Gold World News Flash

Financial Repression Starts Showing Its Ugly Head
Strange Day
Rising Number of Americans See China as Dominant World Power in 2020
Gold is More Than Money
Filling the China Closet
Which America Do You Live In? – 21 Hard To Believe Facts About 'Wealthy America' And 'Poor America'
Guest Post: Is America Being Deliberately Pushed Toward Civil War?
Who Needs Gold Really?
UBS Warns The Fed Is Trapped
Silver and Gold Prices Held Support with the Gold Price Closing at $1,308.40
Silver and Gold Prices Held Support with the Gold Price Closing at $1,308.40
Obama: "I Am Sorry" Americans Will Lose Their Existing Health Plan Because Of Obamacare
Marc Faber Warns "Karl Marx Was Right"
Why Gold?
Why Gold?
Why Gold?
GATA Chairman Murphy interviewed by TF Metals Report
Gold Daily and Silver Weekly Charts - ECB Surprise Cut, Non-Farm Payrolls Tomorrow
Gold Daily and Silver Weekly Charts - ECB Surprise Cut, Non-Farm Payrolls Tomorrow
How to Be Your Own Central Bank
Nolan Watson: “Institutional, Generalist & Value Funds Are Now Preparing To Jump In On Gold & Miners”
Trust Gold & Silver, Not Governments
Trust Gold & Silver, Not Governments
Gold Chart's Low Rhymes with History
Gold Chart's Low Rhymes with History
7 Years to New Gold Price Highs
7 Years to New Gold Price Highs
Energy Commodity Cycle Turns
Energy Commodity Cycle Turns
Slavery in the Digital Age
Market Monitor – November 7th
End Game - “They Don’t Want People Protecting Themselves”
London Metal Exchange increases power to shorten warehouse queues
The Daily Market Report: Gold Retreats on ECB Rate Cut, US GDP Beat
Gold Solution to The Biggest Fear in Retirement
Gold Markets are not Efficient, Don't Reflect Fundamentals and Understate Gold's Market Value (Part 7)
Silver – Major Advances In Industrial Applications
China National Gold weighs investing in Ivanhoe assets
Surprise ECB rate cut helps lift gold
German bullion retailer Degussa buys Sharps Pixley
Fresh money is needed for gold equities to recover
Amara taps Amway family wealth to boost gold prospects
ECB Surprise Interest Rate Cut & US Growth Whip Soporofic Gold Market
Gold Price Forecast to Fall to $1180
2 Miner Developments in the Big Gold Sector
Gold Bear to End with a Bang
Gold slides to new low for the week as Q3 advance GDP beat heightens taper expectations.
Gold Prices Volatile, Dip Below $1300 on ECB Rate Cut, Strong US GDP Data
Financial Repression Starts Showing Its Ugly Head
People's Bank of China "Buying Gold, Supports Prices"

Financial Repression Starts Showing Its Ugly Head

Posted: 07 Nov 2013 11:00 PM PST

2013 is proving to be a hallmark year in the ongoing saga which is called "economic recovery." If anything has started to become blatant, it is undoubtedly the distortion in money, markets and metals.

During the first years after the financial crisis of 2008, the markets reacted in line with what one would expect from additional liquidity: stocks recovered from the crash, interest rates were pushed down, most commodities have gone up, and precious metals were the best performers. Most currencies have been whipsawing.

Read More @ GoldSilverWorlds.com

Strange Day

Posted: 07 Nov 2013 10:00 PM PST

from Dan Norcini:

I am not sure what is going on in many of the markets that I trade/monitor today but whatever it is, it is certainly very odd. There have been some incredible price swings today in so many markets that I cannot name them all here. Suffice it to say, the computers are once again wreaking havoc, all with the blessing of the exchanges, I might add, who love the fees that they generate from this meaningless churning.

As mentioned in today’s earlier post, gold has been all over the place. If you look at the 12 hour chart posted below, you can see one big candle with a large upper shadow and a large lower shadow. Would you like me to translate what this means in trader lingo? Here we go:” What in the hell is going on in this market?”

Rising Number of Americans See China as Dominant World Power in 2020

Posted: 07 Nov 2013 09:00 PM PST

by George Leong, Investment Contrarians:

Over the past year, I have heard a lot about how the Chinese real estate market was in a bubble and ready to collapse, similar to the state of the U.S. real estate market in 2008.

Anti-Chinese real estate pundits were saying to sell. "Chinese companies are crooks," was a common theme and the communist regime there was not to be trusted by anyone, especially Americans, according to these talking heads.

While I do believe China has its issues and faults (heck, we all do!), the opportunity there for growth investors cannot be ignored; the country will continue to become a bigger influence in the global economy. I'm not saying the renminbi will become the go-to currency, but the economic influence of the country will only grow, especially in Africa and other emerging markets where capital is needed—we all know China isn't hurting for cash.

Gold is More Than Money

Posted: 07 Nov 2013 08:49 PM PST

There are many Keynesian guys that state that gold isn't money. However, it's more than money. It represents freedom and enables the govt to live within their means.

[[ This is a content summary only. Visit http://goldbasics.blogspot.com or http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]

Filling the China Closet

Posted: 07 Nov 2013 07:32 PM PST

Nichols on Gold

Which America Do You Live In? – 21 Hard To Believe Facts About 'Wealthy America' And 'Poor America'

Posted: 07 Nov 2013 06:24 PM PST

Submitted by Michael Snyder of The Economic Collapse blog,

Did you know that 40 percent of all American workers make less than $20,000 a year before taxes? And 65 percent of all American workers make less than $40,000 a year before taxes. If you work on Wall Street, or have a cushy job with the federal government, or work for a big tech firm out on the west coast, life is probably pretty good for you right now. But the truth is that most Americans are not living the high life. In fact, most Americans are just trying to figure out how to survive from month to month.

For many Americans, making a choice between buying food for your family and paying the light bill is a common occurrence. But if you don't live in that America, hearing that people actually live like that may sound very strange to you. After all, if everyone around you has expensive cars, the latest electronic gadgets and million dollar homes, the notion that America is in the midst of a very serious "economic decline" may seem very bizarre to you.

On Wednesday, the Dow hit a brand new record high, and Wall Street celebrated. Since the financial crisis of 2008, stocks have been on an unprecedented run. The top performers in the market have not just made millions of dollars - they have made billions of dollars. Luxury apartments in Manhattan and beachfront homes in the Hamptons are selling for absolutely astronomical prices, and it seems like life in the good parts of New York City is one gigantic endless party these days.

Meanwhile, life is quite good down in Washington D.C. as well. The wealth is spread more evenly, but on average the D.C. region actually has the highest standard of living of any major U.S. city. The reason for this is the obscene growth of the federal government. Over the past couple of decades, the U.S. government has ballooned in size and so have government salaries. During one recent year, the average federal employee living in the Washington D.C. area received total compensation worth more than $126,000.

Out in the San Francisco area, Internet money is flowing like wine right now. As I wrote about yesterday, top employees of companies such as Facebook and Twitter can make millions of dollars a year. And if you were lucky to get a piece of the ownership of one of those companies at a very early stage, you are essentially set for life.

And with the Twitter IPO coming up, Internet euphoria is once again reaching a fever pitch. For example, just check out what a 56-year-old administrative assistant said this week about why she is going to buy Twitter stock...

“I’m just buying because everybody’s talking about Twitter,” she said. “I’m just gonna take a chance.”

Is that how we should make our investment decisions from now on?

Just buy a stock because everybody's talking about it?

That is the kind of insanity that is going on in "wealthy America" right now.

Unfortunately, the gap between "wealthy America" and "poor America" is greater than ever before.

If you live in "wealthy America", what you are about to hear next will probably sound very strange.

CNN recently profiled a 44-year-old overnight prison guard named Delores Gilmore. She works really hard, but a lot of times she simply does not have enough money to pay all of her bills...

"The first of the month, I pay the rent," she said. "The next check, I pay my light bills. Sometimes I won't pay my rent and I pay the light bill from last month -- if they cut if it off. Then I pay the rent the end of the month."

Her life consists of going to work, taking care of her children, going to sleep, and then getting back up and repeating that same cycle once again...

"I'm not fooling anybody," she told me. "I don't have any friends. And that's sad. ... I go to work, come home, take them where they gotta go, if they gotta go somewhere, come back home, lay down, go to work.

"That's what I do. All day, that's what I do."

Sadly, the truth is that tens of millions of Americans can identify with what she is going through on a daily basis. In millions of families, both the husband and the wife work multiple jobs and it is still not enough.

If we truly did have a free market capitalist system, the entire country would be a land of opportunity and things would be getting better for everybody. Unfortunately, that is not the case at all. The following are 21 facts about "wealthy America" and "poor America" that are hard to believe...

#1 The lowest earning 23,303,064 Americans combined make 36 percent less than the highest earning 2,915 Americans do.

#2 40 percent of all American workers (39.6 percent to be precise) make less than $20,000 a year.

#3 According to the Pew Research Center, the top 7 percent of all U.S. households own 63 percent of all the wealth in the country.

#4 On average, households in the top 7 percent have 24 times as much wealth as households in the bottom 93 percent.

#5 According to numbers that were just released this week, 49.7 million Americans are living in poverty. That is a brand new all-time record high.

#6 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#7 Household incomes have actually been declining for five years in a row and total consumer credit has risen by a whopping 22 percent over the past three years.

#8 According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

#9 The homeownership rate in the United States is at an 18 year low.

#10 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

#11 18 percent of all food stamp dollars are spent at Wal-Mart.

#12 According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

#13 It is hard to believe, but right now 1.2 million students that attend public schools in America are homeless. That number has risen by 72 percent since the start of the last recession.

#14 One recent study discovered that nearly half of all public students in the United States come from low income homes.

#15 In 1980, CEOs at S&P 500 companies made 42 times as much as their employees did on average. Today, CEOs at S&P 500 companies make 354 times as much as their employees do on average. In fact, there are many CEOs that make more than 1000 times what the average employees in their companies make.

#16 U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

#17 At this point, one out of every four American workers has a job that pays $10 an hour or less.

#18 Today, the United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.

#19 Approximately one out of every five households in the United States is now on food stamps.

#20 The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.

#21 At this point, the poorest 50 percent of all Americans collectively own just 2.5 percent of all the wealth in the United States.

So which America do you live in?

Guest Post: Is America Being Deliberately Pushed Toward Civil War?

Posted: 07 Nov 2013 05:28 PM PST

Submitted by Brandon Smith of Alt-Market blog,

In 2009, Jim Rickards, a lawyer, investment banker and adviser on capital markets to the Director of National Intelligence and the Office of the Secretary of Defense, participated in a secret war game sponsored by the Pentagon at the Applied Physics Laboratory (APL). The game’s objective was to simulate and explore the potential outcomes and effects of a global financial war. At the end of the war game, the Pentagon concluded that the U.S. dollar was at extreme risk of devaluation and collapse in the near term, triggered either by a default of the U.S. Treasury and the dumping of bonds by foreign investors or by hyperinflation by the private Federal Reserve.

These revelations, later exposed by Rickards, were interesting not because they were “new” or “shocking.” Rather, they were interesting because many of us in the field of alternative economics had ALREADY predicted the same outcome for the American financial system years before the APL decided to entertain the notion. At least, that is what the public record indicates.

The idea that our government has indeed run economic collapse scenarios, found the United States in mortal danger, and done absolutely nothing to fix the problem is bad enough. I have my doubts, however, that the Pentagon or partnered private think tanks like the RAND Corporation did not run scenarios on dollar collapse long before 2009. In fact, I believe there is much evidence to suggest that the military industrial complex has not only been aware of the fiscal weaknesses of the U.S. system for decades, but they have also been actively engaged in exploiting those weaknesses in order to manipulate the American public with fears of cultural catastrophe.

History teaches us that most economic crisis events are followed or preceded immediately by international or domestic conflict. War is the looming shadow behind nearly all fiscal disasters. I suspect that numerous corporate think tanks and the Department Of Defense are perfectly aware of this relationship and have war gamed such events as well. Internal strife and civil war are often natural side effects of economic despair within any population.

Has a second civil war been “gamed” by our government? And are Americans being swindled into fighting and killing each other while the banksters who created the mess observe at their leisure, waiting until the dust settles to return to the scene and collect their prize? Here are some examples of how both sides of the false left/right paradigm are being goaded into turning on each other.

Conservatives: Taunting The Resting Lion

Conservatives, especially Constitutional conservatives, are the warrior class of American society. The average conservative is far more likely to own a firearm, have extensive tactical training with that firearm, have military experience and have less psychological fear of conflict; and he is more apt to take independent physical action in the face of an immediate threat. Constitutional conservatives are also more likely to fight based on principal and heritage, rather than personal gain, and less likely to get wrapped up in the madness of mob activity.

What’s the greatest weakness of conservatives? It’s their tendency to entertain leadership by men who claim exceptional warrior status, even if those men are not necessarily honorable.

Constitutional conservatives are the most substantial existing threat to the establishment hierarchy because, unlike dissenting groups of the past, we know exactly who the guiding hand is behind economic and social calamity. In response, the overall conservative culture has come under relentless attack by the establishment using the Administration of Barack Obama as a middleman. The goal, I believe, is to misdirect conservative rage toward the Democratic left and away from the elites. The actions of the White House have become so absurd and so openly hostile as of late that I can only surmise that this is a deliberate strategy to lure conservatives into ill-conceived retaliation against a puppet government, rather than the men behind the curtain.

Department of Defense propaganda briefings with military personnel have been exposed. These briefings train current serving soldiers to view Tea Party conservatives and even Christian organizations as “dangerous extremists.” Reports from sources within Fort Hood and Fort Shelby confirm this trend.

The DOD has denied some of the allegations or claimed that it has “corrected” the problem; however, Judicial Watch has obtained official training documents through a Freedom of Information Act request that affirm that extremist profiling is an integral part of these military briefings. The documents also cite none other than the Southern Poverty Law Center (SPLC) as a primary resource for the training classes. The SPLC is nothing more than an outsourced propaganda wing for the DHS that attacks Constitutional organizations and associates them with terrorist and racist groups on a regular basis. (Check pages 32-33.)

This indoctrination program has accelerated since January 2013, after Professor Arie Perliger, a member of a West Point think tank called Combating Terrorism Center (and according to the sparse biographical information available, a man with NO previous U.S. military experience), published and circulated a report called “Challengers From The Sidelines: Understanding America’s Violent Far Right” at West Point. The report classified “far right extremists” as “domestic enemies” who commonly “espouse strong convictions regarding the federal government , believing it to be corrupt and tyrannical, with a natural tendency to intrude on individuals’ civil and constitutional right." The profile goes on to list supporting belief in "civil activism, individual freedoms, and self government” as the dastardly traits of evil extremists.

Soldiers have been told that associating with “far right extremist groups” could be used as grounds for court-martial. A general purge of associated symbolism has ensued, including new orders handed down to Navy SEALs that demand that operators remove the “Don’t Tread On Me” Navy Jack patch from their uniforms.

The indoctrination of the military also follows on the heels of a massive media campaign to demonize Constitutional conservatives who fought against Obamacare in the latest debt ceiling debate as “domestic enemies” and “terrorists.” I documented this in my recent article “Are Constitutional Conservatives Really the Boogeyman?”

Obama and his ilk have been caught red-handed in numerous conspiracies, including Fast and Furious, which shipped American arms through the Bureau of Alcohol, Tobacco, Firearms and Explosives into the hands of Mexican drug cartels. And how about the exposure of the IRS using its bureaucracy as a weapon to harass Tea Party organizations and activists? And what about Benghazi, Libya, the terrorist attack that Barack Obama and Hillary Clinton allowed to happen, if they didn’t directly order it to happen? And let’s not forget about the Edward Snowden revelations, which finally made Americans understand that mass surveillance of our population is a constant reality.

To add icing to the cake, a new book called Double Down, which chronicles the Obama campaign of 2012, quotes personal aides to the President who relate that Obama, a Nobel Peace Prize winner, when discussing his use of drone strikes, bragged that he was “really good at killing people.”

Now, my question is, why would the Obama Administration make so many “mistakes,” attack conservatives with such a lack of subtlety, and attempt to openly propagandize rank-and-file soldiers, many of whom identify with conservative values? Is it all just insane hubris, or is he serving his handlers by trying to purposely create a volatile response?

Liberals: Taking Away The Cookie Jar

Many on the so-called “left” are socially oriented and find solace in the functions of the group, rather than individualism. They seek safety in administration, centralization and government welfare. Wealth is frowned upon, while “redistribution” of wealth is cheered. They see government as necessary to the daily survival of the nation, and they work to expand Federal influence into all facets of life. Some liberals do this out of a desire to elevate the poverty-stricken and ensure certain educational standards. However, they tend to ignore the homogenizing effect this strategy has on society, making everyone equally destitute and equally stupid. Their faith in government subsidies also makes them vulnerable to funding cuts and reductions in entitlements. The left normally fights only when their standard of living and comfort to which they have grown accustomed plummets below a certain threshold, and mob methods are usually their fallback form of retaliation.

Austerity cuts, which the mainstream media calls the “sequester,” are beginning to take effect. But, they are being applied in areas that are clearly meant to create the most public anger. Reductions in welfare programs are also being implemented in a way that will certainly agitate average left-leaning citizens. The debt debate itself revolved around those who want the government to spend within its means versus those who want the government to spend even more on welfare programs no matter the consequence. The loss of subsidies is at bottom the greatest fear of the left.

A sudden and inexplicable shutdown of electronic benefit transfer cards (EBT cards or food stamps) occurred in more than 17 States while the debt debate just happened to be climaxing. This month, cuts to existing food stamp funds have taken effect, and food pantries across the country are scrambling against a sharp spike in demand.

Remember, about 50 million Americans are currently dependent on EBT welfare in order to feed themselves and their families. The response to the relatively short EBT shutdown last month was outright fury. Imagine the response in the event of a long-term shutdown, or if extraneous cuts were to occur? And where would that anger be directed? Since the entire debt debacle has been blamed on the Tea Party, I suspect conservatives will be the main target of welfare mobs.

The left, once just as opposed to government stimulus and banker bailouts as the right, is now unwittingly throwing its support behind infinite stimulus in order to cement the continued existence of precious Federal handouts. The issue of Obamacare has utterly blinded liberals to fiscal responsibility. Universal healthcare, perhaps the ultimate Federal handout, is a prize too titillating for them to ignore. Democrats will now go to incredible lengths to defend the Obama White House regardless of past crimes.

They are willing to ignore his offenses against the 4^th Amendment and personal privacy. They are willing to look past his offenses against the 1^st Amendment, including the Constitutional right to trial by jury for all Americans, and Obama’s secret war against the free speech of whistle-blowers. They are willing to shrug off his endless warmongering in the Mideast, his attempts to foment new war in Syria and Iran, and his support for predator drone strikes in sovereign nations causing severe civilian collateral damage. They are willing to forget Snowden, mass surveillance and executive assassination lists — all for Obamacare.

And the saddest thing of all? It is likely that Obamacare was never meant to be successful in the first place.

Does anyone really believe that the White House, with billions of dollars at its disposal, could not get a website off the ground if it really wanted to? Does anyone really believe that Obama would launch the crowning jewel of his Presidency without making certain that it was fully operational, unless this was part of a greater scheme? And how about his promise that pre-existing health care plans would not be destroyed by Obamacare mandates? Over 900,000 people in the state of California alone are about to lose their health care insurance due to the Affordable Healthcare Act. Why would Obama go back on such a vital pledge unless he WANTED to piss off constituents?

Already, liberal websites and forums across the blogosphere are abuzz with talk of sabotage of the Obamacare website by “the radical right” and the diabolical Koch Brothers (liberals had no idea who they were a year ago, but now, they the go to scapegoat for everything). Once again, conservatives are presented as the culprits behind all the left’s troubles.

As I have stated in the past, Obamacare is designed to fail. The government has no capacity to fund it, and never will. Its only conceivable purpose is to further divide the country and excite both sides of the false paradigm into attacking each other as the reason the system is failing, when both sides should be questioning whether the current system should exist at all.

As the situation stands today, at least 50 million welfare recipients and who knows how many others exist as a resource pool for the establishment to be used to wreak havoc on the rest of us. All they have to do is take away the cookie jar.

Who Would Win?

Who would prevail in a second American civil war? Tactically speaking, conservatives have the upper hand and are far better prepared. Food rioters wouldn’t last beyond three to six weeks as starvation takes its toll, and mindless mobs would not last long against seasoned riflemen. The military, though suffering purges by the White House, still contains numerous conservatives within its ranks. Outside influences, including NATO or the United Nations, are a possibility. There are numerous factors to consider. But I would point out that the most dangerous adversary Constitutional conservatives face is not the left, Obama, or a Federal government gone rogue. Rather, our greatest adversary is ourselves.

If lured into a left/right civil war, would most conservatives be able to see beyond the veil and recognize that the fight is not about Obama, or the Left, or tyrannical government alone? Could we be co-opted by devious influences disguised as friends and compatriots? Will we end up following neocon salesmen and military elites who materialize out of the woodwork at the last minute to "lead us to victory" while actually leading us towards globalization with a slightly different face?

If a civil conflict has been war gamed by the establishment, you can bet they have contingency plans regardless of which side attains the upper hand. In the end, if we do not make the fight about the bankers and globalists, the Federal Reserve, the International Monetary Fund, the Council On Foreign Relations, etc., then everyone loses. Who wins in a new American civil war? If we become blinded by the trespasses of a certain White House jester, only the globalists will win.

Who Needs Gold Really?

Posted: 07 Nov 2013 04:28 PM PST

Four reasons to waste your time with the deeply historic, deeply human value ascribed to gold. People love to debate, but sadly sometimes it crosses a line and turns argumentative. That's what is happening right now with the debate over gold. Read More...

UBS Warns The Fed Is Trapped

Posted: 07 Nov 2013 04:04 PM PST

The Fed seems to be facing two major risks: first, premature tapering disrupting markets and triggering global turmoil across asset classes, thereby threatening the fragile economy recovery; second, delayed tapering further fuelling asset price bubbles, which could burst eventually and do major damage. UBS' Beat Siegenthaler notes the September decision suggested a Fed more worried about the fragile recovery than about the potential for asset bubbles and other longer-term problems associated with extended liquidity injections. Whereas it had originally assumed that a gradual tapering would result in a gradual market reaction, Siegenthaler explains it is now clear that the situation is much more binary; and as such, the hurdles for tapering might be substantially higher than originally thought.

Via UBS,

Central bankers seem more powerful than ever, yet also more divided and confused than for a long time. This may be particularly true for the Fed, as it struggles with how to exit unconventional policies without creating major global market turmoil. In September it shied away from reducing monthly QE purchases, surprising both markets and central bank colleagues around the world. UBS Economics now expects tapering to start in Q1 2014 with the January meeting seen as somewhat more likely than the March meeting. The risks to this call, though, seem almost entirely on the dovish side as a December move would be tantamount to admitting that September was a mistake given the likely lack of decisive data until then. For the dollar, this could keep things difficult for some time.

Looking back...

Why did the Fed decide to hold back in September, deeply puzzling investors who had very widely expected a move, and thereby putting the credibility of its communication strategy at risk? It appears that two arguments were decisive:

First, the recovery was seen as still too fragile to withstand the level of market turmoil that had developed following the taper talk in early summer.

Second, the looming government shutdown and debt ceiling were seen as seriously clouding the fiscal outlook.

Relatively soft economic data since the decision have so far seemed to vindicate the decision as has the subsequent political turmoil in Washington.

However, many observers, particularly in Europe, have been critical on the political aspect of the decision as the FOMC seemed to 'bail out' the politicians and thus risk creating moral hazard. It would seem fair to say that the ECB, for example, would have acted rather differently in similar circumstances. President Draghi's pledge in summer 2012 to do 'whatever it takes' was the exception to the general ECB rule that monetary policy is not there to address structural problems that are the politicians' responsibility. In Frankfurt, nonconventional policies are seen as something to get rid of as soon as possible rather than something to retain as an insurance policy. It was no coincidence that in June this year Draghi said with quite some satisfaction that 'we, unlike other central banks, can gradually downsize our balance sheet without having to take any decisions that would, or could, create volatility'. This, clearly, is not a luxury the Fed has.

...and looking forward

The Fed is facing two major but opposing risks:

first, premature tapering could unleash market turmoil that could threaten a still fragile recovery;

second, delayed tapering could further drive up the cost of the inevitable QE exit.

The emerging market collapse in early summer may have been just a harbinger of what could come once central bank liquidity injections end. Some observers have argued that the market will react in a more relaxed manner to the next round of taper talk as the issues would be familiar. However, this might be too optimistic a view. Equity markets have continued to rally with the S&P reaching new record highs while 'carry' currencies such as the Australian dollar have regained lost ground, even though the advance has since been capped by the October FOMC statement not shutting the window on early tapering. Given that it has generally been a lacklustre year for most investors, the pressure is to jump back into riskier trades and generate some more performance before year end, even if the tail risk of early tapering might continue to loom. In this situation, any piece of weak data and any dovish communication could push tapering expectations further out and lure investors back into risk, thereby increasing the cost of the inevitable exit.

Linear vs. binary

Ideally, the Fed would gradually exit QE as the recovery gradually gains ground. Indeed, this seems to have been the idea behind the tapering talk in early summer, trying to prepare markets for an initial step later in the year. The belief had been that what investors cared about was the stock of QE purchases, i.e. the overall size of the Fed's balance sheet. As it turned out, however, investors seem to care about the flow of QE purchases instead. Or even worse, they seem to hold a binary view, equating the start of tapering to the end of QE, which means positioning does not adapt in linear, but an abrupt way. It therefore does not matter much whether the initial reduction would be $10bn or $20bn as the market would read any move, whatever the number, as a signal that the monetary policy super tanker had started to turn. Or as St. Louis Fed President Bullard put it last week, "changes in the pace of asset purchases have a very similar financial market effect as changes in the policy rate during more normal times", meaning that any tapering acts very much like a conventional rate hike. "The Committee needs to either convince markets that the two tools are separate, or learn to live with the joint effects of tapering on both the pace of asset purchases and the perception of future policy rates". Bullard seems to believe that the Fed has to live with the joint effects, which would suggest that the hurdle for tapering is much higher than initially thought.

A clash of central banking traditions

So what should the Fed do? Few central bankers would dispute that there are risks to keeping nonconventional policy measures in place for an extended period of time. In fact, the marginal benefits in terms of the economic impact seem to be declining, while the risks in terms of asset bubbles and other distortions seems to be increasing. Many would also argue that keeping 'emergency measures' in place beyond the actual 'emergency' sends out a bearish signal to investors, keeping confidence down. Central bankers in the European, or more specifically the Bundesbank tradition, would thus argue that given the doubtful benefits of QE together with the increasing longer term risks, the policy should be stopped as soon as possible. The Anglo-Saxon tradition, however, would seem more willing to use asset prices as a tool to support economic activity, and have a higher willingness to accept the risk of bubbles. Indeed, a fear of an asset price shock appears to have been what kept the Fed from taking the plunge in September, and might continue to hold them back for some time. The majority of the FOMC might be seeing propping up asset prices as a second best way to keep sentiment up, in the absence of a convincing economic recovery as the first best solution.

Policy trap

A pessimist might see the Fed facing a lose-lose situation, a veritable policy trap. The only scenario in which a relatively painless escape from the trap would be possible is one in which the economic recovery gains ground and becomes robust relatively quickly. This seems exactly what equity markets are pricing in, i.e. a world in which global economic activity will seamlessly take over from QE as a driver of risky assets. UBS Economics has been drawing a picture that looks fairly close to such a benign scenario, expecting a slow but steady acceleration of global growth over the next two years. Monetary policy accommodation could then be withdrawn gradually, avoiding substantial market turmoil (UBS Global Economic Outlook 2014-2015, 28 October). Viewed from this perspective, the likelihood of the Fed unduly fuelling asset bubbles might thus be considerably higher than the one of prematurely reducing QE and triggering market turmoil, particularly as the track record of the Bernanke Fed, as well as the reputation of incoming Chair Yellen, would suggest that monetary policy in the US will err on the easy side for some time to come. All of this might continue to support risky assets and weigh on the dollar, but also increase the risk of a crash once QE inevitably comes to an end.

Conclusions

The September decision suggested a Fed more worried about the fragile recovery than about the potential for asset bubbles and other longer term problems associated with extended liquidity injections. Whereas it had originally assumed that a gradual tapering would result in a gradual market reaction, it now appears that the situation is much more binary. If so, the hurdles for tapering might be substantially higher than originally thought.

For investors, the situation is a very challenging one: should they position for a QE world in which risky assets perform well, or for a QE-free world in which risky assets suffer? For the Fed, the ideal scenario might be one where they succeed in keeping the tapering threat alive without actually going there, thereby avoiding both of the above risks. For investors, the resulting low activity and low volatility environment might be challenging.

For the dollar, the future of QE seems crucial. A clean exit sometime next year would be a major positive driver and this is what investors generally appear to position for, or at least believe in. However, the danger may be that these hopes will continue to be disappointed by a risk-averse Fed, which could thus extend the dollar's underperformance for quite some time.

Silver and Gold Prices Held Support with the Gold Price Closing at $1,308.40

Posted: 07 Nov 2013 03:33 PM PST

Gold Price Close Today : 1308.40
Change : -9.30 or -0.71%

Silver Price Close Today : 21.639
Change : -0.107 or -0.49%

Gold Silver Ratio Today : 60.465
Change : -0.130 or -0.21%

Silver Gold Ratio Today : 0.01654
Change : 0.000036 or 0.22%

Platinum Price Close Today : 1455.00
Change : -10.60 or -0.72%

Palladium Price Close Today : 758.60
Change : -5.70 or -0.75%

S&P 500 : 1,747.15
Change : -23.34 or -1.32%

Dow In GOLD$ : $246.37
Change : $ (0.66) or -0.27%

Dow in GOLD oz : 11.918
Change : -0.032 or -0.27%

Dow in SILVER oz : 720.64
Change : -3.49 or -0.48%

Dow Industrial : 15,593.98
Change : -152.90 or -0.97%

US Dollar Index : 80.850
Change : 0.360 or 0.45%

What did the silver and GOLD PRICES do today? Well, for all the bubbling and bloviating about the higher dollar, they did no more than fall back to the bottom of the same range they've been trading in for more than a week.

Think about those stock index losses today when you consider that silver fell only 0.5% or 10.7 cents to 2163.9 while the GOLD PRICE fell 0.7% or $9.30 to $1,308.40.

Do those numbers sound familiar? Well, I'll be durned. The gold price gained $9.70 yesterday, and lost $9,30 today, and closed near $1,308 again. The SILVER PRICE lost 10.7c today and gained 13.2c yesterday, and is right hear around 2160c again.

But take this home: they did not break that support today. They held. Both did sort of puncture my uptrend line, but closed right at it. Pretty good, all things considered.

All this monetary folly, this criminal lunacy, will not end well. It's liable to break out in a hyperinflation, and whatever happens the US government will default and after the dust settles, the dollar won't be the reserve of anything anymore.

Only protection I know is to convert US dollars to silver and gold. But what do I know? I'm only a natural born durn'd fool from Tennessee. What am I compared to all them Harvard and New York smarties that have never turned a peg or earned a paycheck a day in their lives? Why, I'm so durned ignerunt I can't even understand how they make anvils fly.

Every time I look at the stock market, I feel like a tee-totaling celibate at a Roman orgy: I just don't see nothing that interests me.

Yesterday I mentioned that the stock index choir was singing out of tune, Dow making new highs and other indices down. Well, today they puked all over their choir robes, to wit:

Dow lost 152.90 or 0.97% to 15,593.98

S&P500 lost 23.34 or 1.32% to 1,747.15

Nasdaq lost 74.62 or 1,90% to 3,857.33

Nasdaq 100 lost 63.97 or 1.89% to 3,321.41

Russell 2000 lost 19.54 or 1.78% to 1,079.09.

Wilshire 5000 lost 276.11 or 1.47% to 18,548.79.

You all can brag about your outsized stock gains and all the pointy-shoe types on Wall Street can puff out their chests, but this market is floating on hot money, not economic outlook, and is as nervous as a lame mouse at a cat convention. And it will probably get worse tomorrow.

Andith the twisted logic of a basement full of mouth-foaming, hair-tearing lunatics, reported US GDP rose today and sent the dollar shooting up. Now think about that: back in July the yankee government announced it was "revising" the way it figures GDP, which being translated is, "we're jimmying the numbers so you oafs won't realize how badly we are shafting you." There's only one way you can tell a government spokesman is lying: are his lips moving? GDP numbers have now become as deceptive and meaningless as unemployment numbers or government deficit projections or Viet Nam war casualty reports.

Anyway, the press spun it this way: if GDP improves, the Fed can "taper" sooner and stop injecting so much hot new money. Tennessee hogwash. They've got the stock market and economy so addicted to Quantitative Easing right now there's no way they can stop. No way. Remember, I said it, and you can quote me. Write it on the wall, hoping you can get to rub my nose in it later. You won't.

The very thought of Fed tapering today gave the entire stock market world the wastebasket heaves.

Add to this panic the ECB which lowered its interest rate today to a number nearer zero than it already was: 0.25%. Dollar index jumped to 80.85, up 36 basis points or 0.45%, and it pushed the euro off a cliff. Literally. Euro dropped 0.73% to $1.3416, headed for its 200 Dma ($1.3231) and further infamy and humiliation. After all, the Europeans have the world's second most over-indebted and putrescent economy and most rotten banks (after Japan), and their currency now pays no more interest than the US dollar. What I can't parse because there's something I'm not seeing is that the yen reversed mightily upward, gaining 0.61% to 101.96 cents/Y100, with a high not far from the 102.60 200 DMA. I don't know what drove the yen higher and I don't care, since I wouldn't buy yen with YOUR money.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 2013, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. Be advised and warned:

Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Silver and Gold Prices Held Support with the Gold Price Closing at $1,308.40

Posted: 07 Nov 2013 03:33 PM PST

Obama: "I Am Sorry" Americans Will Lose Their Existing Health Plan Because Of Obamacare

Posted: 07 Nov 2013 03:32 PM PST

Remember all those YouTube clips (the same medium used to nearly justify World War III) that caught the president lying again and again with promises and assurances everyone would be able to keep their existing insurance plan under Obamacare even though he knew full they wouldn't, until a week ago, thanks to what is left of the non-brownnosing media, as much was revealed to the general public? Well, it's time to come clean, and once again via clip. Moments ago, in an interview with NBC, the charming and very photogenic president said he was "sorry."

"I am sorry that they are finding themselves in this situation based on assurances they got from me," Obama told NBC News in an exclusive interview at the White House. "We've got to work hard to make sure that they know we hear them and we are going to do everything we can to deal with folks who find themselves in a tough position as a consequence of this."

Surely a good start to make sure "they know they are heard" is for nobody to lose their job over this fiasco, even those who claim full responsibility for the "debacle."

As for apologies, perhaps it would be more prudent to wait until 2014 when the true costs of this latest welfare Ponzi scheme are revealed for all to see and experience: then it will be a daily tirade of non-stop apologies. So let's just chalk today down to a general rehearsal.

Visit NBCNews.com for breaking news, world news, and news about the economy

There, there, Obama. All is forgiven. Just please tell Mr. Chairwoman to keep pushing that Nasdaq to its old time highs. Because who knows - without the daily distraction from the economic collapse this country finds itself in, an apology just may no longer be sufficient...

Marc Faber Warns "Karl Marx Was Right"

Posted: 07 Nov 2013 03:04 PM PST

Authored by Marc Faber, originally posted at The Daily Reckoning,

I would like readers to consider carefully the fundamental difference between a "real economy" and a "financial economy." In a real economy, the debt and equity markets as a percentage of GDP are small and are principally designed to channel savings into investments.

In a financial economy or "monetary-driven economy," the capital market is far larger than GDP and channels savings not only into investments, but also continuously into colossal speculative bubbles. This isn't to say that bubbles don't occur in the real economy, but they are infrequent and are usually small compared with the size of the economy. So when these bubbles burst, they tend to inflict only limited damage on the economy.

In a financial economy, however, investment manias and stock market bubbles are so large that when they burst, considerable economic damage follows. I should like to stress that every investment bubble brings with it some major economic benefits, because a bubble leads either to a quantum jump in the rate of progress or to rising production capacities, which, once the bubble bursts, drive down prices and allow more consumers to benefit from the increased supplies.

In the 19th century, for example, the canal and railroad booms led to far lower transportation costs, from which the economy greatly benefited. The 1920s' and 1990s' innovation-driven booms led to significant capacity expansions and productivity improvements, which in the latter boom drove down the prices of new products such as PCs, cellular phones, servers and so on, and made them affordable to millions of additional consumers.

The energy boom of the late 1970s led to the application of new oil extracting and drilling technologies and to more efficient methods of energy usage, as well as to energy conservation, which, after 1980, drove down the price of oil in real terms to around the level of the early 1970s. Even the silly real estate bubbles we experienced in Asia in the 1990s had their benefits. Huge overbuilding led to a collapse in real estate prices, which, after 1998, led to very affordable residential and commercial property prices.

So my view is that capital spending booms, which inevitably lead to minor or major investment manias, are a necessary and integral part of the capitalistic system. They drive progress and development, lower production costs and increase productivity, even if there is inevitably some pain in the bust that follows every boom.

The point is, however, that in the real economy (a small capital market), bubbles tend to be contained by the availability of savings and credit, whereas in the financial economy (a disproportionately large capital market compared with the economy), the unlimited availability of credit leads to speculative bubbles, which get totally out of hand.

In other words, whereas every bubble will create some "white elephant" investments (investments that don't make any economic sense under any circumstances), in financial economies' bubbles, the quantity and aggregate size of "white elephant" investments is of such a colossal magnitude that the economic benefits that arise from every investment boom, which I alluded to above, can be more than offset by the money and wealth destruction that arises during the bust. This is so because in a financial economy, far too much speculative and leveraged capital becomes immobilized in totally unproductive "white elephant" investments.

In this respect, I should like to point out that as late as the early 1980s, the U.S. resembled far more a "real economy" than at present, which I would definitely characterize as a "financial economy." In 1981, stock market capitalization as a percentage of GDP was less than 40% and total credit market debt as a percentage of GDP was 130%. By contrast, at present, the stock market capitalization and total credit market debt have risen to more than 100% and 300% of GDP, respectively.

As I explained above, the rate of inflation accelerated in the 1970s, partly because of easy monetary policies, which led to negative real interest rates; partly because of genuine shortages in a number of commodity markets; and partly because OPEC successfully managed to squeeze up oil prices. But by the late 1970s, the rise in commodity prices led to additional supplies, and several commodities began to decline in price even before Paul Volcker tightened monetary conditions. Similarly, soaring energy prices in the late 1970s led to an investment boom in the oil- and gas-producing industry, which increased oil production, while at the same time the world learned how to use energy more efficiently. As a result, oil shortages gave way to an oil glut, which sent oil prices tumbling after 1985.

At the same time, the U.S. consumption boom that had been engineered by Ronald Reagan in the early 1980s (driven by exploding budget deficits) began to attract a growing volume of cheap Asian imports, first from Japan, Taiwan and South Korea and then, in the late 1980s, also from China.

I would therefore argue that even if Paul Volcker hadn't pursued an active monetary policy that was designed to curb inflation by pushing up interest rates dramatically in 1980/81, the rate of inflation around the world would have slowed down very considerably in the course of the 1980s, as commodity markets became glutted and highly competitive imports from Asia and Mexico began to put pressure on consumer product prices in the U.S. So with or without Paul Volcker's tight monetary policies, disinflation in the 1980s would have followed the highly inflationary 1970s.

In fact, one could argue that without any tight monetary policies (just keeping money supply growth at a steady rate) in the early 1980s, disinflation would have been even more pronounced. Why? The energy investment boom and conservation efforts would probably have lasted somewhat longer and may have led to even more overcapacities and to further reduction in demand. This eventually would have driven energy prices even lower. I may also remind our readers that the Kondratieff long price wave, which had turned up in the 1940s, was due to turn down sometime in the late 1970s.

It is certainly not my intention here to criticize Paul Volcker or to question his achievements at the Fed, since I think that, in addition to being a man of impeccable personal and intellectual integrity (a rare commodity at today's Fed), he was the best and most courageous Fed chairman ever.

However, the fact remains that the investment community to this day perceives Volcker's tight monetary policies at the time as having been responsible for choking off inflation in 1981, when, in fact, the rate of inflation would have declined anyway in the 1980s for the reasons I just outlined. In other words, after the 1980 monetary experiment, many people, and especially Mr. Greenspan, began to believe that an active monetary policy could steer economic activity on a noninflationary steady growth course and eliminate inflationary pressures through tight monetary policies and through cyclical and structural economic downturns through easing moves!

This belief in the omnipotence of central banks was further enhanced by the easing moves in 1990/91, which were implemented to save the banking system and the savings & loan associations; by similar policy moves in 1994 in order to bail out Mexico and in 1998 to avoid more severe repercussions from the LTCM crisis; by an easing move in 1999, ahead of Y2K, which proved to be totally unnecessary but which led to another 30% rise in the Nasdaq, to its March 2000 peak; and by the most recent aggressive lowering of interest rates, which fueled the housing boom.

Now I would like readers to consider, for a minute, what actually caused the 1990 S&L mess, the 1994 tequila crisis, the Asian crisis, the LTCM problems in 1998 and the current economic stagnation. In each of these cases, the problems arose from loose monetary policies and excessive use of credit. In other words, the economy — the patient — gets sick because the virus — the downward adjustments that are necessary in the free market — develops an immunity to the medicine, which then prompts the good doctor, who read somewhere in The Wall Street Journal that easy monetary policies and budget deficits stimulate economic activity, to increase the dosage of medication.

The even larger and more potent doses of medicine relieve the temporary symptoms of the patient's illness, but not its fundamental causes, which, in time, inevitably lead to a relapse and a new crisis, which grows in severity since the causes of the sickness were neither identified nor treated.

So it would seem to me that Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures (and as the "financial economy" referred to earlier grows like a cancer) and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society.

Not so, Bernanke and co. argue, since central banks can print an unlimited amount of money and take extraordinary measures, which, by intervening directly in the markets, support asset prices such as bonds, equities and homes, and therefore avoid economic downturns, especially deflationary ones. There is some truth in this. If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.

It is clear that such policies do lead to depreciation of the currency, either against currencies of other countries that resist following the same policies of massive monetization and state bailouts (policies which are based on, for me at least, incomprehensible sophism among the economic academia) or against gold, commodities and hard assets in general. The rise in domestic prices then leads at some point to a "scarcity of the circulating medium," which necessitates the creation of even more credit and paper money.

Why Gold?

Posted: 07 Nov 2013 02:37 PM PST

Watching this year's price action alone, more commentators say gold holds no investment value...

WHY GOLD? Human beings love to debate, but sadly sometimes it crosses a line and turns argumentative, write Miguel Perez-Santalla and Adrian Ash at BullionVault.

That's what is happening right now with the debate over gold investing.

There have been several high-profile articles, most recently in the Wall Street Journal, saying you should eliminate gold as a worthwhile part of your investment portfolio. Why? Primarily because of this year's lower price.

Against that idea, many bloggers and private investors, wondering why gold has fallen in price, say that it shouldn't have dropped. There must be some conspiracy driving down prices when money-printing and our still-weak economy should be driving it higher. But that still puts current price performance front and center in the debate over why gold should or shouldn't feature in your portfolio. So it misses several key points about why gold is uniquely valuable as an investable asset.

We'd like to look here at some of the common arguments now offered for why gold should not figure in your investment strategy. Yes, working at BullionVault, the physical gold and silver exchange, we're biased. But there are also people who always say gold doesn't warrant your investment dollars.

To have any intelligent understanding of your own position, you need to welcome debate. That way you can challenge your own opinions and, if you find they're correct, improve your arguments too. Such as why gold investing continues – in our view – to warrant investors' attention.

#1. Gold Does Not Yield Anything

When you buy any commodity outright you can no longer deposit it with a bank or investment company to earn interest. If you are looking to yield a dividend or interest then physical gold ownership will not yield anything. Yet that is only half the story.

Gold ownership yields security for the investor, the type of security a person seeks from insurance. It is the only physical form of insurance which both exists to counterweight your investments in bonds and stocks, and which is also a liquid, easily traded asset. Gold is also non-correlated with those more "mainstream" markets. Meaning that its price moves indepedently of where other investment prices are heading. So the goal for most investors in holding gold is first as a safety net for their other assets. This metal has held value for thousands of years, and will hold value for thousands more.

#2. Gold Is Worth Only What the Next Investor Will Pay for It

This statement is weak from the onset. There are no stocks, bonds, commodities or goods that are worth more than the next person will pay. That being said gold has something that the others do not. Gold is 100% transparent.

Why? Gold is unlike other easily traded investments because it is only one thing, a pure and precious rare commodity which requires little space for storing great value. This commodity has acted as money for thousands of years. In fact after World War II, the Bretton Woods agreement used gold to bring brought stability and sanity to the world's currency markets once more.

If that history of human use doesn't give intrinsic value to gold, why would you give that title to any other asset? People had their life savings in Lehman Brothers stock. Other people invested in mortgage-backed securities or were holding Argentine bonds or got sold the claims of Bernard L. Madoff Investment Securities LLC.

Though data may tell a story it does not always tell the whole truth. Stocks and bonds, though there are many facts available about them, are never 100% transparent. It is much like a hiring a baseball player. You may have his statistics and you may place him in the perfect spot on the best team in the league. Yet he may perform poorly due to an unknown injury or a problem with the change of venue or any other number of unknown reasons. This is the same for stocks and bonds. Though we have their statistics, we never know when some problem may cause some of these instruments to fail.

#3. Gold Is Not a Good Hedge for Stocks, Nor Inflation

Anyone looking at the 1980s and '90s and concluding that gold is a poor inflation hedge misses the point. You didn't need an inflation hedge when cash-in-the-bank paid 5% above and beyond the rate of inflation each year, as it did on average for US and UK savers for the last twenty years of the 20th century.

But why doesn't gold make a good hedge for stock market investments? The frequent comparison is usually to the stock market overall, or the Dow Jones Industrial Average. Never mind that gold and stocks have, over extended periods, gone in opposite directions. That measure is not a just number to use. Because the stock indexes frequently change. This is also true of the overall market where stocks are delisted if they underperform or go bankrupt. If these types of stocks were kept on how would the indexes and averages have changed? The stock market of 1989 did not have the same listed companies as that of 1996, 2000 or 2013.

In contrast, the gold of 1989 was the same gold of 1996, 2013 and even 2000 BC. Gold does not change and its supply cannot be expanded (or reduced) at will. This is why gold functions so well as a form of exchange and transfer of value. It holds value due to its permanent unchangeable form. World history has shown us again and again that in the final analysis; only gold out of all investable assets holds value in catastrophic situations.

You can lose value owning gold if you buy high and sell lower, but you never lose it all. You could easily pick out a point in any chart of the stock market where an investor could have bought and then another time where you may have sold and lost money. There is no point to this kind of example. Because it never speaks to an individual's overall performance with their assets. They may have liquidated their stock at the low price because they needed the cash to invest in a particular business or real estate opportunity. All assets including gold have to be looked upon as part of a strategy for the investor and not as independent pieces of life's asset management puzzle.

#4. Gold is an Article of Faith, Not Rational Investing

Some people denigrate gold to a relic of the past in terms of its economic importance. The most recognized of today's detractors is perhaps Nouriel Roubini, the famed NYU economist who repeats John Maynard Keynes' cry of the 1930s that gold is a "Barbarous Relic". Still others go further, saying that choosing to own investment gold is anti-social. The argument is that there is no longer any need for gold as a form of exchange, nor as a store of value. Governments and central banks have done away with the need for gold. Which is why gold's only value today lies in the jewelry and electronics trades.

In addition, other analysts write about gold being a faith-based investment and mock it as a type of religion. There are certainly those that invest on faith, and they can be loud, giving the impression that investors in gold are extreme. But this can also be said about the defense of the US Dollar. That currency in the end is only a piece of paper that has no other use than that ascribed by the government. If you put fire to a dollar bill it will turn to ashes and float away. But if you put fire to gold, at the right temperature you get a liquid metal that not only is useful to the arts but important in the electronics and high technology industries.

"We may one day become a great commercial and flourishing nation," wrote George Washington, the first President of the United States of America, on the subject of paper money in a letter to Jabez Bowen, Rhode Island, on 9 January 1787. "But if in pursuit of the means we should unfortunately stumble again on unfunded paper money or similar species of fraud, we shall assuredly give a fatal stab to our credit in its infancy.

"Paper money will invariably operate in the body of politics as spirit liquors on the human body. They prey on the vitals and ultimately destroy them."

It is difficult for those in power to try to overcome this truth, embodied by all of recorded economic history. And it becomes more ludicrous as governments also hold gold bullion in vast amounts.

The modern central banking system, now more than 100 years old, may seem to shape this perception. Yet in the last decade central bankers themselves, albeit in Asia and other emerging economies, have been significant buyers of the yellow metal. Western governments as a group have stopped selling gold.

Why? Economic chaos causes distrust amongst governments and central banks, leading those in power to seek out avenues to strengthen their position with other parties. The position central banks look for to strengthen their balance sheet and ensure their place in the global economy is gold. The United States rose to dominance worldwide alongside its dominant gold reserves. Now becoming a market economy, and hoping to become the next big global economy, China is also building its central bank gold reserves. It becomes obvious that gold has a very deep, very human value, ascribed to it by history and by all major powers today.

Value isn't the same as price, of course. Which is why, perhaps, gold investing remains such a mystery to some people.

Why Gold?

Posted: 07 Nov 2013 02:37 PM PST

Watching this year's price action alone, more commentators say gold holds no investment value...

WHY GOLD? Human beings love to debate, but sadly sometimes it crosses a line and turns argumentative, write Miguel Perez-Santalla and Adrian Ash at BullionVault.

That's what is happening right now with the debate over gold investing.

#1. Gold Does Not Yield Anything

#2. Gold Is Worth Only What the Next Investor Will Pay for It

#3. Gold Is Not a Good Hedge for Stocks, Nor Inflation

#4. Gold is an Article of Faith, Not Rational Investing

"Paper money will invariably operate in the body of politics as spirit liquors on the human body. They prey on the vitals and ultimately destroy them."

It is difficult for those in power to try to overcome this truth, embodied by all of recorded economic history. And it becomes more ludicrous as governments also hold gold bullion in vast amounts.

Value isn't the same as price, of course. Which is why, perhaps, gold investing remains such a mystery to some people.

Why Gold?

Posted: 07 Nov 2013 02:37 PM PST

Watching this year's price action alone, more commentators say gold holds no investment value...

WHY GOLD? Human beings love to debate, but sadly sometimes it crosses a line and turns argumentative, write Miguel Perez-Santalla and Adrian Ash at BullionVault.

That's what is happening right now with the debate over gold investing.

#1. Gold Does Not Yield Anything

#2. Gold Is Worth Only What the Next Investor Will Pay for It

#3. Gold Is Not a Good Hedge for Stocks, Nor Inflation

#4. Gold is an Article of Faith, Not Rational Investing

"Paper money will invariably operate in the body of politics as spirit liquors on the human body. They prey on the vitals and ultimately destroy them."

It is difficult for those in power to try to overcome this truth, embodied by all of recorded economic history. And it becomes more ludicrous as governments also hold gold bullion in vast amounts.

Value isn't the same as price, of course. Which is why, perhaps, gold investing remains such a mystery to some people.

GATA Chairman Murphy interviewed by TF Metals Report

Posted: 07 Nov 2013 02:09 PM PST

5:07p ET Thursday, November 7, 2013

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy was interviewed for a half hour today by the TF Metals Report's Turd Ferguson, taking questions from TF Metals Report subscribers and discussing, among other things, the extremely anomalous behavior of the gold and silver markets. The interview can be heard at the TF Metals Report's Internet site here:

http://www.tfmetalsreport.com/podcast/5228/a2a-bill-murphy-gata

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Gold Daily and Silver Weekly Charts - ECB Surprise Cut, Non-Farm Payrolls Tomorrow

Posted: 07 Nov 2013 01:14 PM PST

Gold Daily and Silver Weekly Charts - ECB Surprise Cut, Non-Farm Payrolls Tomorrow

Posted: 07 Nov 2013 01:14 PM PST

How to Be Your Own Central Bank

Posted: 07 Nov 2013 01:10 PM PST

'Fedspeak' was first used to describe the long, often vague statements by Alan Greenspan on changes in Federal Reserve policy. In fact, Greenspan claims opaque answers to straight forward questions were part of the job as he did not want to make markets overreact. In his words, "What tends to happen is your syntax collapses… All of a sudden, you are mumbling. It often works. I created a new language which we now call Fedspeak. Unless you are expert at it, you can't tell that I didn't say anything." Recently, in a departure from 'Fedspeak', Central bankers around the world have made their intentions known about how they plan to manage their foreign exchange reserves, giving investors a rare glimpse into how to manage their own portfolios.

Daniel Mminele, Deputy Governor of the South African Reserve Bank, recently gave his view on the impact of the Federal Reserve tapering of its bond purchases. He believes that asset purchases by the Fed have significantly elevated prices for US Treasuries. With more than 60% of South African foreign exchange reserves held in US dollars, he has a lot to lose. To lessen the impact of tapering, the South African Reserve Bank will be diversifying into new asset classes and new currencies outside of the US dollar. In simpler terms, tapering will lower the value of their reserves and they are beginning to move out of US dollar assets now.

Further clarity came from the European Central Bank's Mario Draghi when asked by Tekoa da Silva recently his thoughts on gold as a reserve asset he responded, "I never thought it wise to sell it [gold], because for central banks this is a reserve of safety… it gives you a value-protection against fluctuations against the dollar. So that's why central banks which have started a program for selling gold a few years ago, substantially I think stopped… most of the experiences of central banks that have leased or sold the stock of gold about ten years ago, were not considered to be terribly successful from a purely money viewpoint." That is a surprisingly clear endorsement of gold as an asset for central banks – no 'Fedspeak' here – and a clear endorsement for banks to hold some gold.

In contrast to the recent directness from The Reserve Bank of South Africa and the candid comments from Mr. Draghi, we move to the 'Nospeak' policy on gold from China. The last time China reported gold holdings was in April 2009 with 1,054 metric tons. However as we have opined previously "you have to watch what they do, not what they say". China is on pace to consume a record amount of gold this year, which may be partly due to the central bank diversifying its foreign-exchange reserves.

The continued legislative wrangling and a possible debt default next year have only deepened concerns about the outlook for the US dollar and Treasuries. But you won't hear that from the Peoples Bank of China. While officials have vehemently denied adding to their gold holdings, trade statistics tell a different story. As of September 2013 China has imported a total of 826 tonnes so far this year, double that of the first nine months of 2012, well on the way to being the largest consumer of gold in 2013.

It is hard for us to believe that none of this gold has found its way to the Peoples Bank of China. In fact, Andrew Cosgrove and Kenneth Hoffman of Bloomberg industries estimate that Chinese central bank holdings are likely closer to 2,710 metric tonnes – a significant increase over their disclosed amount. But no clarifying statements are expected from the Chinese any time soon.

If we were to cobble together the advice from Mr. Mminele, Mr. Draghi and the 'Nospeak' implications from the Chinese, we can create a 'how-to-manage' your own portfolio manual just as central banks do:

Begin to diversify your holdings outside of the US dollar because Federal Reserve tapering at some point in the future will have deleterious effects on dollar holdings.

Own some gold as a reserve of safety and value-protection against fluctuations in the US dollar.

Accumulate your store of gold slowly over time.

Never disclose how much gold you own and NEVER sell it.

If you are ever asked direct questions about your ownership or intentions on purchasing gold, speak but don't say a thing.

This is sage investment advice from the world's top bankers, which unfortunately, they will never share with you.

David Franklin

For The Daily Reckoning

Note: This originally appeared over at Sprott’s Thoughts

P.S. Readers of The Daily Reckoning email version get all sorts of great tips on protecting your wealth and personal liberty from rising taxes and invasive government. Subscribe today by clicking here.

Nolan Watson: “Institutional, Generalist & Value Funds Are Now Preparing To Jump In On Gold & Miners”

Posted: 07 Nov 2013 12:58 PM PST

I had the opportunity today to review Sandstorm Gold's Q3 2013 conference call, led by the company's co-founder, President & CEO, Nolan Watson.

Nolan historically served as the first employee and CFO at Silver Wheaton, and in the years since, earned numerous industry accolades and business recognitions.

As usual, the Sandstorm Q3 conference call provided an interesting "surgeon's look" at the heart of the junior and mid-tier resource capital markets, and of particular note during this call, Nolan reported that investment capital is now in the early stages of

This posting includes an audio/video/photo media file: Download Now

Trust Gold & Silver, Not Governments

Posted: 07 Nov 2013 12:54 PM PST

But also dump all but the strongest stocks you own, says this analyst...

LEONARD MELMAN is publisher of The Melman Report, and has been writing about precious and base metals for more than two decades.

Here, the monthly columnist for California-based ICMJ's Prospecting and Mining Journal and Vancouver's Resource World Magazine, talks to The Gold Report about his focus on how political and financial considerations impact the world of mining and the prices of the metals.

The Gold Report: You've expressed astonishment at the record highs of world stock exchanges. Given the sluggish world economy, can we expect this trend to end, or have equities become completely disconnected from economic reality?

Leonard Melman: Equities have become somewhat disconnected from economic reality. We've heard comments from the European Central Bank, the US Treasury and the Bank of Japan calling for more inflation because dramatic action is needed to improve the world economy. How does that coincide with the bull markets in equities?

TGR: Is there a connection between these bull markets and quantitative easing (QE)?

Leonard Melman: People now believe that central banks like the Federal Reserve are the only means of stimulating economic activity. Therefore, because QE is likely to continue, investors are buying stocks. I cannot think of any other logical reason for these bull markets. Companies are not rapidly increasing sales. They're not rapidly developing new markets. They're not hiring massive numbers of new workers. It's a stagnant economy, and yet the Dow is up almost 20% this year.

TGR: You said during your presentation at the Cambridge House conference in Spokane that without visible inflation, a strong metals rally might be difficult. John Williams of ShadowStats.com argues that the US is already undergoing highly visible inflation and that the official inflation measurement is so politically perverted as to be practically useless. What's your view?

Leonard Melman: I do agree with Williams that there is some underreporting of inflation. If inflation were reported accurately, all the automatic increases in benefit payments that would then ensue, such as higher Medicare payments, higher payments to doctors, and most important, higher Social Security checks, could bankrupt the government.

That said, I don't think we have anything like the inflation of the late 1970s and early 1980s. Back then, every two weeks you'd walk into a restaurant, and they'd have a new menu with higher prices. Interest rates were horribly high. Gasoline prices have actually been in decline now for quite a few months. There isn't the scary, visible price inflation we saw 30 years ago. Inflation of maybe 10, 12, 15% or more will generate the psychological background necessary for rampaging gold and silver bull markets.

TGR: To what extent can the US government continue to persuade investors that all is well, and thus keep gold prices and silver down?

Leonard Melman: That is the absolute crux of the problem. Most people have tremendous faith in their government to solve problems. But I feel, I hate to say, that a major breakdown is truly beginning to develop. If it does, then we have the potential for massive disillusionment leading to panic. And when people panic, they turn to gold and silver because they begin to lose faith in their currencies.

TGR: A recent New York Times article lauded inflation as good for people. What is your take on it?

Leonard Melman: Inflation, of course, accompanies virtually every historic gold bull market. There are some who say that more inflation means perhaps just 2 or 3% instead of 1%, but once you open that spigot, it is very hard to turn it off.

We're seeing that in the budgetary debates. The US is still running a $900 billion ($900B) per year deficit. How on earth is it going to cut out $900B in programs and still keep the government operating? It can't.

TGR: How long can the debt problem be managed?

Leonard Melman: For 150 years, the US had a currency of gold. And so the reputations of the US Dollar and the US government were unchallenged. If something was good, it was as sound as a Dollar. The Dollar itself was as good as gold. However, the Dollar is no longer backed by gold, and this has resulted in runaway debt.

TGR: What about the role of government in the mining sector?

Leonard Melman: Government has the capacity not only to do good, but also to do immense amounts of harm. An ocean of overregulation is having a terrible effect on mining. Some of the juniors I know are just in agony, especially now, when metals prices are weak. How in the world can they raise enough money to finance all the regulations, reports, applications and filing fees they have to pay in addition to important exploration work?

I'll give you some examples of how government regulations affect mining. In Mexico, Congress is seriously considering a 7.5% mining royalty. Companies have said that if this tax is enacted, they will pull many of their operations from Mexico and will not invest new money. In Quebec, the leftist Parti Québécois government has made prospecting so difficult that one oil company manager actually said that people are more likely to invest in Africa and Iraq than Quebec.

TGR: Several mining analysts interviewed recently by The Gold Report have argued that it's time for investors to dump all but the strongest stocks in their portfolios. Do you agree?

Leonard Melman: I do. There are two kinds of juniors that still retain investment consideration. The first has an adequate treasury to see it through the next year or two without having to raise money, if it takes that long to restore a major bull market.

The second kind, even better, has a producing property and is bringing in cash, which allows it to explore and develop other properties, thus enabling expansion without ruinous share dilution. I have seen a great number of offerings in the last few months on the order of 10 million shares at $0.03/share just to raise $300,000. This keeps the office going for three more months before the company has to go to the market again and maybe offer 15 million shares at $0.02/share just to raise another $300,000. It's ludicrous.

TGR: After these companies pay their brokerage fees, they're not keeping much of this money, are they?

Leonard Melman: Exactly. Juniors are no longer cutting fat; they're down to the sinew and bones. Juniors once prospered by finding a project, immediately developing it and releasing a string of news releases. If these were exciting, share prices would rise. Juniors would use that capital to accelerate exploration and development, go quickly through to a preliminary economic assessment (PEA) and a feasibility study and then bring the property into production.

We just don't see much of that anymore. The Australian Stock Exchange and the TSX Venture Exchange have a whole host of companies that are dead in the water, and these exchanges may be at risk themselves because they need income (registration and filing fees) from active companies to remain in business.

TGR: You said at the Cambridge House conference that present stock price levels offer major opportunity and upside breakouts.

Leonard Melman: Let me explain that comment. When you consider the worth of all other investments versus precious metals, it's on the order of 99.4% to 0.6%. If even 3% of that 99.4% switched to precious metals, the leverage could be absolutely enormous: Multiples of 5, 10 or even 15 times present quotes could occur quite rapidly. That, I think, is the kind of potential that could exist at the early stages of a major bullish turn in the metals.

TGR: Regarding mining in Mexico, according to the Oct. 31 Financial Post, "Shares in several Canadian miners with Mexican operations are swooning after Mexico's Senate on Tuesday gave its general approval of tax reforms hard sought by President Enrique Peña Nieto."

Leonard Melman: I saw that. Some politicians still believe mining is nothing but a bird to be plucked, but mining production is often a goose that lays golden eggs, and such taxation measures could kill it. These politicians don't understand mining, which, to my mind, is the greatest creator of genuine wealth that exists on this earth. Take a place in Mexico like La Preciosa in Durango state. It once was a flat piece of territory that generated nothing. Then mining companies came, spent a great deal of capital and generated huge numbers of jobs and growing prosperity.

You would think governments would love that. Instead, they just try to milk every penny of taxation they can. It's short-sighted and destructive. I've seen it in other countries: Chile, Bolivia, Guyana.

TGR: Would Mexico's new mining regime threaten juniors?

Leonard Melman: I don't think it will have a very strong effect on them because most of the burden will fall on companies making very sizable profits. It's the long range that I don't like. Short term, I don't think there's a real negative impact.

TGR: Not that long ago, rare earths and other critical metals were all the rage among investors. How do you rate them now?

Leonard Melman: There is a great deal of uncertainty. After the Chinese announced they were going to start withholding supply to the West, rare earth stocks shot to the moon, and investors made a great deal of money. Then many of those shares came back down, virtually as fast as they went up. I'm a little leery of the group because three problems exist. The first is that refining rare earths is a very difficult process. Second, there is some difficulty in developing identifiable markets. The third problem is nanotechnology. As the size of end products keeps shrinking, so the quantity of metal needed for each electronic device is also shrinking.

TGR: When can we expect a resurgence in precious metals?

Leonard Melman: I remember very clearly one of the worst bear markets in stock market history. It was from 1971 to 1974. The Dow dropped from about 1,070 to 570 by June 1974, when it then hit bottom. It bounced back to about 700 during the fall and then fell again to about 600 in very late 1974. The key point is that the second selloff terminated above the first. Then the bull market began. This is a technical pattern called a spread double-bottom.

Picture gold now. It fell from a high of $1935 per ounce in August 2011 to $1175 per ounce in June 2013. It then rallied to more than $1400 per ounce and now it has fallen again. The low of the second decline so far has been $1260 per ounce. So we have a technical pattern that's identical in basic form to that giant reversal in the Dow I mentioned above. I believe if we can exceed $1400 per ounce, technically we will have completed a major spread-double-bottom pattern that could be the prelude to a major precious metals bull move.

There is also one other technical point. A lot of important market move retracements are about 50%. The present golden bull market started in 2001 with gold at about $260 per ounce. It ran up to $1935 per ounce before this retracement. That's a gain of $1675 per ounce. Half of that would be about $840. If you subtract $840 from $1935, you get about $1100, which also indicates we could be in a zone where there would be a natural rebound. There are no guarantees in technical analysis – I should note I'm a member of the Canadian Society of Technical Analysts – but we do have indications that are well worth watching.

TGR: Leonard, thank you for your time and your insights.

Trust Gold & Silver, Not Governments

Posted: 07 Nov 2013 12:54 PM PST

But also dump all but the strongest stocks you own, says this analyst...

LEONARD MELMAN is publisher of The Melman Report, and has been writing about precious and base metals for more than two decades.

TGR: Is there a connection between these bull markets and quantitative easing (QE)?

TGR: To what extent can the US government continue to persuade investors that all is well, and thus keep gold prices and silver down?

TGR: A recent New York Times article lauded inflation as good for people. What is your take on it?

TGR: How long can the debt problem be managed?

TGR: What about the role of government in the mining sector?

TGR: Several mining analysts interviewed recently by The Gold Report have argued that it's time for investors to dump all but the strongest stocks in their portfolios. Do you agree?

TGR: After these companies pay their brokerage fees, they're not keeping much of this money, are they?

TGR: You said at the Cambridge House conference that present stock price levels offer major opportunity and upside breakouts.

TGR: Would Mexico's new mining regime threaten juniors?

TGR: Not that long ago, rare earths and other critical metals were all the rage among investors. How do you rate them now?

TGR: When can we expect a resurgence in precious metals?

TGR: Leonard, thank you for your time and your insights.

Gold Chart's Low Rhymes with History

Posted: 07 Nov 2013 12:50 PM PST

Ignore the nonsense, says this analyst. Looking at these gold charts...

FOR MONTHS we've been writing about the major bottom to come in precious metals, writes Jordan Roy-Byrne at TheDailyGold.

It appeared we finally saw it on the gold charts in late June as the metal and the stocks surged during the summer. Yet, these markets trailed off in August and it continued into October. The equities were down seven straight weeks. That gave way to an oversold bounce.

Unless precious metals can close above their October highs on a weekly basis, the outlook remains bearish. While this bear market is finally coming to an end, don't expect it to end quietly. At present gold looks eerily similar to both gold in 1976 and the SYP in 2009 prior to their major bottoms.

The first chart below shows gold in 1975 to 1976. Gold's sudden decline that began in August 1975 took it from over $160 per ounce down to $128 per ounce. It was a 20% drop in one month. After it rebounded it formed a marginal new low (A) and traded around $130 for about five months. Once gold failed at the declining 50-day moving average and lateral resistance it plummeted to its final low.

Gold's chart in 2013 has formed a very similar pattern. The first panic low occurred in April which was followed by another low several months later. Gold then recovered back above the first panic low to point B. Point C labels the decline below the first panic low and a temporary bottom. Just like in summer 1976, Gold rallied up to a strong confluence of resistance (lateral and 50-day moving average) and failed.

I've aligned both of the above plots on the same scale starting with their first panic low. The blue is gold in 1975-1976 and the black is today. The 1976 template has gold bottoming in early March. However, we can clearly see that Gold today is a few months ahead of that.

Next, take a look at the S&P stockmarket index bottom from 2008-2009. It followed the exact same pattern!

Let's compare the three situations. In gold from 1975-1976 its bearish consolidation (from first panic low to failure at resistance) lasted nine months and its final decline lasted two months.

In the S&P 500 from 2008-2009 its bearish consolidation lasted only four months and its final decline lasted no more than four weeks. Gold's bearish consolidation lasted about six and a half months.

So judging from this data on the gold chart today we could project the bottom to come in about six weeks.

There are a few more important things to note. Gold from 1975-1976 had a very weak rally from point A to B. It was in a weaker position and then consolidated for the longest. That is why it had the steepest final decline.

The S&P in 2009 consolidated for only four months. When it broke to a new low, it made its final low the next week. Like the S&P 500, gold today had a stronger rally from point A to B. Also, unlike the other two gold today has been in a bear market for over two years. Considering these things, I'd expect gold's final bottom to be more similar to the S&P in 2009 than gold in 1976.

How would this final decline in gold affect the gold stocks?

The chart below is a monthly chart of the HUI gold bugs index and the NYSE gold miners index (GDM) which is the parent of the GDX ETF. Both markets bottomed in late June not to far above the major support which dates back to 2004. In fact, we referenced this chart when we penned an editorial, one day before the June bottom. Maybe gold will break to a new low but the gold stocks won't. If the gold stocks do make a new low, this chart is telling you that it won't last for long. There is very strong support sitting right below the summer lows.

Unless gold is able to close above $1350 in the near-term on a weekly basis then consider the short-term trend bearish. Gold looks set to plunge to its final bottom. Gold bugs will cry manipulation, CNBC and Twitter types will be mocking the Peter Schiffs of the world and many will be calling for $900 gold.

I urge you to avoid all this nonsense and focus on one thing. Get yourself in position to take advantage of this bottom. It's the very smart money that is looking forward to buying this bottom. I suspect the coming bottom will be the one the typical huge rebounds originate from.

Gold Chart's Low Rhymes with History

Posted: 07 Nov 2013 12:50 PM PST

Ignore the nonsense, says this analyst. Looking at these gold charts...

FOR MONTHS we've been writing about the major bottom to come in precious metals, writes Jordan Roy-Byrne at TheDailyGold.

Next, take a look at the S&P stockmarket index bottom from 2008-2009. It followed the exact same pattern!

Let's compare the three situations. In gold from 1975-1976 its bearish consolidation (from first panic low to failure at resistance) lasted nine months and its final decline lasted two months.

In the S&P 500 from 2008-2009 its bearish consolidation lasted only four months and its final decline lasted no more than four weeks. Gold's bearish consolidation lasted about six and a half months.

So judging from this data on the gold chart today we could project the bottom to come in about six weeks.

How would this final decline in gold affect the gold stocks?

7 Years to New Gold Price Highs

Posted: 07 Nov 2013 12:41 PM PST

Never mind manipulation theories. Focus on the fundamentals, says Jeffrey Christian...

OUTSPOKEN critic of manipulation theories about silver and gold prices, Jeffrey Christian founded the CPM Group consultancy after serving as head of commodities research at J. Aron & Co., acquired by Goldman Sachs.

Here he speaks to Hard Asset Investor's managing editor Sumit Roy both about his latest attack on price manipulation claims, plus his outlook for silver and gold prices...

HardAssetsInvestor: Let's start off by discussing the story that's been making waves recently, the controversy between you and Andrew Maguire. Could you tell us the back story for those who may not be familiar? Who is Maguire? What is his relevance to the gold and silver market? And what is the controversy about?

Jeff Christian: Andrew Maguire is really just a tool. There are groups like the Gold Anti-Trust Action Committee (GATA) and others, who have formed this cottage industry to try and promote the concept of conspiracies to manipulate gold and silver prices.

I have said, as have others, that (a) there's no evidence of such manipulations in the market; and (b) these conspiracy theories are a giant distraction, which can be a very costly to investors.

You have investors who believe this stuff, and then they say, "Okay, well, the silver prices went from $5 to $50. But the conspiracy theorists tell me it's going to $400. So I should stay long." And now the price is $22. And they've lost a big opportunity to make profits or book profits.

We've said these guys are full of garbage. They pollute the precious metals markets intellectually. They distract the market from what are critical issues in the economy and financial markets and the fundamentals of the markets themselves.

In 2010, GATA introduced Andrew Maguire. They said he had decades of experience as a bullion banker at Goldman Sachs or some other unnamed bank. When he came forth in early 2010, he made all kinds of allegations against J.P.Morgan, saying they were trying to suppress the silver price and stuff like that.

A lot of people, not just CPM Group – the New York Times, Wall Street Journal, The Economist, ABC, CNBC, the Financial Times – said to Maguire, "Look. These are very big charges you're making against J.P.Morgan. You need to credentialize yourself. Because frankly, no one in the gold market has ever heard of you. None of the bullion dealers in London know you. They have no record of you ever having worked at Goldman Sachs or other banks. And what you say doesn't actually add up in the minds of people who have experience in these markets."

For these guys, their livelihood is collecting money from investors to support their ligations and their investigations of supposed manipulations. I'm hurting their livelihood by destroying their credibility and they have reacted hostilely in reaction to that.

But that is all a distraction from the real gold and silver fundamentals.

HAI: Let's talk about supply and demand. You've been characterized as somewhat bearish on the market. But that really depends on your time frame, right? I know you're actually quite bullish, over the long term. What do you expect for gold and silver prices over the next several years?

Christian: We issued a sell recommendation on gold and silver in January 2012. And on June 15 of this year, when the price of gold was $1390, we issued what we called a "qualified buy recommendation." We said, at the time, that we thought the price of gold could spike a little bit lower on an intraday basis. We said we thought it could go to $1240; it actually went to $1180 later in June.

When we issued our sell recommendation in early 2012, we said we thought the price would fall to an annual average price of $1300 to $1400 an ounce between 2013 and 2015. And then, depending on what's going on in the economic and political environment, we thought gold prices would likely start rising again after 2015.

That's still our view. We're looking at an average gold price this year of probably around $1420. Our expectation is that the price might average around $1320 next year, and then slightly higher in 2015.

Since we think that the economic and political environment is going to be hostile to consumers and companies and conventional investments, we think that after 2015, we could see gold prices start rising again, possibly reaching new record levels by 2020 to 2023.

We think silver would find a base somewhere above $16, maybe even above $17. That doesn't mean it can't spike below that on an intraday basis. But from a quarterly or annual average basis, we think silver prices probably find support around $17 an ounce.

HAI: How do you see supply reacting to the current low price environment? Are miners in trouble?

Christian: A lot of miners are suffering. Some of them are in trouble. But even the ones that aren't in trouble are suffering because their margins have fallen very sharply.

They're slashing their exploration and development budgets. Based on our database, the pipeline of projects that were slated to come on line between now and 2016 is about half of what it was at the beginning of the year. That's going to limit the growth in the long run.

In terms of the short run, you also have seen a very steep decline in gold and silver supply from scrap this year. That's a segment of supply that can turn itself off immediately, as opposed to mining, where you have a stickiness in production relative to price.

HAI: I want to get your sense on ETFs and the demand for those products. We've seen a big drop in gold ETF holdings this year. But silver ETF holdings seem to be going the other way. Why the divergence? And what is your outlook for ETF demand?

Christian: We think what you saw in the silver market was that a lot of long-term silver bullion holders swapped their physical holdings for shares of the ETFs. These are longer-term investors. And those people continue to buy silver.

As the price has fallen, you've seen an increase not only in silver ETF purchases and holdings, but also in purchases of silver coins. So small investors are buying more silver in coins and ETFs. Larger investors are selling silver in the thousand-ounce-bar market, but that's a different issue.

For gold, in contrast, we think what you've seen over the last decade is that a lot of investors who did not buy gold bullion previously were buying the gold ETFs. And some of the people who formerly bought gold equities switched from gold equities to the gold ETFs.

Then this year you've seen this big evacuation. I think it's a lot of liquidation from people who we think are atypical gold investors. These are people who are new to the gold market, because they either never were in it, or they were gold equity investors.

7 Years to New Gold Price Highs

Posted: 07 Nov 2013 12:41 PM PST

Never mind manipulation theories. Focus on the fundamentals, says Jeffrey Christian...

Here he speaks to Hard Asset Investor's managing editor Sumit Roy both about his latest attack on price manipulation claims, plus his outlook for silver and gold prices...

I have said, as have others, that (a) there's no evidence of such manipulations in the market; and (b) these conspiracy theories are a giant distraction, which can be a very costly to investors.

But that is all a distraction from the real gold and silver fundamentals.

HAI: How do you see supply reacting to the current low price environment? Are miners in trouble?

Christian: A lot of miners are suffering. Some of them are in trouble. But even the ones that aren't in trouble are suffering because their margins have fallen very sharply.

Energy Commodity Cycle Turns

Posted: 07 Nov 2013 12:38 PM PST

Prices in the energy juniors stocks are set to turn, says this analyst...

WITH A lifelong interest in geopolitics and the financial issues that emerge, Chris Berry founded House Mountain Partners in 2010.

Focusing on the evolving geopolitical relationship between emerging and developed economies, Chris Berry studies the commodity space and junior mining and resource stocks positioned to benefit from this phenomenon.

Commodities are and always will be a cyclical market, he tells The Gold Report's sister title The Metals Report here. And now, says Chris Berry, is the time for investors to position themselves ahead of an upswing.

The Mining Report: In your upcoming presentation in Europe, "The Economic Tug-of-War", you examine the future of the commodity sector. What are the implications for junior mining investors?

Chris Berry: Let's start off with the good news. I believe we're at the bottom of the cycle for the commodities. It's been a rough 18 to 24 months for the juniors, but the worst is likely behind us. That said, I don't think we have turned the corner yet toward a new growth cycle. The takeaway is that now is the time to reevaluate these companies with a view for where the global economy will be two or more years from now. The wind is no longer at the back of the entire commodity complex, which means you will need to pay closer attention to the supply demand dynamics of specific commodities.

For example, lithium and nickel have different markets, sources and demand drivers. I monitor each of these factors in detail from a top down perspective until I can drill down to the best junior companies focused on each metal or mineral.

My presentation, "The Economic Tug-of-War", highlights two competing forces: slow or stagnant growth in the developed world and above-trend growth in the developing world. Much of the macro economic data I see in the US is disinflationary and arguably deflationary. Stagnant wage growth, no velocity of money, and flat commodity prices are not indicators of inflation.

This presents a major challenge for Central banks worldwide, most notably the US Federal Reserve, the Bank of Japan and the European Central Bank, all of which are attempting to re-flate their respective economies through easy money policies like quantitative easing. Japan has instituted its "Three Arrows" policy, which essentially doubles the money supply almost overnight in an attempt to break that country's multi-decade deflationary spiral. These policies have certainly breathed life into equity markets, but have not helped the broader economy return to historical growth rates. One need only to look at year-to-date returns of equity indexes like the Nikkei or the S&P 500 to see the disconnect between the equity markets and the broader economy.

The Fed is trying to stoke inflation and lower unemployment through its bond-buying scheme. Attempting to solve a non-monetary problem (unemployment) with monetary tools (interest rates) has not been and likely will not be successful.

To be fair, there are some nascent economic bright spots. Industrial base expansion, capacity utilization, Purchasing Managers Index data and related metrics are improving globally. It remains to be seen, however, if this can be sustained.

The other side of The Economic Tug-of-War is the emerging world growth story. I remain very bullish on the long-term prospects in the developing economies despite the slowdown in growth rates across the region. According to The Economist, for 18 of the past 20 centuries, India and China combined had the largest GDP in the world. When viewed through this prism, the current slowdown is a mere blip.

Much of the debate surrounding emerging world growth centers on China (as it should). We know that the official (and debatable) growth rate of the Chinese economy is 7.8%. Despite the fact that the economy isn't growing at double-digit rates anymore, China is a much larger economy than it was even a few years ago. So you're seeing slower growth, but from a much larger base. There are numerous challenges the country faces, including reigning in shadow banking, pollution control and shaky demographics, but I still believe the country serves as a model for the shift in economic power we're seeing from West to East.

What is the takeaway for a junior mining investor? In the near term, you can expect the uncertainty and volatility to continue. With no specific reason for commodities to rocket higher in the near term as a group, this offers you the most valuable commodity of all – time – to take a closer look at select commodities and their trajectories.

TMR: What types of juniors are going to be rewarded by this type of market?

Chris Berry: As an investor in the sector, my top priorities are to identify juniors with the best financial sustainability and the best financial management. Financial sustainability is about having a clean and strong balance sheet. I want to see cash. I want to see liquid assets. I want to see a company that can stay away from debt instruments like convertible bonds, short-term debt or anything more exotic. In this market, I view balance sheet debt as a red flag. It's important to remember that all debt must be serviced, or repaid. When a company repays debt, they are not drilling or advancing a project forward. It's hard to see share price appreciation when a company must focus on rewarding creditors instead of shareholders.

Of course, with so many variables out of our control, the depth of experience of management and their ability to navigate through these environments and focus on shareholder returns is extremely important.

Despite the challenging environment, there are excellent opportunities hidden in the sector. We are still active in the space and we think that for patient investors, it's an interesting place to be because many of these companies have promising assets. Because the whole sector is under pressure, many of the better juniors are being ignored. This won't always be the case, which again is why it's important to look at the space with a two- to three-year window. If you think the world will be smaller in the future and commodity demand will not increase, this isn't the space for you. If you believe the opposite, as I do, then now is the time to conduct thorough analysis.

TMR: In some of your recent writings, you look to the future and see continued global urbanization. Given the tug-of-war between developed and emerging economies, do you still see a valid investment thesis in the commodity sector?

Chris Berry: Absolutely. There have been several articles in newspapers recently reporting on the sustainability and evolution of global urbanization. The basic point is that society needs to look beyond "growth for growth's sake." In other words, quarterly GDP only tells part of the story; it doesn't reveal the total societal costs to get that number.

The New York Times has published images of Beijing and Harbin where the citizens can't see three feet in front of them at mid-day. The pollution is almost acting as a drag on economic growth and this is unacceptable to the powers that be in China. Yet urbanization will continue and evolve. The authorities in China will achieve growth rates no matter what, but increasingly more attention will be paid to growing in a more sustainable, cleaner and greener fashion.

The investment case for many of the energy metals I follow, like graphite, rare earth elements (REEs) or cobalt, is even more compelling given what I mentioned above, but has been muted due to a slowdown in global growth rates. It's a long-term thesis. China will continue to face extreme environmental pressures if it continues to develop using the same roadmap. Improving quality of life in the emerging economies is an investment theme that continues to be valid.

TMR: Since you mentioned depressed markets and energy metals, I wanted to get your impressions from the U2013 Global Uranium Symposium you attended and reported on in your newsletter. How has your view on the uranium market evolved and have your investment plans changed?

Chris Berry: I'm a long-term optimist on uranium. However, I'm neutral in the near-term. There are several reasons for this. The extreme effect of the Fukushima accident on investor psychology for the entire industry has really given many pause regarding just how positive the future for nuclear energy is. At the conference, a panelist talked about the psychological effects of nuclear accidents lasting for a generation in the psyche of investors and stakeholders. Never mind the facts. Never mind that nuclear energy is still the cleanest most reliable form of baseload power available. Fear can be a powerful motivator. By now, a lot of people, myself included, thought that Japan would have restarted at least some of its reactors. That hasn't happened for a number of different reasons. I believe 14 reactors in Japan are being inspected for re-start and so we are inching closer. Some of the uranium that would have powered Japan's reactors has hit the market and has created a glut. That will take time to work through.

Regardless, the fact is that the spot uranium price is near $35 per pound and the forward price closer to $50/lb. I'm not worried about a short-term price of $35/lb, but it does affect what I will invest in at this stage of the cycle. I am more interested in the global uranium demand in two or three years. The ultimate demand for uranium from new reactors coupled with the need for the current global reactor fleet to be refueled dictate a higher price for uranium in the coming years, which should add leverage to the share prices of those uranium juniors that are near-term production stories.

Another way to invest in the nuclear power generation thesis is through new reactor technology. One example is small modular reactors, or SMRs. Building a full-scale nuclear reactor can cost billions of Dollars and take more than a decade. A modular nuclear reactor has a dramatically lower upfront capex. Modular reactors can be shipped in manageable pieces by rail. In some designs, the reactors are encased underground and offer passive safety systems (they shut themselves down). It is an interesting evolution in technology and we are following companies that are leaders in that space. Full-scale adoption of the technology is not imminent but numerous parties, including the US government, have shown interest.

TMR: So your recommended strategy for investors interested in the uranium space would be to get started on due diligence in both new technologies and near-term production stories. And then be ready to act as the markets improve.

Chris Berry: Yes. It is instructive to look at the situation that the United States finds itself in regarding uranium fuel supply. The US has approximately 100 reactors. A couple of them have received a lot of press for announcing plans to close – one in Vermont and then one in California. Unfortunately, these stories grab headlines but miss the larger point of the necessity to provide reliable and affordable electricity to the grid in the US It would make eminently more sense to rely on a domestic source of critical fuel and to embrace and develop new nuclear technologies on our own soil. Most of the uranium used in the United States comes from outside the country. The Russians are one of the largest producers of uranium in the United States. This is not widely known. That should make some people in Washington D.C. uncomfortable.

TMR: Is there anything novel that you're hearing on conference calls or reports? Are there trends that the mainstream financial media is missing?

Chris Berry: One positive ongoing development in the mining sector is the evolution of cost reporting, especially by the majors. There's always a lot of confusion around what it actually costs a specific company to get an ounce or pound of a commodity out of the ground. More detailed numbers are becoming more common through reporting of "all in sustaining costs". These metrics aren't perfect, either, but do give investors a clearer picture of a company's cost structure. These metrics also have significant implications for the financials of a company. I pay particular attention when companies talk about changes in cost structure or tax rates, for example.

I also listen for clues to future growth projections. Specifically, where is a company seeing growth? In a number of the calls I have listened to recently, CEOs are becoming more optimistic about the prospects for the European Union. This is in stark contrast to recent quarters where the EU economic contraction has served to hurt company bottom lines. This trend appears to have changed and is an example of the type of analysis I do to come to the conclusion that the global economy has bottomed.

Another trend I follow concerns R&D spending patterns. R&D spending drives innovation, which leads to new products and ultimately to new markets. As integrated as global supply chains are, achieving "first mover" status with a new product or market can deliver immediate benefits to the bottom line. Diversification of revenue streams is also a positive. Gaining an understanding of different products and the amount and types of REEs a company uses can help gain a better understanding of the overall REE demand picture going forward.

A final indicator I look for in earnings calls is to make sure a company is maintaining or increasing market share. I want to see a company that is focused on being first or second in the world in a specific line of business. These are the sector leaders that typically have pricing power and have achieved economies of scale.

TMR: In parting, do you have any words of wisdom, or even a pep talk, for junior investors so they can keep their heads up and not miss the inevitable upswing?

Chris Berry: Don't lose your nerve. This is a cyclical business. It always has been and it always will be. Across the entire commodities space we are going to need more of everything, not just to survive, but to prosper in the future. I still believe that the commodity super cycle is intact, despite the subdued commodity price environment. The super cycle looks as though it will become more consumption-centric rather than investment-centric.

Technology will also play a role. New markets will be created, spurred by R&D, and this will create opportunities for investors in and around the commodities sector. But it will be a stock pickers market. It's not a market where you can just invest in XYZ graphite company and watch it appreciate in price. Going forward, a diversified portfolio of select companies across the right metals and minerals will serve the patient investor very well. It's just a timing issue. Again, we're at the bottom of the cycle right now: it's time for voracious due diligence.

TMR: As always, it has been great to talk with you.

Chris Berry: Looking forward to speaking with you in the future.

Energy Commodity Cycle Turns

Posted: 07 Nov 2013 12:38 PM PST

Prices in the energy juniors stocks are set to turn, says this analyst...

WITH A lifelong interest in geopolitics and the financial issues that emerge, Chris Berry founded House Mountain Partners in 2010.

The Mining Report: In your upcoming presentation in Europe, "The Economic Tug-of-War", you examine the future of the commodity sector. What are the implications for junior mining investors?

TMR: What types of juniors are going to be rewarded by this type of market?

TMR: Is there anything novel that you're hearing on conference calls or reports? Are there trends that the mainstream financial media is missing?

TMR: In parting, do you have any words of wisdom, or even a pep talk, for junior investors so they can keep their heads up and not miss the inevitable upswing?

TMR: As always, it has been great to talk with you.

Chris Berry: Looking forward to speaking with you in the future.

Slavery in the Digital Age

Posted: 07 Nov 2013 11:30 AM PST

Slavery is coming back.

In the future, we'll all have personal servants. They'll clean our homes, tend to our gardens, harvest our food, manufacture our goods and fight our battles.

The slaves won't be human, fortunately, but they will be machines. Every new advance in machine intelligence and electronic sensing, along with other diverse and converging fields of technology, is hastening the adoption of these machine servants.

Robots.

Robots are a big, high-growth field investors need to pay attention to. Bill Gates has predicted that by 2025, robots will be as common as computers are today. If he's even half right, investors who get in on promising robotics techs today will be fantastically compensated for their vision. Getting in on the next wave of robotics now will be like getting in on Intel, AMD, Apple or Gates' own Microsoft in the 1980s.

Surgical robots… can make surgery less invasive and more precise, improving recovery times and reducing pain and blood loss. Even your next anesthesiologist could be a robot.

Incidentally, the word "robot" comes from a 1920s Czech science fiction play. The Czech word for servitude, robota, entered the English language as "robot" and has been with us ever since as a description for autonomous or semi-autonomous machines. The name for this field of technology, robotics, also is the product of science fiction — Isaac Asimov first coined the term for a short story in the 1940s.

Although the words date from the 20th century, the idea of self-operating machines is far older. Ancient myths first described artificial and lifelike machines in motion in legendary tales. Later, in the quest to measure time, intricate clockworks — run by weights or springs and self-regulating with mechanisms like pendulums and escapements for accuracy — were developed.

By the early 20th century, electrical controls allowed self-regulating machinery to come into industrial use. After WWII, of course, the invention of modern electronics, based on semiconductors and integrated circuits, meant that industrial automation could become truly "robotic." Microprocessors and sensors allowed the creation of industrial robots and computer numeric-controlled machinery. By the 1970s, the first microcomputer-controlled robots began to enter factories.

Today, the international automotive industry depends entirely on robots, as do several other manufacturing fields. Chip manufacturing, biotechnology and pharmaceutical companies rely on robotics to perform precise and repetitive functions in environments intolerable to humans.

Industrial robots can be hard to recognize, although the International Organization for Standardization has a working definition: "an automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes." Using these terms, even a modern car might be considered robotic, since some of its internal components meet this definition.

Whatever appearance modern robots take, they form a swiftly growing market. By one estimate by transparency market research, for example, the industrial controls and robotics market was worth $102 billion in 2012, and will grow to $147 billion in 2019. Growth has been strong for years, after a brief pause during the last recession.

Advanced robotics will help solve some of our most vexing problems. In our day and age, the health care industry has proven highly resistant to price declines partly because of labor costs. Improved robotic automation is one way to increase productivity and reduce labor costs. And robots can be used to not only do things cheaper, but better. Surgical robots, for example, can make surgery less invasive and more precise, improving recovery times and reducing pain and blood loss.

Even your next anesthesiologist could be a robot. Johnson & Johnson has developed a "sedation machine" that could replace an anesthesiologist during a colonoscopy. A RAND Corp. study finds that more than $1 billion is spent each year sedating patients during the procedure. Johnson & Johnson believes its automated device can reduce the anesthesiology portion of the bill from over $600 down to $150.

Robot adoption is also being aided by a simple economic fact: While cost of production for goods has generally declined over time because of automation, prices for services generally don't fall quite as much, because they aren't as easily automated. Consider that for the performance you receive, your computer costs a fraction of what it did two decades ago, but the technician who repairs it has generally remained quite expensive to hire by comparison.

Automation has solved problems for us in the past. Food prices have fallen steeply in real terms over the last century. This is not only due to better agricultural techniques, but also because of increased automation. From John Deere and Allis-Chalmers, from balers to combines, mechanized agricultural equipment has drastically reduced what we have to pay to for our food. Now we don't generally worry about going hungry in countries with advanced economies. We worry about consuming too many calories. Automation made this possible.

We may even begin to see fully robotic agricultural operations. A convergence of recent technologies, including GPS, wireless communication and electronic sensors, is heralding a second agricultural revolution. Self-driving tractors, for example, are making their debut, able to automatically follow combines and receive the payload of grains. Another robotic appurtenance, dubbed the Lely Astronaut A4, can milk cows without any need for a human being to be part of the process. The robot even analyzes the milk as it works to monitor for possible bovine health problems.

Within 10 years… personal robots will have the ability to do everything from cleaning toilets… to keeping your schedule and monitoring your vital signs.

Robots also bring new capabilities in other areas. They are already being used for dangerous jobs that humans would rather not do. The U.S. military, for example, is deploying robots in the field and in the air. Some of the earliest recognizable robots were remote-controlled bomb detonation units.

Today, unmanned aerial vehicles can pilot themselves in hazardous situations. Some are sophisticated mobile weapons systems. Many are utility vehicles ranging from self-driving trucks to relatively small "PackBots" that climb stairs, risk tripwires, find land mines and look around corners. Some are armed and can be fired remotely or return fire automatically. Though the public may not think of them as robots, automated missile systems have been around for decades.

One experimental robot, called ATLAS, may be the most advanced humanoid robot ever made. ATLAS' hydraulically articulated joints enjoy 28 degrees of freedom, and its nimble hands can use human tools. The robot's sensor suite includes LIDAR, a laser sensor mounted on its head that allows it to measure distances. The military is developing this technology so that in the future, we'll be better able to deal with disasters like the meltdown at Japan's Fukushima nuclear plant. Robots can survive in radioactive environments that would quickly kill humans.

Ultimately, the consumer robot market will outgrow military applications as it enters an explosive growth phase. According to ABI Research, this market racked up $1.6 billion in sales in 2012 and will shoot through $6 billion in 2017.

Like industrial robots, consumer 'bots will become so ubiquitous that they won't always conform to what we may think of as a robot. As you know, some will look like automobiles. Electric automobile pioneer Tesla Motors expects to be able to build a self-driving car in three years that will be able to perform 90% of the driving. Nissan hopes to field its own autonomous automobiles by 2020. Google is also working hard on this technology.

Robots will enter the home too. iRobot's Roomba vacuum has been a sales success, but it represents only the beginning. Within 10 years, some roboticists say, personal robots will have the ability to do everything from cleaning toilets and washing dishes to keeping your schedule and monitoring your vital signs.

That may actually be a pessimistic projection. With the leading edge of the boomer generation entering retirement, there will be huge financial incentives for improved service 'bots. There will be great demand for anyone who can build an affordable robot that can help with housekeeping and basic care. Families that want to keep older members out of assisted care facilities and closer to home will look to robots for help.

In light of this, the famous Japanese enthusiasm for new robot technology is understandable, since more than a fifth of its population is over 65 years old, and the Japanese government is heavily funding robotics projects to provide care and plug holes in the workforce. There are simply not enough young people to take care of an aged Japanese population. The same trend should happen in the U.S. with the baby boomer generation, who are aging in unprecedented numbers.

One thing is certain: the robotic revolution isn't going anywhere. It's only getting started.

Ad lucrum per scientia (toward wealth through science),

Ray Blanco
for The Daily Reckoning

Ed. Note: There's never been a better time to pay attention to this space. All this week, the Tomorrow in Review email edition will be highlighting some great investment opportunities in the robotics industry, including an upcoming IPO that — surprisingly — very few people are talking about. It all started today, as TIR readers were treated to a special report showing how one kind of robot could mean big money for speculators. If you didn’t get the email edition, you missed out. But there’s still time to sign up and get tomorrow’s issue, which will be filled with more of the same excellent opportunities. Don’t wait. Sign up for FREE, right here.

Market Monitor – November 7th

Posted: 07 Nov 2013 10:38 AM PST

Top Market Stories For November 7th, 2013: Adjusted Monetary Base is Growing by Leaps and Bounds - Jesse's Cafe Indians To Import Record Volumes Of Silver - John Rubino Bernanke vs. Yellen: A Spooky Outlook? - 321 Gold China's gold coup d'etat - GoldSeek China's Gold Hoarding Continues

End Game - “They Don’t Want People Protecting Themselves”

Posted: 07 Nov 2013 10:32 AM PST

Today a man who has lived in 18 countries around the world, and witnessed collapses in many of these countries firsthand, told King World News "They know what's coming and they don't want people protecting themselves." Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also spoke about the harsh reality of what is taking place in various countries around the world and what this all means for key markets such as gold.

This posting includes an audio/video/photo media file: Download Now

London Metal Exchange increases power to shorten warehouse queues

Posted: 07 Nov 2013 10:30 AM PST

By Maytaal Angel and Susan Thomas
Reuters
Thursday, November 7, 2013

LONDON -- The London Metal Exchange, aiming to appease critics of its global storage network, today slashed queues for metal, beefed up its powers to act against market abuse, and will review its agreement with warehouse owners.

The world's largest and oldest metals marketplace is under intense regulatory and legal pressure over its storage system, with complaints about queues of more than a year and large surcharges to withdraw material from its warehouses.

... For the full story:

http://www.reuters.com/article/2013/11/07/lme-warehouses-idUSL5N0IS27D20...

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The Daily Market Report: Gold Retreats on ECB Rate Cut, US GDP Beat

Posted: 07 Nov 2013 09:32 AM PST

07-Nov (USAGOLD) — Gold came under selling pressure after the ECB surprised with a 25 bps rate cut, which tanked the euro, thereby boosting the dollar. The yellow metal extended to the downside when U.S. advance Q3 GDP came in better than expected.

The ECB cut their refi rate to a record low 0.25% amid heightened concerns about the risk of disinflation. The eurozone’s headline inflation reading came in at just 0.7% y/y in October, well below the central bank’s target of 2.0%.

“We may experience a prolonged period of low inflation,” said ECB President Mario Draghi. He went on to hint that further easing may be in the cards. When asked about the possibility of QE, Draghi said that the central bank possesses “a whole range of instruments” they might employ before having to consider direct monetization of debt.

A November rate cut was not fully priced in by the market, most analysts were expecting December at the earliest. The euro plunged to a new eight-week low below 1.33 against the dollar, before recovering somewhat. The corresponding rise in the dollar, weighed initially on gold.

Here in the States, Q3 advance GDP came in better than expected at 2.8%. Median expectations were running around 2.0%, but there was a surprisingly large inventory build last quarter, which added about 0.8% to GDP. That inventory build may weigh on GDP going into year end. In fact, Goldman Sachs immediately cut their Q4 GDP forecast to 1.5% from 2.0%.

The Bloomberg Consumer Confidence Index dropped for a sixth consecutive week to twelve-month low of -37.9. Inventory built into an environment of declining consumer confidence? Smells like trouble…

While gold dipped briefly below $1300 intraday, the market snapped back pretty quickly. The good GDP print undoubtedly bolstered the spirits of the pro-taper crowd, but the behind the headline indications and the ECB’s move today, will likely give them pause.

I’d give greater gravitas to the ECB rate cut, and the reason they did it. Easy money is here to stay, and that will continue to provide a key underpinning to the gold market.

Gold Solution to The Biggest Fear in Retirement

Posted: 07 Nov 2013 09:23 AM PST

An interview with Dennis Miller of Miller's Money Forever, by Jeff Clark We get a lot of questions from readers about what role precious metals should play in retirement planning, so we figured, who better to ask than our own Dennis Miller, editor of Miller's Money Forever. In the following interview, Dennis talks about how to categorize investments, why he likes Roth conversions, the greatest danger many seniors will face from Obamacareâ€"and how he recommends protecting against it.

Gold Markets are not Efficient, Don't Reflect Fundamentals and Understate Gold's Market Value (Part 7)

Posted: 07 Nov 2013 09:10 AM PST

In this part and the next, we will look at the prospects for the gold price for the rest of this year and beyond. These next parts are critical. What we will try to do is to synthesize the factors playing on the gold market from ... Read More...

Silver – Major Advances In Industrial Applications

Posted: 07 Nov 2013 09:06 AM PST

In the latest Silver Institute newsletter, several advances have been reported when it comes to applications of silver in industry. In particular, the industrial applications are in the field of photography (first article), bio-batteries (second article), clean energy (third article) and energy (fourth article). Courtesy: Silver Institute.

A Place for Silver in the Growing "Slow Photography" Movement

There's a new trend gaining speed in the age of digital photography: so-called "slow photography" using old-fashioned silver-halide film.

The slow photography movement has been gaining traction in recent years in the same way that some audiophiles have rejected digital music because they believe that vinyl is truer to the original sound. To slow-movement photographers, silver halide films produce richer, more nuanced images than digital cameras.

Since the movement began several years ago (although some would say it never truly disappeared) websites such as The Impossible Project help newcomers find sources for what they term "analog instant photography" and what most others call Polaroid Instant camera photography. According to the website, about 300 million of these cameras are still around and functioning, so it's just a matter of finding them at garage sales, at thrift shops and in attics. The website also directs users to brick and mortar stores as well as other websites where they can purchase the once common instant film.

In 2008, the Impossible Project team saved the last Polaroid production plant for instant film in Enschede, The Netherlands.

In a recent Washington Post story, Impossible Project vice president Dave Bias suggested why people are attracted to the old technology."Our demographic is pretty young, so we're talking about a generation who grew up in digital, and they see our film as a way to escape." He adds: "But it's not all about nostalgia. For us, it's showing that film has a viable place in
the modern world," he says. "People can have a real physical photo – something they can touch, something tangible.”

Silver May be the Key to Bio-Batteries Made from Wastewater and Sewage

Recent research into alternative sources of electricity have shown that when bacteria touches iron oxide, the proteins on the surface of the germs produce small amounts of electrical current. Now, further studies show that by introducing silver oxide, the microbes can generate even more electricity.

This most recent study at Stanford University may help scientists and engineers in their quest for the production of so-called bio-batteries that can produce substantial amounts of electricity from wastewater, contaminants and sewage.

The researchers postulate that it should be possible, in theory at least, to connect bacteria directly to electrodes (the positive one is called an anode) that would then carry the electricity away in the normal fashion. During the process, microorganisms attached to the anode (often made of iron oxide) would start grabbing electrons from organic compounds dissolved in the wastewater to produce carbon dioxide and clean water. Harnessing these free electrons, however, has proved to be a challenge.

The Stanford team learned that when silver oxide is introduced to the area around the anode, the silver compound consumes electrons, literally pulling them out of the bacteria and sending them on their way. Why silver oxide works better than iron oxide is not fully understood; researchers suggest that it may be related to silver's extremely high electrical conductivity, the highest of any element.

Stanford's research titled, Microbial Battery For Efficient Energy Recovery, has been published in the Proceedings of the National Academy of Sciences

Silver Helps to Produce More Hydrogen for Clean Energy Uses

"Water splitting," or artificial photosynthesis, is a way to convert the energy of sunlight into chemical energy to produce hydrogen and oxygen. (It's the opposite of a fuel cell.) The hydrogen can then be used for clean energy, especially in vehicles.

However, it's generally an inefficient method so scientists are using a zinc-oxide/silver photoelectrode — which is very susceptible to sunlight — to produce more hydrogen.

First, a laser is directed at a silver oxide film, which loosens silver particles. The silver enhances the light collecting properties of a zinc oxide array by scattering and then soaking light energy at different angles. The end result is that much more sunlight is absorbed which, according to
a research team at National Taiwan University led by Hao Ming Chen, results in up to 200 percent greater production of hydrogen than without the silver particles.

With a Dash of Sulfur, Silver Nanoparticles Take Giant Leap into the World of Medicine

Silver has found many uses in medicine as a medium to deliver drugs into patients, cell imaging and other applications. For all its positive attributes, though, silver nanoparticles have some drawbacks. The most critical is that it readily oxidizes, allowing it to degrade rather quickly
once inside the body.

Scientists at the University of Toledo may have solved the problem by creating silver nanoparticles that are much more stable than had previously been thought possible.

The solution came about by accident. The researchers were measuring how silver interacts with light – silver is one of the world's most reflective materials – and they attached sulfur-containing molecules to silver nanoparticles as a way to aid in examining absorption levels. They discovered that the silver nanoparticles, which normally come in many sizes, were now all the same size. This uniform 'sizeness' led to stability in the nanoparticles' structures. In other words, the structure became compact, packed tightly with the same-sized, close-fitting atoms and therefore more immune to outside forces (oxygen and other elements) that would normally interact and degrade it.

"We've created stable silver nanoparticles in massive quantities and in a very pure form, using a less expensive substance than some of the traditional methods using gold," said Terry Bigioni, a chemist at the University of Toledo who helped lead the study. Gold has been traditionally used instead of silver because it was more stable, albeit more expensive. Now, silver nanoparticles have closed that usability gap. "Their purity is a huge advantage for biomedical applications."

China National Gold weighs investing in Ivanhoe assets

Posted: 07 Nov 2013 08:44 AM PST

The Wall Street Journal reported in September that China National Gold had talked to Ivanhoe about buying assets or a stake in the company.

Surprise ECB rate cut helps lift gold

Posted: 07 Nov 2013 08:44 AM PST

The ECB rate cut and new US growth data conspire to whip up a “soporofic” gold market, writes Adrian Ash

German bullion retailer Degussa buys Sharps Pixley

Posted: 07 Nov 2013 08:44 AM PST

Degussa Goldhandel has bought London-based broker Sharps Pixley and expects the retail market for gold bars and coins to keep growing.

Fresh money is needed for gold equities to recover

Posted: 07 Nov 2013 08:44 AM PST

According to Chris Ecclestone, while gold equities should be in recovery mode, a number of headwinds have left prices languishing.

Amara taps Amway family wealth to boost gold prospects

Posted: 07 Nov 2013 08:43 AM PST

Under the deal, RDV Corporation – which invests on behalf of the DeVos family who co-founded Amway, will take a stake of around 21% in Amara.

ECB Surprise Interest Rate Cut & US Growth Whip Soporofic Gold Market

Posted: 07 Nov 2013 06:27 AM PST

WHOLESALE GOLD turned suddenly volatile lunchtime Thursday in London after the European Central Bank surprised analysts by cutting its key interest rate to a new record low of 0.25%. The Euro currency sank to an 8-week low vs. the Dollar, while European stock markets turned higher.

Gold Price Forecast to Fall to $1180

Posted: 07 Nov 2013 06:18 AM PST

GOLD reversed sharply to the downside at the start of September, through the rising trend line of a corrective channel. As we know that's an important signal for a change in trend, which means that bearish price action is now back in view that could accelerate to the downside in the next few weeks if we consider possibly completed flat correction in wave 2. A fall and daily close beneath 1251 is needed for a wave 3 down back to 1180.

2 Miner Developments in the Big Gold Sector

Posted: 07 Nov 2013 06:00 AM PST

Late last week, I had a breathless call from an acquaintance in Toronto to discuss breaking news from Barrick Gold (ABX). Barrick announced a huge, $3 billion “bought deal” equity offering to strengthen its ailing balance sheet.

This bought-deal came right after Barrick announced that it’s suspending work on its very troubled Pascua-Lama project that straddles the border between Chile and Argentina.

Wow, two chunks of big-time mining news about “Big Gold” within minutes!

It’s time to drive home the point that the mining investment cycle has turned.

The Barrick bought-deal is based on a syndicate of underwriters led by RBC Capital Markets, Barclays and GMP Securities LP. It means that Barrick is issuing new shares for cash — equivalent to about 16% of current outstanding equity, at a fixed price of $18.35. That’s nearly 6% less than the previous day's closing price, but it’s apparently the number that makes the deal.

Barrick certainly needs cash. Barrick announced that it will use about $2.6 billion of new funds to retire outstanding debt, of which the company carries over $15 billion on its burdened books.

Barrick’s debt load is WAY too much. The overall debt is a company-killer in the current “down” gold price environment, even including the fact that interest rates are at historical lows. Looking back, much of that debt is related to Barrick’s $7.68 billion takeover of copper-miner Equinox in 2011 — a monumental mistake, looking at it with the benefit of our impeccable, 20/20 hindsight.

In recent months, Barrick has sold assets and cut costs across the board. That’s the right thing to do under the circumstances. But the conventional ideas have not been enough to restore the company to financial health, let alone to impress the Wall Street analysts.

Now add news that Barrick is suspending work on Pascua-Lama. The business rationale is simple — to give Barrick financial breathing room. Suspending the gigantic money pit of a South American mine will avoid nearly $1 billion of capital spending in 2014.

On the downside, however, suspending Pascua-Lama will insert a large monkey wrench, so to speak, into the picture of Barrick’s future growth. Eventually, the mine was supposed to crank out 800,000 ounces per year of gold, as well as other metals. Not so fast, eh?

Barrick already slowed down construction at Pascua-Lama this year, after Chilean regulators ordered the company to halt work due to water and other environmental issues. The slowdown upended Barrick’s capital timetables because the ramp to production moved further into out-years, while employees and contractors are still being paid.

In the short term, recently, Barrick focused construction efforts on the Argentine side. But by just building “half” of a project, Barrick could not make up for lost efficiencies. You can’t build half a mine.

Meanwhile, the original $3 billion cost estimate for Pascua-Lama has long gone by the boards. Costs for Pascua-Lama exceed $5.8 billion to date, with perhaps $3 billion more destined to go into the ground if the project ever proceeds to completion. Even then, Pascua-Lama has been problematic. Barrick previously wrote down $5.1 billion on the site.

In the current climate for international resource investing, I’m OK to see Barrick suspend operations at Pascua-Lama. It sends a message to governments everywhere that foreign companies are not cash cows and patsies. To paraphrase President Obama on another subject, if you like your gold mine, you can keep your gold mine.

That is, there’s a troubling tendency amongst politicians and regulators across the world to think that resource companies are chickens to be plucked. Everywhere one looks, the shakedowns have been growing in size and scope, if not audacity.

Well, it’s time to drive home the point that the mining investment cycle has turned. The days of strong pricing are behind us — for a while, at least. On the demand side, the Chinese economy is slowing, and likely in more trouble than most outsiders (and many insiders) want to admit.

For miners, costs continue to rise. It’s everything, too: labor, energy, steel, concrete, machinery, equipment. And then pretty much every company encounters all manner of other players with their hands out, asking for payment on one thing or another… or another. It just doesn’t end.

Over time, I’ve been positive about Barrick, as well as negative. The company is where it is, and past management teams have done what they’ve done. Looking ahead, the bought-deal is dilutive to current shareholders. Yet the new cash will also go to retire high-end old debt. Meanwhile, the Pascua-Lama call is right, under the circumstances.

Let’s let the dust settle here. Don’t rush in just yet. But watch and wait, because Barrick’s current share price is low enough to be a tempting buy. Things are getting better, despite all the sound and fury. Indeed, Barrick recently announced quarterly earnings of $580 million, or 58 cents per share. That beat analyst expectations. And Barrick’s all-in cash cost of $916 per ounce of gold is the lowest among senior gold producers.

That's all for now. Thanks for reading.

Byron W. King
for The Daily Reckoning

Ed. Note: Long story short… There’s still plenty of movement left in these markets. And that could mean tremendous profits for those who know how to play them. That’s where the Daily Resource Hunter comes in… Every morning, it gives readers a leg-up in the day’s resource markets with honest and insightful analysis from the industry’s leading experts. And it’s completely free to sign up. So don’t wait. Sign up for the Daily Resource Hunter, for free, right here and start learning specific ways to profit from the world’s most exciting resource stories.

Original article posted on Daily Resource Hunter

Gold Bear to End with a Bang

Posted: 07 Nov 2013 05:56 AM PST

For months we've been writing about the major bottom to come in precious metals. It appeared we finally saw it in late June as the metals and the stocks surged during the summer. Yet, these markets trailed off in August and ... Read More...

Gold slides to new low for the week as Q3 advance GDP beat heightens taper expectations.

Posted: 07 Nov 2013 05:56 AM PST

Gold Prices Volatile, Dip Below $1300 on ECB Rate Cut, Strong US GDP Data

Posted: 07 Nov 2013 05:48 AM PST

GOLD PRICES turned suddenly volatile lunchtime Thursday in London after the European Central Bank surprised analysts by cutting its key interest rate to a new record low of 0.25%.

The Euro currency sank to an 8-week low vs. the Dollar, while European stock markets turned higher.

Leaping towards 6-week highs for Eurozone investors, gold prices initially dropped $5 per ounce, and then rallied $15, before returning to the $1317 per ounce level seen throughout what traders called "soporific, slow" dealing so far this week.

New US data then showed the world's largest economy growing 2.9% annualized during the July to October period, dramatically beating analysts' GDP forecasts of 2.0% growth.

Gold prices then fell to 3-week lows beneath $1300 per ounce.

Silver prices whipped 2.6% inside 40 minutes, also dropping substantially below the week's previous range.

Friday brings key US jobs data, widely seen as determining the Federal Reserve's view on future growth and therefore affecting its appetite for quantitative easing – currently left at $85 billion per month.

"The good news for gold bulls [was] that $1300 seems to be providing some type of psychological support," said Scotiabank's latest technical analysis of the gold charts late Wednesday.

"If you look at gold prices and the sentiment at the moment," said Mark Bristow, CEO of gold miner Randgold Resources to Reuters Insider TV today, "there's more downside risk than upside risk in the short term.

"But if you look at the longer term," said the CEO of South Africa's largest gold mining firm – now sinking shafts at the giant Kibali project in the Democratic Republic of Congo – "there's a healthy demand for gold."

The gap between Chinese gold supply (imports plus mining) and reported private demand "clearly implies" that China's central bank is buying gold, says Philip Klapwijk, formerly of Thomson Reuters GFMS and now CEO of new consultancy Precious Metals Insights in Hong Kong.

On Klapwijk's reckoning, the PBoC may have acquired some 300 tonnes of gold during the first half of 2013, helping "support" prices during the sharpest drop in three decades.

Either way, "This year China will become the world's biggest source of demand for gold," says Nic Brown's commodity team at French investment and bullion bank Natixis. Because imports to historic world No.1 India "have collapsed as a result of strong government measures to reduce the trade deficit and combat a depreciating currency."

Financial Repression Starts Showing Its Ugly Head

Posted: 07 Nov 2013 05:38 AM PST

Although a range of interventions with exotic names have been invented by the creative directors of Western central banks, our belief is that the full effects of those measures have only started to manifest themselves in 2013. With the end of the year in sight, this year will go into history marked by a historic crash in precious metals, an epic surge in interest rates, US equities all time highs and European and Japanese stock markets surging the wall of worry. Courtesy of the central banking liquidity injections, interest rate manipulations, and, most likely, repeated efforts by the Protection Plunge Team (PPT).

We would like to draw the attention to the importance of interest rate distortion. Not only is the length of the suppression out of proportion, to such an extent that Jim Rickards is totally convinced it is the proof of an economic depression. Besides, there is also a big risk on destructive effects on the economy. During a recent presentation at the Casey Summit in October, Don Coxe compared the interest rate suppression with a wounded soldier. In the army, in the early days, dying soldiers were given heroin. It was the only solution to ignore the pain. However, the crucial part was the timing of withdrawing the heroin. Withdrawing either too fast or too late could have catastrophic results. Knowing when exactly to switch to pain stilling morphine was crucial.

Similarly, zero percent interest rates could be considered financial heroin. The US Fed Chairman experienced it the hard way when his announcement of a potential withdrawal had immediate and destructive effects in June.

Financial repression in 2013

Given the track record of central planners in forecasting (or lack thereof), one could expect that the world is about to experience the destructive effects of financial heroin withdrawal. But what is at risk if things do not work out as engineered by central planners? The short answer, in our view, is financial repression. The following examples provide sufficiently evidence.

Financial repression has truly shown its face in 2013. The year started with an epic event: a bail-in of major banks in Cyprus which laid the foundation of a bail-in template (recently released by the BIS).

Poland saw a major restructuring of its private pension funds; the funds were nationalized overnight. One could call it "pension fund confiscation."

The Detroit bankruptcy was another major development. Recently, it became clear that pensioners, retirees and other unsecured creditors would undergo a 84% haircut on each dollar (source).

One of the newest inventions in the financial world in 2013 was "bank bail-ins." The term achieved the status of a commonly accepted buzz word in a very short period of time. In its latest update, Taki Tsaklanos from Gold Silver Worlds discussed several recent cases which provided proof of the bank bail-in rumble growing louder. He also explained that bank bail-ins are the result of extreme banking leverage; excess liquidity provided by the central banking corporations do not prevent bank bail-ins, they feed them.

The 10% savings cut proposal by the IMF for European households has luckily not been implemented [yet?], but the fact it is openly being discussed as an idea is worrisome to say the least. In our view, it deserves adding it to our list as it is an indication of coming major unexpected measures. From the IMF paper (page 49):

"The sharp deterioration of the public finances in many countries has revived interest in a "capital levy"— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). … The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away. … The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth."

Capital controls

And then there is the other category within the financial repression cloud: capital controls.

A couple of weeks ago, Chase Bank sent out a letter to some of their small business accounts telling them their cash and wire transfer activity would be limited (source). The letter circulated on the internet, and was initially considered a measure of capital control applicable to all Chase Bank customers. We reached out to the communications department of Chase Bank, who replied that the measure was wrongly interpreted. From the answer, it appeared that the decision was affecting only a small group of customers; the impacted clients would have alternatives for international wires. Interestingly, those alternatives were not mentioned in the letter. In line with this reply, a US based law firm in our network concluded, after investigation, as follows: "Although there was initial cause for concern, Chase is still allowing its clients to send international wires – albeit with more restrictions than in the past." Be it as it may, there is a smell to this.

Coincidence or not, some days later, Texas Western Union announced that, due to new regulations, effective October 1, 2013, "the international Western Union wire transfer service will no longer be available. The domestic service will remain unaffected. The credit union's outgoing international wire transfer fee will be $60.00/transaction." (source)

Historic evidence

Hm. One could rightfully ask if this is a trend. In our view, the short answer to that question is "yes, very very likely."

Another way to look at the question whether we are in a trend, is to check what we can learn from history when it comes to financial repression and capital controls. Ronald Stoeferle points out in his latest "In Gold We Trust" report that the post-war period in the US was the standard example of financial repression. "With so-called ‘Regulation Q’, interest payments on demand deposits were prohibited, international capital movements strictly regulated. Moreover, liquid short term bonds were exchanged for illiquid longer term ones." There are several parallels to present times.

Stoeferle continues by laying out the differences between the post-war period of financial repression and the current situation. Although public debt was far higher in the post-war period, private households, banks and corporations were barely indebted at the time. Today, a "twin deleveraging" would be hyper-deflationary. Moreover, the real economy at the time profited from the enormous investment activity in the course of reconstruction, urbanization, trade liberalization and demographic conditions.

One should realistically expect that financial repression in all its different facets is going to gain increasing importance in the coming years, no matter if it is not a constructive long term strategy. The truth of the matter is that it will only achieve redistribution and a temporal delay, but no solution to the problem.

Seeking protection

Going forward, how can one protect against these terrible measures? There are a couple of actionable solutions next to being hopeful. First, converting part of one's assets into physical precious metals is a wise thing to do given that they are outside the banking system. Paper gold and silver investments like ETF's, certificates, options, futures, and mining stocks, are risky investments, not matter if they are considered "gold investments." The real "gold investment" is one that overcomes counterparty risk. Global Gold, part of the BFI group, is offering such protection with ultra safe storage in jurisdictions like Switzerland, Hong Kong and Singapore.

Furthermore, when it comes to banking, one could consider opening up an offshore bank account, provided it is with a reserve bank (meaning that the bank is making no loans at all). Europac Bank, founded by Peter Schiff, was designed to provide an answer to the leveraged banking industry. The bank account can be used as savings and checking account; hence it is suitable for every type of financial transaction. Optionally, the bank account comes with a debit card in gold or silver: account owners can opt to convert their money into gold to preserve the purchasing power of their currency.

Lastly, international diversification of assets is a recommended tactic. Specifically for high net worth individuals, BFI Wealth provides custom advice and wealth management solutions. Ask an advisor how the company could serve you.

People's Bank of China "Buying Gold, Supports Prices"

Posted: 07 Nov 2013 05:15 AM PST

China's central bank seen as a big gold buyer in 2013 by leading analyst...

GOLD BUYING by the People's Bank of China may have totaled 300 tonnes so far in 2013, helping "support prices" during the worst drop in 30 years according to a leading precious metals analyst.

"We've seen tremendous amounts of gold go into Hong Kong for onward shipment to mainland China," says Philip Klapwijk, formerly of Thomson Reuters GFMS, in his first public report as CEO of new consultancy Precious Metals Insights. Domestic mine output, already the world's No.1 since 2007, has also risen this year.

But gold buying data from China's jewelry, industrial and investment sector "do not seem to account fully for this surge in supply," says Klapwijk.

To explain the gap, "anecdotal information" should be used to supplement official and reported data, says Klapwijk. Because not all aspects of the global or Chinese gold markets are transparent for precise analysis. And what Klapwijk calls "a growing contribution" to China's demand would seem to come thanks to the People's Bank.

"China needs to import a substantial amount of gold to meet its soaring local demand," the report says. But reviewing the available data, supply to meet China's demand for buying gold "comfortably exceeded" 1,000 tonnes in the first half of 2013 alone, Precious Metals Insights goes on.

The discrepancy "clearly implies that the Chinese authorities have been acquiring gold," says Klapwijk, with a chart showing perhaps 300 tonnes of gold buying by the central bank in the first half of 2013, when gold prices slumped.

The People's Bank of China last updated the world on its state gold bullion reserves in 2009, reporting a sharp rise to 1054 tonnes. Other analysts have recently pointed to the gap between China's reported private demand and supply (meaning imports and mine output), again concluding the "suspicion" that the People's Bank was buying gold, as Joyce Liu at Phillip Futures in Singapore put it to the Wall Street Journal last month.

"Undoubtedly," says Philip Klapwijk, quoted separately by Bloomberg News in Singapore on Thursday, the fact that the central bank has been buying gold in 2013 "has provided support for prices, which could have been weaker" without it.

Save Your ASSets First

Friday, November 8, 2013