Gold Price Manipulation Explained

I may be winding down this site but i will still be publishing occasional articles here which i think will be of interest.  This one by Frank Holmes has appeared on the U.S. Global Investors website and covers one of the most contentious subjects for today’s gold investor

How to Unrig the Gold Market, According to GATA’s Chris Powell by Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors

In an earlier post, I gave you a sneak preview of my interview with Chris Powell, secretary/treasurer at Gold Anti-Trust Action Committee (GATA). For 20 years now, Chris and others at GATA have made it their mission to expose collusion by international financial institutions to control the price and supply of gold.

Below are highlights from the interview. I have to say that during much of our conversation, my jaw was on the floor. I don’t want to say much more than that! Read on, and remember to share widely.

Tell us about GATA’s background and what it does.

GATA was founded in 1999 to expose and litigate against the longstanding Western central bank policy of suppressing the price of gold. At first we weren’t even sure if it was Western banks that were doing it. But after a year or so of research and investigation, we concluded that the bullion banks were operating surreptitiously as brokers for governments, giving cover to their intervention in the gold market. At the time, we had a law firm advise us that this rigging was very likely authorized by the Gold Reserve Act of 1934, as amended since then, and as such, there may not be grounds to sue the government directly over gold price manipulation.

We went ahead and filed suit in 2001 anyway, in the U.S. District Court in Boston. We had a consultant, a Harvard-trained lawyer and gold investor, who brought a case against the Bank of International Settlements (BIS), the U.S. Treasury and various bullion banks.

One particular hearing I attended that year produced a remarkable admission from an assistant U.S. attorney. In short he said that, while the government was not admitting to the complaint, it nevertheless had the power and authority to do all the things the suit complained of—manipulating the price of gold, in other words. I made a record of this admission and put out a press release. The lawsuit was ultimately dismissed by the judge on technical jurisdictional grounds.

Having lost a little hope of suing the government directly, we determined that the best course of action going forward was to try to publicize our findings. We’re convinced that the Gold Reserve Act gives the U.S. government, particularly the Treasury Department and the Exchange Stabilization Fund (ESF), the unrestricted authority to intervene in and secretly rig any market in the world. Our work now is simply to expose this policy to as large an audience as possible.

On a practical level, how does manipulation like this occur on such a global scale?

It’s done largely in the futures markets. It’s also done in the London over-the-counter (OTC) market. The mechanisms are gold swaps and leases between central banks and bullion banks, and through the sale of futures contracts.

We’ve seen a number of flash crashes in the price of gold, but lately they’ve been happening every few weeks. Somebody will dump a billion dollars or more of gold futures contracts in New York. That can be achieved only by someone with infinite resources and money, who also has a powerful interest in suppressing the price of gold. Nobody interested in making good money would dump that much gold all at once. He would sell it gradually over a period of time. I think these flash crashes are irrefutable evidence of price suppression.

the gold futures flash crash of January 6, 2014
click to enlarge

Are there any public records that point to all of this?

Yes. There’s all sorts of material in the Treasury Department and Federal Reserve archives about gold price suppression being U.S. policy. Jelle Zijlstra—the former president of the Netherlands’ central bank, who simultaneously served as president of the BIS—wrote in his memoirs that the gold price has always been suppressed at the behest of the United States through international action. You can go back to the years of the London gold pool in the 1960s, where the control of the gold price through international action was a matter of public record, operating through the Bank of England (BoE).

A very remarkable transcript exists of a meeting in April 1974 between Secretary of State Henry Kissinger and Thomas Enders, the assistant under secretary of state for economic and business affairs. Enders explains to Kissinger that U.S. government policy is to drive gold out of the world’s financial system and prevent European governments from remonetizing the metal in any way. The purpose of this policy is to support the U.S. dollar as the world reserve currency, and if not the dollar, then the International Monetary Fund’s (IMF) special drawing rights (SDR).

The most compelling evidence, I believe, are letters sent by Representative Alex Mooney of West Virginia to the Federal Reserve, Treasury Department and U.S. Commodity Futures Trading Commission (CFTC). Mooney asked the Fed and Treasury to identify which markets they’re secretly trading in, and to explain the purposes of this trading. Fed Chair Jerome Powell essentially refused to answer the question, as did the Treasury. Mooney asked the CFTC to state whether manipulation trading in the futures markets undertaken by the U.S. government or its agents or brokers is subject to the CFTC’s jurisdiction, or whether such manipulation is actually legal or exempt from ordinary commodities law. The CFTC refused to answer the question.

I think these agencies’ refusal to answer Mooney’s questions is quite revealing. And notably, mainstream financial journalists don’t find any of this curious. They have a rule never to put a critical question to any central bank about anything. Theoretically, somebody could do it. It’s being attempted by alternate news agencies and research organizations, but you can’t get an answer. That’s a good indication, I believe, that central banks are doing things they don’t want the markets to know about.

My next question has to do with central banks and their consumption of gold. They’ve been net buyers since 2010. The United States continues to be the single largest holder of gold of any institution on the planet. How do we reconcile that? If they own all this gold, wouldn’t it go against their self-interest to suppress its price?

global central banks have been net buyers of gold since 2010
click to enlarge

That seemed to be a paradox to GATA some years ago, but we don’t believe it is any longer. To suppress the price of gold, you need a certain amount of inventory to knock the market down. You can’t do it entirely through the naked shorting that they do in the futures market. You always need to be bleeding a certain amount of the metal into the market to maintain the appearance of a gold market. You can’t just be trading paper all the time—it’s not enough.

The U.S. economists Paul Brodsky and Lee Quaintance wrote a paper a few years ago that floats a plausible hypothesis of what’s going on. The two hypothesized that the policy in recent years has been to redistribute world gold reserves among central banks so that those banks that have been overweight in U.S. dollars and Treasuries could hedge themselves in anticipation of an inevitable devaluation of the dollar and revaluation of gold. Central banks, the two allege, intervene together in the futures market to drive the nominal price down to facilitate easy acquisition of gold. They would prefer to keep the public out of acquiring the metal.

Full disclosure, I don’t have any particular evidence from government sources that confirms Brodsky and Quaintance’s hypothesis. But it certainly fits the facts as we understand them.

As you likely know, a JPMorgan trader is awaiting sentencing right now for his participation in gold price rigging. What’s your reaction to this?

His sentencing has been delayed twice now. It was delayed again the other day for another six months.

I’m not sure what to make of it, to be honest. There’s some confusion here because a few years ago, the chief executive of JPMorgan, Jamie Dimon, and the woman who was running its commodities desk at the time, Blythe Masters, both gave interviews saying that JPMorgan has no position of its own in the monetary metals markets. They were trading them only for clients. Of course, nobody in journalism followed up by asking Dimon or Masters who the clients were. I would have wondered if the bank was acting as the broker for the U.S. or Chinese government. That was certainly implied from the answers they gave.

Now this trader, John Edmonds, apparently had to admit that he was rigging the gold and silver markets while trading at JPMorgan. He was allegedly doing it with the knowledge and counsel of his superiors, and if it were done on behalf of the government, presumably it’s legal under the Gold Reserve Act. But as Charles Peters, former editor of the Washington Monthly, used to say: “The scandal is never what’s illegal. The scandal is what’s perfectly legal.”

So why is Edmonds being prosecuted? Because he was front-running government trades? Was he doing it just for himself? I can’t imagine the Justice Department would be prosecuting him if his trading was being conducted on behalf of the U.S. government.

Where do you think gold prices would be right now if not for this manipulation? What’s the true value of gold?

The true value of gold is whatever our free market wants it to be. Our attitude toward money is very libertarian. Let there be free markets and currencies, and if governments are intervening, they should be transparent about what they’re doing.

Having said that, the disparagement of gold for years is that its price has not kept up with inflation. Everything keeps up with inflation. That in itself is pretty powerful evidence of government intervention. It’s not keeping health insurance costs and medical care prices down. It’s not keeping college tuition down. It’s not keeping grocery prices down. How come gold is the only thing that doesn’t keep up with inflation? Silver, too? All of the traditional ratios of monetary metals values compared to stock market levels and other prices have been thrown off in recent years because of government intervention.

global central banks have been net buyers of gold since 2010
click to enlarge

So what would those prices be if the traditional ratios were enforced again? I can’t say for sure, but obviously they would be far, far higher than they are today. And the government knows this. If the government ever got out of the futures market and abandoned its manipulation scheme, metal prices would remonetize in as little as a week.

I’ll add that if you want the gold or silver price to go up, you’ve got to buy real physical metal. Take it out of the banking system and weaken the futures market, which is where the manipulation takes place.

If readers are interested in learning more, where should they go?

They can go to our site, GATA.org. In the upper right-hand side, visitors can subscribe to our daily newsletter, the “GATA Dispatch.” That’s absolutely free. On the left, in the “Articles” section, you’ll find a link to “The Basics” and “Documentation.” All of the documentation of gold price suppression and secret intervention in gold markets by governments is contained there. And if they’re searching for anything in particular, I’d be happy to help them or refer them to someone who can. They can just email me at cpowell@gata.org.

Thank you for your time, Chris! It was a pleasure.

The pleasure was all mine.

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My recent postings on Sharps Pixley website

In the interests of keeping Lawrieongold readers up with my latest musings on precious metals, here are links to my most recent articles published on the Sharps Pixley website

SHARPS PIXLEY MARKET REPORTS

Winding Down

To all Lawrieongold readers

This is to let you know I’ll be winding this site down, but am still writing on precious metals.  You can still read my writings on the Sharps Pixley site.  I may still publish the occasional article here if the mood takes me but in general old age is eating into my time availability so am heading towards long overdue retirement.

I’ve been involved in the precious metals sector – firstly as a mining engineer, and latterly as a publisher/writer/analyst, for over 50 years so its probably time to call at least some of what I do to a halt.

Thank you for reading my material – I hope you’ve enjoyed it and found it useful

With best wishes

Lawrence (Lawrie) Williams

World Top 20 Gold 2018 – Countries, Companies and Mines

Top independent precious metals consultancy, Metals Focus, has published its latest analysis of the World’s gold supply and demand and the following 3 tables break down global production showing the Top 20 gold producing nations, companies and mining operations last year and their relative performances compared with a year earlier.  What will perhaps be disappointing for gold investors and some analysts is that the figures do not yet show that Peak Gold has been achieved, with new mine production growing by around 1.8% last year,

Table 1: Top 20 Gold Producing Nations 2017/2018 (Tonnes)

Rank Country 20 18 Output 2017 Output %  Change
1 China 404 429 -5.9%
2 Australia 315 293 +7.6%
3 Russia 297 281 +5.9%
4 USA 222 236 -6.3%
5 Canada 189 171 +10.4%
6 Peru 158 167 -4.9%
7 Indonesia 137 114 +20.0%
8 Ghana 131 130 +0.7%
9 South Africa 130 154 -15.7%
10 Mexico 115 119 -3.4%
11 Brazil 97 96 +1.3%
12 Uzbekistan 92 89 +3.9%
13 Sudan 77 88 -13.0%
14 Papua New Guinea 69 64 +7.4%
15 Kazakhstan 68 56 +22.1%
16 Mali 61 50 +21.3%
17 Argentina 60 63 -4.6%%
18 Burkina Faso 59 53 +12.8%
19 Tanzania 48 55 -12.7%
20 DR Congo 45 37 +22.8%
Others 728 697 +4.4%
  Total 3,503 3,442 +1.8%

Source: Metals Focus, lawrieongold

Table 2: Top 20 Gold Mining Companies 2017/2018 (Tonnes)

Rank Company 2018 Output 2017 Output %  Change
1 Newmont Mining 158.7 163.8 -3%
2 Barrick Gold 140.8 165.6 -15%
3 AngloGold Ashanti 105.8 116.8 -9%
4 Kinross Gold 76.5 78.6 -3%
5 Polyus Gold 75.9 67.2 +13%
6 Freeport McMoran 75.9 49.1 +55%
7 Newcrest Mining 76.7 71.1 +6%
8 Goldcorp 71.4 79.9 -11%
9 Navoi MMC (est) 64,7 62.3 +4%
10 Gold Fields 58.9 62.5 -6%
11 Agnico Eagle Mines 50.6 53.3 -5%
12 Shandong Gold 47.7 43.9 +4%
13 Harmony  Gold 44.1 34.0 +30%
14 China National Gold 40.4 42.4 -5%
15 Randgold Resources 39.9 40.9 -2%
16 Polymetal 37.8 33.4 +13%
17 Zijin Mining 37.0 37.5 -1%
18 Sibanye Gold 36.6 43.6 -16%
19 Yamana Gold 32.1 30.4 +6%
20 Glencore 31.2 32.1 -3%

Source: Metals Focus, lawrieongold

Table 3.  World’s 20 largest gold mines in 2018 (Production in tonnes)

 Rank Mine Country Owner(s) 2018 2017 Change
1 Grasberg Indonesia Govt ., Freeport 83.9 43.3 +74%
2 Muruntau Uzbekistan Govt. 61.5 61.0 +1%
3 Olimpiada Russia Polyus 41.1 36.6 +12%
4 Cortez USA Barrick 39.3 45.0 -13%
5 Lihir PNG Newcrest 30.3 28.6 +6%
6 Pueblo Viejo Dominican Rep Barrick/Goldcorp 30.1 33.7 -11%
7 Zarahshan Uzbekistan Govt. 30.0 30.0  –
8 Carlin USA Newmont 28.8 30.2 -5%
9 Goldstrike USA Barrick 26.0 26.9 -3%
10 Kibali DRC Randgold/AngloGold/Sokimo 25.1 18.5 +35%
11 Cadia Valley Australia Newcrest 23.4 17.0 +38%
12 Boddington Australia Newmont 22.1 24.5 -10%
13 Canadian Malartic Canada Agnico Eagle/Yamana 21.7 19.7 +10%
14 Kalgoorlie Super Pit Australia Newmont/Barrick 19.5 22.9 -15%
15 Detour Lake Canada Detour Gold 19.3 17.8 +9%
16 Geita Tanzania AngloGold 17.5 16.8 +5%
17 Veladero Argentina Barrick/Shandong 17.3 19.9 -13%
18 Kumtor Kyrgyzstan Centerra 16.6 17.5 -5%
19 Merian Suriname Newmont/ Govt. 16.6 16.0 +4%
20 Yanacocha Peru Newmont/Buenaventura/Sumitomo 16.5 16.6 -1%

Source: Metals Focus, lawrieongold

 

 

Very irreverent Brexit ditty

In the UK we are bombarded with pro and anti Brexit media coverage day in day out.  As someone who voted to Remain in the referendum 2 years ago, but has changed his view since, particularly in the light of intransigent EU negotiators, I hope others may find this ditty, posted on YouTube by Dominic Frisby, amusing if NSFW due to the language used.  Dominic will be known to many lawrieongold readers as an astute commentator on precious metals.  I wasn’t previously aware of his comedic singing abilities, nor of his Brexit viewpoint until this YouTube posting was brought to my attention by Canadian blogger ‘Otto Rock’ (a pseudonym) on his regular Inca Kola News blog (which I would recommend as must reading for anyone interested in the nefarious goings-on in the Canadian junior mining and exploration sector.

What has to be surprising for anyone who follows the UK economy is that it hasn’t collapsed under Brexit uncertainty.  Indeed key indicators like the number of people in work is at its highest level since records began in huge contrast to a number of EU nations which are suffering record unemployment levels.  Global growth is set to expand far faster than EU growth and the UK is one of the world’s biggest economies in its own right, which is why the EU is desperate to keep us in the Common Market and is making it so difficult for us to leave.  Enough said.

The link to the YouTube video for Dominic’s song entitled 17 million f**ck-offs (I warned you so don’t view this if of a sensitive nature) is as follows: https://www.youtube.com/watch?v=jiUFPjulTW8

The latest updates on China’s gold

The Chinese central bank, The People’s Bank of China, has announced a 9.95 tonne increase in the country’s gold reserves and its subsidiary, The Shanghai Gold Exchange (SGE) has come up with its gold withdrawal figures for February (which we equate to China’s real gold demand).  My comments on both these have been published on the Sharpspixley.com website and links to the two, admittedly opinionated, articles are shown below:

CHINA ADDS 10 TONNES TO GOLD RESERVES, BUT IS THAT ALL?

The Chinese central bank has reported adding a fraction under 10 tonnes of gold to its forex reserves in February, but is the new total any more accurate than in the past?

CHINA’S GOLD DEMAND LOOKS TO BE SLOWING THIS YEAR SO FAR

The Shanghai Gold Exchange has now released gold withdrawal figures for the first two months of 2019 and if we equate SGE withdrawal figures to Chinese gold demand, as we do, these suggest the nation’s demand may be slowing this year/

Gold & Silver Awaken from Eight-Year Slumber

The article below was written ahead of this week’s FOMC meeting and statement from Fed Chair Powell which intimated a sharpish slowdown in the US Fed’s tightening programme.

By David Smith, writing for Money Metals Exchange

Two years ago at a conference during which I both presented and attended, a Keynote speaker, “Rich Dad” Robert Kiyosaki, introduced me to a different way of looking at things. He posed the question, “How many sides does a coin have?”

The correct answer is “three.” The front (obverse), back (reverse) and… the edge!

When you think about it, this makes sense. From this angle – uncommon to most observers – a person can begin to look more deeply at a given subject. From the edge, you are able by definition, to see “both sides” of the story.

Using Rich Dad’s perspective as a research tool helps define and validate the premise of this essay… that the price action right now of gold – and soon silver – are giving us important clues about the direction, strength, and durability of the next price trend.

It’s easy and understandable for Norteamericanos to become fixated on the price of gold and silver, expressed in their domestic currency, the U.S. dollar.

But once in a while, it’s important to take a step back and gauge how much people in OTHER countries are paying in their currency when they exchange fiat for some of the honest money that gold and silver have historically represented.

When gold is in an uptrend against other currencies it lets you know that something is going on under the hood that most people are missing.

When precious metals’ buying in these countries continues to increase in spite of the fact that it has become even more expensive to do so, Mr. Market is letting you in on just one more reason why you should pay attention… and either start “stacking” or add to your current insurance/investment position.

The Trend is Your Friend

Increased gold purchases by “Silk Road” countries – for going on two decades – have continued unabated in spite of periodic currency devaluations and loss of purchasing power to the U.S. dollar. Not to mention that China, which used to export millions of ounces of silver annually, has for some years, not only been keeping all of its internal production, but importing more!

The Shanghai Gold Exchange (SGE) chart demonstrates that this trend shows no signs of letting up.

Going forward, plan on gold being more challenging to find, and due to increased regulation along with overall country risk, more complicated, costly and time-consuming to produce. And, not to mention, more expensive to buy as mushrooming demand across the globe kicks in and continues with a vengeance.

Goldcorp was recently bought out by Newmont Mining, creating the world’s largest producer. This is the second recent gold company mega-merger – with others almost certainly to follow – indicating the need these operators have for nailing down future ore bodies, as every ounce they produce depletes their reserves.

Ian Telfer, Goldcorp’s Chairman, has said, “If I could give one sentence about the gold mining business… it’s that in my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down… We’re right at peak gold here.”

Physical Silver Deliveries in Shanghai Are Skyrocketing

After a brief time lag, when gold experiences a sustained and robust rise price rise, so does silver.

The directional correlation between gold and silver is close to 90%. When you observe the statistical rarity of a gold/silver ratio above 80:1 – which happens to be where we are right now – a “reversion to the mean” is in the offing.

Central Bank Gold Holdings Reveal What “The Man” Is Doing

Even as the new gold secular bull run got underway in 2000, central banks continued to sell gold for nine more years.

However, in 2010 that trend reversed and has continued upward through the present day. From 2015 through the end of 2018, central bank buying has noticeably accelerated.

One writer has referred to central banks as “one trick ponies with printing presses.”

But even as they push out more paper promises, these tricksters continue to covet the Midas metal. Former Federal Reserve Chairman, Ben Bernanke, pressed to answer why they still held gold, replied curtly, “because of tradition.”

We’d say there’s more to it than his brief reply – a lot more.

Central Banks Are Stockpiling Gold Once Again (Courtesy World Gold Council)

Way back in 2002, David Morgan made the following comment:

“For the record, I will state, there will be another, more frenzied, scramble that will carry silver prices to highs that will repair all the excess paper money creation, price suppression, supply deficit, and bearish sentiment over the past two decades. This will become known as the Great Silver Crisis.”

Gold, silver and the mining stocks are finally awakening from an eight-year slumber.

While no one can predict just how far and how fast prices will rise, the odds of missing out for those who continue to look the other way or who hesitate to act, will parallel the metals’ upside trajectory.

Then at some point, as surely as the sun rises each morning, many of these same people will decide to step up to the plate and start buying at much higher prices. They will be driven – not by calm, calculated decision-making, but rather by FOMO – the fear of missing out.

Do yourself a favor. Behave like “Rich Dad.” Get up on “the edge of the coin” and take a look at both sides.

Then start “vaulting” gold and silver on a regular basis, while availability is good, and the price is still reasonable.

About the author

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com as well as the LODE Cryptographic Silver Monetary System Project. He has investigated precious metals’ mines and exploration sites in Argentina, Chile, Peru, Mexico, Bolivia, China, Canada and the U.S. He shares resource sector observations withr eaders, the media and North American investment conference attendees.

 

LBMA Panel forecasts 2019

Every year the London Bullion Market Association (LBMA) invites a selection of precious metals experts to predict precious metals prices for the year ahead.  This year there was little consensus among the participants who generally predicted a very conservative price scenario.  The LBMA’s tabulation is shown below:

Our comments on the findings and our more bullish projections have been published on the Sharps Pixley website.  Click here to read them

Gold, Silver, Platinum Group Metals 2019 Metal Price Predictions And Stock Choices

Article published on Seekingalpha.com
Summary

Last year with precious metals, apart from palladium, falling short of projected values, our predictions and anticipated stock gains fell well short of expectations.

For 2019, we again anticipate relatively conservative gains in precious metals prices and continuing falls in general equities and bitcoin valuations.

If our predictions are correct, we could see a further recovery in precious metals prices and a sharp upturn in relevant stocks.

We are sticking in our stock recommendations to major precious metals miners and royalty/streaming companies as they are likely to remain comfortably in existence if metal prices move against them again.

To read full article on Seeking Alpha click on:

https://bit.ly/2Aw1ivY

Precious metals price predictions 2019

An article written by me for www.sharpspixley.com to estimate where I think precious metals prices may be in a year’s time:

Predicting precious metals prices for the year ahead can be an invidious task and I have to say that, although I considered my guesstimates for 2018 made a year ago as fairly conservative they were nearly all out by an order of magnitude.  My only consolation, perhaps, is that they were no more so than those of most other precious metals professional analysts and observers.

In the event, as the year played out to the full, gold at least outperformed equity markets by being almost flat over the full year despite underperforming general stocks for much of the period.  Equities, after performing well earlier on, came down with a bit of a bang over the final few weeks of the year and long term gold holders will have done better than those who held on to their general stocks.

My one prediction which turned out to be very accurate was that for bitcoin – not a precious metal at all – which I predicted would come down very sharply, as it did.  I was also looking for a sharp fall in general equities, but it took the final few weeks of the year for this to happen – prior to which they had performed fairly positively.

But herewith my best guesses for precious metals performance in the current year.  In general the projections for gold and silver are much the same as those I made a year ago – but perhaps a little more conservative.  OK, my timing was wrong a year ago but I see many of the factors likely to drive prices in the year ahead as actually being much the same. Let’s hope I am more accurate in my guesstimates this time around.

In general in 2018 precious metals had a fairly dismal year, with the exception of palladium and for much of the year, after a promising first quarter, were strongly outperformed by equities.  But in the final few weeks of 2018, equities came off very sharply and gold holders did rather better with the yellow metal coming off its lows.  As I pointed out in a previous article here, the strong dollar meant that gold actually performed even better – indeed positively – over the year in most countries other than the U.S.A. and with equities declining even more in most other countries than in the U.S. gold did indeed work rather well as a safe haven – as it is supposed to.  Some of the final figures and percentage changes over the full year are noted in the table below, but these figures are in U.S. dollars and with the U.S. dollar index (DXY) rising quite sharply (around 5%) over the full year gold actually increased in value in many other currencies which made it an even better performer in these nations.

Metal Price or Index Level

Price/Level 1/1/2018

Price/Level 1/1/2019

% Change

Gold (US$)

$1,306

$1,282

-1.8%

Silver (US$)

$17.06

$15.47

-9.3%

Platinum (US$)

$947

$794

-16.2%

Palladium (US$)

$1,087

$1,252

+15.2%

Dow Jones Industrial

24,824

23,327

-6.0%

S&P 500

2,696

2,507

-7.0%

NASDAQ

7,007

6,635

-5.3%

Nikkei

23,506

20,015

-14.9%

DAX

12,871

10,559

-18.0%

FTSE 100

7,648

6,728

-12.0%

Bitcoin

$13,445

$3,717

-72.4%

Gold:  The most significant of the precious metals being covered given that where gold goes the others tend to follow – more or less – despite the fact that industrial demand becomes more and more significant as one moves through the precious metals list.  My prediction for the gold price at this time next year is a conservative US$1,400 – up a little over 10%.   ……..

To read the full article which includes my price estimates for silver, platinum and palladium too on sharpspixley.com’s metalsdaily website click on:

LAWRIE WILLIAMS: PRECIOUS METALS PRICE PREDICTIONS 2019

Gold a better 2018 investment than equities – almost everywhere!

Lightly edited version of article first published on www.sharpspixley.com

The better gold price, coupled with the big downturn in general equities, has meant that over the year to date gold has outperformed stocks quite significantly even in the USA – and even more so in most other countries.

As the year draws to a close we see that gold has outperformed equities, virtually everywhere in the world.  Year to date U.S. equities, as measured by the Dow, S&P and NASDAQ, are down over 10%, while European and Asian equities have fallen by even greater percentages.  Gold, in U.S. Dollars is also down year to date, but only by a little under 4%.  Indeed the gap may even be widening as the year end approaches with gold gaining and equities still falling.

So even in the U.S. gold has comfortably outperformed equities over the year, while in other key currencies it has even done rather better having seen gains in most, with many currencies declining in value against the mighty dollar.  Globally, thus gold has more than performed its role as a safe haven investment extremely well.  In countries where the domestic currency has collapsed, like Venezuela and, to an extent, Argentina, gold has proved to be an exceptionally good asset to hold.

As an example of gold in major currencies, the gold price in Euros is up by 1% so far this year and in the British pound sterling it is up around 2.5%. while in both the EU and the UK equities have fallen sharply (around 11%) over the year to date.  In the Australian dollar gold is up almost 6%, and in Canada it is up around 3.5% in the domestic currency’ while again equities are down sharply in both countries.

There are exceptions of course – in Japanese yen gold is down by 5.7%, but Japan’s prime stock index – the Nikkei – is off by 11.4% so gold has still easily outperformed the market there too.  In Swiss Francs, another currency which is usually considered among the stronger palyers, gold is also down – by around 2.9% – but again it has comfortably outperformed the Swiss Stock market which is also down a little over 11%!  (All figures as at close Friday December 21st).

If one looks also at another key investment asset – the heavily promoted bitcoin – the biggest bitcoin player, BTC, has lost around a massive 70% since January 1st this year.  I think that more than quashes any argument that bitcoin provides a better haven than gold which was prevalent when BTC was riding high in the second half of 2017.  It has proved to be a far more volatile asset than gold which somewhat defeats the safe haven principle! It is altogether a much more speculative asset class and we would not be surprised to see the price dive further in the weeks and months ahead.  Other cryptocurrencies have declined even further than BTC in percentage terms.

As we have noted before we have not been a believer in bitcoin as an investment.  We warned people to get out when BTC was at around $10,000 on the way up to almost double that level so we were a little early with our advice, but were obviously correct in principle.  In our view it’s better be out too soon in what was looking increasingly like a developing bubble situation than too late!

So what happens from here?  Equities are still looking vulnerable while portents for gold and the other precious metals are looking positive although data may yet change the position of either or both.  Geopolitics are ever increasingly uncertain – in part due to President Trump’s domestic difficulties and his insistence on a continuing trade dispute with China which seems to be disadvantageous to both nations. There are also continuing issues in the Middle East, Ukraine, Afghanistan, North Korea and the South China Sea to name but five potential flashpoints – but there could well be others which crop up in the year, or years, ahead.  The Democratic party majority in the U.S. House of Representatives which will be in place in 2019 and the subsequent possibility of moves to impeach the U.S. President add further degrees of uncertainty to the mix, which could weigh on equities and the dollar and boost precious metals.

Some observers feel that silver, which has underperformed in the past year, might be the precious metal to plump for given that it tends to outperform gold when the latter is in a rising pattern.  Palladium fundamentals look strong too, but the price could suffer if there is an economic recession, as could that of silver,  and a global recession may, or may not, be on the cards.  A U.S. recession has looked unlikely in the near term, but further falls in equities could lead to negative overall sentiment which could push the recession button and adversely affect all industrial metals – sooner rather than later.

The U.S. Federal Reserve is currently looking as if it will reduce the projected number of interest rate rises next year.  If this is indeed confirmed – or if the Fed looks as if it will reduce the number of rate rises further, which looks possible if equities continue on their downwards path – then this could depress the U.S. dollar and gold could move up strongly.

A word of caution for precious metals investors though – should equities truly crash, which has to be a possibility, liquidity issues could also lead to a precious metals sell-off too as happened in 2008 as big investors struggled to stay afloat and needed to sell good assets to do so.  However, if history repeats itself in this respect the twin consolations are that firstly some of the big institutions are much lighter on gold holdings this time around, given that gold investment fell out of favour given the seeming ever-upwards path of equities up until the past few weeks.  And secondly comfort could be gained in that back in 2008/9 gold was the quickest major asset class to recover – indeed was rising strongly while equities were still on the way down!

Gold and silver key holdings amidst market and U.S. political mayhem

Treasury Secretary Panics as Markets Melt Down and Trump Mulls Firing Fed Chair Powell

President Donald Trump slammed Fed chairman Jerome Powell yet again and reportedly asked advisors within his inner circle whether he has the legal authority to fire Powell.

It would be unprecedented for a President to fire a Fed chairman before his term is up. Over the weekend, Treasury Secretary Steven Mnuchin raced to quell the idea of ousting Powell. (But Mnuchin seems to have a personal stake in it, as he had recommended to Trump that he pick Powell to replace Janet Yellen.)

Mnuchin also convened over the weekend with big bank CEOs and the Administration’s secretive President’s Working Group on Capital Markets, also known as the “Plunge Protection Team.”

Crash

He took the unusual step of issuing a statement declaring the banking system has “ample liquidity.”

His attempt to preempt any concerns about the current health of the financial system may have only helped draw more attention to them. The Fed’s rate hikes have already put the stock market on the brink of a major cyclical crash.

Does the White House have the legal authority to remove Federal Reserve Board members? Apparently so. According to Section 10 of the Federal Reserve Act, “each [Board] member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.”

If the President finds “cause,” then he can remove Fed policymakers.

Of course, Trump would set off a political firestorm if he attempted to remove the Federal Reserve chairman. Right now, the White House is struggling to put out multiple existing fires threatening Trump’s agenda – from the Robert Mueller investigation, to Defense Secretary James Mattis’ sudden resignation in protest, to the partial government shutdown now in effect.

Early last week, it appeared that Trump was preparing to sign a stopgap bill to keep the government open – without funding for a border wall. But after his base revolted at the prospect of another capitulation on his cornerstone campaign promise – and a complete squandering of the last opportunity to get anything done while Republicans still control both chambers of Congress – Trump changed his mind.

Government Shutdown

Is the current government shutdown anything more than political theater? History suggests shutdowns rarely achieve anything good for Republicans. They certainly never save taxpayers money (all government employees not reporting for work will still get full pay).

What do government shutdowns mean for markets? Not much, usually.

Investor fear is priced in beforehand. But with so much now weighing on the stock market all at once, any additional bad news about the prospects for a resolution of the shutdown could trigger additional heavy selling.

To be sure, the unfolding mayhem reinforces the wisdom of having a meaningful allocation to gold and silver as we head into the New Year.

Gold Bulls Regain Dominance

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

The Gold Bulls Just Regained the Upper Hand

Commodity traders appear excited about gold again as stocks are on pace for their worst year since 2008, and their worst December since 1931. Bullish bets on the yellow metal outnumbered bearish ones for the week ended December 11, resulting in the first instance of net positive contracts since July, according to Commodity Futures Trading Commission (CFTC) data.

traders make first bullish bet on gold since july as stocks tumble
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As many of you know, December has historically been a strong month for stocks. But fears of a slowdown in global growth, rising interest rates and the U.S.-China trade war have prompted many investors to pare down their stocks in favor of gold, often perceived as a safe haven in times of economic and financial instability.

Now, as we head into 2019, gold “is poised to take the bull-market baton from the dollar and stocks,” writes Bloomberg  Commodity Strategist Mike McGlone. Although the U.S. dollar has been strengthening since September, which would ordinarily dent the price of gold, the yellow metal has shown “divergent strength on the back of increasing equity-market volatility,” McGlone adds.

Gold and Metal Miners Have Crushed the Market

So far this quarter, gold has crushed the market, returning more than 5 percent as of December 18, compared to negative 11.9 percent for the S&P 500 Index. Gold miners, though, as measured by the NYSE Arca Gold Miners Index, have been the top performer, climbing nearly 12 percent.

Gold Miners Have been the standout performer this quarter
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We could see even higher gold and gold equity prices next year and beyond, but the dollar will likely need to come down. For that to happen, the Federal Reserve will need to call time out on its quarterly rate hikes. Many industry leaders now support this idea, including Jeffrey Gundlach and Stanley Druckenmiller, not to mention President Donald Trump.

“I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make another mistake,” Trump warned in a tweet Tuesday morning. “Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!”

The WSJ editorial Trump refers to makes the case that “economic and financial signals suggest [Fed Chairman Jerome Powell] should pause,” a line the president has been repeating for months now.

Looking ahead five years, the investment case for gold and gold miners gets even more attractive. London-based precious metals consultancy firm Metals Focus projects a gradual increase in gold consumption between now and 2023, supported by strong jewelry demand and physical investment.

gold consumption forecast through 2023
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“From late 2019 onwards,” Metals Focus analysts write, “we expect a bull market in gold to emerge, which in our view will remain in place for the next two to three years.”

Greenspan Urges Investors to “Run for Cover”

In an interview this week with CNN, former Federal Reserve Chairman (and gold fan) Alan Greenspan urged investors to “run for cover,” as he doesn’t see the market moving much higher than they are now.

“It would be very surprising to see it sort of stabilize here, and then take off,” Greenspan said.

I believe the best way to “run for cover” is with gold and short-term, tax-free municipal bonds. As for gold, I always recommend a 10 percent weighting, with 5 percent in bullion, coins and jewelry, the other 5 percent in high-quality gold stocks, mutual funds and ETFs.

Monetary and Fiscal Risks Boost Gold’s Investment Case

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

The investment case for gold and other precious metals got a boost last week in light of news that might concern some equity investors. The European Central Bank (ECB) announced that it would be drawing quantitative easing (QE) measures to a close by halting its 2.6 trillion-euro bond-purchasing program, begun four years ago as a means to provide liquidity to the eurozone economy after the financial crisis. Interest rates, however, will be kept at historically low levels for the time being.

The ECB, then, will become the next big central bank, after the Federal Reserve, to end QE and normalize monetary policy. Although it’s steadily been tapering its own purchases of bonds, the Bank of Japan (BOJ) is still committed to providing liquidity at this point. Assets in the Japanese bank now stand north of 553.6 trillion yen ($4.86 trillion)—which, amazingly, is more than 100 percent of the country’s entire gross domestic product (GDP). Holdings, in fact, are larger than the combined economies of India, Turkey, Argentina, Indonesia and South Africa.

Major Central Banks' Total Assets
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In the past, I’ve discussed the economic and financial risks when central banks begin to unwind their balance sheets. The Fed has reduced its assets six times separate occassions before now, and all but one of those times ended in recession, according to research firm MKM Partners.

“Business cycles don’t just end accidentally,” MKM Chief Economist Mike Darda said in 2017. “They are killed by the Fed.”

We can now add the ECB and, at some point, the BOJ to this list. The three top central banks control approximately $14 trillion in assets, a mind-boggling sum, and it’s unclear at this point what the ramifications might be once these assets are allowed to roll over.

The Widest November Budget Deficit on Record

In addition, the Treasury Department revealed last week that the U.S. posted its widest budget deficit in the nation’s history for the month of November, as spending was double the amount of revenue the government brought in. The budget shortfall, then, came in at a record $205 billion, almost 50 percent over the spending gap from a year ago.

This follows news that U.S. government debt is on pace to expand this year at its fastest pace since 2012. Total public debt has jumped by $1.36 trillion, or 6.6 percent, since the start of 2018, making it the biggest expansion in percentage terms since the last year of President Barack Obama’s first term, Bloomberg reports.

As of last Monday, the national debt stood at just under $22 trillion, and by as soon as 2022, it could top $25 trillion, according to estimates.

U.S. Debt Projected to Jump by $7.5 trillion from 2016 to 2023
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As I shared with you in November, the government could very well be in a “debt spiral” right now, in the words of Black Swan author Nassim Taleb. This means it must borrow to repay its creditors. And with rates on the rise, servicing all this debt will continue to get more and more expensive.

It’s for this reason, among others, that I recommend a 10 percent weighting in gold, with 5 percent in bullion and gold jewelry, the other 5 percent in high-quality gold stocks, mutual funds and ETFs.

Christmas Comes Early for WHEATON PRECIOUS METALS

Gold mining investors and Canadian capital markets received an early Christmas gift last Friday. Wheaton Precious Metals, one of the largest precious metals streaming companies in the world, announced that it reached a settlement with the Canadian Revenue Agency (CRA), the equivalent of the IRS. Before now, Wheaton had been in an ongoing legal feud with the agency over international transactions between 2005 and 2010.

According to the agreement, income generated through Wheaton’s foreign subsidiaries will not be subject to Canadian taxes. The company, however, will need to mark-up the cost of service provided to foreign subsidiaries, from 20 percent to 30 percent.

“The settlement removes uncertainty with the use of our business model going forward and puts the tax issue behind us so that we can continue to focus on what we do best: building and managing our high-quality portfolio both organically and by accretive acquisitions,” commented Randy Smallwood, Wheaton president and CEO.

“We expect the stock to react positively to the news given the tax dispute was an overhang,” Credit Suisse analysts shared in a note to investors today. Indeed, Wheaton stock was trading up as much as 12.4 percent in New York following the news, hitting a four-month high of $19.63 a share.

wheaton precious metals stock jumped after tax settlement news
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I want to congratulate everyone at Wheaton, particularly Randy for his resilience and strong leadership. He’s always offered invaluable insights to our team and investors. I encourage interested registered investment advisors (RIAs) to check out the July 2018 webcast I did with Randy, where we discussed our seven top reasons to invest in gold. You can listen to the replay by clicking here.

 

Is Palladium Price Action Forerunner for Gold and Silver?

by: Clint Siegner*

The precious metals sector has just one standout performer this year, and that is palladium. Lately the market for that metal has become more than just hot. Developments there could have implications for the London Bullion Market Association (LBMA) and the rickety fractional reserve system of inventory underpinning all of the physical precious metals markets.

Craig Hemke of the TF Metals Report was  the podcast guest this past Friday. He has been watching the developments in palladium closely and gave an excellent summary of what’s involved.

Palladium prices went parabolic once before. The price went from under $400 per ounce to $1,100/oz from late 1999 to early 2001. Then, just as quickly, the price crashed back below $400.

Palladium’s move higher in recent months is reminiscent. It remains to be seen whether or not a price collapse will follow. Some of the underlying drivers are the same, some are not.

Russia May Not Save the Palladium Markets This Time

Today, as in 2001, Russia is the world’s largest producer of the metal. Mines there contribute about 40% of the world supply.

The shortage 17 years ago was driven by demand. Automobile and truck manufacturers began using more of the metal in catalytic converters. It was a lower cost alternative to platinum.

When the market ran into shortage, Russians, under President Boris Yeltsin, rode to the rescue. They were willing and able to bring more physical metal to market.

The added supply turned the market around just in the nick of time. The LBMA and bullion banks got away with selling way more paper palladium than they could actually deliver.

Today, palladium inventory is once again in short supply. This time around, however, the paper sellers in London and in the COMEX may find themselves at the mercy of Vladimir Putin.

Russian relations aren’t what they were in 2001. Palladium users may not get the same rescue as before, assuming Russian miners have stockpiles to deliver.

The bullion banks’ problem is starting to look serious.

System Failure

For one thing, the lease rates for palladium have gone berserk. Bullion bankers and other short sellers often lease metal to hand over to counterparties standing for delivery on a contract. Until very recently, they could get that metal for less than one percent cost. Last week, that rate spiked to 22%.

That is extraordinarily expensive, and it reflects the scarcity of physical palladium. The only reason a banker might pay such a rate is because he is over the barrel and has zero options outside of defaulting on his obligation.

Severe Shortages Lead to High Lease Rates, Backwardation

In conjunction with the surge in lease rates, the palladium market has moved into backwardation. It costs significantly more to buy metal on contracts offering delivery in the near future than it does to buy contracts with a longer maturation.

Normally the opposite is true when it comes to the precious metals. Investors buying a contract normally pay a premium to have the certainty of a fixed price today for metal to be delivered sometime well down the road.

Investors are paying big premiums (about $100/oz currently) to get contacts with offering metal for delivery now. The near-term price reflects a concern over whether promises to deliver palladium months from now can even be met.

Is the Palladium Situation a Dress Rehearsal for Gold & Silver?

Gold and silver bugs have long expected the bullion bankers will eventually put themselves in this kind of bind with the monetary metals. They have sold contracts representing something on the order of 100 ounces for every ounce of actual gold or silver sitting in exchange vaults.

That much leverage is bound to end in catastrophe, someday. All it will take is a collapse in confidence – the suspicion that paper will not and cannot be convertible for actual metal.

A failure to deliver in the relatively tiny palladium market could be the “canary in the coal mine” – a warning to investors in other precious metals. If there is a failure to deliver in LBMA palladium, it could shake confidence in the much larger markets for gold and silver.

The developing shortage in the silver market suggests that silver could be the next

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.