The great gold, silver and pgms futures scams

Mike Gleason of Money Metals Exchange interviews Craig Hemke of TF Metals Report who looks at the recent surge in the palladium price and some disturbing anomalies regarding paper metal in the precious metals market

Mike Gleason: It is my privilege now to welcome in Craig Hemke of the TF Metals Report. Craig runs one of the most highly respected and well-known websites in the entire industry and has been covering the precious metals for a decade now, and he puts out some of the best analysis on banking schemes, the flaws of Keynesian economics, and evidence of manipulation in the gold and silver markets.

Craig, welcome back and thanks for joining us again. How are you my friend?

Craig Hemke: I’m fine, Mike. Thank you for the kind words. I very much appreciate it. It’s always a pleasure to visit with you.

Mike Gleason: Yeah, likewise. Well, Craig to start out today, I want to go a little unorthodox here and ask you about palladium. You’ve been covering developments in that market closely. As we’re talking today, we’re seeing palladium higher than gold now, and the potential ramifications of what we’re seeing in the palladium market could be significant for all metals.

So, if you would, set the stage here and give our listeners a summary of what you see happening there. Lease rates have been exploding higher and that just might be signaling a serious problem for the LBMA. Please explain a little bit about metals leasing and what the dramatic moves in palladium might mean, Craig. And hopefully after you do that, our audience will understand why we’re leading off with that topic in this interview.

Craig Hemke: Yeah, that’s the significance of it Mike. You’ve touched upon it. I guess in a sense, I wish I would have started the TF Palladium report back in 2010 because prices have about tripled since then, and it’s been a better performer than gold and silver. And I’ve seen stuff today about people writing about how all of a sudden with palladium spot prices exceeding gold that that’s something significant. It’s not. That doesn’t mean anything, because they’re not interchangeable. It’s really an apples and oranges thing. What matters in the palladium price is that it’s breaking out to new all-time highs, and the circumstances behind this move.

Personal history, back in 2001, palladium ran from $400 up to $1,100 an ounce over the course of about nine months. And it was all in the back of what was clearly a demonstrable supply shortage at the time, primarily in London because the futures market is pretty small in New York. As legend has it, President Yeltsin, who was eager to curry favor with the west … think of this as just past cold war time, was quick to supply physical palladium to London to be delivered in what was a supply squeeze. It had driven price up that far.

Russia supplies about 40% of the global palladium supply and price then crashed, went back down from $1,100 to $400 over the next nine months. So it was a full roundtrip. Price then came up again to $1,100 about this time last year, and for a while it looked like it’s a clear double top on the chart, but it has since exploded since August. It’s gone from $800 now to $1,200 over the last four months.

And behind this move and the significance of all of this for gold and silver investors is this supply squeeze that’s clearly there. How can I say that? Two things: One, the lease rates in London that you mentioned … David Jensen reports that yesterday a one month lease rate for palladium in London was 22%. Let me repeat that, okay? Traditionally it’s about zero percent, right? You look at the gold lease rates, silver lease rates are always zero to one percent. If you want to borrow my palladium so that you can deliver it against your short obligation or deliver obligation, I’m not sure I’m going to get it back because it’s in such short supply. Therefore, I demand you pay me 22%, okay? That’s up from 15% the day before. It’s up from 10% last week so that’s evidence of the growing shortage.

You can also look at a traditional measure which is backwardation. In futures trading you usually get contango, which means that the spot price is a little bit less than the front month futures, which is less as you go out the board, the price gets higher… that’s contango. That’s how boards are usually structured. In palladium, at present, it’s backwardation. The spot price is about $1,250. The front month futures is about $1,230 and as you go out to this time next year for a … I guess we’ll call it a futures delivery in New York, it’s about $1,150 so you have about $100 in backwardation. That’s also evidence of supply shortage.

Now, putting this all back together; if this in fact, happening like it did in 2001, I don’t think President Putin is going to be as accommodating at this time as President Yeltsin was. If, and this ultimately, now that everybody has this background, this ultimately is why this matters. If the physical palladium market in London begins to fracture and dissolve, and the LBMA palladium market gets exposed for what it is, which is a series of leases and promissory notes and unallocated accounts and all this kind of stuff, then that is going to shed light on the LBMA gold and silver markets, which are similarly a series of leases and fractional reserved, unallocated accounts and the like.

So what my hope is, and why I’ve paid such attention to this over the last couple of months, is that the world will wake up and go, “Well, hold on. Wait a second. Time out. If the palladium market is structured this way and it just blew up, there’s nowhere near the amount of supply of palladium as these paper markets would imply, well holy cow, maybe the gold and silver markets deserve our attention too.”

So, I’m not advising anybody to buy palladium coins and stuff like that. I mean, I’m sure the banks will do everything they can in their power to rig price back down. They’ll probably be successful. But the hope with palladium is that it will shine the light … draw attention to at least, the scam, the fraud of this fractional reserve and paper derivative pricing scheme, and then that’ll trickle over into attention in gold and silver.

Mike Gleason: It is interesting that all of the action the palladium markets isn’t showing up in platinum. Palladium is in the platinum group of metals and shares many of the same properties. When it comes to use in catalytic converters, which drives a lot of demand for both metals, some argue the two metals are pretty much interchangeable. The implication is that car and truck makers will happily switch to platinum if they can save a few hundred dollars per ounce, but so far there’s no indication this is happening. What do you make of the price disconnect between platinum and palladium? Is palladium perhaps the only precious metal that isn’t under the thumb of the Bullion Bank cartel?

Craig Hemke: I wouldn’t say that, Mike. I just think it’s solely focused on the dynamics of the scam of the palladium market, which again is the same scam of the platinum market, which is the same scam of the silver market and the gold market. It’s that the palladium market is fractured. That’s what the 20 plus percent lease rates are telling you. That’s the backwardation of the board is telling you. They’ve set price. Price is determined and we, as a world, allow price to be determined by the trading of derivative contracts which have nothing to do with the actual supply of the physical metal. I mean, that’s why the gold-silver ratio is 80 to 1. “What do you think of the gold/silver ratio?” I think it implies that there’s far more silver derivatives than there are gold derivatives, at least on a historical basic because if we price these things based off of these derivatives which the banks create and then take away at a moment’s notice.

They feed in supply demand of the derivative to set the price of the physical piece of metal. So this movement in palladium is specific to palladium and the physical metal not being there to settle current demands that are made by this paper system. That’s still how you get the 22% lease rates. Can’t wait to see what happens tomorrow, Mike, and next week. Again, what you’ve seen this week is that price rallies during the European session and the Asia session, and then gets blasted backward each of the last four days on the COMEX, where it’s just paper trading. The banks can create paper contracts, and sell ’em short and push the price back down just like they do in gold and silver.

But at some point, that becomes a losing proposition. We were headed that way in 2011 in silver. I mean, we probably don’t need to go through that history lesson. What happened? You got five margin rate hikes in nine days. You got the massive rate on May 1, 2011. JPMorgan, which had a huge short position then, but no vault magically was allowed to create a new vault, a silver vault, and over the course of a couple of weeks and now they’ve got 150 million ounces in their vault.

All those steps were taken to get the silver price back under control so that wouldn’t break this paper slash physical silver market. They may take the same steps in play. Maybe they’ll move to a liquidation only event on the COMEX like they did to the Hunt Brothers in an attempt. This is a physically driven thing which it appears to be out of London, they’re taking some major risks. They being the banks, if they’re going to try to rig price lower through the derivatives in New York.

Mike Gleason: What kind of world would it be for metals investors if we actually had the physical metal setting as the price-setting mechanism instead of the paper derivative market? Gosh, that would be quite a pleasant change.

2018 has been another difficult year in the gold and silver markets. The Fed has been hiking interest rates and until recently, at least, pretty much getting away with it. The dollar has moved higher. It has been risk-on on Wall Street for much of the year and the sentiment around precious metals has been lousy, but there is some reason for hope. It looks like the Fed’s free ride may be over, or at least coming to an end before much longer. Stock prices are taking a beating here recently, and things are getting squirrely in the bond markets.

Now you think metals investors may have some good reason to smile over the next few months. What are you expecting over the next few quarters, Craig?

Craig Hemke: Well, I was excited at the end of 2015 when we put in those lows, that were the bear market lows. Everybody thought $800 gold and $8 silver was coming, and I planted my leg and I said, “No, this looks like we’re going to rally.” We rallied far beyond what I thought we were going to get. We got 30% in gold and 50% in silver. And then the clamps came down and Trump was elected and all the sudden, the narrative was shoved down our throats about how the economy was going to soar and all that kind of stuff, and we’ve not had much happen ever since.

I would point out though, that that year, 2015, was just one of the last four that has seen prices rally out of the December FOMC, the middle of the month, tax loss selling behind us, all that kind of stuff, rallying to the end of the year and then into the first quarter. And I have little doubt that that’s what’s going to happen here this year as well.

Then, as you mentioned, where everybody seems to think that next year is this easy, predictable thing and the Fed’s going to hike rates three or four times, the economy’s going to grow. “Oh no, there’s no recession until 2020” and that kind of stuff. That’s garbage.

You mentioned the bond market. The yield curve is inverting. Got all the way down to less than 10 basis points between a two year note and a 10 year note back on Tuesday. Yield curve inversion always precedes recession, and then you’ve got effects of the tariffs. You’ve got the effects of … I mean there’s going to be 101 different investigations of Trump next year from the Democrat House. All of that is going to impact consumer confidence. The economy is going to slow. By mid-year, the Fed will certainly have halted … they’re going to hike in December. Who knows if they’ll try again in March, but there ain’t going to be four hikes next year.

By the end of the year next year, we’re going to be talking about a resumption of QE because of all of the stuff that I’m talking about. You know, and another thing no one’s talking about is maybe a lack of a Brexit deal and maybe a second referendum. And what if the Brits vote next time that they don’t want Brexit? Well, then the euro’s going to soar, and the euro makes up 60% of the dollar index. That means the dollar is going to crash. Well, nobody’s factoring that in. All I hear is from dollar bulls is about how it’s going above 100 because “King Dollar” and all that garbage, so I think a lot of the forces are aligning, all the way down to the CoT (Commitment of Traders) positioning and the managed money that’s still heavily net short, both metals.

All the forces are aligning for a big first quarter, that I think will carry on through the year. And frankly, again, maybe I’ll be dead wrong, but I think 2019 is going to the best year for gold, and silver too, since 2010 because of a lot of the same situation that prevailed in 2010; slow economy, pickup of QE, all that kind of stuff. That’s all coming back next year and I think investor sentiment will return. Flows of funds will return. The shares are going to do great. It’s just a matter of just kind of navigating our way through these next couple of weeks before this becomes more apparent to everybody.

Mike Gleason: Over the years, you’ve taken some abuse for calling out the chronic cheating and manipulation going on in the futures markets. We’d like to think, given all the evidence now piling up, that the argument over price rigging is now settled. The bullion banks have been running a crooked casino and swindling metals investors for years, if not decades.

John Edmonds, a former JPMorgan trader, has agreed to cooperate and has implicated other people both inside and outside the bank. The FBI and the Department of Justice seemed to be doing what the regulators, and the CFTC in particular, failed to do for so long. They are prosecuting a mass of fraud. What do you make of the DOJ’s involvement and the recent developments? Will the bullion banks finally be held to account here?

Craig Hemke: I wouldn’t hold my breath. I think it’s interesting that the Department of Justice is involved. I think everyone should’ve read, or should read the update on that case, because even in the press releases from the Department of Justice, they went out of their way to not name JPMorgan. People had to research this Edmonds guy and figure out who he worked for on their own. The Department of Justice just wanted to say “a US bank” was all they would say.

This guy then went on to say what he did was just one instance, one guy, but he had the full support of all of his superiors. And then I also read that, “Don’t worry, he’s just a low-level guy.” He was a vice president. Anybody that’s ever worked for a multinational major corporation knows that once you make the level of vice president, you’re kind of a made man, okay? So this wasn’t just some doofus in a cubicle, right?

Anyway, all that said, the only people that deny this or try to spin it in a certain way as a one-off are all people who have a vested interest in protecting their own golden spoons, if you will. They all have their skin in the game. They sell newsletters where they purport that the markets are free and fair and thus you can count it in waves of C and 3 and all that kind of garbage, and if they were to admit that a certain market was manipulated, well, then their customers are going to go, “Well, wait a second. Why am I paying you to give me this information if it’s all just manipulated?”

So they’ll fight until their dying day that markets aren’t manipulated, when anybody with eyes in their head can see that they are. And it’s not just gold and silver. If I can just spin off to the stock market in a second. Look, I’m an observer. I watch this stuff every day, and not very many people get to do that. They have their own skin in the game, they’re trying to trade it and all that kind of stuff and that gives them biases.

I just observe, and I can tell you from my observation of the last eight or ten years, that the stock market is almost entirely manipulated. “How can that be? It’s trillions and trillions of dollars.” Well, to manipulate the market, you don’t have to buy trillions of dollars of stocks. You just have to get the Algos, the hedge fund machines that control trillions of dollars to do the lifting for you, and how do you do that?

90% of the stock market volume each day is high-frequency trading computers run these hedge fund machines. If you can move the inputs, that these machines use to make their buy/sell decisions of S&P futures, then you can move the market, and what are the two key inputs? You go long the dollar-yen, and you short the VIX. Anybody can pull these up on a daily basis, watch them all minute by minute, tick by tick. You can see the clear footprints, the clear fingerprints, whether it’s the Federal Reserve Bank in New York and their massive trading desk, or whether it’s the primary dealers, they go in there. They move one or two of those indicators, or both. The machines then respond. Magically, the decline stops and up we go. It’s not some C way B of sub-sector X, whatever, kind of Elliot Wave nonsense. It’s direct manipulation to create a result.

It’s not, again, not just in the gold and silver markets. It’s in the stock market. QE is utter manipulation of the bond market and interest rates. Central Banks globally intervene and manipulate in Forex, and so for these jokers with their newsletters to sit there and say, “No, gold and silver are these pristine sacrosanct things that aren’t manipulated, they’re comical with their views. It’s asinine. So, anyway, I’m sorry, probably didn’t like the answer, but I’ve had too much coffee today as you can tell.

Mike Gleason: Well, as we begin to wrap up here, Craig, give us any final thoughts here. Maybe some of the data points or market events that you’re going to be looking at that will be an indication that either things are going to happen as you’ve laid them out in 2019, or perhaps something that could derail your theory that next year will be a banner year for the metals. Touch on that if you would as we begin to close.

Craig Hemke: Well, I think what’s priced in, Mike, is this again, this is just continuation of what has happened this year. Again, I don’t think that’s going to happen at all. I think the first thing we got to get through is this FOMC meeting in two weeks. There’s going to be a rate hike, but people are really going to parse the changes to the statement that we call the Fed lines and see if that’s any indicator of what’s going to happen next.

There is no way the Fed’s going to hike three or four times next year because already, the ten year note is where it was back in February and the Fed has hiked three times since, so they’ve flattened the yield curve by 75 basis points. They’re pushing on a string to get long rates higher. It’s just not going to happen. There’s too much cash looking for a home.

That’s going to be the big thing, is the economy is going to begin to visibly slow. Confidence is going to crash; all these investigations of Trump. The dollar is going to reverse and trend lower, and all these things are going to create a really good, positive … I don’t want to call it perfect storm, but a great environment even for these digital derivative gold and silver on the COMEX that sets price.

I guess the one fly in the ointment that we’re going to have to watch closely, and I would just leave everybody with this: the key driver of that COMEX price this year has been the Chinese yuan and its relationship versus the dollar. If the yuan strengthens, gold goes up. If the yuan weakens, gold goes down. It has been prevalent all year long. It has been almost tick-for-tick since April. You can see it this week and the reaction to the discussions over the weekend at the G-20. They’re moving almost tick-for-tick.

China has devalued the yuan in the face of the trade war, and that has then pushed gold down. I mean, we don’t have to go into why and all that kind of stuff, but it’s clearly happening, and so what we’re going to need though at some point next year is a disconnect of those two, or a cessation of the trade war that allows the yuan to appreciate versus the dollar. And I think that’s coming.

I think Trump, and you saw first this weekend with a little bit of capitulation, with the whatever 90 agreements they have, but Trump’s going to look around. He’s going to see the faltering economy. He’s going to see the falling stock market. There ain’t going to be these 25% tariffs. He’s going to settle for much more generous terms than he’s currently offering with the Chinese.

That’s going to allow the yuan to appreciate, and even if the two don’t de-couple, that should also benefit higher gold prices too. So, that would be the thing though. If somehow that doesn’t happen, and the yuan continues to devalue and breaks down through seven-to-one versus the dollar, that’s going to keep pressure on gold regardless of all the other stuff that we’ve talked about, so hopefully all that comes together and like I said, we have a fantastic year next year. It’s certainly all set up to have it play out that way.

Mike Gleason: Yeah, it seems like there could be a lot of fireworks coming together at a head at one time and going to be interesting to watch.

Well, great insights as usual, Craig. It’s always good to hear from you and we greatly appreciate your time today. Now, before we sign off, please tell everyone about the TF Metals Report and what it is that they’ll find if they visit your site.

Craig Hemke: Hey, Mike, thank you. I think it’s tremendous value. The subscription is $12 a month so about 40 cents a day. It’s two things: it’s my analysis every day that I think people use to, I guess, help them figure out when’s an opportune time to buy and sell, add to their physical stacks of metal. If I can save you a few bucks on price through analysis, telling you to wait or telling you to go, versus what I’m seeing, then that kind of makes this thing pay for itself. But it’s also an unbelievably great community of people that are like-minded, realize we’re all in the same boat together, and everybody’s out there helping each other to prepare for all of this stuff that’s assuredly coming; the end of the great Keynesian experiment, as we call it.

So, I encourage everybody to check out, it’s just TFMetalsReport.com. It’s a site like no other. That’s the feedback I get all the time, and I’m really proud of it, and I’d encourage people to check it out.

Mike Gleason: Yeah, we would encourage people too. We follow it very closely here. Craig, as you’ve just heard, has a fantastic handle on the markets, especially when it comes to metals and the things that drive it, you will do yourself a favor if you check that out.

Well, excellent. Thanks very much, Craig. I hope you have great holiday season and a wonderful new year. I’ll look forward to our next conversation as we discuss how this is all playing out. We agree that 2019 is shaping up to be a very interesting year. Until then, take care and thanks as always.

Craig Hemke: Thanks, Mike. It’s always a pleasure.

Mike Gleason: Well, that will do it for this week. Thanks again to Craig Hemke. The site is TFMetalsReport.com, definitely a fantastic source for all things precious metals and a whole lot more. We urge everyone to check that out so you can get some of the very best commentary on the metals markets that you can find anywhere.

And be sure to check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend, everybody.

 

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WORLD GOLD COUNCIL : Global gold-backed ETF flows are now positive in 2018

Holdings in global gold-backed ETFs and similar products rose in November by 21.2 tonnes(t) to 2,365t, equivalent to US$804mn in inflows, marking the second consecutive month of net inflows. Global gold-backed ETF flows are now positive in US dollar terms on the year.** The price of gold was little changed (+0.2%) and global assets under management (AUM) rose by 1.1% in US dollars relative to October.

**See note on tonnage/ flows differences below. ** 

Global stock markets remained volatile, although they ultimately ended the month mixed. Oil performance was a key story as the commodity fell more than 22% on the month amidst supply concerns. The US 2/10 Treasury yield curve flattened to near-low prices on the year as investors became concerned that US economic conditions may have peaked and could be showing potential for a recession in either 2019 or 2020. Long-dollar hedged gold is now higher on the year, rallying over 6% in Q3 with the improving gold and US dollar pricing.

November flows were positive across all regions. European funds led global inflows, with strong flows into UK-based funds as Brexit concerns increased and sterling weakened. North American funds saw inflows for a second straight month but remain negative on the year. Asian funds reversed two months of weak performance adding 2.3% to their assets.

Overall, gold trading volumes remained flat m-o-m, 10% below the y-t-d average. The LBMA announced a new reporting system for gold OTC trading volume (LBMA-i), which provides improved transparency into the liquidity of the gold market. Sentiment and positioning in COMEX futures remain bearish, well below historical averages. As discussed in our recent note Gold recoils amid selloff but may rebound, extreme bearish positioning in futures has historically preceded strong rallies in the price of gold.

Regional flows 

  • • Holdings in European funds rose by 10.5t (US$372mn, 0.9%)
  • • North American funds had inflows of 8.4t (US$353mn, 0.8% AUM)
  • • Funds listed in Asia increased by 2.1t (US$72mn, 2.3%)
  • • Other regions saw a small increase in holdings of 0.2t (US$7mn, 0.6%)

Individual flows 

  • • SPDR® Gold Shares led global inflows, gaining 7.7t (US$309mn, 1.1%), followed by iShares Physical Gold which gained 5.4t (US$207mn, 6.3%), and Gold Bullion Securities 2.1t (US$82mn, 2.7%)–both in the UK–as well as Huaan Yifu Gold, in China, which added 2.7t (US$104mn, 13.3%)
  • • Low-cost gold-backed ETFs in the US continue to add assets as strategic holders increase holdings***
  • • Funds with outflows were few but were led by Invesco Physical Gold, which lost 2.0t (US$ 78mn, 1.8%) and Bosera Gold, which was down 1.1t (US$45mn, 9.5%)

Y-t-d flows 

  • • Collectively, US dollar flows in gold-backed ETFs are now positive having raised US$354mn (40bps), despite the recent trend driven by a strong US dollar and bearish gold market sentiment**
  • • North America reported a second monthly inflow after six consecutive months of outflows but remain negative on the year by 50.0t (US$2.1bn, 4.6% AUM)
  • • By contrast, European funds continue to see net positive inflows with $2.9bn coming in (7.1% AUM) y-t-d
  • • After starting the year strong, Asian funds have given up all their gains and are now negative losing 1.5% of their assets y-t-d

**Note: We calculate gold-backed ETF flows both in ounces/tonnes of gold and in US dollars because these two metrics are relevant in understanding funds’ performance. The change in tonnes gives a direct measure of how holdings evolve, while the dollar value of flows is a finance industry standard that gives a perspective of how much investment reaches the funds. This month, the reported flows measured in tonnes of gold and their dollar value equivalent seem inconsistent across regions. Both figures are correct. The disparity due to the interaction between the performance of the gold price intra-month, the direction of the dollar, and the timing of the flows. For example, Europe experienced outflows early in the month when the price of gold was low but gained assets later in month when the price of gold increased. 

***Low-cost US-based gold backed ETFs are defined as gold-backed ETFs that trade on US markets with annual management fees of 20bps or less

China’s SGE Gold Withdrawals still slipping but up year to date

The latest figures for Shanghai gold withdrawals in November have now been released and they are down a little on 2017 and a bit more on 2016, but the cumulative year to date figures are still up:

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month   2018 2017 2016 % change 2017-2018 % change     2016-2018
January   223.58 184.41 225.08 +21.2%  -0.7%
February*   118.42 148.24 107.60 -20.1% +10.7%
March  192.61  192.25 183.24  +0.2%  +5.1%
April  212.64  165.78 171.40  +28.3% +24.1%
May  150.58  138.08 147.28  +9.1%  +2.2%
June  140.59  155.51 138.51  -9.6%  +1.5%
July 137.41  144.71 117.58  -5.0%  +16.9%
August  190.59  161.41 144.44 +18.1%  +32.0%
September  188.12  214.24 170.90  -12.2%  +10.1%
October*  142.94  151.54  153.25  -5.7%  -6.7%
November  179.08  189.10  214.72   -5.3%  -16.6%
December  185.21  196.37
Year to date 1,876.58 1,845.34 1,774.00 +  1.7% +5.8%
Full Year  2,030.48  1,970.37

Source: Shanghai Gold Exchange.  Lawrieongold.com

* Months include week long New Year and Golden Week holiday periods

For additional comment on the above click on the below link to my article on the sharps Pixley website:

Chinese gold demand slipping – but still up y-o-y

A Free and Fair Gold & Silver Market in 2019? What are the Chances?

JPMorgan Chase and a number of other bullion banks are in a whole lot of trouble. Evidence detailing years of rigging markets and swindling clients is piling up.

Deutsche Bank pleaded guilty two years ago and forked out over hundreds of thousands of documents. John Edmonds, a former JPMorgan trader, entered his own guilty plea last month and turned state’s evidence.

The carefully cultivated system of captured regulators may not help the banks this time.

FBI investigators and Department of Justice attorneys are involved now. This investigation is out of the hands of CFTC bureaucrats who hope to avoid rocking the boat and/or land high paying jobs on Wall Street someday.

The DOJ might be ready to actually prosecute crimes this time around. Bankers may have to explain to criminal juries what they have been doing. When they have finished, class-action attorneys and civil juries will get in on the action.

Perhaps for the first time since metals futures began trading, the possibility exists that crooked bankers will be held to account. There is still a long way to go, and there is certainly plenty of reason to doubt the Department of Justice will live up to its name. But there is hope.

Recent Prosecutions Could Spark and End to Fake Markets for Precious Metals

Fake Markets

It is never too early for market participants to be thinking about what free and fair metals exchanges might look like.

For starters, electronic metals markets need a direct, unbreakable connection to physical supply and demand.

Banks should not be able to meet extraordinary demand for metal with an unlimited supply of paper.

There are days during which futures contracts purporting to represent the entire annual mine production of silver trade on the COMEX. Yet, once all the furious trading is over, barely any actual silver changes hands. That must end.

High frequency trading must also go away. The system which allows preferential treatment for banks and institutions, is, predictably, being seriously abused. It is another way for Wall Street to divorce electronic trading in metals from physical supply and demand.

The metals markets need a lot more accountability. Notwithstanding the impending DOJ action, and any civil judgements which may follow, the bullion banks and other crooked traders have been operating with impunity for decades.

Regulators don’t seem interested or able to enforce fair play. Market-based solutions, backed with the genuine threat of prosecution and jail for those who break the law, are worth a try.

It should be easy to launch a metals exchange. Anyone with an idea for better mousetrap should find the barriers to entry as low as possible. And if they cheat, they should not be able to do what Deutsche Bank did in 2016.

The bank, as an institution, pleaded guilty. Not all of the individuals involved will face charges for their crimes. The fines and restitution will mostly be paid by the bank’s shareholders – not the actual crooks.

There might already be a metals exchange which offers fair treatment to participants if it weren’t for the current stranglehold on financial markets. The Wall Street monopoly, enforced and protected by federal regulators, is the fundamental problem. It needs to be solved.

How the Bitcoin Bubble Burst Could Lead to a New Golden Era

by: Stefan Gleason*

One of the greatest asset bubbles of all time appears to have just burst.

It’s not the stock market. Despite recent downside volatility amidst bubble-like valuations, so far stocks have merely entered a correction.

Cryptocurrencies, on the other hand, have entered into a full-blown meltdown. Bitcoin will go down in history for its extraordinary rise from zero to a high of $19,783 on December 17, 2017. Its subsequent fall may be one for the history books as well.

Bitcoin Chart - November 11, 2018

In the second half of November, Bitcoin prices fell through a months-long trading range, triggering heavy selling down to around $3,500. Anyone unfortunate enough to buy Bitcoin at over $19,000 now faces a loss of more than 80%. Losses are also staggering for Bitcoin Cash, Ethereum, Ripple, and many others.

The story of digital currencies won’t just be a matter of their rise and fall, however. Some may bounce back. Bitcoin and its progeny may embark on another spectacular run to dizzying new heights.

Then again, they may not. Since the leading crypto coins aren’t backed by anything tangible, their value is entirely speculative.

It’s not just radical libertarians and black market merchants who value decentralized alternative payment systems. Such alternatives have the potential to offer practical advantages to users, such as avoiding fees on international cash transfers or credit card transactions.

Assault on Politically Disfavored Businesses Continues

Cryptocurrencies

For some, finding alternatives to conventional financial tools is a must. Banks and credit card processors are increasingly denying services to customers for their political views.

It happened recently to one of the most prominent alternative social networking sites, Gab, merely because it allows controversial views to be expressed by its members – in the same way that a viewpoint neutral email or telecommunications provider does.

Gab founder Andrew Torba recently posted this message to his followers:

Gab has been denied by multiple banks during the underwriting process for a new payment processor. Multiple processors supported us, their banks did not.

Gab is the supreme example of why bitcoin exists. We will be integrating BitPay asap because Coinbase already banned us.

Outside of this we will be setting up a PO box to mail cash/checks to.

This is what we need to resort to in order to have any revenue. This is the level no-platforming has reached.

As the threat of ideologically motivated financial de-platforming by banks and payment processors grows, so does the need for robust alternative payment systems. However, as noted by Torba, major Bitcoin exchanges such as Coinbase are behaving like politically correct bank intermediaries – blacklisting people they don’t like from the crypto marketplace.

They are also collecting personally identifying information on their customers and handing it over to the IRS. The only way Bitcoin holders can absolutely guarantee their privacy is to never put their transactions on the blockchain ledger – i.e., never use their Bitcoin for anything.

The problems with Bitcoin are numerous – slow transaction confirmations, excessive energy consumption, and risk of loss due to loss of digital key, theft, fraud, and potential government crackdowns.

The biggest fundamental problem with Bitcoin and other unbacked cryptos is the lack of any sound basis for valuation. That is a problem that can be addressed by putting real assets on the blockchain, but a degree of counterparty risk would remain.

Overstock CEO Patrick Byrne is investing in blockchain businesses that aim to tokenize publicly traded companies. He sees this as a way to decentralize Wall Street and end share price manipulation by large institutional traders.

Gold-Backed Cryptos Are Not Yet Safe

Gold bugs are eyeing digital currencies backed by physical precious metals. There are many technical and legal challenges still to be worked out, and there are likely to be a few scammers in the mix as well.

But optimists hold out hope that one day it will be possible safely and reliably to use gold or silver on the blockchain to buy shares of stock or perhaps even real estate all without having to convert to dollars or go through the banking or brokerage system.

Digital gold could emerge as a leading default store of value in lieu of dollars or Bitcoins – which would drive huge new demand for the metal.

That’s the bullish case for blockchain and its possible integration with sound money. There is also a bearish case.

What if governments and central banks co-opt the digital currency space as part of a war on cash?

International Monetary Fund chair Christine Lagarde suggested in a recent speech that if central banks issues their own cryptocurrencies, they “could satisfy public policy goals, such as financial inclusion, and security and consumer protection; and to provide what the private sector cannot: privacy in payments.”

Globalist central monetary planners may claim to have our “inclusion,” “security,” “protection,” and “privacy” as their primary concerns. Their real concerns are to drive out competition to fiat currencies and accelerate the move to an all-digital economy where paper bills and coins are abolished and private transactions are impossible.

Federal Reserve officials have so far denied they plan on issuing a digital “Fedcoin.” But they have looked into it.

In the dynamic and rapidly evolving alternative currency space, it is impossible to predict exactly what new government interventions, technological innovations, or market iterations will drive the next major trend.

Precious metals may play a growing role in backing alt-coins. Either way, they will continue to play an important role in the portfolios of investors who want to protect themselves from the risks inherent in digital and paper wealth.

Love. Fear. Inflation. A Precious Metals’ Trifecta

by: David Smith*

Going forward, there are – and will continue to be – three primary drivers of global physical gold (and silver) demand.

During certain times in the past only one or two of these elements provided most of the momentum.

However, as we move into 2019, and for possibly the next 5-10 years, all three will be in play. They will operate synergistically to consistently motivate increased precious metals’ buying around the globe. This will happen, even as meeting that demand with sufficient new supply becomes problematic.

The term “synergistic” is used here on purpose. By definition, it relates to “the interaction or cooperation of two or more organizations, substances or other agents to produce a combined effect greater than the sum of their separate effects.”

The Three Demand Drivers for Precious Metals

Fear: Not just about social and economic unrest, but also – as prices begin to move up and away – fear of missing out!

People buy gold (and silver) as insurance, as an easily saleable for cash when needed option, and as a last ditch “get out of Dodge” ticket when the local currency has been “burned” due to government mismanagement and corruption.

Ask Vietnamese in the 1970’s or Zimbabweans, now in their second currency-destroying hyperinflation in recent memory. Ask Argentines facing their 9th currency-extinction event in modern history, or Venezuelans today.

Fear manifests itself today in the current roller-coaster ride of the larger stock markets (DOW/S&P, etc.), the student debt trigger (at almost $1.5t, much of which is in arrears), liquidity draining by the Federal Reserve, and record levels of overall U.S. debt.

Love: The Chinese New Year celebrations are coming into view… Gold demand from China and India (Chindia) has been consistently higher for the last decade – with no signs of tapering.

This is taking place because history and custom pretty much ordain it. With incomes rising in both countries, this solidly entrenched demand trend is set to continue for the foreseeable future.

China and India Gold Demand

Chindia – the 800 Pound Demand Gorilla

Inflation: For a number of years, an inflation vs. deflation debate has raged. Deflationary analysts believe that the coming massive debt repudiation, at some point inevitably taking place as the misguided, unpaid-for-spending is unwound, will take asset prices – including precious metals – down with it.

But this perspective fails to consider that central banks – foremost among them the Federal Reserve (simply a central bank by another name) will absolutely do everything in their power to avoid an asset crash.

Fed policymakers will print, literally and digitally, “as much as it takes” to keep this from happening.

They want and need inflation to keep their game going as long as possible. Not to mention that the government’s massive deficits get paid off in worth-less money. Politicians can continue spending paper promises, get re-elected, and reward their political allies.

Stewart Thomson of Graceland Updates identifies the critical distinction which practically guarantees that inflation will become the desired outcome, for as long as humanly possible. He states:

When a financial crisis is related to the private sector, it generally takes a deflationary form. When it relates to the government, it generally takes an inflationary form. The next super-crisis in the West is vastly more likely to be a government crisis, not a private sector crisis, and the place that crisis is most likely to take place in is… America.

The Gold Demand Engine Is Heading Toward a Supply Wall

The trend, if going against you, becomes your enemy. In spite of increased exploratory spending, new large gold discoveries are becoming less common, more costly to find, and taking increasingly longer to develop to production stage when they are located.

Annual Global Gold Discoveries

The discovery trend for large gold deposits is decidedly down.
(Courtesy Katusa Research, sources listed.)

Silver production, marching to its own supply drummer, is not looking all that robust either. At current mining rates, only about 9 ounces of silver are being mined for every mined ounce of gold. Yet the silver gold ratio is running around 85:1. Is something seriously out of whack?

Seven years after a major, but most likely not the major top in gold prices at around $1,900 the ounce, gold still shines brightly in the protect your assets department. Liquid, easily storable, fungible, easily divisible, and historically reliable.

Gold Price Has Crushed the Market So Far this Century

Over 20 years, Gold has outpaced stocks… and inflation.

In 2001, at the tail end of a 20-year silver bear market, Doug Casey said: At the top, people don’t look at fundamentals because they think they’re no longer relevant… At the bottom, they’re not looking because they just don’t care.

Sound familiar today?

What have the global ‘financial wizards’ learned since 2008?

In 2008, global debt totals were in the area of $170 trillion, to the tune of 275% of the world’s gross domestic product (GDP). Today those figures are above $250 trillion and well over 300% of GDP. Look at how little the world’s financial wizards seemed to have learned from the crises which literally came within hours of taking the entire global financial system down with it.

So if you haven’t taken this opportunity into declining prices to either establish a position in physical gold and silver, or have yet to “top off” your holdings, consider answering the

A Tale of Two Conferences – 121 and Mines & Money head to head

The past couple of weeks in London have seen two major mining-oriented conferences/exhibitions which in many respects went head to head in attracting participants.  What is perhaps ironic is that the individuals who run the conference organisation for the first of these to take place – the 121 Mining Investment conference- used to be the organisers for the other – Mines & Money – until they deserted virtually en masse a few years back to set up their own conference business.  This they have built up very successfully with events in London, Hong Kong, Cape Town, New York and Singapore and have expanded conference focuses from mining to oil and gas, technology and property.

Mines & Money on the other hand has retained its mining focus and has also expanded geographically from London to Hong Kong, New York, Brisbane, Melbourne and Toronto, but is now run by Beacon Events which does have other conference streams too.

The revenue generating patterns for the two events are somewhat different.  The 121 conference generates all its income from the organisations (mostly junior mining and exploration companies) which give 10 minute presentations to mostly sparsely attended delegate sessions, but generate most interest from meetings set up at their individual display areas in a 2-day event, but with free admission to qualified delegates.  It would seem that Mines & Money might have the edge here as it provides something similar, plus has more general ‘expert’ presentation slots over 4-days, and attracts a number of service companies and national exhibits, but makes its money from attendee fees as well as exhibitor and presentation charges.  However, talking to paying participants, it appears that the 121 event had more of a buzz, perhaps better networking and, in general, the paying participants seemed happier with the overall benefits which may have accrued.

In general the 121 conference’s event facilities, were perhaps better, being held at the old County Hall on the Thames South Bank; the catering was definitely better and the printed conference programme was streets ahead of that given out at Mines & Money.  The latter held its event at the Business Design Centre in Islington as it has almost from the start (its first event some 16 years ago was at the Excel Centre much further from London’s City Centre) but at this year’s event the organisers do, on the face of things, appear to have been cutting some of the costs involved – notably on the catering front and in the printing of conference materials.

Mines & Money also has a very successful associated Awards Dinner, organised by Mining Journal, the original founder of the whole series of Mines & Money events.

So which is the better event?  Both have their strengths, but for paying participating companies we think 121 may have the edge.  The venue, close to Waterloo Station is arguably more convenient and it definitely comes out ahead on facilities and ambience as it does for the catering and printed material pertaining to the speakers and participating companies.. Mines & Money has a much broader conference programme and more ‘expert’ speakers plus the Awards dinner so there’s probably room for both although Mine & Money may have to make more of an effort in future years to retain any dominance it may still have.

Banker admits gold price manipulation

By Clint Siegner – www.moneymetals.com

Gold and silver investors got a rare bit of good news on the enforcement front last week.

Manipulation

A trader from JPMorgan Chase pled guilty to rigging the precious metals futures markets.

John Edmonds admitted to cheating the bank’s clients and plenty of other people naive enough to expect fair treatment on the COMEX and other exchanges.

While this is by no means the first time a banker has been caught cheating, some aspects of this case are certainly worth noting.

Below is some detail on the who, what, when, why, and how of Mr. Edmonds’ activities at JPMorgan.

As part of his plea, Edmonds admitted that from approximately 2009 through 2015, he conspired with other precious metals traders at the Bank to manipulate the markets for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc.

Edmonds and his fellow precious metals traders at the Bank routinely placed orders for precious metals futures contracts with the intent to cancel those orders before execution (the Spoof Orders), he admitted.

This trading strategy was admittedly intended to inject materially false and misleading liquidity and price information into the precious metals futures contracts markets by placing the Spoof Orders in order to deceive other market participants about the existence of supply and demand. The Spoof Orders were designed to artificially move the price of precious metals futures contracts in a direction that was favorable to Edmonds and his co-conspirators at the Bank, to the detriment of other market participants.

In pleading guilty, Edmonds admitted that he learned this deceptive trading strategy from more senior traders at the Bank, and he personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.

Guilty JP Morgan Trader to Rat Out Other Gold Manipulators

Mr. Edmonds is ratting out some fellow traders, including more senior traders and immediate supervisors. It appears that JPMorgan will have trouble painting him as a “rogue” trader, as so often happens when an employee gets caught.

Maybe, just maybe, the trail uncovered here will lead to a high level executive spending some time in prison for rigging the metals markets. That would be a first.

JP Morgan

It is getting harder and harder for futures markets representatives to make the case that trading is even remotely free or fair. That is a good thing. We aren’t going to get honest markets in metals until confidence in the existing structure finally shatters and traders demand something better.

More guilty pleas, new convictions and additional evidence of systematic, widespread cheating is just what is needed for class-action lawsuits.

A handful of suits were launched when Deutsche Bank executives admitted to cheating and turned over piles of evidence in late 2016. Those efforts stand to get a nice boost from the Edmonds case, and perhaps we will see additional classes being formed.

Notwithstanding DOJ’s success here, private actions brought in the civil courts are more likely to hold crooked bankers fully accountable than the regulators who have been tasked with that job. The CFTC has yet to take responsibility for the complete and utter failure, so it is safe to assume that the agency remains captured by Wall Street.

It is telling that CFTC investigators spent five years investigating silver market manipulation, four of them during the time that Mr. Edmonds and his accomplices were operating with impunity at JPMorgan Chase. Yet that investigation was closed without asingle banker being charged with wrongdoing, to the dismay of silver and gold market whistle-blowers everywhere.

May be a great time to buy back into the gold majors

Summary and link to an article published on Seeking Alpha.com

Now May Be The Time To Buy Into The Gold Majors

Summary

The proposed Barrick/Randgold merger, assuming it is implemented, will likely lead to a positive re-rating of the whole sector.

Randgold’s management has been brought in by Barrick in an attempt to change the latter’s management philosophy for the better.

Barrick shareholders may not be happy with a greater involvement in Africa, but Randgold has seen over a decade of virtually uninterrupted growth, wholly in the ‘Dark Continent’.

A more liberal dividend policy is likely to be implemented by Barrick, in itself helping to stimulate investment interest.

The saying goes that the best time to buy into a market is when ‘blood is running in the streets’. After a series of mostly disappointing Q3 results, media and commentators have been climbing into the gold majors, and many of these have seen their stock prices sink to new interim lows. Now may thus well be the time to climb back into investing in these stocks as they are likely to be at, or near, their low points as long as the gold price remains where it is at the moment, or moves higher over the remainder of the year as we think it will…..

To read full article click on: Now May Be The Time To Buy Into The Gold Majors 

 

Dollar to Get Whacked, Catalyzing Gold & Silver Rally- Greg Weldon

Mike Gleason of http://www.moneymetals.com interviews Greg Weldon of Weldon Financial:

Mike Gleason: It is my privilege now to welcome in Greg Weldon, CEO and president of Weldon Financial. Greg has over three decades of market research and trading experience, specializing in the metals and commodity markets, and his close connection with the metals led him to author a book back in 2006, titled Gold Trading Boot Camp, where he accurately predicted the implosion of the U.S. credit market and urged people to buy gold when it was only $550 an ounce.

He is a regular presenter at financial conferences throughout the country and is a highly sought-after guest on many popular financial shows, and it’s always great to have him on the Money Metals Podcast. Greg, good to talk to you again and welcome back.

Greg Weldon: Thanks, Mike. My pleasure.

Mike Gleason: Well, Greg, let’s start by getting your update on what impact trade policy and tariffs may be having on the U.S. economy. We last spoke in July. Tariffs were just beginning to actually take hold. Since then, the President has imposed additional tariffs. Anecdotally, we have seen some effect. We’ve recently ordered some steel storage lockers for our client storage vaults and the price was increased 10% based on the higher cost of imported steel. There are also wholesale price increases coming on one line of the preparedness products we offer on our SurvivalGoods.com website. We can assume lots of businesses are experiencing the same sort of thing. Do you think tariffs are now having a significant effect? Is any of the recent weakness in the equities markets attributable to trade policy, do you think?

Greg Weldon: Yes, no, and yes. First of all, in the sense of is tariffs having an effect, absolutely. But maybe not in the way you think and not in the way you couched the question. What I find really interesting is the Fed just published a really comprehensive survey last week in which they asked businesses, manufacturing firms, I should quantify, but this is where we’re talking about in terms of trade … Manufacturing firms in terms of the impact of tax cuts versus the impact of tariffs. And the results were fascinating, because the impact of tax cuts was dramatically positive, as you might suspect. But what you might not have suspected was the impact of tariffs, which were there a degree of percentage of firms which had negative impact from tariffs? Yes. I don’t remember the exact numbers, but it was somewhere less than 20%.

At the same time, there was roughly something like 13% of firms that said that tariffs actually helped their businesses in terms of generating high revenue and to whatever degree there would be benefits to certain businesses, so offsetting and mitigating the negatives of the 20%, the 13%. So the net-net negative was not as big as you might think and was overwhelmed by the positives still from the tax cuts. We know that to be true as it relates to labor, stock buybacks, and even wages.

I think from the U.S. economic slowdown perspective not a big deal, and that’s what Trump’s counting on. But the bigger picture, absolutely an impact, because it’s affected China so much, and China was already slowing. So the GDP numbers that came out, and you know that we look at most things from a mathematical perspective, and one of the knocks on China is the slowdown in retail sales, the slowdown in money growth, the slowdown in GDP growth, the slowdown in industrial production and FDI.

But the nominal numbers are so high in trillions of renminbi that of course you’re going to have a percentage slowdown, because you came from such a low base. So something like retail sales, you’ve gone from a 15% year-over-year rate to 9, and everyone’s up in arms because the consumer in China’s slowing. No, it’s a record number every month. It’s just a lower percentage gain because the nominal numbers are so huge now.

But right here, the third quarter numbers, were different. There was real weakness, and it’s kind of even ahead of tariffs, which are going to cause more problems for China. We already see inflation on the rise. We see commodity prices in renminbi breaking out here, big thing that nobody’s really talking about too much. And the renminbi’s about to take out 7, probably going to 7-1/4. So yes, major impact, but it’s on China.

Then you see the flow through to how this affects the U.S. and how this affects other global markets, and this coming at a time when you have a lot of other things going on: The Fed, what’s happening with emerging markets, how emerging markets, specifically Turkey, might flow into Spain, and how Europe is vulnerable. So, there’s a lot more than just tariffs going on. Yes, there’s a major impact, but it’s not on the U.S. economy. It’s in the market vis-a-vis what’s happening in China as a result.

Mike Gleason: That leads me right into my next question. The President has said he would prefer to have trade without tariffs. He is imposing them as a tool to negotiate more advantageous trade deals. What do you think of the strategy here? It looks like obviously the Chinese economy is in trouble and maybe they will be more willing to negotiate, but we aren’t sure the U.S. is in nearly as strong a position as the president thinks.

If you look at the balance sheet of trade on goods and services, yeah, it appears they need us more than we need them. But that is ignoring the fact that the United States is the world’s largest exporter of debt and inflation. We need trading partners to keep buying Treasuries and keep taking our dollars in exchange for stuff. So, how would you rate the President’s chances of winning, given what we have to go on so far?

Greg Weldon: Well, you hit on all the pertinent points there, Mike. We could have a three-hour conversation just on this one topic, this specifically. But I’ll give you the short answer, and we said this before potentially on your show, is the strategy here is pretty simple. I mean you have two guys, doused in gasoline, holding matches, lit matches. The U.S. match is longer than the Chinese match, so the dynamics here is do we get to the point where we’re self-immolating and you’re basically catching on fire here? The strategy in the U.S. is that as the match in China gets shorter they’re going to blink. The numbers support that thought process certainly from the trade perspective. There’s no doubt. The numbers are overwhelming, frankly.

But you then, of course, lead to the next phase. And it’s very much like the Cold War with Russia in the ’50s and ’60s, into the ’70s and into Star Wars. It’s the same thing. It’s called MAD – Mutually Assured Destruction – but that’s what you have. China relies still, even though they’ve grown their own domestic wealth, they’ve grown their own domestic income, they’ve done all these things, it’s such a wide gap still, it’s a race against time where time is quite much infinity to some degree. So that still leaves China somewhat dependent on the U.S. consumer, frankly. But at the same time as the net debtor nation and China holding a ton of U.S. Treasuries, therein lies the potential for Armageddon, so-to-speak, where China starts dumping. Already they’re not buying, so now the next move would be they sell.

But that means everyone blows up and everyone catches on fire. So how this plays out, I don’t know. One of the things to me, Mike, is actually you know how Trump is, and sometimes he’s his own worst enemy. Does he have a valid stance? Absolutely, against Canada, against Mexico, against Europe, against China. Yes, should be no tariffs. Free trade is free trade, and we’re really the only free free trader. So it is unfair and China’s taking advantage, so something had to be done. Is this too dramatic a step? Well, we’re going to find out, and we’re kind of starting to find out, because China’s kind of melting down and that’s having a bigger impact on global markets. But if the end game is China’s upset because they were called a currency manipulator a year ago at a time when renminbi was one of the strongest currencies in the world.

Trump, I think really, from what I understand (from) back-channels, this is still kind of a little bit adolescent at some level, because kind of Trump feeds into that and he brings that on himself by acting that way sometimes, by acting out instead of being more presidential. To some degree it works, but to the degree where China’s kind of pissed off, and China’s kind of like, “You know what? You insulted us. We don’t really care. We’re willing to go down to whatever degree.”

And you say China’s hurting and people look at it China is slowing. China is not slowing. The growth is slowing. So guess what? 6% on a level of GDP that’s now significant isn’t chump change. The U.S. would kill to have those numbers. So, yes, it’s Mutually Assured Destruction and you have to think that China will ultimately come to the table. They’re traders. This goes all the way back … You can bring up Marco Polo, for crying out loud. So they’re very astute. They are very smart. I mean, I’ve dealt with them for 30 years. They know what’s going on. So I think at some point they come to the table. That’s the hoped for. The question is, how much damage is done by the time that happens?

Mike Gleason: What is your take on the current volatility in stocks? October certainly has not been kind to equities. Metals investors are certainly watching the action closely. Unfortunately, with metals trading inversely correlated with equities for the time being, the road to higher gold and silver prices is likely through lower prices on the Dow. The total absence of safe-haven buying has hurt metals, at least as far as we see it. Do you think we have much further to go in this correction in stocks?

Greg Weldon: Yeah. I think it’s only begun. And I thought yesterday was a very dangerous day, yesterday being Tuesday, the 23rd I think it was. Because you have the setup for kind of like a crack, a big crack. It was almost, and I’ve been talking about this since the beginning of the year, there are correlations to 2007 and ’08, and that’s more macro in setup, but when you look at the market structure and some of the more overlaid type of correlations, there’s a lot of 1987 here.

We talked about this in the beginning of the year, where the bond market would come under pressure, particularly, and if you go all the way back to the piece I did in September over a year ago and called it Shrinkage, after Janet Yellen came out, dropped the word, “We’re going to normalize policy,” which I hated, because what does that mean? It means nothing, versus we’re going to go to a “neutral” policy.

That change was huge, because what it did was it exposed the two-year note for being way out of position, because it was way too low relative to where neutral would be a level that correlates to inflation. So immediately the two-year note was going to be the target, and it was, and you had a huge move. We actually said it was going to 265 when it was 140.

It got to 265. It was almost exactly the move. Why? It wasn’t rocket science. It was because the inflation rate was somewhere between 220 and 250 if you look at CPI, and that’s what I’m going to use. The Fed can use PCE. I’m still going to use PCI relative to the markets, because that’s what the markets still are going to look at frankly.

So, that move was easy, but then the thought process was even last September coming into now that if the Fed said they’re going to go further, which they did, Jackson Hole and then the September meeting, that would be a problem, because then you bring the bond market into play. Because you can push the two-year notes only so close to the bond markets, the yield curve is not going to invert here and that’s going to push the bond yield up, which it did. It broke 3-1/4 at the same time Turkey was melting down for a second time, when inflation jumped to the level of interest rates they just jacked 600 basis points to get to, that single day kind of precipitated all of this.

But if you look back, this has been a bond market buildup much like ’87, where in that case the bond market was under a lot of pressure, it was the long end then. It’s the short end now. Leading into August, when you kind of had some kind of denouement in the bond market, and then all of a sudden stocks started to feel it, emerging markets started to feel it. You saw emerging markets’ currencies crack in August. Same kind of setup, different era.

To me, this volatility was expected. We said at the end of August if the Fed moves in September you’d see a selloff in October. That’s exactly what’s happened, and I think it’s just beginning. I think you have much more volatility. This is nothing. The on-balance volume indicators, everything. You haven’t had any liquidation and that’s a dangerous accident waiting to happen, when if you go to sell somebody’s high priced stocks that have huge ownership and a diminished turnover in shares because the price is so high, you have a potential vacuum of buyers under this market. So I don’t think you’ve seen the worst of it by any stretch of imagination.

Mike Gleason: Just over the last week or two, we’ve heard a couple of former Fed chairs, Alan Greenspan and Paul Volcker, both coming out and talking about what a bad spot we’re in economically and that the chickens will be coming home to roost here before long. Talk more about this tough spot that the Fed is in, because it seems to us that they’re really stuck between a rock and a hard place here with rates. They want to keep inflation from getting out of control, but they also probably don’t want to kill the economy. And we both know how important, say, the housing and auto sales sectors are in the economy, for instance; And sales of those two big ticket items are very heavily linked to interest rates, and we can see that they’ve been starting to show signs of cracking here of late. How do you see the rising interest rates impacting the consumer drag, and what might that mean for the economy moving forward?

Greg Weldon: Well, I think that’s what the market is exactly telling us, because, again, in August we said if the Fed moves in September, you’re going to have a catalyst here. Because you want to chase inflation, but how far do you chase inflation when you put the consumer at risk? And the consumer is at risk; the consumer’s already stressed. You can talk about (how the) Target CEO says the consumer’s the strongest he’s seen in 30 years. The Fed even mentions, “guess what, consumer balance sheets are pretty “‘healthy'”. There’s nothing healthy about the consumer. This is a steroid-addled consumer that has lived for years on monetary steroids.

The correlations are precise in terms of balance sheet expansion, increases in retail sales. It went from QE1 to QE2 to QE3 to fiscal QE because you were flatlined in 2015 into the middle of ’16 until Donald Trump won the election. And then it was fiscal QE. You’ve run that out now, and everyone owns these shares. To the degree that the Fed keeps pushing here, it puts the consumer at risk because the consumer has borrowed against the stock market unrealized paper profits in a paper asset that they believe cannot go down in price. Doesn’t that sound familiar, 2007, 2008, housing, mortgage equity withdrawal, and huge consumer debt? They went upside down.

You have the same setup here. Different dynamics, but the same exact setup: over-leveraged consumer relative to the stock market. If the stock market gets hit, the consumer will go down. I think we’ve talked about some of these stats before. Before the September rate hike, the monthly payments on interest cost, in other words, paying the interest to carry the credit card debt, not paying down the debt., $325 billion per month it’s gotten up to. A record high, number one, and number two, 60% of total retail sales on a monthly basis, which is $510 billion a month. That’s number one.

Number two. Consumer credit card debt now accounts for 78% of all new consumer debt over the last 12 months. Further, that growth in that debt at $72 billion nominally over 12 months exceeds the growth in retail sales at $31 billion by more than two to one. Now, some of that is using credit cards for more things. But if you look at the Fed’s New York household survey, you see people under the median income of $58,000 a year are using credit cards and borrowing money to pay their bills. They don’t own stocks; the tax cuts are not huge enough with them. It’s more corporate.

This is why they’re talking of middle income tax cuts now, because they’ve kind of left behind that lower level. It’s half the economy. So, wow, to think that this is kind of the situation where you put the Fed behind the 8 ball. Do they keep chasing inflation higher at the risk of deflating the consumer and causing a collapse? That’s the big question. I don’t know how it plays out, but I think the Fed is very close to taking their foot off the brake. And that’s why we think there’s a new trade coming at some point in here, where it’s dollar down and gold rallies.

Mike Gleason: Before we get a little bit more into gold and silver, Greg, I know you keep close tabs on many different commodities and all the precious metals so I wanted to get your update on what we’re seeing in the PGMs, the platinum group metals, because I’ve really been fascinated by this widening gap between platinum and palladium because, my goodness, we’ve got about a $300 palladium premium versus platinum right now as we’re talking on Wednesday afternoon. What’s going on there, Greg, and should we expect palladium to reach parity with gold here soon?

Greg Weldon: You know what, honestly, it’s really hard to handicap what’s going on here, Mike. For the life of me it’s kind of in its own universe. Palladium has been. This has been going on really for the better part of a year and a half, two years, where palladium got up and then exceeded $1,000 and really came off hard. We actually got short, and we had some nice profits over a two-day period which then evaporated over the next two weeks. We didn’t catch this move because, frankly, I didn’t think this was going to be a situation where palladium was going to go off on its own like it has.

You can look at some of the mining situations. There are some reasons you can use, but they’re more excuses. Why this market is doing what it’s doing is not empirically evident to me, so I don’t know. I honestly don’t know. How far can it go? I don’t know. I mean, you know how these things are. You’ve been around long enough to know that you can never count on any kind of situation, any kind of parity, anything going to levels that you never thought possible before. You can’t think that way.

So, could palladium get to parity with gold? It’s pretty dang close already, so yeah. Sure, it could. Could it exceed gold? I mean, frankly, if you want to take it to its base level and strip away all the monetary, all the psychological, all the historic, all the emotional attachments to gold and, even to a lesser degree, silver, if you go to the heart of the matter, which is the supernova, which is where these elements are created. It’s why they’re the most rare elements in the universe, not just in the world, in the universe, because they are created at those last moments when a star collapses into itself. So palladium, from that perspective, is a more rare metal than gold. So maybe it should be priced higher.

Mike Gleason: Yeah, good point. It’ll be very interesting to see that play out. Well, as we begin to wrap up here, Greg, I’d like to have you share your thoughts with us, where do you think you think we go from here. Also give us any other insights on what you’re going to be watching here in the weeks ahead as we approach the all-important November elections and then the last couple of months of the year.

Greg Weldon: Yeah, the elections are kind of a wild card. It’s funny, you could actually say that having kind of a gridlock is actually when you get your best performance in stock market. So, I don’t give that a huge, high risk factor. If there were to be a surprise, it’s a risk, no doubt. But I don’t think that that’s the way that this next phase is going to play out. I don’t see that as the catalyst, per se. Not the highest odds, for sure.

I’m really watching Europe, Michael. I mean, I think that what’s going on with the banks in Europe, what’s going on with Italy and Spain, let’s not forget Spain. There’s a lot of focus on Italy, and we know… the Northern League and the Five Star Movement, they don’t want the euro. And they picked a guy that would appease the president to be their economics minister when it was almost potentially going to go back to another election when they could’ve actually lost their coalition. So they brought the guy in. It’s going to be, “Rah, rah, the euro.” They’re not, “Rah, rah, the euro.” We know they’re not.

And we watch the yield spreads in Spain and Italy relative to Germany, because they’ve widened. This is a risk yield spread. It gives you a sense for the risk. These are countries. I mean, we don’t have to talk about the debt, but we should because no one talks about it. It’s massive. It’s still huge. I mean, Spain, not in quite the situation as Italy but they’re above 90% of GDP. It’s still a crisis-like setup. So, that’s another huge risk factor, and if I’m watching anything right now that’s kind of what I’m watching.

And then the other thing, of course, is the high-flying tech shares in the U.S. because that could be an accident waiting to happen. That’s when you start creating real doomsday scenarios that are not macroeconomic and probably not long-lasting, but would have a major impact. If you have some of these stocks where there’s no buyers under them and people go to liquidate and it starts out innocently enough, let’s take profits, take some money off the table, I’m in Palm Beach County. You know where I live.

I’ve been approached more in the last month, and I’m not talking just last week or so. I’m talking back into September by some of my wealthy friends that are not in the business. I mean, this is one of the richest counties in the country and I’m at the low end of the scale over here compared to some of these people that I know, right? But they’re asking me, “I feel like I should take some caution here.” Yeah, returns are diminished. You’ve gotten all the good news from Trump priced in. You’ve had the big rally, and now people are a little nervous they’re going to let it slip away. That’s a dangerous situation. When these kind of people start asking me, I take notice because that is an accident waiting to happen. So the risk points are kind of like the U.S. high-flying tech shares, and then what’s going on in Europe to me is really where the manifestation of all this takes place.

Mike Gleason: Then, lastly, metals moving forward. What are your thoughts there?

Greg Weldon: Well, the release valve always has been and will be again the dollar. So when the Fed finally wakes up and realizes, “Hey, maybe we’ve pushed the consumer a little too far here and we’re at risk now of not meeting our GDP growth goals, which are 4 to 5% normally”; are you kidding me? For next year? You think that’s going to happen?” Let alone the fact that the Fed’s Dot Plot gives you 3-1/4 to 375 next year, the futures market is actually priced to imply some belief in the market that the Fed won’t even get to 3% with Fed funds.

And the market has been right throughout this entire time since 2014 versus the Dot Plot. They have under plotted the Dot Plot, and that has been the right move. If that plays out, and I think it will, it means that the Fed may be closer to taking their foot off the break than they’re going to keep moving for the next 18 months. I don’t see that. And when that slip takes place, the dollar is very vulnerable to me, technically speaking, because it’s a long-term pattern that goes all the way back to the ’70s and you’re in the zone here where the timing is perfect, the technicals are perfect, the Fed kind of eases off, the dollar gets whacked, and that’s going to be the catalyst for the next move in gold and silver. And we like gold and silver right here.

The risk is not insignificant because if the Fed goes too far and the Fed goes further, frankly, that runs the risk of bringing deflation. You see, some of the commodities are wobbling here. We’re bearish on crude oil, but that’s it’s own universe as a bonus for your listeners. But we like gold and silver; we just think dollar’s the release valve, it always has been, it will be again. And when that time comes, and we think it’s sooner rather than later, it may not imminent but it’s laying in wait, but when it happens you’re going to want to belong to metals.

Mike Gleason: Well, great stuff. Once again, Greg, we love having you on and appreciate your insights as always. Now, before we let you go, please fill people in on Weldon Financial, how they can find you, and any other information they should know about you and your firm.

Greg Weldon: Sure, yeah, I’ve been in the industry 35 years. Started in Florida Comex, worked at Moore Capital, one of the biggest hedge funds in the world in New York, and started my own gig 20 years ago. I’ve been doing this for 20 years. We provide Trade LAB as part of the WeldonLive service. It’s all-in service, one price. You come to the website, sign up, you can get a free trial. We have specific trades in every area: stock indexes, ETFs, bond futures, the currencies, the metals, the energies, the agriculture commodities. We really cover it all.

I’m a trader by trade, and the research is from that perspective, to help you navigate these markets and maybe even some money at the same time. We call it the research that pays for itself, and actually, right now we’re heading into the new year, we’re going to be raising prices, so we’re kind of running a special. This year’s price is still available, so anyone can take advantage of that by visiting the website. It’s WeldonOnline, or you can email me at any time, gregweldon@WeldonOnline.com.

Mike Gleason: Well, excellent. Thanks again for your time, and have a great weekend, Greg. I look forward to our next conversation. Take care.

Greg Weldon: Yep, you too Mike. You do a great job. Keep it up.

Mike Gleason: Well, that will do it for this week. Thanks again to Greg Weldon of Weldon Financial and WeldonLive. For more information, simply go to WeldonOnline.com where you can sign up for a free trial. Again, all of that information at WeldonOnline.com. Be sure to check that out.

And 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.

Big anomalies in September’s Swiss gold exports

Here follows a lightly edited and updated version of an article first published yesterday on the Sharps Pixley website looking at some unusual export data for gold from Switzerland in September.  Switzerland is a key conduit for the transfer of gold bullion from West to East as being the location for a number of refineries which specialise in taking Western gold bars and dore bullion from mines and re-refining this to the smaller sized ultra high quality gold bars and wafers in demand in Asia and the Middle East:

Switzerland has announced its gold imports and exports for September and while imports are from the usual suspects there are some important anomalies from the normal pattern in the country’s September gold export figures.

Imports totalling around 177.8 tonnes largely came from the UK (91.8 tonnes – or a little over half the total) and the USA (33.1 tonnes) neither being abnormal numbers, with the UK being the centre of the global gold trade and the USA being the world’s fourth largest gold producer. The balance came from relatively small amounts mostly from other gold producing nations.

The real surprises came in the gold export recipients. Mainland China topped the list comfortably with 37.5 tonnes out of total gold exports for the month of 119.4 tonnes but the HUGE surprise in the figures was that during September Switzerland, apparently, according to the figures we were presented with initially, exported zero gold to both India and Hong Kong,  We were however fed incorrect data and now we have updated figures which corrects the anomalies.  The initial figures were indeed  erroneous.  In fact exports to India were down very substantially to 16.6 tonnes but Hong Kong still took a respectable 28.9 tonnes.  A graphic of the real figures is shown below:

However, some other Swiss gold recipients in September are indeed really anomalous as they also usually fall outside the country’s normal gold export listings; notably Hungary which imported 28.9 tonnes as it increased its central bank holdings tenfold (see: Central Bank gold buying – New kids on the block), although Hungary reported this as occurring in the first two weeks of October, but it apparently entered the Swiss export figures in the earlier month. Other big unusual importers were Indonesia (with 16.6 tonnes), the African nations of Ghana (5.2 tonnes), Gabon (4.8 tonnes) and Senegal (2.6 tonnes), while among the normal Swiss gold recipients Thailand (7.7 tonnes), Saudi Arabia (2.6 tonnes) and Taiwan (2.5 tonnes) absorbed larger amounts than normal.

It remains to be seen whether some, or all, of these were adding, like Hungary, to their official gold reserves. If they are this should become apparent when the IMF publishes its next table of changes in world gold reserves which is always available in the data section of the World Gold Council’s website (http://www.gold.org).

Interestingly the gold price soared yesterday reaching $1,240.80 at one time up from $1,221.70 when the U.S. market closed a day earlier. This may also have been prompted by a big plunge in general equity markets with Asian, European and North American markets all losing substantial ground.  They do seem to be picking up a little today, albeit nervously (the Hang Seng continued to fall and Germany’s DAX is down a little as I write)  but it remains to be seen if the apparent rise is just a temporary bounce and if there is further carnage to come.

The dollar index has also picked up a little today which could mitigate further rises in the gold price – at least temporarily

Is the oft-predicted plunge in equity prices beginning – and if so are we seeing a move into gold as a safe haven? The dollar index also appears to be slipping a little and we again saw inflows into the big gold and silver ETFs. Perhaps precious metals are coming back into favour again?

Gold may be waiting on U.S. midterms

An article published by me a few days ago on the info.sharpspixley.com website – and followed by on on the same subject from a U.S. commentator:

The gold price, after its recent uptick, seems to be consolidating in a US$1,220-$1,230 range, perhaps held in check by a stronger U.S. dollar index – although maybe even more likely by machinations on the COMEX paper gold futures market.  Every time upwards pressure moves the price to the $1,230 mark it appears to be smartly brought back down a few pegs!  Movements in and out of the big SPDR Gold Shares (GLD) gold ETF have been non-existent the past few days, suggesting  too that the institutional market may be biding its time, waiting for a break-out one way or the other before committing more funds, or withdrawing gold, out of the world’s biggest gold ETF.

With the U.S. midterm elections coming up in a few weeks’ time and with some uncertainty showing up in the polls, gold may well find itself in a hiatus period until after election date (November 6th).  There’s an interesting article published by the BBC in the UK which looks in some graphical detail at the various factors which have tended to move the electorate under past Presidencies and the latest corresponding figures (See:  US mid-terms: Can we tell if Democrats will win?)  Looking at the figures and charts, currently they would on average suggest good Democratic party gains, although whether enough to gain a majority in the House of Representatives, which the Republicans currently control by 241 seats to 194, let alone in the Senate, is not so certain.  President Donald Trump (who is a hugely contentious figure in U.S. politics) has confounded the polls before and could well do so again.  His supporters are fanatical in their partisanship – but then so are his opponents .

We think that perhaps the best pointer to the eventual result may lie in the numbers of political retirements ahead of the midterms from each party – and far more Republicans are retiring than Democrats.  The Democrats have also been far more successful in raising funds for advertising campaigns supporting their candidates than the Republicans.

As the BBC article notes on the political retirements: “Several key committee chairs and Speaker of the House Paul Ryan have already joined what’s become a modern record for retirements from a majority party – a telling sign that they think Republicans may not be a majority much longer.  Several incumbents – on the left and right – also were forcibly retired, as they lost primary races to grass-roots challengers. That could be another indication of an anti-incumbent mood in the electorate that, because there are more Republicans running for re-election than Democrats, could help fuel a Washington power shift.”

As noted above, President Trump is a contentious figure, even within his own party, and we suspect that the record number of Republican legislators standing down could be as much a sign of their dissatisfaction with the incumbent President and his policies as a normal retirement pattern.  Out of the political mainstream they no longer have to support his proposals – or comment positively on his numerous off-the-cuff tweets.  If this sense of dissatisfaction filters down to the grassroots there could well be a very big Democratic Party resurgence.

So all in all we would not be at all surprised if the Democratic Party overturns what is a pretty decent Republican majority in the House, but perhaps the GOP will retain its slender majority in the Senate.  If the Democrats overturn the Republican majority in both houses then the currently hugely partisan state of U.S. politics could lead to any, or all, of President Trump’s policy proposals being mitigated or ended altogether.  But what a wounded President Trump might do in such circumstances, while retaining executive and Commander-in-Chief powers, could be very worrying for both the U.S., and the world as a whole.

While President Trump, and his utterances, are not to everyone’s taste he has been presiding over a growing U.S. economy and falling unemployment – at least as far as perhaps tweaked official statistics tell us.  However the country’s trade deficit has been growing, while some are increasingly worried about the prospective economic implications of the trade wars the President has unleashed.

Should the Democrats prevail in the midterms then that would likely throw the U.S. into a political impasse and could severely knock confidence in the U.S. dollar which has been riding high of late.  A falling dollar would likely mean a rising gold price so political change and uncertainty in the U.S. could well be positive for gold despite the Republicans being, in theory, perhaps more precious metals-friendly than the Democrats.

President Trump and his policies seem to have been good for Wall Street and even many of those who were on the political right, but seemingly opposed to the idea of The Donald becoming President, now, perhaps grudgingly, are prepared to accept that what he has been doing has been positive for the economy.  But the worry for the Republican Party is not necessarily that those of this opinion will vote Democrat – they probably won’t – but they may abstain from voting altogether thus allowing Democrat victories by default.

So the big money, which can swing the gold price either way, may well be holding off for the time being until they are sure which way the political wind is blowing.  But the nearer to the polling date we get, if the polls are looking decisive one way or the other, the more likely we are to see gold breaking out up or down.  At the moment virtually all the polls are predicting Democrat gains, although Republicans still look to be comfortably ahead in the Senate.  The House is a different picture altogether and we look likely to see significant Democrat gains, although whether enough to achieve a majority is still in the balance.  The recent Kavanaugh hearings could have a negative impact on the Democrat vote as there is a general feeling that opposition to the judge’s appointment was purely politically motivated.  That has consolidated Republican support and perhaps weakened likely Democrat turnout.

 

How the Midterm Elections Might Affect Gold and Silver

by: Clint Siegner*

The outcome of the November 6th voting will be a big deal for investors, including gold and silver bugs. The metals, perhaps more than most other asset classes, are sensitive to geopolitics.

Let’s break down what the potential voting outcomes might mean for the factors currently driving the metals.

Election

Let’s start with the equity markets. Stocks got a boost from President Trump’s election and subsequent tax cuts. Last week, the President floated the idea of additional tax cuts and he wants to pass a major infrastructure spending bill.

Not much of what he wants will get done unless Republicans do well at the ballot box. Republicans retaining control in Congress almost certainly represents the best-case scenario for stock prices.

Perversely for metals investors who favor the President’s policies, a positive outcome for the GOP could negatively impact gold and silver prices, at least in the short run.

Rising stock prices and the pervasive “risk on” attitude on Wall Street limits demand for safe-haven assets. We will need plenty of inflation reaching beyond equity markets and real estate for metals to win in that scenario.

Alternatively, gridlock in Washington based on Democrats winning one or both houses may not be good news for stocks. The metals may get a boost, however.

Continual Fed Tightening to Inflame Conflict with Trump

Now let’s examine what the elections might mean for Fed policy…

Despite what officials at the central bank say, they are not independent. We wonder if they will respond to the President’s call to stop tightening, or if the cartel of private bankers which holds formal ownership of the Fed has something else in mind.

The President is blaming the recent weakness in stocks on the Fed’s move to raise interest rates.

Trump and the Federal Reserve

A further sell-off, perhaps sparked by a Republican defeat at the polls, could push Trump to replace Jerome Powell with someone more amenable – particularly if the FOMC stays the course and delivers another hike in December and beyond.

Metals markets would likely rally following a policy reversal at the Fed. Such a move would demonstrate markets are hopelessly addicted to stimulus and money creation.

That said, the alternative scenario is likely to prove the same thing. Markets are already beginning to struggle in the face of rising rates. If officials stay the course and hike again in December, the wheels could finally come off for equities.

The jig is about up, in our view. The bizarre combination of rising stocks, rising interest rates, near total complacency in the traditional asset markets, and the dollar getting stronger in foreign exchange markets can’t last forever.

The reason those conditions have persisted in unison as long as they have brings us to the last point for consideration; market rigging. While it looks like the central planners are reaching the end of their ability to manage performance across the spectrum, we have underestimated them before.

Unfortunately, manipulation is here to stay. There is absolutely no reason to expect the midterm elections will lead to more honest markets.

Nobody in Washington is talking seriously about reform. The President wants the Fed to return to stimulus. Congressional Republicans and Democrats both count on central bankers to support massive deficit spending.

The Fed will retain carte blanche to intervene in any and all markets regardless of who wins, unfortunately. We look forward to seeing what officials there have in mind for the US economy and how much longer they can avoid the sort of inevitable “policy error” which unleashes the next reckoning in our markets.


GLD Rising. Is this the move we’ve been waiting for?

Updated version of an article published on sharpspixley.com on Monday.  To read original article click here

In a post a few weeks ago we suggested monitoring inflows or outflows of gold into or out of the big SPDR Gold Shares gold ETF (GLD) as a way of judging big money sentiment on gold (See: Watch GLD for gold price guidance) and for a corresponding gold price direction. And, after a series of consistent gold withdrawals from the ETF, this does seem as if it may have turned around sharply last week at almost exactly the same time as the big fall in the equities markets commenced. Last Tuesday, for example, 8.82 tonnes of gold were added into GLD – the first increase since July – and after a couple of days of zero movement in the ETF, another 5.65 tonnes of gold were added into it on Thursday. the additions continued over the weekend with a further 4.12 tonnes added.  These are not insignificant amounts. 18.59  tonnes of gold is equivalent to around the annual production of the world’s 32nd largest gold producer last year – and this amount was added only over a 6-day period. This week’s continuing GLD figures will thus be particularly worth watching to see if the build-up continues – and if it does watch out!

Many observers have suggested that for a sustained increase in the gold price this would be accompanied by a significant downwards correction in the general equities markets which are seen by many as overbought, with such a correction perhaps overdue and inevitable. But beware of a really big downward move in equities should this happen, as some commentators suggest. Such an occurrence could bring precious metals down in price too as happened in 2008. The prospect of this may have lightened somewhat in comparison with the last big downturn as many institutions are out of any substantial precious metal holdings given they have been somewhat out of favour as an investable asset in the past several months. And even if they do drop in price alongside equities they will likely recover far faster – as in 2008/2009.

Today has seen a bit of a pick-up in equities in most markets, although gold has pretty well held on to its gains.  What is too early to tell though is whether today’s equity recovery is a shortlived bounce, or a start of the continuation of the bull market in general equities.  It’s perhaps worth reading the transcript of the Stephen Leeb interview published on this site a day or so ago.  Despite a slightly rambling interview, Leeb is one of the smartest guys around and he reckons that if this recent move in equities is not the start of the long-awaited crash, the latter is not far ahead.  We shall see in  the next few days.

Looking for 3-digit silver and 5-digit gold!

Mike Gleason* of Money Metals Exchange interviews Dr Stephen Leeb of Leeb Capital Management on last Wednesday, the day the equities markets turned down very sharply.  To download the actual podcast of the interview and a general introduction by Mike click here. The transcript of the Leeb interview follows:

Mike Gleason: It is my privilege now to welcome in Dr. Stephen Leeb, Chief Investment Officer at Leeb Capital Management. Dr. Leeb has decades of experience in the financial markets and has even authored seven well regarded books, including best sellers The Coming Economic Collapse: How to Thrive When Oil Costs $200 a Barrel, and Game Over: How to Prosper in a Shattered Economy. He’s also the Founder of The Leeb Group, which publishes several financial newsletters. Among them, The Complete Investor, a publication that has received two awards for editorial excellence.

As such, Dr. Leeb is one of the foremost authorities on macroeconomic trends and commodities, especially when it comes to energy and precious metals, and has appeared on financial shows, on Fox Business, CNN, and several others, and it’s great to finally have him here on the Money Metals podcast.

Stephen, it’s a real honor to speak with you and thanks so much for joining us today.

Dr Stephen Leeb: Mike, it’s my pleasure.

Mike Gleason: Well, Dr. Leeb, I’d like to get your thoughts first on the equity markets, as we’re talking here on Wednesday, there’s some real fireworks going on, but stocks bottomed in early 2009 with the S&P 500 at 735. We’re approaching 10 years of a bull market now, with just a few bumps along the way. I guess the last week being one of those. But the S&P has nearly quadrupled.

On the one hand, we can see headwinds for equities building, interest rates are rising, the President’s tariffs are likely to disrupt trade and raise costs. Valuations are really stretched relative to earnings with average PE ratios at extreme highs, and this bull market and stocks is awfully long in the tooth as we both know.

On the other hand, there are some legitimate reasons for optimism. We’ve seen reduced taxes and some reduced regulation with hope for more of that to come, so what are you expecting for stock markets? Do you think we can get another year or two of rising prices?

Dr Stephen Leeb: I would say not two. I would say at most, into 2019. I think after that, we start really having problems. One of the reasons that you have events like today, I mean, the market’s down, wow, I’m looking at this trying to figure out exactly how much it’s down. The S&P is approaching 4% decline.

That’s a very big one day decline. I don’t remember the last time we had one like that, and it follows about four declines in a row. The reasons here I think are basically investors really don’t know what to expect. I mean, you did lay out all the reasons for why the market has been rallying, and rallying recently on the heels of the tax cut. More money in company coffers, etcetera.

But there’s a payback and part of that payback is going to be a whole lot of debt. Part of that payback is going to be, as the IMF said yesterday, lower growth. Especially going into 2019. Really, across the board. That’s going to make the debt problem in the U.S., I think a very, very serious problem. Where are we going to get the money? The administration now is talking about an infrastructure program. I don’t see it.

You see these strange things coming out of the administration. I’m not taking a political side, I don’t think this is a political issue, because these strange things, they go across administrations. It’s not just this administration where you see strange things coming out. It was the previous administration, and probably the administration before that, so I mean, this is not a pox on Democrats or Republicans. This is a reason why we should not be so partisan, though, I guess.

Mike Gleason: Stephen, I know you’ve had some really interesting things to say on the rare earth elementals and how that could really impact things on the trade war, talk about that because I thought that was really interesting.

Dr Stephen Leeb: The Pentagon issued what they might call a whitepaper the other day, telling us how dependent we are on China for certain critical materials. In particular, heavy rare earths, which are really essential for many of our technologies and especially important is that they’re essential for our military technologies. The only real source of those heavy rare earths is China. Well, let me just qualify that. There is a company domiciled in Australia, called Lycas, and they do have a huge ore body of rare earths, including heavy rare earths, but they have to send them to Malaysia in order to be refined.

Because it’s a very, very elaborate process, and recently the Malaysian government has been making noises, very strong noises that they may shut down that refinery. That would leave the world essentially dependent on China for what are really essential chemicals and elements for our high defense, our high technology products. And that’s not a great situation to be in. But what is really upsetting to me is that this is something I wrote about in 2011, in my book Red Alert. I’m doing another book on China right now, and it’s not going to be as optimistic as that.

I mean, I thought we would catch up by this point, and when I wrote about it in 2011, let me be clear, I don’t want to take credit for being the first to realize how important rare earths were. I mean, it was known then, so there’s probably a decade of unwillingness to address this very, very serious problem. And then you see Vice President Pence giving a speech I think within the last week or so, saying that we’re going to go into the South China Sea, we’re going to make a scene, exercises there.

We’re in no position to be able to handicap those kinds of exercises, because it’s not clear that we have the kinds of technologies that we need. I hate to say this. I mean, if we were fighting a world war against China, yes, I would give heavy odds that the U.S. would win. We have a much bigger military presence throughout the world, but China has not really geared itself to fighting a world war. They’ve geared themselves to defending critical territories. And they’ve used these technologies.

I can cite chapter and verse from people that are in our own armies, our Air Force, our Navy, our Army, and that have done this research. They’re paid researchers. This was from circa two years ago. China’s progress in these areas have been startling, while we’ve been hung up in our own bureaucracies. This was pre-Trump, so it was maybe three years ago, three or four years ago.

We still haven’t done a thing about it, and I think this is probably about the third or fourth whitepaper that I’ve seen on rare earths, and then you have, and this I do have to say, I don’t want to take a political stand here because it’s a pox on everybody. But when you hear the president saying that all these tariffs are going to mean tremendous taxes paid by China into U.S. coffers, well, that’s not how tariffs work. It’s the U.S. that are paying the taxes, so that they won’t buy the Chinese products.

There seems to be a lot of disconnection within administrations over what America needs, and this has led me to really think that we probably need a new monetary system, a way for the world to cooperate and come together. We’re just not getting there, and if you’re not going to get there, it’s going to continue to be rough and ready. Most countries have stuff that other countries need.

I think China has been first to recognize this, and they’ve done a pretty good job becoming independent, but they’re not completely independent. I mean, they have their own issues. We have our own issues. We’re just going about this the wrong way. I mean, this is probably the worst time to be as partisan as we are. You just saw this with this debate over the Supreme Court. Who can say who’s right? It’s a question of are you Democratic, are you Republican?

I mean, it was to me, a little bit horrifying to watch what was going on. Supreme Court nominees are not, they don’t get in by one vote and that one vote being based upon what party you’re from. I mean, something has to change or else I fear that it could get worse, and just giving you my feeling that I talk the talk, but I’m also walking the walk in that I’m writing a book that basically will have to do with China, and gold.

I don’t see how you can continue with the kind of situation that you have right now. I think China at this point is doing as much trading, apart from the dollar, as they possibly can. Will that speed up? I would guess it would.

So, you’re in a very unique, historical situation right now, and it covers all sorts of areas. The center point I would probably say would be oil. I mean, what I was talking about earlier, rare earths, that’s certainly a very, very important boldface sidebar, in this whole discussion. But we’ve got to come to some sort of agreement and this stuff with tariffs, I understand it. I understand that China’s done a lot of horrible things, but I think that they will listen to reason.

China from my point of view, I’ve studied them, they’re not a bellicose country, basically. I mean, the last war they fought, I don’t know when the last war they fought, but they’ve fought a lot fewer wars than we have, and they lost wars. I think that’s something that really informs what they’re doing. They don’t want to lose another war. They’re not seeking worldwide hegemony, they don’t have a military that can challenge us across the globe, but they do I think have a military that can well defend the areas that they consider critical to their survival and that’s most of the developing world.

I mean, we’ve got to try and work this out with them, or else we’re going to see a lot more days and a lot more volatility in this market. I think we had a lot of good times, a lot of it was due to the fact that commodity prices dipped and fell, and you had a tax cut more recently, but now it’s going to get a little bit harder. Now you’re seeing all of a sudden, costs rising, and things like that. I think we have our work cut out for us, and I think that every investor probably should own some gold.

Mike Gleason: Talking about gold here, Stephen, it seems to us that it’s actually doing pretty well. I know a lot of people are probably pretty disappointed by the price action, but given how well the stock market has done, prior to this week of course, and how strong the dollar has been in the currency markets, you’ve got to feel pretty good about how gold has hung in there, don’t you?

Dr Stephen Leeb: Yes and no. Yes, you do, but what you have to realize Mike, if you took a chart of the gold priced in yuan, you would see it looking not quite a straight line. If you took a 200-day moving average, it would be pretty close to a straight line. A 52-week moving average. Over the last 12 months, see this is I think part of China’s plan, gold and the yuan have traded very, very close together. Very, very close together.

I think what China is trying to say, and I’m not necessarily accusing them on manipulation or anything like that. I’m not really a conspirator, but as I said, I think back when you first started asking me questions, that if you’re in China, and you have yuan, you can trade your yuan for gold. And if you have gold, you can get yuan for gold, you can get gold for yuan. If you’re trading oil, you can do that.

Now, it’s not an easy thing to do. I mean, you have to go over to another pit. I don’t know what it’s involved. I’ve never really traded commodities on that level. I trade them on the phone, I’m not in the pits etcetera, I have no idea, but I do know that de facto yuan and gold are exchangeable, and oil trading in yuan is oil trading in yuan, de facto backed by gold. So what the Chinese arbitrage or whatever it is, what’s happened is if you look at gold priced in yuan, it’s been very, very steady for the past I would say over a year. At least since they started trading that oil contract.

I think China’s message to the rest of the world is that the yuan is as good as gold. That doesn’t mean it’s as good as the dollar. It has not been as good as the dollar, but it has been as good as gold. My guess is that gold, here we’re talking about a hypothetical, I honestly think gold would probably be higher, had this yuan/gold effect not been in place.

I mean, I think there’s enough uncertainties in the market right now, in the economy right now. There’s a lot of people that are not happy with Trump, profoundly not happy, and there are a lot of people that are profoundly happy. I come from a family where I’m scared to talk to my son and I’m scared to talk to my wife. When I talk to my wife, I have to say one thing, when I talk to my son I have to say something else, or else I’ll be an orphan. I’ll be thrown out. People have very, very strong emotions right now, and I just wish I could bring people together.

But there are these kinds of partisan uncertainties. Can you ever remember a time where you had a partisan division deciding the Supreme Court nominee? I do think Kavanaugh’s a perfectly acceptable nominee, but the way he got in by appealing to partisanship. I mean, this is nuts. I think that gold probably would have been stronger, that’s just my guess. This is highly speculative, had it not been for the fact that it’s now linked to the yuan.

Now, there’s a good reason for the yuan to be weak, because we’re administrating these massive tariffs, so that by weakening the yuan and the dollar staying relatively strong, at least gives China time to transition from exporting to the U.S., to exporting to the developing world in the East. One thing with is true is that China’s trade with the Belt Road Initiative right now is something like 1.6 trillion dollars a year. Much, much more than the U.S.

I think China’s goal would probably be lessen their dependence on the U.S. Our goal should probably keep them dependent on the U.S., so that it’s easier to create a world war, but you do have these blasts of uncertainty coming forward. And how is the high debt going to affect us next year? Etcetera. So, I would have expected gold, everything else equal, to be higher, closer to $1,300-$1400. But look, that’s not an argument anyone can win.

If you tell me you think it’s good around $1,200, I’m not going to get into any sort of debate about that. But I do know that if you look at the yuan and you look at gold, they’ve been basically straight lined. I mean, it’s ironic, because if you look at the yuan by itself, it’s been incredibly volatile, and if you look at gold by itself, it’s always pretty volatile.

But if you look at them together, to have their volatility so matched together, it is really a very, very, very low probability, statistical phenomena, so low that you just have to guess that they are somehow interlinked. But again, I don’t have proof of this, and I don’t want to raise the thought of conspiracy or anything like that, because it could be happening very naturally, because of the arbitrage with oil and gold, vis-a-vis the yuan.

So, yes, I think that gold is holding up with respect to the dollar pretty well, but I think that it probably could do better. There have been a number of periods in history in which gold has done very well in the face of a strong dollar. Typically, if the dollar gets crushed, it means that something’s gone wrong in the U.S., which for most of our lifetimes has been the strongest economy in the world, so it stands to reason that gold would rise.

But there have also been times where the dollar has done well, the U.S. has done well, and there’s been inflationary pressures, and gold has done well, too. So, I think gold is acting according to a different dynamic at this point.

Mike Gleason: Well, we’ve touched on gold a little bit there. How about silver, Stephen? We’ve got a ratio of 83:1 as we’re talking here on Wednesday afternoon. What kind of value do you see in silver in the months ahead? Because silver can be a very interesting metal. It’s got this push/pull situation going on. Sometimes it’s hurt by lack of industrial demand during a slowing economy, but it can also catch a bid during such an environment due to its monetary status as a safe haven. So, what do you have to say about silver here as we begin to close?

Dr Stephen Leeb: I think silver could be, and again, if you’d asked me this a couple of years ago, I would have said it could be a $100 metal. I haven’t changed. I think that silver basically for reasons that you put so well, and it’s an industrial metal, it’s also a monetary metal, and its industrial uses I think in some cases are probably not replaceable. Right now we need it for photovoltaics, and I think that has to play a major role in future energies.

It’s the most conductive metal on the earth, it’s more conductive than copper so it has a major role in all of these car information systems, because you need incredibly good conduction in certain cases. Its industrial uses are starting to really expand, and as you see the electric vehicle take off, I think you’ll see a greater demand for silver. It’s more volatile than gold. I mean, if you find your stomach turning watching gold, which sometimes I do, don’t watch silver.

I mean, then you’ll have to knock yourself out with Valium or something. I mean, it can be really a crazy metal, but if I were a betting man, I would say in the early 2020s, it would not surprise me —I don’t want to make a prediction – but it would not surprise me to see three-digit silver. It would not surprise me, incidentally, to see five digit gold, because you’re going to need a high price of gold in order to back up a lot of the trade that I think you’re going to see in this world.

I just again want to emphasize, in writing this book, I started talking to my editor etcetera, I said, “I don’t want the last chapter to be a doomsday chapter about the U.S. I want it to be a hopeful chapter that this still can be a win/win situation.” There doesn’t have to be a number one country in the world. I mean, there has to be a number one world, a world that can be united and share and do things. I mean, everybody has things that everybody else needs. I don’t want to sound like an idealist, or some sort of spiritual nut, I’m not by any stretch of the imagination.

But I think if you look around and see, the world was doing okay for a while, but we lost it here when everything speeded up for us after we went off the gold standard in the early ’70s. We went from a country that looked forward and invested for what was going to happen in the future, to a country that is now trading in terms of nanoseconds. We’ve got to get back to the Bell Lab days. I mean, we criticized the hell out of China because of these state owned enterprises, which I think is probably right to a certain extent.

But I’ll just cite one state owned enterprise, or state controlled enterprise that we have in this country, and it’s called AT&T. This is before the breakup and everything else. It was when AT&T controlled Bell Labs, and it was basically a government run utility that was allowed a certain rate of return. But they were also allowed Bell Labs, and out of Bell Labs, we got our transistor, we got laser, we got the internet, we got so much out of that. We have to get back to what really made us successful.

In 1957, Sputnik was launched, and three years later, instead of battling Russia, which we were to some extent, but our major focus, our major reaction to Sputnik was what? It was multibillion in today’s dollars, grants for science, education, and everything else, to get us going on. Now you’ve got this thing with rare earths, there’s a massive deposit of rare earths in Canada which could be developed. But we’ve done nothing about it.

It’s been a decade, and we’ve done nothing about it. Incidentally, I’m not saying this to brag, about seven years ago when my last book came out, Steve Bannon did a half hour interview with me, talking about rare earths. The only reason I’m saying that is because this has been known. I was not the first one to discover it. But maybe the first one to write about it in a book. There are so many good things that we could be doing. There are Manhattan Projects around, like rare earths would be one example.

But there are others that we could be using to develop not a hydrogen bomb, but rather things that could help our technologies, help our well-being, and help the wellbeing of a lot of other people. We’ve got to get the right religion, we’ve got to all become Americans. I’ll be happy when someone says to a typical person, “What’s your political persuasion?” If that person says American, he has my vote, or she has my vote. But until we get to that point, I fear you’re going to have a tremendous amount of volatility. Market’s now down 3%, incidentally.

I had the numbers wrong before, but now unfortunately, I have ’em right, and it is down about 3%, the S&P. Maybe a shade less. And I don’t think that this is the big one yet. Could be wrong. I think it’s a time to be cautious. Incidentally, if I can make one correction, I don’t publish these services anymore. They’re published by an outfit called Investor Daily, out of Virginia.

They do a very, very good job and I want to make sure they get credit for it. I’m the editor. Everything that goes into my publications is me. It’s me, my wife, and other people that help me, but I do manage money. That is true. But lately, in the publications we’ve been getting more cautious. Now, of course, I look at it day like today and I say, “Why didn’t I get even more cautious.” But anyway, I would stay cautious right now. I don’t think I would make a big bet that this is the start of a massive decline, unless we see something show up, some big bank in trouble etcetera, then you know that you’ve got to act very, very quickly.

I don’t even think gold would be the best way to act right then. I think it would probably be zero coupon bonds. That’s what worked better for us in 2008, and then you saw gold shoot up. But yes, I think everybody should have gold in their portfolio, at least up to 10%. Silver, as a portion of that, precious metal division, which could again be run up to 15%, and be cautious. Look at value stocks. They tend to do better in situations like this. That would be my general advice. I do think that we’ll probably get a recovery.

New highs in January, it wouldn’t shock me. But it wouldn’t shock me if the market continued to go down. I mean, these are turbulent times. And in turbulent times, things that are unpredictable sometimes happen. When you’re in a situation where you have almost no excess oil supply, you could get a spike in oil. Even from the $82 area, and that would be really very, very serious. Oil spikes have proceeded every major market correction, and I think every major economic decline since the Arab embargo in the early ’70s.

One thing to keep your eye on is not necessarily $100 oil, but if you saw oil find a home above $100 for let’s say a month or so, I would really get super cautious. That would be one sure sign that things are really out of whack. I think times are going to be very turbulent. You’ve got to stick with gold, you’ve got to stay on your toes, and you’ve got to take very much for granted.

Mike Gleason: Yeah, well that’s very well put, we’ll leave it there for now, and thank you so much for joining us, Dr. Leeb. We hope we can do this again in the future. We’ve been following you for quite some time and really value your insights. It was great having you on. Before we let you go, please tell people how they can find you and follow you if they’d like to do that.

Dr Stephen Leeb: Okay, sure. Basically, you can just look me up on the internet, Stephen Leeb. And the place that publishes my publications right now is called Investor Daily. It’s right there. There’s a Wikipedia thing on me, which is actually pretty true I think. And I would look up Investors Daily. I do two or three publications for them. They’d be happy to have you.

They’ll also try and sell you other publications, and those other publications I’m happy to say are very good as well. They do a very good job, so I think that would be the easiest way, instead of giving you a long internet address. Just Stephen Leeb, just Google that and you’ll come across a number of hits. Some of them will say good things about me, some of them will say not so good things about me, but there will be at least one of those things that says Investors Daily, and that’s the one I would hit, and I think they’ll give you free introductory offers. I got out of the publishing business, because it was just too much doing analysis and publishing.

I’m a better analyst than I am a businessman, which is not to say I’m a great analyst, but I’m much better at that than I am at running a business. They do the business stuff and that’s what I would look like, Investors Daily.

Mike Gleason: Well, excellent stuff. Thanks again Stephen. We really appreciate your time today. Enjoy your weekend and take care.

Dr Stephen Leeb: Thank you so much for having me, Mike. It was really a pleasure, you just got me on a roll.

Mike Gleason: Well, we really enjoyed having you, and thanks again.

That will do it for this week. Thanks again to Dr. Stephen Leeb, Chief Investment Officer at Leeb Capital Management. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until this, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend everybody.

HOLMES: 5 Charts That Show Why Gold Belongs in Your Portfolio Now

By Frank Holmes – Ceo and Chief Investment Officer U.S. Global Investors

5 charts that show why gold belongs in your profile in gold we trust report 2018

The annual “In Gold We Trust” report by Liechtenstein-based investment firm Incrementum is a must-read account of the gold market, and its just-released chartbook for the 2018 edition is no exception.

The strengthening U.S. dollar has lately dented the price of gold, and rising interest rates are making some yield-bearing financial assets more attractive as a safe haven. But as Incrementum shows, there are many risks right now that favor owning gold in your portfolio.

Below I’ve selected five of the most compelling charts that highlight why I think you need gold in your portfolio now.

1. The End of Easy Money

To offset the effects of the global financial crisis a decade ago, central banks increased liquidity by slashing interest rates and buying trillions of dollars’ worth of government securities. Now, however, it looks as though banks are ready to start tightening, and no one is really quite sure what the consequences will be. The Federal Reserve was the first, in late 2015, to begin hiking rates, and it’s been steadily shrinking its balance sheet for about a year now. Other banks are set to follow suit. According to Incrementum, the tide will turn sometime next year, with global liquidity finally set to turn negative. In the past, recessions and bear markets were preceded by central bank tightening cycles, so it might be a good idea to consider adding gold and gold stocks, which have historically done well in times of economic and financial turmoil.

central banks to withdraw liquidity from financial markets for the first time since crisis
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2. Banks on a Gold-Buying Spree

While I’m on this subject, central banks have been net purchasers of gold since 2010, with China, Russia, Turkey and India responsible for much of the activity. Just this week, I shared with you the news that Poland added as much as nine metric tons to its reserves this past summer. If gold is such a “barbarous relic,” why are they doing this? As Incrementum writes, “The increase in gold reserves should be seen as strong evidence of growing distrust in the dominance of the U.S. dollar and the global monetary system associated with it.” Having a 10 percent weighting in gold and gold stocks could likewise help you diversify away from fiat currencies and monetary policy.

change in gold reserves held by emerging countries from 2007 to 2017
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3. Too Much Debt

Everywhere you look, debt is rising to historic highs, whether it’s emerging market debt, student loan debt or U.S. government debt. Meanwhile, higher rates are making it more expensive to service all this debt. As you can see below, interest payments will hit a record $500 billion this year. It’s forecast that the federal deficit will not only reach but exceed $1 trillion in 2019. How will this end? Earlier this year, I called this risk the “global ticking debt bomb,” and I still believe it’s one of the most compelling reasons to maintain some exposure to gold.

US government debt outstanding continues to rise rapidly
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4. An Exceptional Store of Value

In U.S. dollar-denominated terms, the price of gold is down right now. But in Turkey, Venezuela,Argentina and other countries whose currencies have weakened substantially in recent months, the precious metal is soaring. This alone should be reason enough to have part of your wealth stored in gold. Need further proof? According to a recent Bloomberg article, the cost of a black-market passport in Venezuela right now is around $2,000. That’s more than 125,000 bolivars, or 68 times the monthly minimum wage. A Venezuelan family that had the prudence to own gold would be in a much better position today to survive or escape President Nicolas Maduro’s corrupt regime. In extraordinary circumstances such as this, the yellow metal can literally help save your life.

gold does exactly what it is supposed to do protect purchasing power gold price increases in turkish lira and venezuelan bolivar
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5. A Sterling Time to Buy Gold?

Finally, a word about timing. According to Incrementum, some of the best gold buying opportunities have been when the gold/silver ratio crossed above 80—that is, when it took 80 or more ounces of silver to buy one ounce of gold. If you look at the chart below, you’ll see that such instances occurred in 2003, 2009 and late 2015/early 2016—all ideal times to accumulate. We see a similar buying opportunity today, with the gold/silver ratio at a high of 83 as of October 8. What’s more, gold stocks are the cheapest they’ve been in more than 20 years relative to the S&P 500 Index.

highs in the gold silver ratio were great buying opportunities for gold
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