Gold: Lessons from Venezuela

Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors, talks us through the cautionary tale of Venezuelan hyperinflation and how holding some gold  could have mitigated the financial disaster which has affected that country’s population.

Wait Until You See the Price of Gold in Venezuela Right Now

Paper Money eventually returns to its intrinsic value zero

Last month in Venezuela’s capital city of Caracas, a cup of coffee would have set you back 2 million bolivars. That’s up from only 2,300 bolivars 12 months ago, meaning the price of a cup of joe has jumped nearly 87,000 percent, according to Bloomberg’s Café Con Leche Index. And you thought Starbucks was expensive.

But that was July. Prices in Venezuela are doubling roughly every 18 days. The International Monetary Fund (IMF) now projects inflation to hit an astronomical 1 million percent by the end of this year. This puts the beleaguered Latin American country on the same slippery path as Zimbabwe a decade ago and Germany in the 1920s, when a wheelbarrow full of marks was barely enough to get you a loaf of bread.

Venezuela’s socialist president Nicolas Maduro—who only this past weekend survived an assassination attempt involving several explosive-laden drones—announced recently that the country plans to rein in hyperinflation by lopping off five zeroes from its currency. If you recall, Zimbabwe similarly tried to combat soaring prices of its own by issuing a cartoonish $100 trillion banknote—which in 2009 was still not enough to buy a bus ticket in the capital of Harare.

Without structural governmental reforms, a new bolivar is just as unlikely to steady Venezuela’s skyrocketing inflation or remedy its crumbling economy.

Gold Could Save Your Life

So where does this put gold? At some point, hyperinflation gets so ludicrously out of control that discussing exchange rates becomes pointless. But as of July 30, an ounce of the yellow metal would have gone for 211 million bolivars—an increase of more than 3.1 million percent from just the beginning of the year.

Gold priced in Venezuela Bolivars
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My point in bringing this up is to reinforce the importance of gold’s Fear Trade, which says that demand for the yellow metal rises when inflation threatens to destroy a nation’s currency—as it’s doing right now in Venezuela. A Venezuelan family that had the prudence to store some of its wealth in gold would be in a much better position today to survive or escape President Maduro’s corrupt, far-left regime.

In extreme cases like this, gold could literally help save lives.

Such was the case following the fall of Saigon in 1975. If not for gold, many South Vietnamese families might not have managed to escape the country. A seat on one of the thousands of fleeing boats reportedly went for eight or 10 taels of gold per adult, four or five taels per child. (A tael is slightly more than an ounce.) Gold was their passport. Thanks to the precious metal, tens of thousands of Vietnamese “boat people,” as they’re now known, were able to start new lives in the U.S., Canada, Australia and other developed countries.

Venezuela’s Once Prosperous Economy Destroyed by Corruption and Mismanagement

But back to Venezuela. Amid the corruption and mismanagement, the only thing helping the country pay its bills right now is gold. Two years ago, it had the world’s 16th largest gold reserves. Today it stands at number 26 as it’s sold off more than half its holdings since 2010. While countries such as China and Russia continue to add to their holdings, Venezuela has been the world’s largest seller of goldfor the past two years.

Venezuela began liquidating its gold after oil prices declined
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It’s hard to remember now, but as recently as 2001, Venezuela was the most prosperous country in all of South America. Like Zimbabwe, the OPEC nation is rich in natural resources, home to the world’s largest oil reserves and what’s believed to be the fourth largest gold mine. Oil exports account for virtually all of its export revenue.

In 2016, Venezuela was the third largest exporter of crude to the U.S. following Canada and Saudi Arabia, but with output in freefall, this is changing rapidly. For the first time ever in February, Colombia sold more crude oil to the U.S. than its eastern neighbor did. And in June, Venezuela’s state-owned oil and gas company, Petróleos de Venezuela (PDVSA), informed at least eight foreign clients that it would be unable to meet supply commitments. According to GlobalData, production is on track to fall to only 1 million barrels per day by 2019, down from 3 million a day in 2011, meaning the petrostate might soon have nothing left to deliver.

President Maduro now has the ignoble distinction of reigning over an economic recession that rivals the very worst in modern history. Last month, the IMF forecast that the country’s real gross domestic product (GDP) would fall 18 percent this year—the third straight year of double-digit declines.

Venezuelas recession among the worst in recent history
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A mass exodus of young, working-age Venezuelans, many of them college-educated, is unlikely to help. Estimates of the number of people who have fled the country in the past two years alone range from 1.7 million to as high as 4 million.

Their escape is no easy task, as numerous international airlines, citing rampant crime and a lack of electricity, have canceled all flights in and out of Caracas. The only U.S. carrier still operating in the country is American Airlines, which offers a single daily flight from the nation’s capital to Miami. Just two years ago, there were as many as 40 nonstop American flights, not to mention those of rival carriers, between the two cities—a sign of just how dramatic and swift Maduro’s mismanagement has been in crippling Venezuela’s once-robust economy.

The Diversification Benefits of Gold

The gold bears were on top last week, with the metal trading as low as $1,205 on Thursday. That’s the closest it’s come to dipping below $1,200 since February 2017. Friday’s lower-than-expected jobs report gave gold a modest boost, but it wasn’t enough to prevent a fourth straight week of price declines.

Gold delped stem the rout
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In times like this, it’s important to remember that, according to gold’s DNA of volatility, it’s a non-event for the metal to close up or down 1 percent at the end of each session, 2 percent for the 10-day trading period. And guess what? The S&P 500 Index has the same level of volatility.

Ten days ago, gold was trading just under $1,230 an ounce, or 0.6 percent more than today. The math is sound.

It’s also worth remembering that gold has traditionally had a low to negative correlation with other assets such as equities. This is why many investors over the years have used it as a portfolio diversifier.

Case in point: On June 26, Facebook suffered its worst single-day decline since the company went public in 2012. Its stock plunged 19 percent, erasing some $120 billion in market capitalization—the most ever in history for a single trading session.

Gold, meanwhile, held relatively steady, slipping only 0.62 percent.

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Pelaez: Time to Position for a Decade-Long Bull Market in Natural Resources

Interview by Mike Gleason of www.moneymetals.com

Coming up we’ll hear a wonderfully fascinating interview with first time guest Samuel Palaez of Galileo Global Equity Advisors. Sam highlights what he views as a tremendous investment opportunity in commodities right now, and also talks about how the markets may be getting it wrong when it comes to the trade wars and the likely impact it will have on the U.S. economy, inflation and the dollar.

Samuel Pelaez

Mike Gleason: It is my privilege now to welcome in Samuel Pelaez, CIO and Portfolio Manager at Galileo Global Equity Advisors, a Canadian subsidiary of U.S. Global Investors. Sam manages Galileo’s Growth and Income fund as well as the Technology and Blockchain fund and also follows the natural resource and gold mining space quite closely. And it’s a real pleasure to have him on with us today.

Sam, thanks so much for the time and welcome.

Samuel Pelaez: Thanks, Mike. It’s a great pleasure to join you. I think this is the first time.

Mike Gleason: Yeah, absolutely. Excited to get a chance to talk to you finally. You’ve been talking about commodities being way undervalued. You published a chart back in the spring showing the value of the S&P GSCI Index of commodities companies relative to the broader S&P 500 Index. The ratio is near all-time lows. Since that chart was published in April not a great deal has changed, so talk about where we’re at here in commodities now and give us your thoughts on what the value proposition looks like today because they certainly have been laggards compared to the broader markets.

Samuel Pelaez: Yeah, absolutely. That’s my favorite all-time chart I think. I’m a big proponent of commodities and natural resource investing. Keep in mind, that chart goes over 60 years or so of markets. We’ve had cycles like this three times or this will be the third time. Twice in the past we’ve seen that sort of extreme rating where commodities are so undervalued relative to the broader market as measured by the S&P 500.

What that suggests is that we may be at a juncture here that provides an opportunity to invest in resources that we haven’t had for over 20 years. Last time this happened was coincidental with the NASDAQ 1990-2000 boom. That was the time when the commodities were as undervalued relative to the broader market. And what happened since was obviously the big industrialization of China commodities did very well for a decade up until 2008 and even a little bit further than that.

So, it was at least a decade of commodities out-performance relative to the market. And we’re in a similar predicament right now and that keeps me very excited. Now, if you think about short term especially since the spring, there’s been a lot of talk of the trade wars. Commodities have sunk most of them quite dramatically, especially those that are sort of core to development of China. I would call those short-term deviations in the bigger and broader context. I think this chart is a very powerful indicator for investments over the next decade.

That may not mean that today is the bottom or tomorrow, but as any responsible investor, I would suggest to start reallocating some of your broader market exposure towards commodities just on the back of what this chart is saying. Now, the short-term deviations that we’ve seen can be very material. Copper is over 20% drop from its highs. Same story with zinc. Gold has also under-performed quite dramatically. But in general, I believe we are approaching a situation with that under-performance is unsustainable.

Frank at U.S. Global put out a piece a couple of weeks ago that was actually very insightful. And it said, “Let science drive your investing.” It just shows how gold is two standard deviations below its mean. Copper is 3 1/2 standard deviations below its mean. And in statistical terms, that’s a very sort of powerful indicator for a rebound. Just to say in a little bit more plain language, what that suggests is, there’s a 95% probability that gold rebounds in the next 60 days. And in copper, it’s more like a 99% probability that it rebounds in the next 60 days.

So, maybe we’re just towards the tail end of this short-term trade war inflicted sort of under-performance. And then maybe we can start recapturing the uptrend that we’ve seen over the last year or year and a half that could, I hope, translate into a decade-long bull market for natural resources and commodities.

Mike Gleason: Of course, our focus here is on precious metals, you alluded to gold of course. They often trade like commodities. Particularly silver which has significant uses as an industrial metal. But gold and silver are also monetary metals. They can get more attention from investors looking to hedge against inflation or as a safe haven. Given that, what are your thoughts on where the precious metals might be headed? Do you think they will be pretty well correlated with commodities in the months ahead? Or, are you looking for them to perhaps behave differently, Sam?

Samuel Pelaez: The answer is yes. I expect them to perform very well. Gold is actually one of the more puzzling asset classes so far this year because it’s under-performed. With the whole trade war angle, China and the U.S. at odds. President Donald Trump being at odds with some of Canada, some of the U.S. allies including Canada. That should be a pretty good environment for gold. But what’s happened is the markets have interpreted the trade war as a positive economic impact to the U.S. and we’ve seen the U.S. dollar rise. And that’s generally negative for gold on the other hand.

That’s also been sort of turbocharged for lack of a better word, by the fact that the U.S. continues to raise rates at a much quicker speed than its peers in Europe or in Japan. The 10-year yield in Japan today is as close to zero as it gets. The euro is already at 3%. So that interest rate disparity has also helped the U.S. dollar be pretty strong year to date. I think that’s going to stall and I’ll tell you why.

Number one, inflation. Gasoline prices if you’ve been to the pump recently you’ve seen that from July 4th last year to July 4th this year, gasoline prices have on average risen about 50%. And that’s inflation. That measure is not captured by the inflation metrics that the markets use. But, it’s captured by the inflation that all consumers in the U.S. pay. So, inflation is creeping in so it’s going to be starting to chip away from that 3% 10-year yield that’s larger than that you can get in Japan and other places.

And the second one and perhaps more important is, I think gradually the markets are going to start turning and accepting the fact that the trade war angle could be detrimental to the U.S. We’ve seen General Motors come out with a profit warning. We’ve seen Alcoa come out and issue a profit warning on the back of the trade wars. And this is just the companies that have started reporting so let’s wait another couple of weeks where most of the S&P 500 reports and see how many times the chairman and CEOs of these companies actually comment on the trade war being a potentially negative impact to the U.S. economy and to corporate earnings.

And circling back to gold, that may take some of that very strong support that the U.S. dollar has had year to date, which conversely should be very positive for gold. If you correlate that to what I mentioned earlier about the charts that show gold being two standard deviations below its mean, then we’re in a predicament where over the next two or three months we may see a strong rally in gold prices.

Mike Gleason: Yeah, extremely well put. I agree that maybe the markets don’t quite have it right and there’s maybe a lot of pent-up inflation coming. Obviously, the U.S. economy has not really felt much of these trade wars and that may be coming. That’s very well summarized there.

Now, I’d like to switch gears a little bit and get your take on the overall health of the markets in general. Around here we wonder how “real” markets are these days. For starters, we have central banks here and around the world heavily involved in markets. Interest rates are centrally planned. And these days it is commonplace for central bankers to be buying corporate stocks and even bonds for that matter. Then there’s the mounting evidence of more underhanded activity. Bank traders colluding to rig prices in everything from metals to LIBOR and to cheat their clients. In recent years the advent of high-frequency trading has raised concerns that retail traders may not get a fair shake.

So, we have a pretty dim view when it comes to the honesty and fairness of markets. That said, we rely on exchanges such as the COMEX and want to believe they can still work. Give us your thoughts, Sam, on the integrity of markets since this is the first time we’ve had a chance to get your thoughts on the subject.

Samuel Pelaez: This is a subject that we discuss internally quite a bit. I do believe there is a fair amount of market manipulation. That’s a very strong statement to say, but there’s facts that support that, right? There’s multiple banks have been, for lack of better word just risk locked. LIBOR, the gold market rigging, FX. There’s factual evidence that some of the banks have been actively manipulating markets.

But that’s just one of the angles from it. I think a second angle which is not manipulation but just an effect of passive investing is ETFs continue to raise capital and ETFs, the majority of them, are market cap weighted so they only allocate money to the top of the market. And that creates a sort of self-fulfilling bias for certain stocks that become market darlings and they receive more dollars, so they out-perform so then they receive more dollars. And it becomes like a vicious circle of out-performance.

That’s because there’s a lot of academics who are very interested in the subject and are writing about it. I think the term they coined for this is the passive investment paradox because the more dollars that go passive, the less dollars that go active essentially. And we start getting into this complacent type of markets, which I think we started to see especially in the broader indices in the U.S. like the S&P 500 and the NASDAQ.

Now, that may have started to crack. I think we can talk about it in a second. But before or after I complete the answer to this question, but we think ETFs have become a problem. They’ve hit that sort of like momentum and size where they’ve started to disrupt the natural flows of money in the markets. I agree completely with you about the LIBOR and FX manipulations.

But then lastly, and you did mention COMEX and I’m glad you did, because I don’t know if people are aware and I don’t think they are, when you buy a gold futures contract on the COMEX, it specifically states that you can redeem in kind. Meaning you can actually show up to COMEX and demand to be paid in physical gold. The problem is… and this number fluctuates… but there’s about 400 contracts for every ounce of gold. Meaning if just one out of 400 people show up to reclaim their gold in physical form, the COMEX vaults would be completely empty.

So, there’s this false perception that this paper contract from the COMEX actually represents one ounce of gold. It actually represents one four hundredths of an ounce of gold. And that in a way is a form of manipulation as well because it inflates the number of contacts. It inflates the liquidity of the sector. It inflates the supply of gold that realistically in physical form is not there.

These things worry us. They concern us. But, what we’re really focusing on in our investing is allocating capital to sustainable companies that have higher than average return invested capital. We are supporting businesses. We’re supporting management teams and we believe that the better ones will be able to surface amidst this market manipulation and still be darlings for a lot of investors.

Mike Gleason: Sam, among other responsibilities you manage the Galileo Technology and Blockchain Fund. Cryptocurrency has been a big topic in the precious metals space. Many people who look at gold as sound money have taken interest in Bitcoin and other cryptocurrencies for some of the same reasons. We at Money Metals Exchange do significant business both selling metals and taking crypto in payment and vice versa, buying metal and making crypto payments. Do you think a cryptocurrency offers genuine potential for widespread adoption as money? What do you make of the comparison between Bitcoin and gold?

Samuel Pelaez: Let me turn the question around. I don’t believe that Bitcoin and gold are the same thing as has been purported by other market participants. I believe gold has a unique status and it’s had it for a long time and it has a lot to do with its physical properties. Gold is the only metal that you can store for decades and then come back to it and it looks exactly the same. It doesn’t rust. It’s essentially oxygen proof, rusting proof, among other things.

You cannot say that about Bitcoin or a paper wallet of Bitcoin or a physical wallet of Bitcoin. So, I’m not subscribing to that thesis that cryptocurrencies are a store of a value akin to what gold is. I do subscribe to the thesis that blockchain technology… and I think tokens are just one representation of blockchain technology… blockchain technology is transformational for multiple industries. The payment processing industry or the barter industry let’s call it, is obviously the most ripe industry for disruption from this kind of technology and that’s what Bitcoin has done and Ethereum in the field of crypto have done, is create a secondary market for transactions outside of the fiat world.

It’s much more efficient than gold at that because you can trade it instantaneously with people anywhere in the world which is something that you can’t really do with gold in its physical form. Now, what do I think about the technology going forward? I think it’s going to disrupt virtually every industry. And people probably heard it before. This is the internet all over again. We’re only starting to learn how deep this is going to get. And also, think about it from a consumer perspective. The internet came about very late. But, for decades now or least two or three decades, when you pay anything at the supermarket and show it to the cash register, that’s an Oracle machine with internet all through the back connected to a number of devices that make all of it possible. If you’re at Walmart, then it automatically connects to the suppliers and updates the inventories and the unit numbers so they can place orders.

The internet has been amongst us for a long time. And I think blockchain technology would be the same. Now, Bitcoin, Ethereum and the other ones we can see as consumers. But the real transformation I think is happening in the business to business world. We’re involved in a number of companies that are doing some incredible amount of work that will facilitate business to business. Not payment transfers but all sorts of technological processes that will completely disrupt the way things are being done right now.

What I’m trying to convey is that sense that this technology is not just limited to payment processing and money transfers. That’s just one of the sectors. There’s dozens and dozens of other sectors where these this technology will transform the way we do our business going forward.

Mike Gleason: Yeah, very interesting technology and that I think is the bigger story here: the blockchain technology much more than say, yeah, just Bitcoin as a cryptocurrency for instance. Well, as you know, we’ve had Frank Holmes on a number of times here on our podcast and he’s talked a lot about the gold royalty ETF, ticker symbol GOAU here in the U.S. and GOGO there in Canada. I know you played a big part in the research behind that. So talk about mining royalty space here, Sam, and why are you guys so excited it. And also, talk about the fund’s performance over the first year or two now.

Samuel Pelaez: Absolutely. We are big proponents of the royalty model. We think it’s a superior business model relative to the miners. They also fit one of the key characteristics in everything you look for which is return on invested capital. The return invested capital in the royalty companies is exceptional. I warn you though if you just calculate the ratio on Bloomberg or any other data source, the return capital may appear lower than it actually is.

And that is because these companies have spent so much money forward in projects that will generate cash flows in the future. But, if you take them on a project-by-project basis, any investment they did and what they’re deriving out of it, the returns are spectacular and they come at a very low risk. So when you sort of risk adjust then they’re even better than they are in absolute form. So, we’re big proponents of the model. We’ve been big supporters of the formation and the ongoing marketing of these companies. Frank was involved in the seeding of what became Wheaton Precious Metals which is the second largest royalty company out there right now.

So, what we decided to create was an ETF that offered investors that alpha generation that the royalty companies have offered us, over the full business cycle. We’ve noticed that many people only invest in gold when they think gold’s going up. We actually believe that everybody should have an allocation to gold throughout the business cycle because it has this diversification properties relative to the other components of your portfolio given to broader the market.

So, what product could we offer our investors in the market that would allow them to invest across the full business cycle and deride all the benefits of gold investing without some of the detriments? And we created this ETF that’s overweight the royalty companies because they offered that intrinsically and then after that it holds a number of gold producers that also have very high returns in invested capital and generally trade at a discount to their peers.

We believe that’s part of the magic sauce. There’s a few other factors that they’re clearly listed on the marketing materials, you could get those at the U.S. Global website or at the Galileo Funds website. And what we’ve been able to achieve and I want to make sure that this doesn’t sound promissory, it’s actually based on the one year of performance, is the data of the ETF to the upside as in how it moves to the upside relative to the gold sector is about one for one.

So when gold starts to go up, owning our product or owning any other product is about the same. It’s when the markets go down that our ETF goes down by a lesser amount than the competing products. And then when you bootstrap that difference over a long time, it creates a very big spread above performance. So far for the one year, our product beat the GDX by about 8%. That’s a pretty… I call it… a pretty impressive alpha generation. The fund also has a lower management fee and it has a lower standard deviation or pretty much every other risk metric is inferior.

So, we’re very confident that it will continue to do that. The back tests suggest that it can do over the full business cycle. And I encourage your listeners to go and have a look because we’re very proud of what we’ve created.

Mike Gleason: Yeah, you should be. It’s done very well and it’s exciting stuff and I love the model as well, you guys have done a great job putting that together and the research behind it. Well, as we begin to close here, Sam, any final comments? What will you be watching most closely in the months ahead? Maybe give us a final synopsis on commodities and metals as we wrap up.

Samuel Pelaez: I’ll give you anecdotal piece of evidence. I had some friends visit from Colombia, where I’m from originally. And the first thing they mentioned was, and they looked at all the cranes and they said, “Wow, there’s so much construction going on.” And I guess because we live in North America and we see it all the time, we don’t really recognize it every day. But, just think about all the wonderful things taking place in terms of… if you travel to New York often you’ve seen the big transformation that’s taking place at the airport at LaGuardia.

I’m sure in all your communities and your cities you’re going to see major projects being built. President Donald Trump has made a big focus of his presidency to roll out a major infrastructure plan. So, we’re going to need these commodities. It’s not like we achieved that peak moment of commodity demand. Commodity demand continues to go up every year. It’s almost like GDP growth. So we will need these commodities. And right now you have the opportunity to buy them at one of the cheapest relative valuations that you’ve had in the last 20 years. And if you’re like me, I wasn’t investing – I wasn’t old enough to be investing in the ’90s – this is the best entry into the resource market that’s ever been presented to me.

And because it only happens every 20 or 30 years, over the course of a professional life. You may only have one or two of this big macro cycles. So, I encourage listeners to follow that chart. We publish it very frequently every six or eight weeks as part of our marketing materials. I invite them to think seriously about reallocating some of the capital from the broader market. The S&P and NASDAQ have been a phenomenal investment over the last nearly decade, since 2009.

So, maybe it’s time to start rolling some of those profits and rolling some of that allocation from some of the sectors that have out-performed into the sectors that have under-performed. And I believe over the next decade you will be handsomely rewarded for that.

Mike Gleason: Very good way to wrap up, very well put. Really enjoyed the conversation today and appreciate you sharing your market insights with our audience. Before we let you go please tell people how they can learn more and how they can reach you and your firm if they’re so inclined.

Samuel Pelaez: Absolutely. The easiest way to reach is through our website GalileoFunds.ca. We’re based in Toronto, Canada. I do travel to the U.S. a lot to speak at conferences, I travel a lot with Frank at U.S. Global. You can find all of our contact information and our fund fact sheets on the website. You can also follow us with social media. We have a LinkedIn page. We have an Instagram account. We’re catching up to the times and finding all the new ways to reach the new demographics and to be out there for people to find us.

Mike Gleason: Well, good stuff. Thanks again, Sam. Keep up the good work. Continued success there and I hope we can speak with you again in the future. Take care.

Samuel Pelaez: Thank you, Mike. Bye, bye.

Mike Gleason: Well, that will do it for this week. Thanks again to Samuel Pelaez, CIO and Portfolio Manager at Galileo Global Equity Advisors. For more information visit www.GalileoFunds.ca.

Latest Gold Demand Trends from the WGC

The World Gold Council released its latest quarterly Gold Demand Trends report today with some mixed messages.  Although overall demand was seen as down 4% in Q2 year on year this was mostly due to outflows (or slower inflows) from/into the gold ETFs.  Positives include increased demand in China and in the industrial sector while jewellery and investment demand was pretty flat, albeit down marginally.

Supply is seen as increasing 3% year on year due to increased mine production – notably in Russia, Indonesia and Canada – yet another indicator that peak gold is not quite with us yet – and an increase in scrap supply, although the lower recent gold price may see this fall away again.

The WGC’s own report summary follows:

Slowdown in ETF inflows drives 4% decline in gold demand in Q2 2018

Global gold demand remained muted in Q2 2018 at 964 tonnes (t), 4% below the same period in 2017, according to the World Gold Council’s latest Gold Demand Trends report. Slower inflows into gold-backed exchange-traded funds (ETFs) created a weak comparison against the highs of last year, contributing to the lowest H1 demand since 2009. Whilst China, the world’s largest gold market, saw a 7% rise in consumer demand.

ETF inflows continued, albeit at a much slower pace compared with the high levels seen in 2016 and 2017. Inflows were down 46% y-o-y. However, European-listed funds saw decent inflows we believe due to uncertainty stemming from Italian elections and monetary policy outlook. In contrast, holdings of North American-listed funds fell by 30.6t as investors focused on domestic economic strength.

Despite the Q2 decline, H1 jewellery demand was scarcely changed at 1,031t. Weaker demand in India and the Middle East in Q2 was only partly offset by growth in China and the US, both up 5% compared with the previous year. Indian demand fell 8% y-o-y, crimped by higher local prices, as well as by seasonal and religious factors.

Q2 2018 saw the seventh consecutive quarter of year-on-year growth in the technology sector, with demand up 2% to 83t. Gold used in electronics continued to thrive, due to enduring demand for smartphones, games consoles and vehicles. H1 demand reached a three-year high of 165t.

Global bar and coin investment was virtually unchanged at 248t. Stronger demand in China and Iran – fuelled by increasing geopolitical tensions with the US – were offset by falls in Turkey, India and Europe, where local prices remained elevated.

Central banks added 89t of gold to global official reserves in Q2 2018, down 7% compared with Q2 2017. Cumulative H1 2018 purchases of 193t were the highest since 2015. Alongside the familiar cast list of Russia, Turkey and Kazakhstan, the Reserve Bank of India returned to the market, albeit with only a very small purchase (+2.5t).

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented:

“It’s interesting how investors around the world have reacted to some of the risks stalking financial markets. Weaker economic prospects and tumbling currencies off the back of heightened tensions with the US boosted Chinese and Iranian gold demand, while US investors shrugged off any geopolitical concerns. Demand from tech companies continued to grow, with H1 demand reaching a three-year high, while economic growth boosted jewellery demand in the US with Q2 demand hitting a ten-year high.

The total supply of gold increased by 3% in Q2 2018 to 1,120t, supported by increased mine production and recycling growth. Mine production in Q2 saw a rise of 3% to 836t, the highest Q2 on record, as projects in Russia, Indonesia and Canada continued to ramp-up. Gold recycling also grew, as currency weakness in India, Turkey and Iran boosted local gold prices and encouraged consumers to lock in profits from their holdings.

The key findings included in the Gold Demand Trends Q2 2018 report are as follows:

  • Overall demand was 964t, a decrease of 4% compared with 1,008t in Q2 2017
  • Total consumer demand fell by 1% to 758t, from 767t in the same period last year
  • Total investment demand was down 9% to 281t compared with 310t in Q2 2017
  • Global jewellery demand fell 2% to 510t, from 519t in the same period in 2017
  • Central bank demand decreased by 7% to 89t compared with 96t in Q2 2017
  • Demand in the technology sector increased 2% to 83t compared with 81t in Q2 2017
  • Total supply was up 3% to 1,120t, from 1,086t in the same period last year
  • Recycling was up 4% to 295t, compared with 283t in Q2 2017

The Gold Demand Trends Q2 2018 report, which includes comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/research/gold-demand-trends and on our iOS and Android apps. Gold Demand Trends data can also be explored using our interactive charting toolhttp://www.gold.org/data/gold-supply-and-demand/gold-market-chart.

Gold News from Russia and China

My latest articles published on http://www.sharpspixley.com website looking at the latest gold related news from China and Russia – two real believers in the future of the precious metal.  Click on the titles to read full articles

Russia’s largest gold miners sees H1 gold output rise substantially

Both Polyus Gold and Polymetal – Russia’s two largest gold producers have seen substantial output increases in H1 making suggestions that Russia’s gold output this year might rise by 3% look distinctly conservative.

China’s H1 gold output falls 7.9%, but demand rises

China, the world’s largest gold consumer, appears to be seeing its own gold production fall – down 7.9% in H1 2018

China imports 400 tonnes of Swiss gold in H1

Greater China (mainland plus Hong Kong) remained the principal destination for Swiss gold exports again in June. So far this year Greater China has imported around 400 tonnes of gold from Switzerland alone.

Russia continues to add to its gold reserves

Russia, which has been running down its holdings of U.S. Treasuries, is continuing to increase its gold reserves at a rate of over 200 tonnes a year. At the current rate of increase the nation’s holdings will exceed 2,000 tonnes by the end of 2018.

 

UPDATE: Gold, Silver, Platinum, Palladium – Price And Stock Forecasts/Recommendations For 2018

My latest article on Seeking Alpha looks at changes to my precious metals price predictions for 2018 and recommended stocks given the underperformance in the precious metals space so far this year

Summary

Our precious metals-related stock selections of late December last year have underperformed along with the corresponding metals prices.

We anticipate an improvement in precious metals prices in the remaining months of 2018.

We have re-worked our tabulation of stock and metal price predictions and look for growth over the remainder of the year.

To read the full article click on: Gold And Silver Now And Forecast Target Price Adjustments For End 2018

How to avoid gold and silver investment scams

by: Stefan Gleason*

It could be undisclosed commissions and fees in an annuity, unwanted accounts opened up by a banker seeking additional fees, trades sabotaged by market manipulators, or any number of other schemes.

Rip-off artists, unfortunately, operate within the precious metals space as well.

Most recently, a scammer posing as a government agent in order to gain people’s trust was convicted of selling counterfeit gold bars and phony Morgan silver dollars. He took one investor for $11,000, according to reports.

You can avoid this type of scam as well as other common cheats when buying or selling precious by heeding the following guidelines.

1. Avoid “Too Good to Be True” Deals

If a price on a bullion product sounds too good to be true – or comes with exorbitant incentives or exaggerated claims – you should be suspicious.

Too Good to be True!

Gold and silver bullion products do not legitimately sell below spot prices. Individuals holding precious metals can visit a dealer and sell items immediately, for full value. Given that everyone has this option, it is highly likely anyone offering items well below actual value is trying to stick it to you.

Legitimate dealers cannot afford to offer items way below cost either. Dealers must charge small premiums above spot prices to reflect product minting costs and the costs of doing business. (One notable exception: 90% silver U.S. coins minted prior to 1965 (aka “junk” silver) which exhibit significant wear occasionally become available at melt value or even slightly lower.)

2. Choose a Reputable Dealer and Use Extreme Care Buying from Unknown Parties Online

Find a reputable dealer who offers prompt, reliable service, and fair prices. Customers who buy based solely on slick advertisements or low quoted prices risk getting left holding the bag when that dealer fails to deliver.

Every so often a dealer will come along that tries to undercut the industry with super-low prices. Only a few years back a “low price leader” called Tulving & Company went bust. A similar blow up occurred at the Northwest Territorial Mint in 2016.

In both cases, warning signs included delivery delays and rising customer complaints. A slew of customers ultimately lost tens millions of dollars when their orders went undelivered.

Bottom line – receiving actual delivery of your metals is way more important than getting the lowest price!

Take a few minutes to investigate a dealer’s online reputation before ordering. You should also expect the dealer to provide a firm estimate as to when the order will ship when the order is placed.

Customer reviews for Money Metals Exchange are overwhelmingly positive for a reason. Regardless of whether you’re a new customer with a small budget or an experienced stacker, you can buy with confidence from Money Metals.

3. Avoid eBay, Craigslist, and Other Online Bulletin Boards

You may be tempted to peruse sources such as eBay, Craigslist, or flea markets to try to find hidden bargains. But all to often, the only ”hot deals” being offered are from sellers with questionable or poor reputations.

Auction sites, including eBay, charge significant fees to the seller. That means reputable dealers must charge very high prices within that platform – passing along the fees eBay charges them. Better prices are usually available by going directly to dealers outside of eBay.

It is always better to know you are dealing with an established business with a reputation for fair dealing, rather than random individuals who can disappear in the night.

With underground sources, you can spend hours researching, bidding, emailing, phoning, driving, and waiting… only to still be left worrying that the product you bought might be counterfeit, stolen, or otherwise not as described.

4. Avoid Rare Coins and Other Hard-To-Sell Products PriceD Way Above Their Melt Value

Numismatics – coins that carry hefty premiums as collectibles – are a huge profit opportunity for dealers and scammers alike. Gold and silver bullion products do not legitimately sell below spot prices.

St. Gaudens Gold Coins

Only serious collectors and experts
are qualified to make wise investment
decisions in so-called rare coins,
so scammers love to peddle them.

If you are a bullion investor, you are more concerned with the number of ounces you hold than the supposed rarity or aesthetic value of coins.

Sometimes the dealer is the scammer – making false claims about a coin’s history, for example, or engaging in “bait and switch” tactics and outright lies to steer unwitting customers into high-premium coins.

There are prominent numismatic dealers that had paid for celebrity endorsements and TV commercials now face litigation over their dishonest sales tactics.

The numismatic market also attracts forgers. There’s little incentive to tamper with bullion coins that sell close to melt value when the value of a numismatic coin can be hugely inflated by altering its grade or appearance slightly.

5. Know Exactly What Something Is Worth to Sell… Before You Buy

Doing a bit of upfront due diligence to determine how – and for how much – you can sell the precious metals you are considering buying can help you steer clear of big mistakes.

It’s not unusual to find a seller of so-called “rare” coins would only pay you 60% of your purchase price if you were to sell it back to them the next day. Most coins being represented as “rare” are not particularly scarce or desirable. They do not bring much premium above the value of their metal content when it is time to sell.

Bottom line – avoid precious metals that are not actively traded. If the difference between the price you will pay to buy and the price you would receive to sell is more than 5-10%, you are likely paying too much.

6. Never Sell Coins, Rounds or Bars at More Than a 5% Discount to Melt Value

When the time comes to sell your bullion, the “cash for gold” sign displayed at your local strip mall represents a fast and convenient way to get paid a fraction of what your bullion is worth.

Whether it’s a jewelry store, a pawn shop, or a scrap gold middleman, you almost certainly won’t be offered anything near fair value. If you negotiate aggressively, you might get closer. But you’ll almost always get a better upfront offer from a large national bullion dealer like Money Metals Exchange (which happens to have the best “sell to us” prices in America).

Some coin dealers will offer more than others, of course. A small local shop that doesn’t carry much inventory may only be able to serve as a middleman for your bullion (and lower the buy price accordingly). Or they may not be able to make an offer at all. A large national dealer will be generally able to accept bullion in larger quantities and varieties – and with narrower buy/sell spreads.

7. Treat Your Bullion Purchases Confidentially and Store Your Metals Securely

A precious metals stash will be at higher risk of theft if you don’t secure it. One of the very best ways to secure your gold and silver is to keep your mouth shut. Loose lips really do sink ships.

Confidentiality

A good home safe that is hidden from view and embedded in or bolted into concrete will go even further to minimize the chances of a burglary.

It can also be a good idea to keep a separate, larger stash in a professionally secured storage facility. A bank safe-deposit box is not suitable for this purpose. Nor are pooled bullion programs offered by brokerage firms.

A few years ago, MF Global lost clients’ gold when it co-mingled their assets with those of the firm…and the firm’s bad derivatives bets caused it to go bankrupt.

Insist on fully segregated storage for maximum security. Money Metals Depository offers this service, as do a few other dedicated bullion storage facilities (albeit at higher storage fees than MMD).

8. Know When Your Bullion Order is Expected to Ship and Monitor the Dealer’s Follow Through

A dealer who is repetitively slow to ship orders is, at best, a poor operator.

At worst, late shipments are a signal that the dealer is in serious financial trouble. They are selling inventory they don’t have and can’t pay for without waiting for funds to come in from future buyers.

Very occasionally there can be legitimate reasons for a delayed shipment.

For example, there have been a few short periods in recent years when mints and refiners were not able to keep up with the huge demand for coins, rounds, and bars, and extended lead times for delivery were not uncommon. But reputable dealers will explain any expected shipping delay upfront, so the client knows what to expect.

With the current glut of inventory in the market, however, there is no excuse for delivery delays at the present time. So if you do not receive prompt delivery, you are most definitily taking more risk by placing another order with that particular dealer.

While performing your due diligence on a dealer, it is wise to look for regular customer complaints about late deliveries. The Better Business Bureau website is one good place to search for what people have to say.

China, South Africa, Trump trade moves and the Dollar – My recent SP articles

Here are links to four recent articles published by me on the Sharps Pixley website.  Sharps Pixley is probably about the best consolidator of links to pertinent articles on precious metals globally so should be on every gold investor’s list of go-to places for precious metals news and comment.

China’s gold reserves – fact or fiction?

China has again reported a zero increase in its official gold reserves to the IMF for the 20th successive month increasing speculation that it is building up its gold holdings in other non-reported accounts.

How the mighty are fallen. RSA gold on the decline

The Republic of South Africa (RSA) used to be by far the world’s biggest gold producer but output there peaked nearly 50 years ago and has been on the decline ever since.

Markets nervous as Trump trade rhetoric escalates

The U.S.-China trade (tariff) war appears to be escalating and markets are reacting nervously accordingly.

Gold held back by dollar index upturn

Gold looked as though it might be about to break out from its recent weak trading range, but has been brought back down to earth by a stronger dollar

Polymetal’s big new gold mine on stream ahead of schedule, under budget

Russia’s No. 2 gold miner, and world No. 5 silver miner, Polymetal, has announced that its big new precious metals mine – Kyzyl in north-eastern Kazakhstan – poured its first gold on June 25th a month ahead of schedule.  What is more, start-up has been achieved under budget.  Polymetal is London Stock Exchange quoted (ticker POLY).

As we noted when writing about the Russian miner a month or so ago, Kyzyl is a key element in the company’s long term production growth strategy and now that it appears to have started up successfully Polymetal can concentrate on the next major project in its production pipeline – the Nezhda mine.

According to Polymetal, Nezhda is Russia’s fourth largest gold property based in the Republic of Sakha (Yakutia) with a resource inventory of 55.9 million tonnes of mineralised material containing 8.9 million ounces of gold equivalent with an average grade of 5.0 g/tonne gold equivalent based on the latest resource estimate.

Currently, the Company envisions the construction of an open-pit mine at Nezhda and a conventional on-site concentrator followed by concentrate processing at the Amursk POX or 3rd-party off-take. This ensures low capital intensity for the project, making it an excellent fit for Polymetal’s core capabilities. Total capital costs for Nezhda are estimated at US$249 million, including $15 million capitalised pre-stripping costs, with approximately $30 million to be invested in 2018 into project design, permitting and exploration.

Polymetal currently has been operating eight producing mines – six in Russia and one each in Kazakhstan and Armenia and has other projects in the pipeline as well as Kyzyl.  However it has a policy of only managing two new projects at any given time and the current concentration, now that Kyzyl is in production, will be on de-bottlenecking its state-of-the-art pressure oxidation (POX) facility at Amursk in Russia’s Far East, and can now take the decision to progress Nezhda. Then in the prospective pipeline it has a second POX line which could be installed at  Amursk, but won’t take the decision on that until the current POX debottlenecking programme is also seen to be successfully implemented – due to be in early 2019.

At Kyzyl Polymetal has achieved the start-up of the concentrator one quarter ahead of the original schedule that had been announced in 2014, and one month earlier compared with the January 2018 updated plan. Project Capex is expected to be approximately 3% below the original US$325 million budget, inclusive of 62 million tonnes of pre-stripping.

Mining activities at Kyzyl have already reached full design capacity with 315,000 tonnes of ore stockpiled ahead of start-up. The grade control programme demonstrated robust reconciliation with the reserve model with both ore grade and gold contained tracking slightly above plan.   Kyzyl is, in today’s terms, a high grade operation with a reserve grade of over 7g/tonne gold.  First concentrate deliveries to off-takers are scheduled for the end of July with shipments to the Amursk POX facility expected to commence in September.

The Kyzyl concentrator will now be entering a 3-month ramp-up period, after which it is expected to reach nameplate capacity of 150,000 tonne/month mand recoveries of 86% by October 2018. This year Polymetal plans to produce 80,000 ounces (around 2.5 tonnes) of payable gold at Kyzyl, ramping up production to 280,000 ounces (8.7 tonnes) in 2019 and nameplate capacity of 330,000 ounces (10 tonnes plus) thereafter at a very low AISC of approximately US$ 500-550/ounce.

At Kyzyl, the JORC compliant gold reserve is estimated at 7.3 million ounces at 7.7 g/t of gold. This would support a life-of-mine of 10 years for the open pit followed by further 14 years of underground mining. Additional JORC-compliant gold resources comprise 3.1 million ounces at 6.8 g/t indicating strong potential to further extend operations.

“Polymetal is delighted and proud to successfully complete the largest development project in the company’s history ahead of time and below budget”, said Vitaly Nesis, Group CEO of Polymetal who we interviewed back in April (see: Polymetal CEO, Vitaly Nesis, very bullish on silver) “Significant cash flow and net income contributions from Kyzyl should start in Q4 2018.”

Russia is the world’s third largest producer of gold after China and Australia but is expanding output and aiming for the No. 2 spot.  Kazakhstan is currently the world’s 15th largest gold miner and Kyzyl’s output could help move it up a couple of slots by the end of the decade.  Its central bank currently buys most of the gold produced by the country’s mines as it aggressively builds its gold reserve.

 

 

 

 

 

 

Lawrieongold one of top 5 UK gold blogs

American based web consolidator, Feedspot.com has selected lawrieongold as No. 3  in the listing of the top 5 UK gold blogs.  Incidentally No. 1 is sharpspixley.com which I also write for as a Special Correspondent. see: https://blog.feedspot.com/uk_gold_blogs/

Globally lawrieongold comes in at No. 49 although many of those which appear above it in the site’s compilation are websites for corporate gold mining companies.

I have to say I am honoured at being so selected, but I suspect it is a representation of how few good specialist precious metals websites there are out there!

Silver and Gold Bludgeoned in Controlled Market

Sound Money Needed Now More Than Ever
Ron Paul and the Tea Party advocated for limiting government and ending the Federal Reserve system. Sound money advocates made real inroads in recruiting Americans to their cause based on evidence that the nation is headed for bankruptcy.

The implications of the most recent financial crisis went way beyond budget and finance.

Many Americans grasped the more significant lesson. The perpetual expansion of government spending lay behind the corresponding decline in personal liberty for them, their children, and their children’s children.

National Debt 1940 - 2008

Dishonest money is a dream for politicians and bankers, but it is a nightmare for citizens. Charts showing the final abandonment of the remnants of the gold standard in 1971 and the exponential rise in government debt helped people make the connection between dishonest, unlimited fiat money and unlimited government.

Here is one example from the Daily Caller…

The trend shown on this chart has not changed or improved. The red bar on the right hand side of the current chart now stands more than twice as high with total government debt north of $21 trillion.

There is no credible effort in Washington to limit spending. It is safe to say U.S. deficits and the corresponding borrowing will continue to rise exponentially. It will continue until confidence finally collapses; either in the nation’s ability to repay, or in the dollar, or both.

The nation needs sound money more desperately now than ever.

Unfortunately, the debt chart above isn’t the only chart that tells a damning story. Below is a chart from TF Metals Report which shows the regular beatings given to silver in recent months. The picture for gold looks similar.

Silver Daily Chart

This is what a controlled market looks like!

The bankers and central planners hated the lesson Americans got following the 2008 financial crisis. They are using the markets to condition people to respond differently. Buy stocks, buy bonds — any conventional “paper” securities. And, for the love of Pete, keep borrowing.

For gold and silver investors, the conditioning is delivered in the form of a regular bludgeoning each time the metals start to show strength.

Any who still question whether markets are manipulated, simply aren’t paying attention. Or they rely upon CNBC for all of their investment news. The topic has been covered extensively on alternative news sites, including by Money Metals.

Crooked and relentlessly painful markets, combined with optimism surrounding Donald Trump, is a potent combination.

Yes, there was some grumbling when Trump signed the latest budget and expansion of government.

However, many fewer Americans feel the sense of alarm that prevailed when the Federal government was running trillion-dollar deficits under Obama. Others may be alarmed, but they question whether gold and silver will work as honest money given the price never seems to reflect the reality of the nation’s finances.

Too many Americans are effectively tuned out when it comes to the message of sound money and limited government. That is tragic. Few will be ready and a whole lot more will be caught by surprise when the inevitable reckoning finally arrives.

Precious Metals Contrarians See Opportunity in Negative Sentiment

by: Stefan Gleason*

Gold and silver markets entered this summer with sentiment toward the metals in something of a deep freeze.

For several months, precious metals prices have gone essentially nowhere. No sustained rallies to attract momentum traders; no washout plunges to attract bargain hunters. The long, protracted stalemate between bulls and bears has frustrated metals investors and, frankly, bored the public.

Sell, Sell, Buy

As a consequence, bullion buying volumes dipped.

The U.S. Mint’s sales of gold and silver Eagles in the first half of the year lagged far behind the pace of 2017, when it sold 302,500 ounces of gold and 18 million ounces of silver.

As of this writing, the U.S. Mint sold just 6.5 million 1-ounce silver coins and 110,000 ounces of gold – a collapse in sales from levels seen in recent years.

Another measure of the public’s disinterest in owning precious metals is declining internet search volumes.

Google Trends data for May show the fewest searches for the phrase “buy gold” since July 2007. Back then, gold traded at around $670/oz – a pretty good price at which to buy amidst public apathy.

Some beleaguered gold bugs are taking the lackluster market conditions as a sell signal. Bullion selling by the public has increased since the start of the year. Money Metals Exchange saw a marked increase in customers wishing to sell, particularly since we offer the best “bid”prices in America.

The silver lining in a depressed bullion market is that buyers can obtain most popular products at low premiums. In some cases, premiums over spot prices have dropped to historically low levels.

We are happy to facilitate either sell or buy orders, but our experience is that when lots of people want to sell, it’s an opportune time to buy – at least for those with a long-term perspective.

The futures market bears this out time and time again. When speculators are lopsidedly positioned on the short side, that usually serves as a contrarian indicator that the market is close to bottoming. By May, speculators had piled in on the short side in the silver futures market in a bigger way than they had in several years.

Investors in the Far East aren’t worried about the ups and downs on the charts. They are concerned with acquiring more ounces.

Tweet This 

Sentiment turned extremely negative in both the paper and physical markets even as gold and silver prices maintained their trading ranges. Although both gold and silver came close to suffering major technical breakdowns this spring, no longterm damage was done.

Given the negative sentiment and the strength of the U.S. dollar in the spring, the downside in metals markets could have been far worse. The fact that it was minimal suggests underlying technical strength.

It appears that growing demand among the world’s central banks is helping to put a floor underneath prices. In recent years, Russia and China have been steadily accumulating gold. Over the past decade, Russia has more than tripled its gold reserves from 600 tons to nearly 2,000 tons.

China’s gold reserves have also grown dramatically. It’s difficult to get exact numbers, as the Chinese government has acquired much of its gold in secret. But it could be as high as 4,000 tons.

Smaller players on the global stage are accumulating physical gold as a way of countering U.S. sanctions and U.S. dollar dominance in global trade. In the first quarter, Iran’s gold bullion purchases surged.

Iran’s Islamic neighbor Turkey, surprisingly, was the second largest state buyer of gold for the first quarter.

Clearly, many countries that count the United States as an adversary are turning to gold as a means of gaining greater independence and leverage in international trade. The ultimate goal of the emerging Russia-China-Middle East economic alliance may be to dethrone King Dollar.

It won’t happen overnight. But gold is gradually rising as a credible counterweight to the U.S. dollar and other fiat currencies.

Far East countries like China are known for their long-term time horizons. They aren’t worried about the ups and downs on the charts. They are concerned with acquiring more ounces. They are happy to buy on price dips when they come. Disciplined long-term investors should be as well.

China gold – positive news on all fronts

Linked below are two articles I have posted recently on the Sharp Pixley website – both on the latest state of play in the Chinese gold markets.  The first of these looks at gold withdrawals from the Shanghai Gold Exchange (SGE), which some observers equate to the real level of Chinese gold demand being somewhat higher than that suggested by the major Western consultancies which have perhaps more limited criteria on what should actually be included in the demand figure.  We have noted beforehand, quite frequently in fact, that SGE gold withdrawal figures equate far more closely to the total of known gold imports from countries/areas which break down their gold export statistics by country of destination, plus China’s own gold output plus an allowance for scrap and from unpublished import data than the estimated Chinese consumption figures by the consultancies.

Be this as it may, for the first five months of the year, SGE withdrawals are up by 8.55% on the figure at the same time a year ago and up 7.79% on the first five months of 2016 .  We speculate further that if we add Hong Kong consumption to that of the Chinese mainland this account for around 70% of all new mined gold, and with the continuing growth in numbers of the Chinese middle classes, and the continually rising national GDP, gold demand is likely to be on the increase given the propensity of the Chinese middle class population to buy precious metals as a hedge Ginat difficult financial times.  A link to that article is as follows:

Chinese gold demand continues to rise yoy

My second article in the past week on Sharps Pixley noted that the total reported amount of gold in China’s forex reserves, as reported monthly to the IMF, remains unchanged as it has done now for nineteen successive months – indeed ever since the Chinese yuan, or renminbi, has been accepted as an integral part of the IMF’s Special Drawing Right.  We think this situation is highly unlikely given indications over the years from Chinese politicians and academics that the country is aiming to at least match the gold reserves of the Big Western national gold holders.

China has a track record of announcing big gold reserve increases only at multi-year intervals and putting this down to gold being purchased and held in non-reportable accounts until moved into its official forex figures.  Again, we speculate that this gold may be being purchased and held by the state-owned commercial banks on behalf of the People’s Bank of China and only moved into the PBoC reportable accounts at say five or six year intervals.  A link to this article is:

China official gold reserves unchanged again as forex holdings dip

Another piece of positive news on Chinese gold demand came from the World Gold Council which reported a return to growth in Chinese gold jewellery demand.

Market Update: China’s jewellery market – quietly improving

Trump opens Pandora’s box. Global trade war very positive for gold.

Article first published on Sharps Pixley website

Well we’ll soon see if President Trump’s imposition of steel and aluminium tariffs on the EU, Canada and Mexico is for real – or just another negotiating tactic.  He is very much a believer in promising the worst as a tactic for generating concessions in his business dealings, but will this work in global geopolitics?  Tit for tat tariffs are already being promised by those affected – they can play at that game too! – and if they all come about they could cost far more in American jobs than any possible regeneration that might be seen in the U.S. steel and aluminium sectors.  Those are too far down the line of closures and write-offs to see any kind of short term recovery.  And U.S. manufacturers currently relying on imported aluminium and steel for their products will see costs rise which, no doubt, will see them having to increase prices for their goods making them less competitive in both domestic and global markets.

And, of course, such a trade tariff war could easily escalate dragging in more products and countries.  A global trade war does nobody any good as noted by top economist Martin Murenbeeld (www.murenbeeld.com) in his latest weekly Gold Monitor newsletter for his subscribers.

Martin is renowned for his comprehensive, but conservative, analyses of the gold market.  As we have noted before he is mildly bullish, but circumspect, on his stated outlook for precious metals.  He is not a predictor of a rapid rise to a $5,000 or $10,000 metal price but, in our view is a much more realistic observer of metal price trends in looking for steadily rising medium to long term price levels in line with a perhaps weakening dollar index.

As he states: “a global trade war would be catastrophic for the world economy – and would be a big issue for the gold market! A global trade war would seriously alter central bank policies – more loosening/less tightening – which is a plus for gold! And the dollar’s reserve-currency role would be damaged, and accelerate the move to a multiple reserve-currency world (with the dollar playing a much-reduced role).   Central bank gold reserves around the world would likely rise accordingly.”  If he is correct in his analysis and President Trump does not reverse course, the global economy could be in for some very uncomfortable years as /a tariff war stutters and possibly escalates.

What is puzzling about the Trump tariffs so far is the countries which have been targeted – all supposedly allies of the U.S. – while China, which most see as the biggest culprit in terms of what are seen as unfair trade practices, seems to be attracting less immediate attention, although talks with the Chinese are ongoing.  However, one suspects that China, and some other Asian nations will become targets too and again tit-for-tat  tariff increases will result with damaging results for the sectors so chosen.  While President Trump has described the tariff increases as a national security issue given steel and aluminium are used in weapons manufacture, others see the moves as pure protectionism of the worst kind.  Such trading issues usually end up as economically disadvantageous to all parties – hence the likely benefits to the gold market as investors look to so-called safe havens.

FRANK HOLMES: GO GOLD! Inflationary Tariffs Could Supercharge the Yellow Metal

By Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors

Global sales of semiconductors crossed above 400 billion for fisrt time in 2017

Ready for inflation?

Just days after Treasury Secretary Steven Mnuchin reassured markets that a trade war between the U.S. and China was “on hold,” the Trump administration announced that it would be moving forward with plans to impose 25 percent tariffs on as much as $50 billion worth of Chinese exports to the U.S. Beijing has already suggested that it will retaliate in kind.

The White House also reinstated tariffs on imports of steel and aluminum from Canada, Mexico and the European Union (EU) after allowing earlier exemptions to expire. Again, there’s a big chance the U.S. will see some sort of tit-for-tat response.

Steel prices are already up 45 percent from a year ago. The annual change in the price of a new vehicle in the U.S. has been dropping steadily since last summer, according to Bureau of Labor Statistics data, but with the cost of materials set to rise dramatically, we could see a price reversal sooner rather than later.

US midwest hot rolled steel price up 45 percent from last year
click to enlarge

Next up, the U.S. government could slap steep tariffs on imported automobiles—and possibly even ban German luxury vehicles outright, according to a report by German business news magazine WirtschaftsWoche.

These decisions, if fully implemented, will have a multitude of implications on the U.S. and world economies. What I can say with full confidence, though, is that prices will rise—for producers and consumers alike—which is good for gold but a headwind for continued economic growth.

You Can’t Suck and Blow at the Same Time
US midwest hot rolled steel price up 45 percent from last year

Let me explain. I’ve often said that middle class taxpayers elected Trump president by and large to take on entrenched bureaucrats, cut the red tape and streamline regulations. People are fed up. A study last year by the Congressional Budget Office (CBO) found that government workers not only earn more on average than private-sector workers with similar educational backgrounds, they’re also guaranteed health, retirement and other benefits. Trump responded to these concerns by signing an executive order that eased the firing of federal workers.

He’s kept his word in other ways. Since being in office, he’s already eliminated five federal rules on average for every new rule created, according to the Competitive Enterprise Institute (CEI). He’s weakened Obamacare and Dodd-Frank, not to mention slashed corporate taxes.

In 2017, the number of pages in the Federal Register, the official list of administrative regulations, dropped to 61,950 from 97,069 the previous year. This is especially good news for productivity. Research firm Cornerstone Macro found that Americans were more productive when there were fewer rules, less productive when there were more rules.

productivity decreased as the number of federal rules and regulations grew
click to enlarge

These are all positive developments that should help boost the economy. The problem is that they could be undermined by tariffs, which are essentially regulations. We believe government policy is a precursor to change, and history suggests that rising tariffs and regulations hurt the economy.

Consider automobiles. U.S. automakers are the second largest consumer of steel following construction. In March, the Wall Street Journal estimated that the tariffs could add at least $300 to each new vehicle sold in the U.S. And speaking to Bloomberg last week, a spokeswoman for the Alliance of Automobile Manufacturers said the tariffs on steel and aluminum imports will make cars more expensive. “These tariffs will result in an increase in the price of domestically produced steel—threatening the industry’s global competitiveness and raising vehicle costs for our customers,” Gloria Bergquist said.

Do tariffs on imported vehicles threaten united states auto sales
click to enlarge

Higher Inflation Has Historically Meant Higher Gold Prices

The good news in all this is that higher inflation has historically been supportive of the price of gold. In the years when inflation was 3 percent or higher, annual gold returns were 15 percent on average,according to the World Gold Council (WGC).

gold has historically rallied in periods of high inflation
click to enlarge

When gold hit its all-time high of $1,900 an ounce in August 2011, consumer prices were up nearly 4 percent from the same time the previous year. The two-year Treasury yield, meanwhile, averaged only 0.21 percent, meaning the T-note was delivering a negative real yield and investors were paying the U.S. government to hang on to their money. This created a favorable climate for gold, as investors sought a safe haven asset that would at least beat inflation.

CIBC: Major Gold Firms to Generate Strong Free Cash Flow and ROIC
gold has historically rallied in periods of high inflation

Finally, I want to draw attention to an exciting research report released last week by the Canadian Imperial Bank of Commerce (CIBC). I’m a huge admirer of the work CIBC does, especially that of Cosmos Chiu, director of precious metals equity research. Chiu and his team write that the “future looks brighter” for gold equities on improved free cash flow and return on invested capital (ROIC). Both factors are among our favorites. I recently shared with you a chart that shows that, over the past 30 years, ROIC outperformed other factors by as much as one and half times.

With gold trading near $1,300 an ounce, producers are currently posting positive margins, according to CIBC. As a result, every stock in the bank’s large-cap universe, with the exception of Kinross, is expected to generate positive free cash flow through 2019.

Go Gold! Royalty/Streaming Companies Deliver the Profits

The bank has even better news for royalty and streaming companies, particularly Franco-Nevada, Royal Gold and Wheaton Precious Metals. For one, the three big royalty names delivered combined shareholder returns of 6.2 percent between 2013 and 2017, outperforming both senior producers and physical gold.

Three largest royalty and streaming companies forecast to deliver strong return on invested capital
click to enlarge

Now, CIBC forecasts the royalty group will generate strong ROICs, “steadily inching higher over the next decade… to average between the 5 percent and 8 percent mark from 2018 – 2023.” ROIC measures how well a company can turn its invested capital into profits.

Loyal readers already know we’ve long been fans of Franco-Nevada, Wheaton Precious Metals and other royalty/streaming names. To find out why we believe they’re the “smart money” of the gold mining space, I invite you to watch this brief five-minute video.

AXEL MERK – Inflation & Precious Metals to Rise, Fed to Act Late

Mike Gleason* of Money Metals Exchange interviews Axel Merk of Merk Investments.

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

Axel, it’s a pleasure to have you join us again today and thanks very much for coming on.

Axel Merk: Great to be with you. What a week.

Mike Gleason: Exactly. Well, Axel when we spoke to you in February the equity markets were in the midst of a sell off and some significant volatility, which had been extraordinarily low, came roaring back to life. Since then, the stocks have recovered some. The S&P regained about half of what it lost by the end of February and has been trading in a range since then.

Our thoughts are that precious metals are trading inversely correlated to equities markets, at least for now. Unless we get a pullback in stocks or more appetite for safe-haven assets it will be hard for metals to get much going to the upside. But what are your thoughts on the relationship between gold prices and stock markets, Axel? And what factors do you expect to be driving stocks between now and say the end of the year?

Axel Merk: Sure, and for context I think we should just mention we are talking before the Non-Farm Payroll Reports (are out), so who knows what’s happened to markets since we have talked? One of the things I don’t recall if I mentioned in February is, ever since last December, and I still believe in that, the markets have been a bit like a washing machine. That correlations have been breaking down. And, if you go back to, kind of, all the way to the financial crisis, that’s the 2008 one, not the one from a week ago, that means that whenever there was a crisis the Fed bought treasuries. And so whenever “risk” falls off, when equities are plunging, bonds were rising. And that kind of ingrained this perception about certain types of correlations and so, similarly, the price of gold was actually reasonably highly correlated to that of treasuries. And so we got this thing that gold and the stocks are sometimes moving in tandem, sometimes they move in opposite directions.

Since January 1970, if you look at monthly correlations, the correlations between stocks and bonds is 0.00. So, there is no correlation. Yet, we get caught up in this thing that, for months at a time, sometimes there’s a correlation that is significant. I think the most noteworthy thing of late is that yields have been, until a good week ago, have been matching higher and the price of gold was falling up. And then, conversely, when bond yields were falling, gold didn’t rise.

And so, gold has kind of marched on its own in some ways and I happen to believe that a lot of the buyers of gold these days are doing it because they are concerned about the equity markets because of volatility spiking. And the reason why volatility and the price of gold are related is because gold doesn’t have cashflow. And that means the future cashflows don’t get discounted more, whereas, if you have a quote unquote risk asset, like equities, and volatility increases, those future cashflows get discounted more and the prices of equities, all else equal, tends to fall. So, that’s why in “normal” circumstances the price of gold should rise when equities tumble. Obviously, that doesn’t always happen.

Mike Gleason: You pay more attention than most people to events in Europe and the European markets. Lately, troubles in the PIGS nations have crept back into the news. Populace in Italy and Spain are making hay by opposing EU imposed austerity and it’s a reminder that deep fundamental issues remain and the union may not survive. Let’s start by getting your take, if we can, on the overall status of the EU. Will there be any high-profile exits, perhaps by Italy or Spain? Is Great Britain going to complete its exit? Or are you expecting the EU to weather the storm here, Axel?

Axel Merk: The UK is almost certainly going to exit and nobody else, probably, any time soon. Now, I say that, I might have egg on my face in a few years down the road on that. But let me, maybe before we get too far carried away, make a general statement because I think we’ve seen this movie before. What we’ve had is a classic case, classic as in classic for financial crisis type of case, where investors were piling in into an asset that they perceive to be risk free, only to wake up that it is risky after all. And what I’m referring to, of course, is Italian bonds, right?

Who wouldn’t want to grab for some yield? And if you don’t grab for some yield, especially if we’ve had someone like the head of the ECB doing quote unquote whatever it takes, all but guaranteeing the debt. So, why would you get a negative yield, or very low yield on German bonds when you can get Italian treasuries for a much juicier return? So, we’ve had yield chasers in there.

Now, the noteworthy thing is, and, again, this is the same picture we’ve had throughout the financial crisis, the folks holding these are not risk-friendly investors. Those are folks who thought that stuff was risk-free. So, sure enough, there is some event happening and people is “Oh, my God! Italian bonds are risky! How could I have possibly known?” So, they run for the exit.

Now, that doesn’t mean there’s nobody there to buy them. Whenever somebody sells something, somebody has to buy it. The folks buying are risk-friendly investors. And so, for example, on Wednesday, there was a treasury option and it was very well received and obviously they’re not the same guys that sold the day before, but now you have risk-friendly investors come in. And you needed to have that kind of a shake-out and have other investors go in.

Now, none of that means whether Italy is going to survive or not, but the relevant part here is that the system cracks when you build up this pressure cooker, when you have an unsustainable situation, and to me, it is unsustainable that folks, like Italians, pay a very, very small premium over – kind of a borrowing cost – than in Germany, for example.

And when this pressure builds up, well, at some point, some steam has to be let gone and, depending on how much pressure has built up, the fallout can be greater. And so, for now, people woke up and now they can deal with this crisis as a risk event, whereas, before, it was something that was kind of a black swan event, and it blew up in some people’s faces.

Mike Gleason: Let’s talk a little bit more about the implications for gold and silver markets. In recent weeks, the euro has weakened and that has been a big driver in the rally of the dollar indexes. This prompted some selling in gold and silver. On the one hand, we could see a continued euro weakness and dollar strength weighing on gold and silver prices; on the other hand, metals could get a bid if concerns over serious trouble in the EU drives some safe-haven demand. What is your best guess about which dynamic might win out there?

Axel Merk: Curiously, during much of the Eurozone debt crisis, I’m referring to several years ago, the price of the euro and gold were quite highly correlated, but anybody liking gold wouldn’t touch the euro with a broomstick. So, I’m just pointing out, as you pointed out, it’s because if the dollar strengthens that, of course, this yellow metal doesn’t change. And so, as the price of the dollar appreciates, the price of gold might go down. Now, that said, again, as volatility flares up, I do think gold is worthy of the consideration as a diversifier.

Also, the reason why I went into detail here about the yield chasers, the market didn’t trade as if the Eurozone were to break apart. By all means, bank stocks sold off, by all means, volatility surged, all kinds of things happened. But this was, here, momentum traders, yield chasers, being wrong-footed. And we had a violent unwinding of that. And that is one of the reasons why the price of gold didn’t surge in this context, because this was not a trade that said “Oh, my God, the Eurozone is going to fall apart”. Now, if that were to happen, then we going to see a very, very different picture.

We also had, for example, bonds rally, right? But there was a very, very substantial short-position bond and so a lot of these guys took profits or said “Oh, I didn’t expect it that a trade could go against me” and then when something is too good to be true, if too many people are piling the same trades, things go bad.

Now, as far as the context of how this is going to evolve, we have no idea even by the time your broadcast is, what’s going to happen next. Are they going to form a new government, are they going to have called new elections, who knows? Anything is going to happen. We have a populace resentment for all the right reasons and the European Union is incapable of communicating with the people and saying “Hey, we’re the good guys. We actually mean well for you.” People are fed up.

Now, that said, the majority of Italians do appreciate the euro and so that means they want to find a way. Also, we tend to forget that it is extremely expensive to leave the EU. It’s one thing for the Brits to leave the European Union; they don’t share the same currency. If you shared a currency, your banking system is going to be sucked empty. Your economy is going to implode if you leave. And that is something that is not really a very attractive proposition. And so, when push comes to shove, most of these countries decide, “Hey, we might want to stay.”

Now at the other end of the spectrum, though, if you have a populist rising, usually the more extreme opinions prevail. And so they are not ruling out that some bad things can happen. When I buy something in Europe, I buy the German stuff, the Northern European stuff. And ultimately, if it were to break apart while I still have that Northern European stuff, right? And that doesn’t mean buying Italian securities is necessarily a bad thing, but you better be aware of the risks that come with it and tying it back to the price of gold, the question is “Is there contagion? Is the Federal Reserve going to change course?” and so forth. In the short term, I don’t think the Fed it rattled by this. Access to credit continues to be easy. I think the Fed is going to continue to march higher.

Now, all that said, I do also think inflationary pressures in the euro’s going to move higher because I don’t think the U.S. economy is about to implode. And so, because of that, I do think people are going to continue to look at gold as a diversifier and at some point that cycle’s going to turn. I don’t know whether it’s in six months or in a year or down the road. We’re looking at these indicators, I don’t think we’re at the top of the cycle at this stage. I think it’s going to continue for another six months, maybe twelve months, and maybe even eighteen months. I can only give us like a six to ten months outlook on this.

But, for the time being, inflationary pressures are rising and the Fed is going to slowly but surely march higher.

Mike Gleason: George Soros made news this week, and I’m talking about much more than what Roseanne Barr said about him during her Ambien-induced Twitter rampage. Soros warned that Europe and even the world financial markets face an “Existential threat saying everything that could go wrong has gone wrong.”

He’s apparently quite upset at the unraveling of the Iran nuclear deal, anti-EU populism, and new calls for fiscal austerity. At the same time, he launched a campaign this week to try to reverse the Brexit decision. Is this just sour grapes by Soros or do you think the world financial markets are truly on the precipice?

Axel Merk: To understand Soros, I think the only thing one has to understand that he is Hungarian at heart. He grew up in Hungary and he loves Hungary. He would love everybody in the world, especially the European Union, to write blank checks to the Hungarians so that that country’s standard of living moves higher. And so they want the Germans to write checks, they want the French to write checks, they want everybody to write checks so that the Europeans are happy. It has nothing to do with the Eurozone being sustainable or not. I have no idea why people are listening to Mr. Soros. Sure, he had a great trade on the Bank of England, but for him, it is all about trying to support Eastern Europe. That’s very well intended. Godspeed for him, let him help these folks and he has some initiatives and foundations that does it. Great for him. But, to conclude from any word he says, whether the Eurozone is stable or not, I wouldn’t listen for two seconds to his opinion.

Now, that doesn’t mean there aren’t any issues in the Eurozone, by all means. But, a lot of people are biased when they hold a trading position, well, George Soros’s trading position is that he wants Eastern Europe to thrive. And if the West can write a check to do that, then he likes that. Anything, any tough austerity measures, anything that against that, Mr. Soros says “Don’t do it”.

And so, it’s very different answer, probably than you might have expected, or you get from other folks, but, if you look at George Soros as a person who has an agenda to help Eastern Europe, then you understand everything and anything that he says.

Mike Gleason: Getting back to the Fed here, briefly. They have been tightening, which is contributing to some of the dollar’s strength, but they almost certainly don’t want a collapse in the euro, and there is, we think, a limit to how much of a rally they’re going to put up with in the dollar. What are your thoughts there? Expand on that a bit. It seems like the markets have priced in a couple more rate hikes this year. Sounds like you think we’ll probably get those?

Axel Merk: Well, let’s think about it. We got a new Fed chair, right? Jay Powell. And he’s a lawyer. He does not have a magic framework. Bernanke had this Great Depression framework, Yellen was a labor economist, well Powell is a lawyer. And he’s a smart lawyer. And he has good intentions. So, what do lawyers do? Well, they call a committee to decide on things. So, one thing you can be sure of with Powell, in my view, is that he’s not going to be very fast. He’s going to call the best and the brightest, to give him their opinion, and then he’s going to make a judgment based on that. And that might be a very boring answer, but, that’s what it is. And the one thing that a Powell Fed will look at is A, is the economy going to continue to move ahead, is the “slack” exhausted, and are financial conditions all right?

One of the things Yellen always said is that “Hey, our quantitative tightening is like watching paint dry on a wall and it’s really nothing.” Well, that’s a bunch of BS because the whole point of raising rates is to tighten financial conditions. But, at the same time, it hasn’t happened. The financial conditions have been easing. In early 2016, the Fed panicked because the fracking market didn’t do well. This time around, stock marks has had a hiccup or so, but access to credit hasn’t been any tighter. So, as long as access to credit is not tightening, the Fed is going to continue to march.

And what we have is, the typical thing at this time of the cycle is that banks are actually easing lending standards. Because the economy is doing all right, they want to write more credit. And that’s why the Fed is going to continue to tighten. Now, as that happens, of course, at some point they’ll overdo it and push the economy into a recession and maybe they’re geniuses and do a soft landing, but that’s usually more luck than anything else.

And so, at the same time, they’re not in a rush. Last year was the first year in many, many years where the Fed tightened more than was priced in the beginning of the year. This year, I would think the same thing can happen again and what has happened over the last week to ten days is that rate hikes expectations has come down quite significantly, obviously, partially because of what happened in Italy.

Now, that said, 85% of the U.S. economy is domestic, 15% is international. And so, unless Europe blows up the next day, I don’t think the Fed, in the near term, can change course. Also, keep in mind, by the way, just a word back on Italy. Italy has had about one government a year. And so even if they have a new election, even if they elect a more populist government, odds are that their new government is not going to survive very long. There’s a European parliament election next year and the two populist parties, if the two are going to buddy up, and that’s still an if, they might get into an argument because, ideologically, they’re not exactly aligned.

And so, a lot of things can happen, and the Fed is not going to pay attention to that because they going to say “Hey, if something does blow up in our face, we can still reverse course”. And so, it’s very different from the Yellen Fed in early 2016, when it was spooked about equity markets going down. And the reason they were spooked about it is because access to credit in the fracking industry was at risk of spilling over to the rest of the economy. At this stage, we see no signs that access to credit is tighter, so they’ll continue to march ahead.

Now, what does it mean for metals? It doesn’t necessarily mean it’s bad, because the pace at which they’re moving is very slow and, by the way, we are already at extremely low unemployment. The labor participation rate is slowly inching higher. I happen to think that in about six months we’ll have exhausted that so-called slack, which means inflationary pressures are going to accelerate. And that’s exactly when the Fed is going to be at a point where it’s going to slow down the economy. And so, we going to have this inflationary push at the end of this economic cycle where the Fed is, in my view, not going to be fast enough to do something about it. And then, because of the higher rates causing more volatility in the markets, in my view, all of that are reasons why precious metals historically, do reasonably well at the end of an economic cycle, which we’re going to see presumably a year from now, or whenever it’s going to be.

Mike Gleason: Yeah. Very well put. There’s a lot of things circling about, and I think you summarized that all very well. As we begin to close here, any other news stories that you’re going to be watching closely as we progress throughout the year, Axel?

Axel Merk: Well, we’ve got a European Central Bank meeting in June 14th. So, in the short term, that’s probably the most interesting event. Whether anything is going to happen, the one thing that Mr. Draghi is not going to do is he’s not going to take options off the table, which means he’s not going to announce the end of QE. There might have been an early chance for him to do it, but, with what’s happening in Italy, he’s not going to do it.

The one thing to keep an eye on there is, what I think may happen in the Eurozone is that they have indicated they’ll stop QE before they’ll start tightening. I wouldn’t be surprised if they’ll get more flexible in that. Meaning that they’ll start hiking rates. At the same time, at some point, if the crisis were to escalate, Mr. “Whatever-It-Takes” Draghi is going to say “Hey, but, we’re not going to allow Italian bonds to trade at too much of a premium” and so to interfere in the markets that way. But they have to, in my view at least, get off that negative interest rates because it’s creating havoc in the rest of the Eurozone that’s actually doing quite well. So, he might, again, pull up some ace up his sleeve where he’s going to say “Yep, rates are going to move higher, but only for Germany and the Northern European countries, whereas, for Italy and others, we’ll guarantee that rates are not going to move higher”.

And before you dream too far ahead, just keep in mind, Draghi’s job is coming to an end at the end of next year, so, as we go towards the end of this year, people are going to speculate who’s going to succeed him. But that’s a story for another day.

Mike Gleason: Yeah, we seem to be focusing a lot of our interest on Europe, once again here. It seems like we’ve been down this road before.

Well, good stuff as always, Axel. It’s great to get your perspective on these matters and we look forward to catching up with you again later this year. Now, before we let you go, please tell listeners a little bit more your firm and your services and then also how they can follow you more.

Axel Merk: Sure. The firm is, my name, Merk Investments. Look us up. Sign up for our newsletter on our website. Follow me on Twitter, that’s really the best way to be in tune of what is happening there. We have several funds, including a gold fund. And we provide some services to institutions and other folks. But come to MerkInvestments.com and browse around.

Mike Gleason: Excellent stuff. Thanks again, Axel. Appreciate your time and hope you enjoy your summer and thanks for joining us again. Take care.

Axel Merk: Yep. My pleasure. Take care.

Mike Gleason: Well, that’ll do it for this week. Thanks, again, to Axel Merk, President and Chief Investment Officer of Merk Investments, Manager of the Merk Funds. For more information, be sure to check out MerkInvestments.com and follow him on Twitter. His handle is @AxelMerk.

Check back here next Friday for our next weekly Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

*About the Author:

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

Ted Butler Discusses the Great Silver Fraud

Ted Butler is nothing but obsessive on what he sees as a huge criminal fraud in the multi-year manipulation of the silver price by big money players with the apparent complicity of the regulators.  But his obsession is almost certainly rooted in truth.  No-one studies this market quite to the extent Ted Butler does.

In his latest posting on silverseek.com he likens Comex activity on silver to the recently uncovered Theranos medical diagnostic fraud in an article entitled Great Frauds Require Darkness – the main difference being that the Theranos fraud only had a life of nearly 15 years before the company behind it came crashing down, while what Ted sees as the Comex silver fraud has been in place now for more than twice as long and is still ongoing, with far more powerful vested interests supporting it.  As ted puts it “all the leading legitimate participants and regulators have aligned themselves to prolong the fraud.

You can read his full article by clicking on the following link:  Great Frauds Require Darkness