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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1. The End of Easy Money

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

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

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

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

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

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

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

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

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

highs in the gold silver ratio were great buying opportunities for gold
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Latest In Gold We Trust Chartbook

Incrementum, which publishes the hugely comprehensive In Gold We Trust annual review of the global gold sector has just published a new chart-based analysis – almost equally comprehensive – packed with fascinating charts on various aspects of the global gold sector.  This is MUST reading for anyone interested in the world gold market.  It can be viewed here: https://bit.ly/2zUyVaL

Gold accumulations could checkmate the petrodollar

by: Stefan Gleason*

President Donald Trump’s administration is playing a game of high-stakes international chess with Russia, Iran, Turkey, China, and other countries viewed as adversaries in trade and geopolitics.

It’s not necessarily the case that tariffs, sanctions, and blustering will result in a hot war. More likely, escalating strife between the U.S. and a bloc of much more populous adversaries will push them to unite more closely to undermine and ultimately dethrone King Dollar.

The U.S. has long been the grandmaster – the dominant player on the geopolitical board – owing largely to its unique reserve currency status.

Quite simply, the U.S. dollar is the go-to currency for world trade. Oil and gold are traded in dollars. Manufactured goods on the international market are traded in dollars. All other currencies are measured against the dollar.

Nations Anxiously Moving to Dollar Alternatives

But all that is in the process of changing. As Washington, D.C.’s international adversaries pursue contra-dollar alliances, it could soon be checkmate for King Dollar.

President Trump recently touted tariffs designed to punish Turkey. The tariffs triggered the biggest financial crisis Turkey has seen in decades.

That may well have been the intended consequence. But the unintended consequence is that Turkey is now being pushed to form stronger economic ties with Iran… which in turn is forming stronger ties with Russia… which in turn is forming stronger ties with China.

Russian Central Bank Gold Reserves

The countries being targeted with tariffs and sanctions have a much larger combined GDP and a combined population that is multiples of the United States.’ What if a contra-dollar bloc formed that was determined to isolate the U.S. from the world financial system?

Russian Deputy Foreign Minister Sergei Ryabkov recently told International Affairs, “The time has come when we need to go from words to actions and get rid of the dollar as a means of mutual settlements and look for other alternatives.”

Foreign Gold Buying Is Ramping Up

One of those alternatives is gold. The Central Bank of Russia is ramping up its gold buying and reducing its holdings of U.S. Treasuries. In recent years, in fact, Russia has been the largest official buyer of gold – followed closely by China.

Earlier this year, the Shanghai International Energy Exchange launched a futures contract for crude oil priced in Chinese yuan. Now Chinese and other international traders can trade the world’s most important energy commodity in a liquid market without using U.S. dollars.

China has also launched a pilot program to purchase oil from Russia and Angola (two of its top suppliers) using yuan. It’s another gambit in the currency war being fought by major powers that have been targeted by the U.S. administration for punishment.

Those calls turned out to be premature. The petro-dollar lived to fight another decade, boosted the perception of the U.S. dollar as a safe haven during the financial crisis and later by the shale oil fracking boom that saw North American oil production surge.

Whether this method of production is sustainable at current oil prices remains to be seen. What’s not sustainable is the U.S. government (officially $21 trillion in debt) being able to extend itself militarily and through punitive economic measures to prop up the petro-dollar.

According to Gal Luft of the Institute for the Analysis of Global Security, “The main front where the future of the dollar will be decided is the global commodity market, especially the $1.7 trillion oil market.”

The Dollar’s Dominance in Global Transactions May End on Trump’s Watch

If China wants to buy oil from Saudi Arabia in yuan, from Russia in rubles or from Iran in gold, then OPEC nations and other major energy exporters will surely figure out how to accommodate their biggest customers.

Dollar Weakens

Whether a new global standard emerges or multiple competing standards rise in tandem, the dollar’s multi-decade run as the world’s dominant transactional currency could end on Trump’s watch.

The trend in the value of the dollar versus other fiat currencies and gold is another question.

China doesn’t actually want the greenback to go down versus its yuan – at least not at this point in the currency wars.

The one alternative currency that stands to benefit as the major national currencies battle each other is gold. It’s the only monetary asset that has proven to be resilient against all economic and geopolitical threats.

What on earth is happening to platinum?

By Clint Siegner*

The bearish price action in platinum has some of our clients wondering just what to expect. We are always happy to give our take on the markets. Below you’ll find a recent customer question along with our answer.

Question: The platinum price has fallen well below gold’s price and it continues to underperform the other precious metals. What is happening in the platinum market?

Answer: We see a handful of factors driving the recent declines in platinum. For starters, it is facing the same challenges we find in the gold and silver markets.

The dollar has been getting stronger, interest rates are rising, and traders on Wall Street have rarely been more carefree. Mainstream investors are positioning for economic strength, not looking for safety.

Platinum is trading like the other precious metals, which is to say performing poorly. As of this writing, platinum is down 16% for the year.

Autocatalyst (Platinum)

Platinum is used in autocatalysts, coins, and jewelry.

Compare that to silver’s decline of 17% and the price action looks pretty much in-line.

There are some other fundamentals behind platinum’s underperformance in the past few years though. Demand from automobile manufacturers is weakening significantly – forecast to be down 6% this year.

The prognosis for diesel cars is even worse, and that has hurt platinum demand more than the other metals. Diesel vehicles demand primarily platinum for their catalytic converters, while gasoline exhaust systems use mostly palladium.

The 2015 scandal involving Volkswagen revealed that diesel is not nearly as clean as thought previously. The car maker had been gaming the emissions testing system, and platinum-based catalytic converters were less efficient at scrubbing out unspent fuel from diesel engine exhaust.

Those revelations have had a serious impact on platinum demand – particularly in Europe where diesel had widespread adoption based on the false assumption that it was dramatically more “green” than gasoline.

 

Platinum is currently in surplus. Experts anticipate supply will outstrip demand by nearly 300,000 ounces this year.

The foreign exchange markets may also be contributing to platinum’s lower price. Recently the South African Rand has fallen significantly. Miners, who are typically paid in dollars or euros, are realizing much higher prices when those funds are converted to Rand.

For bullion investors looking to speculate as well as diversify their holdings, platinum looks interesting at these levels.

The political environment in South Africa has long been a challenge for miners. It may be about to get far worse. That may mean even more weakness in the Rand, but it can also mean a serious disruption to supply.

We also question how much longer the platinum price will remain at a significant discount to palladium. The two metals are largely interchangeable in automotive catalytic converters. If car makers see a good opportunity to save by switching to platinum, look for them to do it.

The Fed’s big mistakes and their consequences

In our view Bill Bonner is one of the most interesting, and outspoken commentators out there so we are publishing one of his most recent commentaries here in full.  These are published on the Bonner & Partners website- www.bonnerandpartners.com  and also syndicated on a number of other associated sites.  Do take time to read this article and others off his website and you will understand why we rate him so highly.  Although the article reproduced below has a title relating to what Bill feels is the fraudulently reported American Oil Boom, none of this would be possible without the Fed’s policies which make borrowing so cheap which has fuelled the aforementioned oil boom as well as much of the tech boom -= all something of a house of cards!

America’s Oil Boom Is a Fraud

By Bill Bonner

PARIS – You’ll recall that Fed policy always consists of the same three mistakes

1) Keeping interest rates too low for too long, resulting in too much debt; 2) Raising interest rates to try to gently deflate the debt bubble; and 3) Cutting rates in a panic when stocks fall and the economy goes into recession.

Well, here comes the Big Bang: Mistake #4 – rarely seen, but always regretted.

Mistake #4 is what the feds do when their backs are to the wall… when they’ve run out of Mistakes 1 through 3.

It’s a typical political trade-off. The future is sacrificed for the present. And the welfare of the public is tossed aside to buy money, power, and influence for the elite.

Apocalypse Now!

Every debt expansion ends in a debt contraction. Stocks crash. Jobs are lost. The economy goes into reverse, correcting the mistakes of the previous boom.

Investors see their money entombed. Householders await foreclosures. The authorities scream: Apocalypse Now!

The more the feds falsify price signals in the boom, the more mistakes there are to correct. For example, this week, a report in The New York Times described the big mistake in the shale oil boom.

You’ll recall that it turned America from a big importer of oil to a major exporter… and revived much of the heartland with big fracking projects in woebegone regions of Texas and North Dakota.

The shale oil boom was even credited with having scuttled the oil market, which dropped from a high of around $130 a barrel in mid-2008 to under $30 in late 2016, thanks to so much new supply.

But guess what? The whole boom was fake. It didn’t add to wealth; it subtracted from it. Accumulated losses over the last five years tote to more than $200 billion, with $36 billion lost in the Bakken shale fields in North Dakota alone.

Had credit been priced properly, it never would have happened. From The New York Times:

The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses. In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.

These companies have survived because, despite the skeptics, plenty of people on Wall Street are willing to keep feeding them capital and taking their fees. From 2001 to 2012, Chesapeake Energy, a pioneering fracking firm, sold $16.4 billion of stock and $15.5 billion of debt, and paid Wall Street more than $1.1 billion in fees, according to Thomson Reuters Deals Intelligence. That’s what was public. In less obvious ways, Chesapeake raised at least another $30 billion by selling assets and doing Enron-esque deals in which the company got what were, in effect, loans repaid with future sales of natural gas.

But Chesapeake bled cash. From 2002 to the end of 2012, Chesapeake never managed to report positive free cash flow, before asset sales.

Turkeys Fly

Of course, the same thing could be said of the trillion-dollar companies, Amazon and Apple, whose market capitalizations are largely the result of cheap credit.

And it could be said of the whole tech sector – with its outrageous inputs of capital into companies that have never made a dime.

Or it could be said of emerging markets, which have managed to suck up the loose change spilling out of the financial industry. They promised slightly higher yields, and now, they owe far more than they can pay.

It could also be said of Silicon Valley carmaker Tesla, which now has an estimated $10.5 billion in debt – despite never having made a profit…

Or of the entire stock market, where trillions of dollars in cheap capital have produced very little real return.

“When the wind blows hard enough,” say the old-timers, “even turkeys fly.”

The wind never blew as hard as it did from 2009 to 2018. And overhead now are so many plump, money-losing birds that we suggest you take cover.

Mistake #4

But that’s just the beginning… As the turkeys fall to Earth, the Fed’s reputation is called into doubt. Its manhood is questioned. Congress and the Trump administration, too, are roused to action!

The feds will make the rational choice (for them). They will go for broke.

That is, they will do things that cause you to go broke… while the insiders continue to get rich, following the tried-and-true remedy of Mistake #4 – the refuge of scoundrels and the last resort of jackasses from Zimbabwe to Venezuela.

The essence of Mistake #4 is “printing” money – lots of it – to cover soaring deficits, prop up failing enterprises, reflate markets, rescue sinking households, save the bankers, reward the cronies, and keep the zombies from running wild in the streets.

All this money-printing will spark inflation… which will soon be blazing-hot.

The Fed, of course, is duty-bound to keep prices “stable.” But in the end-of-the-world hysteria, we predict the Fed will “print”… and worry about price stability later.

“When someone is trapped in a house fire… you try to get them out,” the feds will say. “We’ll worry about the fire insurance later.”

Two-trillion-dollar deficits?

Maybe more.

A breathtaking infrastructure boondoggle. A “space force” so far out that it is quickly lost somewhere beyond Mars.

New trade wars to protect U.S. industries from fair competition. A “guaranteed income” for everyone.

Bailouts… Subsidies… Grants… Contracts… Spend, spend, spend. “It’s good for the economy!”

Oh… and new controls on banking and cash… and perhaps gold and even bitcoin… closing the doors to prevent people from escaping the burning building.

Our advice: Run, don’t walk, to the nearest exit now.

What Would Impeaching Trump Mean for Precious Metals?

by: Clint Siegner,  Money Metals News Service

Robert Mueller appeared to be spinning his wheels for the last year and a half. But recent prosecutions of prominent Trump campaign figures now have Democrats giddy over the possibility of being handed grounds for impeachment.

Tasked with investigating whether or not Donald Trump and people working for him colluded with the Russians during the presidential campaign, the special counsel finally got some traction last week.

Metals investors are wondering if political turmoil ratcheting several notches higher might have ramifications for gold and silver prices.

Looking At Impeachment

The chances for impeachment did get a boost, although it would seem to hinge primarily on whether the Republicans lose the House and Senate in November.

Suddenly a number of people in Trump’s orbit have either fallen to prosecution or appear eager to cooperate with the investigation against him.

Paul Manafort, Trump’s former campaign chairman, was convicted of financial fraud and tax evasion early last week.

One of the president’s former attorneys, Michael Cohen, pled guilty to charges related to paying off two women who claimed to have had affairs with Trump.

David Peck, who owns the National Enquirer and is considered to be a friend of the president, was given immunity for whatever testimony he can provide on the subject.

And finally, Allen Weisselberg, the CFO of the Trump Organization also got immunity for whatever he might have to share about his boss.

Some are now speculating on how an impeachment effort might play out in the metals markets. But we’ll get a much better idea of which way the political winds are blowing for the White House after the crucial November mid-term election.

Last week isn’t even the first-time investors have contemplated the possibility of impeachment. So far, the markets seem to be ignoring the possibility.

“With McCain dead and Corker & Flake retiring, there are fewer Republican senators around obsessed with sticking it to Trump.”

It’s a very daunting political task. Only two presidents have ever been impeached – Andrew Johnson and Bill Clinton. Neither were convicted in the Senate and removed from office, however. That can only be done with a ⅔ majority vote.

Even the most optimistic Democrats are not expecting to win a majority of that size in this Fall’s midterm elections.

To convict, Democrats will need some help from Republicans – and with John McCain now dead and Bob Corker and Jeff Flake retiring, there are fewer Republican senators around obsessed with sticking it to Trump.

It could certainly be said Trump doesn’t have too many true friends amongst the Republican leadership in Congress. However, the President has plenty of loyalty amongst his base. It seems unlikely Senate Majority Leader Mitch McConnell is going to risk suiciding the party by collaborating with Trump’s enemies across the aisle.

Impeachment looks like a bad bet based on what we in the public know today.

If the threat of impeachment somehow becomes more credible based on the revelation of more serious crimes, then all bets are off. It will move markets. But, for now at least, it remains a longshot.

Major political turmoil is just one of many reasons to buy insurance in the form of gold and silver bullion. Investors can add upheaval in Washington to a longer list, which, at the moment, also includes:

  • Precious metals looking oversold.
  • Extremely bullish relative positioning of banks versus speculators in the Commitment of Traders data.
  • Several potential catalysts which could reignite safe-haven buying – not the least of which is a major correction in the exuberant stock markets.

Holmes: It’s Time for Contrarians to Get Bullish on Gold

By Frank Holmes – CEO and Chief Investment Adviser U.S. Global investors

It’s Time for Contrarians to Get Bullish on Gold

Gold can’t seem to catch a break. The yellow metal normally acts as a safe haven in times of political and economic strife, but in the face of Turkey’s lira meltdown, investors have taken cover instead in the U.S. dollar. On Monday, the stronger greenback pushed gold to end below $1,200 an ounce for the first time since January 2017.

The lira fell to its lowest level ever recorded against the dollar Monday, mainly in response to President Donald Trump’s call to sanction and double steel and aluminum tariffs on Turkey. This sent gold priced in Turkey’s currency to all-time highs. If you recall, we saw the same thing happen recently in Venezuela, where inflation is expected to hit 1 million percent by the end of the year.

Turkish lira down more than 45% for the year
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Turkey’s faith in gold was on full display this week as President Recep Erdogan urged his fellow Turks to convert their gold and hard currencies into lira in an effort to prop up the country’s hammered currency. The same strategy was used in December 2016, a month after Trump’s election sent the lira tumbling against the dollar.

The Love Trade Is Strong in Turkey

As I’ve discussed before, Turkey has a long and rich history with gold. Home to the world’s very first gold coins more than 2,500 years ago, Turkey still stands as one of the largest buyers of the yellow metal. In the June quarter, the Eurasian country was the fourth largest consumer of gold jewelry, following India, China and the U.S. Twelve and a half metric tons were purchased in the three-month period, up 13 percent from the same time a year ago.

Along with Russia and Kazakhstan, Turkey also continues to add to its official gold holdings. Its central bank’s net purchases in the first half of the year totaled 38.1 metric tons, up 82 percent from the same six-month period in 2017, according to the World Gold Council (WGC). This made it the second highest buyer, after Russia.

Time to Get Contrarian

Gold investors might be discouraged by its performance this year, compounded by news that hedge funds are shorting the metal in record numbers. A lot of this has to do with the fact that, so far this year, gold has had a very high negative correlation to the U.S. dollar—more precisely, a negative 0.95 correlation coefficient, according to gold research firm Murenbeeld & Co. What this means is that gold prices have been moving in nearly the exact opposite direction as the greenback.

I think it’s important to point out that, despite a stronger dollar, gold is still up for the 36-month period—and climbing even higher over the long term. The dollar has only recently broken even, whereas gold has continued to hit higher lows since its phenomenal breakout in December 2015.

despite a stronger u.s. dollar, gold is still up for 36-month period
click to enlarge

The dollar could be ready to peak, with the potential for even higher gold prices. The metal is currently down two standard deviations over the past 60 trading days, so the math is currently in our favor for gold to rally.

Gold: Lessons from Venezuela

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

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

Paper Money eventually returns to its intrinsic value zero

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

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

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

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

Gold Could Save Your Life

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

Gold priced in Venezuela Bolivars
click to enlarge

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

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

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

Venezuela’s Once Prosperous Economy Destroyed by Corruption and Mismanagement

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

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

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

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

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

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

The Diversification Benefits of Gold

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

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

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

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

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

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

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

Interview by Mike Gleason of www.moneymetals.com

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

Samuel Pelaez

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

Sam, thanks so much for the time and welcome.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to avoid gold and silver investment scams

by: Stefan Gleason*

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

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

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

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

1. Avoid “Too Good to Be True” Deals

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

Too Good to be True!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

St. Gaudens Gold Coins

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Confidentiality

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

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

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

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

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

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

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

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

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

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

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

Silver and Gold Bludgeoned in Controlled Market

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

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

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

National Debt 1940 - 2008

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

Here is one example from the Daily Caller…

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

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

The nation needs sound money more desperately now than ever.

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

Silver Daily Chart

This is what a controlled market looks like!

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

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

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

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

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

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

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

Precious Metals Contrarians See Opportunity in Negative Sentiment

by: Stefan Gleason*

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

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

Sell, Sell, Buy

As a consequence, bullion buying volumes dipped.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ready for inflation?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Higher Inflation Has Historically Meant Higher Gold Prices

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

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

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

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

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

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

Go Gold! Royalty/Streaming Companies Deliver the Profits

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Axel Merk: Yep. My pleasure. Take care.

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

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

*About the Author:

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

Ted Butler Discusses the Great Silver Fraud

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

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

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