past 12 years.  So why should anyone believe that we can rely on stocks to hedge against inflation?

During the last 12 years, the price of gold rose from $275/ounce to $1605—about 480%.  It’s absolutely true that the price of gold has not had a strong correlation to thegovernment’s reported rates of inflation.  The price of gold has clearly exceeded the government’s reported inflation.  But does that discrepancy that the price of gold doesn’t correspond to real inflation? Or that the inflation numbers provided by government don’t correspond to real inflation?

Mr. Allen apparently believes that gold is currently overpriced to an irrational degree.

I believe the perceived value of the fiat dollar is currently overpriced to an irrational degree.

Which argument do you believe is more probable?

•  “A good investment should not just hold its value. It should increase in real value, which is what stocks do. If you own stocks, you don’t need a hedge against inflation. Over the past 125 years, stocks have outperformed inflation by about 5% annually.”

Admittedly, over the past 125 years, stocks have done well.

But for 84 of those years (about 67% of the 125 years), the dollar was still backed by gold or silver and inflation was minimal.  During an era of gold/silver based money, it should’ve been easy for stocks to generate a persistent profit.

But how have stocks fared since A.D. 1971 when the dollar became a pure fiat currency?

The Dow Jones Industrial Average rose from 820 (A.D. 1971) to 13,000 today—that’s animpressive increase of almost 1,500% over the past 41 years.  But in the same period, gold rose from $42/ounce to $1,605—about 3,700%.  Thus, since A.D. 1971, gold has outperformed the Dow by two and half times.

Part of the reason the author’s 125-year analysis of “stocks-beating-inflation-by-5%-each-year” works, is that for 84 of those years, the dollar was backed by gold or silver and inflation was therefore limited or non-existent.

Thus, although Mr. Allen speaks against gold, he implicitly relies on a gold-based dollar to make his 125-year analysis of stock performance seem credible.

So long as the dollar was backed by gold or silver, there should’ve been little or no inflation.  Therefore stocks could be expected to outperform the nearly non-existent inflation.  But once we went off the gold standard, inflation rose and the stocks’ ability to outperform inflation was compromised.  Once our money went off the gold standard, gold became the world’s premiere investment.

•  I agree with the author’s claim that “A good investment should not just hold its value. It should increase in real value, which is what stocks do.”

Since A.D. 2,000 the price of gold is up 480% and the Dow is up 22%.

If you’d invested $1,000 in the Dow in A.D. 2000, then today, the nominal value of your investment would’ve grown to $1,220.   But after 34% inflation (as measured on the US $ Index), the real purchasing power of your $1,000 investment would’ve fallen to about $805 (as measured in A.D. 2000 dollars)—that’s a loss of almost 20%—hardly a “good” investment.

If you’d invested $1,000 in gold in A.D. 2000, then today, the nominal price of that investment would be about $5,800.  After 34% inflation, the real purchasing power of your investment would’ve grown by 280%.

Over the past 12 years, has gold (up 280% in real terms) or Dow (down 20% in real terms) been the better investment?

Past performance doesn’t guarantee future performance, but does anyone expect the Dow (or stocks generally) to do much better in the next 12 years than they did in the past 12?

On the other hand, who doubts that the price of gold at least might increase as much in the next 12 as it did in the past 12?

•  Mr. Allen offers additional arguments against buying or continuing to hold gold.  Some people undoubtedly found his arguments persuasive and even frightening.    I view all of his arguments as flawed or even absurd.

So, who should you believe?  Me?  Or Mr. Allen?

Hard to say.

But you could believe the world’s central banks which recently recommended that gold be elevated from a Tier II to a Tier I asset in bank reserves.  The banks of the world are “officially” recognizing that gold is one of, perhaps the, premier investments on the globe.   The banks of the world will increasingly buy and hold gold as a reserve asset.  Gold has won the battle against fiat currencies. That’s powerful evidence that the world’s most brilliant economists and financiers believe the value of gold will continue to increase into the foreseeable future.

Of course, after the world’s bankers read Mr. Allen’s article, they might change their minds.  But I don’t think so—do you?

Contrary to Mr. Allen’s prediction, the “Era for Gold Investors” is far from ending—in fact, it’s arguably just begun.


There’s a massive Asian buyer in the gold market, Davies tells King World News

Submitted by cpowell on 01:50PM ET Thursday, August 9, 2012. Section: Daily Dispatches
4:46p ET Thursday, August 9, 2012

Dear Friend of GATA and Gold:

Writing at King World News, Hinde Capital CEO Ben Davies reports that there is a strong Asian buyer in the gold market and that “the strong hands are buying from the weak hands.” Davies’ commentary is headlined “There Is a Massive Buyer in the Gold Market” and it’s posted at the King World News blog here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

The CFTC Silver Investigation

via Silverseek

There has been an explosion of interest and commentary these past few days as a result of a front page story in Monday’s edition of the influential Financial Times (of London). The story stated that the CFTC was set to drop its four year investigation into alleged silver price manipulation due to insufficient evidence to bring charges, according to three unnamed sources. I went to sleep Sunday evening when the story first appeared prepared to wake up to similar and confirming stories in other publications. Instead, there were no other stories confirming the case was set to be dropped; only strong statements that the FT was story was “premature” and “inaccurate in many respects” by a named source, Commissioner Bart Chilton of the agency.

The CFTC’s silver investigation is a hot button issue and the FT story, as well as Commissioner Chilton’s response to it, set off an outpouring of emotion and conjecture in the precious metals world. And for good reason, as this is an extremely important issue. There can be no greater concern than whether a market is manipulated in price. The issue of a silver manipulation is also a divisive matter, even within the CFTC itself; otherwise there likely wouldn’t have been leaks that the investigation was over and the immediate response of not so fast. As is usually the case with extremely divisive issues (like politics and elections), emotions take hold and the real issues can get distorted.

Let me try to frame the picture in an unemotional manner. Admittedly, that’s no easy task since I was the prime initiator behind this silver investigation and the two prior CFTC silver investigations in 2004 and 2008. (Too bad there’s no Olympic event for initiating government investigations). However, the truth is that four years ago I was not trying to get the Commission to investigate, as they had just completed a few months earlier, in May 2008, their second silver investigation in four years. By then, I knew where the Commission stood on whether silver was manipulated and it was pointless to ask them to investigate again. I had a different motive in mind when I urged readers to write to the CFTC about the now-infamous Bank Participation Report of August 2008. That was the report that showed that one or two US banks held an obscenely large and concentrated short position in COMEX silver futures that amounted to 20% of world production and 30% of the entire COMEX silver market. No major market had ever been that concentrated. I knew that this short position was so concentrated that, in and of itself, it proved silver was manipulated because the price would be radically higher in its absence. That is always the litmus test for manipulation, namely, what would the price most likely be if a concentrated position did not exist?

As a result of the August 2008 Bank Participation Report and subsequent CFTC correspondence to US lawmakers, I also learned at that time that JPMorgan was the big silver short, as I speculated on in this article. This is when and where the precious metals world came to learn that the big silver short was JPMorgan.

I asked readers to write to the CFTC not to investigate silver anew, but for the agency to simply explain how a big bank holding such a large percentage of the market would not be manipulation. This is a question that the Commission should have answered immediately since it was so basic to commodity law. The last thing I intended was for the agency to embark on a multi-year phony investigation as a delaying tactic for not being able to answer a basic regulatory question. Because the Commission could not explain the legitimacy of JPMorgan’s concentrated short position, they continued to drag out resolution by pretending to investigate. But four years is an extraordinarily long time for any government investigation, phony or otherwise, and it appears that the CFTC has to confront the issue soon; hence the FT article.

While the FT article was disappointing (at least it mentioned my name in a non-derogatory manner) and Chilton’s response was encouraging, the reality is that it is unlikely that the investigation will be resolved much differently than the version leaked to the paper. For one thing, nobody likes admitting they had royally screwed up and if the Commission were to bring manipulation charges now in silver, it would be admitting that it missed the wrongdoing for the previous two decades, despite continuous and documented warnings from 1986. How likely is that?

More importantly, were the agency to charge JPMorgan with manipulation of the silver price (as it should) that could set off a series of events that could easily grow out of control. One thing that makes the silver manipulation so potentially profound is that the core allegation is of a crime in progress. The CFTC has never busted up a manipulation that was in force; like most government agencies, it only reacts after the fact. Don’t take that solely as a complaint, but more as an observation that governments are more reactive than proactive. Because the silver manipulation is very much in force, were it to be terminated by CFTC actions against JPMorgan and/or others, it would be a “live” event for the first time. History shows that all manipulations end violently. In the case of silver, since it has been depressed in price by a downward manipulation, its termination would necessarily cause prices to explode higher. Any charge brought by the CFTC would send a clear signal to the world that silver had been depressed in price and was undervalued and, therefore, should be purchased. This would cause a flood of buying and discourage new selling, causing the price to truly explode, most likely in disorderly market conditions. Do you find it likely that the CFTC would wish to cause that disorderly pricing that could lead to further unsettled conditions in other markets?

If JPMorgan (and perhaps the CME Group) were found to be the main culprits in the silver manipulation and the CFTC brought charges against them, the repercussions to JPM and the CME could be a threat to them as going concerns. It was never a case that JPMorgan couldn’t financially afford to buy back its concentrated silver short position; it was always a case that should JPM ever move to buy back aggressively to the upside that would prove conclusively that it had been manipulating the price of silver all along. That would set JPMorgan (and the CME) up for a legal holocaust, both civil and criminal. There has been talk of a civil litigation nightmare for those banks deemed guilty in the developing Libor manipulation; but determining damages will be difficult because the Libor rates were allegedly manipulated both up and down, making the damages unclear and hard to prove. Were there to be findings of a downward manipulation in silver, those damaged, from investors to producing companies and countries could easily demonstrate the damage. Back in the Hunt Bros silver manipulation of 1980, one of the successful litigants was Minpeco, the government producer organization from Peru, who I remember collected more than $100 million. That would be chicken feed compared to the consequences of the much longer downward silver manipulation of today by JPMorgan. And this says nothing of potential criminal liability.

JPMorgan is perhaps the most important and influential US bank and for the CFTC to move against them in a matter as important as basic market manipulation could lead to unintended consequences that could threaten the world’s financial system. Do you think the CFTC would dare challenge the supremacy of JPMorgan considering that potential financial fall-out? Besides, as I have written previously, JPMorgan is too big to sue, at least matched up against the CFTC. The matter of the bank manipulating any market is something that JPMorgan would defend against to the death, as for it to be found guilty could possibly end the bank in its current form. JPMorgan would certainly spend $5 billion (only one quarter’s net profits) to fight any charges in connection with a silver manipulation and, at a minimum, delay a legal resolution for decades. On the other hand, the CFTC is struggling to fund the whole agency on $200 to $300 million annually. This is most likely the reason behind the leak to the FT about the silver investigation being dropped, namely, the CFTC is no match for JPMorgan and the agency knows it. This has nothing to do with law, or justice, or doing what is right; it is simply a case that the crooks at JPMorgan (and the CME) can bully anyone they chose, including the US Government. The most plausible alternative explanation, of course, is that the Treasury Dept ordered the CFTC to keep its hands off JPMorgan. Either way, it stinks.

The truth is that the silver investigation was a ruse from the start in that the CFTC could never have moved against JPMorgan or the CME in any circumstance. The proof of that is evident in the many other specific instances of price manipulation in silver that have occurred after the soon to be dropped investigation began. The most obvious instances were the two separate 30% and 35% price smashes in a matter of days that occurred in silver in 2011. There never were such blatant price declines in such a short time in any world commodity in history, to say nothing about there being no obvious supply/demand changes to account for the declines.

In other words, the CFTC started their third silver investigation four years ago as a way of avoiding having to explain how JPMorgan could be allowed to hold a clearly manipulative concentrated short position and then ignored the two greatest manipulative price events in commodity market history while the phony silver investigation was under way. Think of how devious and dishonest the CFTC has been; it announces a formal silver investigation to avoid having to answer bedrock regulatory questions, then ignores the two most manipulative prices events in history claiming it can’t comment on them because there is an active investigation under way. If government officials could ever be horse-whipped for malfeasance and for failing to protect the public interest, surely the CFTC’s performance in silver would permit it.

I realize that what I have written to this point paints a picture that is not optimistic for the resolution of the silver investigation that most would favor. I am sorry about that, but I try to be an analyst and not an entertainer. That said I’d like to spend some time explaining why the outcome of a dropped case may not matter much and that the net result is good for silver. More than anything, this FT leak was likely a trial balloon for the CFTC to gauge public reaction to it dropping the case. If so, the reaction couldn’t be clearer; even I was taken aback by the near universal condemnation of the agency for proposing to drop the case. I think what got to people the most was the suggestion that the agency would walk away without bothering to explain the concentration and the two historic price drops of 2011, to say nothing of the almost daily beatings in silver as a result of crooked High Frequency Trading. If anything, the FT article may have given legs to the silver manipulation allegations.

While it was a mainstream media publication that leaked the story, the silver manipulation is surely not a mainstream media issue. The silver story is an Internet and private publication issue that grew despite being ignored in the mainstream media. As such, any declaration that the matter is now closed will not close it anywhere outside the MSM, where it was never accepted to begin with. It’s not just that the silver manipulation was never accepted by the MSM, it was more a case of it never being allowed to be openly discussed. But legitimate questions of undue market concentration and historic and unjustified silver price movements are matters worthy of transparent examination that MSM censorship has been unable to stifle.

Not only is the matter not going away, the leak to drop the case may bring greater attention to it. Such attention could prove to be the death knell for the silver manipulation, as the last thing the silver manipulators want or need is a fully transparent examination of the facts. One of my longest held beliefs has been that as time rolls on more would become aware of the real silver story and once they did, more investment demand in silver would result. That has occurred and any new attention brought to silver as a result of a dropped investigation will likely accelerate the process. The truly amazing thing is in how slowly the real silver story has spread in the ranks of super big investors. Aside from Eric Sprott, very large investors have overlooked the silver story completely. I am as certain as I can be that these very large investors just haven’t taken the time to look objectively at silver. I think it’s a case of silver being such a universally known item that most people assume they already know all the facts because they know what silver is. This includes very large investors who, in addition, may actually be turned off that so many smaller investors have invested in silver. It’s a common human failing to dismiss something because others thought to be less knowledgeable got there first. In the long run, however, very large investors are more concerned with superior returns, so the key is getting them to look at silver objectively. The dropping of the silver manipulation may be that key.

Perhaps the most amazing thing of all, at least to me, is the glaring fact that even after four years of non-stop public allegations about involvement in the silver manipulation, JPMorgan still remains the big short. It is hard for me to comprehend how such a large and powerful financial organization (as well as the CME) could silently tolerate the obvious reputational damage which is accruing. While JPMorgan’s short COMEX silver position is in the lower range of what it has been since the Bear Stearns takeover of March 2008, it remains shockingly large and concentrated. After last week’s big increase of 3000 contracts, JPM’s short position, at 18,000 contracts (90 million oz), is still more than three and a half times the proposed position limit in silver.

The most plausible explanation for why JPMorgan has not rid itself completely of this manipulative short position is because it can’t do so easily. This is particularly true if JPMorgan tried to buy back its silver short position on rising prices. It would be a shock to the silver market system if the biggest short seller of last resort suddenly turned buyer. In essence, this is the root problem with concentrated positions in general – they cannot be unwound without market upheaval. For JPMorgan to turn to the silver buy side would beg the question – who would sell to them and at what price? The problem with the sharply higher silver prices that JPMorgan would cause if it turned silver buyer is that it would confirm that the bank was, in fact, manipulating the price of silver all along. To my mind, this means JPMorgan is trapped. They can’t run and they can’t hide. This is precisely the conclusion that any large investor would reach if that investor took the time to study silver closely. I can’t see how that won’t happen in time and a more bullish set up is hard to imagine.

Of course, I would be the happiest guy in the world to be proven wrong about what the CFTC will do with the ongoing silver investigation. But the potential of the likely greater exposure of the real issues in silver that a dropped investigation would bring is plenty good. With silver, it’s always been about getting people to learn the real facts.

Ted Butler

August 8, 2012

Is a Strong Dollar Trouble for Gold?

You’ve probably heard that a strong dollar means weaker gold prices.

Yet anyone who has been watching the markets closely knows that “strong dollar = weak gold” isn’t exactly true.

Sometimes, when the dollar strengthens, gold will fall. Other times it will stay flat or can even rise.

So where does that uncertainty leave gold investors?

The Dollar-Gold Relationship Has Some Surprises
We really need to understand the gold-dollar relationship in precise terms, not general ones.

One thing that you can do is look at a chart of gold and the USD/EUR over the past six months, starting from the February 1 price of $1,749.50:

It clearly shows that gold has been going down as the dollar has been gaining against its primary competitor, the euro.

In fact, the percentage gain for the dollar is nearly the same as the decline in gold, just under 10%. Seems like an almost perfect inverse correlation, right?

No, not exactly. Look closer.

There are a lot bumps and anomalies along the way. Sometimes gold has a mind of its own, separate from the dollar, meaning that other factors must be driving it.

To find out more, we also calculated the correlation of returns on gold and the USD/EUR currency pair.

For a quick refresher on definitions:

A correlation of +1 means two variables are moving perfectly together.
0 means no correlation between the variables.
-1 means a perfectly inverse correlation – when one variable goes up, the other goes down.
So what’s gold’s correlation with the USD/EUR currency pair over the past six months? It is -0.471.

To make sure this wasn’t a euro-only phenomenon, we also checked the correlation of gold to the US dollar Major Currency Index, which reflects the strength of the dollar relative to the currencies of the Eurozone, Canada, Japan, the United Kingdom, Switzerland, Sweden, and Australia.

Once again, the correlation was far weaker than one might expect, at -0.531.

So what does this mean to you and your gold investments?
If you’re expecting more flights to safety boosting the dollar, then these correlations are definitely something to think about. At the same time, the correlations are not that strong.

Many gold investors falsely believe that a stronger dollar will simply run gold into the ground. Yes, a strong dollar would present challenges, but we need to also remember that we’re not talking about a correlation of -1.

Bottom line… the dollar influences gold prices, but it is not the sole determinant of its value.

Another factor for gold investors to consider is that the relationship between these variables can change over time. -0.471 is not set in stone – the correlation can get stronger or weaker from there.

In fact, over the past five years, the correlation has typically been weaker.

It’s hard to believe, but in the six-month period preceding September 21, 2010, gold hit a peak positive correlation to USD/EUR of +0.149. On the other end of the spectrum, gold had its most negative correlation of -0.741 in the six-month period prior to September 12, 2008. From these two points, gold has been everywhere in between.

So a strong dollar doesn’t mean the end of the world for gold.
If we enter a period of an even stronger dollar, gold investors might be concerned, but nonetheless, as the data show, gold and the UD dollar are not the perfect inverse of each other.

Even if the correlation were to become as negative as -0.741 again, a rising dollar wouldn’t necessarily crush the gold price.

Furthermore, there’s also the possibility of gold becoming less negatively correlated to the dollar. Even without the statistics, this is apparent. After all, the dollar has already strengthened, and gold is still holding up well. Has it been roaring to new heights as it did in years past? Not lately; but it hasn’t been beaten into the ground either – and there’s a lot more of the gold story yet to play out.

Vedran Vuk is a senior analyst at Casey Research, publishers of 10 research services read by over 175,000 independent-minded investors around the world. The August issue of BIG GOLD, due out Tuesday afternoon, outlines a new trend in gold that most analysts haven’t picked up on yet – and more importantly, an actionable solution. Now is the time to buy gold and gold stocks while prices are down.

Via Casey Research

David Morgan Interviewed “Better 6 months too early than 6 minutes too late”

1) David discusses how he believes miners have bottomed

(2) We talk about the inflation vs hyperinflation question.

(3) David discusses how he believes that shorting bonds will be a great money maker.

GATA’s Chris Powell on the Silver Manipulation Probe & the Fed Gold Audit!

Welcome to Capital Account. JP Morgan said in a court filing that PFG’s subpoena of the bank may be overly burdensome. Will JP Morgan find a way to get out of it? It looks like they could be off the hook for accusations of silver manipulation. The Financial Times reported US regulators are increasingly likely to drop the four year investigation of silver manipulation, failing to find enough evidence. Bart Chilton, CFTC Commissioner, told a Motley Fool reporter that this FT report is premature and inaccurate. We find out what Chris Powell, co-founder and treasurer of the Gold Anti- Trust Action Committee, thinks.

Since 1998 the Gold Anti-Trust Action Committee, GATA, has been exposing, opposing, and litigating against collusion meant to control the price and supply of gold and other precious metals. GATA has collected and published dozens of documents showing Western treasury and central bank efforts at intervention in metals markets – interventions that occur both openly, as well as surreptitiously, preventing the proper functioning of a free market in gold. Chris Powell, co–founder and treasurer of GATA and Managing Editor of the Journal Inquirer, has come all the way to our DC studio to give us an update on where GATA is in its efforts.

Also, the Federal Government is auditing the gold stored at the New York Fed. Are those who have been calling for an audit for years satisfied, or does this miss the point? We talk to Chris Powell about what this audit accomplishes, and if it even begins to scratch the surface, no pun intended.
And talking about precious metals, are shares in Wal-Mart as good as gold? Some are suggesting the discount retailer is the new safe haven. What does that mean? Since 40% of Wal-Mart’s revenue is from food stamps, according to one of our guests, should investors go long government subsidies? Lauren and Demetri give you their take on Loose Change.

via Silverseek

BNN’s ban on GATA noted at MineWeb, SilverGoldBull

via GATA Submitted by cpowell on Mon, 2012-08-06 17:05. Section: Daily Dispatches
1p ET Monday, August 6, 2012

Dear Friend of GATA and Gold:

MineWeb’s Lawrence Williams today takes note of newsletter writer Jay Taylor’s admonition by a producer for Business News Network in Canada not to mention GATA on the air:

Also taking note of it is Jeff Nielson of

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Silver Prices: When Schrödinger’s Cat Jumps Out of Pandora’s Box

Dr. Jeffrey Lewis | August 6, 2012 – 12:25pm via Silverseek

Although silver is traded as a commodity, it is also a form of money. You only have to go back less than a hundred years in the long span of human history to discover that silver once circulated widely as currency, typically in the form of silver coins.

In fact, the UK’s paper currency the Pound Sterling originally obtained its name from the British currency that once represented the value of one pound of sterling silver, which is a mixed metal that consists of more than 92.5 percent pure silver.

Furthermore, as you look closely at the supply and demand profile for silver, the issue of its monetary status seems increasingly important.

Silver’s Supply and Demand Profile Make it an Attractive Store of Wealth

All the silver ever mined that is currently available for use is known as the stock of silver, while the yearly amount of silver mined is known as its flow. Silver has a relatively high stock to flow ratio compared to other commodities, as does gold.

This means that silver’s intrinsic value should remain fairly stable over time because the annual increase of the available amount of the metal is relatively low compared to the amount already in circulation.

This gradually increasingly supply of silver has supported its use by investors as a store of wealth over many centuries, and it makes silver far superior in this regard to easily printed paper currencies that facilitate an ever expanding money supply and which consistently lose value.

Despite Silver’s Price Discovery Issues, its No Schrödinger’s Cat

Furthermore, a closer examination of silver’s supply/demand situation and the nature of price discovery leads to a puzzling question: Why has silver’s price remained muted for so many years?

Beyond any benefit that the few consistent shorts that make money covering when the price drops might reap, the current price of silver seems just too cheap on a historical basis. It typically falls far below conservative inflation-adjusted price estimates.

When this apparent undervaluation of silver is investigated further, one might just find a faulty price discovery mechanism. When seeking a motive for this apparent market inefficiency, the conversation typically morphs into a demand issue.

Nevertheless, a commodity that trades largely via synthetic derivatives, such as futures and options, means that its price is determined by those derivatives markets, rather than by actual physical demand. This situation reveals the paper market for the sham that it is.

Looking closely at price discovery reveals that silver trades like a commodity, but its price is dominated and even manipulated by the very entities that benefit the most from keeping the over-inflated financial system from naturally imploding.

Despite these ongoing price discovery issues, silver seems far from being a bouncing dead cat and seems more akin to Schrödinger’s paradoxical ‘half dead’ cat that could well surprise the market by making a dramatic price recovery. The fact remains that silver is a valid form of currency, especially in a crisis situation, as well as a valuable commodity with strong underlying industrial demand.

Silver’s Price Locked in Pandora’s Box?

Muted silver prices in the context of higher production costs have relegated most silver mining activities to the ‘by-product’ variety. This situation makes it more difficult to make reliable predictions about the future supply of silver since it typically depends on the production of other mined commodities.

Furthermore, the ‘Pandora’s Box’ of silver’s price has been kept closed for years due to the official dishoarding of the precious metal by central banks that has resulted in price suppression or even manipulation, as some observers have claimed. When this box finally opens, the price of silver will be set loose to find its true level.

Taking a close look at industrial demand also involves peering into the depths of an economic crisis as a thirty or forty year credit expansion cycle unravels, often with disastrous consequences. When the solutions are examined, suddenly all of the commodities become attractive investment alternatives, and silver and gold simply rise to the top.

Basically, when you examine the roots of the current financial crisis, sooner or later one discovers that the use of an ever-devaluing and intrinsically worthless paper currency is the true weakness of the financial system, not a faltering economy. Silver will continue to offer investors a safer haven against both gradual and catastrophic forms of wealth erosion spurred on by ever-increasing national debts and quantitative easing programs.

Big Banks Dodge Silver Manipulation Investigation

Via Wealth Wire

A tedious investigation that began four years ago is coming to a screeching halt, taking serious pressure off JPMorgan and HSBC.
Allegedly, they were thought to be involved in some serious silver manipulation in an attempt to “deviously control” and manipulate the silver market.

Despite suspected fraudulent behavior, the big banks are getting another big break due to a lack of sufficient evidence to move forward with the costly investigation. Previously, the investigation honed in on other details – besides the two banks mentioned above – in an attempt to uncover secrets pertaining to the broader spectrum of silver market manipulation.
Jeff Nielson touched on this “enlightening” topic in a recent article revealing some startling truths about the overwhelming problem of gold and silver market manipulation.

He believes the fiat currency system is one of pure evil and allows banks like JPMorgan and HSBC to get away with these manipulation schemes.

The idea revolves around the concept of “banker-stealing.” Banker stealing itself isn’t technically illegal on its own because the banksters are able to use fiat currencies as a “tool” that functions similarly to other forms of wealth (i.e. silver and other precious metals) but Nielson contends that fiat currencies are intrinsically valueless. Once the public catches onto this notion – the idea that they are being conned by the banks – they lose confidence and the currency crashes.
Based on this mentality, many critics and silver investors suspect big banks have been manipulating the silver prices to be much lower than they should be…

Meanwhile, big banks counter-attack “conspiracy theories” by pointing out the “huge” physical stockpiles in various metals that banks keep hidden and locked away in their big vaults for their clients – ones in which banks hedge in the market by taking short positions.

Whether you’re buying that or not, the most recent manipulation investigation has been cut short after the Commodity Futures Trading Commission (CFTC) reportedly analyzed over 100,000 documents as of Novermber 2011. Additionally, it said it had interviewed dozens of witnesses, sought and received expert opinions.
Although no official statement has been given from the CFTC, the insufficient evidence is expected to bring the entire investigation to an end quite soon.

Two months ago Ted Butler, a silver investor and blogger, sighted the CFTC as being “negligent” when it came to ending some of the bogus precious metals market manipulation.
While there is no doubt that silver investors won’t be happy about this recent decision, if it does come to fruition, JPMorgan has declined to comment on the matter.

The bottom is probably in for silver – Morgan

Hello and welcome to this week’s edition of’s Metals Weekly podcast. Joining me on the line is author of the Morgan Report, David Morgan. If we look at where the silver market is at the moment we are effectively in terms of prices at least in dollar terms, roughly where we started the year but concerns about macro economic pressures in Europe and the US have gone up if nothing else. Where do you see the silver market placed at the moment?

We’re still in a long consolidation or basing pattern right now and I feel it will probably continue for a little longer. I think that perhaps the bottom is actually in for, not only the mining equities (I called that bottom probably in the middle of May or so and so far I am right, but barely, it looks like we might retest it) but also, it looks like the metals themselves probably bottomed very recently, it is too early to count that because time will tell but I think that we will actually work our way further up over the next several months and, by year’s end, I am looking for the silver to probably be in the $35-$40 range and gold will probably be well up $1750 – $1850 is my best take at this point in time.

If we look at the factors driving the market, there was an interesting report out of HSBC saying that investor sentiment is clearly going to be the swing factor given perhaps the slowdown that we’ve seen on the physical side from industry and from jewellery as well. What is your take in terms of particularly the investment side of things? What would likely derail investment demand for silver at this stage?

First of all let me say that I agree that investment demand is the driving factor of both gold and silver and, on the industrial side, I agree that it has fallen off measurably. However, I just put an alert out to our membership and there was a recent report coming out of Japan that they were going to increase their solar activity a great deal – so solar may pick up more in the upcoming years than perhaps was projected earlier. But, having said, the sentiment right now is for safe haven status and gold actually holds a much higher place in investors mind than silver does, so to get silver moving again I think gold is going to have to lead us up out of this basic pattern in a rather significant way and I think then silver will probably follow it up. It’s not always the case. Usually when these markets base and start moving back up it accelerates relative to gold; that could happen but I think gold is going to have to give a big push before new investment starts coming into the silver market.

In terms of that investment demand – that sentiment, particularly the safe haven element of it, the query that has been raised a couple of times in recent weeks and months is the notion of the US dollar as the safer or perhaps the better term is preferred safe haven over gold and silver which has surprised a lot of people especially given the amount of liquidity that is being pushed into the system. What is your view of silver and perhaps gold’s role as a safe haven and is that likely to become more of a safe haven than the dollar in months to come?

Excellent question. The ultimate currency is gold and silver there is no doubt about it. We have four or five thousand years’ history that proves that. We also know from history that every fiat currency that has ever been attempted has failed. but, as a practical person probably 99% of the population doesn’t even consider gold or silver to be an investment and so everything is settled in some kind of currency which is US dollars primarily, or any other currency on the planet (even a gold bug or silver bug if they had to meet a margin call or some kind of emergency medical expense or whatever would have to basically cash out of that position or some of it rather and get dollars or yen or whatever and pay that) so the fact is that even though the dollar has gone down from the time of inception of the Federal Reserve in 1913 basically, the fact is that the dollar is a settlement vehicle that is used throughout all commerce and because of that fact it’s going to continue to have some merit for who knows how long. Regardless of that the ultimate currencies are the metals, and it doesn’t take much more of a percentage of the population to wake up to that fact. In other words the more the dollar depreciates, and it will, the more it will wake people up to go into something that’s working well against it and that would be the metals markets. When you get these lulls like we’ve had for about a year in gold it makes people question their conviction. It was true then but maybe it’s different this time or it was true then back a year ago but now it has stopped. With the bull market over they started questioning their conviction and once that takes place you then just have to have new buying come into the market and I believe strongly that it will probably by years end.

In terms of the manner in which people are buying silver we saw an interesting report from ETF Securities stating that interestingly silver ETFs did particularly well in June and saw net inflows over the second quarter. Is this a market that you think is going to continue expanding or are we likely to see a move back towards gold bullion, coins and bars?

I think that the silver market is much tighter than most people believe. Most people just look at the price and based upon the price they get a feeling that silver is plentiful or what have you. The fact is that Sprott Asset Management came in with their Silver Physical Trust and bought approximately $200 million physical silver very recently. I think that’s another factor to my thinking and others that perhaps the floor is in and perhaps the bottom is in. Sprott is extremely savvy about the silver market, he is extremely bullish about the silver market and the last time that they made a purchase of that quantity it moved the price up about $2.50 over a rather short period of time. I don’t know if it’s going to happen this time or not. I am watching the market carefully. The point is that the silver market seems to have more of a safe haven status than it did, let’s say a few years ago. More and more people are waking up to the fact that silver has every quality that gold has only it sells for a much cheaper price. As people get squeezed more and more but still want to protect what they have left, the tendency is in the latter stages of a major bull market, like we are experiencing, more and more money moves into the silver market rather than the gold market because gold is so expensive for most people that they by-pass it even though they might prefer to own gold they move in the silver market. So what you said about the ETF is not a surprise to me at all.

To close off with one would be remiss at the moment to talk about the silver market and not talk about what’s been going on in the US with regards to the CFTC report, the probe into perhaps or the likelihood of silver manipulation. We’re now expecting a report in September and October. There are few people that are sceptical to whether or not we are likely to see an actual report coming out then, but what are your views?

My views are that there will be a report, if it happens on time or not I don’t know. My opinion is that the report will probably allude to some misbehaviour. I think it will be extremely watered down – there will be some position limits changed that have absolutely no meaning in reality, in other words that certain banks or certain hedges are allowed that really disrupt the market still and so – excuse my scepticism – but I have been studying this stuff for over four decades and I’ve looked at politics, government, money. Monetary history, what happened at the end of these great fiat systems and on and on and I just can’t see anyone standing up and telling the absolute truth that so much has been manipulated that banks have been doing it and we are really going to go after them. I don’t see that at all. I see some kind of watered down version that appeases the public and people that are in the mainstream media mostly will look at it and say this is really interesting – silver was manipulated or whatever word they choose to use and wow, we’ve correct that problem and move on while, in reality, it’s basically a whitewash. That’s my strong opinion on it.

We’ll have to look out and see what happens when the CFTC does release that but as you heard from David it’s not necessarily going to be what some people are hoping for.

Reality Check: Do We Really Need To Audit The Federal Reserve?

We’re buying seven million ounces of silver: Eric Sprott

Eric Sprott announced that his company has $200 million committed to his self-named Sprott Physical Silver Trust, and the announcement will help silver.

“We thought the timing was good in the sense that the silver price has been in the doldrums and there would be some underlying interest in the metal. We were happy the announced offering reached the target of $200 million because the issuing market is not very robust these days,” wrote Sprott on his blog.

Spot silver hit a high of $35.41/oz in February. It is now sitting at just over $28/oz.

While Sprott now has the money, his firm hasn’t pulled the trigger yet.

“So we were quite happy with the results. And initially it will allow us to buy seven million odd ounces of silver, which we haven’t bought yet, but it will certainly help the silver market.”

The Sprott Physical Silver Trust is an exchange-traded investment.


PPMI Week in Review

The Week in Review

1. On Thursday, Mario Draghi announced that the ECB stood ready to do whatever was necessary to
save the Eurozone from collapse. German Chancellor Angela Merkel and French President Francois
Hollande followed suit on Friday saying, in a joint statement, “Germany and France are deeply committed
to the integrity of the euro zone. They are determined to do everything to protect the Eurozone.”

2. Initial claims for unemployment fell sharply this week, beating economist’s expectations but there
appear to be some errors in the Labor Department’s model for projecting “seasonally adjusted” unemployment
data so once again this week’s figures may be erroneous. Last week’s figures were revised
upwards. Durable goods orders in June declined, indicating additional contraction in the manufacturing
sector of the US which may be an advance indication that job cuts may be on the horizon.

3. The final Thomson Reuter/University of Michigan US Consumer sentiment readings are in and they
struck their lowest level for the year in July. Richard Curtin, the survey director, said “While consumers
do not anticipate an economy-wide recessionary decline, they do not expect a pace of economic
growth that could satisfactorily revive job and income prospects. Moreover, consumers have
become increasingly convinced that current economic policies are incapable of solving the underlying
problems facing the economy.”

4. It seems the mainstream media is finally starting to pick up on what the rest of us have been saying
for the past several years. An article that appeared on CNBC’s web site Friday posed this question:
“can fiat currencies survive round after round of debasement?” Mark Mobius, Executive Chairman of
Templeton Emerging Markets Group, says investors will soon start to demand that fiat currencies be
backed by gold or some other form of hard assets. Mr. Mobius said “It’s already happening, you’re
beginning to see that trend with central banks stocking up on gold. The estimate is that at least half of
the buying is central bank buying. They are looking to the day when they can say okay, our currency
is backed by gold and therefore we’re a strong country.”

5. China is bracing for a steep increase in prices of corn, soybeans and animal hides this year as the US
struggles with its worst drought in 50 years. Soybeans have become particularly important for the
Chinese as they are the main source of feed for pigs, which the Chinese people have begun to con-
sume in large quantities as their personal wealth has increased. A sharp rise in food prices for the Chinese
may limit Beijing’s options for trying to overcome the current economic slowdown in the Chinese

6. William Buiter, chief economist at Citi said on Thursday that there is now a 90 percent chance that
Greece will be forced to exit the Eurozone in 2013. In his research note, Buiter said “Our base case
[for the Eurozone] is for prolonged economic weakness and financial market strains in periphery
countries, spilling over into renewed recession for the euro area as a whole this year and the next.
Buiter continued, addressing Spain and Italy’s troubles a well, saying “Even with the Spanish bank
bailout, we continue to expect that both Spain and Italy are likely to enter some form of troika bailout
for the sovereign by the end of 2012.

7. Pending sales for existing homes in the US were down in July, apparently due to a dwindling supply
as current homeowners appear to be unwilling to list their homes now for fear over the current economic
slowdown may affect their employment status and thus, their ability to acquire a mortgage.
New home sales saw their biggest drop in more than a year, according to the US Commerce Department.
The drop in both pending and new home sales may mean the housing industry is still struggling

8. Crude oil dipped back below the $90 a barrel mark over continued concerns that Spain may need a
full blown bailout to address its spiraling sovereign debt crisis. An increase in US Crude inventories
also helped push prices lower. Escalating tensions in the Middle East may lead to an increase in
prices again in the near future.

9. The euro declined against the dollar for most of the week, but reversed course when news broke that
Greece had come up with a plan to save close to 12 billion euros over the next two years in an effort
to meet the conditions of the latest bailout agreement. An announcement on Thursday by ECB President
Mario Draghi saying the ECB would do whatever was necessary to save the Eurozone from collapse
helped bolster the euro’s move higher. The Japanese yen continued its climb against the dollar
this week.

Friday to Friday Close
July 20th July 27th Net Change
Gold $1583.00 $1618.00 35.00 + 2.21%
Silver $ 27.35 $ 27.50 0.15 + 0.55%
Platinum $1415.00 $1405.00 (10.00) – 0.71%
Palladium $ 576.00 $ 570.00 (6.00) – 1.04%
Dow Jones 12822.57 13075.66* 253.09 + 1.97%
Previous year Comparisons
July 29th 2011 July 27th 2012 Net Change
Gold $1628.00 $1618.00 (10.00) – 0.61%
Silver $ 40.10 $ 27.50 (12.60) – 31.42%
Platinum $1785.00 $1405.00 (380.00) – 21.29%
Palladium $ 827.00 $ 570.00 (257.00) – 31.08%
Dow Jones 12143.24 13075.66* 932.42 + 7.68%

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1600/1575/1550 27.30/27.00/26.50
Resistance 1630/1650/1675 27.80/28.00/28.40
Platinum Palladium
Support 1400/1380/1350 560/550/520
Resistance 1420/1450/1480 585/600/620

Volatility should be expected to continue as the global economy continues to struggle and remains mired
in uncertainty. In the European Union, triggered by the LIBOR scandal that has major European banks
scrambling under investigative scrutiny, the EU Commission has proposed a set of reforms that would
make manipulating international commodity benchmarks such as Brent crude oil, cocoa, and gold, a
criminal offense. The EU commissioner for the internal market, Michel Barnier, said “By imposing
criminal sanctions for serious market abuse throughout the EU we send a clear message to deter potential
offenders – if you commit insider dealing or market manipulation you face jail and a criminal record.”
Coincidentally, Bart Chilton stated this week that he thought the CFTC’s four year old investigation into
whether JP Morgan has been manipulating the silver market might actually be completed by September or
October. Maybe with Europe threatening to take their own action, the CFTC finally decided they should
step things up. Mainstream media outlets are beginning to realize that the serial bailouts being carried out
across the globe are debasing fiat currencies at a faster and faster pace. Tocqueville Gold Fund manager
John Hathaway is in full agreement. In an interview with King World News this week, Hathaway said
“The issues for paper currencies are not isolated to the euro or the dollar, it’s the whole system that’s
based on unanchored paper currencies. We are at the end game for all of that, and over the next three or
four years I think we will see gold reintroduced in an official monetary role.” Hathaway also said “That
can only be done at substantially higher valuations in terms of paper currency.” The US Federal Reserve
meets again next week and the latest economic data, coupled with events in Europe, may finally be
enough to trigger another round of stimulus in the form of additional quantitative easing. Hathaway continued
in his interview, saying: “This year long consolidation is in its final stages, and I don’t think gold
is going to creep higher when that gets resolved. I think gold is going to move very explosively and not
give all of the people who sold it a chance to get back in.” If the Federal Reserve announces another
round of QE, and the European Central Bank launches another Long Term Refinancing Operation, as is
expected to occur next week, then the stage should be set for precious metals prices to resume their upward
climb, and to do so in spectacular fashion. Maintain ownership of your precious metals products
through any temporary price dip, keeping in mind the long term nature of investing in precious metals,
and be prepared to act swiftly in the coming week(s) if the metals explode to the upside. The fact that the
news broke that Europe may be considering another LTRO after the metals market closed may mean that
Sunday could be the start of some serious upside to metals prices when Asia opens. The fact that the
stock market rallied on news reports that additional bailouts in Europe and the US may be on the near horizon
shows just how desperate the situation in the global financial market has become. Currency debasement
here we come, let the race to the bottom begin! It is the wise investor that continues to own and
even accumulates additional product in this environment. Remember that precious metals should be
viewed as a long-term investment and that the key to profitability through the ownership of physical precious
metals is to actually own the physical products and to hold them for the long term. Always remember
that you should never overextend your ability to maintain ownership of your precious metals over the
long term.

Silver: Supply and Demand

Central Bank Gold-Grab Intensifies Further, Part II

via Bullion Bulls Canada

In Part I, readers had revealed to them the latest chapter in Western bankers’ newfound love-affair with gold. Indeed, as central banks around the world swap their own paper for gold at the fastest pace in history, it’s quite clear which monetary asset these charlatans really believe is a “barbarous relic.” After bad-mouthing gold for decades (and continuing to get their media trolls to attempt to frighten people away from gold today), we are currently witnessing history’s greatest “bash and buy”.

Both European banking authorities and those in the U.S. are now proposing reclassifying gold as a “Tier 1” financial asset. As was previously noted, this would have the effect of instantly making gold twice as attractive and twice as valuable to all of these large, Western financial institutions. What makes these developments especially interesting at the present time is that they are occurring at the end of another long period of sideways trading in the gold and silver markets.

Throughout this 10+ year bull market, these temporary periods of sideways price-action where the bankers are able to trap gold and silver within trading ranges have preceded the largest/longest rallies over the past decade – where gold and silver prices smash through all previous (nominal) highs. While the bankers are typically the last to notice and understand the consequences of their relentless manipulation, if you hit a dog over the nose with a rolled-up newspaper enough times, eventually the dog will get the message.

Thus the bankers themselves know their “fun” has nearly come an end (at least for an extended period of time), and they will have to once again sound the retreat on gold and silver prices. Being greedy (above all else), these banksters manage to be quite pragmatic: when they know that gold and silver are set to blast-off once again, many of them like to come along for the ride.

So, with a long period of sideways trading in the precious metals sector nearly at an end; with the bankers themselves in the process of reclassifying gold to make it much more valuable (for themselves); and with the bankers having a known tendency to switch sides and jump on the bandwagon (for short stretches); now is the time for all savvy precious metals investors to empty-out their bank accounts and sink every last dollar into silver and gold. Right? Not so fast.

There is, in fact, only one thing that the banksters like to do more than make money, and that’s to be able to make money while simultaneously whipsawing other investors (and hopefully totally destroying them). As a result, the banksters have come up with a particularly fun game that they like to play called Bait the Chumps.

It’s actually a really easy game to play when you are given complete and utter freedom by both government and “regulators” to rig/manipulate markets. First you target a sector with especially bullish long-term fundamentals – meaning that precious metals is the banksters’ favorite playground for this game.

Then, at a time when investors are already sensing that a rally is imminent you send out some really obvious “bullish signals”. Then you simply wait for the mice to take the cheese. Once the rodents have all latched onto their fromage, you spring your ambush. All the greedy, new “longs” who went out and leveraged themselves to the hilt on margin because they “knew” the sector was about to take off are instantly obliterated.

The downward momentum this creates then makes it possible to blow even moderately leveraged traders out of the water, and so the dominoes fall. With the whole market expecting a sector to “zig”, the bankers simply rig a “zag”. This is a classic win/win for these Vampires: not only do they get the tactile pleasure of destroying other investors, but the downward price action generated in the process then allows the bankers to do their own buying even cheaper.

Central Bank Gold-Grab Intensifies Further, Part I

Via Bullion Bulls Canada Posted: 24 Jul 2012 11:25 AM PDT

Precious metals commentators (the legitimate ones) are continually striving to tear away the veils of deceit and propaganda, in order to present the global economy (and the world as a whole) in a realistic manner. This, in turn, is done in order to warn people of the grave financial/economic peril which looms ahead of us; thanks to the unholy alliance of unscrupulous bankers and corrupt politicians (and regulators).

It is a frustrating task. It is a fundamental trait of human psychology that most people expect tomorrow to be just like today. Couple that inherent defect in thinking with history’s greatest propaganda-machine, continually blaring to the masses an endless chorus of “don’t worry, be happy”; and the result is as predictable as it is tragic: hordes of lemmings blissfully marching toward the gaping chasm ahead.

This is why we continually look for opportunities to demonstrate how the actions of the duplicitous bankers are entirely contrary to their words, and thus reinforce the reasoning and analysis of commentators like myself. Recall how the bankers and their minions in the ivory towers of academia have spent nearly a century attempting to brainwash the masses into believing the absurd proposition that gold was/is “a barbarous relic”.

To reinforce this Big Lie, the bankers dumped thousands of tons of gold onto the market – gold that (ironically) was actually owned by these same legions of lemmings – because (amazingly) all of the peoples’ gold has been placed in the custody of this cabal of private bankers, the central banks. It was a strategy doomed to fail; because today they have no more gold to dump, and their Big Lie has been exposed. Now nothing remains except for them to attempt to (quietly) buy back — or simply steal — as much of this gold as possible.

This task is greatly complicated by the fact that Western bankers cannot simply go out and re-purchase large quantities of gold on the open market, for myriad reasons (including the fact that gold-buying by other central banks is already soaring to record levels). To begin with, supplies of actual bullion are very tight. We can deduce this in various ways directly: the sixfold increase in the price of gold, the extremely abrupt end to Western gold-dumping, and the naked hunger which governments such as China and India are demonstrating in finding new supply-sources for gold bullion (i.e. ore that hasn’t even been dug out of the ground yet, let alone refined).

As Forbes Magazine tells us, there are also indirect ways in which we can deduce that actual supplies of bullion are extremely limited, such as the unscrupulous people who sell “paper gold” to Chumps, only for the Chumps to discover that they are holding all “paper” and no “gold”. Where did the intrepid sleuths of Forbes Magazine spot these gold-scammers? Halfway around the world in China.

There are a few preliminary points to make regarding Forbes’ “discovery”. First of all it is incongruous (bordering on outright absurdity) that these same Corporate Media talking-heads have spent literally decades scoffing at even the possibility of bullion-scamming of this nature taking place in New York and London; despite mountains of empirical evidence and even a bona fide whistleblower. Indeed, one of these New York fraud-factories has already been fined once for its own “paper bullion” escapades.

Yet here we have this (supposedly) prestigious New York financial publication pointing an accusatory finger halfway around the world, even though it openly acknowledges that “details are unclear how the scam worked”. Meanwhile, with 25% of Wall Street bankers being openly confessed thieves, the sleuths at Forbes Magazine claim to be totally unable to “see” manipulation and scamming taking place right outside the windows of their own head office – despite a trail of bread-crumbs so obvious that even Inspector Clouseau could get to the bottom of things.

Silver Market Update

Clive Maund | Monday, July 23rd via Silverseek

Silver investors and speculators are amongst the manic-depressive you can possibly find in the investment world. When they are playing maximum credits on the slots and passing round boxes of cuban cigars and taking out massive loans to buy Ferraris and Lambos you know it’s time to watch out. When they retreat into the shadows, only coming out to hurl themselves off bridges and other tall structures, mumbling about the “cartel” as they plummet earthwards, you know it’s getting time to buy – and that is the situation we now find ourselves in. In this update we are going to examine evidence which suggests that, despite the fragile looking price pattern, silver is going to turn surprisingly strong in short order, or alternatively, if it does break down, it turns out to be a false move that is swiftly followed by a dramatic recovery.

On its 3-year chart we can see that silver has been severely testing its key support at and above its September and December lows in recent weeks, and with its falling moving averages bearing down on the price overhead, and this being the 3rd major test of this key support, clearly there is some risk that it could crash it and plunge, yet while this is certainly true, various indicators are telling a story of gathering internal strength, and we will examine these a little later.

Staying with the 3-year chart a very important point to note is the current unbeatable risk/reward ratio. With the price hard down on support after a long period of retreat, those buying here have the opportunity to get in right at the start of a major uptrend if it does start higher from here, and can guard against serious loss by the simple expedient of placing close stops beneath the support. If this is obvious to us, then you can bet that Big Money is aware of it, and by Big Money we mean those with sufficient clout to muscle the market around to their own advantage. So what might they do here to make even more money? – crash the support, and run the little guy out of his remaining positions before a dramatic reversal back above the support leading to the major uptrend starting that we are anticipating. This is why it is so important to be ready to jump back in if, after failure of the support, the price then reverses back above it again, accepting the modest whipsaw loss as the possible cost of this strategy. Given the unusually bullish COTs and sentiment indicators for silver, it does not look likely that failure of the support would lead to more than a brief plunge that is quickly reversed, the only exception to this being if we see a 2008 style market wide total meltdown, and while this of course possible it does not look likely over the short to medium-term. The Accum-Distrib line shown at the top of the chart looks remarkably positive and is in itself a good omen, although we know from past experience that this indicator cannot always be relied upon. The current very low volume, about the lowest since the 2010 and 2011 Christmas holidays, is another positive sign. A new uptrend in silver will really gain traction and accelerate once the price succeeds in breaking above the red downtrend line shown on the chart.

The 6-month chart for silver shows a downtrend in force from March that parallels the one in gold. With the price approaching and then backing off from the upper boundary of this downtrend about 8 times now, it is clearly valid and very important, and while for various reasons we are thought to be at an optimum entry point here, the safer approach for would be buyers is to wait for the price to break out upside from this downtrend boundary, which as it is now close by above, would not involve missing much in the way of gains – unless that is the price takes off like a rocket upon breaking out – which is quite likely given how obviously important this downtrend is. There are several other lesser but still important points to note on this chart, which are the run of “doji” candlesticks that appeared last week that are indicative of a situation of extreme indecision – total standoff, but coming as they have after a drop they indicate a higher chance of a resolution to the upside, especially given that upside volume last week was predominant, which we can see reflected in the rising Accum-Distrib line shown at the top of the chart (On-balance Volume, not shown, also rose). Lastly the Bollinger Bands also pulled in tightly, signifying that pressure is building for a big move.

From what is set out above it will be clear to more sophisticated traders that we now have a near perfect setup for playing it both ways – a raft of straddles (Calls and Puts with the same strike price) or “strangles” (Calls and Puts whose strikes are both out of the money, and which are thus cheap) – and the current low volatility, if it persists into tomorrow, will mean you can get these on board cheaply. If the support fails and the price plunges you quickly ditch the Puts for a whacking great profit and hang on to the Calls. If, as we suspect, the breakdown is the result of Big Money running the little guy out of his positions by triggering his stops, then we can look forward to a rapid reversal back above the support enabling the trader to at least recoup the cost of the Calls and very possibly make a profit on them too. If the new uptrend develops from here, then you simply hang on to the Calls and write off the Puts, and you should end up with big gains.

A big reason that we are believed to be at or very close to a bottom here is the latest silver COT, which looks exceptionally bullish, with the Commercial short positions being close to record lows for this bullmarket, and the Large and Small Spec long positions being close to record lows. Unless we are just entering an era when things are suddenly very different, this is a classic indication of a major low in silver. The rationale behind the bullish implication of this is that the Large and Small specs’ interest in silver is at a very low ebb, so their long contracts, which the Commercials counterparty, are a very low level reflecting this lack of interest.

The silver public opinion chart shown below is such a reliable barometer of the foolishness of most silver speculators and traders that it is almost comical. Why don’t they refer to it? – just too stupid, I guess. It’s a good thing they don’t because it means that people like us can use it to our advantage. As we can see the “great unwashed” have a low opinion of silver at this time, and that has to be bullish.

Finally, the long-term 15-year chart of silver relative to gold is interesting as it shows several interesting things. The first is that during the early days of the Precious Metals bullmarket silver underperformed gold, and it got treated as almost worthless trash during the 2008 market crash. Then, after a period of recovery, it really went nuts in a big way for the first time ever in late 2010 and early 2011, with silver speculators becoming totally manic before being overcome by blind panic and exiting their positions just as fast or even faster. Now silver bugs are licking their wounds and feeling decidedly timid after the severe kicking they have received since May of last year – it’s kind of sad really considering how attractive silver is now compared to those earlier heady days – but we can surely count on them getting interested again – once the new uptrend has become well established.

China Precious Metals Strategy

Dr. Jeffrey Lewis | July 23, 2012 – 12:20pm via silverseek

The Chinese currency the Yuan is still pegged to the U.S. Dollar at a level that undervalues it substantially, provoking criticism of this exchange rate policy. The world still believes that China cannot survive and prosper without the West to fund its development, and so most analysts are focused on a hard landing for China.

Nevertheless, what is really happening is that new currency swaps are forming the backdrop of Chinese metals accumulation and production. In essence, China is gradually amassing the lion’s share of global wealth in the form of hard assets.

An amusing quote posted by Tyler Durden at sums this situation up rather well:

“While the insolvent “developed world” is furiously fighting over who gets to pay the bill for 30 years of unsustainable debt accumulation and how to pretend that the modern ‘crony capitalist for some and communist for others’ system isn’t one flap of a butterfly’s wings away from full on collapse mode, China is slowly taking over the world’s real assets”.

China is Gradually Shifting the World Away From Using the U.S. Dollar

Recent headlines from around the world have focused on how China is spearheading a shift away from the U.S. Dollar as a reserve currency. Some articles on this topic from over the last year were entitled:

· World’s Second (China) and Third Largest (Japan) Economies to Bypass Dollar, Engage In Direct Currency Trade

· China, Russia Drop Dollar In Bilateral Trade, China And Iran To Bypass Dollar, Plan Oil Barter System

· India and Japan Sign New $15bn Currency Swap Agreement

· Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says

· India Joins Asian Dollar Exclusion Zone, Will Transact With Iran in Rupees

· The USD Trap Is Closing: Dollar Exclusion Zone Crosses the Pacific as Brazil Signs China Currency Swap

· Chile is Latest Country to Launch Renminbi Swaps and Settlement

· Central Bank Pledges Financial Push in Africa

· Yuan Spreading – China Creating Dollar Exclusion Zones

The movement first began in Asia, but then spread to South America, and now to Africa. These may seem like small steps, but the ultimate impact could well be a dramatic shift out of the U.S. Dollar. This will make it harder and harder for the United States to continue to sustain its twin deficits and fund its massive national debt.

China Encourages Precious Metal Ownership

Another important Chinese policy change has been to legalize precious metals ownership recently. Even silver ownership has been overtly encouraged by Chinese authorities.

In effect, by encouraging domestic hard asset ownership, this creates a third tier or leg of support for the accumulation of precious metals.

This means that China is becoming a global force in the import, production — and now the domestic ownership — of precious metals. China is already a major producer and importer of gold. The country was also a net exporter of silver, but it has now become a net importer of silver.

To further support the growing Chinese precious metals market, new metals exchanges are opening.

Could China be Considering a Metals Backed Currency?

While this shift in emphasis is incremental, it could easily reflect a strategic movement by China toward a new reserve currency that might be backed by gold or other precious metals. Silver has been used as an official currency in China before, dating back to the Han Dynasty that ruled from 206 BC to 220 AD.

Perceptually speaking, such a trend will initially be ignored and downplayed by both sides.

China would rather buy precious metals while their prices are low and unwind their massive U.S. Dollar positions without creating a market panic. Furthermore, to strengthen its funding position, the United States will continue to chant the strong Dollar mantra.

Nevertheless, as the official announcement of such an intention approaches and Chinese metals buying becomes increasingly evident, the affected precious metals market(s) will have little choice but to rally substantially.

PPMI Week In Review

The Week in Review Via PMI LImited

1. “We can expect a rally from here that will take our breath away.” Those are the words of
James Turk, in an interview with King World News this week. Mr. Turk is of the opinion that
world events are coming to a head and that the “summer doldrums” that precious metals have
been experiencing will soon be coming to an end as a result.
2. Eurozone finance ministers approved a loan of up to 100 billion euros to Spain so that it can
recapitalize its banks on Friday. The exact size of the loan is to be determined at a later date,
most likely in September, after audits of the Spanish banking sector can be reviewed.
3. Initial claims for unemployment spiked higher this week and, just as we surmised might be
the case in our July 13 memo, the previous week’s data which showed a steep decline was
deemed erroneous due to the July 4th holiday falling mid-week. Mid-Atlantic region manufacturing
in the US also saw a decline for the third straight month, perhaps signifying further
weakening in consumer demand.
4. Drought across the Midwest in the US is causing food prices, particularly corn and soybeans,
to spike. The drought is drastically shrinking the size of this year’s corn crop, and as oil
prices rise over Middle East tensions, Ethanol prices are on the rise as well. The end result
may be a serious spike in the price of gasoline, especially if the Middle East erupts into further
violence. The drought, if it continues unabated, may also lead to an increase in meat
prices later in the year as farmers are being forced to sell animals to reduce the feed they require.
A report by the National Agricultural Statistics Service showed that the US now has
the smallest number of cattle in almost forty years and we all know a shortage of supply
means a serious increase in prices.
5. Federal Reserve Chairman Ben Bernanke was in front of Congress this week and much of
what he had to say was negative. In one particularly amusing exchange between Mr. Bernanke
and Senator Chuck Schumer, Senator Schumer told Mr. Bernanke that “Congress isn’t
going to do it”, in reference to addressing the coming “fiscal cliff” when Bush era tax cuts
expire. Senator Schumer amusingly told the Chairman “Get to work Mr. Chairman” suggesting
that Congress is looking for the Federal Reserve to initiate additional stimulus measures
since they, themselves, are apparently deadlocked and unable to act.
6. In Asia, fears are growing that the extreme drought taking place across the United States may
trigger a repeat of the 2007/2008 food shortages. If food prices across the globe begin to
spike as a result of droughts in important agricultural regions, then inflation may well become
entrenched in the global economy.
7. The European Central Bank announced on Friday it would stop accepting Greek sovereign
bonds, and other assets backed by the embattled country’s government, as collateral starting
July 25. The ECB said it would review the situation once the “troika” had completed its visit
to Athens and that Greek banks would still be able to get funding from the Greek national
central bank in the meantime.
8. In an ironic twist of fate, homeowner and condominium association groups are bringing several
of the “big banks” to court in foreclosure cases due to unpaid association fees. Attorney
Ben Solomon, representing Homestead Florida’s Keys Gate Community Association, said
“The association has both a statutory right under the Florida laws as well as rights under its
restrictive covenant in the community, and it pursues those rights just like any other owner.
In this legal scenario JP Morgan is no different than any other homeowner in the community
who has failed to pay.”
9. Crude oil pushed its way back over $90 a barrel this week as geopolitical tensions in the
Middle East, particularly in Syria, heightened fears that oil supply may be disrupted.
10. The euro struggled marginally higher against the dollar this week despite continued fear over
the stability of the Eurozone. Despite edging higher against the dollar, the euro was at fresh
two year lows against other currencies. The Japanese yen continued its climb higher against
the dollar this week.

Friday to Friday Close
July 13th July 20th Net Change
Gold $1592.20 $1583.00 (9.00) – 0.57%
Silver $ 27.35 $ 27.35 0.00 + 0.00%
Platinum $1430.00 $1415.00 (15.00) – 1.05%
Palladium $ 585.00 $ 576.00 (9.00) – 1.54%
Dow Jones 12777.09 12822.57* 142.32 + 1.12%

Previous year Comparisons
July 22nd 2011 July 20th 2012 Net Change
Gold $1601.00 $1583.00 (18.00) – 1.12%
Silver $ 40.10 $ 27.35 (12.75) – 31.80%
Platinum $1795.00 $1415.00 (380.00) – 21.17%
Palladium $ 806.00 $ 576.00 (230.00) – 28.54%
Dow Jones 12724.71 12822.57* 97.86 + 0.77%
* Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1575/1550/1530 26.80/26.50/26.10
Resistance 1600/1620/1640 27.50/28.00/28.50
Platinum Palladium
Support 1400/1380/1350 560/525/500
Resistance 1425/1450/1500 590/605/625

Volatility should be expected to continue as the global economy continues to struggle and remains
mired in uncertainty. In uncertain times such as these, it is important to keep the longterm
nature of investing in precious metals foremost in your mind. Wise investors are maintaining
their ownership of their precious metals, and even accumulating more as temporary price
dips present them with opportunities to do so. At King World News this week, they interviewed
their “London Trader” regarding the recent price action in gold and silver. Their source said “It
is now beginning to be discussed, openly, that the unallocated gold is not at the banks. This is
definitely the case with many of the allocated accounts as well.” Their source continued, saying
“This tells me there is something major that is happening behind the scenes. It tells me that the
LBMA’s price fixing scheme is coming to an end.” He continues: “As this scandal is brought to
light, that the unallocated gold and silver are not there, and much of the allocated gold and silver
is not at these banks either, and as you see these naked short positions unwound, the world will
witness a massive price rise in both gold and silver. The move in gold and silver, at that point,
will literally frighten most people. They simply won’t understand what is happening.” Their
“London Trader” also had some striking things to say regarding demand out of China: “Gold is
the primary focus, but very recently, and on every dip, we are seeing significant purchases of silver
in size. So yes, demand from China, it’s unceasing. They want out of these debasing currencies.
I would add that they are buying anything that’s tangible, land, timber, mines, art, etc..”
Tensions in the Middle East are increasing. In Syria, a suicide bomber killed Syria’s Minister of

Defense and several other top officials. US Secretary of Defense Leon Panetta said that the
situation in Syria “is rapidly spinning out of control.” Secretary Panetta also added his voice to
those of other western leaders calling for Syrian President Assad to step down. Following Secretary
Panetta’s Pentagon news conference, the White House announced it was adding additional
financial sanctions on Syria’s current leaders. Israel accused Iran of responsibility for the bus
bombing in Bulgaria which killed Israeli tourists. Iran continues to threaten to block the Strait of
Hormuz and disrupt global oil supply. In Europe, additional debt woes are beginning to come to
light in Spain. Even as Eurozone finance ministers agreed to lend Spain 100 billion euros for
bank recapitalization, the Valencia region asked Madrid for financial assistance. The move
sparked fears that a full blown bailout may be required to resolve the Spanish debt problem, and
that the 100 billion euro loan agreed to might pale in comparison to the amount that is truly required
to resolve the issues. The US Congress appears to be deadlocked over addressing the
looming “fiscal cliff” which Fed Chairman Bernanke this week said poses a “serious threat” to
the US Economy if it remains unaddressed. All of these events are leading analysts to renew
their projections for gold to reach $2,000 an ounce soon. Maintaining ownership of your existing
precious metals products, and using any temporary price dips to acquire more for your portfolio,
may be looked back on as genius if precious metals prices skyrocket as fast and as furious
as King World News’ “London Trader” believes will happen in the near future. Remember that
precious metals should be viewed as a long-term investment and that the key to profitability
through the ownership of physical precious metals is to actually own the physical products and to
hold them for the long term. Always remember that you should never overextend your ability to
maintain ownership of your precious metals over the long term.

Rick Rule of Sprott USA Interivew: Gold, Water, Stocks, the Economy, and Life Success

Silver Undervalued

After being sucked into the general commodities correction, silver has been relentlessly drifting lower since late February. But this weakness has forced the white metal down to a very bullish place technically. Silver is now quite undervalued compared to prevailing gold prices, its primary driver. Thus it has great potential to rally mightily in the coming months to regain much lost ground relative to gold.

Silver is a fascinating commodity that has won a fanatical following among traders. It is extremely volatile, with big spikes or plunges always possible. This makes it irresistibly alluring to speculators, who alternately pile in to ignite huge rallies before running for the exits to spawn near-crashes. The perpetual back-and-forth struggle between greed and fear is the essence of speculation, and silver embodies it.

But what drives these winds of sentiment that buffet silver around? Gold. Silver traders constantly look to the yellow metal’s fortunes to figure out whether they should buy or sell the white metal. While there are rare and short-lived exceptions, the vast majority of the time silver only rallies significantly when gold is strong and only sells off materially when gold is weak. Gold is the key to silver’s price action.

Greed flares up in silver traders’ hearts when gold is strong, motivating them to aggressively buy silver and catapult it higher. And fear rears its ugly head when gold is weak, scaring silver traders into dumping silver hand over fist which crushes its price. Because gold overwhelmingly influences silver-trader psychology, it is the primary driver of silver. Technically this has proven irrefutably true for decades now.

And silver’s recent correction is no exception to this rule. Silver’s last major interim high was on February 28th, the exact day gold’s latest top was carved. The next day gold plunged when the Fed Chairman failed to hint at a third round of quantitative easing in testimony before the US Congress. Since then, silver has lost 26% while gold only gave back 12%. This has left silver “undervalued” compared to gold.

Now since silver doesn’t spin off any earnings like a stock, it can’t be valued with traditional valuation metrics like price-to-earnings ratios. But its historical relationship with gold is so strong that it can be valued compared to gold, an alternative valuation measure. When silver gets too high relative to gold, a correction is due to restore this relationship. And when it gets too low, like today, a rally is probable.

This first chart simply looks at the silver price superimposed over the gold price. Before 2008’s once-in-a-century stock panic, silver tracked gold very closely. But the panic’s epic fear superstorm forced hyper-speculative silver to decouple from gold to the downside. Silver eventually caught up with gold again, and overshot to the upside in a mini-mania in early 2011. And today it is once again way too low.

Before the stock panic, silver’s correlation with gold was very tight both visually and statistically. Silver had a pre-panic r-square with gold of 94.7%. This means nearly 95% of silver’s daily price action was statistically explainable by gold’s own! Silver was truly a leveraged secondary play on the gold price, rallying when gold was strong and selling off when gold was weak. Gold overwhelmingly drove silver.

But the stock panic’s extreme fear radically disrupted this historical relationship. While gold plunged 27% between July and November 2008, silver plummeted 53%! This dragged silver to a 34-month low, while gold only hit a 14-month low. Silver was simply too low relative to gold, creating an incredible buying opportunity as I discussed just after the panic. Silver would have to soar to reestablish this relationship.

Interestingly during the panic, silver’s r-square with gold plunged to 52.5%. Only half of its daily price action was statistically explainable by gold’s own. This brings up a second important point for silver traders to understand. While gold is silver’s primary driver, the stock markets sometimes usurp it. Major stock-market down days generate so much fear that it spills into silver and taints this hyper-speculative metal’s sentiment.

After the panic silver indeed rallied strongly with gold, but the panic-driven gap between these metals persisted for a couple years. Silver didn’t really start regaining favor with traders in a big way until autumn 2010 when it started surging much faster than gold. By late 2010 it had finally caught up with gold, regaining its tight pre-panic relationship with the metal that drives its traders’ psychology.

But provocatively silver’s strength had started to feed on itself. The huge silver rally enticed more capital into silver, which forced its price even higher, which drew in still more capital. The result was a mini-mania in early 2011 where silver blasted higher to hugely overshoot the gold price. While fun, silver was extremely overbought and the rampant greed was mind-boggling. So a sharp plunge was imminent.

I warned our subscribers in advance, just as silver was topping. And the resulting plunge was actually a near-crash, an extreme selling event nearing crash magnitude. Unfortunately silver’s mini-mania had pulled most near-term buying forward, leaving overwhelming selling pressure in its wake. So silver started grinding lower on balance, ultimately correcting 46% between April 2011 and June 2012.

The latest part of this correction since February is particularly interesting for us today. Note that silver had nearly regained its historical relationship with gold before Bernanke’s latest QE3 scare hammered the precious metals. But the subsequent outsized selloff in silver, which leveraged gold’s downside in recent months by 2.2x, has left silver too low relative to gold today. A panic-like gap is back, a very bullish omen.

Silver, which is trading near $27 this week, would have to rally to $35ish to regain its historical “valuation” relative to gold. This is a 30% move higher, and assumes gold doesn’t advance which would push the silver target even higher. This silver catch-up rally is likely to begin soon, no later than September. Once we get through this year’s usual precious-metals summer doldrums, silver has a lot of ground to make up.

But silver’s near-term potential is even greater than this as evidenced by the Silver/Gold Ratio. The SGR mathematically quantifies silver’s close relationship with gold. It is calculated by dividing the daily silver close by the daily gold close and charting the resulting multiple over time. Since the true SGR results in tiny decimals (like 0.017 today), I prefer to use an inverted Gold/Silver Ratio scale as an SGR proxy.

For me at least, it is a lot easier to think in terms of ounces of silver per ounce of gold (58) than the other way around. So the SGR proxy on this chart is rendered in blue off the right axis, superimposed over the raw silver price in red. This particular perspective on silver’s relationship with gold is far more precise than the visual comparison in the first chart. And it shows silver is quite undervalued relative to gold.

Prior to the epic discontinuity of the stock panic, silver traded in a range between 60 ounces per ounce of gold on the low side to 45 on the high side. This is highlighted in darker blue in this chart. When silver was in favor among speculators it was high in this range, and when it was out of favor it was low. The pre-panic average was 54.9. But silver plummeted so fast during the panic this average briefly fell to 75.8.

Silver was quick to recover after the stock panic, temporarily regaining the lower support of its trading range as early as autumn 2009. But then it drifted lower again until autumn 2010, when gold rallying to new all-time nominal highs finally rekindled greedy excitement among silver traders. So silver took off like a rocket, blasting higher in a mini-mania that ultimately peaked at an SGR near 32 in April 2011.

This incredible spike opens up another technical perspective beyond silver’s horizontal trading range relative to gold. As you can see on this chart, the SGR was actually in a secular uptrend before the panic and regained that trend channel for over a half year in 2011. So there is a chance as silver’s allure spreads to more mainstream speculators this metal could once again be pushed back up into that secular uptrend.

Today the SGR is trading near 57.9, it takes almost 58 ounces of silver to equal the value of a single ounce of gold. But this is very low in the SGR’s trading range, and way below its secular uptrend. These metrics yield a variety of near-term upside targets for silver, all possible between this autumn and next spring. No matter how you want to look at silver today, it remains quite undervalued relative to gold.

After the SGR has fallen relentlessly for 14 months, silver is certainly due for some outperformance relative to gold. Silver enthusiasm is like a sine wave oscillating around the gold price, periods of underperformance are followed by periods of outperformance and vice versa. So conservatively it is not hard to imagine silver shooting back up near the top of its horizontal SGR trading range by next spring.

This means silver would have to rally until just 45 ounces of it equaled the value of an ounce of gold. At this week’s gold price of $1580, a 45 SGR implies a silver price of $35. Interestingly this is the same target the first chart yielded, so once again it is a 30% rally from today’s levels. That’s not too shabby at all, and would certainly lead to soaring prices for today’s all-but-abandoned silver miners’ stocks.

But what if gold rallies too? Throughout its decade-long secular bull, gold has averaged a seasonal rally around 19% between late July and late May during its strong season following its summer doldrums. If gold is 19% higher by next spring, we are talking $1875ish. Plug a 45 SGR into that, and silver’s upside target for its coming strong season rises to $42. This is an impressive 54% rally from this week’s levels!

But since silver has been out of favor relative to gold for so long, I suspect merely seeing silver head back up near the resistance of its pre-panic trading range is fairly conservative. So how about an aggressive upside target? If silver regains favor among speculators again over its coming strong season, which is certainly possible, it could punch back into its secular uptrend in SGR terms. Its midpoint is 34 now.

At today’s gold prices, a 34 SGR implies a silver price of $46. This is 70% higher than today’s silver prices! But if you assume a normal seasonal gold rally between now and spring, a 34 SGR implies $55 silver by May. This is a staggering 104% above today’s levels! While this higher target is a lot less likely since speculators will have to fall in love with silver again for it to happen, it is still definitely possible.

Regardless of which SGR target you think is most likely in silver’s upcoming strong season, there is no doubt that silver is undervalued relative to gold today. After being out of favor compared to gold for over a year, silver has been driven to such compelling price levels that it shouldn’t take much of a gold rally to get speculators salivating over silver again. And gold’s usual summer-doldrums drift is nearing its end.

Don’t underestimate the power of this mean-reversion tendency in the precious metals. Back in February 2009 when I first ran these charts just after the panic, the SGR was trading way down near 72. There was so much silver despair after its panic-driven plunge that people thought I was nuts for thinking silver would ever recover. But recover it did, not only regaining its historical average relative to gold but far exceeding it.

This is a fantastic lesson for precious-metals-stock investors and speculators to take to heart. Recently despair hammered the gold stocks and silver stocks down to panic levels relative to the gold price! I wrote about this extensively, explaining what extreme bargains PM stocks have become. Yet traders are still so scared they won’t touch PM stocks with a ten-foot pole. They believe a mean reversion is impossible.

But as silver’s meteoric mean reversion and overshoot relative to gold proved in late 2010 and early 2011, sectors don’t stay out of favor forever. Sooner or later new investors and speculators recognize the incredible undervaluations in left-for-dead sectors and start buying. And this feeds on itself, as nothing begets higher prices like higher prices. Silver, silver stocks, and gold stocks are all overdue to benefit from this cyclical mean-reversion phenomenon.

And now is the time to start buying, in the heart of the summer doldrums. Nearly every year like clockwork, gold drifts sideways in the summer while silver and the PM stocks grind lower. This is driven by the lack of seasonal gold-demand spikes, as I explained in an essay last week. This leads to widespread capitulation among precious-metals traders this time of year, just before the big autumn rally.

So seasonally the best entry points for gold, silver, and the PM stocks are spread across the next couple weeks. Precious-metals psychology is down near an ebb of despair this time of year, leading to excessively-low prices in the entire PM complex. Even though the summer doldrums happen every year, for some inexplicable reason PM traders seem to be frightened anew each time summer rolls around.

At Zeal we just added a new high-potential silver-stock trade this week in our weekly newsletter. Because silver is so low relative to gold, its near-term upside potential in the coming strong season is outstanding. And the silver stocks are even far cheaper than silver, as they’ve been dragged down into the irrational pessimism plaguing gold stocks. Thus the bargains to be found in this sector are amazing.

If you want to stay up to speed on the opportunities the markets are presenting, we publish acclaimed weekly and monthly subscription newsletters. In them I draw on our vast experience, knowledge, wisdom, and ongoing research to explain what the markets are doing, why, where they are likely heading, and how to trade them with specific stock trades as opportunities arise. Subscribe today!

The bottom line is silver is now quite undervalued relative to gold. It has been losing ground compared to its primary driver for over a year now following a massive mini-mania spike. But the selling in recent months has been excessive, driving silver too low relative to prevailing gold prices. So silver is likely to outperform gold in this year’s upcoming strong season for the precious metals, which is due to start soon.

Brave contrarians willing to fight the crowd have a great opportunity today to buy silver and silver stocks cheap ahead of this rally. As usual the summer doldrums have frightened the weak hands into selling low. And with silver cheap relative to gold, and silver stocks trading near panic levels thanks to the gold-stock capitulation, the bargains today are amazing. Seize the day and load up before the autumn rally.

Adam Hamilton, CPA

July 20, 2012

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence, that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research. Please consider joining us each month for tactical trading details and more in our premium Zeal Intelligence service at …

“Bill Murphy’s London Source: “Silver & Gold Will GO NUTS in August!”

via Silver Doctors
Our friend Sean from has released a breaking report with GATA’s Bill Murphy regarding the story we broke earlier Thursday on JP Morgan having extreme difficulties extricating themselves from their massive naked short silver position- which we speculated could be related to the impending resolution of the CFTC’s investigation of silver manipulation.
Bill’s tells Sean that his source in London, one of the wealthiest men in Europe, is telling him that JP Morgan is having a hard time extricating themselves from their silver short position, and that ‘SILVER AND GOLD WILL GO NUTS STARTING AUGUST! BIG, BIG gold and silver moves are coming this August!


Via SRSrocco (Silverdoctors)

The title of this post was inspired by the frustrating conversations I have had with friends and acquaintances on the subjects of politics, energy and the economy. Normally, I keep my BIG TRAP SHUT. As one gets older (and supposedly wiser), you realize that people don’t change. Conservatives will more than likely die as conservatives. The majority of Liberals will also take their liberal philosophy to the grave. Furthermore, those who practice one of the organized flavors of religion will probably be buried by that same variety of church they were lifetime members.

People have been slowly programmed over their lifetime to believe and behave a certain way. Trying to convince someone their ideology is invalid is trying to input software that is not recognized by their own programming. Basically… it spits out the data and does not allow it to compute. A few paragraphs or a page of information is not going to change millions of pages of programming in a person’s mind.

That being said: every once in a great while, even I can’t help myself from following my own wisdom. The majority of conversations I have with friends and local acquaintances are based upon SUPERFICIAL SMALL TALK. Lately though, the conversations have moved to subjects of politics and the economy. I gather the overall situation in the country and the world is become so GRIM, that the public is starting to catch wind.

I was at a local coffee house when one of my acquaintances started to talk to me about Obama and how he was screwing up everything. I live in a very conservative state located in the southwest. One of the pastimes of many of the folks here is to listen to TALK RADIO starting with Glenn Beck, then Rush Limbaugh and finishing up the jam-packed extravaganza with Sean Hannity. After 7-8 hours back to back of this sort of programming, these folks really believe they got the SKINNY on everything they need to know.

It does take a lot of will-power to keep my mouth shut, but this morning this fella starting to go off about all these things I gather he heard on one of those fine upstanding radio talk shows about Obama. Let me clarify my position before going further. I am AGNOSTIC when it comes to politics. I don’t belong to any parties or ideologies. However, I do believe both parties are completely FOS (full of sheet).

This gentlemen was going off about how Obama’s lousy Secret Service men were caught fooling around with some prostitute and how the Obama Health Care Plan was passed and now the USA was nothing more than a SOCIALIST COUNTRY. It was then (out of severe frustration) I took a pen and put a dot on a piece of paper. I said that Dot was the Secret Service Men. I then made another dot next to the first dot and said that was Obama Health Care. I went on a roll and placed dozens of other dots giving each one a label of meaningless subject matter. I then took the pen and drew a huge eight foot imaginary circle around the dots and said this is:

“THOSE DOTS ARE ZITS ON AN ELEPHANTS ARSE…… Why on earth are you concerned about ZITS when you should be worried that the ELEPHANT is getting ready to sit and crush the life out of you?”

I told him the whole Wall Street controlled US Govt… Fiat Money… Derivatives Monster… Peak Oil… Massive Debts were all wrapped up as one big fat elephant A**. I asked him if the elephant was ready to come down on you, why would you be concerned about the ZITS ON THE ELEPHANTS ARSE

He looked at me sort of puzzled. Furthermore, I must have spoken with a little passion as several other people had overheard my diatribe and were looking at me kind of funny. There was one individual who looked me and said, “You’re not one of those DOOM & GLOOMERS are you?” I looked back and responded by saying, “If I had a choice, I’d rather be a well prepared Doom & Gloomer than a flattened pancake that waited until the last minute.” I did hear someone laugh, but I decided to finish my tea and make my exit.

As I drove home, I realized this term would become my new response… whether or not the individual knew what I was talking about or not. It would be my inside joke. When I later told my wife, we both had a good laugh.


The strategy by the folks in charge of the pulling the strings in the GOVT & ECONOMY is to keep the public on focusing on the supposed nasty ZITS, while manipulating the elephant’s bum on a constant basis. If we look at the chart below, we can see how successful this strategy has been when we consider the seemingly magical elevation of the U.S. Retirement Market while at the same time economic indicators disintegrate:

In the third quarter of 2011, the U.S Retirement Market stood at $17 trillion. Within only a half a year, the total U.S. Retirement Market increased 11.1% to $18.9 trillion. This was a wonderful accomplishment by the folks working the dials at the PPT – Plunge Protection Team. However, not all the dials were turned higher. If we look at the following GOLD & SILVER price changes from the same time period:





GOLD AVERAGE PRICE Q3 2011 = $1700.17

GOLD AVERAGE PRICE Q1 2012 = $1690.84




We can see that the PPT’s FLOW OF FUNDS found its way into the U.S. Retirement market while the precious metals declined in net value in comparison.

Fortunately for the precious metals investors, the strategy of keeping the public focused on the superficial blemishes is starting to show cracks as further cases of fraud such as the PFG bankruptcy and the manipulation of the LIBOR become household words. Those who think this will be 2008 all over again fail to comprehend that ALL ASSET CLASSES declined at that time. Here we can see that there is an orchestrated effort to keep the public happy by inflating Retirement Accounts while deflating commodities and precious metals.

Furthermore, if we add up all the FAT on the elephants bum we can see that there is a great deal of DEBT masquerading as WEALTH. If we look at the next graphic, we can see that the total OUTSTANDING US TREASURIES are over $11 trillion:

Lets do some numbers:



TOTAL PAPER PONZI = $30 Trillion

Here is my chart from my article THE COMING PARADIGM SHIFT IN SILVER showing just how lopsided the Paper Ponzi Wealth is compared to precious metals:

As you can see this chart shows the US Retirement Market back when I wrote the article at only $17 trillion. Just look how precious metals compares to US Retirement market. Now, add the total US TREASURY’s outstanding… and you can see oh what a bloody mess we have on our hands.

So… anytime anyone starts to talk about nonsense issues, you can blurt out “ZITS ON AN ELEPHANTS ARSE”.

80% of the Gold the World Owns Doesn’t Exist

Posted by Wealth Wire – Friday, June 22nd, 2012

Chris Powell, Secretary and Treasurer of the Gold Anti-Trust Action Committee told Bernie Lo on CNBC Asia overnight that central banks are continuing to manipulate the gold market as they are interested in supporting government bonds and the dollar and keeping interest rates low. Powell warns about “paper gold” and says that we “try to persuade investors that if they are purchasing gold, they had better get real gold – metal.
They should not get “paper gold” and keep it within the banking system.” He says that “there is huge naked short position in gold” and estimates that perhaps “75% to 80% of the gold that the world thinks it owns does not exist and is just a claim on a bullion bank that is underwritten basically by the central banks.”

Bernie Lo asks what is the “end result”?

With regard to price Powell said that he does not make predictions but he wonders “what the value or the price of gold will be if the world ever discovers that 80% of the gold that it thinks it owns – does not exist.”

“There may not be enough zeros in the world to put behind the gold price then.”

Powell said that buyers should own gold in “your hand”or in allocated format outside of the banking system.

He concluded by saying that surreptitious intervention in the gold market can continue as long as gold buyers do not own real physical bullion.

We do not endorse GATA’s opinions however some of their evidence and many of their arguments are persuasive. We have yet to see any analyst or commentator address the substantive issues they have raised and debunk or refute their allegations.
Free markets need freedom of speech and a plurality of opinion. Group think and cosy consensus got us into today’s the financial and economic mess. Therefore, open, frank and rational debate about all aspects of the precious metal and other markets and our current monetary system is important.

Being fully informed of all of the facts and fundamentals driving markets are essential in order to protect and grow wealth.

PPMI Week In Review

“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at and a new one is released every Friday.

July 13, 2012

The Week in Review

1. The fundamentals supporting precious metals prices appear to be growing even stronger.
This week’s data dump from multiple countries generated a media “spin” frenzy as media
outlets struggled to put a positive spin on the state of the struggling global economy.

2. The scandal surrounding the fixing of the London interbank offer rate (Libor) continues to
expand and shows signs that it may spill over into other interbank offer rates. 16 banks were
involved in setting the Libor rate during the period of time under scrutiny and at least 12 of
those are under investigations by various regulatory bodies. The lawsuits have already begun
to pile up and the projections of the costs of both regulatory penalties and fines and damages
to investors and counterparties may approach $22 billion according to estimates by Morgan

3. Initial claims for unemployment in the US hit their lowest number in four years, but many
believe the data may be skewed due to the July 4th holiday in the middle of the week. The
initial reading for July of the Thomson Reuters/University of Michigan’s Consumer Sentiment
index hit its lowest level in 7 months.

4. And yet another Wall Street scandal hits the press. Peregrine Financial Group filed for bankruptcy
on Tuesday, following the discovery of an apparent suicide attempt of its founder and
CEO Russell Wasendorf on Monday. Regulators say that as much as $200 million in customer
funds are unaccounted for so far. This is yet another black eye for the CFTC and when
combined with the mounting pressure of all the scandals that broke last week in regards to
Libor and JPMorgan’s alleged activities in manipulating the Energy market, may finally force
some action out of the besmirched regulatory body.

5. The Federal Reserve released the minutes of their latest FOMC meeting and it was virtually a
carbon copy of its previous meetings, disappointing the stock markets with its lack of mention
of additional quantitative easing measures once again. The Fed, of course, continues to
stand ready to implement additional monetary easing if required.

6. China’s GDP growth rate hit its slowest pace in three years in the second quarter according to
official data released this week. Economists were grasping at straws to try to paint a picture
of coming strength in the coming months, ignoring the official numbers and citing their own
analysis of loan growth, power output and oil demand instead.

7. Oddly, following a Moody’s downgrade of Italy’s rating to just two notches above junk
status, Italy’s three year borrowing costs fell, dropping below 5%. Moody’s said, regarding
current reform measures underway in the country, “The negative outlook reflects our view
that risks to implementing these reforms remain substantial. Adding to them is the deteriorating
macroeconomic environment, which increases austerity and reform fatigue among the
population. The political climate, particularly as the spring 2013 elections draw near, is also
a source of implementation risk.”

8. According to RealtyTrac, banks are moving delinquent loans into foreclosure proceedings at
a faster pace. The increase in supply of distressed homes hitting the market may trigger another
decline in home prices just as analysts were beginning to see glimmers that prices may
have finally bottomed.

9. Crude oil was solidly in the middle $80 a barrel range again on Friday. Announcement of
increased sanctions against Iran by the US, and Iran’s threat to shut down the Straits of Hormuz
if the sanctions continue are helping to support oil prices even as the global economy
continues to show signs of slowing further.

10. The euro continued its drop against the dollar, sinking to two year lows as the Eurozone continues
to struggle under its sovereign debt woes. The Japanese yen edged higher against the
dollar this week.

Friday to Friday Close
June 6th July 13th Net Change
Gold $1580.20 $1592.00 12.00 + 0.76%
Silver $ 27.00 $ 27.35 0.35 + 1.30%
Platinum $1445.00 $1430.00 (15.00) – 1.04%
Palladium $ 578.00 $ 585.00 7.00 + 1.21%
Dow Jones 12772.47 12680.25* (92.22) – 0.72%

Previous year Comparisons
July 15th 2011 July 13th 2012 Net Change
Gold $1525.00 $1580.00 67.00 + 4.39%
Silver $ 35.40 $ 27.00 (8.05) – 22.74%
Platinum $1775.00 $1445.00 (345.00) – 19.44%
Palladium $ 775.00 $ 578.00 (190.00) – 24.52%
Dow Jones 12479.73 12680.25* 200.52 + 1.61%
* Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1570/1550/1530 27.00/26.50/26.10
Resistance 1600/1625/1650 27.60/27.90/28.50
Platinum Palladium
Support 1420/1400/1375 570/550/525
Resistance 1440/1460/1500 590/610/640

Volatility should be expected to continue as the global economy continues to show signs of slowing.
Precious metals have survived yet another takedown attempt this week, and the fundamentals
supporting a coming explosion to the upside appear to have grown even stronger. Europe
continues to struggle under its massive debt burden, and there still seems to be no feasible plan to
resolve the situation. In a report issued by Goldman Sachs on Friday, the firm noted that the current
100 billion euro aid package expected to see final agreement in late July, may not be enough
to salvage the crippled Spanish banking system and that more measures may be needed. China’s
economy still appears to be slowing, despite analyst’s attempts to make the statistics show otherwise.
In the United States, housing may be in for another downturn as distressed properties
flow into the market again driving prices down. In perhaps a sign of just how desperate the
housing situation in the US has become, San Bernardino County, in California, apparently began
exploring the legality of using eminent domain to seize underwater mortgages and write down
their principal values. The effects of this would be massive and far reaching, as it would almost
certainly affect the values of the very Mortgage Backed Securities that, due to their incorrect
valuation, triggered the initial financial crisis in the first place. The scandals surrounding financial
institutions across the globe may finally, and sadly, force the CFTC to act on the precious
metals manipulation accusations they have been receiving for years. Ned Naylor-Leyland, investment
director at Cheviot, told CNBC on Thursday that the Libor scandal may have opened
markets up to “more scrutiny and more investigation.” Naylor-Leyland said he expects to see
revelations over the next few months that the price of gold was also manipulated because “gold
and silver reflect the true value of money the same way interest rates do.” Naylor-Leland continued,
saying “It is effectively an intervention in two ways; one would be the fact that for central
banks, gold and silver going up doesn’t make their currency look any good, and secondly, a
number of the big commercial banks have very large short positions which they like to manage
and make easy money from.” JP Morgan, long the chief “big bank” accused of accumulating
massive short positions in the silver market which they then use to manipulate the price to their
advantage, is now under several different investigations for other manipulation schemes. JP
Morgan has been implicated in the Libor scandal, is apparently under investigation for manipulation
of the energy market, and the US Congress has been scrutinizing their activity since details
of the failed “London Whale” trade emerged. As scandal after scandal emerges, most having
taken place right under the noses of the very regulators that were supposed to have been monitoring
these firms, calls for action and penalties are growing increasingly louder. Drought conditions
across the agricultural areas of the US are beginning to show signs of pushing food prices
higher. Even Italy has reported that weather conditions there may severely impact grapes and
therefore curtail wine production there this year. Despite the fact that so called “volatile” food
and energy costs are stripped out of official inflation figures, spiking global food costs may well
be the first sign of impending inflation as the monetary printing presses across the globe continue
whirring. Precious metals may well skyrocket in those circumstances. Remember that precious
metals should be viewed as a long-term investment and that the key to profitability through the
ownership of physical precious metals is to actually own the physical products and to hold them
for the long term. Always remember that you should never overextend your ability to maintain
ownership of your precious metals over the long term.

Managed money positions hint at bullish turns for gold and silver

Alasdair Macleod | Monday, July 16th via

I have recently written about the breakdown of disaggregated data from the futures markets into producers and swap dealers for gold and silver futures, as reported in the Commitment of Traders reports issued by the US government’s Commodity Futures Trading Commission (CFTC). There is a further category of trader to consider, and that is Managed Money.

According to the CTFC, “A ‘money manager’ is a registered commodity trading advisor (CTA); a registered commodity pool operator (CPO); or an unregistered fund identified by CFTC. These traders are engaged in managing and conducting organized futures trading on behalf of clients.” So it ranges from the advisory and discretionary clients of brokers and investment managers, to mutual and hedge funds. These are the users of the market who effectively represent the general public.

Managed money is often regarded as a contrary indicator, with good reason: the public is usually late on the scene, buying at the top and selling at the bottom, so a bullish chart would be one with a generally low level of long positions and a high level of short interest. Happily this is confirmed for both gold and silver in the charts below. First up is gold.

Extreme bullishness in the past was reflected in long positions (blue line) exceeding 200,000 contracts, while shorts (red line) remained very low. This has changed over the last year, with longs well under 150,000 contracts, and shorts at historically high levels. Contrarians will be pleased by these numbers, especially with the net long position (green line valued in USD – right-hand scale) at less than $15bn in value, having peaked at $38bn last August, indicating the market is oversold. What is not shown is that the number of money managers who are long has approximately halved from as high as 120 when the market was over-bought, to the current level of 67. Realistically, a level of 60 or 70 traders with long positions represents an unshakable hard core. Confirmation is to be found in the number of traders who are short, which is close to highs at 35, the all-time recorded high being 48 on June 26th , compared with a normal range of 15-20. In summary, this contrarian indicator is very bullish.

Now silver.

Long contract positions (blue line) have fallen from an extreme high of 52,960 contracts in September 2010 to current levels of about 20,000. Meanwhile, shorts (red line) have risen from a normal range with an upper bound of 7,500 contracts to current levels of about twice that. Adjusting the net figure for its dollar value (green line, right-hand scale) gives a total outstanding position of less than $1bn compared with previous bullish levels five times that. Furthermore, the number of traders with long positions has fallen from bullish levels of 50+ to half that today; and shorts have risen from less than 10 to nearly 30.

As a contrarian indicator, the managed money statistics for gold and silver as reported in the CTFC’s disaggregated data are the most bullish they have been since this data first became available in September 2009. As the wise old traders used to say, there are few sellers left to sell, just many buyers to buy.

Gold market manipulation issue seeping into polite company

Submitted by cpowell on 05:52AM ET Thursday, July 12, 2012. Section: Daily Dispatches Via GATA
8:47a ET Thursday, July 12, 2012

Dear Friend of GATA and Gold:

Commentary concurring that the gold market is or is probably manipulated by central banks for the same reasons the LIBOR interest rate was manipulated is turning up frequently now.

Jan Skoyles of The Real Asset Co. today notes, as GATA has been doing for a while, that the current manipulation just continues in secret the central bank manipulation that was conducted in the open through the London Gold Pool in the 1960s. Skoyles’ commentary is headlined “The London Gold Pool 2012”:

And MineWeb’s Lawrence Williams, in commentary headlined “LIBOR Scandal Brings Gold Price Manipulation Once More to the Fore,” writes today: “The idea of gold price manipulation, once the preserve of the much-derided Gold Anti-Trust Action Committee — derision is one of the principal tools in the armory of those wishing to diminish the views of organizations that try to expose wrongdoing — is now beginning to make an appearance in the mainstream press and among the most respected of financial commentators. Take this headline from the UK’s Daily Telegraph only yesterday: ‘The price of gold has been manipulated. This is more scandalous than LIBOR.'” Williams’ commentary is at MineWeb here:

Your secretary/treasurer was interviewed at length yesterday by a reporter for a mainstream news media organization that also seems serious about pressing the issue. While I provided her with much of the basic documentation, I urged her not to bother with supposed experts like me but rather to put some specific questions to the original sources of information, the Western central banks themselves; to collect from them a few refusals to answer these specific questions; and then to publicize those refusals and to ruminate on what they might mean.

Of course that sort of ordinary journalism isn’t likely to be committed soon, even by journalists openly contemplating the issue, but maybe within the next few years.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

The Precious Metal Achilles’ Heel

Dr. Jeffrey Lewis | July 9, 2012

In the grand scheme of things, people have traditionally had more faith in silver as a currency than in paper fiat currencies.

Furthermore, since modern paper currencies are only backed by the creditworthiness of the authority issuing them, if that authority goes into default on its debt, the currency it issued could become virtually worthless.

Basically, in order for the fiat money system to keep going, more paper currency must be printed. Also, ‘old money’ like silver and gold must be kept at arm’s length, both literally and figuratively, by the use of propaganda.

Ultimately, a lack of confidence will force this grand paper experiment into default as the essentially flimsy physical reality underlying fiat currencies is gradually exposed to the public currently being duped by it.

Silver Shines When Defaults Seem More Likely

A major series of defaults seems increasingly likely, especially given the LIE-bor gate scandal and the sovereign debt crisis in Europe. Countries around the world are having their debt ratings downgraded as government spending remains unrestrained by fiscal responsibility.

Another factor is the increasingly public exposure of the silver market’s manipulation over the last few years. The price of silver has been kept artificially low by futures exchanges allowing short sellers to control whether or not physical delivery into a futures contract actually occurs.

Rather than actually having to deliver silver into a short futures contract, a government can simply print more money to pay for its losses should the price of silver futures rise.

Possible Default Scenarios

In the event of a substantial COMEX default, silver’s price would soar mostly because of the scarcity of the metal relative to the underlying demand for it and the greater confidence that investors have in it relative to paper assets.

Furthermore, the exchange would probably set limits on position sizes and price fluctuations. Trading might also be halted or a sellers-only market established.

This sort of default scenario would seriously erode confidence in such one-sided paper futures markets as a way of setting prices for intrinsically valuable physical commodities like silver.

Price discovery for precious metals might gradually move to a more physical-based valuation system. Nevertheless, the retail sector would surge, and the demand for physical silver would likely determine its market value, at least for a while.

One could expect to see long lines with people buying and selling silver at the retail level. Governments might also place restrictions on precious metal holdings to avoid seeing their paper currencies devalue as a loss of confidence in paper assets grows.

Even if a metals futures exchange default is not the event that triggers the final stages of a loss of confidence in fiat money, the reactionary blow off as metal prices are allowed to move closer to a fair value equilibrium price will unmask the great fragility that has lurked beneath the surface of the manipulated paper silver market all these years.

Silver Will Remain a Store of Value

Insufficient supplies of physical silver could mean that the metal may not “flow” enough to become a de-facto currency in a default scenario.

Basically, using physical silver as a currency has some drawbacks, which include:

· An insufficient supply of above ground physical metal to cover massive currency circulation requirements

· As demand grows, the price of silver as a commodity goes higher

· It is consumed as an industrial and jewelers’ metal

· Its market suffers from a lack of physical sellers

· Low mobility relative to paper and electronic currency

· Safe storage challenges

Nevertheless, silver does not need to circulate as currency within a country to be considered a form of money or to act as a store of value.

The fact remains that silver will continue to be a valuable, mobile, liquid, tradable and recognizable asset that is in short supply relative to its true underlying demand.

The Silver Price Enigma: Buying Low, Trading High

Dr. Jeffrey Lewis | July 9, 2012 via Silverseek

For the long-term silver holder, investor or conservationist — as differentiated from the active derivatives or physical trader — two strong psychological phenomena tend to exert influence over their decisions:

1) The normalcy bias as applied to fiat currency – Investors have been conditioned to ignore gradual inflation, the threat of hyper-inflationary periods and the risk of an outright currency collapse. Diversity from a currency standpoint is rarely considered an investment priority.

2) The psychological challenges of being an early buyer – Some people have a problem sitting tight with their silver investment in the face of adverse market conditions, even when they feel intuitively that it is the right place to put their wealth.

The power of social proof and market pricing can become overwhelming since it is a part of human nature. Investors have to overcome the difficulty of stepping out of the crowd into the relatively lonely position of the valuation investor where no one else seems to understand their viewpoint.

Selling Versus Trading

The mindset of the masses can be summarized with the subtle — yet significant — difference between what is meant by selling versus trading.

Selling implies exchanging an item for paper or electronic currency. This process is gradually being made obsolete by policy. On the other hand, trading implies exchanging or bartering one thing for something else that has inherent value or power.

Silver has been kept so relatively cheap for so long by market manipulation that most people are convinced that its suppressed paper price truly reflects its physical supply and demand fundamentals. This psychological situation persists despite the fact that practically any fundamental measure suggests silver should be priced much higher.

The Challenge of Being Right and Sitting Tight

The will and determination required of an investor to be right and sit tight is tremendous and seems to require an almost religious conviction. The psychology of this situation can make a person vulnerable to conspiracy theories about why market conditions currently seem unfavorable to their position.

Silver investors also have to face the difficulty in accepting the idea of currency collapse or hyperinflation. These scenarios are not very popular in the minds of others and are truly something that no one wants. Nevertheless, the acknowledgment of the possibility and subsequently positioning oneself appropriately can be seen as implying a desire for that unpopular outcome.

Yet, as the U.S. Dollar slowly begins to fade from world reserve currency status and the true meaning of the Barclay LIBOR scandal emerges, even mainstream observers are suddenly starting to characterize the silver market as manipulated, almost as a matter of common knowledge.

Looking ahead and embracing an unpopular but fundamentally justifiable perspective is an ability that can serve long term investors well, even in an unpredictable world where survival often depends on the cohesiveness of social relationships.

In an investment environment where savers are being punished by sustained inflation and historically low interest rates, at least silver offers an alternative to those investors who can see the writing on the wall regarding the questionable future of intrinsically worthless fiat currencies.

Why do so few investors seem to understand the silver story?

Peter Cooper | July 9, 2012 via silverseek

It is a mystery story really: why do so few investors seem to understand the case for silver? After all the track record is formidable. Silver prices have risen 10-fold in a decade, out performing gold and pretty much any other investment available to the ordinary investor.

You would need to have been a private equity investor like Mitt Romney to have done better or some kind of hedge fund rocket scientist trading derivatives in a favourable market. Silver is a boring lump of metal and anybody could have owned it. Those who did, and held their nerve during the volatility, are laughing.

Tempus fugit

The diehards who miss every major investment call through excessive caution would now have it that silver’s game is somehow up. Industrial use will plummet in another global recession producing a panic crash in the silver price.

Well yes we saw that in 2009, except that silver prices rebounded faster than almost anything else and went to record a record high of almost $50 in April 2011. They then corrected by half and have been trading in a narrow range ever since, the classic market correction before another price advance.

So if we have already seen the silver price have a major correction recently why should it do so again if the rest-of-the-world decides to do the same? Or if it does then why should it be anything so dramatic? In short, this time the volatility factor favors investment in silver rather than argues against it.

Some serious investors probably will catch on to this point very soon and indeed the technical data from the futures market suggests those bets are already being placed. The stage for another very powerful upswing in silver is being set.

$50-60 target

Readers of Arabianmoney will recall the predictions in the Old Dubai Gold Souk of $50-60 silver by September (click here). We doubt this will be far wrong and it may be that these prices are reached in advance of a global financial crash of some variety in October that pulls silver down again.

Will silver then correct back to current prices or are these prices a floor in the market that will not be seen again. We wonder. With so much money printing by global central banks, currency instability and the banking system under severe pressure, silver is bound to shine sooner or later.

The latecomers to this investment party will then ask themselves why they did not understand the silver story earlier.

The War Between Manipulation and Buying

July 6, 2012, at 6:06 pm
by Jim Sinclair

My Dear Extended Family,

Next week is the war between manipulation of gold by the West, and appetite for buying gold in the East, both from friendlies and enemies. Anyone that does not see today’s gold market as a rig is blind or brain dead. There is a full blown crisis in Western world banking today, right here and now. There is a full blown crisis in sovereign debt of some weaker nations as in a very short while certain government will be out of money. The Eurosnobs hate each other which does not make for a fast reconciliation of a crisis.

It is a myth that Western banks are strong enough to weather the storm of a full blown banking crisis in Europe.

It is a myth that the Federal Reserve will stand as the one hawk in the Western world and fiddle while it’s Rome burns.

It is a myth that Obama could be re-elected if the Fed remains intransigent.

It is a myth that Finland or Germany will strike a match to the euro that totally wipes out the largest part of their exports.

It is a myth that governments are ready to face the economic, social and political fallout standing austere as their economies implode, which they will.

It is myth that there is any recovery in the USA. By falling more we will be in a depression.

It is a myth that because thousands of bears email me that somehow they can convince me of the opposite when I know I am correct.

Next week will be the time the cartel tries to break the gold price again. They have failed seven times, and will fail on the 8th. Gold is going to $3500 and above. All the lying and conniving only means the price will go higher. Just as Morgan’s whale could not fight the market, the cartel cannot fight gold as we have a flight away from all fiat currencies.

How can anyone in Europe sleep tonight with cash in the bank, even amongst the stronger nations whose banks are loaded with weak nation’s paper. The house of cards is coming down right now. Trying to manipulate the price of gold to hide the crisis at hand is futile.

If you have your positions on margin you are crazy and I cannot do anything for you. All others stand tall because gold will trade above $3500 and not in some LaLa Land future of Armstrong’s imagination.


Money Printing Like Never Before

~ by Michael Lombardi, MBA

Although not a coordinated effort, the desperation to boost economic growth around the world by central banks was very apparent late last week.

The European Central Bank (ECB) cut interest rates to a record low 0.75% on Thursday in response to the financial crisis gripping the eurozone. The ECB stated afterward that risks to economic growth were to the downside, but that inflation was under control and did not show signs of reigniting.

Translation: the ECB could cut rates even further at its next meeting.

This action does very little to stimulate economic growth among the 17 nations that make up the eurozone; but it may alleviate pressure on eurozone banks as interest rates in Greece, Italy and Spain continue to climb.

Frustrated with low economic growth and feeling the effects of Europe’s recession, the Central Bank of England decided to increase its asset-purchase program by another 50 billion pounds, for a total of 375 billion pounds. Of course, “asset-purchase” is just another fancy term for quantitative easing (QE) or good, old-fashioned money printing.

Since the Central Bank of England currently has interest rates at 0.5%, which is where they have remained since 2009, there really was not much room to move them lower. So the only other option becomes money printing.

If consumers in England, as in the eurozone, are overly indebted and are afraid to spend because of the financial crisis, how is this extra money going to help stimulate economic growth?

It will certainly help the banks. Lower interest rates relieve pressure on banks as they transact business every day. The problem is that lack of confidence in economic growth and high debt levels signal the average consumer is hard-pressed to spend to get the economy going again.

If consumers are not spending, businesses are not investing.

When will the world realize this vicious circle cannot be solved by central bank action?

Not to be outdone, on Friday the People’s Bank of China—China’s central bank—cut its interest rates for the second time in a month.

It’s true that China’s central bank has room to cut more because its interest rate is at a higher level than the rest of the world.

But the problem is that China is an export country. With its largest customer Europe in a recession and with the U.S. headed towards recession, China feels the effects.

Whether these actions by these three central banks will have any effect on economic growth remains to be seen. Personally, I have serious doubts and believe these actions will do little to help. What is most critical to note, dear reader, is that these actions by central banks illustrate how desperate they are to find some (make that any) economic growth.

These central banks are frightened, as the global economic slowdown is accelerating to the point where a global economic recession is becoming the reality.

Michael’s Personal Notes:

Over the past four years, after financial crisis hit in 2008, the U.S. economy has experienced very little in terms of an economic recovery. Since it has been such a long time, and because this has been the weakest economic recovery on record since the great depression, there are negative consequences the economy will inevitably experience.

Small businesses are a critical part of job creation in this country. They accounted for 48.5% of the job creation in 2011 and 51.6% of the job creation year-to-date (source: ADP).

The U.S. Census Bureau just released its latest findings. Unfortunately, its latest data only dates back to 2010, but its report is nonetheless instructive regarding the repercussions of the supposed economic recovery.

In both 2008 and 2009, the U.S. lost about 168,000 businesses respectively (source: Reuters, June 26, 2012). Thankfully, in 2010, the pace of businesses going under fell, but the U.S. still lost 36,800 companies.

At the end of 2010, there were 7.4 million businesses in this country; while, in 2008, there were 7.8 million businesses in the U.S.!

Obviously, many construction companies went under after the credit crisis. There were 6.4 million jobs lost from the closing of these businesses from 2008 to 2009, which does little to bolster job creation and pours cold water on the notion of an economic recovery.

From 2009 to 2010, the pace of job losses slowed, but there were 2.5 million fewer workers needed, which again, puts into question the whole theory of job creation and the economic recovery.

Of the 7.4 million businesses in this country, just over four million are sole proprietors or firms with four employees or less. How many of these businesses are just getting by in this supposed economic recovery? How many of these businesses suffered terrible revenue losses since the financial crisis hit in 2008?

Unfortunately, there are no data available to answer these questions, but I pose them because they are critical to understanding the health of small businesses in this country and ultimately the health of the U.S. economy.

The National Federation of Independent Business (NFIB) regularly conducts a survey to feel the pulse of small business here in the U.S. Its latest index readings, from May 2012, are at a level that is normally found in recessionary periods!

More small businesses actually feel the U.S. economy will deteriorate in the next six months as opposed to growing. One in four small business owners believe this is a bad time to expand their business, which puts into question the whole economic recovery theory.

In light of this, fewer small businesses were looking to increase their capital spending in the next six months. Of those that were increasing their capital spending, 44% were creating investments that would translate into job creation and help bolster the view of an economic recovery, but the rest of their money went toward maintenance.

Many small business owners believe they will experience lower sales over the next six months. This is not a vote of confidence on any possible economic recovery here in the U.S. for 2012.

These latest figures on U.S. small business are not encouraging for those expecting an economic recovery. To me, it paints a picture of more difficult times ahead. The government chose to focus on big business after the 2008 credit crisis. It should have been focusing on small business.

Where the Market Stands; Where it’s Headed:

Remember what a great start to the year the stock market had? You may recall January 2012 was one of the best Januarys for stocks in years.

But it’s all wilting away now. The Dow Jones Industrial Average closed Friday up only 4.5% for 2012. At one point only a few short months ago, the Dow Jones Industrial Average was up nine percent on the year!

The stock market is waiting…waiting for the Federal Reserve to announce Q3. But given the market’s meager reaction to additional monetary stimulus announced by the ECB, Bank of England and Bank of China on Thursday and Friday of last week, I’m starting to wonder if more money printing in the U.S. will make a difference anymore.

That bear market rally that started in March of 2009? Getting closer to its end.

A Few Questions; One Answer

via Silverseek

Please read this article carefully because I’m disclosing for the first time that the U.S. government has given JPMorgan the green light to manipulate the silver market. This fact explains the shenanigans in the silver market. It answers all the questions and exposes this tawdry affair for all to see.

The scandal recently became more outrageous. The June Bank Participation Report, as of Tuesday, June 5, along with the COT confirmed that JPMorgan’s silver short position has increased by at least 5,000 contracts in the past two reporting weeks. That is the equivalent of 25 million ounces of silver, truly an enormous amount in a two week period and about equal to all the silver produced and consumed in the world in the same period. I calculate JPMorgan’s net short position in COMEX silver futures to be between 16,000 and 17,000 contracts. JPMorgan has been the sole net commercial silver short seller over the past two weeks. That is the clearest proof yet of manipulation. A market dominated by one buyer or seller is the ultimate definition of manipulation.

Had JPMorgan not sold short 5,000 or more net additional contracts in COMEX silver over the past two weeks, the price of silver would have climbed even higher. Why? Because without JPMorgan selling, someone else would have had to sell in their place. Those sellers would have demanded a higher price. Furthermore, JPM’s short position alone equals the entire 16,500 contract total net commercial short position in COMEX silver. In other words, if JPMorgan did not hold a 16,000 to 17,000 contact net short position, there would be no commercial net short position at all. The additional proof of silver manipulation includes the two massive price takedowns of last year, when the silver price fell more than 30% in a matter of days, benefitting JPMorgan more than any other trader.

How can I continue to get away with accusing JPMorgan, arguably the most powerful bank in the US, of the most serious market crime possible and get no reaction from them? An objective reading of the past four years, since the time I first publicly identified JPMorgan as the big silver short, has resulted in the bank being universally recognized on the Internet as the big silver crook. The reputation of a systemically important financial institution is always of prime concern from the board of director and senior management level on down. Why have I never been threatened by them?

The same question comes to mind when applied to the CME Group, owner and operator of the COMEX, where the silver manipulation is centered. The allegations that the CME is aiding and abetting in the silver manipulation are serious because the CME has been officially designated as a self-regulatory organization (SRO), meaning they have a legal obligation to prevent any attempt at manipulation in their markets. Like JPM, the CME is tough as nails and, presumably, could step on me should they choose to. (Yes, I send everything I write to JPM, the CME and the CFTC).

Unlike JPMorgan and the CME, the Commodity Futures Trading Commission (CFTC) has not remained completely silent. The agency has initiated a number of reviews and investigations into allegations of manipulation in silver over the years (at my prodding), including a current Enforcement Division investigation, now approaching the four-year mark. The allegations of a silver manipulation were always credible, since they were based upon data from the agency itself and compared to how the Commission reacted strongly to past instances of concentration. The CFTC had to at least go through the motions of pretending to care. After all, many thousands of silver investors have consistently petitioned the agency on this matter over the years.

It’s been all talk and no action from the Commission when it comes to the silver manipulation. I can’t tell you how many times I have asked myself after I have just explained another undeniable proof of silver manipulation, “why can’t these regulators see this?” Why is the Commission conducting an expensive and formal silver investigation in the first place, when all it has to do is explain why a US bank holding a silver short position equal to 25% to 30% of both the paper and physical total world market wouldn’t be manipulative to the price (in and of itself)?

To this day, I have been baffled by how CFTC chairman Gary Gensler can preach the Holy Gospel of true regulatory reform of transparency, position limits and no concentration, while ignoring the clear evidence of manipulation in silver. I think what has caused his and the agency’s failure to terminate a highly-visible silver manipulation has nothing to do with a lack of understanding of the silver manipulation. It took me a while to figure it out, but better late than never.

The answer to all the above questions lies with the President’s Working Group on Financial Markets. Largely in response to the great stock market crash in October, 1987, President Ronald Reagan signed an Executive Order in 1988 creating the Working Group to prevent a recurrence of a market crash.

There are four members in the Working Group; the Federal Reserve Chairman, the Treasury Secretary, the Chairman of the Securities and Exchange Commission and the Chairman of the CFTC. The Treasury Secretary is the Chairman of the Working Group. The purpose of the group is to promote market stability and prevent disorderliness by working with the exchanges and major market participants in times of stress.

Such a time for the financial markets existed in March 2008, when the investment bank Bear Stearns failed and, undoubtedly, the Working Group was heavily involved. The Group, along with exchanges and major market participants, oversaw the transfer of Bear Stearns’ giant short positions to JPMorgan, in the process indemnifying JPM from any concerns of dominance and overt control of silver and gold prices. As a result, JPMorgan orchestrated (and was the biggest beneficiary) the more than 50 % decline in silver prices into late 2008 with the Working Group’s permission.

Things then quieted down in silver until the fall of 2010, when prices started to make an historic move into the late-April 2011 price high near $50. At that point, JPMorgan’s giant short position began to hurt and it moved to cover some of the silver shorts into the very top. At that point, it looked like JPMorgan would get crushed by the physical silver shortage and the growing losses on their short positions. Instead, JPM appealed to the Working Group for relief and, working with them and the CME, JPM caused the silver market to crash, starting on Sunday night, May 1. Later, the Working Group teamed with JPMorgan and the CME to smash prices by 35% in 3 days in late September 2011.

The President’s Working Group on Financial Markets answers all my questions. It explains why JPMorgan and the CME remain silent about allegations of manipulation. They have been given legal cover by the Working Group. This also explains why the CFTC says they are conscientiously investigating silver when it is clear they are not. The agency can’t come out and disclose silver was smashed with the full knowledge of the Working Group, so it pretends to go through the motions of investigating. What is going through Gary Gensler’s mind? Is he not tormented by the blatant silver manipulation which runs contrary to all his public utterances? Commodity law is being broken.

If my analysis is correct, what does this mean for silver from here? It will prove to be wildly bullish for the price; maybe not immediately, but on a long term basis. It sets the stage for the really big move in silver. This overt government interference in the silver market will boomerang at some point, just as every attempt at artificial price setting has failed. Just let the word start to spread about Working Group involvement in causing the price of silver to fall and the natural reaction by the world’s investors will be to take advantage of the bargain created.

This is an attempt by the government to influence the price of silver lower by favoring the paper short sellers and not by dumping physical silver on the market. That’s because neither the US Government, nor any other world government has any physical silver to dump. All the Working Group can do is aid the paper silver short sellers by permitting vicious price sell-offs designed to scare existing holders. There is an easy way around that scam and that is buying real silver, not the junk represented by COMEX paper contracts. If, as and when the role of the Working Group in the silver manipulation becomes known, the best reason yet for buying silver will come into focus.

I know that many have long suspected that some type of government involvement was present in gold and silver. But rarely have those suspicions been as clearly documented as they are now in silver. Questions about a silver investigation that never ends, or price moves beyond reason or historical precedent, or why the nation’s most important bank and exchange are up to their eyeballs in the silver manipulation have been explained by the Working Group. Too bad the Working Group took the side of a few short manipulators and not the many silver investors and producers of the world. No doubt someone has sold a bill of goods to the regulators, falsely convincing them that terrible things will happen financially should silver explode to its true market value. Well guess what? The rotten state of world finances has nothing to do with the price of silver currently, nor will it in the future.

Ted Butler

June 15, 2012

silver video: record low on commercial net short positioning – many historic bull market lows

The Rig Is Up

My Dear Friends,

Gold will go to and above $3500. This is the most important message I have sent you since 2001.

There are very few of us dynamic thinkers that see everything as a trend constantly in motion. Anyone can be a static thinker, quoting recent economic figures or news headline (MSM), and coming up with a usually wrong opinion.

The change today is that the “Rig Is Up.”

The Bank of England turning their backs on Barclays, the company who did their bidding, will be the event in time marking the trend change.

Many of us in our areas of activity will successfully fight the Riggers. The many complaints that so many of you kindly sent in to fight manipulation released the Kraken in me.

The Kraken is back in its cage where it belongs. The paper trail is there. The worm has turned. Even more importantly is that this fight in the $1540 gold price area was not for regaining the old high in gold. The six attempts to kill gold, supported by some gold writers looking for favors from the riggers was a now failed attempt to keep gold from trading above $3500.

The battle to stop gold has been lost.

The start, like all starts towards the old high and well above, should be slow with more unfolding drama. It will build on itself but gold will trade at and above $3500. I am now as certain of this as I was over ten years ago when I told you gold was headed for $1650. I knew that as fact and to me from $248 gold was trading at $1650.

My job now is to define gold’s full valuation for you when it occurs. The timing is no less than one year from now to a maximum of three years from now. I believe I will be able to do that for you.

This is the most important message I have written you since early in 2001. I write this with total intellectual and spiritual certainty.


PPMI Week In Review


1. The extreme volatility in the market was never more evident than this week. Thursday’s selloff
appears to have been triggered purely by panic and fear over the situation in Europe. Today’s
turnaround following the EU Summit announcement shows exactly why it is so vital to
maintain ownership of your precious metals products in times of fear and uncertainty.

2. Initial claims for unemployment dropped 6,000 last week, but some of the drop was the result
of the previous week’s figures being revised higher once again. The fact that claims still remain
at levels comparable all the way back to April only serves to reinforce the idea that the
labor market continues to show fundamental weakness.

3. The final reading for June of the Thomson Reuters/University of Michigan index on consumer
sentiment saw the index hit its lowest level of the year. Much of the drop was attributed
to households with incomes over $75,000 which, it appears, have sharply curtailed their
buying plans as economic data has weakened.

4. In the early morning hours in Brussels, Belgium, following a long night of negotiations
European Union leaders announced Friday that they had agreed to take action to bring Spain
and Italy’s escalating borrowing costs down. The agreement allows the Eurozone rescue
funds known as the EFSF and ESM to be used in a more flexible fashion, without the extra
austerity measures that have been forced upon Greece, Ireland, and Portugal. The ESM in
particular will now be able to lend directly to recapitalize banks without adding to the receiving
country’s budget deficit.

5. In a move that should, at this point, surprise no one, yet another big bank was hit with market
manipulation charges this week. Barclays settled allegations that it manipulated the key
lending rate known as LIBOR. According to the settlement, Barclays bankers and traders,
including senior managers, regularly misreported what it cost the bank to borrow money and
did so in collusion with other banks to manipulate their lending rates as well. Barclays will
pay $200 million to the Commodity Futures Trading Commission, the largest such civil fine
the CFTC has levied in history, $160 million to settle US Department of Justice charges, and
$93 million to the UK Financial Services Authority. The manipulation of LIBOR has farreaching
effects and Barclays will certainly be facing a slew of class action suits in response
to the scheme. Other banks potentially involved in the scheme are Deutsche Bank, Credit
Suisse, RBS, Lloyds and UBS.

6. JP Morgan continues to try to unwind its failed “London Whale” series of trades. Reports
now place the losses that will be endured by the bank at between $4 billion and $9 billion
dollars. Despite the escalating figure, Jamie Dimon continues to say that any losses as a result
of the failed trades can easily be absorbed by the bank.

7. The outcome of the European Summit may once again spark further outrage in Greece as
they see further evidence that the bailout conditions that they were forced to agree to now
seem to no longer be required by their surrounding neighbors that are in similar trouble. As
the fragile Greek government tries to piece itself together after its recent elections, Friday’s
announcement is sure to increase the pressure for the new Greek government to renegotiate
its current bailout agreements.

8. Crude oil pushed its way back above the $80 mark following the announcement out of the
European Summit regarding a reconfigured relief plan, particularly tailored to come to the
aid of Spain and Italy.

9. The euro tumbled lower this week amid fear and concern over the situation in Europe. The
Japanese yen moved erratically this week, spiking higher, and then dropping amid Thursday’s
selloff only to reverse course again to move higher on Friday.

Friday to Friday Close
June 22nd June 29th Net Change
Gold $1567.20 $1604.00 37.00 + 2.36%
Silver $ 26.70 $ 27.60 0.90 + 3.37%
Platinum $1453.50 $1447.00 12.00 + 0.84%
Palladium $ 606.00 $ 582.00 (24.00) – 3.96%
Dow Jones 12640.78 12834.64* 193.86 + 1.53%
Month End to Month End Close
May 31st June 29th Net Change
Gold $1563.00 $1604.00 41.00 + 2.62%
Silver $ 27.80 $ 27.60 (0.20) – 0.72%
Platinum $1415.00 $1447.00 32.00 + 2.26%
Palladium $ 612.00 $ 582.00 (30.00) – 4.90%
Dow Jones 12393.45 12834.64 441.19 + 3.56%
Previous year Comparisons
Jul 1st 2011 Jun 29th 2012 Net Change
Gold $1483.00 $1604.00 121.00 + 4.40%
Silver $ 33.70 $ 27.60 (6.10) – 18.10%
Platinum $1715.00 $1447.00 (268.00) – 15.63%
Palladium $ 757.00 $ 582.00 (175.00) – 23.12%
Dow Jones 12582.77 12834.64* 251.87 + 2.00%
* Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver

Support 1590/1560/1530 27.20/27.00/26.50
Resistance 1610/1630/1650 28.00/28.50/29.00
Platinum Palladium
Support 1425/1400/1380 560/550/525
Resistance 1475/1500/1520 600/615/640

Volatility should be expected to continue as this week has dramatically shown. The outcome of
the European Summit announced on Friday seems to have set off a bout of euphoria that Europe
may finally be on the path to resolving its massive sovereign debt woes. Legendary investor Jim
Rogers disagreed, telling CNBC “Just because now you have a way to get them [the banks] to
borrow even more money, this is not solving the problem; this is making the problem worse.
People need to stop spending money they don’t have. The solution to too much debt is not more
debt. All this little agreement does is give them [banks] a chance to have even more debt for a
while longer.” Mediocre jobs numbers in the US point to continuing weakness in the jobs market
and that may yet lead to a need for additional monetary easing by the Federal Reserve.
Thursday’s announcement that the Supreme Court upheld president Obama’s healthcare law on
grounds that the “individual mandate” was a tax and not a penalty may also have the unintended
effect that small businesses may begin cutting costs or putting off hiring in order to pay for their
increased healthcare costs due to items mandated by the law. US Gross Domestic Product grew
at just 1.9 percent in the first quarter and the apparently weakening job market, a slowdown in
consumer spending and the ever churning Eurozone sovereign debt crisis may indicate that
growth won’t get any better in the second quarter. Next week, the European Central Bank holds
its next policy meeting and there is growing sentiment that Mario Draghi may be contemplating
cutting the deposit rate below its current 0.25%, a tactic rarely used by Central Banks. Cutting
the deposit rates to zero, or lower, could mean the ECB would start charging financial institutions
for the money they deposit with it overnight. The expectation is that such a move might
encourage banks to start lending their cash instead of parking it with the ECB, but many think
the opposite effect, in the form of additional credit contraction, might be the result instead. In a
powerful interview with King World News, Eric Sprott of Sprott Asset Management said, when
asked what he expected going forward, “Continuing contagion, maybe with some kicking of the
can down the road, which we’ve been doing for a long time now.
But the day is coming when
we’re all going to realize that the debts can’t be paid. You’ve got to shed paper assets and you’ve
got to own physical gold and physical silver. The system is imploding on itself, but the central
planners want everyone to think it’s fine. They just lie to us. ‘We have an agreement.’ No you
don’t have an agreement. ‘We have a Spanish bank bailout plan.’ No you don’t have a Spanish
bank bailout plan. You don’t have a plan, you just say you have a plan. There is no plan. Of
course, they are probably in buying the banks stocks, just to make it look like they really do have
a plan, but there is no plan, no formalized plan, no agreed to plan. It’s all just vaporware.” The
situation in Europe seems to be gaining an air of desperation and the euphoria over this latest
bailout plan may quickly fade. Taking advantage of buying opportunities, such as those presented
on Thursday, to purchase additional precious metals products for your portfolio may help
you weather the readily apparent, and steadily oncoming, financial storm. Remember that precious
metals should be viewed as a long-term investment and that the key to profitability through
the ownership of physical precious metals is to actually own the physical products and to hold
them for the long term. Always remember that you should never overextend your ability to
maintain ownership of your precious metals over the long term.
Trading Department – Precious Metals International, Ltd.

The Price of Precious Metals: Bears and Bulls Shaking the Coconut tree

by Leslie Michael via

Because of the recent swings in the prices of silver and gold, it is important to remember why you have it. This is my opinion and please be aware that my opinion can change if news changes.
The people who own silver and gold are like coconut trees.
The coconuts represent your holdings in precious metals.
And the market, acts like wilds bears and bulls trying to shake your coconuts away from you.
Pay them no mind!
The bull run of precious metals will end one day. But not until the mainstream world wakes up from their beer and football and hockey induced coma. When your next door neighbor finally gets off the lazy boy and heads to the precious metals store to buy silver or gold it’s time to sell sell your metals.
The middle class always gets slaughtered at the end when they come rushing in to buy an investment when it is already too late.
Also don’t fall for false bull runs. David Morgan of the Morgan Report and pointed out that during the last bull run of silver and gold, the price of gold went from $100 to $200 and then it went back to $100. He points out that nobody was interested in gold when it went back down to $100. Yet shortly after, the price of gold went all the way past $800.
You’ve heard me give the evidence in Money Uncensored. The book is coming out shortly for the world to read.
We are in a massive secular bull run of silver and gold. The bear and the bulls will shake your coconut tree. It is up to you to hold to as many coconuts as you can until the final euphoric stage of silver of gold has arrived and it is finally time to sell your precious metals.

John Embry Interview on Silver, Precious Metals & More – Radio Nugget Interview

John Embry

Chief Investment Strategist

John Embry joined SAM as Chief Investment Strategist in March 2003, with a focus on the Sprott Gold and Precious Minerals Fund. He plays an instrumental role in the corporate and investment policy of the firm. Mr. Embry, an industry expert in precious metals, has researched the gold sector for over thirty years and has accumulated industry experience as a portfolio management specialist since 1963.

After graduating from the University of Manitoba with a Bachelor of Commerce degree, John Embry began his investment career as a stock selection analyst and Portfolio Manager at Great West Life. He then became Vice President of Pension Investments for the entire firm. After 23 years with the company, John became partner with United Bond and Share, the investment counseling firm acquired by Royal Bank in 1987. John was named Vice-President, Equities and Portfolio Manager at RBC Global Investment Management, a $33 billion organization where he oversaw $5 billion in assets, including the flagship $2.9 billion Royal Canadian Equity Fund and the $250 million Royal Precious Metals Fund, the #1 ranked fund across the country for its 2002 net performance of 153%.

PPMI Week In Review

The Week in Review

1. It was a rough week in the markets. The media had hyped the Greek elections and the Federal
Reserve meeting this week as major events that could be a turning point in the growing
global financial crisis. Both events came and went and appear not to have “moved the needle”
at all. The disappointment over the lack of definitive action seems to have factored
heavily in triggering Thursday’s sell off across all markets.

2. Economic data out of the US was disappointing once again this week. Manufacturing grew
at its slowest pace in 11 months in June and initial claims for unemployment only declined
due to an upward revision in the previous week’s data. The four week moving average of
unemployment claims, which is considered to be a better measure of the state of the US labor
market, moved to its highest level since early in December.

3. Wednesday’s comments by Federal Reserve Chairman Ben Bernanke following the conclusion
of this week’s meeting seemed to be a massive disappointment for the markets. The Fed
did agree to extend “Operation Twist”, but the market was hoping for an outright promise of
additional Quantitative Easing. The Fed, citing further slowdown in the US economy, said it
was “Prepared to take further action” with Chairman Bernanke stating “Yes, additional asset
purchases are among the things we would consider if we need to take additional measures to
strengthen the economy.” Mr. Bernanke continued, saying “We’re prepared to do more. We
have to get additional information on the state of the economy, what’s happening in Europe.”

4. On Thursday Christine Lagarde, Managing Director of the International Monetary Fund, said
“A determined and forceful move towards complete European monetary union should be reaffirmed
in order to restore faith. At the moment, the viability of the European monetary system
is questioned.” Ms. Lagarde continued, saying “There must be a recapitalization of the
weak banks, with preferably a direct link between the European Financial Stability Facility/
ESM and the banks, without going through the sovereign, in order to break the negative
feedback loop that we have between banks and sovereigns.”

5. Independent auditors in Spain have estimated that the besieged banks in that country may
need up to 62 billion euros in fresh capital to bail them out. Borrowing costs for the latest
member of the Eurozone to succumb to its massive debt load have spiked to their highest
levels in 15 years.

6. The Greek elections went off successfully this week with the pro-bailout parties appearing to
have carried the day. New Prime Minister Antonis Samaras however, has spent this week
attempting to re-negotiate the terms of the very bailout that he promised to uphold. A “senior
Eurozone official” told Reuters on Tuesday “Anybody who would say that we need not, and
cannot renegotiate the Memo of Understanding (MoU) is delusional, because he, or she,
would be under the understanding that the whole program, the whole process, has remained
completely on track ever since the weeks before the Greek first election. Because the economic
situation has changed, the situation of tax receipts has changed, the rhythm of implementation
of the milestones has changed, the rhythm of privatization has changed, if we were
not to change the MoU, it does not work.” This appears to have been directly aimed at German
Chancellor Angela Merkel who is adamantly opposed to renegotiating the bailout

7. Moody’s followed through on its downgrade of 15 major banks this week with the announcement
coming late on Thursday after markets were closed. Friday saw very little reaction
to the downgrade as most analysts feel that the move has been telegraphed for months
and was therefore already priced into the markets. The fallout will still be felt by the banks
themselves as the credit rating downgrades will likely cost those banks their borrowing costs
spike higher and they are required to post higher collateral amounts against trades. Some
analysts project that the additional costs to these banks may reach into the billions.

8. Crude oil broke through the $80 floor this week amid poor economic data out of the US and
China, and continued pressure coming from the crisis in Europe.

9. The euro struggled higher against the US dollar for much of the week, but reversed course
amid Thursday’s mass selloff in the markets. The yen traded essentially sideways for most of
the week, but also saw a steep and sharp decline amid Thursday’s mass selloff.

Friday to Friday Close

June 15th June 22nd Net Change
Gold $1628.20 $1567.00 (61.00) – 3.75%
Silver $ 28.75 $ 26.70 (2.05) – 7.13%
Platinum $1487.50 $1453.00 (52.00) – 3.50%
Palladium $ 630.00 $ 606.00 (24.00) – 3.81%

Dow Jones 12767.17 12655.50* (111.67) – 0.87%
Previous year Comparisons
Jun 24th 2011 Jun 22nd 2012 Net Change
Gold $1501.00 $1567.00 66.00 + 4.40%
Silver $ 34.65 $ 26.70 (7.95) – 22.94%
Platinum $1675.00 $1435.00 (240.00) – 14.33%
Palladium $ 730.00 $ 606.00 (124.00) – 16.99%
Dow Jones 11934.58 12655.50* 720.92 + 6.04%

* Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1550/1525/1500 26.50/26.20/26.00
Resistance 1580/1600/1640 27.00/27.50/28.00
Platinum Palladium
Support 1420/1400/1385 600/585/560
Resistance 1450/1480/1500 620/640/670

Volatility should be expected to continue and may increase dramatically in the coming weeks.
This week seems to have presented a perfect buying opportunity to get back into the precious
metals market. Poor economic data out of the US, China, and the ongoing and escalating crisis
in the Eurozone all seem to have led to an unwarranted selloff. George Gero, RBC Capital Markets
Precious Metals Strategist, told CNBC “Gold has been selling off because of all the antiinflationary
headlines. Fed warning on the economy, weak employment data, weak manufacturing
data are all anti-inflationary.” Mr. Gero agreed with a report by Barclays Capital Management
which said that the long-term macro picture for gold remains bullish, saying “Every time
we have had a sell-off, it’s turned out to be a buying opportunity.” Egon von Greyerz, founder
and managing partner at Matterhorn Asset Management in Switzerland, told King World News
this week “Eric, the entire financial system is under immense pressure. First you have the EFSF,
the European Stability Fund, they are saying they must buy euro debt. The problem is that fund
is now just 440 billion euros, which is nowhere near enough to support all of these failing European
countries or their banking systems.” Mr. von Greyerz continued, saying “The risk in the
financial world as a whole right now is enormous. The Fed knows this and they are trying to
avoid direct QE, but they will not be able to do that for very long.” The long term fundamental
picture for owning precious metals remains unchanged. The market has become entrenched in a
vicious cycle of alternating fear and disappointment and has strayed far from trading on the true
fundamentals. It is imperative that you keep the true fundamentals of investing in precious metals
over the long term clear in your mind during these times of uncertainty. This fear and uncertainty
may well be presenting the perfect buying opportunity to add more precious metals to your
portfolio at a discount.

Slowly and steadily, fear and uncertainty will evolve into shock and realization
when it becomes apparent that the stopgap measures that the world’s governments and
Central Banks have desperately tried in order to save the fiat currency system have failed. As
these same Central Banks are forced to print more and more money, under the guise of “monetary
easing”, to bail out the failing banking systems and address massive governmental debt
loads in this interconnected global financial world we all live in, fiat currencies will continue to
lose value. As fiat currencies lose their value, inflation will take hold, perhaps even moving
straight into hyperinflation. If that hyperinflationary move takes place, precious metals prices
may move to astronomical levels that make today’s prices look miniscule in comparison. Every
solution under discussion in the Eurozone seems to involve printing more money. Even the US
Federal Reserve is giving significantly stronger hints that more Quantitative Easing may be on
the way, which means more money printing. In that environment, owning precious metals, accumulating
more on any temporary price dips, and holding on to your product for the long term
as the global financial system shows further signs of completely coming apart seems like the best
way to be prepared for the eventual collapse of the fiat currency system. Remember that precious
metals should be viewed as a long-term investment and that the key to profitability through
the ownership of physical precious metals is to actually own the physical products and to hold
them for the long term. Always remember that you should never overextend your ability to
maintain ownership of your precious metals over the long term.

Via Precious Metals International

Don’t Time the Market, Buy Physical Metals Now Before the Door Locks

As we can see from many sources, the BIG PLAYERS have increased their gold and silver purchases lately, while the RETAIL INVESTOR cuts back. This is typical. I hate to say it… RETAIL INVESTORS are DUMB as a BOX OF ROCKS. What has happened is that the public has been put into a trance by MSM that this CHARADE will go on forever. They now believe that the FED and Central Banks can just keep kicking the can down the road until they retire or die.

Some think that the decline in SILVER EAGLE purchases are due to the downturn in the economy and that silver is now in SURPLUS. So, the rational is that silver will fall during a DEFLATION.
While this is true when Gold and Silver are not considered money, it is not true at the end of a FIAT MONETARY SYSTEM.

When I spoke with Harvey Organ on the phone recently, I found it very surprising that we both agreed that the big decline in gold and silver prices in 2008 were not due to DEFLATIONARY FORCES, but rather a complete manipulation and take-down by the FED and Central Governments. So, the reason Silver did not keep heading towards $50 in 2008 was due to a massive take-down. That is why when people say that the PARABOLIC move in silver in the beginning of 2011 was not sustainable… all I can do is LAUGH.

Why? Because the price of silver should already be past that level. It gets so tiresome to listen to the MORONS who should know better. I also can empathize with JIM WILLIE when he stated that he laughed at questions concerning “QE”. I am so tired of the QE debate it is sickening.

Anyhow, for all of those who think SILVER may be in trouble due to the downturn in Silver Eagle sales… Here are some charts to ”SET THINGS STRAIGHT”:

As you can see, RETAIL INVESTORS have bought a heck of a lot less Gold than Silver Eagles. You would think if silver was in jeopardy, than Gold sales would be much higher than silver sales. Here we can see that AMERICANS are still inept when it comes to understanding the value of REAL MONEY.

Don’t take this too harshly…. CANADIAN RETAIL INVESTORS are just as dense as their American Counterparts. If we look at the graph below, we can see that both OFFICIAL GOVT COINS have declined about the same percentage:

I know… some of you are saying it may be a GRAND CONSPIRACY that these sales are down so much. Why couldn’t these organizations be manipulating their figures… some may say?

While that may be true in theory, I have had conversations with several of the top bullion dealers. APMEX told me that their sales were down about the same percentage as the OFFICIAL COIN SALES. Now unless APMEX is part of the grand Conspiracy… then we just have to realize that RETAIL INVESTORS are dumb as a box of rocks.

This is why I believe one day the WHOLE WORLD WILL CHANGE. Sure it will get worse as time goes by and there will be several attempts and bailouts before-hand… but one day the DOOR WILL LOCK and it will be over for the GRAND FACADE.

That is why it is best to buy PHYSICAL NOW and not try to time the market. Because, you may have more FIAT MONEY to buy gold and silver, but it may come at a time when there is NO OFFER for anyone holding FIAT. In the END, the BIG PLAYERS may have beat the public to the punch.


-SRSrocco via Silver Doctors

How Shorts on Metals ETFs are Nearing a Big Squeeze

June 19, 2012 • Reprints via resource investor

There has been an increasing number of investors taking short positions on gold exchange-traded funds (ETFs) – but they better watch out for what’s ahead this summer.

In fact, each day that passes brings us closer to what could be the day of reckoning for those holding massive short positions on the ETFs for gold, silver, copper and related investments.

You see, the Federal Reserve Bank of Kansas City in late August will host an economic policy symposium in Jackson Hole, WY. Speaking at the conference, as he did in August of 2010 when he introduced the second round of quantitative easing, will be Federal Reserve Chairman Ben Bernanke.

There is much to believe that QE3 – if not declared sooner – could be announced at Jackson Hole. Should this happen, the prices of gold, silver and copper will likely soar like back in 2010.

That means anyone holding shorts on gold ETFs or similar investments could find themselves scrambling to cover their positions.

QE2 and Gold Prices

QE2 consisted of inflating the Federal Reserve balance sheet through the purchase of $700 billion in US Treasury bonds. QE2 ran from November 2010 to June 2011.

During that time, the PowerShares DB US Dollar Index (NYSE: UUP) slipped about 2.5%, while SPDR Gold Shares (NYSE: GLD) rose 12%, iShares Silver Trust (NYSE: SLV) 25% and iPath DJ-UBS Copper TR Sub-Index (NYSE: JCC) 7.3%, as investors piled into hard assets.

This trajectory in price trends for the greenback and metals ETFs has since reversed. The dollar index is up 6.6% since July 2011, and up about 2% over the past few months.

For the last three months, GLD is down 2%, SLV is off by nearly 12%, and JJC is down more than 13%.

Even though famed investors such as Jim Rogers and George Soros buy gold, the point of view of investing icon Warren Buffett has led his followers to remain bearish on the yellow metal. Just look at what Buffett had to say about gold in March 2011, when GLD was trading around $140.

“I will say this about gold,” said Buffett. “If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States. For $7 trillion dollars, you could have all the farmland in the United States, you could have about seven ExxonMobils, and you could have a trillion dollars of walking-around money …Call me crazy, but I’ll take the farmland and the ExxonMobils.”

Shorts on Gold ETFs

Investors thinking like Buffett have been constructing massive short positions on gold ETFs as well as other metals-related investments.

A 5% short float is considered to be troubling. At present, there is a 4.47% short float for GLD, and 4.40% for SLV.

Short floats are much higher for individual company stocks in the industry.

For example, Eldorado Gold Corp. (NYSE: EGO) now has a short float of 27.60%. Now trading around $13.00 a share, the 52-week high for Eldorado Gold is $22.12. Before QE2 was announced in the summer of 2010, Eldorado Gold Corp was trading for under $16.

But the monetary stimulus measures happening around the world are reason to be bullish on metals.

Central banks have been working together to bring the world out of The Great Recession, and will continue to do so. The Bank of Japan initiated a round of stimulus measures earlier this year. China appears to be on the verge of another massive program.

QE3 could soon be introduced to the world in late August at Jackson Hole by Federal Chairman Bernanke.

If so, the great sucking sound being heard around the world will be the shorts on silver, copper and gold ETFs being squeezed.

Jonathan Yates is a contributing writer for Money Morning.

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QE3 Is a Given

BY BILL HAYNES via Resource Investor
June 18, 2012

Notable mainstream economists and influential policy makers are calling for more quantitative easing – so many that QE3 is a given. Officially, it will be QE3, but in actuality it will be QE4 because “Operation Twist” is quantitative easing with another name. One important voice now calling for another round of QE is no less than Dennis Lockhart, president of the Federal Reserve Bank of Atlanta and a voting member of the FOMC, which decides such policies for the Fed.

As recently as April 3, Lockhart said that he doesn’t see the need for additional asset purchases [which is how quantitative easing is employed] with the US economy picking up and inflation close to the central bank’s 2% target. He later added, “I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing.” (

However, two months later, Lockhart cited recent poor jobs reports as justification for more quantitative easing. Lockhart said that “. . . further monetary actions to support the recovery will certainly need to be considered.” (Financial Times, June 7, 2012). With such a quick reversal, it shows just how bad Lockhart views the recent job reports.

Other prominent mainstream voices are those of professors Niall Ferguson (Harvard) and Nouriel Roubini (New York University). Although the professors are not calling for quantitative easing by name, they are calling for “recapitalization” of Europe’s troubled banks. (Financial Times, June 9, 2012). Of course, such a program would result in further expansion of the world’s money supply. The money that would be used to recapitalize Europe’s troubled banks would not be already in existence but would be freshly created.

And, last week the UK government and the Bank of England (the UK’s central bank) went beyond talking and announced a £100 billion “support programme” for the British economy as they, according the Financial Times, “battened down the hatches for a worsening ‘eurozone debt crisis.’” George Osborne, UK chancellor, said that they were working to “deploy new firepower,” while BoE governor said Mervyn King said that “ugly” economic conditions and “today’s exceptional circumstances create a case for a temporary bank funding scheme to bridge to calmer times.”

Princeton professor Paul Krugman, arguably the most influential mainstream economist behind Ben Bernanke, has long been a critic of the Fed’s quantitative easing programs in that they were not large enough. He has called for $8 to $10 trillion in quantitative easing. All of this is on top of a Fed policy of near zero interest rates.

Conditions could not be more ripe for the hyperinflation that John Williams of Shadow Government Statistics is predicting for as early as 2014. Hyperinflation or not, investors need to position themselves for the times, which includes financial and economic problems of magnitudes never before faced. Gold and silver are proven vehicles for such times.

A Rare Occurrence in the Silver Market

Posted by Wealth Wire – Tuesday, June 19th, 2012

In New York huge lots of commodities get traded every day on the COMEX (Commodity Exchange) between market makers, speculators, producers and consumers.
It can be very confusing – because we can’t know why banker X, trader Y, consumer Z or producer A buys, sells or holds at any given time. There’s lots of noise – and most investors simply will never buy or sell a commodity contract.
It’s somewhat complicated, but one easy way to get a reading on what’s really going on for a specific commodity is to see how many contracts are long, and how many are short.
The chart below shows us that right now, on a net basis, there are more contracts short than at any time during the last two years.

How is this information useful? Well, think of the commodity market (or any market) as a boat. When everyone stands on one side of the boat, it’s generally a good idea to stand on the other side.
Put another way: when would you rather buy – when everyone else is bullish and buying, or when everyone else is bearish and selling?
And to support this analogy, just look at a price chart of silver plotted during the same 5-year period:

Each time the COMEX net positions were at this point, silver rose in the months following.
I know these kinds of charts seem cherry picked or uninformative, and I’m also acutely aware that I seem to tell you to buy silver every week.
And to be honest, had you bought every time I told you to buy silver, you’d be sitting on substantial gains considering your average cost basis.
If you’ve been averaging into your position steadily over the past few years (as I have) then you’re doing it right.
But if you’ve been slacking lately because of all the volatility and perceived uncertainty in the markets – or if you’ve NEVER bought silver – then right now is about as good as it gets to pull the trigger.
As you may know, I recently bought silver at about the same price it sells for today. I think it’s a fine time to build or add to your position – and my long-term prediction is STILL for silver to top out at over $100 an ounce before the end of this current commodity bull market.
When will this bull market end? I can’t say, but I firmly believe we have several years left at the very least.

*Post courtesy of Kevin McElroy of Wyatt Research. He is the editor of Resource Prospector Pro.

Celente: “Tidal Wave” of Investors Coming to Gold

Posted by Brittany Stepniak – Monday, June 18th, 2012 via wealth wire

Renowned financial trends forecaster Gerald Celente grimly states that each new day presents a new catastrophe. Everyday, politicians and central bankers say the crisis must me mended as the entire financial system lies on the verge of collapse.
With each passing day, an increased number of smart investors opt for gold because of the wild volatility elsewhere. The eurozone crisis has sparked a coming tidal wave of investors expected to enter the gold markets in the coming weeks and months.
Greece may leave the eurozone, Spain just gained $125 from the “Spailout”, and the trillions of dollars of debt remain…it’s a bleak outlook for sure.

China is preparing for a Greece euro exit and just lowered their interest rates for the first time since the financial meltdown of 2008. It is also about to replace India as the largest gold market with demand expected to increase by 30% in 2012. Individuals and nations alike are doing the best they can to be as financially savvy as possible in these deeply uncertain times.
Weak economic data plagues headlines across the globe; in Europe and the U.S. especially, but now it’s everyone’s problem. As the entire world retreats from various markets in fear, gold offers the only glimmer of hope these days. Investors are really catching on to this gold trend amidst all the national and international fiscal disasters.

Celente elaborates:
Do you remember in the winter edition of the Trends Journal, we warned of bank runs and bank holidays. We thought they were going to happen first in the US. Our timing was a little off with the country, but we nailed it. There are bank runs in Greece, Spain, Italy, and they are making it more and more difficult to get your money out. If I was a European, why would I have my money in the banks?

I’ve always made it very clear, I only put my money in gold and silver. Here is my take on gold, the next big breakout point is $1,655. After that it’s $1,675, and then $1,700. For me to see gold strong again, it has to break the $1,850 mark.
Although Celente isn’t entirely positive as to when the tidal wave gold entrance will ensue, he is confident that the “cards are in place for the house of cards to collapse.”
Once leaders and central bankers can no longer convince the public that quantitative easing and paper money can’t fix the root of the problem, investors will seek a golden safe haven.
Brace yourself: go for gold before the tidal wave hits and the price begins to skyrocket due to the quick surge in demand.

Peter Schiff on Fox Business – Monday, June 18, 2012

PPMI Week In Review

The Week in Review via PMI Limited

1. Europe continues to foster uncertainty in the market this week. Spain was indeed offered a
bailout over the weekend, as expected, and if anything it seems to have made the situation in
Europe even worse, particularly in Greece. The terms of the Spanish bailout appear to be
much less onerous than those agreed to by Greece and seem to have given leverage to the
leftist parties in the upcoming Greek weekend election.

2. Economic data out of the US was extremely disappointing this week. Initial claims for
unemployment climbed again, the fifth time in 6 weeks that it has done so. Manufacturing
output in the US contracted in May and a number of regional surveys in June, such as the
New York Fed’s “Empire State” general conditions index also saw steep drops. The initial
reading of the Thomson Reuters/University of Michigan’s Consumer Sentiment index fell to
six month lows. Survey director Richard Curtin said “Income losses were reported by nearly
one-third of all households in early June and the news reaching consumers about job
prospects turned negative for the first time since late 2011.”

3. Oddly, the US stock market surged higher following Thursday’s less than stellar jobs
numbers. It seems to be widely viewed that the slowing US economy and the ongoing and
worsening crisis in Europe adds more pressure to the Federal Reserve to come through with
additional monetary easing when it meets next week.

4. In the UK, the Bank of England announced in Friday that it will be implementing emergency
liquidity-providing operations for UK banks beginning next week in an attempt to free up
credit in Britain’s economy. The BOE said at least one “Extended Collateral Term Repo
Facility” per month will be held until further notice with each one to offer at least 5 billion

5. Greece is front and center in the news as their elections take place over the weekend. The
situation in Greece is becoming more and more desperate as crippling austerity measures
forced upon the country as a result of its two bailout agreements appear to be doing more
harm than good. Intellectual talent appears to be fleeing the country, many to Australia,
searching for work and the rate at which bank deposits have been disappearing is even more
alarming. Healthcare and utility costs are skyrocketing as a result of new taxes put into place
as part of the austerity measures and many in the Greek populace simply can’t afford to pay
the bills.

6. Moody’s downgraded Spain’s credit rating three more notches this week to Baa3 on grounds
that the bailout announced over the weekend would raise the country’s debt burden.
Moody’s said “the Spanish economy’s continued weakness makes the government’s
weakening financial strength and its increased vulnerability to a sudden stop in funding a
much more serious concern than would be the case if there was a reasonable expectation of
vigorous economic growth within the next few years.”

7. US Foreclosure starts rose for the first time in over two years according to RealtyTrac,
perhaps indicating that the banks have finally worked all the kinks out of their foreclosure
procedures following the infamous “RoboSigning” incident. With the US apparently
becoming a “renter nation”, it will fall to investors to purchase these properties and any
failure on their part to take action on them may drive home prices lower yet again.

8. Crude oil remained in the mid-$80 a barrel range this week, under pressure by a reduced
demand forecast by the International Energy Agency, continued evidence of a slowdown in
China and the worsening crisis in Europe.

9. The euro continued to stumble along this week against the US dollar, and appears that it will
end slightly higher on hopes that any chaos caused by the results of the Greek elections this
weekend can be contained by central bank actions. The Japanese yen appears that it will end
the week essentially sideways against the dollar.
Friday to Friday Close
June 8th to June 15th
Net Change
Gold $1591.20 $1628.00 37.00 + 2.33%
Silver $ 28.50 $ 28.75 0.25 + 0.88%
Platinum $1425.50 $1487.00 62.00 + 4.35%
Palladium $ 611.00 $ 630.00 19.00 + 3.11%
Dow Jones 12554.20 12723.35* 169.15 + 1.35%
Previous year Comparisons
Jun 17th
2011 Jun 15th 2012 Net Change
Gold $1538.00 $1628.00 90.00 + 5.85%
Silver $ 35.75 $ 28.75 (7.00) – 19.58%
Platinum $1750.00 $1487.00 (263.00) – 15.03%
Palladium $ 742.00 $ 630.00 (112.00) – 15.09%
Dow Jones 12004.36 12723.35* 718.99 + 5.99%
* Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1610/1588/1533 28.20/27.78/26.80
Resistance 1635/1658/1697 29.10/30.38/31.48
Platinum Palladium
Support 1455/1428/1397 610/580/550
Resistance 1485/1520/1561 652/678/708

Volatility should be expected to continue and may increase dramatically in the coming weeks.
This weekend, once again, it is vitally important to monitor the news. The Greek elections
taking place over the weekend may lead to chaos in the European Union should the left-leaning
parties take control and refuse to abide by the terms of Greece’s bailout conditions. Central
banks around the globe are reportedly “set to act”, should it be required. Mario Draghi, president
of the European Central Bank said “The ECB has the crucial role of providing liquidity to sound
bank counterparties in return for adequate collateral. This is what we have done throughout the
crisis, faithful to our mandate of maintaining price stability over the medium term – and this is
what we will continue to do.” In other words, the ECB will continue to print money as it has
since the crisis began. The uncertainty over the outcome of the Greek elections and the state of
the Eurozone following those elections may lead to massive volatility next week as the markets
absorb the fallout. Tensions between German Chancellor Angela Merkel and the new Socialist
French President Francois Hollande appear to be getting worse. Ms. Merkel took the opportunity
this week to make some criticizing remarks regarding Hollande’s plans to try to grow the French
economy. Ms. Merkel also reiterated that she was still set against the idea of “euro bonds”, an
idea which Hollande has declared he is in favor of. Fitch ratings agency said this week that all
sovereign credit ratings in Europe, including the final four AAA rated members were at risk for
downgrades unless they find a more lasting solution to the debt crisis washing over the
Eurozone. The Spanish bailout agreed to over the weekend seemed to be shrugged off by the
market in just a matter of hours on Monday. From the outside it appears that this is just another
“quick fix” operation, the effects of which will be fleeting and temporary. Obviously the bailout
doesn’t meet the “lasting solution” criteria that Fitch is looking for. Pay attention to every single
news item that emerges out of Europe over this weekend. While it can be hoped for that media
outlets will verify their stories before they air them, it is also important to keep in mind that with
the sheer amount of uncertainty surrounding the Greece elections, it is highly likely that markets
will move on nothing but headlines, rumors and sheer emotion when the market opens on
Sunday night in Asia. The fact that the “G20” central banks are standing ready to provide
bailouts if chaos should ensue after the Greek elections take place means that they stand ready to
print money, and print money, and print money, until they devalue their currencies to the point
that they might as well be used for wallpaper or attic insulation.

Stand ready to take advantage
of any panic that may offer up buying opportunities to add more precious metals to your
portfolio. The sense of urgency regarding the state of global finances seems to be growing and
as it grows, the demand for precious metals may skyrocket, sending prices to astronomical
levels. Whatever the triggering event that ignites the fuse under precious metals prices, if you
are not poised and ready to act before the fuse is lit, it will be very difficult to try to catch the
rocket after it leaves the launch pad. Remember that precious metals should be viewed as a longterm investment and that the key to profitability through the ownership of physical precious
metals is to actually own the physical products and to hold them for the long term. Never
overextend your ability to maintain ownership of your precious metals over the long term.

Back to the fundamentals of investing in silver

Peter Cooper | June 17, 2012 – 3:55am via Silverseek

It’s about four years since ArabianMoney began to recommend investing in silver (click here). It has been a roller-coaster ride but few investments have gained 70 per cent like silver over those difficult years for financial markets.

Things were even better last April with a short price spike that gave left us with almost triple our investment of three years earlier. But that is the sort of volatility that you have to live with as a long-term silver investor.

Market timing

You can of course try to be a market timer. However, it just is not worth the heartache. You will make horrible mistakes. At the end of last year one famous pundit was particularly bearish, only to get it completely wrong as silver found a New Year burst of life.

Will we see silver finally take out the 1980 all-time high of $50 this autumn as expected earlier this year? (click here) Given the long sideways move since that April spike in 2011 we ought to be due for some sort of an upturn, and the fundamental case for investing in silver remains as strong as ever.

It’s a precious metal with many industrial uses and limited supply and very limited reserves. Silver is a tight market dominated by three bullion banks who hold massive short positions. If they ever have to cover those shorts there is your $50+ silver price and very much higher.

For any commodity to be the same price as it was 32 years ago is a pricing anomaly in need of a correction. Then there is the historic link between gold and silver as precious monetary metals.

The average ratio of silver-to-gold in terms of value is a factor of 15 over the centuries. It is way out of whack now at closer to 50, so silver has the potential to outperform gold by a factor of three as the law of mean reversal says this must correct over time.

And don’t worry too much about the impact of a recession. Silver is mainly a byproduct of copper and zinc production and so supply will fall if production of these metals is cut, and that probably in the face of rising investment demand.

Money printing

What has been driving prices up and will continue to do so is the creation of money by global central banks to offset the deflationary impact of the global financial crisis. They can electronically print money to inflate debt away but not increase the number of ounces of gold and silver in existence.

Precious metals are also a safe haven asset class. That does not mean that their price always goes up in a straight line. It does mean that they always have a residual value and no third party between you and your money. Gold and silver are money or currency.

In times of inflation, deflation or financial insecurity this is the asset class to hold while all the others plunge in value. Don’t be fooled by the US dollar’s strength recently. Its denouement is yet to come and that is when you will really want to own precious metals.

Silver would disappear in a nanosecond if people understood how little there is: Eric Sprott


Eric Sprott told Silver Doctors that he sees no reason for precious metals’ to be priced so low with the current global economic weakness.

“All of the data speaks to huge volumes of physical gold being consumed, way beyond the ability of the miners to provide that gold, which makes me think the central banks are continuing to lease or to supply the gold into the market somehow,” said Sprott.

He says China bought 100 tons in April, Kazakhstan is lifting reserves from 12% to 15%, and Turkey and Iran are both buying.

“Of course gold and particularly silver being in such short supply will be massive beneficiaries when all of a sudden people realize that there’s not as much gold around as people think. Of course the silver supply would disappear in a nanosecond because it’s a very small amount of money.”

Sprott says the US, Japan and UK are all deeply in debt. Europe is most worrying. On a trip to the EU, Sprott was discussing the size of potential bank runs.

“I was sitting there and I asked someone, how many mortgages do they have? And they said, they have about a trillion. I told them, well the hole will be about $400 billion then because I’m sure all those things are 40% underwater!”

Sprott argues that the banking sector in Europe is way bigger than the countries and due to the massive deficits each country is running, there will be no way for the countries to bail out the banks.

“It’s a mess, everyone’s behind the curve, and I don’t think they’ll get in front of the curve quite frankly. Extending and pretending, program after program, and when the program ends, the markets always go down.”

Image of Eric Sprott speaking at Casey Research/Sprott Summit When Money Dies

Are you brave enough to buy low?

Casey Research:

“It’s a great idea to buy physical gold and silver when the price dips, as has been happening recently. However, there are other ways to play this market that offer outsized gains – if you’re brave enough to get in on them.”

This time last week, I was at the Cambridge House World Resource Investment Conference in Vancouver, BC. Usually the show is quite hopping, but this time, while there was the usual mob and there was standing room only at several of the events Doug, the Casey crew, and I participated in, the mood was decidedly low-key.

But here’s the interesting part: it was low-key, but not depressed.

In fact, with metals and related stocks having just had a particularly vicious few months in the markets, I was half-expecting an angry confrontation with a soon to be ex-subscriber… maybe more. But that didn’t happen. People were quietly coming up to me and asking, “So, what are you buying?”

I subsequently heard from one subscriber who had followed our published advice to average down and after the June-first surge in gold, was overall in the black. This is no mean feat during a bearish turn of the market, but not really surprising when someone buys value when it’s on sale.

Back at the show, I polled my workshop audience, as I often do. This was almost the last session of the last day of the conference. From out over the show floor, I could hear the sounds of the company promoters tearing down their booths. And yet, the hall filled to capacity, and there were people standing in the hallway outside by the end of my presentation. These were serious investors.

When I asked them how many were worried about gold’s recent negative price movements, I was not surprised that only a handful put their hands up. When I asked them how many were excited by the opportunity, about three times as many put their hands up. That means most were unsure what to think, which is always the case, but I was pleased to see that there was a significant presence of people at the show who viewed the low energy level as a buying signal.

People brave enough to buy when others are not interested know the secret of how to “buy low and sell high” – they are true contrarians.

I know such people exist. I work with them every day here at Casey Research. But it’s precisely because such investors are rare that contrarian investing is possible.

Quick reminder: to be a contrarian does not simply mean to do the opposite of what everyone else is doing. There can be wisdom in crowds – in a way, a market price is a distillation of mass judgment. And a broken clock can be right twice a day. No; it’s not just about being ornery. A contrarian is a person who analyzes markets, finds trends she or he regards as very solid – solid enough to put financial weight on – and invests accordingly regardless of what others think, say, or do.

To maximize returns doing this, a speculator picks items that people must have, such as meat, oil, copper – and, yes, gold – when they are in relative disfavor and it’s a buyers’ market, then liquidates the positions when everyone else is jumping in with both feet and it’s a sellers’ market.

So, when a good chunk of my audience told me they were excited by the correction in the metals markets, and when individuals came up to ask about what we recommend buying, I was very pleased.

And I suppose it was actually a good thing that not everyone was a contrarian – or contrarianism would cease to be contrarian, and the profit would go out of it.

Fortunately, it’s not easy to buy when the market is bearish and everyone is giving you 101 reasons why things can only get worse. Perversely, it’s even harder to sell when everyone else is buying and congratulating you on how smart you were to lead the way to such a profitable investment strategy. Both take genuine courage and independent thought, neither of which are common traits.

I’m not worried.

But I am buying, on days like last Thursday, June 7 – when more fearful investors will hit the bid at stupid-cheap price levels.

I hope you are too, in whatever sectors you are investing in.

It’s a great idea to buy physical gold and silver when the price dips, as has been happening recently. However, there are other ways to play this market that offer outsized gains – if you’re brave enough to get in on them.

By Louis James

One Billion Silver Ounces and 100 Billion Owners

Dr. Jeffrey Lewis | June 11, 2012 – 8:52am

When considering whether silver is a good investment for the future, you might want to take a closer look at the current above ground supply of silver.

A reasonable estimate is that roughly 1 billion ounces of silver currently exists above ground in investment grade form.

This does not include the ounces of silver that need to assayed, melted, and recovered from what little silver is left in jewelry, silverware or sequestered away in electronics.

But at least it’s something.

Silver Derivatives and JP Morgan Chase’s Recent $2 Billion Loss

A classic example of the risks involved in derivative products that have no readily visible asset underlying them, such as synthetic credit and debt instruments, is the recent $2 billion loss announced by J.P. Morgan Chase.

When it comes to silver paper derivatives like futures and options, at least a real and visibly traded physical commodity underlies and determines the value of the paper trading vehicles.

Nevertheless, the markets in these silver derivatives can be manipulated due to the lack of a requirement by futures exchanges for both the buyer and the seller to actually deliver the physical metal into a futures contract.

Since only the seller typically has the right to instigate delivery into a futures contract, this means that silver futures sellers can have no physical to sell and yet still sell a silver futures contract.

As a result, these silver derivatives have become the tails that continue to wag the dog. They can and have been used to artificially keep physical silver prices low.

Paper Ounces Versus Physical Silver

Given the opportunity for manipulation of the silver market using derivatives, one might ask how many ounces of paper silver trade versus the number of ounces of the actual metal, as well as how many claims to each physical ounce of silver exist?

One well-informed source, Jeffrey Chrisitian of CPM Group, admitted that there are as many as 100 claims for every ounce of physical silver.

This indicates a real problem with considering the physical silver supply ample at only 1 billion ounces of above ground investment grade silver, when owners may hold claims to as much as 100 billion ounces.

Stockpiles of Physical Silver

It also seems worthwhile to take a look at the major stockpiles of physical silver and just how willing the owners are to part with their precious metal stash.

A large amount of not-so-visible physical silver is currently held by small individual investors, who are typically not willing to sell their metal so readily since they often hold it for longer term investment purposes.

Perhaps the most visible stockpiles can be found at the various exchanges that trade silver futures, such as those in London and Chicago. Physical silver is also visibly stockpiled by physical silver Exchange Traded Funds (despite some controversy over their backing) and trusts.

It is not as if that physical silver is not owned by anyone, but at what price is that visible silver actually for sale? Also, that sale price may differ substantially from the “market” paper silver price that can be readily manipulated by large special interests.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit silvercoininvestor

Silver Could Preserve More Value Than Gold

Hubert Moolman | Monday, June 11th

The fundamentals for silver and gold are very strong, and with all the massive bailouts, which are increasing debt levels, they are just getting stronger. Until a significant portion of these debts is repaid or defaulted on, it would be foolish to talk about a top in precious metals.

The repayment of debt (or default on debt – which is more likely) will result in significantly reduced economic activity. Significantly reduced economic activity will have a negative effect on the stock market, which in this case, will likely result in a huge crash. It is these conditions (a deflating debt bubble) that will drive gold and silver prices significantly higher.

Why? Because this will not just be a normal type of reduced economic activity, but one in which the monetary system as a whole is questioned or collapses (due to the excessive debt levels).

In a crisis like this, it will be all about preserving value, which will make gold and silver the most wanted goods. The excessive debt levels we have currently, mostly represent artificial value, or value that will never be realised. We now have a great opportunity to convert that soon to be destroyed value into real value, by buying gold and silver, with fiat currency.

In my opinion, silver bullion presents the better opportunity, when compared to gold. Silver bullion is still trading much lower than its 1980 high, and also at relatively historic lows against gold.

Silver Flag

Here, is a follow-up on my previous article about the similar flag formations on the silver chart. Below is a 6-year chart of silver (all charts generated at

On both charts, I have suggested how the flag patterns might be similar, by marking similar points, from 1 to 6 (and alternatively from a to f). Based on this comparison, it appears that the silver price might now have found that point 6 or h, and is about to increase significantly. See my latest video on my website for more details of this analysis.

For more silver and gold analysis and guidance, see my Long-term Silver Fractal Report or subscribe to my Premium Service.

Warm regards,

Hubert Moolman

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

PPMI Week In Review

June 8, 2012

The Week in Review

1. What a week for news! Europe, led by Spain, was the driving force behind markets this
week for the most part. Once again, we will be going into the weekend with a slew of important
data set to be released out of Europe and Asia.

2. Initial claims for unemployment fell by 12,000 last week, the first time claims have declined
since April. Despite the drop, the four week moving average for new claims edged higher by
1,750 thanks to an upward revision in the previous week’s data. The four week moving average
is considered a better read on the state of the jobs market than the weekly claims data so
any increase there is still cause for concern.

3. In testimony before the US Congress’ Joint Economic Committee (JEC) on Thursday, Federal
Reserve Chairman Ben Bernanke seemed to be taking the same stance as Mario Draghi,
of the European Central Bank. Last week, Mr. Draghi told European parliament members
that it is time for politicians to essentially step up and come forward with their own solutions
to the crisis at hand. This week, Bernanke echoed that sentiment, telling the JEC “It would
be much better to have a broad-based policy effort addressing a whole variety of issues. I
leave the details to Congress, who have considered many of these issues.” Chairman Bernanke
reiterated that the Fed stands ready to act if the economy slows further, but failed to
give an outright guarantee that more Quantitative Easing was on the way.

4. Spain continues to struggle with its banking sector and is widely expected to formally request
aid from the European Union as early as Saturday. In contrast to Greece, whom much of the
Eurozone seems willing to let go of, Spain virtually has the Eurozone by the throat as a result
of the sheer size of its economy. Spain, which has the fourth largest economy in the Eurozone,
is being described as “too big to fail, too big to bail” at this point. On Thursday Fitch
Ratings Agency cut Madrid’s sovereign credit rating by three notches, citing the Spanish
banking sector’s exposure to failing property loans and contagion from Greece’s debt crisis.
Fitch said that the cost to recapitalize Spain’s banks could be as high as 100 billion euros,
while the International Monetary Fund estimates the figure to be a “mere” 50 billion.

5. Tension is mounting in Greece as the June 17th elections deadline approaches. The Greek
economy shrank by 6.5% during the first quarter as crippling austerity measures, required as
a condition for receiving the “troika’s” bailout money, continued to take a toll on tax revenues.
Wage cuts and layoffs carried out as a result of the austerity measures seem to have
done the exact opposite of what European leaders envisioned when they established those
measures. While the measures have worked to lower government spending, they have also
caused consumers to limit their spending in fear of losing their jobs, and the public sector
layoffs have added to the unemployment woes in the country. Both factors have worked to
seriously reduce tax revenues for the Greek government which was already plagued by tales
of corruption in its tax collection efforts, making it more difficult for the government to reduce
its budget gap.

6. China surprised economists and markets alike on Thursday when it cut its benchmark lending
rates by 25 basis points. Most economists had expected a cut in the required reserve ratio for
banks instead of a cut in interest rates. The move is China’s first rate cut in four years and
many feel that the move may indicate that the industrial production data, which is due out
Saturday, may show a larger economic slowdown in China than previously projected. According
to Donna Kwok, economist for Greater China, in an e-mail sent to CNBC, “The discount
that banks were previously allowed to offer on lending rates relative to the benchmark
rate has been doubled, from 10 percent to 20 percent, which means that the lowest official
lending rate has effectively been cut by 63 basis points, not just 25 basis points.”

7. Crude oil continued its run in the low $80 a barrel range this week, held down by perceived
demand weakness in both Europe and Asia. The start of the summer driving season may help
send prices higher soon, however.

8. The euro made an attempt to claw its way higher against the dollar this week, but Spain appears
set to be a major headwind against it next week. The yen plunged against the dollar
this week on poor Japanese economic data.

Friday to Friday Close
June 1st June 8th Net Change
Gold $1620.20 $1591.00 (29.00) – 1.79%
Silver $ 28.45 $ 28.50 0.05 + 0.18%
Platinum $1445.50 $1425.00 (20.00) – 1.38%
Palladium $ 612.00 $ 611.00 (1.00) – 0.16%
Dow Jones 12118.57 12480.52* 361.95 + 2.99%
Previous year Comparisons

Jun 10th 2011 Jun 8th 2012 Net Change
Gold $1528.00 $1591.00 63.00 + 4.12%
Silver $ 36.32 $ 28.50 (7.82) – 21.53%
Platinum $1830.00 $1425.00 (405.00) – 22.13%
Palladium $ 815.00 $ 611.00 (204.00) – 25.03%
Dow Jones 11951.91 12480.52* 528.61 + 4.42%
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.

Gold Silver
Support 1580/1550/1530 28.00/27.60/27.20
Resistance 1600/1625/1640 29.00/29.50/30.00
Platinum Palladium
Support 1415/1400/1390 600/580/550
Resistance 1450/1500/1540 620/640/680

Volatility should be expected to continue and may increase dramatically if data out of Europe and
China continues to disappoint. This weekend it is vitally important to monitor the news with
China’s manufacturing, retail and inflation data due to be released and a widely expected announcement
out of Europe regarding recapitalization of Spain’s troubled banking sector. According
to Reuters, Five senior EU and German officials, speaking on condition of anonymity,
said that deputy finance ministers from the single currency area would hold a conference call on
Saturday morning to discuss a Spanish request for aid, but that no figure for the amount of assistance
required has yet been decided on. The officials also said that following that conference
call, the Eurozone’s seventeen finance ministers would hold a separate call to discuss approving
the request and that “the announcement is expected for Saturday afternoon.” The European
Commission’s spokesman on economic affairs said that Spain had made no request for aid and
that he would not confirm that a conference call was planned for Saturday. The spokesman went
on to say “If such a request were to be made, the instruments are there, ready to be used, in
agreement with the guidelines agreed in the past.” Despite the denials, it is widely expected that
the calls and accompanying announcement will take place this weekend to try to calm markets
ahead of Greek elections on June 17th, the outcome of which is still totally uncertain. If the leftist,
anti-bailout parties in Greece gain a decisive victory in the June 17th elections then the odds
that Greece will exit the Eurozone will increase dramatically and European officials seem to be
concerned that if there is no solution to Spain’s banking sector woes prior to that, panic may ensue.
Elections take place this Sunday, and again on June 17th in France and it is widely expected
that Francois Hollande may see his ability to rule reinforced if the left takes control of the lower
house of National Assembly. Mr. Hollande has been widely critical of the austerity measures
that are being forced on the peripheral Eurozone countries in exchange for bailout funds and the
data coming out of Spain and Greece appear to be reinforcing his view that pro-growth policies
would be more effective at boosting economic output in those countries than the severe austerity
measures currently under way. In a sign of just how dysfunctional the stock market has become,
stocks appeared to be set to post their best weekly gain for the year solely on the rumors out of
Europe that the EU might agree to bail Spain’s banks out. Amid the backdrop of a slow-down in
China, the very real possibility of a Greek exit from the euro, mounting debt and the looming US
“Fiscal Cliff” that apparently even former president Bill Clinton even agrees is not being taken
seriously enough by the US Congress, stock markets climb on the hope that Europe can print up
some more money to bail out its fourth largest economy? That is sheer idiocy. The day may
soon come, and Europe may just be the trigger that sets it off, when Central Banks simply can’t
print enough money to paper over the debt woes of their respective nations. When that day arrives,
paper money won’t even be worth the cost of the ink used to print it up and precious metals
prices might be nothing short of astronomical. Pay close attention to the news this weekend
and be prepared to act as we move into next week. Remember that precious metals should be
viewed as a long-term investment and that the key to profitability through the ownership of
physical precious metals is to actually own the physical products and to hold them for the long
term. Never overextend your ability to maintain ownership of your precious metals over the long
Trading Department – Precious Metals International, Ltd.

Parasites In Pinstripes With All Their Ideas An excerpt from Bob Chapman’s weekly publication.

June 3 2012: US economy to lag despite all its efforts, bleak view from the labor market, are states broke… how states and municipalites could bypass Wall Street, stupid decision in the economy, losses in the Economy could increase.

With the recent late night announcement from China and Japan as to their plan to bypass the US dollar and trade directly in the yuan and yen, this will bring about significant consequences for the US dollar’s reserve currency status. As usual the socialist media groups are doing their best to keep this out of the public eye due to future toil this could take on the already strained US dollar. As China, the worlds largest import/exporter along with Japan as a major trading partner with China’s slow withdrawal from the US dollar it only adds to the demise of the US dollar as a fiat currency will be slow and methodical, the only safe haven will be gold and silver.

The US economy with all its money printing and how interest rates still remain lagging at best and with consumer confidence slowly declining, the avenue to QE3 is being smoothly laid. With that being said precious metals are severely undervalued given the relativity as to what is occurring in the world as to where their prices should be, don’t allow an over manipulated precious metals market fool you into believing otherwise. With QE3 on its way, we should see gold prices fighting their way upwards pulling silver along with it.

The US housing market’s ongoing weakness along with its recent fall in home sales by 5.5 percent to 95.5 the lowest levels since December thus far is disappointing at best and could be the signal for the beginning of a downturn in an already lagging market.

With the housing market being one of the US economies toughest hurdles to overcome during an attempt at recessionary recovery and millions of current homeowners being underwater on their homes forcing them to be extremely cautious with their spending habits thus far causing a severe holding pattern for economic recovery, adding fuel to the fire are the abundance of unsold properties and the continuing foreclosures as is evident with the mid week report showing contracts fell 12 percent in the western US, 6.8 percent in the south, slightly lower in the Midwest, and a slight rise in the northeast. Another factor overshadowing the recovery is the faltering application demand for refinancing US home mortgages; they decreased 1.3 percent in the week ending May 25th. As would be expected, the National Association of Realtors downplayed the declines in pending home sales.

Views on the labor markets deteriorated this month. The board’s survey showed 7.9% of respondents think jobs now are “plentiful,” down from 8.4% thinking that in April. Another 41.0% think jobs are “hard to get,” up from 38.1% last month.

Confidence among U.S. consumers unexpectedly fell in May to the lowest level in four months as optimism about employment prospects faded.

The Conference Board’s index decreased to 64.9 this month from a revised 68.7 in April, figures from the New York-based private research group showed today. Home prices in 20 cities dropped in the 12 months ended in March at the slowest pace in more than a year, according to another report.

The share of Americans expecting fewer job opportunities in the next six months climbed to the highest level since November, raising the risk that consumers will limit spending. A 30-cent decline in gasoline prices since early April failed to brighten spirits, showing that more progress is needed in the job market.

“Gasoline prices aren’t doing the trick,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, whose forecast was closest. “We are making progress when it comes to the labor market, but clearly this is another sign that it’s still very slow going.”

Stocks gained after Greek opinion polls eased concern the country will leave the euro. The Standard & Poor’s 500 Index climbed 1.1 percent to 1,332.42 at the close in New York. Crude oil for July delivery on the New York Mercantile Exchange settled at $90.76 a barrel, down 10 cents.

Home prices in 20 U.S. cities fell 2.6 percent in the 12 months ended in March, the smallest decrease since December 2010, according to an S&P/Case-Shiller index of property values

(Thank you Bob for all of your hard work and contributions, may your soul rest in peace.)

PPMI Week in Review

The Week in Review

1. It seems the old Stock Market adage “Sell in May and Go Away” continues to hold true.
Stocks had their worst month in two years in May, and today’s jobs data appears set to start
the month of June off with a massive losing day in the stock market as well. In stark contradiction
to the global stock “downdraft”, precious metals all closed higher for the week.

2. The jobs data for May was released today by the Bureau of Labor Statistics, and the numbers
may have some economists looking for work themselves today. Economist estimates were
for a creation of 158,000 new jobs and the actual number was a mere 69,000, a miss by well
over 50% for the esteemed economists! The unemployment rate rose for the first time in
close to a year as well, climbing back to 8.2%. Todd Schoenberger, managing principal at
The BlackBay Group in New York told CNBC “It’s painfully obvious the economic recovery
in the U.S. isn’t just slowing down, it’s pulling up the emergency brake.” The BLS also revised
April’s jobs data downwards, dropping from 115,000 down to 77,000, a drop of 38,000
which may indicate this month’s figures might be overinflated as well.

3. Unemployment across the Eurozone hit 11 percent, its highest level since 1995, according to
Eurostat which is the EU’s statistics office. The low average number for the Eurozone as a
whole belies the larger issues in countries such as Spain, where unemployment has hit a staggering
24.3 %, and Greece, also well above 20% unemployment (as of February, current figures
in yet). France and Italy both saw a rise to 10.2 % unemployment in April as well.

4. Pressure is mounting once again for some form of intervention in the Eurozone, either in the
form of additional QE or another Long Term Refinancing Operation (LTRO). Mario Draghi,
the European Central Bank president, told members of the European parliament Thursday
that the ECB is reaching the limits of its powers and that it is up to politicians now to move
forward. Mr. Draghi said the structure of the EU has become “unsustainable unless further
steps are undertaken.” Mr. Draghi also left political leaders with this question and an accompanying,
and blunt, answer: “Can the ECB fill the vacuum left by lack of euro area governance?
The answer is no.”

5. In Greece, deposits continue to flow out of banks as fear increases that the embattled country
is edging closer and closer to having to exit the European Union. Elections in Greece are set
to be held again on June 17th and the most recent polls do not show any clear leader in the
upcoming contest. Should the radical left-wing SYRIZA party gain victory, the party’s outspoken
leader Alexis Tsipras has said the previous bailout agreement Greece struck with the
“troika” would be null and void. Mr. Tsipras said the agreement would be replaced with, “a
national recovery plan for economic and social growth and productive reconstruction”. Any
move to annul the previous bailout agreement would almost assuredly throw the debt-laden
country into chaos as its funding disappeared.

6. In China, two different surveys of manufacturing activity showed that the economy there
continued its slowdown in May. Federic Neumann, co-head of Asian Economics Research at
HSBC told CNBC Asia “It is very clear from these numbers that more needs to be done and
micro-surgery might no longer do it because the patient is in critical condition.”

7. Crude oil inventories rose for the 10th week in a row and the price dropped into the lower $80
a barrel range on concerns over the continued slowdown in China, poor economic data out of
the US, and the continuing crisis in Europe.

8. The euro continued its slide against the dollar, once again renewing speculations that the euro
was headed for parity with the US dollar. The Japanese yen climbed sharply higher against
the dollar this week.

Friday to Friday Close
May 25th June 1st Net Change
Gold $1571.20 $1620.00 48.80 + 3.11%
Silver $ 28.39 $ 28.45 0.06 + 0.21%
Platinum $1426.50 $1445.00 18.50 + 1.30%
Palladium $ 590.00 $ 612.00 22.00 + 3.73%
Dow Jones 12454.83 12118.57* (327.93) – 2.63%

Month End to Month End Close
April 30th May 31st Net Change
Gold $1664.00 $1563.00 (101.00) – 6.07%
Silver $ 30.95 $ 27.80 (3.15) – 10.18%
Platinum $1570.00 $1415.00 (155.00) – 9.87%
Palladium $ 682.00 $ 612.00 (70.00) – 10.26%
Dow Jones 13213.63 12393.45 (820.18) – 6.21%

Previous year Comparisons
Jun 3rd 2011 Jun 1st 2012 Net Change
Gold $1542.00 $1620.00 78.00 + 5.06%
Silver $ 36.20 $ 28.45 (7.75) – 21.41%
Platinum $1825.00 $1445.00 (380.00) – 20.82%
Palladium $ 783.00 $ 612.00 (171.00) – 21.84%
Dow Jones 12151.26 12118.57* (32.69) – 0.27%

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver

Support 1600/1550/1530 28.20/27.80/27.20
Resistance 1640/1675/1700 28.70/29.00/29.80
Platinum Palladium
Support 1420/1400/1380 600/580/550
Resistance 1450/1475/1500 620/640/675

Volatility should be expected to continue and perhaps increase further. The May jobs report in
the US has once again reignited speculation that the Federal Reserve may need to engage in further
easing measures. Combine the poor US economic data with the poor China economic data,
and a crisis in Europe that seems on the verge of spiraling out of control and exploding across the
globe and you have a situation that seems like almost a “perfect storm”, and one that may very
well blow precious metals prices to new highs that make last year’s record moves seem miniscule
by comparison. Robert Zoellick, President of the World Bank, in an editorial in the Financial
Times on Thursday compared the summer of 2012 to the days of 2008, just prior to Lehman
Brother’s collapse. Mr. Zoellick said “The European Central Bank, like the U.S. Federal Reserve
in 2008, has sought to reassure markets by providing generous liquidity, but collateral quality is
declining as the better pickings on bank balance sheets are used up.” Discussing the possibility
of a Greek exit from the Eurozone, Mr. Zoellick said “If Greece leaves the Eurozone, the contagion
is impossible to predict, just as Lehman had unexpected consequences.” In what can only
be considered a stark warning to bickering Eurozone politicians, Mr. Zoellick said “A Greek exit
would trigger a hit to confidence in other sovereign euro assets. Euro zone leaders need to be
ready. There will not be time for meetings of finance ministers to discuss the outlook and debate
the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other
flames.” Money is literally fleeing both Greece and Spain as investors and depositors increasingly
look for safer stores for their hard earned cash.
This week saw the dollar index moving
higher, the yen moving higher and the 30-year and 10-year bonds hitting all-time highs. One
other asset was moving higher along with those just mentioned…Gold. As Dan Norcini put it in
his interview with King World News on Thursday, “So there was a steady rush of buying in the
safe haven markets. The surprise for many was the action in gold today. Gold came off the lows
and rocketed higher. This took place when the dollar was moving higher, along with the yen and
bonds. That tells you gold is functioning as a safe haven.” James Turk, one of our favorite industry
analysts, had this to say in his King World News interview on Thursday: “The global financial
situation is really starting to spin out of control, Eric. It won’t be long now before the
Federal Reserve, ECB, Bank of Japan and Bank of England start more QE in an attempt to keep
global stock markets from imploding and causing another Lehman Brothers collapse.” As the
fear of a major event in the Eurozone continues to climb across the globe, it appears that precious
metals have found their footing again. If this is the start of the massive upside move that James
Turk has been predicting then now is the time to be vigilant and search for buying opportunities.
A massive panic event, if it occurs, could send precious metals prices exploding to the upside so
fast it might well be dizzying. June is setting up to be a month full of news with a Fed meeting,
Greek elections, and who knows what out of Spain and the rest of the Eurozone.
Pay attention to
the news each week, especially on the weekends as Europe and Asia open, and make sure you
are prepared to act swiftly and decisively so that you don’t miss any other buying opportunities.
Remember that precious metals should be viewed as a long-term investment and that the key to
profitability through the ownership of physical precious metals is to actually own the physical
products and to hold them for the long term. Never overextend your ability to maintain ownership
of your precious metals over the long term.

Greg Weldon: Turbulence Is Coming

Washington D.C.’s political will to make the needed changes to the federal government’s out-of-control spending is completely absent. That does not mean, however, that there aren’t ways for an informed investor to capitalize on opportunities to profit.

The Three Trends Which Rule The Precious Metals Market, Part II

Written by Jeff Nielson
Tuesday, 29 May 2012 11:08

In Part I, readers were presented with a list of the three trends which overwhelm all other factors and fundamentals in the gold and silver markets. The first and most dominant trend – the grossly excessive printing of (worthless) paper currencies – was explained to readers in detail.

Through elementary logic, we established that no rational investor would choose to hold these worthless paper currencies, rather than opt for humanity’s 5,000-year old safe havens: gold and silver. Specifically, with all our governments explicitly engaged in the monetary policy known as “competitive devaluation”, only an idiot would hold an asset where the producers of that asset are trying to drive its value to zero as rapidly as possible.

As I discussed in the first installment, the other two dominant trends are directly and/or indirectly derived from the first trend: the gross misallocation of capital, and the long-term destruction of the supply chain. I will focus on the second of these trends in Part II.

Here it is important that readers are aware that we are discussing two separate-and-opposite dimensions to this misallocation of capital. On the one hand, Western investors currently hold only roughly 1/10th the amount of gold and silver that they have normally held on an historical basis. In other words, at the point in time where Western investors should be choosing to hold more gold and silver than at any time in history they are instead holding less gold and silver than at any time in history.

Then there is the second and opposite misallocation. These zombie investors are not only loaded up with $trillions of our (worthless) paper currencies; they are also holding $10’s of trillions in bonds, issued by hopelessly insolvent Western debtors – and denominated in those same, dying fiat currencies. Here clueless paper-holders must step back and take a look at history.

In the 1,000 years since China began humanity’s experiments with these worthless, paper (“fiat”) currencies; the paper has a perfect record: it always goes to zero. Meanwhile, we are equally well-advanced along the road to another regular, economic event in our collective history: what I call a “bond-burning party” – where insolvent debtor governments simply erase all of those bond debts, leaving bond-holders with a big, fat nothing.

These bond-burning parties have more commonly been known throughout history as “debt jubilees”: one or more governments collectively or unilaterally decreeing that their bond debts no longer exist, and thus the “bonds” themselves become nothing but an inferior brand of toilet paper. They are regular events in history, but naturally most Western readers are totally unfamiliar with this common (and inevitable) historical trend.

Our paper-pushing bankers have made sure that their servants in government and the media never let the Sheep know that both the bankers’ paper currencies and the bankers’ paper bonds always end up as worthless paper. In fact, “debt jubilee” is a concept which literally dates back to Biblical times. Back then they didn’t wait for the bankers to officially bankrupt nations before declaring a debt-jubilee. Rather, they were scheduled events – every 25 or 50 years.

So we have our bankers telling us that both their paper bonds and paper currencies are “safe havens”. Meanwhile, 1,000+ years of our own history tells us that both forms of paper are certain to end up totally worthless. Obviously treating $10’s of trillions in worthless (Western) banker-paper as a “safe haven” represents a misallocation of capital on a scale at least an order of magnitude greater than anything else in our history.

For those deluded paper-holders who scoff at the idea of their precious paper becoming worthless “during their lifetime”: open your eyes. In little more than 40 years since the gold standard was abolished and our currencies fully became “fiat currencies” they have already lost more than 75% of their value. With “competitive devaluation” now our official monetary policy, that rate of dilution/destruction is increasing exponentially.

As for these equally worthless Western bonds, Debt Jubilee has already started. What do readers think just happened in Greece? One minute there was a stack of paper with a (nominal) value of $400 billion. The next minute the stack of paper was worthless. What happened in between? Debt Jubilee.

Understand that Debt Jubilee is now a mathematical certainty in the West. Nearly three years of Europe’s “austerity” has shown that none of these debtors is even capable of reducing the size of their deficits – let alone ever approaching a balanced budget. Absolute, empirical evidence that all of these Deadbeat Debtors are past the point of no return.

Across the Atlantic, it is common knowledge that the U.S. is even more fundamentally insolvent than Europe’s debtors. Meanwhile Canada’s new Conservative government has now made this nation even less solvent than we were when the last Conservative government mismanaged the economy into an official “debt crisis”.

Indeed, Canada is the perfect Illustration of both the level of Western insolvency and the degree of denial concerning that insolvency. As Canada again plummets toward insolvency, instead of being castigated for being in another debt-crisis, it is hailed by the duplicitous Western media as a paragon of fiscal prudence.

The day after (or maybe the same day?) our governments and media finally acknowledge that the entire Western bloc is effectively bankrupt we will have Debt Jubilee. By then it will be much, much too late for investors to rid themselves of all their $trillions in officially worthless bonds.

As for our paper currencies, if they haven’t already been rendered worthless by the excessive money-printing of our governments when Debt Jubilee occurs then the destruction of the bond market will complete that process. At that point, deluded paper-holders will finally realize the intrinsic value of ink on paper, just as the Dutch painfully came to the realization that the tulip was merely a flower – at the end of Tulipmania over 400 years ago. Today we are all “Dutch”.

The financial stampede out of the bankers’ two equally worthless paper instruments will mark an exodus of capital totally unprecedented in our history, assuming that our governments don’t simply decree all that paper to be worthless before the stampede even begins. Just as the money-printing of the bankers dwarfs all economic fundamentals today, the Flight out of Paper will dwarf all other fundamentals tomorrow.

Then there are the tiny, grossly under-owned financial Lifeboats in which our species has sought refuge in times of crisis for nearly 5,000 years: gold and silver. On an average historical basis, investors have held between 5% and 10% of their financial assets in gold or silver, with that ratio tending to rise dramatically in times of crisis.

Yet today, as the clueless paper-lemmings charge toward the looming financial chasm ahead; gold and silver represent only about 1% of the average (lemming) portfolio. What happens on the day when even the lowly lemming realizes that their precious paper is worthless – and only gold and silver remain as “safe havens”? Picture a million elephants trying to squeeze through the eye of a needle, simultaneously.

The creators of all this worthless paper (our central banks) aren’t waiting for that stampede to begin. They are already dumping their worthless paper for gold at the fastest rate in 50 years, and by the end of this year that will likely have escalated to the fastest rate in history, as the gold-buying by central banks continues to accelerate.

We have our governments, the official owners of these paper currencies openly stating that they are trying to drive their value to zero as quickly as possible. We have the creators of that paper, the central banks, swapping paper for gold as fast as they can (without spooking the herd into a premature stampede).

Then we have the Corporate Media duping the hordes of lemmings into continuing to hold this worthless, obsolete paper – so that the bankers can buy their gold first (and cheaper). Indeed, the malevolent media propaganda machine has gone much further. It has fraudulently referred to gold and silver as “bubbles”, despite never being so under-owned by Western investors in all of history.

The only evidence offered by the media to justify this lie are the (nominal) prices of gold and silver – priced in relation to worthless paper. If I was under the delusion that sand was a “currency”, and I tried to buy some gold or silver with a truck-load of sand then using the media’s logic I would have even more “evidence” of a gold bubble.

Apart from shattering the lies of the media about a gold bubble with simple and obvious logic, the behavior of our central banks is an irrefutable rebuttal to the media’s propaganda. It is this same media which hails these central bankers as the ultimate sages of our financial system, and their message is clear: dump your paper and buy gold (or silver).

In Part III, we will explore the third dominant trend, and the reason why there is so little gold and silver available to global investors: the long-term destruction of the supply chain.

The Three Trends Which Rule The Precious Metals Market, Part I

Written by Jeff Nielson
Sunday, 27 May 2012 13:41

It is bad enough watching the talking-heads of the mainstream media undermine the precious metals sector with their insipid and invariably flawed analysis. However, what is positively infuriating is when these drones manage to influence the market through parroting “fundamental” factors which (at present) are simply irrelevant.

Understand that in normal markets (and normal market conditions) that there would/should be a host of variables which influence the precious metals market – as with any other market. However, what has been completely lost in all the white-noise coming out from the mainstream media is that conditions have literally never been less normal.

Specifically, not only our markets but our entire economies have been perversely warped through pursuing (or simply allowing) the most extreme policies, and the most extreme behavior in our markets in all of history. These extreme policies, and the extreme behavior they have spawned now totally drown-out all other factors, even many of the most basic elements of supply and demand. Indeed, the ultimate proof of the cluelessness of media drones (and the mainstream “experts” who feed those drones) is the fact that none of them have even the slightest awareness of how economic fundamentals have been skewed in such an extreme and flagrant manner.

The purpose of this piece is to identify the three policy/behavior trends in our economies and markets today which either subsume any other factors, or simply render them (at the moment) irrelevant with respect to gold and silver. Understand that because the second and third trends are derivatives/consequences of the first trend that there will be considerable overlap here, so readers are encouraged not to become side-tracked by issues of semantics. Those three trends are:

1) Excessive money-printing

2) Gross misallocation of capital

3) Long-term destruction of the supply chain

Excessive Money-Printing:

There is simply no other single dynamic in the global economy today (and specifically Western economies) which comes anywhere close to the significance of the utterly insane monetary policies which Western governments have allowed to take place. Indeed, so dominant have these forces become that no one (not even our governments themselves) find it the slightest bit noteworthy that the Money-Printers (i.e. the privately-owned cabal of Central Banks) now absolutely dictate economic policies to our (supposedly) sovereign democracies.

The most current and extreme example is Greece. Here the bankers (and their political servants) have made it clear that they are going to force one election after another unless/until the Greek people “elect” a government who will do exactly what the Bankers tell them to do: inflict more savage/suicidal “austerity” on that economy in order that the Bond Parasites can continue to receive their interest payments.

Understand there is no long-term economic “plan” of any kind for Greece, not even any theoretical hope for solvency. Instead, the entire purpose of forcing more austerity on the Greek people is to allow the Bankers to print even more money – which they will then lend to this totally insolvent economy. None of the media drones or their “experts” consider this at all unusual or inconsistent either.

However we can be much more general here. Currently, every significant economic policy being pursued by all of the West’s largest economies either directly involves more money-printing or indirectly involves more money-printing. Indeed, this has forced the bankers to continue to invent new euphemisms and double-talk on a near-daily basis – so that they have jargon they can use to describe these policies without simply saying “print more money” again and again and again and again.

Here the media descends into sheer stupidity. We have the media reporting on our governments (not just in the West but around the world) explicitly engaged in “competitive devaluation” – which literally means racing to see which government can drive the value of their currency toward zero the fastest (through printing more money). Meanwhile out of the other sides of their mouths we have these drones referring to one of those currencies (the U.S. dollar) as a “safe haven”.

Let me see if I can construct an analogy simple enough for the media to understand. Suppose all of their favorite Wall Street fraud-factories announced that they were going to engage in “competitive devaluation”: printing up more and more shares for the sole purpose of diluting the value of those shares. Would the media drones and their experts search around for the “best” of those Wall Street banks, and then call it a “safe haven” to investors?

Hopefully not. Hopefully even the mediocre minds of the media would grasp the complex principle involved here: you never own an asset where the producers of that asset are deliberately trying to destroy its value. If the media ever became sane/competent, then as long as our governments kept talking about “competitive devaluation” the media’s automatic response would be “hold none of this paper”.

Yet instead of getting sanity/competency from the media, what do we hear instead? We’re told that investors should shun the 5,000-year safe haven represented by gold and silver because “in a weakening economy demand for the metals will fall”. Here it’s necessary to introduce the media to another concept: proportionality.

Any slight changes in demand for gold and/or silver (higher or lower) have now been rendered totally irrelevant with respect to being determinative of prices. In other words, the relative “value” of gold and silver due to changes in demand is being drowned-out by money-printing on a scale at least an order of magnitude greater. The problem is attempting to quantify the size of that differential.

Here the strategy of the bankers is simple. They have created so many different definitions for both “money creation” and “money supply” that they can now totally confuse any debate on this subject by throwing out several different definitions – some of which are literally contradictory.

Crucial here is that the bankers have managed to include wealth destruction within their definition of “money creation”. Thus while the reckless gambling of the bankers is destroying wealth (with their failed bets) on a scale literally a thousand times greater than at any other time in history, this simply allows them to more easily hide the obscene magnitude of all this new (theoretical) “money” being electronically created by these financial pirates.

Currency-dilution is the dominant economic trend of our era. The destruction in the value of these currencies (at the most rapid rate in history) means that any sane investment strategy must revolve around holding “hard assets” (beginning with gold and silver), since their value cannot be destroyed/debased as the underlying currencies are being (deliberately) destroyed by our governments.

The obvious example here is Western bonds. The “prices” for Western bonds become totally irrelevant nominal numbers – as our paper currencies are driven closer and closer to zero. Indeed, if we received any competent analysis of the bond market by the mainstream media their coverage would begin with the latest news on more Western currency dilution, with the nominal bond prices themselves (rightfully) being treated a distant second in terms of importance.

Sadly, readers are strongly advised not to “hold their breath” waiting for sanity/competence to return to the mainstream media. Instead, their only recourse is to simply tune-out roughly 95% of all mainstream reporting on our economies and markets, reflecting the fact that (being charitable) only about 5% of what is put out on a daily basis by the mainstream media has any relevance at all.

In particular, the moment that readers see the words “economic fundamentals” this is their cue to stop reading since (as I just finished demonstrating), the mainstream media doesn’t have the slightest comprehension of the nature of the real fundamentals in our markets and economies today. Their mis-reporting, along with the extreme distortions that all of this excessive money-printing has produced have directly led to the other two, dominant economic trends of our current era.

In Parts II and III, I will explain and explore the two trends in the precious metals sector which have become the consequences of living in the Era of Money-Printing.

Gold Bar Demand Surges 51% in China

Posted by Wealth Wire – Tuesday, May 29th, 2012

A reminder of the sharp increase in demand for gold and silver, particularly store of wealth demand, in recent years was seen in the figures released by the China Nonferrous Metals Industry Association in Shanghai today.

China’s gold consumption rose 33% to 761 tons in 2011 and China’s silver consumption rose 6.8% to 6,088 tons last year.

China’s gold consumption rose 190 metric tons last year to 761 tons, Wang Shengbin, China Gold Association Vice Chairman, said in a speech in Shanghai as reported by Bloomberg.
China’s jewelry consumption jumped 28 % to 456.7 tons last year, gold bar consumption surged 51% to 213.9 tons and gold coin consumption gained 25% to 20.8 tons, Wang said
China’s silver consumption, including industrial use, jewelry and coins, rose 6.8% to 6,088 metric tons last year, the vice chairman said. The amount shows a surplus given China’s output of 12,348 tons last year, which gained 6.3%, Wang said.
*Post courtesy of Mark O’Byrne at GoldCore. His daily ‘Market Updates’ are quoted and reported on in the international financial press on a daily basis.

This Billionaire Just Bought 400% More Gold

This Billionaire Just Bought 400% More Gold
May 18, 2012 | 27 comments | includes: ABX, AUY, GLD, NEM
Shaun Connell via Seeking Alpha

A few weeks back, I wrote an article asking Is George Soros Wrong About Gold? He made waves a couple of years ago by claiming that gold is the “ultimate asset bubble,” only to then invest heavily in gold.

Last year, he made a lot of cuts to his position, easily missing the heavy correction that occurred mid-to-late 2011. But now? He’s getting back in the game.

According to Fox Business, George Soros’ hedge fund just quadrupled it’s holding in SPDR Gold Trust (GLD), and even opened a new position in call options for Newmont Mining (NEM).

This is a pretty big deal for those of us who watch Soros’ actions, as well as anything his fund does. While blind faith is, well, blind, Soros has a record worth making observation worth it, especially sense he’s one of the few people making a big enough deal out of reflexivity — something more investors should obsess over.

But why is Soros buying gold? While I have no way of tapping into his brain, he’s making a choice that should seem relatively basic:

Gold might drop. In the short run, anything is possible, especially as people rush to cash out of Euro fears. But that’s the short run.

Gold will rise. Eventually, we’ll be paying the piper. Inflation without economic creation, losing our dollar reserve status over time, national debt that is completely insane and pointless, fiscal lunacy — these all help spell out a long-term bull market, regardless of the short-term fluctuations.

While I’m strictly in gold and silver bullion, for those willing to take risks for gold and silver miners, the next few months are a great window of opportunity for those looking to buying into Barrick Gold (ABX) and Yamana Gold (AUY).

Over the next few months, we’ll see what the medium term outlook is for gold. If the economy continues to lag, there will likely be more chatter about QE3, if not an announcement itself. This could send gold prices popping back up. Whether or when prices will hit $2,000 is anyone’s guess. The price could continue to drop, and the increase from QE3 and inflationary concerns might not reach 2011 highs for another year.

Either way, I’m continuing to add to my physical position, for reasons I’ve written about in my article on Gold Stocks Vs. Physical Gold and my gold investing newsletter.

Overall, the next two or so months for gold is uncertain, but if prices keep falling I’ll keep buying — because the long-term outlook is unchanged and very bullish.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I own gold and silver and will likely be adding to my position this month.

Silver Is Finally Ready To Bottom

Silver a great business to be in for the next 50 years – Phil Baker

China’s ICBC wants to be major bullion market maker

While it is the top player on China’s gold and futures exchanges The Industrial and Commercial Bank of China, the world’s biggest bank by market value, is currently limited to OTC trading in foreign markets.

Author: Fayen Wong
Posted: Tuesday , 29 May 2012
Gold to the masses – China’s top bank partners with World Gold Council
Standard Bank, ICBC look to Africa


Industrial and Commercial Bank of China Ltd is seeking membership of overseas exchanges and aims to become a major global bullion market maker, a senior executive said on Monday.
The world’s biggest bank by market value, ICBC is the top player by volume on China’s gold and futures exchanges, but its participation in foreign markets is limited to over-the-counter trading, which reached a total $90 billion last year.
Emboldened by Beijing’s ambitions to have a bigger say in global commodity prices, ICBC now has an eye on bourses such as COMEX and on joining the 11 market makers of the London Bullion Market Association (LBMA).
These quote continuous two-way bid and offer prices for gold, silver, platinum and palladium throughout the London day, providing a liquid market in which to trade.
“We hope to play a bigger role in the global precious metals market and become a major market maker, like Barclays,” Shen Shisheng, ICBC vice-general manager of financial markets, told Reuters on the sidelines of a conference in Shanghai.
Barclays Capital is among the gold fixing members on the LBMA.
The newest LBMA market maker, Merrill Lynch, was appointed in January last year. ICBC became an ordinary member of the LBMA late last year, the first commercial bank in China to join the association.
Given the bank’s large trading volume, Shen said that ICBC has recently started price quotation for gold transactions on the Shanghai Gold Exchange and has begun acting as an agent for non-member clients.
It has also opened offices in London and New York and plans to start price quotation in both cities soon, he said.
ICBC also wants to grow its financial products to service the full supply chain of the bullion market, including loans to miners and smelters, physical gold leasing, hedging and brokering.
“We now have banking operations in 34 countries and we need to expand our gold services and products to other major markets,” Shen said.
China’s gold markets have boomed in recent years as high inflation and poor performance in equities markets have seen investors turn to bullion as a safe-haven asset.
According to the U.S. Futures Industry Association, China was fourth in terms of volume of gold futures contracts traded in 2011.
Total trade for China’s gold futures hit 722.18 million lots in 2011, a 113 percent jump from a year ago, while turnover jumped nearly 180 percent to 2.55 trillion yuan ($401.9 billion), according to data from the Shanghai Futures Exchange.

© Thomson Reuters 2012 All rights reserved

Platinum surplus diminishing as bear market approaches

Barclays Plc estimates the metal’s 17% plunge to $1,433.50 since late February leaves it within 3 percentage points of the common definition of a bear market.
Author: By Nicholas Larkin
Posted: Tuesday , 29 May 2012


The first drop in platinum mine supply in four years and record car sales, the biggest source of demand, are reducing a surplus of the metal and shoring up prices on the brink of a bear market.
Output will drop 4 percent to 6.14 million ounces this year as labor strikes and safety concerns disrupt mining in South Africa, the biggest producer, Barclays Plc estimates. That will diminish the annual glut by 90 percent to 37,000 ounces, the bank predicts. Prices will average $1,750 an ounce in the fourth quarter, 22 percent more than now, the median of 13 analyst estimates compiled by Bloomberg shows.

The metal, used to make autocatalysts and jewelry, slid 16 percent in the past three months and hedge funds are now their least bullish since at least 2009 on speculation that slower global economic growth will curb demand. Prices are now within about 1 percentage point of average production costs, which continue to rise as companies dig as deep as 1.3 miles to find ore and face surging wage and energy bills.

“Platinum is very, very cheap at the moment,” said Thorsten Proettel, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany and the third-most accurate forecaster of platinum prices in Bloomberg Rankings in the two years through December. “It’s more the supply side which could help the platinum price accelerate because supply is very tight.”
Bear Market

The metal’s 17 percent plunge to $1,433.50 since late February leaves it within 3 percentage points of the common definition of a bear market. The slump pared this year’s gain to 2.3 percent, still beating the performance of gold and palladium. The Standard & Poor’s GSCI Spot Index of 24 commodities fell 3.5 percent since the start of January and the MSCI All-Country World Index of equities rose 0.6 percent. Treasuries returned 1.2 percent, a Bank of America Corp. index (MXWD) shows.
It costs an average $1,437 to extract an ounce of platinum, according to Proettel. The slide in prices is eroding earnings, discouraging the development of new mines or expansions. Impala Platinum Holdings Ltd. (IMP), the second-biggest producer, will report a 21 percent drop in net income in 2012 while London-based Lonmin Plc, the third largest, will make 72 percent less profit in its fiscal year ending in September, analysts estimates compiled by Bloomberg show.
Hedge funds and other large speculators cut wagers on a rally by 70 percent to 6,200 U.S. futures and options in the three months through May 22, according to Commodity Futures Trading Commission data. Holdings in exchange-traded products backed by the metal dropped 11 percent to 41.1 metric tons valued at $1.9 billion since September, data compiled by Bloomberg show.

Electrical Goods
Rebounding prices may encourage more recycling, compensating for the decline in mine output. Scrap supply from autocatalysts, electrical goods and jewelry reached a record 2.05 million ounces last year, from 565,000 ounces in 2002, according to Johnson Matthey Plc, the maker of about one in three of all autocatalysts. Prices averaged an all-time high of $1,721 last year, compared with $541 in 2002.
The surge is encouraging carmakers to use more palladium in autocatalysts, canisters that have honeycomb-like surfaces and convert emissions into less harmful substances. Platinum’s sister metal is trading at $601 an ounce. Palladium accounted for about 30 percent of the metal loaded into catalytic converters for diesel-power vehicles last year, up from 20 percent in 2009, London-based Johnson Matthey estimates.

Largest Car Market
Demand for platinum, which Barclays anticipates will grow 1 percent to 7.99 million ounces this year, may fall short of expectations as economic growth weakens. China, the world’s largest car market, expanded 8.1 percent in the first quarter, the slowest pace in almost three years. About $4.3 trillion was erased from the value of global equities since April on concern that Greece will exit the 17-nation euro zone.
Global sales of cars and light commercial vehicles are poised to rise 5.5 percent to a record 79.4 million units this year, according to LMC Automotive Ltd., a research company in Oxford, England. Carmakers account for 38 percent of platinum consumption, Johnson Matthey estimates.
Prices may also rebound as supply becomes more constricted. Mining companies are contending with strikes by workers demanding higher wages. South African inflation rose to 6.1 percent in April, up from 3.5 percent at the end of 2010, government data show. Workers at Johannesburg-based Impala’s Rustenburg mine in South Africa, the world’s biggest, started a month-long strike over a pay dispute in January that cut more than 100,000 ounces of output. The company said May 24 that the latest labor unrest at the site cost 6,000 ounces.

Miners Killed
Work has also been suspended after 123 mining deaths and 2,918 injuries in South Africa last year, Mineral Resources Minister Susan Shabangu told reporters March 20. The platinum industry lost about 300,000 ounces of production last year because of safety stoppages, London-based Anglo American Plc said Feb. 17.
Mine disruptions in the first quarter drove platinum prices 17 percent higher, the best performance in three years. While most of that was erased in the subsequent slump, the metal’s gain since the start of January compares with a 2.3 percent advance in silver, 0.8 percent increase in gold and an 8.2 percent drop in palladium.

Energy Prices
Lonmin extracted 4.4 grams of platinum-group metals from every ton of ore last year, 5.4 percent less than in 2010, according to the company’s annual report. Production costs rose 11 percent because of wages, energy prices, safety stoppages and strikes.
The company will report net income of $77.3 million in the 12 months through Sept. 30, compared with $273 million a year earlier, the mean of 10 estimates shows. Impala will make 5.25 billion rand ($630 billion), compared with 6.64 billion rand in 2011, according to the mean of seven estimates.
That contrasts with Anglo American Platinum Ltd., the biggest producer, which is expected to post earnings of 4.35 billion rand this year, from 3.59 billion rand in 2010, the mean of six estimates shows. Shares of the Johannesburg-based company fell 9.4 percent this year, compared with an 18 percent drop for Impala and 24 percent retreat for Lonmin.
Shafts now extend down as much as 2,115 meters (6,940 feet) and temperatures at the rock face of Northam Platinum Ltd.’s Zondereinde mine in South Africa can reach as high as 162 degrees Fahrenheit (72 degrees Celsius). It uses as many as seven refrigeration units to pump chilled air into the mine, according to data on the company’s website.
“For many producers the price is insufficiently high to sustain the industry,” said Bart Melek, the head of commodity strategy at TD Securities Inc. in Toronto. “Given the fact that we’re going to see some decent demand growth over the next several years, we’re going to have to see expansion.”

To contact the reporters for this story: Nicholas Larkin in London at
To contact the editor responsible for this story: Claudia Carpenter at

The flock of black swans facing gold

Deliberations on World Markets Author, Ian McAvity, believes that the world faces a number of major challenges that could see gold go significantly higher this year.

Author: Geoff Candy
Posted: Tuesday , 29 May 2012


While the commodity spectrum as a whole peaked out around 14 months ago the sheer number of potential black swan events on the horizon could see gold breach $2,500 before year-end.
This is the view of Deliberations on World Markets Author, Ian McAvity, who maintains ” the Continuous Commodity Index peaked in early 2011 and [commodities] have been declining and will continue declining – that’s in a sense what the stock markets have been reflecting.”

But, he says, gold is increasingly trading like a currency at the moment, a behaviour that is amplified by the fact that the speculative money has now largely been chased out of the gold market.
Speaking on’s Metals Weekly Podcast, McAvity added, the whole point of the various levels of the gold standards that have been tried over history is largely an attempt to discipline against the irresponsible printing of paper.
“What you’ve seen over the last couple of years is a lot of the newly wealthy emerging countries quietly accumulating gold… I think a lot of people are converting paper – not just euros but also US dollars into tangibles and doing it quietly. Nobody advertises what they’re buying until after they’ve bought it.”

As a result of this and a multitude of other factors, McAvity, believes that gold is unlikely to trade much below $1500 but, he says, “I still think that we’re going to have events – various black swans unfolding over the course of the year that will have the gold price up to $2500 sometime by year end.”
Indeed, McAvity says black swans are travelling in flocks at the moment so it is difficult to predict which might be the catalyst for a sharp move higher but, there are a number of significant ones over which he is keeping a sharp eye.
The first of these is the potential for the blow-up of a European bank.
“In a sense you’ve got a global bear market under way that in many respects I regard as being the second half of the events that started in 2007-2009 and I don’t think that the global banking system today is any better than it was back then,” he says.
But. he says, that the attitude of many of the US banks is that what is happening now is very much a European problem.
“If a European bank blows up, that problem will cross the Atlantic in a Nano-second because the Federal Reserve was bailing out some of the European banks in 2008-2009 and they’ll be doing it again. So we’re still pretty much in the same mess and it comes down to one very simple question – how can you borrow your way out of a debt problem… and that’s what they’ve been trying to do.”

The second significant one is linked to currencies, of which McAvity says, the dollar is “the best looking horse in the glue factory.”
“I think we’re getting to a point where if the euro breaks 1.20 that probably will become the crisis level that could spark a major exodus out of the various euro currencies. Switzerland has already made it clear that they’ve got a line in the sand, but I think if the euro was to break 1.20 in the dollar, then you might see a greater level of panic coming out.”
And, as McAvity points out, a strong dollar doesn’t have to mean a weak gold price.
“If a trillion dollar’s worth of euros was fleeing because the euro was about to blow up, perhaps 800bn, maybe 850bn of it would flow to the dollar, maybe 150bn of it would flow to gold and the relative volatility of gold is such that that 150bn going to gold might actually end up driving the gold price up in dollar terms too.”
The third black swan event that McAvity is concerned about is the build up of Israeli pressure over the past year on who’s going to go in and take out some of the Iranian nuclear facilities.
“I was very concerned when I saw Israel call up six battalions of reserves about three or four weeks ago and it hasn’t been in the headlines much because they’re negotiating in Baghdad about not throwing Iran out of the system if they allow inspectors and that sort of thing.

“But when you look back at the history of violence in the Middle East, particularly Arab-Israeli wars and various uprisings, they all seem to have occurred between May and July. So in a sense it’s almost a seasonal risk that has me extremely nervous about something going on in the Middle East that right now nobody seems to be focused on.”

The Real Crash – Peter Schiff

I first came to national attention back in 2008 and 2009 when the housing and credit markets imploded. I became known as the guy that other market “experts” laughed at when I warned of trouble brewing in the seemingly indestructible American economy. After the wheels ground to a halt in mid-2008, people noticed that my book Crash Proof, originally released in early 2007, read like a detailed preview of many of the events that eventually unfolded.

Three years later I am now catching heat from many who assume that my predictions actually fell short. They argue that I was able to anticipate the crash but that I severely underestimated the resiliency of the American economy. They admit that we took an “unexpected” blow to the chin, and that it left a lingering bruise, but they argue that we never hit the canvas like I predicted we would.

However, they mistakenly assumed that the crash I was warning about was solely a housing led credit bubble. While that was part of it, I never saw it ending there. The crash that most concerned me was the one that would result from the government’s response to the initial crisis. My concern was not that our economy would succumb to the disease that I had diagnosed, but instead would be taken down by the “cure” that the government unleashed to combat it.

When the government’s delaying tactic, which involves continuous debt accumulation and money printing is no longer tenable, the dollar could collapse, borrowing costs and consumer prices could soar and the U.S. economy could implode. That’s the real crash that I was warning about, and the one we all need to be worried about now.

This is the subject of my new book “The Real Crash: America’s Coming Bankruptcy, How to Save Yourself and Your Country.” For now it is just a prophecy but as with my first book, it soon may be regarded as history. Unfortunately, the policies of both the Bush and Obama administrations, and the Ben Bernanke led Federal Reserve, have vastly raised the chances that my catastrophic view will come to pass. However, it’s not all gloom and doom – I devote a large majority of the book to solutions. The real crash may be inevitable, but what we do in response is not. We can follow on the path that I recommend back to prosperity, or we can continue on our current course which I believe will lead to economic ruin.

When looking back from a point in the future, I believe that the years immediately after the credit collapse of 2008 will stand out as a period of dangerous economic negligence. We have bought ourselves some time by sweeping enormous problems under the rug. Through a combination of political cowardice, economic ignorance, and false confidence, we are digging ourselves into a hole so deep that it may take generations to crawl out.

Most people assume that half way through 2012 we have made some important positive strides since flirting with the brink of economic catastrophe in the dark days of 2008. Although no one is wildly celebrating the below trend 2 to 3 percent GDP growth, we are continuously reminded that we have turned the corner and that our situation is better than many other regions around the world. But what has really changed?

Immediately prior to the crash, the United States economy was experiencing unprecedented consumer debt levels, persistently high trade deficits, historically large government budget deficits, high-energy prices, and a moribund manufacturing sector. Four years later, all of these problems have gotten worse. And unlike four years ago, we are now saddled with the highest unemployment rate in generations and levels of public debt that would have been unimaginable then. Yes we are no longer technically in recession. But I believe that is just an illusion created by perhaps the cheapest, and most obvious, trick ever devised.

I had argued that our economic growth prior to the crisis was largely a function of the real estate bubble. When that bubble popped, I knew that the economy would have to shrink. And that’s just what happened. From 2008 to 2009 our national GDP (of around $14 trillion) contracted by $212 billion. To prevent any further dips, the government aggressively spent, borrowing heavily to do so. To the relief of just about everyone, these moves did stop the nominal contraction. From 2010 to 2011 the U.S. GDP expanded by $502 billion, and from 2011 to 2012 it added an additional $508 billion. All told, from the end of 2008 the U.S. economy added a cumulative $798 billion in GDP. But those gains came at a very high price.

The combined federal deficits for the same time frame come in at a staggering $4.2 trillion! In 2009 alone the feds chalked up a chart breaking $1.4 trillion in debt (the deficit was a mere $161 billion in 2007). In other words, we borrowed five times more than we grew. This “strategy” for growth is no different from an individual who loses half his income, but continues to spend by running up credit card debt. Could this be described as economic growth? But that’s just how we are describing our current economy, and for the large part, expert economists, politicians, investors, and academics all agree.

I felt certain before writing Crash Proof that the government would never let the economy contract far enough to restore balance and sustainability. I knew the spending and deficits would head off the charts. I thought those realities would push down the dollar and cause foreign creditors to shun American government debt. However, I did not factor in the reprieve we have gotten from the false perception that Europe is in even worse shape than we.

As the curtain eventually falls on the drama unfolding in Europe, the world will refocus its attention on the more spectacular events in the U.S. The sovereign debt crisis that is now playing out in Europe will cross the Atlantic, and when it opens here the Real Crash may indeed finally begin. The average American will have a front row seat but will hardly enjoy the show.

PPMI Week In Review

The Week in Review Via PMI

1. Well it finally happened; JP Morgan has opened the proverbial “Pandora’s Box” and angered
regulatory bodies on both sides of the Atlantic Ocean. Pressure is building in the global financial
markets, with all of Europe sitting at the center of the storm. Pay attention to the
fundamentals for precious metals, especially while the media outlets and stock markets are
all totally distracted by facebook, or you may miss buying opportunities.

2. Tim Johnson, Senate Banking Committee Chairman, will be “inviting” Jamie Dimon to testify
before Congress as a result of the recently announced massive losses at JP Morgan. Initially
JP Morgan announced it had suffered at least $2 billion in losses, and that estimation
has now escalated to $3 billion and looks as if it will climb even higher as hedge funds that
are on the winning side of JP Morgan’s risky bet turn the screws to squeeze more profit out of
them. According to the Financial Times (FT), more than a dozen “senior traders and credit
experts” have told the FT that the Chief Investment Office, the unit responsible for the bad
trade at JP Morgan, also has as much as an additional $100 billion in the very same risky
bonds that crippled the financial system in 2008.

3. Initial claims for unemployment were at 370,000 last week, which the media spun as “holding
steady” since the previous week’s figures were revised upward. The Philadelphia Federal
Reserve’s index on business activity went negative in April, an indication that manufacturing
in the region has gone from growth to contraction, which does not bode well.

4. Moody’s downgraded the credit rating of 16 Spanish banks this week, citing that “banks will
continue to face highly adverse operating and market funding conditions that pose a threat to
their creditworthiness.” Moody’s also stated “the Spanish economy has fallen back into recession
in first-quarter 2012” and that it does not expect conditions in Spain to improve this

5. World stocks, according to the MSCI Index, have given back all of their gains for the year.
The ongoing financial crisis in Europe, particularly the escalating banking crisis in Spain
seem to be key in the decline. Bad loans among Spanish banks reportedly hit their highest
levels in 18 years this week according to the Bank of Spain. These figures were released
only hours after Moody’s downgrade, adding additional pressure on Spain’s government to
find a way to salvage the banking industry of Europe’s fourth largest economy.

6. US home mortgage rates are once again setting record lows, but no one seems to be buying.
Tighter credit conditions continue to plague potential home buyers and a continuing decline
in home prices has made those who do qualify for credit leery to get back into the market for
fear that the bottom is not in yet.

7. In Asia, China’s home prices fell for the second month in a row as the government continues
to try to rein in speculation in the property market in an effort to prevent a similar real estate
bubble to that which struck the US as the financial crisis exploded across the globe.

8. The spiraling crisis in Europe seems to have definitively pulled the $100 floor out from under
crude oil, and appears to now be threatening to push prices below $90 a barrel.

9. According to the European Union’s trade commissioner Karel De Gucht, continency plans
are in the works in case Greece has to exit the Eurozone. This even as we hear constant,
nearly daily reassurances by European policymakers that Greece will remain in the Eurozone.
A German spokeswoman for the finance ministry, when asked about plans for a Greek
Eurozone exit, said “The German government naturally has the responsibility to its citizens
to be prepared for any eventuality.”

10. The euro continued its dramatic downward slide against the US dollar this week. The Japanese
yen was dropping against the dollar for much of the week, but reversed course and
ended the week higher against the dollar.

Friday to Friday Close

May 11th May 18th Net Change
Gold $1584.00 $1592.00 8.00 + 0.51%
Silver $ 28.85 $ 28.70 (0.15) – 0.52%
Platinum $1470.00 $1455.00 (15.00) – 1.02%
Palladium $ 600.00 $ 605.00 5.00 + 0.83%

Dow Jones 12820.60 12375.13 (445.47) – 3.47%
Previous year Comparisons
May 20th 2011 May 18th 2012 Net Change

Gold $1509.00 $1592.00 83.00 + 5.50%
Silver $ 35.10 $ 28.70 (6.40) – 18.23%
Platinum $1770.00 $1455.00 (315.00) – 17.80%
Palladium $ 735.00 $ 605.00 (130.00) – 17.69%
Dow Jones 12512.04 12375.13 (136.91) – 1.09%

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1570/1550/1525 28.00/27.50/27.10
Resistance 1600/1640/1670 29.00/29.50/30.00
Platinum Palladium
Support 1440/1420/1400 580/550/525
Resistance 1475/1500/1520 620/640/680

Volatility should be expected to continue and perhaps increase further. As we said at the start of
this memo, JP Morgan has opened the proverbial “Pandora’s Box” this time. Their previous $2
billion trading loss has ballooned to $3 billion in just 4 trading days, and looks set to continue to
escalate as hedge funds on the other side of the trade smell blood in the water and step up efforts
to keep JP Morgan from unwinding their massive and failed trade. On top of the already staggering
losses already admitted to by Mr. Jamie Dimon himself, reports are surfacing that there may
be another $100 billion in risky bond bets still sitting in the wings! Aside from JP Morgan’s
woes, Joseph E. Floren, a lawyer at Morgan Lewis, the firm which has been defending Goldman
Sachs against a litigation filed by, apparently filed something to which he attached
a non redacted copy of one of the very documents that the law firm was trying to keep
under court seal. The motion can be found here: Morgan Lewis Motion and you should take a
good close look at pages 14-19. DeepCapture has the story, with links to stories at Bloomberg
and the Economist here: DeepCapture Floren Story. It looks like the game may finally be up for
“Da Boyz” and their market manipulation tactics. JP Morgan has finally hung themselves out to
dry and the cries are already calling for Jamie Dimon to lose his job over the fiasco. The media
outlets are all trying to play it off, coming to Mr. Dimon’s defense and saying “since when is it a
crime to lose your own money?” in reference to JP Morgan using its own money for its failed
trade. But the damage is becoming too large for it not to take down Jamie Dimon’s “Golden
Boy” image. It is also becoming apparent that JP Morgan has been unloading its short positions
in silver as they scramble to contain the damage. JP Morgan faces an angered Department of
Justice and an even more enraged US Congress over their actions regarding this loss, and this
may be the event, combined with the exposures in the Goldman Sachs suit, that finally puts a
stop to the ability of these banks to manipulate markets, be they Stock Markets or the Precious
Metals Market.

“Da Boyz” appear to be losing their grip on the precious metals market, and
Wednesday’s low tick of $26.58 in silver might be looked back on as a “gift” from them to the
private investors they’ve apparently had no remorse over “taking to the cleaners” time and again.
Europe’s woes appear to be approaching the meltdown stage. Greece is reporting massive withdrawals
from its banks; Spain’s borrowing costs are escalating again, and Moody’s downgrade of
16 Spanish banks may trigger an exodus of cash from Spanish banks just as is happening in
Greece. The distraction of facebook’s IPO is now past, though we are certain that it will be
weeks before all the major media outlets get back to reporting on the world events that appear to
be verging on triggering another major financial crisis. Watch the news and look for additional
buying opportunities in the coming weeks as the EU struggles to come up with a solution to its
massive debt woes. In the end, the answer to their woes may simply be to “print more money”
and the US probably won’t be far behind in firing up the printing presses. In the current global
environment, as Jim Rogers said in his CNBC piece on Thursday, it is best to “own real assets
[such as gold and silver] because if the world economy gets better I’ll make money because of
shortages and if things get worse they’ll print more money, which will drive up the value of hard
assets.” Remember that precious metals should be viewed as a long-term investment and that the
key to profitability through the ownership of physical precious metals is to actually own the
physical products and to hold them for the long term. Never overextend your ability to maintain
ownership of your precious metals over the long term.