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Tuesday, December 25, 2012

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Jim Willie: The Gold War

Posted: 25 Dec 2012 08:31 AM PST

By Jim Willie The global financial crisis is better described as a global monetary war to defend the toxic USDollar, whose sunset can be seen.In the last 12 to 18 months, the monetary war has again morphed, this time into … Continue reading →

Ho Ho Ho! Eric Sprott: Why are (Smart) Investors Buying 50 Times More Physical Silver

Posted: 25 Dec 2012 07:35 AM PST

Why are (Smart) Investors Buying 50 Times More Physical Silver than Gold?

By: Eric Sprott

As long-time students of precious metals investing, there are certain things we understand. One is that, historically, the availability ratio of silver to gold has had a direct influence on the price of the metals. The current availability ratio of physical silver to gold for investment purposes is approximately 3:1. So, why is it that investors are allocating their dollars to silver at a much higher ratio? What is it that these "smart" investors understand? Let's have a look at the numbers and see if it's time for investors to do as a wise man once said and "follow the money."

Average annual gold mine production is approximately 80 million ounces, which together with an estimated average 50 million ounces of annual recycled gold, totals around 130 million ounces available per year. In comparison, annual mined silver production has averaged around 750 million ounces, while recycled silver is estimated at 250 million ounces per year, which adds up to approximately 1 billion ounces. Using this data, there is roughly 8 times more silver available to buy than there is gold. However, not all gold and silver is available for investment purposes, due to their use in industrial applications. It is estimated that for investment purposes (jewelry, bars and coins), the annual availability of gold is roughly 120 million ounces, and of silver it is 350 million ounces. Therefore, the ratio of physical silver availability to gold availability is 350/120, or ~3:1.1

Now, let's examine how investors are allocating their investments between gold and silver. The data below is from the US Mint showing gold and silver sales in ounces:




Source: US Mint (www.usmint.gov)

As you can see, investors are choosing to buy silver at a ratio to gold that is well above what is available. This uptrend doesn't show any signs of slowing either. The ratio of the physical silver to gold is both rising and extraordinarily above the availability ratio of 3:1.

We can also use other data such as the most recent issues of the Sprott Physical Gold and Silver Trusts. The last Gold Trust issue in September 2012 raised US$393 million and the last Silver Trust issue raised US$310 million. On the basis of prices for each metal at the time of issue, we could purchase ~213 thousand ounces of gold and ~9.1 million ounces of silver. This represents a purchase ratio of 43:1.

If we examine ETF holdings in both gold and silver, we note that in the period from 2007 to 2012, the increase in silver holdings amounted to 12,000 tonnes, compared to 1,200 tonnes of gold – meaning, investors purchased ten times more silver than gold.
These are only three factual data points to consider, but there are other indications that silver investment demand is way out of line with availability. Our favourite question to the bullion dealers we meet, is to ask the ratio of their dollar sales in gold versus silver. The answer is that dollar sales are equal, which means that physical silver sales relative to gold are greater than 50:1.

A recent news headline on Mineweb read, "Silver Sales to Outshine Gold in India.2" It went on to quote a bullion dealer that "investors and jewelry lovers prefer silver jewelry these days." As the largest importer of gold in the world, it would be impossible for India to purchase an equivalent amount of silver, as it would require more than one billion ounces, essentially more than the current annual mine production.

While these last two confirmations of silver demand are anecdotal, the statistics from the US Mint, the ETFs, and our Physical Trust issues, are factual.

For the time being, the silver price is essentially set in the paper market where the daily average trade on the Comex is approximately 300 million ounces. An outrageous number when you compare it to the daily mine production of about 2 million ounces. As Bart Chilton, Commissioner of the Commodity Futures Trading Commission stated on October 26, 2010, "I believe there have been repeated attempts to influence prices in silver markets. There have been fraudulent efforts to persuade and deviously control that price. Based on what I have been told and reviewed in publicly available documents, I believe violations to the Commodity Exchange Act have taken place in the silver market and any such violation of the law in this regard should be prosecuted."3

Which brings us back to the phrase "Follow the money." In our view, it is almost inconceivable that investors would allocate as many dollars to silver as they would to gold, but that is what the data shows.

The silver investment market is very small. While the dollar value of gold in the world approaches $9 trillion, the value of silver in the forms of jewelry, coins, bars and silverware is estimated at around $150 billion (5 billion ounces at $30 per ounce). This is a ratio of 60:1 in dollar terms.4

How long can investors continue to buy silver at the current ratios when the availability for investment is only 3:1? We are surprised that the price of silver has remained at such a depressed level compared to gold. Historically, the price ratio between gold and silver has been 16:1, when both were currencies. Today the ratio is 55:1, so what are the numbers telling us? We believe this is one of those times when smart investors will be well rewarded to "Follow the money."

On behalf of all of us at Sprott, I wish you safe and happy Holidays and a prosperous New Year.

P.S. – US Mint Sold Out of Silver Eagle Bullion Coins Until January 7, 2013
The Mint recently informed authorized purchasers that all remaining inventories of 2012-dated Silver Eagle bullion coins had sold out and no additional coins would be struck. Since the 2013-dated coins will not be available to order until January 7, 2013, this leaves a three week void for the Mint's most popular bullion offering.


1 Sources: Gold data is from World Gold Council www.gold.org, and silver data is from Silver Institute, http://www.silverinstitute.org/site/supply-demand/
2 Source: Mineweb.com
3 Source: Bloomberg: http://mobile.bloomberg.com/news/201...lton-says.html
4 Sources: Gold data is from World Gold Council, silver data is from United States Geological Survey (USGS) and Silver Institute.



http://sprottasset.com/markets-at-a-...ver-than-gold/

Losses On Gold Positions And Other Economic Data The Swiss National Bank Will Not Like

Posted: 25 Dec 2012 06:12 AM PST

By George Dorgan:

We indicate several economic events that weaken the position of the Swiss National Bank (SNB). Moreover, we give several reasons for recent movements of the gold price and explain the correlation between gold, German economic data and the Swiss franc.

IFO data shows that Germany will not see a crisis

The IFO data on German business expectations has shown that Germany is unlikely to be dragged into a crisis. The value increased from its low in September of 93.2 to 97.9, higher than all estimates.

Investors and trading algorithms often associate the Swiss franc with the German economy. Certain tendencies, especially like rising prices in the Swiss housing sector, in exports and imports are correlated to Germany. Rising German salaries mean that Swiss imports from the biggest Swiss trading partner, Germany, become more expensive and this increases Swiss inflation. Therefore, the EUR/CHF often falls after good German data.


Complete Story »

Yen Doesn't Live In A Vacuum: Shorts Take Notice

Posted: 25 Dec 2012 05:55 AM PST

ByHamlet Capital:

Incoming Japanese Prime Minister Shinzo Abe's demands for open-ended central bank easing have seen the yen down over 5 percent against the U.S. dollar since mid-November. Abe and his supporters, including the influential Chamber of Commerce and Industry, insist that the Bank of Japan (BOJ) is doing too little to end Japan's crippling deflation. In the past decade, consumer prices excluding food have fallen on average 0.2 percent monthly. Weak demand from the EU and China has driven exports lower for six consecutive months. His solution to reviving Japan's export-driven economy is simple: devalue the yen.

He warned that unless the BOJ raises its inflation target to 2 percent at its January meeting, the bank's charter would be revised to accommodate the parliament's will. Despite the latest expansion by the BOJ in asset-purchases, Governor Masaaki Shirakawa declined to double the central bank's 1 percent inflation target.


Complete Story »

Jim Sinclair: Stay the Course, Manipulation Will Fail

Posted: 25 Dec 2012 05:05 AM PST

Jim Sinclair sent subscribers an alert today, urging PM investors to stay the course in the midst of massive cartel interventions in the gold and silver markets.   Sinclair states that the downward economic spiral caused my excessive amounts of debt cannot be stopped by central interventions or media propaganda, and that there is no tool [...]
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  3. Jim Sinclair: Cartel Cap Will Fail As Eastern Cash Market Gold Demand Will Drive Gold Over $3500/oz!

The Legend of the Lost DeLozier Silver Mine

Posted: 24 Dec 2012 11:00 PM PST

Graham

South Australian Gold mining

Posted: 24 Dec 2012 10:00 PM PST

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Stock Market Breather & Gold Yearly Cycle Low

Posted: 24 Dec 2012 09:21 PM PST

Gold Scents

The Case for $136,604/oz physical silver

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‘Max got us into Silver at $7 bucks'

Posted: 24 Dec 2012 06:17 PM PST

GGR Holiday Changeover to new Servers, Subscriber Daily Comment

Posted: 24 Dec 2012 05:05 PM PST

HOUSTON -- Over this holiday period GGR staff will be changing over to new servers, including all the features on the Subscriber pages.  Readers should not notice any difference, but we are temporarily unable to post new Daily Commentary on the Welcome Page of the Subscriber website. 

The brief daily Subscriber comment below was intended for Christmas Eve and Christmas Day, so we are posting it here for our readership until staff completes the changeover. 

Thank you and Happy Holidays.

20121224 Subscriber comment:


CHRISTMAS EVE. For all intents, with a few possible exceptions, Tax Loss Shopping Season is over.  For good or bad, right or wrong, counting trades in November, we took advantage of this 2 year bear market for juniors induced PTLC Season to build good positions, including GoldQuest, Comstock, Kaminak, Channel Resources, Prosperity Goldfields, Precipitate, and most recently Timberline.  (Our TLR stake is now an unprecedented and uncomfortably large 7 unit oversized stake.)  We are pleased and grateful for the unexpectedly large opportunity this year.

2012 was also a year of disappointment.  Notably for us were 3 Yukon related issues.  Manson Creek and Northern Tiger (which we still hold), and Argus, all for different reasons.  Winners this year were modest, including Andina, Aldrin, Evolving Gold, Corvus, Mega, Pinetree and Precipitate (partial sale).  Plus two exceptionally good trades each in gold and silver futures. On balance it was a tough, tough year.  (A year of opportunity, if building positions on the cheap. )

But as tough a year as it was, we can still count our many blessings, especially when we consider the year our good friend Eric Coffin of HRA endured.  He lost his father, his beloved brother and devoted wife of 30 years all in this one year, all during the Junior Bear Market From Hell. (Godspeed to our good friend.)

Be safe, be thankful, and hug your family this holiday season.  Trust that the fundamentals for gold and silver are robust and that bear markets DO NOT LAST FOREVER. 

That is all; carry on...     

20121224-MerryXmasTexas

Say Goodbye To The Good Life

Posted: 24 Dec 2012 03:16 PM PST

Say Goodbye To The Good Life - The U.S. Capitol With A Babylonian Holiday Tree In The ForegroundWill this be the last normal holiday season that Americans ever experience?  To many Americans, such a notion would be absolutely inconceivable.  After all, in the affluent areas of the country restaurants and malls are absolutely packed.  Beautiful holiday decorations are seemingly everywhere this time of the year and children all over the United States are breathlessly awaiting the arrival of Santa Claus.  Even though poverty is exploding to unprecedented levels, most families will still have mountains of presents under their Christmas trees.  Of course a whole lot of those presents were purchased with credit cards, but people don't like to talk about that.  It kind of spoils the illusion.  Sadly, the truth is that our entire economy is a giant illusion.  The extreme prosperity that we have been enjoying has been fueled by debt, and any future prosperity that we will experience is completely dependent on our ability to go into even more debt.  The total amount of debt in our economy is almost 10 times larger than it was just 30 years ago, but we don't like to think about that too much.  Most Americans are way too busy living the good life to be bothered with "doom and gloom".  Well, get ready to say goodbye to normal.  As history has shown us, no financial bubble lasts forever, and time is rapidly running out for us.

You know that the hour is late when even mainstream news sources start publishing articles with titles such as this: "Will 2013 Mark the Beginning of American Decline?"

That article appeared on Bloomberg.com the other day, and it was written by Simon Johnson, a former chief economist at the International Monetary Fund.  He is convinced that a day of reckoning is coming for U.S. government finances, and he seems resigned to the fact that we will not be ready when that day arrives...

"Sooner or later, it will be America's turn to fall out of favor with investors and to see its own interest rates rise. It is hard to know when that day will come, or precisely what pressures the country will face.

Let me only venture one forecast: We will not be ready."

Other analysts are far more pessimistic.  For example, the following is what Gerald Celente said about the "bond bubble" during a recent interview with King World News...

Eric King: "Gerald, I wanted to take a look at this upcoming issue you have coming out. (In here it says,) 'Bonds Away! The bond bomb is ready to explode ... threatening to make the real estate and dot-com bubbles, and even the Great Recession, look like market corrections.' Can you talk about that?"

Celente: "Yes. This piece is being penned by Dr. Paul Craig Roberts, the former Assistant Treasury Secretary under Ronald Reagan. And he is convinced that the bond bubble is about to burst. This cannot continue to go on the way it is. Everyone knows that the whole game is rigged, and so is this...."

"The whole game is rigged. It's ready to go down, and Dr. Paul Craig Roberts believes it's 'Bonds Away' in 2013 as the bond bubble explodes and brings about a financial disaster even worse than the Great Depression."

Eric King: "He's saying here it's a road to financial collapse that we are going to head down when this thing bursts."

Celente: "It is. Because the whole world is being propped up by these phony bonds and it's going to collapse. It has to happen. Interest rates are going to start going up, and when they do the bond bubble explodes. You cannot keep interest rates at zero for this amount of time and expect anything other than disaster to follow."

For much more on all this, you can listen to another excellent interview with Gerald Celente right here.

Our politicians just assume that we will be able to borrow trillions upon trillions of dollars far into the future at super low interest rates, but that is a very dangerous assumption.

As I noted the other day, the average rate of interest on U.S. government debt was 2.534 percent at the end of November.  If that number just rose to where it was about a decade earlier we would be in a massive amount of trouble.

Back in the year 2000, the average rate of interest on U.S. government debt was 6.638 percent.  If we were at that level today, the U.S. government would be paying out more than a trillion dollars a year just in interest on the national debt.

But our politicians just keep borrowing and spending as if we could do this forever.

From the time that George Washington was inaugurated (1789) to the time that George W. Bush was inaugurated (2001), the U.S. government accumulated about 5.7 trillion dollars of debt.

During the first four years of the Obama administration, the U.S. government accumulated about 5.7 trillion dollars of debt.

How can anyone support this kind of insanity?

You can see an excellent video demonstrating the vastness of our national debt right here.  In the end, all of this debt will absolutely destroy the U.S. dollar, our economic system and the bright futures that our children and our grandchildren were supposed to have.

As if all of that was not enough to be concerned about, there is also the threat that Wall Street could implode at any time.  Most Americans have no idea that Wall Street has been transformed into the largest casino in the history of the world.  The "too big to fail" banks are the ringleaders, and the derivatives bubble hangs over our financial system like a "sword of Damocles" that could fall at virtually any moment.

Everything will remain fine as long as the spiral of derivatives that our bankers have constructed remains perfectly balanced.  But if something happens and it becomes unbalanced and starts to collapse, the consequences could be unlike anything we have ever seen before.

A recent Zero Hedge article entitled "1000x Systemic Leverage: $600 Trillion In Gross Derivatives 'Backed' By $600 Billion In Collateral" detailed how there is barely any collateral backing up the hundreds of trillions of dollars of derivatives that are out there...

But a bigger question is what is the actual collateral backing this gargantuan market which is about 10 times greater than the world's combined GDP, because as the "derivative" name implies all this exposure is backed on some dedicated, real assets, somewhere. Luckily, the IMF recently released a discussion note titled "Shadow Banking: Economics and Policy" where quietly hidden in one of the appendices it answers precisely this critical question. The bottom line: $600 trillion in gross notional derivatives backed by a tiny $600 billion in real assets: a whopping 0.1% margin requirement! Surely nothing can possibly go wrong with this amount of unprecedented 1000x systemic leverage.

Our entire economy has become a giant pyramid of debt, risk and leverage.  At some point there is going to be a giant crash.  When that happens, people are going to become very desperate.

When people become very desperate, they often accept "solutions" that they were not willing to consider previously.

We need to learn some lessons from history.  This is exactly the kind of thing that happened back in the 1930s.

For example, an elderly woman named Kitty Werthmann is telling audiences what life was like in Austria back in the late 1930s...

"In 1938, Austria was in deep Depression. Nearly one-third of our workforce was unemployed. We had 25 percent inflation and 25 percent bank loan interest rates."

"Farmers and business people were declaring bankruptcy daily. Young people were going from house to house begging for food. Not that they didn't want to work; there simply weren't any jobs."

The Austrian people were really hurting and they were desperate for answers.  When Hitler came to them with "solutions", they were ready to embrace him with open arms...

"We looked to our neighbor on the north, Germany, where Hitler had been in power since 1933." she recalls. "We had been told that they didn't have unemployment or crime, and they had a high standard of living."

"Nothing was ever said about persecution of any group – Jewish or otherwise. We were led to believe that everyone in Germany was happy. We wanted the same way of life in Austria. We were promised that a vote for Hitler would mean the end of unemployment and help for the family. Hitler also said that businesses would be assisted, and farmers would get their farms back.""Ninety-eight percent of the population voted to annex Austria to Germany and have Hitler for our ruler."

"We were overjoyed," remembers Kitty, "and for three days we danced in the streets and had candlelight parades. The new government opened up big field kitchens and everyone was fed."

Sadly, America is already starting to go down the same path in many ways.  If you doubt this, you can read the rest of her account right here.

Right now, things are still relatively good in America.  Yes, there are a whole host of economic numbers that look really bad, but what we are experiencing right now is nothing compared to the horrific economic pain that is coming.

When our economy finally crashes, nobody is going to be able to press a button and restore things to how they were previously.  We will be told that we have to "adjust" and consider "new solutions" to our "new challenges".  Someday we will look back on the good life that we were enjoying in 2010, 2011 and 2012 and wish that we could go back to those days.

So enjoy the relative peacefulness and prosperity of these times while you still can.  A horrific economic collapse is on the way, and once it strikes none of our lives will ever be the same.

Santa Claus - A Symbol Of Our Materialism

Arbitrage now surfaces between Shanghai gold/silver exchange and comex/new uses of gold/Indians switching to gold coins instead of jewelry/

Posted: 24 Dec 2012 03:03 PM PST

Hugo Salinas Price comes out swinging against plagiarist, Keith Weiner

Posted: 24 Dec 2012 02:35 PM PST

Stacy Summary: We're having Professor Fekete on in the new year (mid January); and will also interview Hugo, so will have a full update on this for you and a whole lot more about the biggest silver manipulation scandal in … Continue reading →

Alasdair Macleod: “We are quite likely to have a failure on COMEX in the silver market”

Posted: 24 Dec 2012 12:09 PM PST

Matterhorn Asset Management's Lars Schall has released an excellent interview with GoldMoney's Alasdair Macleod, discussing the latest take-down of the metals post QE4, the outlook for gold and silver, and cartel manipulation of the metals. Macleod states that massive amounts … Continue reading →

Eric Sprott: Why are (Smart) Investors Buying 50 Times More Physical Silver than Gold?

Posted: 24 Dec 2012 12:03 PM PST

December Markets At a Glance From Eric Sprott: As long-time students of precious metals investing, there are certain things we understand. One is that, historically, the availability ratio of silver to gold has had a direct influence on the price of the metals. The current availability ratio of physical silver to gold for investment purposes [...]
Check out these similar articles:
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Japanese Gold reserves, end of last month

Posted: 23 Dec 2012 09:50 PM PST

Bank of Japan
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