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- Gold Still in the Red from a Short-term Perspective
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- Testing A Harry Browne Permanent ETF Portfolio
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| Gold Still in the Red from a Short-term Perspective Posted: 14 Feb 2012 06:30 AM PST
There is a study published by the Credit Suisse and the London Business School that says that gold prices have been too volatile to play a reliable role as a hedge against inflation over the past 112 years.
While inflation does not reduce gold's real value, it has no yield or income flow and the precious metal has given a far lower long-term return than equities in the period since 1900, or 120 years, says the study. Generally, the analysis is conducted based on periods when gold was money and where it was not and we believe that these two should not be mixed.
We realize that gold does not give income or interest. People invest in gold is a search for yield through capital appreciation or as a safe haven – or as money. When interest rates are close to zero or negative in real terms, gold begins to glimmer. The US, Europe, the UK, China, India, gold's biggest markets, all have negative real interest rates. It is true that the past 112 years have not all been good for the yellow metal. Yes, there are bull markets and there are bear markets and we are in the midst of a bull market in gold right now.
In the period since 1900, gold gave a real return of 1.1 percent in sterling terms and its value fluctuated widely, said the study. "Gold is the only asset that does not have its real value reduced by inflation. It has a potential role in the portfolio of a risk-averse investor concerned about inflation," it said. "However, this asset does not provide an income flow and has generated low real returns over the long term. Gold can fail to provide a positive real return over extended periods."
True. That's why we are invested now, while gold is in the midst of a bull market. When it swings into a bear market we'll consider other options or perhaps evaluate the profitability and risk of trading the downswing – impossible to tell at that point. However, the key issue is that one does not have to be fully invested in the precious metals sector during bear markets – what is the assumption of the study.
Mohamed El-Erian, CEO and co-chief investment officer of bond fund giant PIMCO, said that given the fragile global economy and geopolitical risks, investors should be underweight in equities while favoring "selected commodities" such as gold and oil.
Obama seems to have run into a good streak of luck in his bid to get reelected president. Just in the nick of time, the U.S. economy is improving, at least as evidenced by last Friday's jobs report. Payrolls numbers are up by 243,000 jobs. Unemployment is down to 8.3 percent.
The Sunshine Profits Team extends our best Valentine's Day wishes. To see if you'll fall in love with the precious metals sector again, let's begin the technical part with the analysis of the yellow metal. We will start with the very long-term chart (charts courtesy by http://stockcharts.com.)
We begin with the chart of gold from a non-USD perspective. Last week there was a weak consolidation from a non-USD perspective and the strong similarities to the trading patterns of mid-2011 are no longer in place. With these developments, it is unlikely that a move to the upside will be as sharp this time. We have seen two consolidations this time and last year there was only one small stop, after which gold's price immediately shot upward. This chart suggests that a sharp rally is not a likely probability and that further consolidation is quite possible at this time.
In the long-term chart of gold from the perspective of the Japanese yen, we see that the RSI level over 60 and this suggests that the local top may be in or is at least close. In the past, when the RSI held close to the 70 level for some time, local tops have been seen. Such is the case today. Prices are also close to the middle of the trading range but not at it, so a pause appears likely though not yet imminent.
So, will gold decline from here? Most likely yes, but not very far. The additional confirmation of the short-term bearish case comes from the general stock market, as gold has been recently moving in tune with stocks. Consequently a turnaround in stocks could ignite a move lower in gold as well.
The next local top in stocks will probably be close to the level of the 2011 high. The recent trading pattern has been consistent with the period leading up to the local top in 2010-11. In October-November 2010, declining prices were seen for a few weeks but were quickly followed by a continuation of the rally. We may have a similar situation here.
RSI levels should be looked at as well and are also indicating that a rally is likely ahead. It appears that it could last for two to four weeks as the RSI level will then likely be close to 70. This has coincided with local tops in the past.
The short-term (and short-term only) bearish case for gold is further confirmed by the actual recent action in the silver market which has followed what we outlined in our essay (February 10th, 2012) on the likely silver pullback:
Silver's price has been in a sideways trading pattern during the past two weeks after a strong rally in which the red support-resistance line was pierced and volume levels were significant. With silver now above this line, it seems that a move back to it, a test of the breakout may in fact be seen. The 38.2% Fibonacci retracement level based on the 2002 to 2011 rally is also in play and will likely assist in stopping a decline as well.
(…) the medium and long-term outlook for silver remains bullish but – also based on the analysis of the USD Index – the short term is now more bearish than not.
Summing up, the outlook for gold remains bullish for the medium and long term but is now rather bearish for the short term.
Thank you for reading. Have a great and profitable week! P. Radomski * * * * *
Sunshine Profits provides professional support for Gold & Silver Investors and Traders.
All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments. By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
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| 5 Undervalued Oil/Energy Stocks Trading Below Book Value Posted: 14 Feb 2012 06:06 AM PST By Hawkinvest: The oil and energy sector should be a core holding for most investors as it is something that everyone needs and uses. It is also a sector that is just about guaranteed to grow over the long term as the population increases worldwide. Demand for energy is likely to grow particularly fast in emerging market countries since those consumers are likely to increasingly use energy as their incomes rise. The market has made impressive gains in 2012, so it makes sense to look for value in the energy sector and one way to do that is by considering book value. Book value is a metric used by many investors to evaluate a stock investment. It is measured by taking the total assets held by a company and subtracting the liabilities. This gives investors some basis for what the dollar value per share might be in the event of a liquidation Complete Story » |
| Testing A Harry Browne Permanent ETF Portfolio Posted: 14 Feb 2012 06:02 AM PST By Scott's Investments: Last week I detailed an ETF portfolio (part 1 and part 2) intended to mimic PRPFX, the Permanent Portfolio mutual fund. Coincidentally, Global X launched a Permanent ETF (PERM) last week; the fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Permanent Index. The Solactive Permanent Index allocates 25% each to four asset class categories: Stocks, U.S. Treasury Bonds (Long-Term), U.S. Treasury Bonds (Short-Term), and Gold and Silver. The stated allocation of PERM corresponds to Harry Browne's proposed allocation in his 1998 Fail-Safe Investing: Lifelong Financial Security in 30 Minutes. Browne proposed an equal-weight portfolio of stocks, long-term bonds, cash, and gold. An investor could create this portfolio using as little as four ETFs: SPY (SPDR S&P 500 ETF), TLT (iShares Barclays 20+ Year Treasury), SHY (iShares Barclays 1-3 Year Treasury Bond Fund), and GLD (SPDR Gold Complete Story » |
| Posted: 14 Feb 2012 05:43 AM PST By Tony Daltorio: There is a long history of gold ownership in China. Gold's centuries-old popularity in the country for jewelry, payments and dowry gifts ended in 1949 when the Communist Party took power. The metal was declared to be a bourgeois symbol and gold mines became state owned. Gold prices were set by the state until 2002 when the Shanghai Gold Exchange opened and domestic prices began tracking international prices more closely. So for more than 50 years, the government controlled China's gold market and set prices. But now, the precious metal has reemerged as a popular hedge among ordinary citizens against inflation and currency movements. China is already the world's largest gold mining country. Now it is on the cusp of surpassing India as the world's biggest gold importing nation too. Just look at the figures from 2011. China's imports of gold from Hong Kong more than tripled last year from Complete Story » |
| Posted: 14 Feb 2012 05:43 AM PST
Dollar Weakness "Creating Gold Demand" after Greek Deal, Time for American Austerity "Is Not Now" says White House SPOT MARKET gold prices touched $1733 per ounce Monday morning – 0.5% up on last week's close – as stock markets, commodities and the Euro all rallied following Greece's vote in favor of new austerity measures. Silver prices meantime hovered around $33.90 per ounce – 0.8% up on the end of last week – while government bond prices dipped and the Dollar fell on the currency markets. "The weakness in the Dollar…creates a bit of demand for gold," reckons Bernard Sin, head of currency and metal dealing at Swiss precious metals refiner MKS. By Monday lunchtime, Euro-denominated gold prices were roughly where they ended last week, at around €42,000 per kilo (€1306 per ounce). Greek lawmakers last night approved a fresh austerity package, including public sector layoffs, minimum wage reduction and pension cuts. A reported 80,000 people took to the streets in protest, while press reports said up to 30 buildings were firebombed. Antonis Samaras, leader of the New Democracy party and widely tipped as Greece's next prime minister, expelled 21 members from his party for voting against the measures. Former prime minister George Papandreou, leader of the socialist Pasok party, also expelled members who did not support the measures. Eurozone finance ministers are due to meet on Wednesday to review the new agreement, and potentially sign off Greece's €130 billion second bailout. This in turn should pave the way for a deal with Greece's private creditors to reduce the country's debt burden, as well as stave off a default on March 20 when €14.5 billion of 3-Year Greek bonds mature. "The government may yet find that approving the new measures…proves to be far less of a challenge than implementing them in the months ahead," reckons one gold bullion dealer here in London. "We are still looking for more measures out of Europe before we see a sustainable risk rally," adds Ong Yi Ling at Phillip Futures in Singapore, who expects gold prices to hit resistance at $1760 per ounce. "That will be the first resistance and the second one is at about the $1800 level. For gold to break the $1800 level, we need more measures, I would say." Here in the UK, the latest Bank of England figures relating to Project Merlin – the agreement between the UK government and British banks aimed at promoting lending to business – show that banks lent £214.9 billion overall to business in 2011, against a target of £190 billion. However, the target for smaller businesses was missed, with £74.9 billion lent versus a target of £76 billion. The final quarter of last year saw a 3% drop in net lending. "The Merlin targets have failed," says Andrew Cave, head of external affairs at the Federation of Small Businesses. "Talking to our members, 30% of them say they missed a growth opportunity because they weren't able to access finance at the right times, so there is still a problem." "The reality," adds Lee Hopley, chief economist at manufacturers' federation EEF, "is that small and medium enterprises continue to be frustrated by the cost and terms and conditions around lending, with some opting out of using external finance altogether. This cannot be good for growth." China's government has ordered the country's banks to begin rolling over its loans to local governments, according to the Financial Times. When the global financial crisis broke in 2007-8, the state launched a massive stimulus program. Local authorities in China now have debts worth an estimated $1.7 trillion the FT says. US president Barack Obama will today call for higher taxes on millionaires and billions of Dollars' worth of infrastructure projects to create jobs as part of his 2013 budget proposals, news agency Reuters reports. "I think there is pretty broad agreement that the time for austerity is not today," White House chief of staff Jack Lew said Sunday. Obama is expected to repeat his call made during his State of the Union address for the introduction of the so-called Buffett Rule, which would see millionaires pay a tax rate of at least 30%. The net difference between bullish and bearish gold futures and options contracts held by traders on New York's Comex – the so-called speculative net long – went up for the fifth week in a row over the week ended last Tuesday, according to the latest data from the Commodity Futures Trading Commission. The spec net long and open interest both hit their highest levels since the week ended 15 November. "Options open interest in this period also shows a rise in puts relative to calls, suggesting some doubt may be creeping into the sustainability of the price rally." The volume of gold bullion held to back shares in world's largest gold ETF the SPDR Gold Trust (GLD) meantime is at its highest level since 20 December, having risen 0.1% over the course of last week. Ben Traynor Gold value calculator | Buy gold online at live prices Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. (c) BullionVault 2011 Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
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| The Lesson Some Investors Never Learn: Keep It Simple Posted: 14 Feb 2012 05:37 AM PST By Rocco Pendola: I love Tuesday mornings. I'm not ashamed to admit that a couple hours after the open every Tuesday, I receive an email from Sharebuilder announcing that "One or more confirmations for your Automatic Investment Plan are available online." That's right. I have a Sharebuilder account. And I say it with pride. Sure, I have accounts with bigger, seemingly more sophisticated brokerages and mutual funds. And I like to trade and execute some options strategies that would just cost too much with a firm dedicated, for all intents and purposes, to helping investors dollar cost average. But, at the end of the day, my Sharebuilder account and a few Dividend Reinvestment Plans (DRIPs) provide the best bang for my long-term buck. Lately, I've been on two interrelated war cries:
Complete Story » |
| Dumb, Dumber and Dumbest: Trading Gold for Oil Posted: 14 Feb 2012 05:35 AM PST A recent headline blasted the breaking news: "India to Pay Gold Instead of Dollars for Iranian Oil: Markets Stunned." I too was stunned. That is one of the dumbest ideas to cross my desk in a long while. |
| Analyzing Monday's Noteworthy Insider Buys And Sells Posted: 14 Feb 2012 05:26 AM PST By Ganaxi Small Cap Movers: We present here noteworthy buys sells from Monday's SEC Form 4 (insider trading) filings, as part of our daily and weekly coverage of insider trades. These were selected by a review of over 330 separate transactions in over 190 different companies that were filed with the SEC on Monday. The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock (for more info on how to interpret insider trades, please refer to the end of this article): Halozyme Therapeutics (HALO): HALO develops recombinant human enzymes for the infertility, drug delivery, endocrinology, oncology, and dermatology markets. On Monday, Director and 10% owner Randall Kirk, also the CEO and Sr. MD of Radford, VA-based venture capital firm Third Security, filed SEC Form 4 on Complete Story » |
| Posted: 14 Feb 2012 04:25 AM PST Will Bancroft takes a look at another financial book that we feel is of great relevance to investors today. In this review he takes a look at a book that has inspired reams of legendary gold investors; 'Gold Wars'. In our book reviews section we often feature the best financial books for our readers, but today's review is a bit of a special one. There are many great books out there for gold and silver investors to read and understand monetary history and the precious metals markets. However, there is one book that might stand above them all: 'Gold Wars' by the late Ferdinand Lips. Gold Wars has inspired the likes of Ben Davies, CEO of Hinde Capital, is highly regarded by gold market heavyweights, is regularly mentioned by expert commentators on the financial and monetary system, and was published by The Foundation for the advancement of Monetary Education (FAME) in New York. Uncovering Gold WarsAlthough the full title, Gold Wars: The Battle Against Sound Money as Seen From a Swiss Perspective, sounds technical and might come across as dry, this book is mostly very easy to access. The reader is in fact taken on a compelling journey of the history of money and gold, with revelatory diversions that touch on liberty, freedom and human progress. Readers with a moderate knowledge of money are likely to find this book revelatory and illuminating. Ferdinand Lips drew wide ranging praise for his publication from a range of academics, historians, miners and geologists, and professional investors. What is even more impressive is the standing and depth of the individuals Herr Lips has come across or read and understood in his dealings as a Swiss banker and advocate of sound money. His breadth of knowledge is remarkable and he was clearly very well acquainted with the likes of the late gold market analyst, Julian Baring, monetary expert, Professor Peter Bernholz, investor and author, James Dines, Ex-Federal Reserve banker, John Exter, and many other notable individuals who appear in the literary journey. Introducing gold and money.Herr Lips begins with an introduction that is useful to contextualise the subject matter for the reader (both new and familiar with the subject matter), some condensed history of gold and a definition of money itself. This helps the reader understand why gold and silver began to be used by humans as amedium of exchange, and how numerous great civilisations operated on metallic monetary systems. References are paid to ancient Babylon, China, Egypt, Greece the Incas and Lydia. What is of particular interest is how the decline of so many of these civilisations coincided with their fiddling with the monetary foundations, and how the flourishing of human development always coincided with the use of sound money, whether it was the Roman Aureus, Arab Dinar, or Florentine Florin. The reader is then introduced to gold's role within modern history with chapters covering the 1930s and abandonment of gold, the apparent 'Gold War' of 1960 to 1971, the not so golden 1980s, through to the 1990s and contemporary financial era. It is worth noting that the book is slightly out of date, being published in 2001 (Herr Lips died in 2005), but its relevance is little diminished. You may not pick up the book with an initial interest in philosophy, but anyone with a belief in liberty and small government will enjoy Herr Lips' explanation of sound money's link with liberty and freedom. Herr Lips also puts the abandonment of gold in the 1930s into perspective and charts the rise of Keynesianism, noting that "the reasons why the war against gold has intensified with every passing year, one has to go back to the crucial and historic events of the 1930s". Whilst not as much focus is given to why the flawed gold exchange standards of the Western world failed, compared to Jim Rickards in 'Currency Wars', the reader is well educated as to how the developed world lost its golden anchor during this period and what this really means for the later periods of history yet to be assessed. Upstanding individuals who tried to prevent the abandonment of gold are quoted and given airtime, such as Senator Carter Glass (1858 – 1946). Instead of wading through chapter and verse we asked ourselves what are the takeaways from this book we found most educational, and that we had not found elsewhere? The media don't get gold.Another subject that was fleshed out further for us was the mainstream media's general lack of understanding of gold and money, and their at times patent dislike of gold. It has generally appeared to us that when expert gold market commentators are interviewed by the talking heads of the financial media about gold, the interview can only offer so much given the interviewers potential lack of knowledge. To hear Herr Lips, as experienced and expert gold market commentator as you might have found, opine that "for decades the media of the establishment have done everything in their power to either avoid the subject of gold or denigrate it", is bold, and we find it instructive. We are informed that German Swiss media outlets have stopped their coverage of the gold price, whilst the major German language Swiss daily newspaper, the Neue Zürcher Zeitung is not much better. The people commentating on gold today have no idea what money is and are better not mentioned. Weakness in the gold price: 1980 – 2000.
Perhaps the most illuminating aspect of Gold Wars to us was the book's coverage of a range of actors and factors which arguably contributed to systematic weakness in the gold price in the last two decades of the previous millennium. Whilst the market was due some period of recovery and consolidation after the blow off of 1979-1980, this vicious 20 year bear market that followed was not entirely natural according to Herr Lips. This is where his analysis gets a bit more technical to those unfamiliar to the financial markets and related instruments and jargon. The first to act and apparently begin a dynamic, which for obvious and less easily understood reasons contributed to a weak gold price, were the central banks. Their apparent mismanagement of their gold reserves is cited by the author who suggests "in the absence of central bank sales and lending, the gold price would not be so suppressed" and that "no normal business person would act in such a way as to depress the price of his most valuable asset". This criticism of central banks focuses on the fact their gold sales and loans were managed in a way that was as public as possible and often not aimed at achieving the best price. Central banks would typically announce their transactions ahead of time letting other market participants know of their impending sales, then announce them again at the time of sale, and finally announce them again after the event to ensure all market participants were aware of their actions. This is all unhelpful for achieving the best possible price for their nation's monetary assets. Herr Lips argues that this was deeply irresponsible and short-termist, and that the public dumping of gold by the market's largest gold holders caused deep and long lasting psychological damage to the market. Nonetheless, we should not be entirely surprised to hear of this given central bankers' aversion to gold, and the previous attempts at gold price suppression by the London Gold Pool. Essentially the market's most powerful participants were acting in concert to prevent appreciation of the gold price. For a period of time they were successful. Enter the Bullion BanksTo learn how the bullion banks were also involved in a weak gold price, and how the gold mines got bound up in a speculative feedback loop, read part II. Continued from part I: Will Bancroft looks at another financial book that we feel is of great relevance to investors today. In this review he takes a look at a book that has inspired reams of legendary gold investors; 'Gold Wars'. In part I we put the book in context and then began a detailed look at what Ferdinand Lips deemed as key reasons for a 20 year bear market in the gold price. We continue this articulation from Herr Lips, starting with the role of the Bullion and Investment Banks. Enter the bullion banksThe major bullion banks then enter the fray to apparently compound the effects of the central bank activity. With their enthusiasm to borrow leased gold from the central banks, the bullion banks made spectacular sums of money by executing a 'Gold Carry Trade'. The bullion banks borrowed gold at a 1% lease rate, sold this gold (thereby putting more selling pressure on the market) and invested the proceeds in US Treasuries at a 5% yield. Beyond the attraction of the Gold Carry Trade, the bullion banks had also discovered ways for gold to apparently achieve a yield. This involved gold forwards and loans, and they sold the idea to owners of above-ground gold and owners of gold ounces yet to be extracted. Holders of gold bullion (eg – central banks) would loan their asset for 1-2% a year, and this gold would be lent to gold miners, providing them with cheap credit at below market rates at 3-4% a year. The miners would then sell this gold on the spot or forward market to realise the value and use the sales proceeds. This chain apparently offered something for everyone, but soon a prudent hedging mechanism exploded into a "speculation machine". It all depended on a lower and lower gold price though. Investment bankers, encouraged by their lucrative profit centre, lost no time and lost no bearish argument to build up their clientele steadily and aggressively… What neither the central banks or gold mining companies realised at first was that this activity turned into a vicious circle contributing to lower and lower gold prices. So, if somebody wanted to manipulate the gold market, he only had to convince the central banks to lend more and the mines to hedge more. Then they could sit back and watch their income from fees grow. That they were undermining the gold price in the process did not concern them.Herr Lips found that it made no sense to loan gold at such ridiculously low rates and then risk losing it in an exercise that contributing to the asset losing value. A dynamic was building, aided by newly alerted speculators and hedge funds who had identified the reasons for the gold price weakness, that allowed the price of gold to be depressed for years yet had nothing to do with supply or demand in the physical market. We are informed that the biggest overhang on the market was from central bank lending not from actual sales. The greater the bearish sentiment regarding the gold price, the more confident the speculators and beneficiaries from the short side became. Gold mines develop an addictionWhilst Herr Lips has shown how this dynamic may not have been in the interests of the central banks, the mining industry had apparently developed an unhealthy addiction which was undermining the value of the very resource they extracted. The mining industry was, therefore, equally short sighted. They were selling what they had not dug up by borrowing the metal from central banks through bullion banks. Seduced by cheap loans, they started projects that would have been uneconomical under normal market circumstances. The more the gold price fell, the more difficult it became to remain profitable or to limit the size of their losses. Many companies, therefore, resorted to mining higher grade ores just to stay alive. They were selling the precious metal at the most unfavourable prices at the most inopportune time, thereby shortening the life of the mines. Also, exploration virtually stopped.We are informed that the market had become so divorced from the fundamentals, and miners so over hedged in the pursuit of profits independent of gold mining, that once the gold price eventually and unsurprisingly rose, like a balloon having been held underwater, some miners hedge books caused them enormous loses. The price of their product had risen yet miners like Ashanti of Ghana and Cambior of Canada were victims of this price appreciation. Not only mine shareholders but gold producing countries felt this pain. Within a discussion of a badly short-sighted mining industry Herr Lips provides the reader with a firm understanding of the importance of gold mining to gold producing countries that receive royalties from extraction. Notably some of the poorest nations on earth could have been earning greater incomes had the gold price been more naturally set at a higher level. In 1999 the WGC found that 30 of the 42 Heavily Indebted Poor Countries (HPIC) were gold producers, yet these had paradoxically been undermined by those offering a 'helping hand' such as the IMF and governments of some developed nations (often active sellers and lenders of gold into the aforementioned dynamic). Also worthy of careful attention is a detailed discussion with Professor Antal Fekete about the potentially questionable hedging and reporting practices of miners like Barrick, which we are told was not properly understood by the accounting profession which signed off on it. Needless to say Herr Lips is not shy in expressing a subsequent opinion that the net losers from this dynamic were the miners, the mining shareholders, gold producing countries, central banks, along with employment generally, and the savers of the world. The beneficiaries are represented to be the bullion banks, the speculators that worked the short-side, and gold buyers. Readers might ask why demand from these encouraged buyer did not rebalance the supply demand balance, and this the price, but remember Mr Lips' assertion that the market was acting under a bounded rationality that prices would always remain weak, and likely get weaker. Switzerland in the Gold WarsAn account of the Gold Wars from a Swiss perspective was something new to us that Herr Lips also presented with great consideration and empathy. We learn how gold rich Switzerland became a central target in the Gold Wars as it became ever more obviously sound and gilded in a world of debased fiat currencies. The Swiss Franc was superior to other money. "The reason was quite simple: the Swiss Franc was 100% backed by gold, and therefore considered as good as gold". After joining the IMF (a seller of gold and contributor to potential gold price manipulation) in 1992, the Swiss government and Swiss National Bank (SNB) "came to the surprising conclusion that, in today's world, a 40% reserve backing of its currency was no longer necessary. Under the IMF's Articles a currency being backed by, or linked to, gold is not permissible. Herr Lips is firm in his stance that there was not a good reason for the Swiss to have joined the IMF, and"the reasons that were given to the electorate were simply not serious… Not one person may realise that it is Switzerland's political and economic suicide in slow motion". He cites disingenuous and illogical actions by duplicitous or duped Swiss politicians and central banks who had appeared to give up on gold's monetary role as well. Switzerland had apparently fallen prey to masters of a new world order who were floating adrift of gold. If the Swiss could be persuaded to sell the majority of their gold, one of the last remaining national bullion stockpiles could be whittled down, and another strategic victory would have been achieved by those with interests to side-line gold forever from its apparently natural monetary role. The reader is told of a concerning lack of public disclosure, and that ultimately Switzerland appears bullied out of its previously sound monetary habits. One must remember the historical backdrop of alleged complicity with the Nazi party for handling Nazi gold that Switzerland had found impossible to shrug off altogether (even if a range of independent observers found Switzerland's actions understandable if not wholly preferable – Winston Churchill and Harry Schultz among them) . You may be thinking that this path towards a pure fiat currency fixed to nothing has continued with the SNB finally giving up on the integrity of the Swiss Franc in 2011, when it announced a peg to the Euro and the commitment to printing unlimited amounts of money to maintain this peg. Is this the final nail in the Swiss economic coffin? It's too early to tell, but it is interesting how many anecdotal reports fly around the City of London of regular and significant capital flows from Switzerland to apparentlypreferable havens, like Singapore. Final thoughtsWhilst it may be difficult to do justice to such a book that is held in such esteem, we hope we have not been entirely unsuccessful. Herr Lips' writing is enjoyable, lively, rich and eloquent. His depth and breadth of the gold market was not far from unrivalled and it would seem the Austrian school lost a great contributor when he died in 2005. Gold Wars is an expression of his standing and is highly recommended by us. Just take a look at the bibliography to understand Lips' depth of knowledge and standing in the markets and banking systems he operated in. We found interesting perspectives on, and dynamics observed within, the 20 year bear market in gold at ended in 2000. Within this we achieved deeper and more rounded appreciation for the role and nature of the mining industry, and how the practice of prudent hedging evolved to become a speculative endeavour with pernicious implications. Perhaps most importantly we gained far greater understanding on what Gold Wars are, and how they can be identified. It appears that Switzerland may have been one of the final bulwarks to fall against the tides of corrupting fiat money. This book is a vital part of any investor's collection and will likely prove most supplementary to your knowledge. The Gold War is nothing else than a Third World War. It is not only a most unnecessary but the most destructive of all wars. It should be stopped now. 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| Gold Heading Back Towards A Monetary System, Not Away Posted: 14 Feb 2012 04:07 AM PST by Jim Sinclair, JSMineset.com:
The Gold Aficionado's greatest fear is totally without basis. The price of gold will not fall significantly from its points of true standard valuation and the introduction of a new currency system. Gold is heading back towards a monetary system and not away from it. The producing gold company of the future is the new utility as it dividends a majority of its profits to its shareholders. The fact that gold is money and not a commodity is the safety latch that opens on its own when all other forms of money close. Gresham's Law is human nature seeking a standard when all other forms of exchange have mutated to casino chips with national flags on them. Increasing world liquidity multiplies itself in increasing volatility of all things traded until an epic moment when over the top volatility convinces even the most economically ignorant that only a standard that cannot be multiplied by an instant Bernanke helicopter unlimited electronic monetary liquidity system is honest money. It is the flight from the burning values in terms of purchasing power of the casino chips called fiat currency towards a standard that proves Professor Gresham's Law. It is a study of history that repeatedly shows his thesis that good money, honest money, forces out bad money. Read More @ JSMineset.com |
| Dubai Explores New Ways of Selling Gold Posted: 14 Feb 2012 04:04 AM PST by Roman Baudzus, GoldMoney.com:
According to Ramesh Ramani, CEO of BRR Jewellery, it's important for businesses such as his to cater to rising tourist demand. Those customers are mostly tourists from countries like India who hope to find hot deals in Dubai. Due to on-going high demand for the yellow metal, so-called Express Outlets are springing up like mushrooms. The much lower rents for the small kiosks are also playing a role and after receiving a licence they can be opened virtually anywhere making it easy for merchants to approach well-visited tourist centres. Another plus for the gold kiosks are the low personnel costs as it only takes two to three well educated employees to assure a smoothly operating business. The large showrooms on the other hand require a lot more personnel and the presentations of gold products take more time compared with gold kiosks. The large Indian jewellery firm Sky Jewelley recently opening its first gold kiosk in Dubai. Read More @ GoldMoney.com |
| Timberline Permit Delay Last Good Buying Op? Posted: 14 Feb 2012 03:59 AM PST Please note, this update was part of the Got Gold Report shared with subscribers on Sunday, February 12. Subscribers may note some minor editing from the original, mainly to provide context for a wider audience. HOUSTON – Timberline Resources (AMEX:TLR, TSX:TBR.V), our favorite soon-to-be low cost gold producer is close to the point where they can begin mining some high-grade Montana gold ore via a 50-50 joint venture with Highland Mining. The JV has driven a drift or ramp thousands of feet down into the Butte Highlands future gold mine, about 15 miles south of Butte. Internal studies indicate a roughly 750,000-ounce gold resource there with an average grade just under .25 ounces per ton of rock. That's high-grade gold material by anyone's standard and new underground drilling in 2011 discovered additional Bonanza core grading as high as 27-ounces per ton. In late 2011 the underground mine was in the final approval stage, very close to receiving the final hard rock operating permit from the Montana environmental authorities, but on January 12 Timberline announced that recent water well testing conducted by the company indicated the development of the underground mine would likely produce more water than originally thought. The water treatment and discharge regimen would have to be redesigned and the approval was therefore delayed. Already battered to its lowest level in three years by a rough market for junior miners in 2011, shares of TLR dipped from near $0.60 to as low as $0.45 shortly after the permit delay announcement. This is exactly the kind of "non-fatal disappointment selling" we Vultures enjoy gaming. TLR, 4-month, hourly volume candle chart. If any of the images are too small click on them for a larger version. As long-time readers and Vulture subscribers already know we have a sizable stake in TLR, so we are keenly interested in the Butte Highlands development. The following are notes we shared with our Got Gold Report subscribers regarding that disappointing, but understandable and non-fatal development for the company. Our take is that this could very well be our last, best "buying op" for TLR shares, which by our reckoning were already woefully undervalued before the permit delay surfaced. As will become apparent in a moment, we deem shares of TLR as entering the top of the "Vulture Road Kill Bargain" zone. Continued… *** February 12 TLR Notes – 'Speed Bump, Not a Roadblock'In a phone conversation Thursday, Feb 9, Timberline Resources (TLR) president and CEO Paul Dircksen and CFO Randal Hardy confirmed that the recent delay in obtaining the final permit to begin mining the high-grade ore at Butte Highlands in Montana stems from test wells drilled down below the current underground workings and are not related to the amount of water encountered by the development ramp. The development drift or ramp is already down very close to the "pay zone" thousands of feet into Nevin Hill about 15 miles south of Butte Montana. TLR's Randal Hardy and Paul Dircksen at Butte Highlands in 2010. All photos Gene Arensberg Essentially the amount-of-water issue has to do with what might be encountered as the mine probes deeper into the mineralization in future years. Although the amount of water that would be generated today is consistent with the original application, the new well tests indicate that a larger water volume would enter as they moved lower (further from surface). The plan for the mine operating permit needs to include this larger than expected water removal, its pumping, containment, treatment and how and where it will be discharged in the beginning so that it won't become a problem in the future. The water well tests measured the amount (volume and time) of "recharge" back into the test holes once they were drawn down. From that new test data an engineer can make a reasonably accurate estimate of the volume of water to be expected in the water-bearing portions of the development workings. The new water well tests indicated the amount of water would be high enough to cause the need for a new hydrological study, and it also requires the need for a different kind of discharge permit, which allows for the water to be fed into one or more of the three different watersheds that leave the mine portal area. Butte Highlands sits atop the Continental Divide and there is some optionality as to which of the drainages to send the water into after treatment. Mr. Hardy says that TLR engineers are working closely with Montana environmental staff as they go. Mr. Dircksen says there is little in the way of difficult to treat metals or substances expected from the water there. Butte Highlands Drift Portal In the original permit application the company relied largely upon water dispersal via evaporation, snow making in winter and drip-emitters to handle the water flow. Given the expected larger amount of water to be discharged once development gets farther down into the mountain, that process would likely no longer handle all of it. If the volume of water ended up being more than the original system could handle, then they would have had to shut down and submit a new plan then. It is much better to design for it in advance and to design water treatment facilities to accommodate the higher expected flows before they encounter a problem. So, as we understand it, dispersal and evaporation methods of water removal need to be scraped in favor of a water treatment plant and ordinary water discharge permit. The technology to treat the "effluent" from this kind of underground mine is not cutting edge science and although it requires continuous testing, it is not something Montana officials would have to study very hard. In our own development background we are familiar with scalable, modular so-called "package" water treatment plants that are used for this volume of water treatment and they are neither difficult to obtain nor are they prohibitively expensive. We know from our own experience that the modular design allows for rapid and predictable adjustments to volume of the water to be treated and the systems and circuits are not complicated. Odds are there are several of them operating at sewage treatment substations near you as we write. In Montana, as it is here in Texas, water treatment plants are required to release water into the streams at a much higher quality than what already exists in the receiving stream. These typical package water treatment plants are designed with that in mind and they operate in all kinds of extreme weather conditions. Bottom line is that we expect that the settlement pond in the picture below is about to get larger and instead of using "evap" and drip dispersal for the water coming out of the new mine, the company will be installing a package water treatment plant and larger pumping capacity. Butte Highlands settlement ponds in June of 2010. Mr. Dircksen estimates that the revised plan will be submitted to the Montana DEQ within a month (sometime in February or March), with about two months thereafter being the best case to expect a final go-ahead for the underground mine. As with any new submission there could be staff comments that have to be addressed prior to a final-final approval. "This isn't a roadblock to the project," Dircksen said. "I'd call it a speed bump. And we want to get it right going in with Montana rather than having something jump up once we are in there mining," he added. Both Mr. Dircksen and Randal Hardy lamented the delay in getting the permit, but they are pretty confident they will be mining the high grade ore at Butte Highlands sometime later this year. After our telephone conference, we reiterate our confidence in the project. As just a reminder of what some of that high grade Montana rock looks like, just below is a photo of some of the drill core that was on display when we visited the future mine in June of 2010. Hopefully the labels of the very high grade material are legible in this photo. If not, they range from about a quarter of an ounce of gold to about six tenths of an ounce of gold per U.S. ton. Other, more recent drilling from underground drilling discovered zones containing up to 27 ounces per ton, remember, so there is a great deal of motivation to start mining and processing that Butte Highlands rock. The cash flow it will generate will enable TLR to continue its exploration at the company Flagship prospect in Nevada at Lookout Mountain, which Mr. Dircksen sees as a district-sized discovery. We may have more about Lookout Mountain in a future update, but for now, another look at some of the historic core that came from Butte Highlands. Six feet of just under 3-ounces per ton rock is mighty good-looking rock and therefore worthy of our continued support of Mr. Dircksen, Mr. Hardy and the entire TLR team as they get past this permitting speed bump thing. This seems like a good time to share our long-term "Vulture Road Kill Bargain" chart, the one we shared in our presentation at the New Orleans Investment Conference in October, 2011. This event has the shares just kissing the top of the "back up the truck" level, in the blue. TLR chart from New Orleans in October of 2011, updated through Feb 10. As always we have a choice when a non-fatal disappointment arrives for one of our "Faves." We can either succumb to the disappointment, become disgusted and hit the red button, or we can choose to take advantage of other exhausted and disgusted gamers doing that very same thing. We have already noted our intentions directly in the TLR charts and will continue to keep our current super-cheap bid ladder in play. We plan to ride our now 5-full unit oversized position with TLR until they earn the cash-flow respect of a currently disappointed and under-appreciative market. So, we're holding and adding to our TLR stake if the disappointment selling drives the price down to the third rung of our "blue panic level buying op" target ladder. (The first two rungs already connected as previously disclosed on the private Vulture chart.) Of course everyone can make up their own minds about such things. We'll close this brief with one last photo of a guy who is unquestionably "The Real Deal," and one of the reasons we intend to stick with the story to Pay-Day. And remember, Vultures, when we say "our timing is simply as long as it takes," you'd better believe we mean it for the issues we have very high confidence in. Highland Mining's Ron Guill describes the mining plan for the underground Butte Highlands project and how the material will be removed safely and profitably for TLR shareholders. Mr. Guill is not only the owner of Small Mine Development, the mining company that has built the big ramp down very close to the pay zone under Nevin Hill at Butte Highlands, he is also TLR's largest single shareholder. Mr. Guill's Highland Mining company has expended roughly $25 million in development of the ramp and mining headquarters for the Butte Highlands project (to be recouped from future production) and will in turn receive one-half the gold produced for the life of the mine. Butte Highlands is expected to produce between 50,000 and 70,000 ounces of gold per year at cash costs of roughly $500 the ounce for about a decade. By our own back-of-envelope calcualtion, at current gold prices that represents net revenues of perhaps $72 million per annum for the JV; roughly $36 million per annum to TLR's account after payback, some great long-term jobs for the Butte area miners, and some decent tax revenues for the government. *** As we send this note off to be posted, shares of TLR are changing hands near 50-cents a copy in very light volume in New York. Gold $1,722.10, Silver $33.68. Disclosure: Timberline Resources is a Vulture Bargain Candidate of Interest (VBCI) and is our fully fledged Vulture Bargain #4. Members of the GGR team are actively accumulating shares of TLR and continue to hold a speculative long position in the company. |
| Morning Outlook from the Trade Desk - 02/14/12 Posted: 14 Feb 2012 02:40 AM PST I appologize for the missed day yesterday, I've been travelling to and from California for the Cambridge House Resource Conference. Turns out Palm Springs is gorgeous, certainly a drastic difference from the cold back home in Montreal. This morning's headline from the Orange County Register: Obama - Spend to grow... My American relatives are greatly concerned and critical of this approach. The Greek parliament voted although it wasn't with conviction as 40 odd members voted against the austerity program and were thrown out of the Government. The streets of Athens are certainly not a model for an Expedia ad. Although the EU is still awaiting guarantees that this vote will hold no matter the outcome of the April elections and civil violence may continue, the psychology of the vote passing has given a lift to European equities and US futures are up ahead of the open. The vote translated into support for the metals but follow through is now needed. Would suggest buying on dips would be the trade of the day. Regular posts to resume Thursday. |
| Inevitable Downgrades Spur Safe Haven Gold Demand Posted: 14 Feb 2012 01:44 AM PST Safe haven demand for gold continues due to concerns that Greece's "bail out" is yet another short-term panacea and Moody's downgrades of various European nations' ratings have reignited contagion fears. |
| Posted: 14 Feb 2012 01:41 AM PST It looks like Greece will get its debt restructuring, which presumably delays its collapse by a few months. So now the spotlight shifts to the other functionally bankrupt eurozone countries which have no choice but to demand the same deal. Portugal, by general consensus, is next in line. It hasn't blatantly lied about its problems the way Greece has. And it hasn't accumulated quite as much debt as Greece, though at 105% of GDP its government is still deep in the danger zone.
But it doesn't export much and runs truly massive trade deficits. In order to pay down its debt it will need to generate trade surpluses going forward, but without the ability to devalue its currency to make exports cheaper, there's no way to accomplish this.
So as with Greece, austerity leads to depression:
Depression, in turn, leads to chaos:
The dynamic of austerity leading to depression leading to regime change will continue until Germany just gives up and bails out the whole eurozone periphery. |
| Your chance to take advantage of this "risk-free" inflation hedge could be over soon Posted: 14 Feb 2012 12:31 AM PST From Economic Policy Journal: The current nickel is made of 75% copper and 25% nickel. At current metal prices, there is 5.7 cents of metal in a nickel. As price inflation accelerates, I expect the metal value to soar and these nickels to disappear from circulation the same way silver dimes and quarters did in the 1970s. It is very likely that the U.S. Mint will stop producing the nickel in its current metallic form, because it costs more than $0.05 to produce. Indeed, President Obama, as part of his recent budget proposal, wants to change the composition of nickels and pennies to save money. The president's budget would... Read full article... More on inflation: This could be the next best thing to hoarding "junk" silver in the 1960s New report reveals Federal Reserve president owns millions in gold and platinum Gov't OUTRAGE: Federal Reserve president denies inflation, but secretly owns millions in inflation hedges |
| Today's entertainment: The Super Bowl ad Clint Eastwood should have made Posted: 14 Feb 2012 12:28 AM PST From John Stossel's Take: I love this new video from Reason! I wish Clint had said: It's halftime in America... People are wondering where their money went. It went to bail out the chosen ones... Read full article (with short video)... More entertainment: This could be the most incredible end to a football game in history Hilarious video shows the media is still completely clueless about gold Today's entertainment: Jon Stewart absolutely DESTROYS Newt Gingrich |
| The Federal Reserve openly admits plans to crush the dollar Posted: 14 Feb 2012 12:13 AM PST From Washington's Blog: The Federal Reserve's explicit goal is to devalue the dollar by 33%. As Forbes' Charles Kadlec notes: The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level. The Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years. While that is stunning, it is actually... Read full article... More on inflation: This is how much more money the Fed could be printing Ten things every American should know about the Federal Reserve An incredible -- and controversial -- take on unemployment, debt, and the "real" economy |
| Posted: 13 Feb 2012 10:28 PM PST Presenting The Reason Why The CME's Crude Market Was Halted For Over One Hour from ZeroHedge:
Read More @ ZeroHedge.com |
| Oil Insider Warns of $5 Gas This Year Posted: 13 Feb 2012 10:04 PM PST by Mac Slavo, SHTFPlan.com:
According to oil industry insider and former Shell CEO John Hoffmeister, that's exactly what we can expect this year. In an interview with CNBC, Hoffmeister warned that the price of oil will continue to rise amid increasing global demand from emerging economies, tensions in the middle east, and a weakening dollar, causing the price of gas to jump to $5 per gallon before the end of this year: Read More @ SHTFPlan.com |
| The Gospel of Gold According to Peter Posted: 13 Feb 2012 10:03 PM PST by Peter Grandich: from TheAUReport.com:
The Gold Report: Going back to your time as a fund manager in the '80s on Wall Street, how does what was happening then compare with what is happening now? Peter Grandich: It's dramatically different. The biggest change is that the game is stacked against the average investor more so than at any other time. For example, the mortgage debacle a few years ago was equivalent to all the big car companies manufacturing cars that they knew were going to crash and buying life insurance on the people that they sold the cars to knowing that they would die so they could collect on both ends. That's what the financial institutions did. Those people are still in charge of the game. I take exception when I hear people talking as if the game is fair and the average person has a reasonable chance. Read More @ TheAUReport.com |
| A Coming Paradigm Shift in Silver? Posted: 13 Feb 2012 09:55 PM PST Why, silver bulls ask, has the price of silver not outstripped the price of gold? In past bull markets, most notably the 1973-1980 bull market, the price of silver shot up 25 times while the price of gold rose only seven to eight times. |
| Bank of Japan fires its bazooka Posted: 13 Feb 2012 09:30 PM PST Gold and silver prices continue to consolidate. Absent some kind of black swan event, this is likely to remain the case until the end of this month, when the European Central Bank announces its second ... |
| Vietnam Has Written the Book on Gold: The West Should Read It Posted: 13 Feb 2012 09:14 PM PST ¤ Yesterday in Gold and SilverThe gold price was up about twelve bucks or so just a few minutes before 9:00 a.m. in London yesterday morning...and that was the high tick of the day. From there, the price swooned five dollars or so before almost regaining its old high shortly before 1:00 p.m. GMT...about twenty-five minutes before the Comex opened at 8:20 a.m. in New York. From that secondary high, the gold price got sold off about a percent, with the low of the day [$1,714.90 spot] coming at 9:45 a.m. Eastern time. The subsequent rally ran into a not-for-profit seller at precisely 11:00 a.m...and from that point, the gold price got sold off about five bucks into the close of electronic trading at 5:15 p.m. The gold price closed at $1,721.90 spot...down 20 cents from Friday. Net volume was very light at 94,000 contracts, give or take a thousand or so.
In fits and starts between the Sunday night open...and its high of the day a few minutes before 9:00 a.m. in London...the silver price rose about 45 cents. But, once again, the moment that it broke through the $34 spot price level, a not-for-profit seller showed up and sold it down about two bits. The price more or less stayed at that level until precisely 1:00 p.m. in London [twenty minutes before the Comex opened]...and then selling began anew, with the low of the day coming at 10:15 a.m. in New York. And, like gold, the subsequent rally in silver ran into a not-for-profit seller at precisely 11:00 a.m. Eastern as well. The subsequent rally ended shortly after the Comex closed for the day...and silver traded sideways for the rest of the Monday trading session. Silver closed the Monday trading day at $33.72 spot...up the magnificent sum of 13 cents. Net volume was a rather small 25,000 contracts.
The dollar index gapped down about thirty basis points right at the open on Sunday night in New York...recovered most of that within an hour...and then rolled over...hitting its low of the day [78.62] at 8:45 a.m. in London [3:45 a.m. Eastern]...which happened about ten minutes before the high tick of the day in both metals. From that low, the dollar index steadily gained back about 40 basis points of its loses by the close of trading late in the New York afternoon...and the index closed a few basis points above the 79.00 mark...and is still heading higher as of this writing, which is 11:04 p.m. Eastern. The dollar index finished unchanged from its Friday afternoon close in New York. A cursory glance at the Kitco gold chart above shows that the gold price was rather reluctant to head south as the dollar headed north...and the last two sell offs of the day [7 and 11 a.m. Eastern time] look like the handiwork of not-for-profit sellers, as every time they stopped selling, the price rose. Ditto for silver...and platinum.
The gold stocks gapped up at the open, but one or more not-for-profit sellers used the opportunity to beat the stocks into the red by 10:15 a.m. Eastern...and the moment that the subsequent rally made back into positive territory, there was someone waiting to sell it off once again. It's as plain as day that the gold stocks would have finished in the black if it wasn't for this indiscriminate selling. Sprott Asset Management's John Embry and I [plus many others] are in full agreement on this one...that 'da boyz' are not only dicking with metal prices themselves, they are managing share prices as well. The HUI closed down 0.47% yesterday.
The silver shares were a mixed bag yesterday...and Nick Laird's Silver Sentiment Index actually close up 0.04%.
(Click on image to enlarge) The CME's Daily Delivery Report showed that only 10 gold contracts...but a rather large 127 silver contracts...were posted for delivery tomorrow. In silver it was, as usual, Jefferies as the short/issuer...and the Bank of Nova Scotia and JPMorgan as the big long/stoppers...receiving 108 of those issued contracts. UBS stopped 14 contracts. We're about half way through February...and 585 silver contracts have already been delivered so far this month. This goes along with the 1,600 of so that were delivered in January. These are amazing amounts for these two months which, as I've said before, are not normal delivery months for silver. Both Ted Butler and myself would love to be flies on the wall over at Jefferies these days, as they've been the short/issuer on just about every one of these 2,200+ contracts delivered since the beginning of the year. That's 11 million ounces dear reader...over five days of world silver production in total...and that ain't chopped liver. The link to yesterday's Issuers and Stoppers Report is here. There were no reported changes in GLD yesterday...but over at SLV, authorized participants withdrew 1,360,461 troy ounces of silver. There was a small sales report from the U.S. Mint yesterday. They sold 1,500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 25,000 silver eagles. The month-to-date totals aren't worth mentioning...and the mint isn't even close to selling a million silver eagles yet this month. Friday was pretty slow over at the Comex-approved depositories, as they didn't receive a bar of silver...and only shipped 46,522 ounces of the stuff out the door. The link to this little bit of activity, is here. On Friday I forgot to check the short interest in silver over at the shortsqueeze.com website. I normally check it every day, but with the Commitment of Traders Report...and the Bank Participation Report to write about in Saturday's column as well, it just never crossed my mind. However, silver analyst Ted Butler didn't forget...and this is what he had to say about what he saw... "The first big development this week is one that caught me by surprise, although perhaps I shouldn't have been completely surprised. I'm speaking of the new report on the short position in shares of SLV, as of the close of business January 31st. Where I was girding for an increase in the short SLV position (since we climbed nearly $4 in price for the two week reporting period), instead there was a very big decline in the short position of more than 35%. The short position in SLV declined by 9.4 million shares (ounces), from 26.6 million to under 17.2 million shares. This is the biggest two-week reduction in the SLV short position in my memory...and the first I can recall when silver prices were advancing. The decline in the SLV short position brought it down almost 50% from the high-water mark of over 36 million shares in the spring of 2011. Here's the link to SLV's short position over at shortsqueeze.com." "I admit to doing a double-take when I first glanced at the numbers. As I previously reported, towards the end of December, I received a very threatening letter from lawyers representing BlackRock, the sponsor of the SLV, demanding that I cease defaming their client on the shorting SLV issue. By coincidence, on the same day I received the letter, I got a call from a fellow subscriber and friend (who is a European money manager) and when I told him about the letter, he told me that it probably meant that BlackRock was taking this very seriously and would move to get the SLV short position reduced, despite the threatening tone of the letter to me. I told my friend that I thought (and hoped) that he was correct and we would see if we were correct in future short reports as they were released." "I can't help but feel that the most plausible explanation for the dramatic reduction in the SLV short position (especially on rising prices) is as my European friend predicted, namely, that BlackRock came to realize that the shorting of SLV was fraudulent and manipulative and they were working to eliminate it. Of course, I don't want to be overly optimistic...and if we witness future big increases in the short position of SLV, that would indicate [that] we were back to the old fraud and manipulation in the shorting of those shares. But let's take it one day at a time and reserve judgment on whether we go back to the bad old ways of short selling in SLV." Before heading into the stories I have for you today, here's the chart of the U.S. M3 money supply updated as of Friday's close. It's a pretty sick looking puppy...and if this continues for any length of time, we'll see the Fed begin QE3 pretty quick, as deflation is not on their play list. I thank Nick Laird for sending it to me.
(Click on image to enlarge) Being a typical Tuesday column, I have a lot of stories for you today. I hope you have time to skim them all. It was apparent, at least to me, that not-for-profit sellers were about in both the metals and their respective shares again yesterday. What's crazier than creationism and gold? It's in your wallet. Gold has humbled smart men before: David Cottle. Turk foresees 'buying panic' when gold hits $1,750. Happy Valentine's Day from the BoJ. ¤ Critical ReadsSubscribeThe [Mortgage] Deal Is Done, but Hold the Applause: Gretchen MorgensonThere's no doubt that the banks are happy with this deal. You would be, too, if your bill for lying to courts and end-running the law came to less than $2,000 per loan file. As for the supposed benefits to the economy, skeptics abound. One of them is Paul Diggle, property economist at Capital Economics in London. In a report last week, he rejected the notion — espoused by both banks and government authorities — that this deal would help turn around the American housing market. For most homeowners, it will barely move the needle. Forgiving $17 billion in principal "is a drop in the ocean," Mr. Diggle said, "given that close to 11 million borrowers are underwater on their loans to the tune of $700 billion in total." Doing the math, $17 billion in write-downs would be about 2.4 percent of the total negative equity weighing down borrowers across the nation now. This Gretchen Morgenson piece was in the Saturday edition of The New York Times...and it's one I borrowed out of yesterday's King Report. The link is here.  The Silent Victims of the U.S.-China Currency War: Jim RickardsThe Federal Reserve set about trying to cheapen the dollar through policies such as quantitative easing—the printing of money—and zero interest rates. The idea was to make the U.S. dollar unattractive to foreign investors and import inflation from abroad through higher import prices. The prospect of inflation would encourage Americans to borrow and spend, and ultimately get the U.S. economy growing. Inflation was being encouraged for the first time in 40 years because it was the key to reducing the real value of America's debt. This U.S. policy of devaluation and inflation would hurt not only foreign investors but also U.S. savers who held bank accounts, insurance policies, retirement plans, annuities, and other fixed-income investments. All savers and investors, both American and foreign, would be deprived of the value of their savings through U.S. dollar devaluation in order to benefit banks, hedge funds, speculators, and other leveraged investors. Yet the currency war with China is really a red herring. China may generate an enormous dollar volume of exports to the United States but it is far from the greatest source of value added. Indeed, it is the policy of the United States to devalue against all trading partners, not just China. I thanks reader Randall Reinwasser for sending me this story that was posted over at the usnews.com website yesterday...and the link is here.  Charting The Federal Reserve's Assets - 1915-2012The Fed has degenerated from a by and large passive institution (dealing only in high-quality self-liquidating commercial paper and gold) to an active pursuant of junk, an enabler of wars, a 'benevolent' combatant of the depressions of its own creation, a central planner of employment & prices and of course a forgiving friend to inconvenient market follies. This graphical presentation deserves a few minutes of your time. Washington state reader S.A. sent me this zerohedge.com piece on Sunday...and the link is here.  Judge Napolitano: How to get fired from Fox Business in under 5 minutesSlowly but surely, all the voices that speak the truth are disappearing from the main stream media...and Judge Napolitano is the latest in a list of high-profile and very outspoken TV personalities that have been shown the door. I suspect that the linked youtube.com video was his commentary from last Friday. I've been told that his last commentary on Fox News was yesterday. I thank Casey Research's own Doug Hornig for bringing this video clip to our attention...and the link is here.  |
| Charting The Federal Reserve's Assets - 1915-2012 Posted: 13 Feb 2012 09:14 PM PST  The Fed has degenerated from a by and large passive institution (dealing only in high-quality self-liquidating commercial paper and gold) to an active pursuant of junk, an enabler of wars, a 'benevolent' combatant of the depressions of its own creation, a central planner of employment & prices and of course a forgiving friend to inconvenient market follies. This graphical presentation deserves a few minutes of your time. Washington state reader S.A. sent me this zerohedge.com piece on Sunday...and the link is here. |
| Gold needn't fear rising rates: Alasdair Macleod Posted: 13 Feb 2012 09:14 PM PST  Economist and former banker Alasdair Macleod's new essay "Katastrophenhausse" anticipates from monetary debasement the "crack-up boom" the economist Ludwig von Mises warned against, and he adds that if interest rates finally are allowed to rise again, they "will only bankrupt insolvent governments and other borrowers, and the interest costs would end up being covered by the creation of yet more fiat money." Macleod concludes that "the important point for owners of gold and silver is that rising interest rates should drive prices higher, and not suppress them as commentators might expect." |
| Large move in the gold stocks imminent? - Adrian Douglas Posted: 13 Feb 2012 09:14 PM PST  The latest edition of the Market Force Analysis letter, published by GATA board member Adrian Douglas, finds very compelling the question: "Large Move in the Gold Stocks Imminent?" It's posted at GATA's Internet site...and the link is here. |
| Gold has humbled smart men before: David Cottle Posted: 13 Feb 2012 09:14 PM PST  It takes a brave man to suggest that Warren Buffett has missed a point. After all, unless you are Carlos Slim or Bill Gates, a comparison of his bank balance and yours will show that he caught quite a few that you and I saw only when it was far too late. However, as Mr. B rails against gold in an article for Fortune magazine -- it's tempting to think that he just might have it wrong when it comes to the oldest haven of all. He mounts all the attacks that exasperated non-gold-bugs often go for: The stuff has no inherent value, it underperforms stocks horribly over time, and has merely become a self-inflating bubble in its long climb to record highs. |
| The Silent Victims of the U.S.-China Currency War: Jim Rickards Posted: 13 Feb 2012 09:14 PM PST  The Federal Reserve set about trying to cheapen the dollar through policies such as quantitative easing—the printing of money—and zero interest rates. The idea was to make the U.S. dollar unattractive to foreign investors and import inflation from abroad through higher import prices. The prospect of inflation would encourage Americans to borrow and spend, and ultimately get the U.S. economy growing. Inflation was being encouraged for the first time in 40 years because it was the key to reducing the real value of America's debt. |
| Posted: 13 Feb 2012 08:31 PM PST While the market rally continues the uptrend is slowing according to the charts. Dow Jones Industrial Average: Closed at 12890.46 +6.51 on 103% of normal volume and flattening momentum. The price has broken through hard resistance at 12,500. Next upper resistance is 12,950 and 13,000. Support is12,850 and price is above all moving averages. There is stalling and pausing now on the Greece questions (no agreement details yet). Further, technically, the price double-topped and peaked matching a high near May 1, 2011. While the up-trend is slowing, it remains an up-trend and other signals are telling us the rally is not over yet. Will there be more buying on Friday and Monday? We think so. S&P 500 Index: Closed at 1351.95 +1.99 on normal volume and flattening momentum. New support and resistance is on 1350. This week the price has been moving steadily higher in small buying increments pushing up against the under side of the top channel trading range line. Technically, trading can stop and pause, or stop and sell back against 1350 before rising even higher. The close was on an up-bar signaling more buying, or at least no selling for Friday, 2-10-12. The price has been rising in a tightening bull flag but appears so steady we think there might be more trading-buying over the next two sessions. S&P 100 Index: Closed at 611.10 +0.72 with price above all moving averages like the other indexes. Momentum is flatter and volume was normal. Today's close was higher than the 2011 high on the first of May, 2011. With the S&P 100 Index moving steadily up, this means the funds are staying long to ride this rally and make some money. They were tentative in January but now it appears most want to stay in the markets and be long. Look for more buying on Friday and Monday with a pause and some selling next Tuesday. Nasdaq 100 Index: Closed at 2563.93 +18.21 on 105% of normal volume and openly rising momentum lines. The previous stock indexes had flat momentum. Our leading indicator, the Nasdaq Index not only has better momentum but closed on a higher, buying price bar. Earlier this week price opened with a large bull gap-up that remains to be filled just above 2500. Since the middle of December, the Nasdaq has jumped-up 350 points in an almost straight bullish pattern. It has to take a profit-taking rest soon and we think that is coming near February 17-20. For now, expect higher prices in this index, at least until through next Tuesday. 30-Year Bonds: Closed at 141.53 +0.32 on flat to declining momentum. The bonds want to sell but instead they have been pausing in trading chop on European indecisiveness. With the alleged Greek settlement today (no details yet) bonds will soften even more. The trading range has been 140.00 to 142.50. Now, look for bond traders to sell back to 140.00 support first, and then next week make moves to breakdown under 140.00 to 139.50. The chart has a bearish parabolic top signaling weakness and selling to come. The 200-day moving average is 136.64. It will take some time to go there; probably near the middle of March. XAU: Closed at 198.32 -0.63 on flattening and peaky momentum. The metal to shares ratio remains crawling on the bottom showing no signs of life, or going long. The close is stuck almost upon the 200-day average at 199.14. That price is now hard resistance as is the price of 200.00. The 50-day average is below at 194.94 and the 20-day is in the middle at 196.76. The XAU cannot move-up very much until the broader markets top out and correct first. Then with the physical metals going long and the broader markets back in a buying mode, the XAU will follow and rise. Expect flat to down trading until the third week of March. Gold: Closed at 1729.30 -4.30 on rising but peaking momentum. The price is stalled at 1750 after trying for the second time today to break-out and up and through 1755.50 on the April futures. Gold had a nice rally from the end of December near 1550 to the 1750 high adding +$200.00. Now it is pausing for a rest and may be a seller, dropping back to 1708 support near the 20-day average. Our next higher objective to the end of April would $1,923, the former August, 2011 high. With some extra power on an overshoot, gold might touch $2,000 to $2,050 by April 30, 2012. Silver: Closed at $33.88 -0.10 after touching $34.45 on the March futures. Price of 34.48 is hard upper resistance and is the last impediment before a rally to $36.48, and then $38.18. A 50% retracement would be near $37.48 to $38.18. Silver is very toppy right now just like gold. However this does not mean additional rallies are blocked. Rather, of late, silver has been faster than gold and once its past $34.48, it should break free and move-up smartly at a faster pace. Watch for a mild pullback followed by new buying advancing silver to $$35.18. All of the moving averages are clustered back at $32-$33 giving very strong support. US Dollar: Closed at 78.60 -0.01 after selling down from 81.50 near a peak to 78.50. The dollar had a longer rally from 75.00 in November to a mid-January peak at 81.50. The Euro and US dollar have been trading inversely. Since the Euro did not unravel, and went up, the dollar went down. The dollar is firming just above the 200-day moving average at 77.88. Today's support is 78.50. Resistance is 79.32 on the 50 and 20-day moving averages. Expect a news reaction when analysts read the Greece agreements. The dollar will rise if they don't like the contract and the Euro will fall. If applauded, we get the reverse. Crude Oil: Closed at 99.64 as oil remains in a trading range of 98.50 to 102.50. The price of $100 has been hard resistance. The 20-day average is 98.94 and the 50-day average is 98.35; both offer firm support. The 200-day average is back at 94.72, say $95 firm support, as well. Some time next week, or slightly thereafter, oil should breakout and rise toward $120 toour objective. We could yet touch $96 support again producing a double bottom before the next rally, which is normally the largest of the year from mid-February to the end of April. Expect a selling touch near $95-$96 followed by a new buying breakout over the next few days. CRB: Closed at 315.50 +0.73 surrounded by moving averages as the price went sideways into choppy trading. Price of 319.18 is resistance and 312.08 on the 50-day is support. Wait for selling over 5-10 more days followed by buying in a spring rally. The CRB follows oil and oil cannot rally for a few more days. When it does, then the CRB will follow. Expect to add 50 points, or more to the CRB by April 30. –Traderrog         This posting includes an audio/video/photo media file: Download Now |
Dear Extended Family,
Gold merchants in Dubai are seeking new ways to offer their gold products to tourists and buyers from India. More and more gold kiosks are being opened which – in contrast to large showrooms – can satisfy many potential customers in a short period of time. Because it takes fewer employees to run such a kiosk, this distribution model also helps sellers to reduce their costs. The typical range of products contains gold ornaments, gold jewellery and gold coins – all of which are very popular among walk-in customers.
Earlier today, 
U.S. consumers may be able to ignore continued warnings about economic and political instability by avoiding the news and burying their heads in the sand when water cooler conversations pop up, but what they will not be able to ignore is paying $40 more every time they pump gas into their minivans.
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