Will gold and silver also be victims of EU war on cash?

By Clint Siegner*

The global war on cash rolls on. The cabal of bankers seeking more transaction fees, busybody political leaders, and central bankers who want to experiment with negative interest rates recently threw India into turmoil by eliminating the two largest denomination bank notes.

Now they are preparing a similar assault on Europeans’ ability to transact privately and without giving bankers a cut. European Union officials just published a “Proposal for an EU Initiative on Restriction on Payments in Cash.”

War on Cash

Predictably, the restrictions are being sold to citizens as a means of fighting terrorism – much like a host of other privacy and liberty-destroying power grabs in recent decades. This despite a telling admission contained in the proposal: “There remains the lack of readily available and solid evidence on legitimate versus illegitimate cash transactions.” Ban the use of cash first, ask questions later.

Officials may, however, come to regret the timing of their proposal. Many European citizens will have trouble reconciling why leaders are willing to clamp down severely on cash, but not on the flood of refugees pouring in from the Middle East. Can they really be serious about terrorism?

Anti-EU movements are surging across the continent, with important elections coming this year in both France and Germany. Anger and frustration is already threatening to tear the EU apart. Now EU officials are floating another measure that promises to be controversial.

In Germany, 79% of transactions are done in cash. Many there aren’t going to take restrictions lying down. Some see the war on cash for what it is – bureaucrats using the lever of fear to once again ratchet up controls and restrict privacy.

The EU bureaucrats may just see the day when citizens stop using paper euros to make payments, but not because of the restrictions they hope to impose. It could instead be the result of the EU and its common currency being dumped.

A European setback for the bankers and politicians behind the move to de-monetize cash would be good news for bullion investors everywhere, including the U.S.   Attempts to regulate the trade of physical gold and silver will not be far behind any restrictions on cash. Precious metals are an obvious target because they are a premier form of private, off-the-grid, and portable wealth.

With these draconian proposals gaining momentum across the globe, you can bet we will continue to follow the war on cash carefully.

 
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Britain reaping the whirlwind of Remain campaign ‘project fear’ rhetoric

Post the Brexit vote, the pound sterling is down around 8-9% from the kind of level it was at for most of the couple of weeks before the vote, while there seems to remain a distinct element of pending gloom in much of the economic commentary and the general opinions of the more economically aware in the country’s financial centre.

Should this be so?  The more representative market index – the FTSE 250, which includes many smaller companies not represented in the most quoted FTSE 100 Index of the top 100 London Stock Exchange companies – is actually higher than it was in mid-June (just) but commentators only seem to mention the immediate post-Brexit vote fall of around 13.6% , and ignore the fact that it had peaked ahead of the referendum in anticipation of a Remain vote, and has since recovered a good part of the lost ground.  Year to date the FTSE 250 is down 6% – but is running 6% higher than at its low point in mid-February – hardly a stock market meltdown as many had been predicting.  Indeed if one looks at the larger companies which comprise the FTSE 100 index this is actually 3% HIGHER than its mini peak on June 23rd when Remain appeared the most likely referendum result.  This certainly doesn’t seem to represent a particularly downbeat outlook by the market professionals.

Gold of course has risen in the dollar, and obviously rather more so in the pound, which is a positive for those who took our advice and bought some gold, or gold derivatives, ahead of the referendum as insurance against a possible Brexit vote.  Again we had not ruled out a result for the vote to leave the EU ahead of the referendum vote contrary to the opinions of most of the media, politicians and economists.  We had recognised the big underswell of anti-EU feeling in the country which did not seem to be being picked up by the opinion polls.

But even the performance of those elements which have come back quite sharply like the pound could probably be at least partly blamed on the tenor of the Remain campaign which was preaching huge negativity should the vote be to leave.  Some would say Remain campaigners are thus being proved correct, but could this just be that they had imbued such a negative opinion in the minds of the sector of the populace which voted to Remain in the EU that we are now reaping the consequences of such a ‘project fear’ campaign?

Interestingly though some of the European stock markets have fared far worse than the UK ones.  Germany’s DAX Index for example is down 5.6% on the year, the French CAC down 6.4%.  Spanish and Italian indexes fell even more.  One wonders where the Brexit vote is impacting most – it doesn’t seem to be the UK?

It is notable that there is already a degree of backtracking on the likely adverse effects of the Brexit vote by the politicians of all hues who are now desperately trying to see positives in the result however much they may, at heart, disbelieve them.  There should, for example, be much comfort in that the financial markets actually on balance seem to be positive rather than negative.  This could suggest that the pound may be oversold too, although it is showing little sign of recovery so far and is still slipping back against the dollar and the euro.  In this context it should be noted that Britain imports a far greater value of goods from EU nations – Germany in particular – than it exports to them, and while much was made by the Remain campaign of the possibility of UK exports to the EU being cut off in the case of a parting of the ways, the imposition of trade barriers would seem likely to have a greater impact on the EU than on Britain itself.  One suspects that self-interest will predominate here and reciprocal trading relations will be largely uninterrupted even if official trade deals may be slow in being negotiated.

The lower value of the pound could also boost consequentially less-costly UK exports globally, although would make imports more expensive.  It could also work against that other threat of multinational organisations moving manufacturing plants out of the UK as the resultant lower cost of goods by remaining might more than balance the possibility of the imposition of tariff barriers inside the EU – if indeed this were to occur.

While the prospect of Brexit would not be ‘a storm in a teacup’ as some optimists and Leave campaigners might suggest, it may well not be nearly as disastrous for the UK economy as the Remain camp was saying only 10 days ago.  But the belief in their rhetoric is in itself having an adverse effect on sentiment and may continue to do so for some weeks and months.  This will likely settle down as politicians change their tune on the fait accompli of the Brexit vote with more positive statements certain to flow from those who only a week or so ago were preaching doom and gloom.  While the UK economy may be in for a difficult several months it may not be nearly so badly affected once things are seen in the cool light of day as the anti-Brexit commentary inevitably dies down.

Gold: Last man standing post Brexit vote

A perhaps controversial U.S. viewpoint  from Guy Christopher* on the fallout post-Brexit, who discusses calls for a similar break from the EU by a number of countries.  Gold (and silver) have been the major beneficiaries as markets dived and currencies collapsed against the dollar and the yen.  We have since seen something of a turn back towards the status quo, but geopolitics and geo-economics remain shell-shocked. Secession fever is even apparent in the U.S., although in our opinion this is a total non-starter – but, who knows…..

 

“Look at that screen,” exclaimed Fox Business Network’s Stuart Varney, referring to the television graphic showing markets crashing across the globe. “The only thing going up is the price of gold!”

“It’s always a dangerous thing when you leave democracy up to the people,” joked Varney’s guest – venture capitalist and author Peter Kiernan, as they watched Britain vote Thursday night to escape the European Union.

The dust is still settling after Britain’s seismic Brexit vote June 23rd. At issue: who should control British economic and immigration policies – Brits themselves, or unelected bankers and their bureaucracy stooges. A choice between the liberty of self-determination or the tyranny of faraway cronyism.

While the gritty election fallout spread through rattled markets and wafted into plush offices of banking’s money masters, the hard and fast implications were clear. The British Empire stood tall on what outspoken political leader Nigel Farage called Our Independence Day.

“Only Lunatics Would Consider EU Membership”

The Brit’s dramatic decision is the latest revolt of those fearing the loss of personal and national identities. Until Brexit, the populist revolution against powerful centralized world order was a series of smoldering brush fires.

The Brexit victory has now kindled a wildfire.

Tattered EU Flag

Spanish Catalonia was all set for independence from Spain in 2014, until stopped in its tracks by Spanish courts. Scotland the same year managed to muster 45% of three million votes in a losing bid to leave the UK. Quebec voted down independence from Canada in 1995, but has never stopped talking about it.

Strong political voices in Italy, France, Austria, and even Germany are shouting to preserve national identities or else to leave the EU. Italy’s Five Star separatists claim support of half that country, and have just elected Rome’s mayor.

Political leaders in the Netherlands and Poland, just hours after the June 23rd British Revolution, made it clear they will push for a Brexit replay. Scots lost no time in restating their intention to separate from Great Britain.

Switzerland decided just two weeks ago to drop all plans to join the EU. “Only lunatics,” said one Swiss official, “would consider EU membership.”

The big loser so far in the fight for economic self-determination is Greece. Up to their Parthenon in debt for the next hundred years, Greeks elected Alexis Tsipras as Prime Minister, who promised to stiff Greece’s banking creditors and give Greece a new start.

But Tsipras turned on his people, repudiated the cradle of democracy’s historic vote, and left Greece even deeper in debt. Tspiras was channeling an old political axiom – if voting mattered, we wouldn’t let them do it.

Secede

Here at home, the current and former governors of the always revolution-ready Texas have suggested secession from the United States. A move to include secession as a plank in the Texas Republican platform came up just two votes short last May. Secession efforts are now called “Texit.”

THE MAIN EVENT

Some thirty states have circulated petitions recently to gauge interest in secession. Californians have discussed carving their Golden State into three states.

Which brings us to the main event in the United States. In twenty weeks, Americans will set a course for the world with their own historic choice – either sticking with what America has right now, or demanding monumental changes to government authority over lifestyles and pocketbooks.

The long list of financial crimes by over-bloated centralized governments include trillions in money printing to enrich banks; destructive interest rates to smother savings; punishing taxes; the war on cash to demolish private wealth; suffocating regulations on business owners; and the ongoing crime-in-progress of theft through planned inflation.

Unpopular open border policies toward immigration cannot be overemphasized as a driving factor in Britain’s vote, or in the coming U.S. presidential election.

You wouldn’t know it from watching or reading most lapdog media, but nowhere was the reaction to the Brexit earthquake more stunning than the immediate rush to gold.

Media Overlooked the OTHER Big Story Last Week…

In a matter of a few hours Thursday night, gold shot straight up almost one hundred bucks from low to high, stopping just shy of $1360 per ounce. The price perfectly tracked media reports of voting results.

As markets cratered worldwide, the message was clear. Gold was the only safe haven – the blue ribbon champ – the last man standing.

By dawn’s early light, London dealers were reporting record sales of coins and bars to store-front customers standing in line. Google searches for “buy gold” went soaring 500%. Online sellers had heavy traffic.

Brexit's Effects on GoldGold rose 22% overnight in the British pound, 7% in U.S. dollars.

Brexit has been all about wealth and liberty – who will have it, and who will protect it. Gold buyers knew the most enduring wealth for 5,000 years has been gold and silver you hold in your hand, unlike the trillions in digital wealth evaporating into cyberspace during Brexit’s aftermath.

Wealth is the stored and stockpiled accounting of our labor, time, energy, and talent. We depend on that store of wealth to ensure financial liberty for our families, to pass on to future generations, or just to enjoy a day at the beach without punching a clock. And without being told what to think.

Throughout history, gold and silver have been the sole survivors found in the smoking ruins of failed kingdoms, borders, flags, and currencies.

As markets began sinking like stones June 23rd, as bankers panicked, and as media pundits blathered, the price of liberty was paid, and the value of gold embraced.

Both gold, and liberty, were destined to shine that night, no matter what the cost.

A Classic Case of Failed Socialism: What’s Next After the Brexit?

By Frank Holmes, CEO and Chief Investment Officer for US Global Investors

Brexit Vote

Defying sentiment polls leading up to last week’s historic Brexit referendum, British voters said “thanks, but no thanks” to excessive EU taxation and regulation, choosing to take back Britain’s sovereignty in financing, budgeting, immigration policy and other areas essential to a nation’s self-identity. It was a momentous victory for the “leave” camp, led by former London mayor Boris Johnson and U.K. Independence Party leader Nigel Farage, who invoked the 1990s sci-fi action film “Independence Day” by declaring June 23 “our independence day” from foreign rule.

As I’ve been saying the last couple of weeks, British citizens and businesses have grown fed up with an avalanche of failed socialist rules and regulations from Brussels, responsible for bringing growth and innovation to a grinding halt. Even if the referendum had gone the other way, it should still have served as a wake-up call to the European Union’s unelected bureaucratic dictators. Euroscepticism and populist movements are gathering momentum in EU countries from Italy to France to Sweden, and the week before last, fiercely independent Switzerland, which voted against joining the EU in the 1990s, finally yanked its membership application for good.

American voters should be paying attention. Many have already pointed out the parallels between the Brexit movement and Donald Trump’s populist campaign for president. This connection was not lost on Trump, who tweeted early Friday morning: “They took their country back, just like we will take America back.”

Britain’s decision to leave exposes the fragility of trade right now and mounting apprehension toward globalization. The EU is mired in tepid growth, and the blame cannot be pinned on immigrants, as some have tried to do. Instead, Brussels’ policies are anti-growth. Moore’s Law says the number of transistors in a microchip doubles every two years. That’s just a fact. American entrepreneurs embrace and indeed push the limits of technological innovation, but “Eurocrats,” to a large extent, seem to be in open opposition to it. This is why many large, successful American tech firms such as Facebook and Google are treated with such hostility in Europe. The bureaucrats are so against growth and prosperity, it wouldn’t surprise me if they tried to do away with Moore’s Law.

A Legendary Day for Gold

Immediately after results were announced, the British pound sterling, one of the world’s reserve currencies, collapsed spectacularly against the dollar, plunging to levels not seen since Margaret Thatcher’s administration. The euro, the world’s only fiat currency without a country, fell more than 2 percent.

Gold, meanwhile, screamed past $1,300 an ounce to hit a two-year high, proving again that the yellow metal is sound money and fervently sought by investors worldwide as a safe haven during times of economic and political uncertainty.

Gold and British Pound Make Huge Moves Following Brexit Referendum
click to enlarge

Uncertainty is indeed the order of the day. As the World Gold Council (WGC) put it on Friday, “It is difficult to find an event to compare this to.” Trading blocs have fractured before, but none as large and significant as the EU. As the world’s fourth most liquid currency, gold saw massive trading volumes. At the Shanghai Gold Exchange, an all-time record amount of gold was traded following the Brexit—the equivalent of 143 tonnes in all.

“We expect to see strong and sustained inflows into the gold market, driven by the intense market uncertainty that now faces the global markets,” the WGC wrote.

The Brexit lifted not just bullion but gold stocks as well, with many of them climbing to fresh highs. Shares of Barrick Gold shot up 10 percent in early-morning trading while Yamana Gold and Newmont Mining both saw gains of over 8 percent.

I’ve always advocated a 10 percent weighting in gold—5 percent in physical gold, 5 percent in gold stocks—with rebalancing done on a quarterly basis. Gold is now up at least one standard deviation for the 60-day period, meaning now might be a good time to take some profits and rebalance. It’s been a spectacular six months!

So What Happens Now?

As I said, global growth is unstable, especially in the EU, and the Brexit will only add to the instability. This will likely continue to be the case in the short and intermediate terms as markets digest the implications of the U.K.’s historic exit.

It should be noted that the country will remain a member of the EU for two more years, during which time the nature of the relationship following the official divorce can be negotiated. These negotiations will take place without David Cameron, who unexpectedly announced early Friday morning that he was stepping down as prime minister.

The results of the referendum also call into question the unity of the kingdom itself. England and Wales both voted to leave the European bloc while Scotland and Northern Ireland were aligned in their desire to remain members.

Polls suggest Bremain – gold slips, pound strengthens but not over yet as Brits vote

So crunch day in the UK is here as voters head to the polling stations to decide on the nation’s immediate future within, or outside, the European Union(EU).  Latest opinion polls suggest the Bremain option will prevail as voters go for the perceived safer option rather than a big step into the unknown.    Financial markets tend to agree with the pound sterling at its highest level against the dollar for some time and gold heading lower back into the $1,250s at one time, although pulling back above $1,260 on some prevailing nervousness about the final outcome.

But the polls have been erratic right up to today and some observers put the result as too close to call.  However if the Brexit (Britain exiting from the EU) vote should prevail, which is still a possibility, the financial fallout could be very quick to follow and very sharp indeed with a rapid turnaround in the pound sterling – perhaps back to $1.40 or lower – and probably a soaring gold price given that the ramifications would be a serious blow to the whole EU experiment and perhaps lead to its breakup as other anti-EU factions in a number of other member countries gain heart and seek their own exit referenda.

We won’t know the official outcome until tomorrow morning, but indications one way or the other would probably start to become apparent by the time the polls close at 10 pm this evening, BST.  Things could get very volatile indeed if the outcome continues to be seen as too close to call, and if Brexit does end up ahead we’d be looking at a brave new world ahead.  if Bremain wins then there would be huge sigh of relief from the UK establishment, which is generally supportive of remaining in the EU, and from the EU itself.  But, one suspects, EU internal politics will still  be changed forever.  It will have come too close to the brink for comfort.

Are We Nearing the End of the EU? Will gold hit $1,400 this year?

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

Global slowdown worries high Indias booming economy

Right out of the gate, I want to thank everyone who took time out of their busy schedules to tune in to our gold webcast last Wednesday. I also want to thank Aram Shishmanian, CEO of the World Gold Council, for joining me as our special guest. His deep insights into gold investing were well articulated and highly appreciated. If you happened to miss it live, I urge you to catch the replay, which we’ll be posting on usfunds.com soon. Look for it!

If you’re a serious investor—and because you’re reading this, I have to assume that you are—gold is looking more and more like a crucial trade. Fewer than two weeks remain before United Kingdom voters decide on whether the country will continue to be a member of the European Union (EU) or become the first-ever to leave it. The “Brexit,” as it’s come to be known, is arguably the most consequential political event of 2016—perhaps even more so than the U.S. presidential election in November—with far-reaching implications.

Global slowdown worries high Indias booming economy

Should the U.K. leave, it will certainly underline the question many people have about the EU’s viability. And remember, this is a group of countries that collectively has the world’s second largest gross national product (GDP), followed by China.

But whatever happens, “the European Union is not going to remain the same,” as Aram put it during the webcast. “The euro is still very unstable, and I think we could easily see an environment in which trade barriers will increase and currency wars will increase. Regrettably, we could have a weaker global economy.”

With this as the threat, “gold’s role is one of wealth protection,” Aram said.

Taking Precautions Against an Unknowable Future

Even Europeans are beginning to lose confidence in the European experiment. The Pew Research Center recently polled nearly 10,500 Europeans from 10 separate EU countries on their favorability of the 28-member bloc. Nearly half of all respondents—47 percent—held an unfavorable view.

Global Manufacturing Sector Stagnates May
click to enlarge

Trust in the European Central Bank (ECB) continues to falter as well. In a blistering note titled “The ECB must change course,” Deutsche Bank called out the central bank for “threatening the European project as a whole for the sake of short-term financial stability.” The ECB’s actions have “allowed politicians to sit on their hands with regard to growth-enhancing reforms.” The longer the bank persists with a negative interest rate policy, the more damage it will inflict upon Europe, Deutsche added.

Meanwhile, Frankfurt-based Commerzbank is considering stashing physical cash in pricey vaults instead of keeping it with the ECB, whose policies are cutting into bank profitability.

Speaking to the World Gold Council’s Gold Investor newsletter this month, former Governor of the Bank of England Mervyn King criticized the ECB’s negative rate policy, saying: “If you repeatedly bring down interest rates to try and persuade people to spend today rather than tomorrow, it works for a while. But they become increasingly resistant to being asked to spend their resources now rather than save for the future.”

Like Aram and others, Governor King sees gold as a likely solution. “There is clearly a need to take some precautions against an unknowable future,” he said, which is the same argument for having health insurance.

Negative rate policies are having a huge effect on bond yields, as you can see below. Over $10 trillion worth of government debt across the globe carried a negative yield as of the end of April. (In a tweet last week, legendary bond guru Bill Gross called it “a supernova that will explode one day.”) In Switzerland, three quarters of all government bonds right now actually charge investors interest. Real harm is being done to retirees, who have had to pick up part-time work at Walmart or become Uber drivers to offset lost interest on their savings and pensions.

Global Manufacturing Sector Stagnates May
click to enlarge

This is prompting investors to look elsewhere, including the U.S. municipal bond market, which has attracted $632 billion in assets this year alone as of June 1. Of that amount, more than $22 billion has flowed into muni mutual funds, the best start to a year since 2009. Between that year and the end of 2015, the amount of U.S. municipal debt held by foreign investors climbed 44 percent, validating its appeal as an investment with a history of little to no drama, even during times of economic turmoil and periods of rising and lowering interest rates.

$1,400 Gold this Summer?
George Soros

Joining Aram in seeing the Brexit as further proof of impeding economic troubles is billionaire investor George Soros. After a hiatus of conducting any personal trading, the 85-year-old is back in the game—this time with some bearish investments. In the first quarter, he purchased a $264 million stake in Barrick Gold, the world’s largest gold producer, and a million shares in precious metals streaming company Silver Wheaton. It appears he’s added to both positions, indicating a bet against the broader equity market.

Now, with a Federal Reserve rate hike looking more and more unlikely this month, gold is expected to resume its bull run, according to Australia and New Zealand Bank Group (ANZ) commodity strategist Daniel Hynes. This, along with a possible Brexit, could push the yellow metal to $1,400, a price we haven’t seen in three years this month.

Paradigm Capital also sees the rally picking up where it left off in May, noting that gold’s trajectory so far this year resembles the one it took in 2002, the first full year of the last bull market, which carried the metal to $1,900 in 2011. “The resemblance is rather striking,” Paradigm writes.

Global Manufacturing Sector Stagnates May
click to enlarge

The investment dealer forecasts gold to reach nearly $1,400 by year-end after a dip in October. It also maintains its position that this particular bull run will peak at $1,800 sometime during the next three to four years.

Whether or not this turns out to be the case is beside the point. Savvy investors—not to mention central banks and governments—recognize gold’s historical role in minimizing the impact of inflation, negative rates and currency depreciation. This is what I call the Fear Trade, and I always advocate up to a 10 percent weighting in gold that includes gold stocks as well as bullion, coins and jewelry.

Catching Up with Sectors and Industries

Because we’re near the halfway mark of 2016, I thought you’d be interested to see what the top performing sectors and industries were for the year so far.

As for sectors, utilities is on top, delivering more than 15 percent so far. Jittery investors, worried about slow global growth and geopolitical threats, have moved into defensive stocks such as water and electricity providers and telecommunications companies, many of which offer steady dividends in a low-yield world. Financials, as you might imagine, have been hurt by interest rate uncertainty.

Global Manufacturing Sector Stagnates May
click to enlarge

Below I’ve highlighted the 10 best performing industries for the year, and interestingly enough, metals and mining companies, particularly those involved in the gold space, lead all others. Spot gold is up 20 percent so far, but amazingly gold miners have doubled investors’ money. Metals and mining companies have rallied more than 53 percent.

Global Manufacturing Sector Stagnates May
click to enlarge

Many of the top-performing companies this year had some of the biggest declines last year because of impaired balance sheets. To maintain their performance long-term, they will need to show earnings.

Greek endgame looks to be here. Gold back up through $1200

Julian Phillips sees Greece likely exiting the Euro perhaps next week which he sees as positive both for the Euro itself and for gold.

While New York ignored the Greek crisis in its financial markets gold appeared to be reacting to the tragedy that seems to be entering its finale.  The ECB told a meeting of Eurozone finance ministers that it was not sure if Greek banks, which have seen large daily deposit outflows [€2 billion in the last three days], would be able to open on Monday 22 June.

It is also possible that Greece may have closed its banks by then, so as to change its currency to the Drachma. After all, why wait until the banks are completely empty? But there is a reason why. If the banks are empty then the adoption of a new currency together with Exchange & Capital Controls would be seen as a pre-emptive strategy, not a reactive one. If Greece looks to be a victim, the new government will be able to makes such changes as a necessity, due to the harsh treatment by the E.U.

It appears that Greece has asked for a write-down of its debt. This is a clever tactic, because once it is in default, creditors will have to consider such, so as to be able to get back at least something, certainly not all of it. Monday will see the final decision of the E.U. We see it as having to say no. Looking at the globe’s financial institutions, we see an exit as being disturbing to markets but good for a stronger euro and for gold.

Next week is likely to be a volatile week for gold and other financial markets across the world.

Silver is following gold cautiously waiting to see if the current rally will hold.

Markets

New York closed yesterday at $1,202.10 up $15.00.  The dollar is at $1.1317 down 0.7 of a cent with the dollar index back up to 94.38 up from 93.87. The LBMA Gold Price was set at $1,198.15 barely changed on yesterday with the equivalent euro price at €1,058.90 up €7.68. Ahead of New York’s opening, gold was trading in London at $1,202.00 and in the euro at €1,062.31.

The silver price fell to $16.20 up 3 cents in New York. Ahead of New York’s opening it was trading at $16.19.

The rise in the gold price was due to short covering and to dealers moving prices up to protect their books, in a thin market. From Monday on we will be watching the LBMA gold price setting to see if we can discern the presence of the Bank of China. It is unlikely we will see them as they will simply take up available stock ensuring they don’t push prices higher by themselves.

There were no sales or purchases of gold from or into the SPDR gold ETF but a purchase of 0.3 of a tonne into the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 701.897 tonnes and at 167.01 tonnes in the Gold Trust.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

SPDR Gold ETF continues to show increase as geopolitical factors weigh

Julian Phillips’ latest market commentary shows more purchases into the big SPDR gold ETF (after a small sale the previous day) and considers the impact on the gold price of slipping oil prices (again) and the Greek/EU/German impasse.  Something will have to give here sooner rather than later!

New York closed yesterday at $1,265.30 up $4.10. In Asia gold rose to $1,270.6 ahead of London’s opening where it returned to $1,266.6. At the Fix gold was set at $1,263.75 down $17.25 and in the euro, at €1,106.708 down €2.092, while the euro was weaker by nearly 1.5 cents at $1.1419. Ahead of New York’s opening gold was trading in London at $1,262.30 and in the euro at €1,103.94.

There were purchases of 2.986 tonnes of gold into the SPDR gold ETF and a purchase of 0.24 of a tonne into the Gold Trust on Wednesday. The holdings of the SPDR gold ETF remain at 767.929 and at 167.75 tonnes in the Gold Trust.  The tone of U.S. investors into physical gold remains solid. The gold price rose in the U.S. but more so in Asia.

Overnight two events have taken place that could indirectly impact the gold price. The first is the oil price has begun to fall again. We remain aware of Saudi Arabia’s indication that it could fall much lower. We would not be surprised to see an eventual oil price of $35, particularly if Canadian oil swamps the oil market, in an already oversupplied market. The Saudis are taking the line that they are not holding prices down it’s the new boys in town flooding the market. We see this situation lasting for years, not months. Despite gold rising with oil in 1973 we see falling oil prices indirectly helping gold to rise.

The second event is in the Eurozone where the ECB has announced that from February 11th it will not be taking Greek bonds as collateral for funding and likely to be the case going forward in E.U. Q.E. This is an early ploy to put Greece in its place. Germany is likely to follow suit. As we look from a distance at the progress of these re-negotiations we see a major factor on each. The ECB and Germany just cannot afford to see Greece exit. The benefits of the decade and a half of a low euro have left the Eurozone with considerably more than €250 billion in profits and global trade, which they would not have had if the Deutschmark were still in existence. Therefore, faced with the threat of a Greek exit, we see that both the E.C.B. and Germany will make concessions. But they need to believe that Greece will exit before they concede. By playing hardball, Germany and the E.C.B. ensure a weak Greece and a weak euro, too great a benefit to lose! Get ready for the ride!

On the Greek side, they need to be fully prepared to exit the euro and the Eurozone if they want to make real progress. They have already indicated that they will not consider that. We see this as dragging matters out through several dramas to come.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

Global Gold Price (1 ounce)
Today Yesterday
Franc Sf1,169.96 Sf1,173.48
US $1,262.30 $1,267.60
EU €1,103.94 €1,107.85
India Rs.77,972.90 Rs. 78,344.02

I don’t want to belong to any club –Marx (Groucho): or Does Greece Really Matter?

UK-based mining analyst, David Hargreaves, publishes a weekly subscription newsletter – Week in Mining – aimed primarily at U.K. resource investors but incorporating always pithy comment that should be of interest to resource investors worldwide.  Here follows the introduction to his latest such in which he puts the Greek/EU economic imbroglio, following Alex Tsipras’ Syriza party victory in the recent elections there, into some perspective.  To request a copy of the full letter and/or receive a 4 week free trial subscription click on this link: http://weekinmining.com/free-trial-subscription/    

Does Greece matter? If so, to whom?

So this highly indebted, badly run little land has voted-in a far left wing government on what appear to be unsustainable promises. It is an upset which, if we read the popular press, threatens world economic stability.

Really? Here sits Greece:

Greece and the World Economy

World EU USA China India Japan Greece
GDP ($Billions) 98,056 18,005 17,993 17,019 6,451 4,995 351
% Total 100 18.2 18.2 17.2 6.5 5.1 0.4
Population (Millions) 7,100 435 310 1,330 1,150 130 11
% Total 100 7.0 4.4 18.7 18.2 1.8 0.15

So here we have 0.15% of the world’s population generating 0.4% of its GDP, shaking the apples off the trees and threatening to topple the largest single economic bloc. This puts David and Goliath into perspective.

Now why such an impact? We think it has something to do with this: There are 27 EU member states. It is not a federation, nor yet a free trade organisation. It has its own flag, national anthem and currency and a sort-of common foreign and security policy, but all a bit wishy-washy. It bails out ailing members on an annual accounting basis, but has only two regular putters-in financially. You guessed it, Germany and the UK. Most of the others are net takers-out and some of the more powerful members e.g. France, Spain, Italy, are becoming increasingly so.

Strict rules are imposed on those who rattle the begging bowl too loudly and that is Greece right now. It has dragged €240 billion out of the EU charity fund in the past five years and has little to show for it. Not only could it not repay but now says, under its new government, it won’t, except on its own terms. Now this is no way to talk to your bank manager is it?

So we are convincing ourselves that this could not only rock the EU boat, but cause it to hit the rocks.

Suddenly, almost 20% of the world’s economic clout looks shaky. All because 2% of its collateral is suspect.

Is this a club to which you would like to belong?

As Groucho concluded: I don’t want to belong to any club that will accept me as a member.

Gold and the Greek aftermath; and Ukraine too having an impact

The Greek election result fallout has created significant waves in the gold market looking ahead – while there’s always the Ukraine to spice things up….  Update of article previously published 2 days ago on www.mineweb.com 

Lawrence Williams

Perhaps predictably, gold initially jumped up to the $1300 level in Asian trading as the Greek election results became apparent.  But as the news, which had been largely anticipated, began to be assessed the gold price fell back fairly sharply in London trading before subsequently recovering up to around the $1290 level whereabouts it has remained since give or take a few dollars.  Analysts at Commerzbank put this down to ‘buy the rumour and sell the fact’ profit taking, but with the aftermath of the election result still to really impact, one suspects that the likely forthcoming very difficult negotiations between the new Syriza government in Greece and the EU/ECB and the IMF over renegotiation of Greek debt will create some significant waves in the gold market ahead.  Syriza has promised to end most of the austerity measures imposed on it by its bailout lenders and there doesn’t seem to be any means of paying for this without defaulting on its billions of dollars of bailout loans unless the EU/IMF can be persuaded to cut and/or extend them.

Initial indications are that the IMF, and probably the Eurozone nations led by Germany will, however, strongly resist any Greek attempts to renegotiate and write-off much of its debt.  IMF Managing Director, Christine Lagarde for example seems to be taking a hardline approach.  “A debt is a debt” she is reported as saying.  But how much this is setting out an initial negotiating position ahead of the inevitable horse trading remains to be seen.  If all this results in deadlock then there is a strong likelihood that Greece will default on its debt as soon as next month, or at best by this summer with the possibility it will be ejected from the Eurozone by the other members who may have had enough of the already huge costs of trying, unsuccessfully, to support the Greek economy and bring it back on track.  The Greek Syriza point of view is that with the huge debt overhang it will be impossible for the Greek economy to recover for years, if not decades if it continues to have to repay them.

But Syriza itself may not even have an easy internal ride.  It appears to be agonisingly short, by 1 seat, of an overall majority in the Greek parliament and has had to enlist an unlikely coalition partner in Independent Greeks – a right wing party which has little in common with the radical left wing Syriza apart from the ending of the austerity measures which have so devastated the Middle and Lower classes’ incomes and generated huge unemployment – particularly among the under-24s (estimated at around 66%).

Syriza itself is also something of an unholy alliance of Marxist far left across to some with almost Centrist viewpoints, but again all opposed to the austerity measure imposed on  the nation as a condition for past bailouts and put in place by the now defeated New Democracy party which controlled the previous administration.  There is a substantial element which wants an immediate Greek exit from the Eurozone – something Syriza’s leadership has tried to play down ahead of the election, as this option is not seen as a popular one amongst the general population.  However, if Greece is forced out of the Eurozone, and this can be blamed on current bêtes noires Angela Merkel and Christine Lagarde, somewhat akin to Russia’s President Putin being able to blame his nation’s economic woes on the U.S. and its allies and carry the nation with him, then that might make an eventual Greek exit (Grexit) more palatable internally.

There is also the potential of the Syriza victory generating momentum for other European anti-austerity and anti-Eurozone groupings.  The attempted negotiations on loan mitigation between the new Greek government and the EU/ECB/IMF , coupled with ever more uncertainty as to whether the EU itself will survive amidst the economic difficulties which beset it is bound to create uncertainty in the weeks, months and possibly years which lie ahead – and geopolitical uncertainty is a strong driver of investment money into perceived safe havens like gold.  So don’t write off gold’s initial relatively samll downwards move as the end of the recent momentum upturn as it looks like volatility, both down and up,  could be back in play in the markets.

As Julian Phillips succinctly puts it in one of his recent daily newsletters to his www.goldforecaster.com and www.silverforecaster.com subscribers:

“The result Eurozone officials feared most in Greece happened over the weekend with the far left party coming into power with all but one of a clear majority in Parliament. It is clear to observers that unless the E.U. agrees to write down debt and allow a turnover of austerity measures, the new government will have to leave the euro. It’s one or the other. Certainly, Greece is a drag on the euro as is Spain, but without them the euro would be much stronger, something Germany and other member states don’t want, so they must weigh this against agreeing to Tsipras’ terms and keeping Greece in the euro. What is a certainty is a painful path from now on for the euro and E.U. itself ensuring ongoing uncertainty in Europe.  Today the euro tried to fall below $1.12 but suddenly the euro is rising. The next few days will see the news on Greece being digested. But we mustn’t forget that the E.C.B. is soon to start its QE program. Will the E.C.B. buy Greek bonds against this background? February will see a decision on this come as Greece must renew debt obligations or default then. We do expect to see a weaker euro, at least up until then.

The ripples out from where this particular stone hit the water, covering Europe and the rest of the world have yet to be seen. Whether Greece stays in the euro or leaves it, we believe the resulting scene will be positive for the gold price.”

But Greece and its travails are not the only geopolitical goings-on which could have a positive impact on safe haven demand for gold.  ISIL and other fundamentalist Muslim militarist factions are most certainly not going to go away without considerably more grief to come.  They have the prospect of generating ever more military and political mayhem, not only in the Middle East, but also in North and West Africa and Asia where there are very substantial Muslim populations.

Meanwhile media overload has largely relegated what’s going on in Ukraine to a place among the less important stories out there.  Arguably the latest action in south east Ukraine, with the Russian-supporting separatists apparently moving to try and take control of the strategic port of Mariopol on the Sea of Azov, could be an equally destabilising force in European geopolitics.  Russia denies involvement, but the apparent usage of high tech weaponry by the separatist rebels belies a totally neutral standpoint.  A Russia-friendly controlled land corridor along the coast to Crimea would be of considerable strategic importance.

Should, heaven forbid, NATO be dragged into any kind of military action in support of Ukraine forces then this could result in a very significant conflagration and one doubts NATO’s European members would want to see this.  It would be a very different proposition to the military action taken against Iraq or Serbia.  Russia has high-tech weaponry, and a well-trained army, which would be a match for what most of the West can assemble and would have a significant logistical advantage in fighting next to its own borders.  The USA being further away geographically may take a more belligerent tone, but even the extreme ‘nuke-em’ brigade would probably fall silent given the possibility of being ‘nuked’ back.

And as for increasing economic sanctions against Russia, an economically weak Europe would probably not be keen to go down this route either given Russia’s potential for retaliating in kind – particularly in terms of cutting off oil and gas supplies.  The West may well be miscalculating Russia’s ability to survive economic hardships also.  The Russian population’s been through all that before, and can no doubt do so again without generating, in any serious manner, anti-government protest.  President Putin has a very high popularity rating as being a strong leader who has put Russia back on the map as a major military and political powerhouse which has done wonders for Russian pride.

So lots of potential ahead for geopolitical elements that may work in favour of a retreat into gold as a safe haven investment – and these are just the ones we know about.  We’ve already had a few unpredictable Black Swan events in the first three weeks of the year (see: 2015 Black Swans abounding – Safe Haven gold to benefit).  On this pattern there could be a whole host more ahead in what is already turning out to be something of landmark year for geopolitical discord and change.