“This is the real move in gold and silver… it’s going to be multiyear.”

Interview by Mike Gleason of Money Metals Exchange with David Morgan

Precious Metals Soar on Falling Yields, Global Currency Turmoil

Mike Gleason: It is my privilege now to welcome back our good friend David Morgan of The Morgan Report. David, it’s always good to have you on and appreciate you joining us today. How are you, sir?

David Morgan: Mike, I’m doing all right and it’s good to be with you.

Mike Gleason: Well, David, I know we don’t have a whole lot of time today, but I’m really glad we’re able to speak to you this week because we’re finally seeing some real fireworks here in the metals lately. And I wanted to get your comments.

I should mention that we’re talking here on Thursday morning and we’ve got gold hovering around $1,500 and silver right at about $17. They both popped above those respective key levels yesterday, Wednesday. So first off, what do you make of this move, David? What’s driving it? And the bigger question, will it be sustained?

David Morgan: Well, what’s driving it is something that no one’s really, really talking about. This is my opinion. Of course, you’re asking for my opinion. A lot is the financial press, “Well, It’s all about this trade war with China and the trade war is getting worse. And there’s going to be more sanctions coming in,” and on and on and on. And that may have something to do with it.

But first of all, the underlying fundamental is financial uncertainty. That’s number one. But beyond that, it’s really something going on in the physical market that no one’s really writing about and I don’t know enough about the state other than it’s got to be part of it. The reason I say that is that the paper paradigm is very clear on how the markets move in the futures markets with trading this paper back and forth for contracts to buy and sell silver. And all they really do is set the paper price.

And of course the metals price goes along with that. I’m not trying to discount that very much. What I’m trying to state is that the paper markets dominate the price over and over again. And every now and again you’ll get in a situation like this where something’s going on, where something needs to be fulfilled and accomplished, and it hasn’t been settled out yet.

So for an example, let’s say there’s some bank that’s demanding a physical settlement in gold and they haven’t received it yet. Once that’s accomplished, you may, and most likely, see the market cool off and go more into some type of trading range where you’re more apt to be able to look at the paper trades, more of what we call levels that we’re used to seeing.

So, I think there’s something out there. Whether that’s occurring with silver or not, I doubt it, right now based on the fact that silver has been lagging gold so much. And there’s a couple of gaps in the charts that will probably be filled, one, you haven’t missed this move at all. If you bought yesterday at maybe the high, I don’t know yet, and it goes down and let’s say silver makes it all the way back down into the, I don’t know, $15.50 range or something, you haven’t missed much. Yeah, you wouldn’t want to buy and see a loss right away. But what I’m trying to state is this, I’m convinced, is the real move. It’s going to be multi-year. And silver and gold, at the end of three, four years from now are going to be substantially higher than they are today.

Mike Gleason: Certainly strong comments. You’re always take a very level-headed approach and have not been just pumping sunshine over these last several years every time we get a rally. So, that’s definitely something that we should all take note of.

Now, silver, you mentioned this, silver does seem to be underperforming a little bit vis-a-vis gold. And now we’ve seen the gold-silver ratio come down from, I think I saw it 93 to one, maybe about there, within the last few months. It’s about 88 to one right now. So, silver has gained somewhat but maybe not quite like you would expect given a big bull move and given that silver should vastly outperform gold in a bull market. So is this seeming lack of out performance from silver a cause for concern?

David Morgan: Somewhat still it is. First of all, I like to see, I mean 80 to 1 at a minimum. And even there that’s an extreme.

When I started the previous website – my website, I think everyone knows is TheMorganReport.com – I rebranded that for years now because I want everyone to be aware that I cover all the resource sector, lithium, rare-earths, et cetera, and not just silver.

But back in the older days with Silver-Investor.com, when I started that website, the ratio was 80 to one, and that was an extreme. And if you would have asked me, even, I don’t know, three years ago, a couple years ago, “Will you see the gold-silver ratio above 80 to one?” I would’ve said, “No. I really, really doubt it” and I’m wrong. It’s got to about 93, 4, 5, somewhere in that range.

So, to really be convinced that, and first of all, I’m convinced that we’re in a new bull market, to be convinced that things are, let’s say, going to show both metals really outperform many other sectors, the equity markets, the bond market, the real estate market, everything else, and take the dominating lead as this currency crisis continues, I want to see silver below a 70-to-one ratio. That would be ultimate confirmation for me, Mike that okay, we’re well on our way, and we’re not. We’re at 88.

Silver has some work to do. Silver is, in my view, much more difficult to analyze than gold, but it can make these moves rather drastically and quickly as gold is doing. Of course, silver’s done pretty good job here of late picking up some momentum and moving from the doldrums into the 17, which is still dirt cheap.

I mean, if you take an AISC, all-in sustaining cost, for some of the major silver producers, they’ll tell you they’re at $15 but they don’t tell you is what their taxes are. So if you add those in, a lot of them are right at basically where we’re at, in other words $17. They’re just break even.

And for any company, what they’re making dresses or corn chips or cola, you want as wide a margin as you can get commensurate with what the market’s willing to pay for your product. And in the case of silver, these companies are still struggling at these levels. So, silver’s got a long ways to go, as does gold, for the margins to be large enough for these companies to breathe easy and have a viable business and be able to have a cashflow that allows them to go out and explore further or retain assets or whatever. So, I see a lot of upside but I’m also anxious for silver to kind of show its wings and fly, and that type of thing.

Mike Gleason: Gold has risen to levels last seen in 2013 when it broke down. But silver obviously is nowhere near those levels, which was say the mid-20s at about that point. What is it going to take for silver to get back above that say into the $20 plus range and what are some of the key resistance points you’re watching for silver between here and there and then beyond?

David Morgan: Okay. Well for, yeah, it does take more interest in the metals all together. Obviously there’s a lot of interests coming in, but it’s mostly institutional. It’s not your retail (investors) at this time. I talk to many dealers such as yourself, Mike. And what I found out was a little bit surprising. A lot of this trading is going through, as I said, institutions which means futures trading and ETFs and a lot of the retail investors are saying, you know what gold’s back to where I bought it, I bought it at this $1,450. It’s there, I’m selling it back. So a lot of the retail investors aren’t believing this rally is for real. And what they’re doing is basically getting their money back. Not all of them of course, but so there’s a lot of work to be done on the silver side. There is lots of areas of resistance on this.

Pulling up a chart as we’re speaking, Mike, because I anticipated this. So there’s huge resistance at $17, which is where we’re at right now as we speak. Will it get through that? Yes. Eventually it will. Will it instantly? I doubt it. I think it’ll come back and fill the gap. And I’m going to do an update for my paid members here, show them where a good entry point is. If they have stopped, if they want to get into this market or add to their positions, whatever. Normally I do that all through equities. I use the futures as a proxy for the overall market. Doesn’t mean you should do futures. In fact, a dissuade anybody from using the futures market. It’s just, that’s where the price is set. So it’s easier to analyze, and I can show them on the chart when silver gets to this level, that’s a good time to start buying your top tier or your favorite junior or whatever you’re going to do.

So, $17… $17 to $17.25 is a pretty big area of resistance. After that, it floats up to a really $19-20 pretty easily. So once we work through that level, Mike, you’ll probably see an acceleration of silver from, I’m going to say $17.50 up to $19.50 I expect it to go to that level fairly quickly. It won’t be like two trading days, but it may probably won’t take very long. Silver could surprise anybody, even me as far as how it reacts. It doesn’t seem to ever do what you expect it to do. But regardless it will outperform and we do need to see a higher level. Once again, over the $20 level, I think the psychology will change and people will say, “It’s silver, not so bad.” Now, they won’t touch at $15. I know you guys sell silver at all levels and every day and there’s always purchases.

But, mark my words, you check the volume and activity at your business. How many people are calling in and buying silver or when it gets silver when it gets over $20, what it’s doing now, and I’m sure you’ll be selling more at that level. People just love to buy the metals at a higher price. When I’m pounding the table saying “This is it.”

Because most people don’t want to put up with, the time, the patience that’s required, if you bought silver at $14 at the end of 2015. Watched it rally all the way up to $21. I was convinced at that time where the bull mark was back in tact. And in a way it is, I mean if you look at gold from that perspective, that’s where it bottomed and has had high or lows all the way up. Silver’s chart doesn’t look like that. Silver bottoms at the same time as gold, which is December, 2015. and it has not made high or lows all the way up. And we’ve basically stayed flat to about $15.75 and then it broke down from there and it got down as low as the 14s. So still higher than it was in December, 2015 but a messy chart, let’s say.

Mike Gleason: Yeah, there’s certainly some big, big levels above us and yeah, I agree. I think when we see silver, get that two handle again. I think that’s when a lot of people are going recognize that okay, it’s time to start moving and the smart people will do it before then.

Again, thanks David for fitting us in. I know we had a tight window here and it’s been great to have you on. But as we wrap up though, I want to give you a chance to fill our audience in on any of the other markets that you’re looking at here.

David Morgan: Sure. Always looking at the equity market and of course the bonds are the key and the currency markets – we looking at everything really. I think the stock market is showing some wear. It’s been a bull market for quite some time. It’s overvalued by any metric you want to use. I’m looking at that and see it get rolled over further. And then bond market of course is the key because this is the debt markets that everything depends on and how much faith there is in that is going to determine the future of the financial system. So, those are key currencies. As I’ve said many times you can see gold and the dollar go up. Dollar’s making new highs. Gold’s making a six year high. And I said “Watch.” And of course here we are. There’s a reason for that. So, I think that’s about it.

I just close out, I got this email. “I’m a young guy, I have a high conviction, precious metal is the best place to be in the next three to five years. I’m in need of guidance of how to build a long-term precious metals portfolio. I want to fund this as soon as possible. I know you’re not a financial adviser, but you offer services that will help me start a precious metal portfolio. I continue to monitor the market on an ongoing basis with your analysis, can you help me?” And that’s almost precisely what I do. So, I will get with this gentleman and kind of reaffirm what he’s already asking. Can you help me? Yeah, that’s what our business is. So anyway, if you want to learn more, just go TheMorganReport.com put in a first name and an email address, be happy to put you on our free list. And you can determine from there, if you want to go further.

Mike Gleason: There’s probably no better time to get in and get on board with services like The Morgan Report, and the great commentary that David and his team put out there. And, and just see what’s going happen and what they have to say about these markets as we could be entering this new bull phase. I mean, you heard David say it, he’s convinced we’re in a new bull market and this is going to be an exciting time and the time that precious metals investors have been waiting for, for a number of years. So definitely urge people to take advantage of that and go to TheMorganReport.com it’s truly great stuff. You have just heard what David was talking about. A great approach to all these markets and lots and lots of experience over the years. He’s seen everything.

Well good stuff David. Always appreciate it. Thanks so much. I hope you enjoy the rest of your summer and I can’t wait for our next conversation, take care.

David Morgan: Thanks so much Mike. It’s great to be back with you.

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Low or negative interest rates drive gold to new interim highs as Central Banks continue to buy

With Yields Sinking Everywhere, Gold Just Hit New All-Time Highs…

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

With Yields Sinking Everywhere, Gold Just Hit New All-Time Highs…

“It is no longer absurd to think that the nominal yield on U.S. Treasury securities could go negative,” Joachim Fels, PIMCO’s global economic advisor, warned investors last week. “Whenever the world economy next goes into hibernation, U.S. Treasuries—which many investors view as the ultimate ‘safe haven’ apart from gold—may be no exception to the negative yield phenomenon.”

Fels seems not to be the only investor with this idea, judging by the increased demand for gold.

The price of the yellow metal had its best week in nearly two months as the total value of negative-yielding debt around the world touched a new record of $15 trillion. With the nominal yield on the 10-year Treasury having fallen below 2 percent—and just shy of 0 percent on an inflation-adjusted basis—gold surged above $1,500 an ounce in U.S. dollars (USD) for the first time since September 2013.

It also hit historic all-time highs when priced in a number of other world currencies, including the British pound, Russian ruble and Indian rupee. Last week, the central bank of India, along with those in New Zealand and Thailand, surprised markets by cutting rates more than expected, adding to fears that an economic slowdown is imminent.

On Wednesday, gold’s performance for 2019 caught up with and surpassed that of the stock market.

gold is now beating the market year-to-date
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Analysts at Goldman Sachs now say that $1,500 is only the beginning, and that we could see $1,600-an-ounce gold within the next six months.

“If growth worries persist, possibly due to a trade war escalation, gold could go even higher, driven by a larger ETF gold allocation from portfolio managers who still continue to under-own gold,” Goldman analyst Sabine Schels said in a note to investors last week. “Gold ETFs have recently built momentum almost as strong as in 2016, and we believe that can be maintained in the short-term.”

Indeed, gold ETFs attracted $2.6 billion of net global inflows in July alone, raising their collective holdings to 2,600 tonnes—a level unseen since March 2013, according to the World Gold Council (WGC).

A $1.2 Trillion Hit to the World Economy

For further insight on global trade, Goldman no longer believes a resolution to the U.S.-China trade war will occur before the 2020 presidential election. On Friday, in fact, President Donald Trump told reporters that “we are not ready to make a deal” with China, “but we’ll see what happens.”

Should the trade war continue to escalate, it could cost the world economy “dearly,” according to Bloomberg. New modeling by Bloomberg analysts shows that global GDP would be 0.6 percent lower by 2021, amounting to a whopping $1.2 trillion hit, if markets slumped as a result of a full blown trade war.

Currency Wars Are Pushing Up the Price of Gold

Again, it’s not just USD-priced gold that’s done well in recent days. The precious metal blew past new all-time highs in a number of currencies on top of those I already mentioned. They also included currencies in major gold-producing economies such as Australia, Canada and South Africa. Australia’s dollar traded at its lowest level against the USD since the financial crisis a decade ago.

gold has hit all-time highs in multiple currencies
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One of our favorite ways to play this appreciation is with Russia gold stocks, particularly Moscow-based Polyus, which was up nearly 55 percent in the 12 months through August 8. Its peers, Polymetal (up 51 percent) and Highland Gold (75 percent), have also been winners in a strong gold-price environment.

Russian gold stocks have made giant moves
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“Polyus is undoubtedly a growth company,” according to equity research firm Wood & Company. Analysts there note Polyus’ lower-than-average production cost of only $348 an ounce last year and attractive valuation of 6.8 times price-to-earnings (P/E). “It offers a decent yield more long-term growth than any other stock in Russian metals and mining, and we believe the sanction risks are small,” Wood analysts write. The producer’s dividend yield is expected to average between 5 percent and 6 percent this year, well above its peers.

Beijing Wants Even More Gold in Its Reserves

In other currency war news, China added to its official gold holdings for the eighth straight month in July. Its central bank increased holdings as much as 10 tons, after raising it 84 tons in June. Total holdings now stand at 62.26 million ounces, as the world’s second largest economy expands its efforts to diversify away from the USD.

China added to its gold reserves for eighth straight month
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As I explained earlier last week, China allowed its currency, the renminbi, to weaken past 7.0 versus the USD, a level not seen since 2008. This was just the latest development in the country’s trade spat with the U.S. that’s nearing its 18th month.

Doctor Copper Hits a Two-Year Low on Growth Concerns

Fears of slower growth may be beneficial for the price of gold right now, but they’re taking a toll on copper, often seen as a barometer for the global economy. The red metal is widely used in, well, anything that needs to conduct an electrical charge, and when a slowdown in industrial demand is expected, prices struggle.

Take a look below. Copper has more or less followed the global manufacturing purchasing manager’s index (PMI) down over the past year and a half. Factories across the globe contracted for the third straight month in July.

copper price falls to a two-year low on weaker manufacturing demand
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As the Wall Street Journal puts it, the slide “threatens to limit investment in new mines, a trend that industry analysts and executives say could lead in coming years to sizable shortages of the material critical to manufacturing and renewable-energy projects.”

The price of copper slid as low as $2.53 per pound on last Monday, a 52-week low and nearly 25 percent down from its recent high of $3.30 from last June.

An economic gauge of heavy copper-using manufacturers indicated contraction in July. The Global Copper Users PMI fell from 50.0 in June to 48.6 last month, the weakest result in five months, according to IHS Markit.

“Companies noted that raised trade tensions played a part in reducing production, as new export orders fell at a sharper rate,” said IHS Markit economist David Owen, who added that weakness in the European auto sector also played a role in declining copper demand.

Gold Demand Trends Q2 2019

Here’s a summary of some of the key findings in the World Gold Council’s Q2 Gold demand Trends report.  For further details click on: https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2019

Central bank buying and ETF inflows boosted H1 demand

Gold demand was 1,123t in Q2, up 8% y-o-y. H1 demand jumped to a three-year high of 2,181.7t, largely due to record-breaking central bank purchases.

Central bank buying and healthy ETF inflows were the driving forces behind gold demand throughout the first half of 2019. Growth in H1 jewellery demand was largely the product of a more positive environment for Indian consumers. Shifts in bar and coin investment were very much price-related: as the gold price powered its way to multi-year highs, profit-taking kicked in and retail investment all but dried up. The technology sector reduced its usage of gold due to challenging global conditions, although the outlook is for this element of demand to establish something of a floor over coming quarters. Solid growth in both mine production and recycling fed into a 2% increase in total H1 gold supply.

H1 gold demand boosted to a three-year high by record central bank buying

Highlights

Central banks bought 224.4t of gold in Q2 2019. This took H1 buying to 374.1t – the largest net H1 increase in global gold reserves in our 19-year quarterly data series. Buying was again spread across a diverse range of – largely emerging market – countries.

Holdings of gold-backed ETFs grew 67.2t in Q2 to a six-year high of 2,548t. The main factors driving inflows into the sector were continued geopolitical instability, expectation of lower interest rates, and the rallying gold price in June.

A strong recovery in India’s jewellery market pushed demand in Q2 up 12% to 168.8t. A busy wedding season and healthy festival sales boosted demand, before the June price rise brought it to a virtual standstill. Indian demand drove global jewellery demand 2% higher y-o-y to 531.7t.

Bar and coin investment in Q2 sank 12% to 218.6t. Combined with the soft Q1 number, the H1 total ended at a ten-year low of 476.9t. A 29% y-o-y drop in China accounted for much of the global Q2 decline.

Gold supply grew 6% in Q2 to 1,186.7t. A record 882.6t for Q2 gold mine production and a 9% jump in recycling to 314.6t – boosted by the sharp June gold price rally – led the growth in supply. H1 supply reached 2,323.9t – the highest since 2016.

Gold prices shot to multi-year highs. The gold price broke through US$1,400/oz for the first time since 2013. Among the factors driving this rally were expectations of lower interest rates and political uncertainty, with further support coming from strong central bank buying.

Some thoughts on silver’s poor performance vis-a-vis gold.

What is puzzling in the precious metals space is the underperformance of silver in comparison with gold during the latter’s very sharp recent price rise. Historically silver tends to outperform gold percentage wise when the latter is rising sharply.  This time around, so far, this has not been the case,  Silver guru Ted Butler puts this down to continued price manipulation on the U.S. COMEX Futures Exchange – see: http://silverseek.com/commentary/stranger-fiction-17678 for his latest outspoken commentary on this subject, and who he sees as the main culprits.

Meanwhile appended below is Stefan Gleason’s latest commentary from Money Metals Exchange, where he predicts a potentially explosive rise in the silver price should gold continue its upwards path.  Gleason heads up a precious metals trading business in the U.S. so he does have an interest in higher prices, but his views on the current silver situation are echoed by many perhaps more impartial observers too:

Will Silver Soon Follow Gold’s Lead?

Gold Price (June 21, 2019)

To be sure, there is also the possibility of some retracing and back-testing this summer before the $1,400 level is conquered for good.

The fall and winter periods are typically more conducive to big precious metals rallies.

Seasonality, however, isn’t a dependable trading tool. Some technical analysts (who will go unnamed here) wrongly turned bearish on gold and gold stocks after they put in a disappointing early spring performance and were thought to be headed straight into the summer doldrums.

Instead, the summer solstice arrived with gold’s chart displaying a powerfully bullish long-term setup.

The one glaring problem with the current setup in precious metals markets: silver hasn’t yet confirmed gold’s breakout.

Silver Price (June 21, 2019)

Silver needs to break above $15.50, then $16.00 (the last intermediate cycle high) in order to establish a bullish trend on par with gold’s.

The white metal’s lagging price performance in recent months has resulted in it trading at its biggest discount to gold in three decades.

Hardy silver bugs are excited at this rare opportunity to buy more ounces on the cheap. Others are understandably concerned that silver isn’t showing any leadership during rallies in the metals sector.

Silver, being a smaller and naturally more volatile market than gold, is supposed to amplify gold’s moves on both the upside and downside. So why is silver instead acting like an anemic version of gold?

Lots of reasons can be proffered – from record central bank buying of gold, to silver’s reliance on industrial demand, to low (official) inflation, to market manipulation.

It probably comes down largely to investor psychology. When precious metals markets have been out of the “mainstream” news cycle for years – trumped by a rising stock market and the rise of digital currencies – the general public won’t be interested in precious metals.

The super-rich and large institutional investors who are more apt to take contrarian positions in overlooked assets generally prefer gold over silver because it is more convenient for them to accumulate in large quantities.

We are still in the stealth phase of a precious metals bull market. When we enter the public participation phase – and demand for physical bullion increases – we have no doubt that silver will shine.

Put Your Trust in Gold

The latest blog post from Frank Holmes, CEo and chief investment officer for U.S. Global investors follows on a similar subject on one  we made ourselves a week or so ago – see: Trust in Gold and Indian Gold Demand Strong

Put Your Trust in Gold

Put Your Trust in Gold

Americans’ trust in institutions, from the federal government to banks to the news media, has been deteriorating for decades. Sixty years ago, three quarters of Americans expressed faith in the government to do the right thing “most of the time” or “just about always.” Today, only one in five people, a near-record low, believes our leaders make decisions in the country’s best interest.

The news media fares just as poorly. A new survey finds that Americans believe “fake news” is a bigger problem right now than violent crime, illegal immigration and terrorism.

Just take a look at the chart below, based on Gallup polling data going back to 1973. Whether it’s newspapers, television news or, more recently, online news, Americans’ faith is steadily eroding. Last year, the percent of Americans who said they have a “great deal” or “quite a lot” of confidence in newspapers stood at a near-record low of 23 percent. Trust in television and online news was even lower.

Americans trust in news media has been slipping for decades
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So where can you still put your trust in today’s often cynical world? Friends and family. Our churches and other religious organizations. Our jobs.

As an investor, I continue to have great faith in gold as a store of value during times of economic and geopolitical uncertainty. It’s behaved precisely as I expect it to. In response to heightened global trade concerns and weakening economic indicators, investors have piled into the yellow metal, pushing its price up for a remarkable eight straight days as of last Friday. We haven’t seen such a winning streak since June 2014, when gold traded up for 10 straight days.

Late last week, it was within striking distance of its 2019 high of about $1,356 an ounce, which should spur even more investors to get off the sidelines and participate.

Gold within striking distance of 2019 high
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Indeed, there are a number of warning signs that suggest investors should proceed with caution as the U.S. economic expansion turns 10 years old. Global manufacturing growth reversed for the first time since 2012, with the purchasing manager’s index (PMI) falling for a record 13 months in May.

This weakness turned up in the monthly jobs reports from the federal government and payroll services provider Automatic Data Processing (ADP). The Labor Department reported Friday that U.S. employment edged up only 75,000 in May, far below expectations of 175,000.

According to ADP, the U.S. added 27,000 jobs, making May the weakest month for job gains in more than nine years. I don’t know about you, but I can’t help reading this as a direct negative consequence of the White House’s escalating trade war with China and earlier threat to impose a tariff on all imports from Mexico. The U.S. goods producing sector was hit hardest, with construction losing 36,000 positions, natural resources and mining losing 4,000 and manufacturing losing 3,000.

US had the smallest monthly job gain since economic expansion began
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The 5 percent Mexican tariff was “indefinitely suspended,” according to Trump Friday evening, in exchange for Mexico doing more to stem the flow of illegal immigration into the U.S.

As I’ve explained elsewhere, tariffs are essentially taxes and, as such, they’re inflationary. This has historically supported the price of gold.

Besides Walmart and Costco, a number of other retailers have been telling customers and investors that prices will be going up thanks to the Chinese tariff. Discount retailer Five Below said it will likely need to raise prices on certain items above $5 for the first time. Dollar General and Dollar Tree both alerted shoppers that they will be “facing higher prices as 2019 progresses.”

Trump Could Be a One-Term President Thanks to Mexican Tariffs

Discussing the trade war, JPMorgan’s Michael Cembalest, who hosts the “Eye on the Market” podcast, reminded listeners last week of an article written back in August 2015 by Trump’s National Economic Council director, Larry Kudlow, and former Trump pick for the Federal Reserve Board of Governors Stephen Moore. In the article, titled “Why Trump’s protectionist ways will hurt the economy,”Kudlow and Moore compared then-candidate Trump unfavorably to Herbert Hoover, the last Republican “trade protectionist.”

“Does Trump aspire to be a 21st century Hoover with a modernized platform of the 1930 Smoot-Hawley tariff that helped send the U.S. and world economy into a decade-long depression and a collapse of the banking system?” the two asked.

For better or worse, we may end up getting an answer to this question in the coming weeks and months.

What the Gold/Silver Ratio Is Telling Us

Another sign of slowing economic growth is the gold/silver ratio. This ratio tells you how many ounces of silver it takes to buy one ounce of gold. Last week it crossed above 90 for the first time in 26 years, meaning silver has not been this undervalued relative to gold since the first year of Bill Clinton’s first term.

Gold to silver ratio at highest level since 1993
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The reason this is important is that half of silver demand comes from industrial applications. When the demand cools, the price of silver falls. One of the metal’s primary uses is in semiconductors, sales of which have been slipping. According to the Semiconductor Industry Association (SIA), global sales were $32.1 billion in April, a 14.6 percent decrease from the same month last year. This is the deepest plunge since the financial crisis.

Buying silver, then, could be a contrarian play, but I recommend also that you maintain a 10 percent weighting in gold. Although the yellow metal’s price surged last week, it’s still not quite in overbought territory when you look at the 14-day relative strength index (RSI). There could be further upside potential, especially if Trump revisits the Mexican tariff.

In Gold we Trust – New Edition

Today marks the release of THE 13th Edition of the In Gold we Trust annual treatise.  it is one of the most comprehensive reports and analyses of the global gold sector available anywhere.  It is published by Leichtentstein’s Incrementum AG and authored by Ronni Stoerferle (who initiated this annual report when he worked for Austria’s Erste Bank some years ago) and Mark Valek.
The Incrementum AG press release on the report is published below for the benefit of Lawrieongold readers together with links to enable you to download the full report – or an abridged version
Highly recommended for followers of the Gold Market
In Gold We Trust report 2019 – Gold in the Age of Eroding Trust

This year’s In Gold We Trust report was presented at an international press conference on May 28, 2019. The authors of the report are the two fund managers Ronald-Peter Stoeferle and Mark Valek from Liechtenstein-based Incrementum AG.

The more than 300-page In Gold We Trust report is world-renowned and has been named the “gold standard of all gold studies” by the Wall Street Journal. Last year’s edition was downloaded more than 1.8 million times. This makes In Gold We Trust, which will be published for the 13th time this year, one of the most widely read gold studies internationally.

For the first time ever, the study will also be published in Chinese on June 15.

The following topics are covered in the In Gold We Trust report 2019, among others:
– Review of the most important events in the gold market over the past 12 months
– Is gold the last monetary anchor of trust in a world suffering a general loss of confidence?
– “The Monetary U-Turn”: The reversal of monetary tightening and its impact on gold
– The increasing importance of gold in a time of de-dollarization
– Gold and cryptocurrencies – a solidifying friendship
– Gold stocks: reasons for our confidence (ESG, technology, valuation)
– Outlook for gold price development

Further highlights of this issue are:
Exclusive interviews with
► Jim Rogers, the world-renowned investor: “Whenever you see problems, remember weiji!”
► Freegold/FOFOA: In Gold We Trust 2019 contains the highlights of an interview with the legendary blogger.

Guest contributions by
► Prof. Steve Hanke: “Hyperinflation: Much Talked About, Little Understood.”
► Keith Weiner on “Gold Bonds”
► Mark Burridge (Baker Steel Capital Managers LLP): “Reforms, Returns and
Responsibility – How can gold mining equities become more important during the next

This year’s In Gold We Trust report can be downloaded free of charge under the following links:

Extended Version (340 pages)

Compact Version (100 pages)

The Authors
Ronald-Peter Stoeferle is Managing Partner & Fund Manager of Incrementum AG. Previously, he spent seven years in the research team of Erste Group in Vienna. In 2007 he published his first annual In Gold We Trust report, and it has gained international renown over the years.
Stoeferle is a lecturer at the Scholarium in Vienna and at the Vienna Stock Exchange Academy. In 2014, together with Rahim Taghizadegan and Mark Valek, he published the book Austrian School for Investors: Austrian Investing Between Inflation and Deflation. Recently he co-authored the book The Zero Interest Trap. He is also a well-known keynote speaker and consultant for Tudor Gold, a promising Canadian exploration company.

Mark Valek is Partner & Fund Manager of Incrementum AG. Previously, he worked for Raiffeisen Capital Management for more than ten years, most recently as a fund manager in the Multi Asset Strategies Department. In this role he was responsible for inflation-hedging strategies and alternative investments and managed portfolios worth several hundred million euros.
Valek is a lecturer at the Scholarium in Vienna and at the Vienna Stock Exchange Academy. Together with Rahim Taghizadegan and Ronald Stoeferle, he published the book Austrian School for Investors: Austrian Investing Between Inflation and Deflation.

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
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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
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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
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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.

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.

 

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.

 

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