Gold World News Flash

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• Asian Metals Market Update
• GGR Charts Updated
• Sunday Charts
• Gold, Germany, and Geopolitics
• GoldSeek.com Radio: James Turk, Jorge Ganoza & Keith Neumeyer, and your host Chris Waltzek
• Sure, there's probably still gold in central bank vaults, but how many claims to it?
• The Free Market’s Slow Death
• Is Santa Coming Early for Gold and Gold Mining Stocks?
• BE PREPARED
• Profiting from Silver Mining in the Age of Resource Nationalism: Sean Rakhimov
• WHERE'S MY GOLD????
• Here Is Why Gold & Silver Are Set To Explode Going Forward
• On The Fullness And Boldness Of QE's Manipulation Of American's Behavior
• Silver Downtrend Targets Support at $28.50
• Memo to Central Banks: You’re debasing more than our currency
• Don’t Fear a Normal Gold Correction
• Gold Market Update
• Silver Market Update
• Bundesbank yields some confidentiality but still won't answer critical questions
• Try not to be too worried by the volatility of silver it’s the price of outperformance
• Video: What Could Happen in the First 12 Hours of a US Dollar Collapse
• Rising Deflation Concerns Could Cause Gold to Plummet Dramatically ? Here?s Why
• Gold, Germany & Geopolitics
• The Fear Factor

Asian Metals Market Update Posted: 29 Oct 2012 12:02 AM PDT We have the US October non farm payrolls this week. Traders will prefer not to go short before this number which can result in gains for gold and silver this week. Technically gold and silver are in a neutral zone to bearish zone. A positive spate of good economics from the USA and the UK should prevent a further slide in base metals and energies. Intra day volatility will rise over the next two weeks.

GGR Charts Updated Posted: 28 Oct 2012 10:49 PM PDT HOUSTON – Vultures (Got Gold Report Subscribers) please note that the GGR charts have been updated as of late Sunday night, October 28, following our return to HQ from the New Orleans Investment Conference.  Kindly log in and navigate to the GGR Charts section to view the updates.  On another note, we have added new commentary in the Welcome section as well regarding several of our targeted small junior miners and explorers – having spent quality time with management at the conference.     As much as we enjoy the New Orleans confab each year, it is always good to be back at the ranch in Texas.    More... Several of our "livestock" probably wondered if the human with the feed had forgotten about them. Perhaps a double ration is in order this one time...

Sunday Charts Posted: 28 Oct 2012 10:14 PM PDT from TF Metals Report: Just a few things before we begin a stormy week. First of all, this week's CoT was really, really interesting…at least in silver. Where gold is acting "normal", whereby the spec longs are selling and the Cartel shorts are covering, silver is an entirely different animal. If you missed my comments on Friday, here's a reprint: GOLD With price down nearly $40 on the reporting week, the CoT was predictable. The large and small specs dumped 11,ooo gross longs and The Cartel covered 11,000 gross shorts. The Cartel also added some longs so the net short position declined by almost 15,000. The Cartel net short ratio is now 2.75:1. For perspective, three weeks ago on 10/2, the net short ratio was 2.98:1. SILVER Here's where it gets really interesting. For the week, price declined well over $1 and the total OI fell by just 762 contracts. JPM et al covered 2000 naked shorts and also sold 400 longs. But check this out. The common theme in predicting another "collapse" in silver (and gold, too) was that the specs had overbought and were going to be chased out by an attacking Cartel. New spec short money would speed the collapse and allow the Cartel to cover. Even I subscribed to this a bit as I figured that the spec position was turning over as longs were sold and shorts were added. The data, though, doesn't bear this out! Read More @ TF Metals Report.com

Gold, Germany, and Geopolitics Posted: 28 Oct 2012 10:00 PM PDT by Dr. Joseph P. Farrell, Giza Death Star: So many of you are following this story, and, like me, are probably thinking "this is huge". Well, first, why is it huge? The answer is geopolitically very simple: it's huge because you can't have a nice, tidy, global New World Order being run out of London and New York without having a nice, orderly, tidy, European Union, and you can't have a nice, tidy,Gesetz und OrdnungEuropean Union without Germany (after all, what economy is left in Europe to bail out all the rest? Great Britain doesn't particularly like what it sees in the EU [and can you blame the Britons?] so that leaves the Germans, but they don't particularly like what the see either…). Now I've been maintaining all along that the Euro-crisis – by which I mean both the crypto-Fascist political monster in Brussels, and the currency by that name – is really in part designed to lock Germany into Europe by entangling it with everyone else's debt… a kind of nifty plan, except for one little thing: human beings, Germans no less than anyone else, do not like being told they're going to have to pay for some other human beings' profligacy, particularly when the first group (the Germans) does more trade with people in mystical far away places like China and Russia than it does with anyone in Europe. Read More @ gizadeathstar.com

GoldSeek.com Radio: James Turk, Jorge Ganoza & Keith Neumeyer, and your host Chris Waltzek Posted: 28 Oct 2012 10:00 PM PDT Show Highlights: Guest Interviews. Headline news & the Market Weatherman Report. Host answers phone calls and email questions. Guests: Jorge A. Ganoza, President, CEO and Director Keith Neumeyer, President & CEO: First Majestic Silver Corp. James Turk, GoldMoney.com

Sure, there's probably still gold in central bank vaults, but how many claims to it? Posted: 28 Oct 2012 09:00 PM PDT by Chris Powell, GATA: Dear Friend of GATA and Gold: In his otherwise spectacularly obtuse commentary the other day about the clamor to audit Germany's gold reserve — http://www.gata.org/node/11868 – CNBC Senior Editor John Carney stumbled onto a point often made by GATA about the unreliability of central bank claims about gold vaulting. In reference to the foreign gold vaulted at the Federal Reserve Bank of New York, Carney wrote: "The compartments do not have labels reading 'Germany's gold' and so on. They are instead numbered, and only a few people at the Fed know what numbers correspond to which country. The Fed says it does this to protect the privacy of the depositors. But this also makes actual inspection less reliable. There's no way for Germany to know that the gold it is being shown is Germany's, as opposed to some other depositor's. In an extreme case — which I have no reason to believe is true — miscreants at the Fed could just show everyone who came to visit the same pile of gold." Read More @ GATA.org

The Free Market’s Slow Death Posted: 28 Oct 2012 08:00 PM PDT from Gold Money: Much has been made in the press of the manipulation of LIBOR, without much explanation of the consequences for prices of all things that depend on supply and demand for bank credit. Outrage focuses on the activities of avaricious bankers, which is why the connection never gets made between relatively minor manipulations of credit pricing by banks and far larger manipulations by central banks. It is the latter that should really concern us. Central banks persistently intervene in markets to keep interest rates below where they would otherwise be. This leads to artificially high prices for all assets, since they are bolstered by cheapened credit. The idea that we have a capitalist economy, where assets are priced on the basis of their productive value is untrue. Read More @ GoldMoney.com

Is Santa Coming Early for Gold and Gold Mining Stocks? Posted: 28 Oct 2012 07:35 PM PDT If you own physical gold, gold mining stocks or plan on buying anything related to precious metals before year end, you are likely going to get excited because of what my analysis and outlook shows. Read More...

BE PREPARED Posted: 28 Oct 2012 07:30 PM PDT Good article, but if you haven't followed this advice by now, it's too late. Emergency preparedness checklist for perfect storm Hurricane Sandy – Here's what you need to get NOW Mike Adams Natural News [1] Oct 28, 2012 Called a "monster storm," Hurricane Sandy is much more than a hurricane. It's a hybrid monster storm system that weather experts are now warning could cause $1 billion in damage when it strikes the U.S. eastern seaboard early Tuesday morning. If you're living anywhere near Philadelphia, Boston, Delaware or surrounding states, you have a very limited window of opportunity to get ready with everything you'll need to ride out this storm. That's the purpose of this article: To give you an emergency preparedness checklist for surviving this "monster storm." Even if you don't leave nearby, this storm can serve as an important reminder: We must ALL be prepared for unexpected events, or we can easily be caught empty-handed. A long-lasting event: 2-3 days of being hammered by Mother Nature Hurricane Sandy is not some simple hurricane that blows through in one night and then is over. "It's going to be a long-lasting event, two to three days of impact for a lot of people," said James Franklin [2] of the National Hurricane Center in Miami. "Wind damage, widespread power outages, heavy rainfall, inland flooding and somebody is going to get a significant surge event." Given that it usually takes another 2-3 days for cleaning up city streets after a massive snowfall event, this means the following: !! You need to have a 6-day food and water supply ready right now! !! That's 3 days for the storm and 3 days for cleanup. And that's if nothing else goes terribly wrong. In a worst case scenario, this could extend to 7 – 10 days in some of the harder-hit areas. Local grocery stores are already sold out of essential items Anthony Gucciardi of NaturalSociety.com [3] lives in the area expected to be hit by this super storm. Here's his firsthand report from earlier today: Major grocery stores in the area have completely sold out of essential items like batteries, bottled water, and even highly processed snack foods that do not require preparation or refrigeration. I personally went to purchase a few minor items for my preparedness [4] kit from a local grocery outlet that is quite large and witnessed completely empty shelves within the aisle that generally contains large amounts of water bottles along with gallon jugs, and various glass sparkling water [5] bottles. The aisle that houses the batteries (particularly the heavy duty kind used for most flashlights) was also almost entirely dry. When shopping I also saw several individuals with the government-approved 'survival'checklist [6], striking off the items one by one as they acquired them. Last year's hurricane Irene prompted somewhat of a response from locals within the Philadelphia and New York City area in regards to preparation and concern, but this hurricane has generated one that is far more severe. It is conservative to say that by the end of this weekend going into the storm (assuming it does hit as predicted), most if not all local stores will be out of most essential and even non-essential items. And this is just a few days after the news of the storm hit the mainstream media. See my complete preparedness checklist, below… Staying warm Another huge concern with all this is the possibility that the power may be out. As temperatures drop, this could put many people in the position of having to endure very cold indoor temperatures. This lacking of heating could endure for many days, even as long as two weeks in some areas. The best defense against the cold is, of course, to have good shelter (a roof over your head), warm clothing and extra sleeping bags for all family members. Do NOT plan on using propane heaters indoors as these are a health hazard and a fire hazard when used indoors. Same story with candles. Water: Do you have enough? Imagine a week without tap water. Now you're starting to get the picture of what may be coming. If this storm hits as promised, you're going to be living in third-world conditions for about a week. Most Americans have never lived in a third-world country like I have, so they've never really tried to live without running water, electricity, grocery stores, and so on. (It's no fun, believe me. Nothing like a cold sponge shower to wake you up in the morning, eh?) You'll need a MINIMUM of 2 gallons per day, per person, stored in your home or apartment. So if there are two of you living there, and you're planning for six days without running water, you will need 24 gallons of water stored, got it? How can you store [7] that much water? • Fill your bathtub(s) with water. • Fill empty containers with water and set them aside: Milk jugs, soda bottles, jars, buckets, coolers, etc. • Buy water storage bags and fill them Make sure you have a home water filter that doesn't need water pressure to operate: A gravity filter or hand-pumped filter is best. I like the Katadyn brand for portable water filters. Is your immune system ready? If you think about the stresses put on you by a disaster scenario, many of them impact your health: • Sleep deprivation • Adrenal gland depletion • Stress-induced nutrient depletion • Stress from cold temperatures • Possible spread of infectious disease • Anxiety All of these can be prevented, in part, with immune-boosting nutrition. So this is a time when you really want to boost your intake of superfoods, immune-boosting herbs and nutritional supplements. You want to make sure your body is ready for the stresses and uncertainties it will soon be experiencing. Remember: Good nutrition will also help you think better, because food affects your brain function. The cleaner your diet, the clearer your thoughts, and the better decisions you'll make in a crisis. Staying physically safe Do you have a fire extinguisher? Fire trucks won't be able to get to your house during a storm, and indoor fires can rage out of control for hours or days before help arrives. So make sure you have at least one fully-charged fire extinguisher at the ready. What about physical safety? Do you have a way to defend yourself and your family in case looters start going door to door, demanding money, jewelry and anything else they want? Remember, if the power grid goes down, all the street lights will be off, too, plunging your city and neighborhood into darkness. Criminals love darkness. In their minds, that's time to "loot and pillage." Massachusetts is very much an anti-gun state, meaning only the citizens are disarmed, but not the criminals. When the police are too busy responding to other emergencies, the green light is on for armed criminals to go door to door, robbing (disarmed) citizens at gunpoint. This doesn't fly in Texas, where the average looter is met with a 12 gauge shotgun shoved in his face, but in Boston, it's a free-for-all for the criminals. Even if you don't own a gun (or can't legally own one), you can still have bear pepper spray — a large-sized canister of pressurized pepper spray which will strongly dissuade bad guys from hanging around and bothering you. (Check your local laws, please.) Forget about calling 911. Virtually all emergency [8] services will be tied up dealing with other emergencies. Just because YOU have an emergency doesn't mean it's THEIR emergency. By law, fire, police and ambulance services are under no legal obligation whatsoever to respond to your call. Think about that as you plan for preparedness. For me personally, I don't call 911 and wait to die. Instead, I call on Mr. Benelli. If you don't know what "Mr. Benelli" means, here's a picture that explains why Mr. Benelli instantly stops all looters: http://www.benelliusa.com/shotguns/benelli-m4.php [9] Hurricane Sandy "monster storm" survival checklist by Mike Adams, the Health Ranger I've taught preparedness to tens of thousands of people, so I know this subject very well. Here's my preparedness checklist, and then below it, I link to some of my preparedness courses and solutions if you're interested in those: • Minimum 6 days of stored food. • A way to safely boil water so you can prepare food. • Non-electric can openers. • Minimum 6 days of stored water. • Portable water filter. • Full fuel tanks in all your vehicles. • Gasoline and cords for your generator (if you have one). • Sleeping bags for all family members. • Flashlights and batteries. • Minimum 6-day supply of any prescription meds. • Colloidal silver and other emergency medicine items. • Cell phones full charged, with spare batteries. • Minimum one large fully-charged fire extinguisher. • Plenty of clean laundry with warm socks, undies and heavy clothing. • Backup power source: large 12V marine (deep cycle) battery with an inverter to charge cell phones and laptops. • Sponges for cleaning things when there's no power. • Cleaning agents: Hand soap, dish soap and bleach. • Immune boosting herbal tinctures and supplements. • Topical first aid supplies: Antiseptics, bandages, etc. • Personal hygiene items, including toilet paper. • Emergency multi-purpose knife. • Activities to pass the time when there's no TV: books, cards, games, etc. • Copies of your important paperwork and identification documents. • Two-way radios for you and your family members to communicate. • Wind-up weather radio so you can tune in to government broadcasts. • CB broadcasting radio so you can call for help if the cell towers are down. • Nuclear preparedness: Do you have potassium iodide pills? • Hiding stuff: Do you have good hiding places in your home in case criminals break in and overpower you? • Pet preparedness: Do you have enough food and water for your animals? • Go bag: Do you have a "bug out bag" ready in case you have to evacuate? • Hiking gear: What happens if you have to leave on foot? – Cold weather hiking shoes – Rugged backpack – A good hat to protect you from the elements – Local map and compass – Water carrying containers (and a way to carry them) – Portable food – Weather-proof writing notepad – Flashlights – Identification – Portable self defense items • Security plans for your neighborhood or building: How will you defend against looters? • Physical barriers to block doors and windows: Are your windows locked? • Tripwire alert devices and motion alert devices (see course, below). • Self defense items to defend against possible looters: – If firearms, double check your ammo, firearm lubrication and sights. – Have a challenge / response code word with your family members so that you can identify each other in the dark. For example, if you say "Flash" they should say "Thunder" in response. – Drill all safety procedures in the home. Children should know in advance where a "safe hiding place" is located. – Emergency whistles for all children or senior citizens so they can call for help. Does this sound like a long preparedness list? It's nothing, actually, compared to what many preppers, patriots and survivalists have already accomplished. I'm not afraid to say publicly that my own personal preparedness plans have gone far beyond the list you see above. If a three-day hurricane struck my home right now, I would be completely prepared without even making a trip to the store for supplies. Emergency readiness products Here are the best products we've put together so far for emergency preparedness: IMPORTANT NOTE: Most delivery services are shut down Monday and Tuesday across the eastern seaboard, so if you are trying to order these products to have them delivered before Tuesday, that won't work. UPS, Fedex, and the U.S. Postal Service will all be shut down during the storm. • Sovereign Silver first aid gel [10] • Sovereign Silver liquid hydrosol [11] • 100% organic 40-day survival food supply [12] • Enerhealth Herbal Medicine Cabinets: Basic [13] | Intermediate [14] | Advanced [15] • Nascent Atomic Iodine [16] • Zeotrex (zeolites) [17] • Emergency ruggedized flashlights [18] and other supplies Coming soon at the Natural News Store [19]: Storable certified organic food (including chia seeds), chlorella, potassium iodide pills, water filters and more. Preparedness and survival courses By now, most Natural News readers are fully aware that I'm well versed in the realm of preparedness. In addition to having in-depth knowledge of herbal medicine and nutritional defenses, I have also been licensed to carry concealed handguns by four different U.S. states, and I've been fingerprinted, vetted and approved by the FBI and federal law enforcement agencies. I have trained with U.S. military personnel on hand-to-hand combat, I've trained on vehicle evasion and pursuit tactics with local law enforcement, and I have helped teach physical self defense to children, women and senior citizens. If you want to get a download of my best knowledge on food preparedness, self defense preparedness and emergency survival, here are the three most popular courses I've ever produced, and ALL of these are available for instant streaming from Natural News: Health Ranger LIVE: How to Protect and Defend Yourself [20] Be Prepared, Not Scared – Food Security [21] Surthrival with Daniel Vitalis and Mike Adams [22] Stay safe, folks. Get prepared NOW, even if you're not in the path of this approaching storm.

Profiting from Silver Mining in the Age of Resource Nationalism: Sean Rakhimov Posted: 28 Oct 2012 07:30 PM PDT by Brian Sylvester, The Gold Report: The Gold Report: You have written that the pace of global resource nationalism is gaining momentum, affecting the supplies and prices of many commodities. You believe resource nationalism in all of its current forms is likely to affect silver more than other metals, particularly investable silver. Would you explain why? Sean Rakhimov: The effect of resource nationalism on the physical supply market has not been significant yet, but I do think it's going to affect future supply. Large-scale projects like the Navidad in Argentina owned by Pan American Silver Corp. (PAA:TSX; PAAS:NASDAQ), the Corani and Santa Ana projects in Peru owned by Bear Creek Mining Corp. (BCM:TSX.V) and most recently the Malku Khota project in Bolivia owned by South American Silver Corp. (SAC:TSX; SOHAF:OTCBB) are already affected. Read More @ Theaureport.com

WHERE'S MY GOLD???? Posted: 28 Oct 2012 04:32 PM PDT Governments and the ruling elite are starting to turn on each other. They have taken their debt created fantasy world to its limits. The pressure is getting to them. They are bickering. The Germans are starting to assert their independence. Once one domino falls, the rest will follow, and then all hell will break loose. The gold isn't in the Federal Reserve vaults. Bundesbank slashed London gold holdings in mystery move Germany withdrew two thirds of its vast holdings of gold from Bank of England vaults shortly after the launch of the euro more than a decade ago, according to a confidential report by German auditors. Germany has 3,396 tons of gold worth €143bn (£116bn), the world's second-largest holding after the US. Nearly all of it was shifted to vaults abroad during the Cold War in case of a Soviet attack. Photo: ALAMY By Ambrose Evans-Pritchard, International business editor 8:24PM BST 24 Oct 2012 The revelation came as Germany's budget watchdog demanded an on-site probe of the country's remaining gold reserves in London, Paris, and New York to verify whether the metal really exists. The country has 3,396 tons of gold worth €143bn (£116bn), the world's second-largest holding after the US. Nearly all of it was shifted to vaults abroad during the Cold War in case of a Soviet attack. Roughly 66pc is held at the New York Federal Reserve, 21pc at the Bank of England, and 8pc at the Bank of France. The German Court of Auditors told legislators in a redacted report that the gold had "never been verified physically" and ordered the Bundesbank to secure access to the storage sites. It called for repatriation of 150 tons over the next three years to test the quality and weight of the gold bars. It said Frankfurt has no register of numbered gold bars. The report also claimed that the Bundesbank had slashed its holdings in London from 1,440 tons to 500 tons in 2000 and 2001, allegedly because storage costs were too high. The metal was flown to Frankfurt by air freight. The revelation has baffled gold veterans. The shift came as the euro was at its weakest, slumping to $0.84 against the dollar. But it also came as the Bank of England was selling off most of Britain's gold reserves – at market lows – on orders from Gordon Brown. Peter Hambro, chair of the UK-listed gold miner Petropavlovsk, said the Bundesbank may have withdrawn its bullion in self-protection since it did not, apparently, have its own specifically allocated bars in London. "They may have decided that the Bank of England had lent out too much gold, and decided it was safer to bring theirs home. This is about the identification. Can you identify your own allocated gold, or are you just a general creditor with a metal account?" The watchdog report follows claims by the German civic campaign group "Bring Back our Gold" and its US allies in the Gold Anti-Trust Committee that official data cannot be trusted. They allege central banks have loaned out or "sold short" much of their gold. The refrain has been picked up by German legislators. "All the gold must come home: it is precisely in this crisis that we need certainty over our gold reserves," said Heinz-Peter Haustein from the Free Democrats (FDP). The Bundesbank said it had full trust in the "integrity and independence" of its custodians, and is given detailed accounts each year. Yet it hinted at further steps to secure its reserves. "This could also involve relocating part of the holdings," it said.

Here Is Why Gold & Silver Are Set To Explode Going Forward Posted: 28 Oct 2012 02:34 PM PDT Today 40 year veteran, Robert Fitzwilson, wrote the following piece exclusively for King World News.  Fitzwilson, who is founder of The Portola Group, discusses every investors dream. This posting includes an audio/video/photo media file: Download Now

On The Fullness And Boldness Of QE's Manipulation Of American's Behavior Posted: 28 Oct 2012 01:54 PM PDT With equity markets having reverted to pre-Draghi and pre-Bernanke levels, retail mortgage rates and MBS spreads now above pre-QEtc. levels, and the fundamental reality of the world's credit-driven growth peeking through into the new normal 'muddle-through'; it seems increasingly evident that central banks' actions (or the anticipation of such) are all that keeps advanced economies from crumbling back onto their non-vendor-financed rational valuations. The question is - who are the central banks really trying to help? Baupost's Seth Klarman provides the most clarifying and thought-provoking assessment of both the Fed's actions (quantitative easings specifically) and the moral hazard implicit in their deeds (as well as words).   Via Seth Klarman of Baupost's Q3 Letter: Our Thoughts on QE3   On September 13 the Federal Reserve initiated QE3, a variation of the first two quantitative easings, involving the government buying back $40 billion per month of mortgage securities while maintaining the Fed's near-zero interest rate policy through mid-2015, nearly a full seven years after the financial market collapse of 2008. The goal of QE3 is to drive interest rates on 30-year mortgages lower (they reached an all-time record low of 3.36% in early October) while concurrently lifting housing prices (and inevitably the stock market), triggering a theoretical wealth effect that would potentially bolster consumer spending.   While QEs 1 and 2 had no lasting impact, they did give a short-term boost to the stock market But because that effect was ephemeral, it's hard to comprehend why anyone would believe that QE3 will turn out better. QE3 is bold in its apparently unlimited duration, which may be intended more to demonstrate the Fed's determination rather than any actual conviction that it will work. Perhaps the oddest part of the ongoing QE scheme is that everyone can see in its fullness and boldness the attempted manipulation of Americans' behavior. (If people know they are being manipulated, do they behave exactly the same as if they don't know?)   While anyone would be glad to have a cheaper mortgage as a result of QE3, would they really believe this would make their home worth more? It's more of a credit holiday, whereby the government offers you better terms than previously available. In addition to making explicit the implicit U.S. government guarantee of more and more of the U.S. residential mortgage market, the rousing stock market approval of this measure is seen as a free lunch. But of course it is not free. For one thing, buying mortgage securities with newly printed money has the same inflationary risk that QEs 1 and 2 posed. This probably explains why gold rose strongly in response to this announcement.   Also, artificially low interest rates have a cost to the government. As we know from the recent U.S. housing price collapse, mortgage lenders can indeed lose money. The guarantor of the U.S. housing market has a huge contingent liability. Moreover, the U. S. housing market was clearly overbuilt (by five million homes, according to some estimates) as of 2007, yet cheap financing may attract temporary incremental demand which home-builders might interpret to be permanent and thus overbuild all over again. This highlights the deleterious second and third order effects of well-intended but ill-conceived government programs.   It is clear that someday the Fed will decide that the economy has strengthened sufficiently to end and then potentially reverse QE and zero-rate policies. Any possible sale of trillions of dollars of securities owned by the Fed, at such time would most likely be at a substantial loss given that interest rates would likely have risen and bond prices have fallen. Also, when people with a 30 year, 3.5% mortgage seek to move at a time when new mortgages now cost 5% to 6% or more, buyers will pause, reducing demand and driving house prices lower. QE3 may deliver a dose of helium to housing prices, but eventually helium leaks out of balloons, and gravity pulls them to earth. What kind of policy is this: untested; inflationary; eroding free market signals; diverting more of the country's resources toward housing at the expense of priorities such as infrastructure, technology, or science and medical research; and inevitably only a temporary fix with no enduring benefit?   Finally, we must question the morality of Fed programs that trick people (as if they were Pavlov's dogs) into behaviors that are adverse to their own long-term best interest. What kind of government entity cajoles savers to spend, when years of under-saving and overspending have left the consumer in terrible shape? What kind of entity tricks its citizens into paying higher and higher prices to buy stocks? What kind of entity drives the return on retirees' savings to zero for seven years (2008-2015 and counting) in order to rescue poorly managed banks? Not the kind that should play this large a role in the economy.   Moral Hazard and Financial Risk   Recently, a financial columnist wrote: "Four years after the fall of Lehman Brothers, and with-a presidential campaign in full swing, everyone can surely agree on one thing: we shouldn't risk another financial crisis." While I'm sure he is well-intentioned in this sentiment, this highlights a flawed notion held by too many of our country's commentators and regulators. What does it even mean to risk or not risk a financial crisis? You don't intentionally risk financial crises; they just happen. In fact, there is no way to not "risk them". And they don't usually provide fair warning. Financial crises are awful: they affect the lives of individuals and families; they can damage the economy, weakening it to the point of tearing the social fabric they often take years to overcome. It would be great if we could outlaw them, but unfortunately we cannot. Ironically, attempts to limit short-term pain, such as those in the four years did counting since the collapse of 2008, almost certainly make a future crisis much more, not less, likely.   The seeds for financial crises typically grow undetected from a variety of excessive behaviors and assumptions, to where they become almost inevitable. Financial crises are rooted in over leverage and excessive levels of valuation. If society wants to prevent crisis, it must take measures well in advance, before the storm clouds gather, before excesses build in the system and before unbridled optimism dominates investor and business thinking. Efforts to constrain incipient crises in order to avoid feeling their full wrath, such as propping up bankrupt institutions and bankrupt countries, merely result in stagnation and a protracted period of subdued economic activity. Proper regulation might make some difference, if it had the effect of limiting leverage and containing speculative bubbles; but so much of regulation is naïve, ill-considered, and poorly enforced, thereby rendering it ineffective.   Anyone who believes that government control and intervention will prevent problems of all sorts is living in a fantasy world where what we wish will happen always does. Go back to 2007 where the world was seemingly in a perpetual period of prosperity with low volatility while stock markets were hitting record highs. Few sniffed the possibility of any crisis on the horizon. Virtually no one imagined the magnitude of the crisis that erupted only one year later. Financial crises, sadly, will be with us forever. The idea that we can avoid one at our will only suggests both a dangerous naivete regarding how the world works and also the likelihood that when a crisis does arise, years of built up excesses will ensure that it will be far worse than it would otherwise have been.   An environment where financial crises are seen to be a regular part of the landscape is one where people might actually take more precautions. People would maintain a margin of safety in all their decisions. investment and otherwise, regulations would be well thought out and diligently enforced, and the unscrupulous and the incompetent would quickly fail and disappear from the scene. Modern day attempts to abolish failure only serve to ensure it, as moral hazard-- the likelihood that people's behavior changes in response to artificial supports or guarantees-- surges. Attempts to prevent or wish away future crises only make them more likely. Only by allowing, even welcoming, episodic failure do we have a chance of reducing the likelihood and magnitude' of future financial crises.   We wrote on Friday of the frailty of central bank independence and merging of fiscal and monetray policy: Globally, central banks are edging down monetary policy paths that can be viewed as increasingly backstopping budget deficits as lawmakers of respective governments continue to fail to make progress toward fiscal consolidation. A progression down this road could lead to many unsavoury outcomes, as fiscal and monetary policies entwine themselves in an increasingly negative dynamic. It seems Mr. Klarman agrees... and perhaps our recent discussion of "The Dark Age Of Money" clarifies exactly what is at stake.

Silver Downtrend Targets Support at $28.50 Posted: 28 Oct 2012 12:08 PM PDT The intermediate top in silver was called several weeks back in the last update. We had expected it to plunge, but instead into went into a more orderly steady decline, its measured rate of decline thus far being due to the fact that the dollar has not entered into a new uptrend – yet.

Memo to Central Banks: You’re debasing more than our currency Posted: 28 Oct 2012 11:53 AM PDT John Mauldin shares a brief from Dylan Grice, which looks at how debasing the currency has far more implications that mere inflation. Note the timely quote of John Maynard Keynes which Americans ought to see as a klaxon sounding a dire warning. I can only pass on Societe Generale's work to you once in a while, but the piece for today's Outside the Box is important enough that its author, Dylan Grice, worked hard to convince his bosses to let me share it with you. Dylan is one of my favorite investments analysts, as well as just an all-around nice guy. In a change from his usual fun-loving demeanor, Dylan issues a serious warning here. I am more worried than I have ever been about the clouds gathering today (which may be the most wonderful contrary indicator you could hope for...). I hope they pass without breaking, but I fear the defining feature of coming decades will be a Great Disorder of the sort which has defined past epochs and scarred whole generations…. So I keep wondering to myself, do our money-printing central banks and their cheerleaders understand the full consequences of the monetary debasement they continue to engineer? He runs through some of the Great Debasements of the past, starting with third-century Rome, running through Europe's medieval inflations and the French Revolution, to the monetary horror story of Weimar Germany in the 1920s. His key point is that inflations and hyperinflations don't just hurt money, they hurt people and the societies they live in. Inflating money is less trustworthy money, and so people doing business trust each other less. Plus, those who are farthest from the source of artificially created money suffer the most (the "Cantillon effect"). And now the social debasement is clear for all to see. The 99% blame the 1%, the 1% blame the 47%, the private sector blames the public sector, the public sector returns the sentiment … the young blame the old, everyone blame the rich … yet few question the ideas behind government or central banks ... I'd feel a whole lot better if central banks stopped playing games with money…. All I see is more of the same – more money debasement, more unintended consequences and more social disorder. Since I worry that it will be Great Disorder, I remain very bullish on safe havens. In just 10 days we will see how the US elections turn out. Depending on what happens after, the US will either remain as one of those safe havens (and perhaps become even more of one) or those of us who reside here will need to start thinking more globally. I know a lot of thoughtful people who are already contemplating (if not acting on) plans to make sure their life savings maintain their buying power through the coming decade. I remain optimistic that we will set ourselves on a course that ends in a safe harbor, although the sailing will be quite volatile. What Dylan describes are the unintended consequences of people who think they understand macroeconomics and who are well-intentioned but whose policies can be most disruptive. Sunday night I head for South America. I always enjoy traveling there, and I am interested to see what I can learn, both about how Brazil, Uruguay, and Argentina are doing and what they are thinking when they look north. I really do find that I learn much more than I impart on these trips. Election night will find me in a bar drinking non-alcoholic beer in Cafayete in the far north of Argentina, where the California polls won't close till almost midnight. It might be a long night. Maybe I can set up a twitter account from there. Might be fun. There will be lots of friends on hand to share the times and commentary. I will be back in Texas that Sunday to write my letter, and I'll be thinking about how the results will impact all of us everywhere. Have a great weekend. And I am off to cast my absentee ballot! You make sure to vote too! Your wishing I was in Illinois so I could vote several times analyst, John Mauldin, Editor Outside the Box JohnMauldin@2000wave.com Popular Delusions Memo to Central Banks: You're debasing more than our currency By Dylan Grice, Societe Generale At its most fundamental level, economic activity is no more than an exchange between strangers. It depends, therefore, on a degree of trust between strangers. Since money is the agent of exchange, it is the agent of trust. Debasing money therefore debases trust. History is replete with Great Disorders in which social cohesion has been undermined by currency debasements. The multi-decade credit inflation can now be seen to have had similarly corrosive effects. Yet central banks continue down the same route. The writing is on the wall. Further debasement of money will cause further debasement of society. I fear a Great Disorder. I am more worried than I have ever been about the clouds gathering today (which may be the most wonderful contrary indicator you could hope for...). I hope they pass without breaking, but I fear the defining feature of coming decades will be a Great Disorder of the sort which has defined past epochs and scarred whole generations. "Next to language, money is the most important medium through which modern societies communicate" writes Bernd Widdig in his masterful analysis of Germany's inflation crisis "Culture and Inflation in Weimar Germany." His may be an abstract observation, but it has the commendable merit of being true … all economic activity requires the cooperation of strangers and therefore, a degree of trust between cooperating strangers. Since money is the agent of such mutual trust, debasing money implies debasing the trust upon which social cohesion rests. So I keep wondering to myself, do our money-printing central banks and their cheerleaders understand the full consequences of the monetary debasement they continue to engineer? Inflation of the CPI might be a consequence both seen and measurable. A broad inflation of asset prices might be a consequence seen, though not measurable. But what about the consequences that are unseen but unmeasurable – and are all the more destructive for it? I feel queasy about the enthusiasm with which our wise economists play games with something about which we have such a poor understanding.   If you take a look around you, any artefact you see will only be there thanks to the cooperative behaviour of lots of people you don't know. You will probably never know them, nor they you. The screen you watch on your terminal, the content you read, the orders which make the prices flicker … the coffee you drink, the cup you hold, the bin you throw it in afterwards  … all your clothes, all your accessories, all the buildings you've been in, all the cars … you get the idea. Without exception everything you own, everything you want to own, everything you need, and everything you think you need embodies the different skills and talents of a mind-boggling number of complete strangers. In a very real sense we constantly trust in strangers to a degree, as strangers trust us. Such cooperative activity is to everyone's great benefit and I find it is a marvellous thing to behold. The value strangers put on each other's contributions manifests itself in prices, and prices require money. So it is through money that we express the extent of our appreciation for the many different talents embedded in each thing we consume, and through money that our skills are in turn valued by others. Money, in other words, is the agent of this anonymous exchange, and therefore money is also the agent of the hidden trust on which it depends. Thus, as Bernd Widdig reflects in his book (which I urge you all to read), money … "… is more than simply a tool for economic exchange; its different qualities shape the way modern people think, how they make sense of their reality, how they communicate, and ultimately how they find their place and identity in a modern environment." Debasing money might be expected to have effects beyond the merely financial domain. Of course, there are many ways to debase money. Coin can be clipped, paper money can be printed, credit can be created on the basis of demand deposits which aren't there ... the effects are ultimately the same though: the implied trust that money communicates through society is eroded. To see how, consider the example of money printing by authorities. We know that such an exercise raises revenues since the authorities now have a very real increase in purchasing power. But we also know that revenue cannot be raised by one party without another party paying. So who pays? If the authorities raise taxes explicitly and openly, voters know exactly why they have less spending power. They also know how much less spending power they have. But if the authorities instead raise money by simply printing it, they raise the revenue by stealth. No one knows upon whom the burden falls. People notice only that they can't afford the things they used to be able to afford, or they can't afford the things which everyone else can afford. They know that something is wrong, but they just don't know what, why, or who is to blame. So inevitably they look for someone to blame. The dynamic is similar to that found in the well-worn plot line in which a group of strangers are initially brought together in happier circumstances, such as a cruise, a long train journey or a weekend away. In the beginning, spirits are high. The strangers exchange jokes and get to know one another as the journey begins. Then some crime is committed. They know it must be one of them, but they don't know who. A great suspicion ensues. All trust between them is broken down and the infighting begins.... So it is with monetary debasement, as Keynes understood deeply (so deeply, in fact, that it's ironic so many of today's crude Keynesians support QE so enthusiastically). In 1921 he said: "By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some …. Those to whom the system brings windfalls …. become "profiteers" who are the object of the hatred … the process of wealth-getting degenerates into a gamble and a lottery .. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." (editors comment: hear the klaxon sounding the dire warning??????) History is replete with Great Disorders in which currency debasement has coincided with social infighting and scapegoating. I have written in the past about the Roman inflation of the Third Century AD. The following chart shows the rapid turnover of emperors during what is known as the Third Century Crisis. As trade declined, crops failed and the military suffered what must have seemed like constant defeat, it wasn't difficult for a successful or even popular general to convince the rest of the empire that he'd make a better fist of governing.   But this political turnover was accompanied by what may be history's first recorded instance of systematic currency debasement. With the empire no longer expanding and barbarians being forced westwards by the migrations of the Steppe peoples, Rome's borders were under threat. But the money required to fund defence wasn't there. Successive emperors therefore reached the same conclusions that kings, princes, tyrants and democratically elected governments would later reach down the ages when faced with a perceived "shortage of money": they created more by debasing the existing stock. In the second half of the third century, the silver content of a denarius had shrunk to zero. Copper coins disappeared altogether. This debasement of currency also coincided with a debasement of society. Factions grew more suspicious of one another. Communities fragmented. And one part of the community bore the brunt of the fears: Christians. While Rome had always welcomed new religions and Gods, incorporating new foreign deities as their empire grew, Christians were altogether different. They rejected Rome's gods. They refused to pray to them. They said that only their God was deserving of worship. The rest of the Romans concluded that this obstinacy must be a source of great anger for their own ancient Roman gods, and supposed that those gods must now be exacting their own great punishment in return.   So the Romans turned on their Christians with a great violence which lasted throughout the period of the currency debasement but peaked with Diocletian's edict of 303 AD. The edict decreed, among other things, that Christian meeting places be destroyed, Christians holding office be stripped of that office, Christian freedmen be made slaves once more and all scriptures be destroyed. Diocletian's earlier edict, of 301 AD, sought to regulate prices and set out punishments for 'profiteers' whose prices deviated from those set out in the edict. A similar dynamic seems evident during Europe's medieval inflations, only now, the confused and vain effort to make sense of the enveloping turmoil saw the blame focus on suspected witches. The following chart shows the UK price index over the period with the incidence of witchcraft trials. Note the peak in trials coinciding with the peak of the price revolution.   Were the same dynamics at work during the French Revolution of 1789? The narrative of Madame Guillotine and her bloody role is well known. However, the execution of royalty by the Paris Commune didn't begin until 1792, and the Reign of Terror in which Robespierre's Orwellian sounding "Committee of Public Safety" slaughtered 17,000 nobles and counter-revolutionaries didn't start until well into 1793. In the words of guillotined revolutionary Georges Danton, this is when the French revolution "ate itself". But the coincidence of these events to the monetary debasement is striking. The political violence was justified in part by blaming nobles and counter-revolutionaries for galloping inflation in food prices. It saw 'speculators' banned from trading gold, and prices for firewood, coal and grain became subject to strict controls. According to Andrew Dickson White, author of "Fiat Money Inflation in France", (echoing Keynes' remark that "wealth-getting degenerates into a gamble and a lottery") "economic calculation gave way to feverish speculation across the country."   However, the most tragic of all the inflations in my opinion, and certainly the starkest example of a society turning on itself was the German hyperinflation. Its causes are well known. Morally and financially bankrupt by the First World War, the reparation demands of the Allies (which Keynes argued vociferously against) followed by the French occupation of the Ruhr served to humiliate a once-mighty nation, already on its knees. And it really was on its knees. Germany simply had no way to pay. The revolution following the flight of the Kaiser was incomplete. Concern was widespread that Germany would follow the path blazed by Moscow's Bolsheviks only a year earlier. A de facto civil war was being fought on the streets of major cities between extremist mobs of the left and right. Six million veterans newly demobilized, demoralized, dazed and without work were unable to support their families ... the great political need was to pay off the "internal debts" of pensions, life insurance and welfare support in any way possible. The risk of printing whatever was required was well understood. Bernhard Dernberg, vice chancellor in 1919, found himself overwhelmed with promises to pay for the war disabled, food subsidies, unemployment insurance, etc., but everyone knew where the money was coming from: "A decision of the National Assembly is made. On its basis, Reich Treasury bills are printed and on the basis of the Reich Treasury bills, notes are printed. That is our money. The result is that we have a pure assignat economy." But print they did. Prices would rise by a factor of one trillion. At the end of the war, Germany owed 154bn Reichmarks to its creditors. By November 1923, that sum measured in 1914 purchasing power was worth only 15 pfennigs.   It is difficult to comprehend the psychological trauma inflicted by this episode. Inflation inverted the efficacy of correct behaviour. It turned the ethics of thrift, frugality and notions such as working hard today to bring benefit tomorrow completely on their heads. Why work today when your rewards would mean nothing tomorrow? What use thrift and saving? Why not just borrow in depreciating currency? Those who had worked and saved all their lives, done everything correctly and invested what they had been told was safe, were mercilessly punished for their trust in established principles, and their inability to see the danger coming. Those with no such faith who had seen the danger coming had benefited handsomely. Everything, in other words, was dependent on one's ability to speculate, recalling what Dickson White observed of the French Revolution and Keynes reflections more generally. Erich Remarque is best known for his anti-war novel "All Quiet on the Western Front" but perhaps his best work was the "The Black Obelisk" set in the early Weimar period, and a penetrating meditation on the upside-down world of inflation. The protagonist Georg poignantly captures this speculative imperative when he sits down and lets out a long sigh: "Thank God that it's Sunday tomorrow … there are no rates of exchange for the dollar. Inflation stops for one day of the week. That was surely not God's intention when he created Sunday." Perhaps the most eloquent chronicler of the Weimar hyperinflation was Elias Canetti, whose mother moved him from the security of Zurich to Frankfurt in 1921 to take advantage of cheaper living. Canetti never forgave her, and his life's work shows what a lasting impression the move from heaven to hell made: "A man who has been accustomed to rely on (the monetary value of the mark) cannot help feeling its degradation as his own. He has identified himself with it for too long, and his confidence in it has been like his confidence in himself … Whatever he is or was, like the million he always wanted, he becomes nothing" More tragic still was what German society became during the inflation. Like other Axis countries on the wrong side of the War and now in the grip of hyperinflation, Germany turned viciously on its Jews. It blamed them for the surrounding evil as Romans had blamed Christians, medieval Europeans had suspected witches, and French revolutionaries had blamed the nobility during previous inflations. In his classic "Crowds and Power", Canetti attributed the horror of National Socialism directly to a "morbid re-enaction impulse". "No one ever forgets a sudden depreciation of himself, for it is too painful … The natural tendency afterwards is to find something which is worth even less than oneself, which one can despise as one was despised oneself. It is not enough to take over an old contempt and to maintain it at the same level. What is wanted is a dynamic process of humiliation Something must be treated in such a way that it becomes worth less and less, as the unit of money did during the inflation. And this process must be continued until its object is reduced to a state of utter worthlessness. … In its treatment of the Jews, National Socialism repeated the process of inflation with great precision. First they were attacked as wicked and dangerous., as enemies; then, there not being enough in Germany itself, those in the conquered territories were gathered in; and finally they were treated literally as vermin, to be destroyed with impunity by the million. All this is very disturbing stuff, but testament to a relationship between currency devaluation and social devaluation. Mine is not a complete or in any way rigorous analysis, I know. I emphasize that it's not in any way meant as some sort of crude mapping on to today's environment. My point is to show that money operates in many social domains beyond the financial, and that tying currency devaluation to social devaluation might have some merit. Consider some recent and less extreme currency inflations. The 1970s bear market in equities saw relatively mild inflation which was also characterized by relatively mild but nevertheless real factionalization of society. An ideological left vs right battle played out between labour and capital, unions and non-unions and perhaps most bizarrely, between rock and disco. As already stated, money implies a trust in the future. It implies that today's money can be used in the future. So in the era of punk, did the Sex Pistols provide the most concise commentary of the malaise?   Which brings us to today. Despite the CPI inflation of the 1970s receding, our central banks have continued to play games with money. We've since lived through what might be the largest credit inflation in financial history, a credit hyperinflation. Where has it left us? Median US household incomes have been stagnant for the best part of twenty years (chart below)   Yet inequality has surged. While a record number of Americans are on food stamps, the top 1% of income earners are taking a larger share of total income than since the peak of the 1920s credit inflation. Moreover, the growth in that share has coincided almost exactly with the more recent credit inflation. These phenomena are inflation's hallmarks. In the Keynes quote above, he alludes to the "artificial and iniquitous redistribution of wealth" inflation imposes on society without being specific. What actually happens is that artificially created money redistributes wealth towards those closest to it, to the detriment of those furthest away.   Richard Cantillon (writing decades before Adam Smith) was the first to observe this effect (hence "Cantillon effect"). He showed how those closest to the money source benefited unfairly at the expense of others, by thinking through the effects in Spain and Portugal of the influx of gold from the new world as follows: "If the increase of actual money comes from mines of gold or silver …  the owner of these mines, the adventurers, the smelters, refiners, and all the other workers will increase their expenditures in proportion to their gains. . . . All this increase of expenditures in meat, wine, wool, etc. diminishes of necessity the share of the other inhabitants of the state who do not participate at first in the wealth of the mines in question. The altercations of the market, or the demand for meat, wine, wool, etc. being more intense than usual, will not fail to raise their prices … Those then who will suffer from this dearness … will be first of all the landowners, during the term of their leases, then their domestic servants and all the workmen or fixed wage-earners ... All these must diminish their expenditure in proportion to the new consumption … (Quoted in Mark Thornton, "Cantillon on the Cause of the Business Cycle" Quarterly Journal of Austrian Economics Vol 9, No 3 [Fall 2006]) In other words, the beneficiaries of newly created money spend that money and bid u

Don’t Fear a Normal Gold Correction Posted: 28 Oct 2012 11:19 AM PDT Our friend Frank Holmes, U. S. Global Investors writes: I've spent the latter half of the week at the New Orleans Investment Conference, talking with investors, mining companies and analysts about the state of the gold industry. The annual conference falls at an interesting time of the year, as the price of gold typically corrects in October. In fact, going back 30 years, the historical seasonality of gold has been to rise during September, with a subsequent correction in October. This fall, gold has followed this historical trend, with the metal climbing throughout the month of September to reach a high of $1,790 an ounce on October 4, only to have a normal correction to $1,701 by October 24. This decline typically comes ahead of the Love Trade fueling demand prior to the Hindu festival of lights, Diwali, which begins in November. Miners, Show Me the Money! At the conference, I've been discussing the multiple forces squeezing the profits and earnings out of gold miners, causing equity investors to become the Rod Tidwells of the gold world, getting miners energized to "Show me the money!" In my opinion, this phenomenon highlights the importance of selectively choosing among those gold companies that exhibit the best relative growth and momentum characteristics to help obtain outstanding investment results. My workshop presentation in "The Big Easy" integrated preeminent thinking from multiple gold experts, including research firm CIBC, Gold Fields and the World Gold Council, about how gold companies' performance has been neither "big" nor "easy." There's been a decline in production per share, an 80 percent increase in the average cost per ton of gold over the past six years, and a 21 percent decline in global average grades of gold since 2005. Cash taxes per ounce of production have increased dramatically, and, according to CIBC World Markets, the replacement cost for an ounce of gold is now $1,500, with $1,700 as a sustainable number. Cash operating costs eat away the most, at $700 an ounce, while sustaining capital, construction capital, discovery costs, overhead and taxes eat up $800. At the October 24 gold price of $1,700 an ounce, only $200 is left over as profit, says CIBC. Gold companies have had their share of challenges in the past. Prior to the huge run-up in gold prices in the late 1970s, forward price-to-cash flow ratios crashed from a high of about 22 times to just under 9 times. Eventually, as gold climbed to its high, multiples spiked back up to 21 times. Miners also didn't increase the supply of the precious metal in the 1970s. Back then, there were only a few major players in the gold game. South Africa was a significant gold-producing country, as well as Russia and North America. However, following years of a gold bull market in the 1970s, production climbed. In fact, Pierre Lassonde, chairman of Franco-Nevada and a living legend in the mining and resource world, says it took seven years for the gold industry to respond after the rise in the price of gold. Ironically, as the price kept falling over the next 20 years, production doubled, says Lassonde. Beginning in 2000, gold companies have experienced a similar phenomenon, with production remaining flat, even declining in some years. In 2008, mine supply of gold fell to levels not seen since the early 1990s. Now, after a seven-year lag, the industry has responded as we're beginning to see some growth in supply. From 2006 through 2011, production throughout the entire gold industry has increased about 3 percent, says CEO Nick Holland of Gold Fields. During his keynote presentation at the Melbourne Mining Club in July, he indicated that most of the growth was not coming from the major producers. In more mature markets, such as South Africa, Australia, Peru and the U.S., annual production decreased by about 5 million ounces since 2006. Emerging markets on the other hand—China, Colombia, Mexico and Russia—added about 7.6 million ounces over the last six years, Holland says. Of gold finds that contain at least 2 million ounces of gold, research from the Metals Economics Group (MEG) finds that there have been 99 significant discoveries between 1997 and 2011. Only 14 of the 26 major gold producers made these major gold discoveries. "Today, the major producers and their majority-owned subsidiaries hold 39 percent of the reserves and resources in the 99 significant discoveries made in the past 15 years." This amounts to less than half of the yellow metal needed to replace the gold companies' production from 2002 to 2011, says MEG. According to Lassonde, this is the "elephant in the room," as new finds have become elusive. The chart below from CIBC shows that there was only one major discovery that was more than 3 million ounces in 2011. Over the past seven years, there have been only nine major discoveries of gold. Lassonde doesn't think we have hit "peak gold," but believes the gold industry needs a "3D seismic" event similar to what occurred in the oil industry before we see considerable finds. For as many challenges as gold companies face today, they have rarely experienced such a well-diversified consumer base and diversified demand for their product: It's "the best we could ask for," says Lassonde. A newer trend that I've discussed is the reemergence of emerging markets central banks as buyers of gold, as they have been "relearning that all paper currencies are suspect," says Lassonde. Today, he says "cash is trash," with the value of euro, dollar and yen in question. He believes this source of demand could be long-lasting and quite significant if you look at emerging market countries' gold holdings as a percent of total reserves. In 2000, the European Central Bank decided that the right proportion of gold to own should be 15 percent. Pierre says if you apply that figure to the potential gold holdings of the emerging market central banks, they would need to accumulate 17,000 tons of gold. At a purchase of 1,000 tons a year (or about 40 percent of today's production), these central banks would have to buy gold for the next 17 years! Another growing source of demand has been from the Fear Trade's scooping up of gold exchange-traded funds (ETFs). Eight years after the products were launched, 12 gold ETFs and eight other similar investments are valued at around $120 billion and hold 2,500 tons of gold, says Nick Holland. I believe the Fear Trade will continue buying not only gold but also gold stocks, as the group is driven by Helicopter Ben's quantitative easing program. In the latest Weldon's Money Monitor, Greg Weldon discusses the consequences of the Federal Reserve's debt monetization and liquidity provisions, showing the "somewhat frightening pace" of expansion in money supply. Weldon says that over the last four years since August 2008, the U.S. Narrow Money Supply, or M1, which is physical money such as coins, currency and deposits, has increased 73 percent, or more than one trillion dollars. This is about as much as it expanded in the previous forty years! Don't let the short-term correction fool you into selling your gold and gold stocks. The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, I believe these are the positive dynamics driving higher prices for gold and gold stocks. October 26, 2012 (Source: U. S. Global Investors) http://www.usfunds.com/investor-resources/investor-alert/#.UI1nW2cw-So

Gold Market Update Posted: 28 Oct 2012 10:00 AM PDT The top in gold was called within a day of its actual occurrence in the last update several weeks back, since which time it has been in steady retreat. This retreat has not been as steep as we had expected, but then, the dollar has not even started a new uptrend – yet.

Silver Market Update Posted: 28 Oct 2012 09:56 AM PDT The intermediate top in silver was called several weeks back in the last update. We had expected it to plunge, but instead into went into a more orderly steady decline, its measured rate of decline thus far being due to the fact that ... Read More...

Bundesbank yields some confidentiality but still won't answer critical questions Posted: 28 Oct 2012 09:46 AM PDT Zero Hedge tonight calls attention to and mocks a statement given two days ago by Carl-Ludwig Thiele, a member of the Executive Board of Germany's central bank, the Bundesbank, to the German Press Agency (Deutsche Presse-Agentur), that the Bundesbank's gold reserves are stored securely abroad. Zero Hedge notes that the Bundesbank official's statement fails to explain the recently disclosed withdrawal of German gold from the Bank of England:

Try not to be too worried by the volatility of silver it’s the price of outperformance Posted: 28 Oct 2012 09:42 AM PDT The gold price is down almost $100 and silver has shed a couple of dollars an ounce. That is bad news if you have just bought gold and silver. But if you have bought and hold for the past few years you would know it is only what to expect from these precious metals.

Video: What Could Happen in the First 12 Hours of a US Dollar Collapse Posted: 28 Oct 2012 09:01 AM PDT This is the scenario nobody thinks is possible but really at the end of the day, it's not like the US can print money and live on debt forever right so when something cannot go on forever what happens when it stops? So says Mark Jeftovic ([url]http://wealth.net/[/url]) in edited excerpts of his introduction to a 7 minute video (see here) presented by [url]www.inflation.us*[/url]entitled The First 12 Hours of a US Dollar Collapse. [INDENT]Lorimer Wilson, editor of [B][COLOR=#0000ff]www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!), request that this paragraph must be included in any article re-posting to avoid copyright infringement.[/COLOR][/B] [/INDENT]Related Articles: 1. If You Are Not Preparing For a US Debt Collapse, NOW Is the Time to Do So! Here's Why Timing the U.S. debt implosion in advance is virtually impossible. Thus far, we've managed to [avoid such an event], however, this will not al...

Rising Deflation Concerns Could Cause Gold to Plummet Dramatically ? Here?s Why Posted: 28 Oct 2012 09:01 AM PDT The arguments for gold to rise dramatically are well known and highly publicized. The arguments for gold to remain flat or to decline are minimally discussed (and generally attacked vigorously when raised). [I do just that in this article and the conclusions will not be liked by the goldbugs.] Words: 285 So says an article* by StopAlerts ([url]https://secure.stopalerts.com/[/url]) as posted on Seeking Alpha under the title Gold Price Plausibly $1,300 In A Deflation Scenario. [INDENT]*Lorimer Wilson, editor of [B][COLOR=#0000ff]www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor's Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.[/COLOR][/B] [/INDENT]Edited excerpts from the article are as follows: It would seem to us that inflation and debt repudiation are the two p...

Gold, Germany & Geopolitics Posted: 28 Oct 2012 07:21 AM PDT Gold, Germany & Geopolitics Well, normally I do not embed any one else's videos, but this one was literally recorded by Max Keiser at Russia Today (RT) TV as I was recording my News and Views and writing yesterday's blog … Continue reading →

The Fear Factor Posted: 28 Oct 2012 12:03 AM PDT Gold fell 0.59% for the week. Gold has a strong support level at the $1,700 area with its uptrend line but it's forming yet another bear flag here which points to a test of the 100 and 200 day moving averages.

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