Gold World News Flash |
- The Coming Economic Collapse Will Be Much Worse Than Most Realize
- FT: Learn From Buba
- Gold Price Exploding In Emerging Markets
- The Status of Gold Exchange Traded Funds
- The Silver Price Bottom Is In
- Bitcoin, Gold, and the Quantity of Money
- Bitcoin Is Not the Future of Money – It’s Just Wild Speculation! Here’s Why
- How Long Can Gold Prices Be Held Down – Supply factors
- Economic Collapse 2014 -- A Mega Crash is Coming
- Richard Russell: A gold-backed yuan or a debt-backed Federal Reserve note?
- Doug Noland Warns "Bubbles Are Faltering... China Trust Is The Tip Of The Iceberg"
- Gold flows east as bars recast for Chinese defy slump
- This Will Create A Massive Spike In The Price Of Gold
- James Turk and Michael Pento at King World News
- Three Signs Of Gold’s Bottom
- Gold Price Exploding In Emerging Markets
- Gold Daily and Silver Weekly Charts - FOMC Week Shenanigans
- Gold Daily and Silver Weekly Charts - FOMC Week Shenanigans
- Turk - War On Gold Accelerates, But Silver Will Shock Traders
- Economic Schools of Thought
- Learn from Buba
- When the Earth Stops Revolving Around the Dollar
- Corvus Gold (KOR.TO or CORVF) Makes New 52 Week High: Leading The Junior Gold Mining Sector
- India to review gold restrictions by end of March
- Debunking Tapering Mythology
- Maguire – “Stunning” Physical Gold Buying Terrifies Shorts
- Tocqueville's Hathaway cites ever-rising leverage in Comex gold
- Mark Mahaffey: Day of the turtles
- Eric Sprott talks about gold market manipulation with Sprott Money News
- December Existing Home Sales: The Housing Bear Roars
- December Existing Home Sales: The Housing Bear Roars
- How Long Can Gold Prices Be Held Down - Supply Factors
- This Will Create A Massive Spike In The Price Of Gold
- What’s Bad For Stocks Is Good For Gold
- Economic Collapse 2014 -- THE GREAT AMERICAN DOWNGRADE
- China Gold Trading Sees New 10-Week High "But Winding Down" for New Year as Emerging-Market Slump Continues
- Labour 50p Tax Rate Shows Labour Wants Every Street to Become Benefits Street
- Gold Price Canary In The Coal Mine
- Is the Canadian Dollar This Currency Losing Its “Safe†Status?
- Doug Casey: “Gold Stocks Are About to Create a Whole New Class of Millionaires”
- Gold price in a range of currencies since December 1978 XLS version
- Floor for Gold Price at Last?
- Floor for Gold Price at Last?
- The Fate of All Paper Currency
- The Fate of All Paper Currency
- Big Jump in Junior Silver
- Big Jump in Junior Silver
- Swap Dollars for Renminbi
- Swap Dollars for Renminbi
- Gold Mining Stocks Now Leading the Metal
| The Coming Economic Collapse Will Be Much Worse Than Most Realize Posted: 28 Jan 2014 12:15 AM PST Citizens of the U.S. and the world are heading into a future that few have prepared for. It will also turn out to be much worse than most realize as it will be unlike anything we have witnessed in the past. Part of the reason we are in such a bad fix has to do with the compartmentalization and specialization of our modern educational and economic system. There are many intelligent people in the market doing smart things; however, they often have no clue on what the hell is going on in other industries or professions. |
| Posted: 27 Jan 2014 11:30 PM PST by Jan Skoyles, TheRealAsset.co.uk
Whilst Collins argues that you can learn from Buba by demanding delivery, we would argue that someone interested in gold and silver investment does not need to demand delivery (storing within the bonded system has significant advantages) but instead ensure that you buy allocated gold and that regular vault audits are carried out. |
| Gold Price Exploding In Emerging Markets Posted: 27 Jan 2014 11:07 PM PST Mainstream economists and mainstream media remain convinced that the economy and markets are in full recovery mode. Along the same lines, gold is unanimously expected to decline in the year(s) head. One of the most recent appearances of that kind was the 2014 outlook of IMF economic counselor, Olivier Blanchard, who explained last week that global growth would average 3.7% in 2014. |
| The Status of Gold Exchange Traded Funds Posted: 27 Jan 2014 11:05 PM PST Guest post from the Financial Chronicle: Are they still a worthy investment? Of all gold-backed investments, the ETFs receive the most criticism—this is because its status in the markets has been as... {This is a content summary only. Click on the blog title to continue reading this post, share your comments, browse the website, and more!} |
| Posted: 27 Jan 2014 10:56 PM PST When the bulls are running for the doors, that is a sign that we have hit bottom and wise investors should hold on to their portfolios for the ride up, says Silver-Investor.com Editor David Morgan in this interview with The Gold Report . It may take a couple of resource war-addled years for gold and silver prices to move back to profitable levels, but the right companiesâ€"and he points to five from the members-only Morgan Report filesâ€"could make money all the way up. |
| Bitcoin, Gold, and the Quantity of Money Posted: 27 Jan 2014 09:58 PM PST by Keith Weiner
The popular view today is based on the linear Quantity Theory of Money. It seems to be common sense. If more units of a currency are issued, then the value of each unit should fall. Many people may not think of it in explicit terms, but the idea is that the value of one unit of a currency is 1/N, where N is the total money supply. If you double the money supply, then you halve the value of each currency unit. Inflation, according to this view, is either the cause—the increase in the money supply itself. Or it's the effect—rising prices. The Keynesians hold that inflation is good, and the Monetarists basically agree, though they quibble that the rate should be limited. The Austrians universally think inflation is bad. The Quantity Theory is not based in reality. One should think of this theory like the Lamarckian theory of evolution.[1] Lamarck asserted that changes to an animal's body—e.g. its tail is cut off—can be passed on to its offspring. At the time, this theory may have seemed only common sense, and it was very convenient, if not tempting. The same is true with the Quantity Theory of Money. It is convenient, seems like common sense, tempting—and wrong. The Fed has been inflicting Quantitative Easing on us for five years. There are many negative effects, but rising prices, today, is at best debatable. Certainly, even where prices have risen, the increase is not nearly proportional to the increase in the money supply. Advocates of the theory explain this by saying that the money hasn't entered the economy, it's sitting on bank balance sheets. However, money is always on bank balance sheets in a debt-based system, so this answer is not satisfying. Enter, bitcoin, a cryptography-based currency and technology developed by someone with the pseudonym Satoshi Nakamoto. It has been designed to have a limited rate of growth in the total quantity of currency, up to a predefined cap. There can never be more than 21M bitcoins. The Quantity Theory says that this will make prices of goods measured in bitcoins stable. One problem with this theory is that the real costs in terms of land, capital, and labor to produce things is steadily falling. Every productive enterprise is constantly seeking to drive cost out of production. If a currency had a constant value, then prices in terms of this currency would be falling. As we shall see below, the value of bitcoin will be anything but constant. Without a mechanism for responding to increased market demand by creating more currency, there is a fatal flaw. In the real world, when prices appear to be stable it is not because anything is static or unmoving. It is because there is constant arbitrage. Arbitrage is the act of straddling a spread. If one thing becomes more valuable relative to something else, then someone will take the arbitrage. For example, if the price of eggs in a city downtown rises relative to the price of eggs in a farm town 50 miles away, then someone will buy eggs in the farm town and sell them in the city. This will lift the price in the farm town and depress the price in the city center, until there is not much of a gap any more. To continue with the analogy on to another point, what happens if the price of eggs in the farm town is higher than the price in the city? This arbitrage is one-way. Distributors can only buy in the farm town and sell in the city; they do not distribute in the other direction. There must be another arbitrage or arbitrages, if the farm-city egg spread is to remains stable. Indeed, there is. If the price of eggs gets cheap in the city, then consumers will prefer eggs to other foods. In the body of a vertebrate, every joint is stabilized by a pair of muscles. Consider the upper arm. The biceps flexes it, and the triceps extends it. Muscles can only pull, but not push. There must be a second, opposing, muscle to move the joint in the opposite direction. This is analogous to arbitrage, as each arbitrage can only pull a spread tighter in one direction, but not push in the other. No market is more important than the markets for money and credit. So what happens when the price of money itself rises? In thinking about this question and the answer, you should not look at the dollar. The dollar is defective by design and does not work the way proper money ought to. The dollar is the product of fiat, not of a market. Everything about it is driven by forced wielded by the government. It is more instructive to consider gold. Gold is produced by gold miners. They buy labor, oil, truck tires, machine parts, and they sell gold. As we saw above, they bid up these inputs and gold metal onto the market. The gap between the value of gold and the value of this broad swath across the major factors in the real economy is thus closed by the arbitrage of gold mining companies. This keeps the value of gold from becoming too high, or in other words allows gold to be produced in response to market demand. What happens if market demand for gold drops? One reaction is that the jeweler and the artisan increase their activities. They tend to bid up gold metal, and sell jewelry and objets d'art onto the market. There is another kind of arbitrage, which is outside the scope of this article[2] but it's worth mentioning. If the demand for gold metal drops, then the owners of gold, otherwise known as savers, can lend gold for interest. This tends to press down the bid on the rate of interest. Now consider bitcoin. Bitcoin is not a fiat currency. No government forces anyone in any way to use it. However, bitcoin is irredeemable. That is, there is no agreement by anyone to redeem bitcoin in exchange for a defined quantity of gold, silver, or any real good. With its fixed quantity, there are no arbitrages regarding the value of bitcoin. So what does this mean? What will happen? The value of bitcoin will be set entirely by speculators. In gold, there are numerous forces in reality—i.e. numerous arbitrages—that will keep the value of gold tied to the values of every other thing in the economic universe. The value of gold in a free market is the exact opposite of untethered and arbitrary. The value of gold cannot crash and it cannot shoot the moon. Satoshi Nakamoto ignored these forces, and his design does not provide for them. The value of bitcoin is not tethered by the value of labor and capital. It was assumed to be sufficient that its quantity is fixed. It is the exact opposite of sufficient—a fatal flaw based on the Quantity Theory of Money, which is flawed to its core. The speculators will use bitcoin as a toy to generate profits (as they already do). When the value of bitcoin is rising, it will be obvious. Everyone has a chart, and they can pile on. The value can rise much farther than anyone would expect. Eventually, the chart will show a topping pattern. Momentum will dry up. The speculators can see this too, and thus will begin a collapsing wave of bitcoin. If a giant speculative spike occurred in food, the consequence is that poor people starve. When the price crashes, the consequence is that food producers will go bankrupt. As bad as this is, the consequences when the value of money spikes and crashes are incalculably worse. This is because every business, including food growers, depends on a stable currency. To understand this, let's ask the following question. If you take two bushels of corn and feed it to raise one chicken from egg to market, did you create or destroy wealth? Which has greater value, two bushels or one chicken? To answer, we use the common denominator of money. If Two bushels cost ½ ounce of silver and a chicken is 2 ounces of silver, then feeding the corn to the chick creates value. Simple cases like this can be (and were, in the ancient world) resolved without money. Complex cases cannot be. If you borrow money to buy land, erect a building, buy machines and inventory, then hire people to manufacture computer chips, did you create or destroy wealth? This question cannot be answered without a stable unit of measure. It would not have been possible to answer it in the ancient world. Businesses keep books to measure profit and loss. The very principle of bookkeeping depends on a constant value of the unit of account, the numeraire. When the value of the numeraire spikes and crashes, then business which produce wealth go can bankrupt. At the same time others, which destroy wealth, can grow larger, employing more people and more capital to scale up their wealth-destroying activities. This is occurring today on a massive scale. Bitcoin may make a great speculation today, because its unique combination of technologies enables many transactions that would otherwise be impossible (due to government fiat). If you live in a country that does not recognize your right to freedom of speech, you can trade your local currency for bitcoin, pay Wordpress, and have your blog hosted safely outside your regime. There are many other kinds of legitimate transactions that are made possible by bitcoin. Bitcoin would not work as the exclusive currency. Its unstable value is not suited to being used as the numeraire. For the same reason, it is not suitable for hoarding by wage earners. As I explain in In a Gold Standard, How are Interest Rates Set? it is the arbitrage between hoarding and saving (i.e. lending) that sets the floor under the rate of interest. If bitcoin is unsuitable for hoarding, then either it will not develop a lending market, or the lending market will not have a stable interest rate. A destabilized interest rate is the root cause of the ongoing global financial crisis.[3] Bitcoin works well as a foil to fiat currencies. It makes it possible for people to conduct business that would otherwise be impossible. If enough people participate, then it becomes more difficult and more unpopular for governments to act to squelch those activities. It's a pointed object lesson, showing people what is possible in a less-unfree market. Hopefully it will motivate them to clamor for more freedom. Only gold serves as the objective measure of value necessary to act as the numeraire. It is no coincidence that the quantity of monetary gold is not fixed, but has elegant mechanisms to expand and contract in response to changing market demand. HAS GOLD finally found a floor? asks Steve Sjuggerud's Daily Wealth email. It's one of the biggest questions in the market right now. Longtime readers know that since we started publishing DailyWealth in 2005, we've been outspoken bulls on gold. (We were gold owners and gold bulls years before that.) Since then, we've published hundreds of essays on the right ways to own it. We even published a book on the stuff. It's fair to say we're experienced with gold. In 2011, a worried market sent gold bullion skyrocketing to $1900 per ounce. It then corrected to the $1800 level...then the $1,500 level...and then the $1,200 level. This "$1,200 level" is where we are today.  As you can see from the three-year chart, the gold price has found at least a short-term price "floor" in the $1200 area. We see this area as a "line in the sand" for gold. It's where buyers have overpowered sellers. Since sentiment is very negative toward gold...and since China is buying so much of the stuff, we're guessing gold will hold above this "line in the sand". Traders can buy here and set a tight stop loss near recent lows. We believe it marks a tradable bottom for the gold market. You can execute this trade by simply buying physical gold. You can also "juice" the trade by owning gold stocks. Keep in mind, we don't see gold mining stocks as a good long-term investment...like we would an income-producing rental property or a blue-chip stock, like Coca-Cola. Gold stocks are more for traders. When it comes to them, we often say, "Rent, don't buy."  And as you can see from the chart of the gold-stock fund GDX, gold stocks have suffered a huge decline over the past few years. But in just the past few months, GDX has dug in a "toehold" in the $21 area. Gold stocks are disliked by the public...and they are very cheap relative to gold. With gold prices finding a floor, we think a "bad to less bad" rally is likely for the gold-mining sector. |
| Posted: 27 Jan 2014 02:01 AM PST The $1200 mark looks to mark a new "line in the sand" for gold prices... HAS GOLD finally found a floor? asks Steve Sjuggerud's Daily Wealth email. It's one of the biggest questions in the market right now. Longtime readers know that since we started publishing DailyWealth in 2005, we've been outspoken bulls on gold. (We were gold owners and gold bulls years before that.) Since then, we've published hundreds of essays on the right ways to own it. We even published a book on the stuff. It's fair to say we're experienced with gold. In 2011, a worried market sent gold bullion skyrocketing to $1900 per ounce. It then corrected to the $1800 level...then the $1,500 level...and then the $1,200 level. This "$1,200 level" is where we are today. As you can see from the three-year chart, the gold price has found at least a short-term price "floor" in the $1200 area. We see this area as a "line in the sand" for gold. It's where buyers have overpowered sellers. Since sentiment is very negative toward gold...and since China is buying so much of the stuff, we're guessing gold will hold above this "line in the sand". Traders can buy here and set a tight stop loss near recent lows. We believe it marks a tradable bottom for the gold market. You can execute this trade by simply buying physical gold. You can also "juice" the trade by owning gold stocks. Keep in mind, we don't see gold mining stocks as a good long-term investment...like we would an income-producing rental property or a blue-chip stock, like Coca-Cola. Gold stocks are more for traders. When it comes to them, we often say, "Rent, don't buy." And as you can see from the chart of the gold-stock fund GDX, gold stocks have suffered a huge decline over the past few years. But in just the past few months, GDX has dug in a "toehold" in the $21 area. Gold stocks are disliked by the public...and they are very cheap relative to gold. With gold prices finding a floor, we think a "bad to less bad" rally is likely for the gold-mining sector. |
| The Fate of All Paper Currency Posted: 27 Jan 2014 01:43 AM PST Who can resist the temptation to print, Print, PRINT...? A PAPER currency system contains the seeds of its own destruction, writes Philipp Bagus, professor for economics at University Rey Juan Carlos in Madrid, in this article republished by the Cobden Centre from Mises.org. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system, with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this scenario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt. This is especially true of players that can expect that they will be bailed out with newly produced money such as big businesses, banks, and the government. We are now in a situation that looks like a dead end for the paper money system. After the last cycle, governments have bailed out malinvestments in the private sector and boosted their public welfare spending. Deficits and debts skyrocketed. Central banks printed money to buy public debts (or accept them as collateral in loans to the banking system) in unprecedented amounts. Interest rates were cut close to zero. Deficits remain large. No substantial real growth is in sight. At the same time banking systems and other financial players sit on large piles of public debt. A public default would immediately trigger the bankruptcy of the banking sector. Raising interest rates to more realistic levels or selling the assets purchased by the central bank would put into jeopardy the solvency of the banking sector, highly indebted companies, and the government. It looks like even the slowing down of money printing (now called "QE tapering") could trigger a bankruptcy spiral. A drastic reduction of government spending and deficits does not seem very likely either, given the incentives for politicians in democracies. So will money printing be a constant with interest rates close to zero until people lose their confidence in the paper currencies? Can the paper money system be maintained or will we necessarily get a hyperinflation sooner or later? There are at least seven possibilities:
Any of the seven options, or combinations of two or more options, may lie ahead. In any case they will reveal the losses incurred in and end the wealth illusion. Basically, taxpayers, savers, or currency users are exploited to reduce debts and put the currency on a more stable basis. A one-time wealth tax, a currency reform or a bail-in are not very popular policy options as they make losses brutally apparent at once. The first option of inflation is much more popular with governments as it hides the costs of the bail out of over-indebted agents. However, there is the danger that the inflation at some point gets out of control. And the monopolist money producer does not want to spoil his privilege by a monetary meltdown. Before it gets to the point of a runaway inflation, governments will increasingly ponder the other options as these alternatives could enable a reset of the system. |
| The Fate of All Paper Currency Posted: 27 Jan 2014 01:43 AM PST Who can resist the temptation to print, Print, PRINT...? A PAPER currency system contains the seeds of its own destruction, writes Philipp Bagus, professor for economics at University Rey Juan Carlos in Madrid, in this article republished by the Cobden Centre from Mises.org. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system, with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this scenario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt. This is especially true of players that can expect that they will be bailed out with newly produced money such as big businesses, banks, and the government. We are now in a situation that looks like a dead end for the paper money system. After the last cycle, governments have bailed out malinvestments in the private sector and boosted their public welfare spending. Deficits and debts skyrocketed. Central banks printed money to buy public debts (or accept them as collateral in loans to the banking system) in unprecedented amounts. Interest rates were cut close to zero. Deficits remain large. No substantial real growth is in sight. At the same time banking systems and other financial players sit on large piles of public debt. A public default would immediately trigger the bankruptcy of the banking sector. Raising interest rates to more realistic levels or selling the assets purchased by the central bank would put into jeopardy the solvency of the banking sector, highly indebted companies, and the government. It looks like even the slowing down of money printing (now called "QE tapering") could trigger a bankruptcy spiral. A drastic reduction of government spending and deficits does not seem very likely either, given the incentives for politicians in democracies. So will money printing be a constant with interest rates close to zero until people lose their confidence in the paper currencies? Can the paper money system be maintained or will we necessarily get a hyperinflation sooner or later? There are at least seven possibilities:
Any of the seven options, or combinations of two or more options, may lie ahead. In any case they will reveal the losses incurred in and end the wealth illusion. Basically, taxpayers, savers, or currency users are exploited to reduce debts and put the currency on a more stable basis. A one-time wealth tax, a currency reform or a bail-in are not very popular policy options as they make losses brutally apparent at once. The first option of inflation is much more popular with governments as it hides the costs of the bail out of over-indebted agents. However, there is the danger that the inflation at some point gets out of control. And the monopolist money producer does not want to spoil his privilege by a monetary meltdown. Before it gets to the point of a runaway inflation, governments will increasingly ponder the other options as these alternatives could enable a reset of the system. |
| Posted: 27 Jan 2014 01:38 AM PST Junior silver mining stocks have risen nearly 30% since New Year's... PRECIOUS METAL mining ETFs – those that invest in the companies that explore and produce precious metals around the globe – had a very difficult year in 2013, writes Cinthia Murphy in this article, first published at Hard Asset Investor's sister site, ETF.com Gold and silver miner ETFs bled more than half of their value as gold and silver prices sank. But so far this year, they've been delivering serious performance, particularly in the small-cap segment. Funds like the Market Vectors Junior Gold Miners ETF (GDXJ) and the PureFunds ISE Junior Silver (Small Cap Miners/Explorers) (SILJ), for instance, have rallied now 20.7 and 29.5%, respectively, since the beginning of the year. That performance is outpacing the also-impressive gains in their larger-cap counterparts, the $7 billion Market Vectors Gold Miners ETF (GDX) and the $216 million Global X Silver Miners ETF (SIL), as in the chart below.  These are a significant jump in returns in a very short time, considering these same four funds gave up as much as 60% of their value last year when investors continued to shun the perceived safety of precious metals altogether for other equities and short-term debt securities. That distaste for precious metals markets – and mining stocks – has been the case for much of the past 2.5 years, following the global economic crisis. To put it in CPM Group's words – a commodities research and consulting company that issued a research note earlier this month – "as investors realized the world was not ending, we expected them to bail out of precious metals. They did." For instance, those investors who held on to GDXJ in the past three years or so have watched the fund slide nearly 70%. GDXJ has $1.4 billion in assets.  But that could be about to change. Precious metal prices – and mining stocks – may have fallen to what may be cyclical lows, and a rebound, while slow at first, may prove to be the beginning of a longer-term upward trend, according to CPM Group. Investors are likely to come back to the segment not only because metals and share prices are at attractive levels right now, but because there are still a lot of factors holding back real economic growth globally. "We're telling people now we think 2014 is going to be the year where we see the prices bottom out, but don't necessarily run away to the upside," CPM's Managing Director Jeff Christian said in a recent interview with HardAssetsInvestor.
But a slew of new merger-and-acquisition activity in the segment could point to a recovery, Chanin said. While many have tried to call for a bottom in mining stocks, Chanin pointed out that during the last run-up in prices, many CEOs made acquisitions of miners, and when the market turned around, these same CEOs were held liable for purchasing these assets at relatively high valuations. That's to say that these companies wouldn't be buying smaller miners unless they saw opportunity. Junior miners, in particular, don't have predictable revenue streams, and can trade at deep discounts relative to larger mining companies. They primarily explore for precious metals rather than actually mine the metals.
So far this year, only GDX has seen net asset outflows – of $223 million – while the other three ETFs have been net gainers. But it's worth noting that in 2013, GDX was hugely popular despite its dismal performance – the fund attracted more than $2.64 billion in net new assets last year.
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| Posted: 27 Jan 2014 01:38 AM PST Junior silver mining stocks have risen nearly 30% since New Year's... PRECIOUS METAL mining ETFs – those that invest in the companies that explore and produce precious metals around the globe – had a very difficult year in 2013, writes Cinthia Murphy in this article, first published at Hard Asset Investor's sister site, ETF.com Gold and silver miner ETFs bled more than half of their value as gold and silver prices sank. But so far this year, they've been delivering serious performance, particularly in the small-cap segment. Funds like the Market Vectors Junior Gold Miners ETF (GDXJ) and the PureFunds ISE Junior Silver (Small Cap Miners/Explorers) (SILJ), for instance, have rallied now 20.7 and 29.5%, respectively, since the beginning of the year. That performance is outpacing the also-impressive gains in their larger-cap counterparts, the $7 billion Market Vectors Gold Miners ETF (GDX) and the $216 million Global X Silver Miners ETF (SIL), as in the chart below. These are a significant jump in returns in a very short time, considering these same four funds gave up as much as 60% of their value last year when investors continued to shun the perceived safety of precious metals altogether for other equities and short-term debt securities. That distaste for precious metals markets – and mining stocks – has been the case for much of the past 2.5 years, following the global economic crisis. To put it in CPM Group's words – a commodities research and consulting company that issued a research note earlier this month – "as investors realized the world was not ending, we expected them to bail out of precious metals. They did." For instance, those investors who held on to GDXJ in the past three years or so have watched the fund slide nearly 70%. GDXJ has $1.4 billion in assets. But that could be about to change. Precious metal prices – and mining stocks – may have fallen to what may be cyclical lows, and a rebound, while slow at first, may prove to be the beginning of a longer-term upward trend, according to CPM Group. Investors are likely to come back to the segment not only because metals and share prices are at attractive levels right now, but because there are still a lot of factors holding back real economic growth globally. "We're telling people now we think 2014 is going to be the year where we see the prices bottom out, but don't necessarily run away to the upside," CPM's Managing Director Jeff Christian said in a recent interview with HardAssetsInvestor.
But a slew of new merger-and-acquisition activity in the segment could point to a recovery, Chanin said. While many have tried to call for a bottom in mining stocks, Chanin pointed out that during the last run-up in prices, many CEOs made acquisitions of miners, and when the market turned around, these same CEOs were held liable for purchasing these assets at relatively high valuations. That's to say that these companies wouldn't be buying smaller miners unless they saw opportunity. Junior miners, in particular, don't have predictable revenue streams, and can trade at deep discounts relative to larger mining companies. They primarily explore for precious metals rather than actually mine the metals.
So far this year, only GDX has seen net asset outflows – of $223 million – while the other three ETFs have been net gainers. But it's worth noting that in 2013, GDX was hugely popular despite its dismal performance – the fund attracted more than $2.64 billion in net new assets last year.
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| Posted: 27 Jan 2014 01:31 AM PST Why Jim Rogers say the Chinese currency is a "buy" right now... JIM ROGERS has one of the greatest track records in history, writes Steve Sjuggerud in his Daily Wealth. He delivered a 4,200% return to investors of his legendary Quantum Fund in the 1970s...at a time when the US stock market returned just 47%. And then he walked away from managing money. Today, Jim and I agree on a major investment idea. We agree that the time has come to move a portion of your money OUTSIDE of the US Dollar...and into a place you've probably never considered. I have a simple way to make the investment...and I believe it's the safest place to park your cash over the next few years. Jim is more ambitious. He believes it could be a triple-digit winner. Either way, it's an idea you need to consider today. Last summer, Jim predicted that China's currency could soar by 300%, 400%, or even 500% against the US Dollar in the next couple decades. "If anyone wants to sell Renminbi, I'd be willing to buy," Jim said. And just last month, Jim said he expects China's currency to replace the US Dollar as the world's most important currency in the next 20 years. (He is so optimistic about China, he moved his family from New York to Asia, and his young daughter now speaks fluent Mandarin.) Anyone investing in China's currency over the last few years has done well. Just this week, the Dollar hit a new low versus China's currency...the Renminbi. In fact, the Dollar has looked pretty bad against the Renminbi over the last decade. Take a look:  Importantly, Jim and I both believe this trend will continue for one simple reason...China's currency is deeply undervalued. The Renminbi is undervalued by 30%-50%, according to The Economist magazine. China's currency has appreciated 3%-4% per year in recent years. I think that's our "base case" going forward. However, we might do much better than that in the coming years...thanks to Janet Yellen.
So we can expect to earn 3%-4% a year in profits simply by holding cash in China's currency – with the potential for much bigger gains if smart people like Jim Rogers are right. "China's currency is going to crush the Dollar," my friend and colleague Porter Stansberry said on his weekly Stansberry Radio podcast earlier this month. Porter says the Chinese are striving to make their currency the world's most dominant currency – much faster than you expect. So you want to get some of your money out of US Dollars, and into China's currency. The main reasons are simple. The US government is the world's largest debtor, with some $20 trillion in debt. Meanwhile, China is now the world's biggest gold buyer AND it's the world's biggest gold producer. On the radio show, Porter made a bold prediction. He said that China currency would "become fully convertible" THIS YEAR. That means that it would be easily tradable, just like Euros or British Pounds. Nobody is expecting that this soon. |
| Posted: 27 Jan 2014 01:31 AM PST Why Jim Rogers say the Chinese currency is a "buy" right now... JIM ROGERS has one of the greatest track records in history, writes Steve Sjuggerud in his Daily Wealth. He delivered a 4,200% return to investors of his legendary Quantum Fund in the 1970s...at a time when the US stock market returned just 47%. And then he walked away from managing money. Today, Jim and I agree on a major investment idea. We agree that the time has come to move a portion of your money OUTSIDE of the US Dollar...and into a place you've probably never considered. I have a simple way to make the investment...and I believe it's the safest place to park your cash over the next few years. Jim is more ambitious. He believes it could be a triple-digit winner. Either way, it's an idea you need to consider today. Last summer, Jim predicted that China's currency could soar by 300%, 400%, or even 500% against the US Dollar in the next couple decades. "If anyone wants to sell Renminbi, I'd be willing to buy," Jim said. And just last month, Jim said he expects China's currency to replace the US Dollar as the world's most important currency in the next 20 years. (He is so optimistic about China, he moved his family from New York to Asia, and his young daughter now speaks fluent Mandarin.) Anyone investing in China's currency over the last few years has done well. Just this week, the Dollar hit a new low versus China's currency...the Renminbi. In fact, the Dollar has looked pretty bad against the Renminbi over the last decade. Take a look: Importantly, Jim and I both believe this trend will continue for one simple reason...China's currency is deeply undervalued. The Renminbi is undervalued by 30%-50%, according to The Economist magazine. China's currency has appreciated 3%-4% per year in recent years. I think that's our "base case" going forward. However, we might do much better than that in the coming years...thanks to Janet Yellen.
So we can expect to earn 3%-4% a year in profits simply by holding cash in China's currency – with the potential for much bigger gains if smart people like Jim Rogers are right. "China's currency is going to crush the Dollar," my friend and colleague Porter Stansberry said on his weekly Stansberry Radio podcast earlier this month. Porter says the Chinese are striving to make their currency the world's most dominant currency – much faster than you expect. So you want to get some of your money out of US Dollars, and into China's currency. The main reasons are simple. The US government is the world's largest debtor, with some $20 trillion in debt. Meanwhile, China is now the world's biggest gold buyer AND it's the world's biggest gold producer. On the radio show, Porter made a bold prediction. He said that China currency would "become fully convertible" THIS YEAR. That means that it would be easily tradable, just like Euros or British Pounds. Nobody is expecting that this soon. |
| Gold Mining Stocks Now Leading the Metal Posted: 27 Jan 2014 01:26 AM PST Continues the pattern of the slump, but now miners have turned higher... AT THE START of the year we asserted that gold mining equities could lead the price of bullion higher, writes Jordan Roy-Byrne at TheDailyGold.com Since then, the shares have roared higher while the metals have remained subdued. Gold has gained a bit but silver has really struggled. Why are the stocks performing so well if the metals are not confirming? The main reason is the stocks led the metals down (specifically gold) during the bear market. The chart below plots CDNX (Canadian juniors), GDXJ (US juniors), GDX (large caps) and gold. Note that both junior markets peaked months before gold. GDX technically peaked at the same time but began its topping process in December 2010, well before gold peaked.  The stocks essentially began to underperform in December 2010 and then peaked a few months later. Most companies peaked even before gold went parabolic! As a result, most mining stocks have been in a bear market longer than gold and may have already discounted the worst. It makes sense that they would bottom first and there is a precedent for that scenario. The chart below shows the action in the HUI and gold during the 2000-2001 bottom. The HUI bottomed in November while gold formed a double bottom in February and April. The HUI barely corrected when gold declined to its first bottom. The HUI did decline nearly 20% before the April bottom in gold but that was after it rebounded 70% in only four months. Moreover, the HUI exploded after gold's final bottom in April.  Moving along, another reason for stock outperformance is because the relationship to gold recently reached a historic extreme. I am usually not a fan of comparing gold stocks to gold. Over time the gold stock sector as a whole struggles to outperform gold. It badly underperformed in the 1970s and has badly underperformed over the past five years. However, this relationship (gold stocks vs. gold) recently hit a 70-year low! When something reaches that type of extreme, we have to take note. (Source: NowandFutures.com)  It turns out that there have been two great buying opportunities in the stocks (June 2013 and December 2013) with a possible third to come. During gold's final decline in 2001 the HUI shed about 20%. Yet gold rebounded strongly and the HUI did too, exploding 65% in less than two months. If gold hasn't bottomed then its final bottom (presumably in the coming months) could offer another major opportunity for the mining stocks. That being said, an investor should not wait for a correction or buying opportunity just weeks after an important bottom. What happened to those who waited for the S&P in 2009, the gold stocks in November 2008, the S&P in 2003 or the gold stocks in 2001? We believe the risk has shifted from getting caught in a final plunge to missing out on the rebound. |
In a dramatic change of stance, the Financial Times published a brief commentary item last week on the issues facing the Bundesbank (Buba) and their gold repatriation plan. Expressing thoughts that would have previously been dismissed as those of a conspiracy theorist/ gold bug, the author Neil Collins addresses a market and a price that is now significantly different to the product it purportedly represents, so much so that Collins refers to the physical metal aspect as 'something of a sideshow.'
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