saveyourassetsfirst3 |
- The Journey, Part VI: New Horizons
- SRSrocco: GOLD & SILVER = STORED TRADE-ABLE ENERGY
- Should You Buy Gold Stocks Right Now?
- Doug Casey’s Current View of the World
- Diversify Your Precious Metals!
- A Coy Public Suddenly Gets Cozy with Stocks
- Gold edging closer to upside breakout – Nichols
- Freeport-McMoRan's Long-Term Potential Not Blighted By Energy Acquisition
- Sandstorm Gold's Latest Move
- Pastor Dowell: Germany Cannot Get It's Gold Back From U.S.
- Beginning of the end seen for current Gold price era
- Pierre Lassonde: The Looming Gold 'Production Cliff'
- Two King World News Blogs
- US Dollar Vulnerable to a Loss of Confidence Event, Massive Shift From Paper to Physical Gold Underway
- GOLDVIEW: Germany's Gold & Mining Industry Updates
- Fiat Money and the Gold Problem
- Gold price rigging is as old as gold itself
- By the Numbers for the Week Ending February 1
- Modern Day Alchemists
- Rush To Safety: Americans Buy Nearly Half a Billion Dollars Of Gold and Silver In January
- Final Bottom in Gold Stocks Coming
- Is your precious-metals portfolio ready for 2013?
- Kitco Axes Cartel Shill & PM Perma-Bear Jon Nadler!
- 5 Gold & Silver Investment Tips
- Gold & Silver Prices – Counterintuitive Behavior To Continue
- Peter Schiff & Doug Casey About Gold, Dollar Collapse & US Fed
- Gold and Quantitative Easing: Inflation All Over Again?
- Dying Hope
- Investors “In Great Danger” If They Don’t Own Gold, Warns Faber, as GDP Drop Sees US Fed Press On with QE
- Gold Outlook For The Following Months
- Gold and Silver Disaggregated COT Report (DCOT) for February 1
| The Journey, Part VI: New Horizons Posted: 02 Feb 2013 10:45 AM PST With this installment, we conclude our series, " The Journey: From Floor Trader to Family Office Manager." (If you haven't read the whole thing, start here.) In Part V, Global Opportunities, we discussed managing large amounts of capital, moving beyond conventional wisdom, and the search for, well, global opportunities. In Part VI, New Horizons, we discuss the Family Office outlook… dig deeper into risk control… and finish with a view of the horizon — trading, investing and beyond. This interview series is part of the Mercenary Vault, an archive of exclusive high quality materials available to Mercenary Dispatch subscribers. The Dispatch is our means of direct communication with Mercenary community members – and it's free! Sign up here and don't miss out on future exclusives. And now to the finale… Note: This interview segment is Part VI of a series. Also available:
JACK: If an up and coming hedge fund manager wanted to break into family office circles and get a meaningful allocation of capital, what advice would you give? What kind of approach would be recommended, what kind of pitch, and so on? DEEP ALPHA: First, I would say be aware of some changes in the Family Office world. The shifts have been occurring for some years, but since 2008 they have accelerated. For one thing, there has been a migration from single family office structures to multi-family structures to help reduce costs. For another thing, family offices (like so many) are scarred from financial crisis losses and the lack of transparency post-disaster. They are more savvy now, and some of the larger offices are plucking top-notch investment talent from hedge funds and private equity firms. That is the bigger scale. But, whatever size a manager is dealing with, most Family Offices want to know immediately about your fee structure and how you manage risk. They want scenarios. They don't want big surprises. JACK: It keeps getting back to risk control. DEEP ALPHA: Yes. In your interview with Peter Brandt, I was very impressed with the way he thoroughly goes over risk management: How he reviews trading performance, what he could have done differently, breaking it down and so forth. That deep focus on risk management is what I would be asking for. Very specific parameters, broken down, laying out exactly what would happen under various scenarios. That and the profile of the sandbox the manager is playing in. What are the opportunities, how crowded is the space, is it saturated yet… how long has he been there, does he have people there… with emerging markets especially, having people there is key. Knowing the local markets, the local color and flavor of what's happening. Depth of expertise and depth of risk management – those are the two big ones. Then I want them to be aware enough to answer all my detailed questions. JACK: What is your opinion on some of the major hedge fund players out there today? Och Ziff, Moore, Paulson… just the big humongous players. How do you view the big giant funds out there? DEEP ALPHA: This may be a personal bias, but it just isn't my style to go with asset managers that large. I would much rather hand pick some boutique, smaller shops – JACK: You'd rather trust in your ability to find up-and-comer managers who can deliver real returns. DEEP ALPHA: That's me. And as I mentioned, since the big meltdown, fee structures are being questioned. Negotiating is much more common. Fees were just accepted before, but now it's no longer the case. JACK: The standard "2 and 20" is becoming "1 and 15" and so on? DEEP ALPHA: It's changing, absolutely. The fees are getting smaller. JACK: Is there a place in this universe for aggressive risk-return type funds? Where there is still a risk management process, obviously, but the target might be 40 to 80 percent annual returns with acceptance of a larger drawdown – DEEP ALPHA: I can tell you that family offices don't look at that. Endowments wouldn't look at that. I personally would look at it though… JACK: They are more in the neighborhood of, say, 10-15 percent annualized and single-digit drawdowns. DEEP ALPHA: Right. JACK: Another question relating to allocation: In your own trading, how do you think about allocating capital to various time frames: Day trading positions, swing positions, long-term investments… how do you break that out? DEEP ALPHA: I wish I had a scientific answer… JACK: Just a general feel for how you approach it. DEEP ALPHA: My short answer would be "Opportunistically." Day trading is kind of a staple. Bread and butter. JACK: By opportunistic, you mean that you see something and on the spot say "Hey this could be a good swing trade," or "Hey this could evolve into a long-term position trade." DEEP ALPHA: Yes. And I would say the swing trades are much more frequent than the long-term trades. I can and have sat with gold for 10 years…but not in the futures market. I never would be able to hold it like that. JACK: What is going to happen in your own trading as you get more and more involved from a family office perspective? The very definition of long-term capital allocation – deep digging, vetting the managers, finding the gems – how will you balance that with the demands of short-term trading? Just do a lot of delegating? DEEP ALPHA: There will definitely be delegating, especially with the next move I'm contemplating to a much bigger family office structure. JACK: So your expertise is also shifting to becoming an evaluator of other traders, of other managers. DEEP ALPHA: Exactly. I'm looking forward to that. I've been doing that on a small scale, but it's going to start happening on a much larger scale. JACK: Part of your ongoing evolution. DEEP ALPHA: Yes. The reality is, I enjoy interviewing others amd learning what they know and how they implement their strategies. Time for changes… JACK: Put short-term trading on the shelf and possibly come back to it later… DEEP ALPHA: Yes, putting it on the shelf while I see how I like a far deeper commitment to the family office world. Will I still be swing trading and doing things of that nature? Maybe upon occasion. You certainly don't want a conflict of interest when you are responsible for very large sums. I need to focus my energies on becoming an experienced long-term investor – again, an evolution that I'm ready for. I am looking forward to traveling, meeting with managers, and talking with competent people. JACK: How do you think about risk from an investment perspective? We're talking just your investment portfolio, where everything in it has a minimum time horizon of twelve months, or a longer term 5 years, perpetual cash generation or whatever – how do you think about risk allocation to this pool of capital that you have? I mean, would you go on an individual investment basis? 5% of capital into this idea and whatnot? How would you mentally approach this? DEEP ALPHA: Let me get back to you in deeper detail on that. This is an area I'm growing in and formulating right now. JACK: I've always been curious about this. It's the question of how value investors manage risk. Most of what they do is, "When you buy something make sure it can't go to zero." It's strange in a sense that deep value still has serious embedded volatility risks. But as Buffett says, Volatility is not risk; you think about risk in terms of permanent loss of capital. If you're going to be a real deep value player, I guess you have to be willing to sit back and have these years where you are down 20% or whatnot… the whole question is very interesting to me, because value becomes more poignant the larger your capital base becomes. DEEP ALPHA: Certainly. It's going to be a learning process, no question. JACK: What makes sense to me is: If you're talking about a longer term pool of capital, you have to establish a series of outlier cases and then work off of those. You have to say, "If we're going to invest this capital with a 5, 10, 15 year time horizon, we're going to have to endure drawdowns of X percent or more." And even that is going to be fuzzy because, if you're doing off-exchange type stuff, there aren't going to be regular mark-to-market values. It's very interesting, the complexities involved here. DEEP ALPHA: Agree, and I will be diving headfirst into that. JACK: What would you say is the ballpark capacity level for, say, daytrading vehicles like the e-minis and bonds, or swing-trading — say you've developed a great short to intermediate term system for trading equities and futures — what would you say is the upper limit for that type of strategy? 50 million? 100 million? At what point does the base get too large? DEEP ALPHA: I would say $100 million… there are enough liquid assets and places to play for that to be a reasonable ceiling. JACK: That makes sense to me too. So then here is another question, more of a personal one: Given that your short-term strategies give you the possibility to run as much as $100 million — the bulk of which could become your own money after a while — why choose to go into the longer term arena? It could be a great decision, of course, I'm just curious about your motivation. Are you just passionate about new vistas and new horizons, or…? DEEP ALPHA: For me, one of my goals is to open up my time horizons. As human beings we are like monkey brains: We get trained in something, and then we keep going there and going there, and I want to open up my time horizon to get past that. And this is going to do it. This will also open up a whole range of opportunities to dig deep into risk management… all kinds of alternative investments… areas that I am very fascinated by. JACK: Do you think it could actually be less stress, to run larger amounts of capital on a family office timeframe? DEEP ALPHA: I think so, for me personally. Again I wasn't trained classically — it's just been boots on the ground training, off we go. This whole concept of an enormous portfolio, and the world as your playground — I want to see how this goes, and what I'll be learning from it. And if it works, the access to people and ideas I'll have will be huge. I've had good access so far, but it will be even bigger. It will just give me this leap to learn – JACK: It sounds like a new adventure. DEEP ALPHA: Yes. And like we were talking at dinner the other night — Mongolia. So many interesting places in the world… JACK: Right, any economy that is growing 50% per year is likely to be intensely interesting. And it is such a wild time. I've said before there is as much exciting change going on now as there has been in the past 100 years. We've got industrial revolutions, global power shifts, breakthrough technologies on the cusp — craziness. DEEP ALPHA: So much fun. I think too that giving up trading is an empty nest syndrome for me, so I really have to fill it up with something big. JACK: And you are only partially walking away from trading because there is a new horizon of things that are even more interesting, at such a great time. DEEP ALPHA: It's a time of incredible opportunity and change. And, of course learning…  | ||
| SRSrocco: GOLD & SILVER = STORED TRADE-ABLE ENERGY Posted: 02 Feb 2013 09:45 AM PST By SD Contributor SRSrocco: GOLD & SILVER = MONEY ENERGY = MONEY GOLD & SILVER = STORED TRADE-ABLE ENERGY Gold & silver will be some of the best stores of value going forward, because they are stores of trade-able energy. Not only will gold and silver protect ones wealth from the ravages of monetary debasement… [...] | ||
| Should You Buy Gold Stocks Right Now? Posted: 02 Feb 2013 09:28 AM PST By Mitchell Clark, B.Comm. for Profit Confidential
Gold prices have been in consolidation for about a year and a half, and I feel they should experience an upward breakout later this year. But cash costs per ounce are going up, and I would say that the majority of gold producers are reporting this in their quarterly earnings reports. It begs the question: should you buy gold stocks right now? My answer is no. I'd rather see you just buy gold. Why take the investment risk of betting on the spot price of gold, a company's ability to meet production targets, and the industry-wide trend of higher costs? Right now, it's not worth it. You might as well just speculate on gold prices, not gold stocks. That's enough investment risk. Barrick Gold Corporation (NYSE/ABX) is one of several large-cap gold stocks that are having a tough time on the stock market these days. Gold stocks have corrected much more than the actual spot price of gold due to rising costs. Earnings estimates for Barrick have been revised downward for upcoming quarters; and while you might argue that $30.00 a share is a floor for the stock, why bother taking the risk? Barrick's stock chart is featured below: Chart courtesy of www.StockCharts.com While I do feel that investors should already have exposure to gold and that gold prices are getting set for a breakout, I don't see that breakout happening in the very near term. Even on days when the spot price is rallying, daily gains are unenthusiastic; the action is reminiscent of a trade that has basically played itself out. Right now I have two mid-tier gold stocks that I like and one large-cap name that represents good value. I also have one development-stage junior explorer that I like, but that stock's already gone up in price. Practically, there's no need to take the risk with gold stocks given current fundamentals. I would argue that silver is more attractive on a relative basis, but I still come back to the same conclusion. Unless the spot price is roaring, gold stocks aren't going anywhere. Accordingly, for the investment risk, if you want to invest in gold today, you're better off speculating on the spot price. Nowadays, there are a lot of options for gold investors, and you don't have to go to the futures pit or deal with gold stocks. With so many gold exchange-traded funds (ETFs) out there (and many employ leverage), you can go long or short, create your own hedge, and even make a big bet, just as you would in the stock market. How about a mutual fund of gold stocks? Forget it. Just bet on the spot price. I want to highlight one more chart for you, and this is the SPDR Gold Shares (NYSEArca/GLD) ETF, which is one of the largest ETFs dedicated to changes in the spot price of gold. As you can see in the chart, the recent consolidation is very similar to the consolidation experienced in 2008/2009. Chart courtesy of www.StockCharts.com My bet is that history is going to repeat itself at least one more time, and a breakout in gold prices is in the cards for sometime this year. (See "Looking for a Great Track Record? Look at SPDR Gold Shares.") I recognize, of course, that commodities are inherently volatile; even with the sovereign debt crises, massive money printing, and the prospects for inflation, gold can still go down for the simple reason that speculators withdraw from the marketplace. There is no true value for gold; only what the marketplace perceives it to be on any given day. Without question, gold at $1,250 an ounce is as equal in possibility as $2,050. This is the true risk with commodity investing, whether it is in gold stocks, the spot price, or an exchange-traded fund (ETF). The long-term trend might still be intact, but it could cause you a lot of grief getting there. The 2012 Gold Investing Guide from Casey Research tells you all about ways to leverage gold – from bullion to stocks to ETFs and more. Get it ABSOLUTELY FREE today. | ||
| Doug Casey’s Current View of the World Posted: 02 Feb 2013 09:26 AM PST Doug Casey's latest book, Totally Incorrect, gathers his iconoclastic views in a tidy package to stimulate and possibly dismay readers. In an interview with The Gold Report, Doug elaborates on some of his most radical ideas and offers his view of where the markets are likely to head in 2013. The Gold Report: Doug, you have a new book out called Totally Incorrect: Conversations with Doug Casey. In one of those incorrect conversations with Louis James you said, "It's not the US economy that's facing a fiscal cliff, it's the US government. People equate government with the economy. They are entirely two different things. The only way to revitalize the US economy is through both vast reductions in taxes and vast reductions in government spending. Instead, these idiots are arguing over how much to raise taxes and how little they can cut spending." Now that we have avoided parts of the fiscal cliff and delayed addressing other parts, what are your observations? Doug Casey: Nothing has changed. I am amazed to read about what is called a trillion-dollar platinum plan to get around Congress having to raise the debt ceiling. It's actually quite comical that some people are talking about it as a solution; it's Three Stooges economics. My only question is: Why not make it a $10 trillion coin? That would solve the problem for several years and release the government from even the fictional restraints on spending it now has. Actually, let's do $100 trillion; why deal in half measures? It's all a ridiculous charade at this point, the precisely scripted Kabuki theater between the left and right wings of the Demopublican Party. The ending of the ridiculous drama is totally predictable. The point is that the government is spending more than $1 trillion a year more than it is taking in. And that's using cash accounting, which is improper. If the government used accrual accounting, which takes into account future obligations, mandates, and liabilities, the number is more like $3-4 trillion. Already the Chinese and the Japanese really don't want to buy any more Treasuries to finance the deficit. So the Federal Reserve is buying most of it and crediting the accounts of the US government with the money it creates. Maybe it should ask the Chinese if it would like the trillion-dollar coin? At least it would have a cute collectible. The Chinese should insist on a 10-ounce-size coin, so it doesn't get lost too easily. But all kidding aside, the Fed may as well issue a $1-trillion coin. As the economy really goes off a cliff over the next couple of years, government outlays will almost necessarily go up and tax revenue will absolutely decline as the economy slows down. TGR: You often make a distinction between the government and the country, and the economy. But if the government and the economy are two different things and the government is the one facing the fiscal cliff, why should the economy go downhill as well? DC: Because the government is such a massive actor in the economy today. Whenever a massive economic actor is bankrupt, there will be repercussions. There are around 2.7 million people directly employed by the federal government, by all the hundreds of agencies, bureaus, commissions, and whatnot; that's been fairly stable for a long time. They say there are around 22 million employed by all levels of government, and that's actually been dropping – non-federal governments can't borrow any more, and they can't print money. A few have declared bankruptcy. But those numbers don't include things like the Post Office and Amtrak. They don't include 1.5 million active-duty troops. And all branches of government have increasingly gone to using outside contractors, as the military famously does. Some 25 million people, more or less, employed by government is one thing. That's a lot. But of course, many are doing things that would otherwise be done privately. The real problem is so many major corporations have the state as their major customer – military and aerospace contractors, construction firms, computer outfits – everything you can imagine. Having your major customer bankrupt is a big problem. But there's much more. The US government has 50 million people dependent on food stamps, 7 million on disability, and scores of millions more on Medicaid, Medicare, and other programs. In my ideal world, government would exist for two reasons: as a police force to protect the citizens, and as a court system to allow citizens to adjudicate disputes. The economy is far too important to be left to the government and the kind of people who are drawn to work in it. The fiscal cliff and the bankruptcy of the government are important because so many people depend on the government for their livelihoods. Most major corporations are customers of the US government. It's said fully 37% of Americans derive their income from the government. That is a gigantic distortion that has been put into the economy over many decades, and it has to be unwound. TGR: Can it be unwound slowly over many decades or do we have to go over a cliff? DC: It could be unwound slowly over many decades, but that would require a complete change in the way the American people think. Right now, the people who run for president or for Congress, for state legislature seats, and even local offices, actually think that government is a magic cornucopia. This problem will not be solved unless that attitude changes, and I do not see how that will happen at this point. In fact, there's every reason to believe it's going to get worse. TGR: Some European countries have implemented severe austerity programs. Will that help Europe turn around or are these programs just a slow, painful edging toward the same cliff? DC: Europe is in much worse shape than the US. Socialism is totally ingrained in the psyche of the average European. The European idea of austerity is cutting back some government programs around the edges, making a few cosmetic changes. Maybe an occasional headline upbraiding a particularly egregious example of corruption. It's all public relations and generalities. But the idea of pulling the plant out by its roots is totally anathema. That's because they really believe socialism, welfarism, and all kinds of state intervention is morally correct. Most Europeans actually want a stronger state, all paid for with money stolen from a diminishing pool of productive taxpayers. Most Europeans believe the state owes them a living and that the rich should be eaten to finance that. That attitude will not be changed without real tumult. There is no impetus for gradual change or reversal in Europe. TGR: In the conversation titled On 2013, you say 2013 will be ugly, but merely a warm-up for 2014. Yet the economic trends appear to be positive: the end of quantitative easing by year-end, increased domestic oil and gas production resulting in inexpensive energy for decades to come, more manufacturing jobs, and less unemployment. Is this slow-growing economic recovery masking the effects of the deficit and unfunded liabilities, thus allowing politicians to kick the can further down the road? Why do you think 2013 and 2014 will be so bad? DC: Most of the information that people get about what is going on comes from the popular press and, at this point, the popular press is almost the fifth branch of government – after all the agencies, which have become the fourth branch of government. As for things improving, yes, things seem better because we're not actually in the middle of chaos. Well, actually we are, but only because it's the eye of the hurricane. Those trillions of currency units that have been and still are being created make people feel more prosperous than would otherwise be the case. I have no trust in the unemployment figure. If it were still calculated as it was before 1980, unemployment would be between 13% and 19% today. I have no more confidence in the inflation figures issued by the US government than I have in the inflation figures published by the Argentinean government. It is in the government's interest to keep those reported numbers as low as possible, in part because payments on things like Social Security are adjusted to inflation. In addition, people in government think the economy depends more on psychology than reality, and no one wants to set off a panic. I suggest people panic now and beat the last minute rush. [laughs] As far as oil is concerned, I believe in the peak oil theory, which basically says that the cheap, easy, light sweet crude has all been found. Crude is extremely hard to find. At the same time I believe technology will solve all energy problems – oil is a very simple compound made out of hydrogen and carbon, essentially. Technology allows us to create almost anything, so there's no reason why we'd ever run out of oil. Fracking and horizontal drilling will make lots of hydrocarbons available. The question is, at what price? TGR: But why 2013? DC: In 2007, we started into the leading edge of a financial hurricane. In 2010 through 2012, governments around the world printed trillions of new currency. That did not solve the financial problems of the banks, brokers, hedge funds, or large corporations – much the way giving a million dollars to a wino will temporarily solve a lot of his problems – but at some point those dollars, which are currently sequestered, will start coming into circulation. That will result in huge price rises of everything. You can't solve problems just by printing pieces of paper. You become prosperous by producing more than you consume and by saving the difference. However, the US, Western Europe, and many other parts of the world consume more than they produce. They have been living on borrowed money and mortgaging our future with debt. That holds true for governments and for individuals. TGR: That leads me to another conversation in the book, called The Morality of Money. In that conversation, you argue that accumulating wealth is an important social as well as personal good. You say, "The good to the individuals of accumulating wealth is obvious, but the social good often goes unrecognized. Put simply, progress requires capital. Major new undertakings, from hydropower dams to spaceships, require huge amounts of capital. You need the wealth to accumulate in private hands to pay for these things. If the world is going to improve, we need huge pools of capital, intelligently invested." You said earlier that the goal of government should be to provide police and to adjudicate disputes. But if world improvement requires huge amounts of capital, who is better placed to make those intelligent investments: self-serving wealthy individuals or self-serving governments? DC: Let me say something many people will consider shocking: I do not believe government entities should exist at all, or are even necessary. Government is based on force and coercion. Essentially, the power of government comes out of the barrel of a gun, as Mao Zedong noted. I do not think that is the proper way for a civilized society to function. By its nature, government never has and never will be a producer. It is a consumer. It acquires income by theft. I am an anarchist. Contrary to popular opinion, anarchy has nothing to do with a guy dressed in black holding a little round bomb with a lit fuse. Anarchy is a system of self-rule; you do not have someone telling you what to do and not do. TGR: But if civilization needs huge amounts of capital to progress, can we expect the wealthy to employ their capital wisely and for the social good? DC: You cannot expect anybody to do anything, but the fact that the wealthy have a lot of money shows they are good at making money – which is to say, creating and conserving wealth. Governments aren't noted for production – their history is largely one of wars, persecutions, confiscations, and general repression. And the people who are attracted to government are problematical for that reason. Most rich people, for example Warren Buffett today and Sam Walton a generation ago, are not interested in consumption. They are more interested in creating more capital. It is better to trust the people who are creating more capital than to trust those in government who do things for political, not economic reasons. TGR: In the On 2013 conversation, you talk about the bond market, saying, "We are approaching the absolute peak of the bond bubble. Interest rates in the developed economies around the world are two percent, one percent, or even negative. This is fueling a bond bubble of truly catastrophic proportions. When it bursts, it will be an order of magnitude worse than the tech stock-market crash of 2001 or the real-estate crash of 2008." DC: This is another reason why I think 2013 and 2014 will be so turbulent. At this point, it appears interest rates are at an all-time low. Bonds are in a bubble. And low rates encourage people to borrow – not save. But saving is absolutely critical – and as much as possible – because it's proof that an individual or a society is producing more than it's consuming. When interest rates start going back up, the face value of the bonds will collapse. A lot of individuals and a lot of governments cannot crack their monthly interest nut at low interest rates. How will they cope with high interest rates? This bond bubble will be much more serious than the stock market bubble, especially because absolutely everyone is buying all kinds of complete junk today that offers a 2% yield. This will be much more serious than the tech-stock or real-estate crashes. The money markets are much bigger. I pity those who are reaching for yield now. Instead of risk-free return, they're getting return-free risk. TGR: Do you see ancillary economies crashing along with the bond market, or do you agree with the notion that rising interest rates will prompt governments to print more money, creating hyperinflation? DC: A catastrophic deflation is always a possibility – and it's better than the alternative, a catastrophic inflation. Either way, a depression is inevitable – we're in it now, actually. I think at this point the authorities will go with creating lots more money. The government gets revenue three ways. The first is by confiscating the wealth of citizens through taxes. There are hundreds of different taxes, and they all are quite high right now. The second way is by borrowing. Governments are incredibly overindebted and uncreditworthy now, and those debts will never be repaid. The third way is by printing money. They will continue to print money because number one, it is now the only way out. Number two, the politicians masquerading as economists actually think printing is a good way to stimulate the economy. TGR: Will that create a bond crash or hyperinflation, or are they one and the same thing? DC: Perhaps both in sequence. The thing to remember here is that bonds are a triple threat to your capital: interest rate risk, inflation risk, and the risk of default. Anyone who holds old bonds today is holding an asset that is reward-free risk. The risks have never ever been greater in the bond market, and the returns have never been lower. We are at the peak of one of the biggest bubbles in history. TGR: If we are at the peak, what is the best way to preserve wealth and ride out the next two or three years? DC: Agriculture and arable land have become quite popular recently. I like them. But I am not crazy about investing in grains and soybeans because they are very political commodities, and the price of agricultural real estate has gone up hugely to reflect higher grain prices. There are no bargains anywhere in the world. I am a big fan of cattle because cattle herds are at generational lows today. They have been in liquidation because it has been an unprofitable business for years. For most people, however, cattle are not a practical investment. The most practical thing the average person can do is have a significant position in precious metals. They should own the metal. In years to come, when governments have blown up their currencies, gold and silver will be reinstituted as money. TGR: How large a portion of one's portfolio should be in precious metals? DC: Apart from my house, my business, and expensive consumer goods, I would not be afraid to have most of my financial assets in precious metals. I am not very interested in the stock market today. The bond market, as I said, is a fantastic short-sell at this point. Real estate is certainly a lot cheaper than it was, but it floats on a sea of debt. That's not good. It's also the easiest thing for governments to tax. Now people ask what about owning cash? The dollar is an unsecured asset of a bankrupt government, and it will be a hot potato in the years to come. For cash you definitely want to own precious metals – even at current prices. The other thing to look for is speculations in the marketplace. As inflation heats up and markets become more chaotic in the years to come, people will be forced to speculate. It's a pity, really… TGR: And what would those be? DC: Speculation is capitalizing on politically caused distortions in the marketplace. In effect, it's betting against the government. It is not gambling in the market. The best speculation – the most beat-up market – right now is mining exploration companies, junior resource stocks. There are several thousand of them trading around the world. Most are not "investments," most are "burning matches," but relative to the price of the metals, they are close to the lowest levels in history. We have not had a truly good bull market for them in years, so they are an excellent place to put a portion of your capital with potentially large returns. TGR: To what extent do investors need to be selective in that category? DC: There is an old saying in the mining-stock business: When the wind blows, even the turkeys will fly. That is true. When the public gets the bit in its teeth and gold and silver are running, all kinds of junk will be promoted. A lot of money will be spent on promotion instead of exploration work out in the field. TGR: If the bond bubble bursts this year or next, should investors wait for that before buying into the gold and silver junior mining stocks? Might they not be at even lower prices once the bubble busts? DC: That is a real possibility. If you want to speculate and ride the futures market, sell long-term bonds short. That will offer a bit of a hedge. You have to get the timing right in the market, of course. In the past, decent companies have sold for half of their cash in the bank and you end up with all of their properties for free, along with half the cash in the bank. There is no telling how cheap the market can get. Anything can happen with these little stocks, but I think now is the time to start accumulating quality issues. TGR: Both Totally Incorrect and the earlier Conversations with Casey are thought-provoking and entertaining. What motivated you to have these conversations and publish them? DC: No one in the mass media and no politician today is willing to say that the king does not have any clothes on. That is why I am doing this. I say a lot of things I suspect you do not hear among friends at cocktail parties. TGR: True. Cocktail party chatter tends to be about weather, sports, maybe entertainment, but nobody talks about government or religion. Why is that? DC: I blame the educational system in part. In the last century, people learned Latin and Greek and read the classics. The object was to see what people thousands of years ago thought and said and to be able to comment on whether they were correct and how those thoughts might apply today. Education today is sound bites. Nobody reads a classical book in school anymore, only PC stuff that has been passed by a school board. They have a half an hour of geography where they're lectured by some teacher who probably has not traveled outside his or her home country, maybe never out of the state or province. Education has been transformed into political indoctrination in many ways. TGR: Will greater access to the Internet, where you can Google just about anything and delve into specific topics and areas, change people's appetite for more meaningful conversations? DC: The Internet is the best thing since the invention of moveable type. Rather than misallocating years of time and huge amounts of money to go off to college where they will just chase the opposite sex and drink, and where the quality of the professors is uncertain and the courses are in subjects that will clutter up their minds – gender studies, political science, English, and the like – people who really want to can get an education from the Internet. The fact that you cannot believe everything on the Internet is equally true for what you read in books or newspapers. TGR: That is a perfect example of why the book is called Totally Incorrect. Thank you for this conversation. Ever wonder how famous investors and self-made millionaires think – what it is that makes them so successful? Then you should let Doug Casey give you a piece of his mind. His new book, Totally Incorrect, is a showcase of radical libertarian thinking and unwavering free-market advocacy that will open your eyes to a new world view… not to mention investment opportunities flying under Wall Street's radar. Learn more about this provocative work. | ||
| Diversify Your Precious Metals! Posted: 02 Feb 2013 09:22 AM PST Long-term financial safety can be achieved by wealth preservation. And what could be better than buying land and precious metals? During times of economic crisis, precious metals always played an important role in wealth preservation. As major currencies are facing potential debasement and hyperinflation, you should think seriously about buying some gold, silver and perhaps other metallic commodities. But what would be the next important thing is to know how to diversify your assets! Hoarding the investment metals isn't enough. Smart investors know which ones to buy when, for which purpose and they think out an ideal proportion of each within their portfolio. This article teaches us the basics of precious metal portfolio diversification. The publisher offers investment advice and teaches us the basics of precious metal investments. Basically (and according to the article) the two first metals that we should own are silver and gold. Silver is considered "poor man's gold", because it's a lot more affordable (now in early 2013 an ounce of silver cost around 31-32 $, while gold is around 1,675 $ per ounce). When diversifying assets, one has to keep account of the budget and of the country of residence. Because: the more money you have, the more gold you can buy, the less money you have, the more you should focus on silver, since it's more affordable, but experts mostly agree on the fact that it has a lot higher potential for growth than "the king of all metals". Country of residence is important, because: in some countries it's very hard to buy and sell silver or other metals except gold. Either because they're unpopular and there are few agents buying or selling or, the premiums on silver are very high – like in Europe, for instance. The more money you have, the more types of metals you can afford to purchase. You may add platinum, perhaps palladium to your portfolio. This generally happens in case of those who have at least 100,000 US dollars to spend. | ||
| A Coy Public Suddenly Gets Cozy with Stocks Posted: 02 Feb 2013 09:16 AM PST A Coy Public Suddenly Gets Cozy with Stocks |
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This article was syndicated by Elliott Wave International and was originally published under the headline href="http://www.elliottwave.com/r.asp?acn=9tmg&rcn=aa349&dy=aa020113&url=http://www.elliottwave.com/freeupdates/archives/2013/01/30/A-Coy-Public-Suddenly-Gets-Cozy-with-Stocks.aspx">A Coy Public Suddenly Gets Cozy with Stocks
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Gold edging closer to upside breakout – Nichols
Posted: 02 Feb 2013 09:11 AM PST
Freeport-McMoRan's Long-Term Potential Not Blighted By Energy Acquisition
Posted: 02 Feb 2013 08:47 AM PST
When Freeport-McMoRan Copper & Gold (NYSE: FCX) announced $9 billion in energy acquisitions, the market reaction was fast and furious: Over a two-day period, the stock plunged from nearly 40 to barely 30, and the panic was palpable.
To be sure, few expected the purchase of Plains Exploration (NYSE: PXP) for $6.9 billion and former unit McMoRan Exploration (NYSE: MMR) for $2.1 billion. Freeport had been ramping up copper output, and to a lesser extent molybdenum, and conventional wisdom was the next target would be from those businesses.
The post-deal company will garner roughly a quarter of cash flow from energy production. And the percentage is likely to rise going forward, as the company spends approximately $2.5 billion to develop oil and gas in 2013, out of a total capital budget of $7.1 billion.
But Freeport is hardly the only energy purchase by a mining company in
Complete Story »
Posted: 02 Feb 2013 07:33 AM PST
Two news releases by Sandstorm Gold (SAND) aroused our interest this week.
First up on January 29, Sandstorm Gold announced the purchase of 33.7M shares and 7M warrants of Premier Royalty (NSR-TSX) from Premier Gold Mines (PIRGF.PK). (Let us all make a mental note here to distinguish between Premier Royalty and Premier Gold Mines from here onwards). Then on January 30 Sandstorm Gold followed up with another announcement reporting the purchase of additional 11M common shares of Premier Royalty from an undisclosed source, increasing the total tally to 46.7M shares or 59.9% of the currently issued and outstanding shares (plus 7M warrants). (Numbers are rounded for convenience).
Before we continue we would like to get a few explanations out of the way:
Sandstorm Gold has a business model called gold streaming whereby Sandstorm Gold provides capital for companies to develop gold
Complete Story »
Pastor Dowell: Germany Cannot Get It's Gold Back From U.S.
Posted: 02 Feb 2013 06:22 AM PST
Beginning of the end seen for current Gold price era
Posted: 02 Feb 2013 06:01 AM PST
Pierre Lassonde: The Looming Gold 'Production Cliff'
Posted: 02 Feb 2013 05:39 AM PST
Yesterday in Gold and Silver
The gold price traded in a tight five dollar price range during Far East and early London trading on Friday...and by the time the Comex opened, the price was basically unchanged from Thursday's 5:15 p.m. close in New York.
Then the job numbers were released at 8:30 a.m....and the gold price blasted off, only to instantly run into a not-for-profit seller. The high of the day [$1,683.20 spot] came shortly before the equity markets opened in New York at 9:30 a.m...and by the time the London p.m. gold fix was in at 10:00 a.m. Eastern time, the price was back down to where it started at 8:30 a.m.
That also appeared to be the low tick of the day, which was $1,661.10 spot...and from there, the gold price rallied until 12:15 p.m. before getting sold down into the electronic close.
Gold finished the Friday session at $1,667.60 spot...up a whole $3.80. Volume was immense at 185,000 contracts...so you just have to know that JPMorgan et al threw everything they had at the gold price to prevent it from getting anywhere near the $1,700 spot mark...or beyond.
Here's the New York Spot Gold [Bid] chart on its own so you can see the price action that mattered in more detail.
The price path for silver on Friday was essentially the same as for gold, but with one important difference. The attempt to sell it down at the London p.m. gold fix wasn't nearly as successful...and it rallied quit a bit after that...and only got sold down a bit in electronic trading.
Silver closed on Friday at $31.84 spot...up 37 cents. Net volume was around 49,000 contracts, so it's obvious that silver's attempted rally did not go unopposed, either.
Here's the New York price action in silver on its own...
The dollar index opened at 79.20 on Friday morning in the Far East...and then slid 25 basis points by the time the job numbers were released in New York at 8:30 a.m. Eastern time. Then like the precious metals, the dollar index blasted higher...and by shortly before 10:00 a.m. in New York, it had reached its zenith at 79.28...but by 11:15 a.m. it had fallen to its low of 78.93. From there it rallied into the close...finishing the Friday session at 79.19...basically unchanged from where it started the day.
Good luck co-relating the action of the dollar index and the precious metals yesterday, as there was none that I could see.
The gold stocks gapped up almost two percent at the open...only to get sold back down to unchanged minutes after the 10:00 a.m. Eastern time London p.m. gold fix...the low in the gold price. From there they recovered in fits and starts, with the HUI finishing at 400.00 right on the button...up 1.55% on the day.
With only one exception that I could see, all the silver shares finished with green arrows on my stock list...and Nick Laird's Intraday Silver Sentiment Index closed up 1.63%.
(Click on image to enlarge)
Here's the historic Silver Sentiment Index to put this past week's price action in some perspective.
(Click on image to enlarge)
The CME's Daily Delivery Report for 'Day 3' showed that another 1,106 gold...along with 6 silver contracts were posted for delivery on Tuesday within the Comex-approved depositories. In gold, the big short/issuer was the Bank of Nova Scotia with 1,000 contracts. Only three long/stoppers were involved in yesterday's report. They were Deutsche Bank with 627 contracts...HSBC USA with 362 contracts...and JPMorgan with 117 contracts. In the first three days of the February delivery month...10,248 gold contracts have been posted for delivery...over a million ounces. I expect these volumes to fall off precipitously starting early next week...as the bulk of the deliveries occur during the first week of the delivery month. The link to yesterday's Issuers and Stoppers Report is linked here...and it's worth a quick look.
There were no reported changes in GLD yesterday...but over at SLV, an authorized participant added 1,498,949 troy ounces of silver...and that's after a withdrawal of 2.2 million ounces on Thursday.
There was no sales report from the U.S. Mint yesterday.
Over at the Comex-approved depositories on Thursday, they reported receiving a very chunky 2,550,785 troy ounces of silver...and didn't ship a single ounce out the door. The link to that activity is here...and it, too, is worth a look.
In case you've missed it, there was lots of silver in motion this past week...and record amounts for the month of January in total. One has to wonder what is going on...and I just know that Ted Butler will have more to say about this situation in this weekly review later today.
Late next week we'll find out the new short position in SLV...and what was up with that 18.3 million ounces of silver that was deposited on January 16th. Was it deposited to cover a short position...or for a new buyer? Whichever it was, it's certainly bullish for the price of silver going forward. Stay tuned.
Well, the Commitment of Traders Report was a surprise in gold and an even bigger surprise in silver silver. Based on the reporting week's price action, both Ted Butler and myself were expecting declines in the Commercial net short positions in both metals. We turned out to be half right...and I'll start with gold first this week.
There was a big decline in the Commercial net short position in gold...even bigger than what either Ted or myself were expecting. The Commercial net short position declined by a monstrous 28,853 contracts, or 2.89 million ounces of gold...and now sits at 16.71 million ounces. That was more than double the decline I was expecting.
The 'Big 4' bullion banks are short 10.85 million ounces of gold...and the '5 through 8' traders are short an additional 5.69 million ounces of gold. So the 'Big 8' short holders in gold are short 16.54 million ounces...or 99% of the Commercial net short position in that metal.
Once you removed all the market-neutral spread trades you can from the open interest, the 'Big 4' bullion banks are short 30.0% of the entire Comex futures market in gold...and the '5 through 8' traders add another 15.7 percentage points to that total. So the 'Big 8' are short 45.7% of the entire Comex gold market...and that's a minimum number.
It's my opinion that three of the 'Big 4' bullion banks are JPMorgan Chase, the Bank of Nova Scotia...and HSBC USA. The bullion bank in number four position is up for grabs...but if I had to pick a candidate, it would be either Citigroup, Deutsche Bank or Morgan Stanley.
And now for silver...
Instead of a decline in the Commercial net short position as there was in gold, there was a substantial increase...2,869 contracts to be precise...or 14.3 million ounces of silver. This is exactly opposite of the number that I was expecting. Considering the fact that silver declined by an appreciable amount during the Tuesday to Tuesday reporting week, this is amazing...and Ted Butler and I are still scratching our heads over it.
My first thought was that the CFTC made an error in reporting...and until Ted Butler's theory below pans out, or next Friday's COT Report is issued...that's my preferred explanation.
Ted's thinking on this is radically different. First of all, instead of covering short positions during the reporting week, JPMorgan added another 2,000 contracts to their already obscene and grotesque short position, which now sits at a bit more than 33,000 contracts. The small traders decreased their long positions and increased their short positions on that price decline...which is precisely what one would expect of them. But the big surprise was that the brain dead technical funds increased their long position by 3,711 contracts, instead of reducing it...which is NOT the action that one would normally expect on a week over week price decline. Ted is speculating that a surprise buyer shows up in the Non-Commercial category...and this forced JPMorgan et al to short massive amounts of the metal in order to prevent the price from blowing up.
I sure hope he's right...but I will be waiting to see if there is any corrections made to the silver portion of the COT Report as the week progresses. Maybe we'll have to wait until next Friday's report to find out. This will coincide with the updated short position in GLD and SLV over at shortsqueeze.com...so there's lots of eagerly awaited silver news coming out next week, so stay tuned.
Anyway, assuming the silver numbers are correct, the 'Big 4' are short 260.0 million ounces of silver...and the '5 through 8' short holders are short an additional 55.0 million ounces of silver. The Commercial net short positions checks in at 251.3 million ounces, so the 'Big 4' are short 96.7% of that amount.
Once you subtract out the market-neutral spread trades, it shows that the 'Big 4' traders are short 51.2% of the entire Comex futures market in silver...and the '5 through 8' traders are short an additional 10.8 percentage points. So the 'Big 8' are short 62% of the entire Comex futures market in silver on a net basis. JPMorgan is short almost 33% of the entire Comex futures market in silver all by itself! And no matter how you slice it or dice it, that is what I call an obscene and grotesque concentrated short position!
Here's Nick Laird's "Days of World Production to Cover Short Positions" chart updated with Tuesday's numbers.
(Click on image to enlarge)
The long-term interactive COT charts for silver and gold are here and here respectively. Speaking from personal experience, the silver charts are slow to load if you have an older computer and/or browser.
I have the usual large number of stories for a weekend, so I hope you can find the time in what's left of it to read the ones that interest you. A fair number of them are ones that I've been saving for this weekend column because of length or subject matter.
Critical Reads
Kyle Bass Tells 'Nominal' Stock Market Cheerleaders: Remember Zimbabwe
Amid the euphoria of the crossing of the Dow's Maginot Line at 14,000, Kyle Bass provided a few minutes of sanity in an interview with CNBC's Gary Kaminsky. Bass starts by reflecting on the ongoing (and escalating) money-printing as the driver of stock movements currently and would not be surprised to see them move higher still (given the ongoing printing expected). However, he caveats that nominally bullish statement with a critical point, "Zimbabwe's stock market was the best performer this decade - but your entire portfolio now buys you 3 eggs" as purchasing power is crushed.
Investors, he says, are "too focused on nominal prices" as the rate of growth of the monetary base is destroying true wealth.
This 6:32 minute video interview is embedded in a Zero Hedge story from yesterday...and I thank Phil Barlett for being the first person through the door with this story. It's a must watch...and the link is here. One thing I did notice, was that he never mentioned gold once, even though he was given the opportunity to do so.
WSJ: Fed Easing Isn't Doing Us Any Good
Wall Street Journal editors are none too impressed with the Federal Reserve's decision Wednesday to stick with its massive easing program.
The Fed is buying $85 billion of Treasuries and mortgage-backed securities a month and plans to keep short-term interest rates near zero until unemployment drops to 6.5 percent, from 7.8 percent in December.
"The Fed has led a parade of easing around the world, as other central bankers follow to prevent their currencies from rising too much," according to a Journal editorial. "Yet the economic paradox of our time is slow growth and lousy job creation despite these monetary exertions."
This article showed up on the moneynews.com Internet site yesterday morning...and it's courtesy of West Virginia reader Elliot Simon. The link is here.
Doug Noland: Late 90s-Like
Unrelenting trade and "capital" account deficits have ensured the ongoing injection of dollar financial claims into inflated global financial systems, markets and economies. Unending dollar flows have, in particular, bolstered "developing" Credit systems, economies and Bubbles. China and "developing" central banks have, then, continued the recycling of Trillions of surplus dollar balances directly back into U.S. Treasury and agency debt markets, in the process helping to monetize U.S. income growth, inflate securities markets and sustain the U.S. Bubble Economy. All along the way, perilous global imbalances know only one direction: bigger. And the greater the imbalances, the lower global central bankers peg rates and the more they resort to unfathomable "quantitative easing"/"money printing."
I'm OK if every analyst in the world disagrees. It doesn't change the reality that we've experienced another historic transformation in U.S. and global finance - and we are these days witnessing the consequence: history's greatest synchronized Credit, market and economic Bubbles.
Kyle Bass would see eye-to-eye with Doug Noland on this...and both are saying the same thing, but in different ways. Both warn of the danger...and the ultimate end game. Doug's Friday Credit Bubble Bulletin is always a must read for me...and it's posted over at the prudentbear.com Internet site. I thank reader U.D. for sending it...and the link is here.
On This Day In History, Gas Prices Have Never Been Higher
Between Hess' plant closing and scheduled maintenance, the squeeze appears to be on the refining space and wholesale gasoline prices are smashing higher. Along with flares in geopolitical risk (Ankara today and Israel/Syria earlier in the week) driving underlying crude prices, Gas prices (at the pump) are surging - to record highs for the first week of February as per AAA, hitting an all time high of $3.465 for this day and just surpassing last year's price of $3.455; and based on where wholesale prices are (given the lag), we could be seeing $4.00 gas at the pump in the next few weeks.
This short article was posted on the zerohedge.com Internet site yesterday...and the charts are well worth the trip. I thank Elliot Simon for sharing this story with us...and the link is here.
Former Peregrine CEO Wasendorf gets 50 years in prison
A U.S. judge on Thursday sentenced the founder of Peregrine Financial Group to 50 years in prison for looting hundreds of millions of dollars from the brokerage, saying his customers would probably never recover the money they lost.
Russell Wasendorf Sr., who had tried to kill himself just before the fraud was uncovered, received the maximum sentence allowed by law and was ordered to pay $215.5 million in restitution for his nearly 20-year scheme.
Wasendorf's fraud was revealed in 2012, triggering the collapse of the brokerage and further shaking investors' confidence in the U.S. futures industry, already rattled by the failure of larger rival M.F. Global.
"I'm very sorry for the financial and emotional damage I've caused to investors and employees of Peregrine Financial Group," Wasendorf said in a feeble voice at a sentencing hearing in Cedar Rapids, Iowa. "I feel I fully deserve whatever sentence I am given. My guilt is such I will accept that sentence."
Too bad that Jon Corzine won't meet the same fate. Today's first story is from Reuters...and was posted on the chicagotribune.com Internet site early on Thursday afternoon. I thank Marshall Angeles for sending it...and the link is here.
Posted: 02 Feb 2013 05:39 AM PST
The first interview is with Caesar Bryan of Gabelli & Company. It's headlined "This is Why Gold Will Vault to New All-Time Highs in 2013". The other blog is with James Dines...and it's headlined "Exclusive Look at His Stunning 2013 Predictions".
Posted: 02 Feb 2013 04:00 AM PST
GOLDVIEW: Germany's Gold & Mining Industry Updates
Posted: 02 Feb 2013 03:51 AM PST
GOLDVIEW is one of the publications of the European Gold Centre. The editor is Henk J. Krasenberg who has been following the precious metals and miners for a couple of decades. He is one of the veterans in the industry. In this article we summarize some highlights from the latest edition of GOLDVIEW.
Germany's gold case: suspicious
The most recent edition was dedicated to the German central bank gold reserves. The whole story has captured quite some attention in the gold community in the past weeks. The aim is not to repeat what has been written about it extensively. As an insider, Henk Krasenberg's view on this case is interesting to share. Basically, he is not convinced about a conspiracy theory although he became very suspicious lately. He says:
"I have seen too many signs of incomprehensible movements in the world of gold and gold trading to be completely comfortable and trusting. There are just too many secrets and unanswered questions. I would like to know whether the gold is there where we believe it is and I just refuse to understand why it is so difficult to give us convincing proof, if and when all the gold is there that is supposed to be there."
He shared in GOLDVIEW the actuals of the gold reserves, from which the importance of Germany's case appears. Germany has the second largest gold holding in the world. Their gold holdings cover some 72% of the country's reserves.
Gold & Silver mining updates
Apart from macro gold trends and insights, GOLDVIEW contains news updates out of the mining industry. The editor does not republish mainstream news, but rather focuses on industry inside updates from a selection of companies. The latest edition featured two special companies: Explor Resources and Orvana Minerals.
Explor Resources is a pure exploration company and has no ambitions to become a producer. The company focuses on a prospective property and keeps on exploring until it is ready to become a producing mine for another miner. This is not the first realization of CEO Chris Dupont of this type. Explor's flagship project is the "Timmins Porcupine West" property in Ontario. Explor expects their total resource to increase to 1.5 million ounces by the end of 2012 and to 3.0 million ounces by the end of 2013.
Henk Krasenberg writes: "In my view, Explor Resources is a perfect example of what we know as a pure exploration company. A company that has proven expertise and is very well managed. The TWP property bears a strong resemblance to the nearby Hollinger-McIntyre Mine which produced over 30 million ounces. It is in the right area and the achieved exploration results indicate the company has a high quality and very promising project on hand."
Orvana Minerals is the other featured miner. The company operates with the baseline: "We don't explore, we build, operate and expand mines." Henk writes: "It has a 'Multi Project Producer Strategy' and aims to become a multi-mine gold and copper producer as objective. The project mix of the company has a significantly growing gold and copper production over the next few years, spread geographically over Spain, Bolivia and the USA. For FY2013, Orvana forecasts total production of 75,000 ounces of gold, 18 million pounds of copper and 850,000 ounces of silver."
Fiat Money and the Gold Problem
Posted: 01 Feb 2013 10:30 PM PST
Gold price rigging is as old as gold itself
Posted: 01 Feb 2013 07:11 PM PST
By the Numbers for the Week Ending February 1
Posted: 01 Feb 2013 06:07 PM PST
This week's closing table is just below.
If the image is too small click on it for a larger version.
Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday (by 18:00 ET).
To subscribe to Got Gold Report please click on the "Subscribe to GGR" button at top right. Join us today.
Posted: 01 Feb 2013 03:46 PM PST
Back during the Medieval Period, a craft developed which attempted to find a method whereby common, ordinary and PLENTIFUL materials, could be transmuted into something rare, precious and accordingly, valuable. Through various experiments, they took lead, iron and other metals and tried to create a foolproof method for generating untold sums of wealth and thereby prosperity.
We all know that such attempts ended in disappointment/failure but at least we did enhance somewhat our understanding of chemistry and some other earth sciences a bit in the process.
Fast forward to today - what we are witnessing in the Central Bank actions of this last decade is unprecedented as far as its scope but not in its goal when we clear away all the fog and obfuscations involved. The goal of these modern day alchemists remains EXACTLY the SAME as that of the quacks of the Medieval period, namely, the transmutation of common, ordinary and plentiful materials into something of value which will herald in a new era of lasting prosperity.
What I am referring to goes by various names, Quantitative Easing, Bond Buying Programs, Inflation Targeting, etc. but in its essence it is identical. It is no less than the attempt by Central Banks to turn paper into something of value. In this case it is even worse, because it takes DEBT and somehow cosmically turns that into VALUE by declaring it an asset. I cannot think of anything more opposed to sound logic and economic common sense and yet this is where we are at today.
Think about what these hucksters have foisted upon this generation - As the governments of the West sinking deeper and deeper into a debt abyss, these Central Banks "buy" this debt (government IOU's from technically insolvent nations) by the creation of electronic digits in a computer which they then credit to a primary dealer (large bank). This large bank then declares this an asset against which it may generate loans and thus the new "credit" makes its way down through the economy ending up, supposedy, in creating more spending (more debt) which in turn is supposed to stimulate demand for all manner of products and services.
Along the line, the size of the debt burden gets bigger and bigger and bigger, while the citizens are told not to concern themselves with such things. "Don't worry" we are told, "The Fed can continue to enlarge its balance sheet and accomodate as much liquidity as is needed to deal with matters."
MEanwhile, here in the US, the federal debt is now firmly over 100% DEBT to GDP. The last time that this happened in this nation was back during WWII, when the nation was forced to deficit spend in order to ramp up for that conflict. However, and this is key, the DEBT/GDP ratio did not stay there long as the path for that ratio was one of decline. Today however, and this is what is absolutely terrifying, the trajectory for the US debt is not one of decline. Quite the contrary, it is one of a PARABOLIC INCREASE. We only have to look 4 years out the curve to see that the nation's deficit will increase by a minimum of $4 TRILLION taking the total well over $20 TRILLION. Heaven only knows where we will be in a decade!
Yet, this CERTAIN DEVELOPMENT seems to have been completely and utterly relegated to the back corner of some faraway room when it comes to the current wave of euphoria, and I might add, downright GIDDINESS, that has infected the chattering financial class and the majority of the wildly bullish analysts now urging continued buying of stocks by investors worldwide. Shortsightedly, they point to corporate profits, low interest rates and continued intervention by the Federal Reserve to make their point that equities are the GO TO investment that the public needs to buy right now, because "they are still cheap". It is as if an intoxicating brew or opiate has been poured out from on high upon the generation who are declaring with absolute confidence that the "worst is over".
Case in point is Japan, which has a DEBT to GDP ratio of over 200% and is climbing. As a matter of fact, the new government there ran on a platform that it would force the Bank of Japan to target an inflation rate of 2%. In other words, buy as much debt, print as much yen, etc. as is needed to FORCE inflation to move to a 2% rate. Take one look at what this has done to the value of the Yen, but particularly to the value of the Yen compared to Gold. It has plunged 16% against the value of the US Dollar in 5 months.
It has fallen a whopping 80% against the value of an ounce of gold in 12 years time.
The same thing is happening to the Yen in relation to the Euro, against which is continues to also plummet.
If you think that the grand experiment is not going to impact the average Japanese citizen, take a look at the following chart of Brent Crude oil when priced in terms of the Yen. Notice the rocket shot higher that has occured since the currency began strongly devaluing. Crude oil prices in Japan are certainly experiencing that "benign" inflationary impact. Since Japan imports the vast bulk of its crude oil, its devaluation of the yen, caused by massive yen printing/creation, is going to hit the average Japanese citizen quite harshly.
Another chart is the Brent Crude in Dollar terms just to provide a gauge to see that while crude has been rising even in Dollar terms, the rise in not nearly as pronounced as it is in Yen terms.
That brings us fact to our initial point. What the Western Central Banks have all opted to do is basically the same as the Japanese although the Japanese, to their credit, are far more open and honest about what they are attempting.
This is the reason that heretofore the GRAND EXPERIMENT of the MODERN DAY ALCHEMISTS has not yet ended in apparent failure. In a world in which only one nation was engaged in this massive bond buying/liquidity injection/money creation attempt, that nation would see its currency collapse in value against the other major global currencies, thereby impacting its average citizen (the middle class and especially the poor) as their standard of living inexorably declines, much to their bewilderment and loss to explain. Rampant inflation would be seen even in the midst of a soaring stock market as the inflation manifests itself FIRST in that sector.
Were the Fed the only Central Bank engaged in this madness, the Dollar would have already gone the path of the Yen and begun its INEVITABLE and UNAVOIDABLE devaluation. Both the Yen and the British Pound however are beating the Dollar to the devaluation punch.
Even at that, the US Dollar is still barely holding its own right now. Look the monthly chart and see how the Dollar is beginning to sink. Again, were it not for the weakness in the Yen and the British Pound, the Dollar would be the "sick man" of the global economy based on the sheer size of this Federal Reserve alchemy.
Rush To Safety: Americans Buy Nearly Half a Billion Dollars Of Gold and Silver In January
Posted: 01 Feb 2013 03:24 PM PST
Final Bottom in Gold Stocks Coming
Posted: 01 Feb 2013 03:06 PM PST
In my articles you've heard me talk about accumulating on weakness, buying support, being patient and waiting for better opportunities. Folks, this next week is one of those opportunities. The mining stocks have been a disaster if you've invested in the average fund, GDX or GDXJ. If you've invested in the wrong stocks, they've been a total disaster and you now hate the sector forever. We've certainly been surprised by this protracted struggle. However, the gold shares are set to test a major bottom and could be on the cusp of a major reversal which could begin as soon as next week.
The gold stocks are setting up similarly to the bottom in 2005. Let me explain. The gold stocks made a major double bottom in 2004 and 2005. The first bottom occurred in 2004 and the second in 2005. Interestingly, the 2004 bottom was its own double bottom. Following that the gold stocks rallied significantly for several months before eventually giving it all back. Note the circles on the chart as they compare to the current situation. Below is a chart of the HUI in 2004-2005 with the HUI/Gold ratio plotted at the bottom.
In 2012 the HUI formed a small double bottom and then rallied strongly for a few months (like in 2004). Similar to 2005, the market has given all of that back and in the process the HUI/Gold ratio broke to a new low. The question now is will the HUI form a major rebound similar to the one in May 2005 and cement a long-term double bottom? Correlation is not causation but we should be aware of the potential for a strong rebound.
Aside from the 2012 double bottom support, there is major trendline support around the 350 area. In the short-term, a move below the May 2012 low would constitute a major breakdown. However, it could be a test of the bull trendline and induce a bear trap and major reversal. On a very long-term chart, the difference between 375 and 350 is barely noticeable. The chart below shows the trendline connecting the 2000 and 2008 lows.
One should buy when the sector becomes extremely oversold on a very short-term basis. Look for a bad day followed by a gap down the next day which produces big losses intraday. This is the type of action that precedes bottoms in the mining stocks. Traders can buy GDXJ or NUGT for leverage. For stock pickers, look for stocks with strong fundamentals which have held up well in recent days and weeks. Those stocks will produce good rebounds. If you'd be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.
Good Luck!
Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com
The 2012 Gold Investing Guide from Casey Research tells you all about ways to leverage gold – from bullion to stocks to ETFs and more. Get it ABSOLUTELY FREE today.
Is your precious-metals portfolio ready for 2013?
Posted: 01 Feb 2013 02:58 PM PST
Is your precious-metals portfolio ready for 2013? We want to get positioned in the best performers ahead of the industry's next big move to maximize profit while minimizing risk.
Some readers may question if gold stocks really have snapped out of their funk. We could discuss this topic for many pages, but the bottom line for us at Casey Research is simple: if you believe gold and silver prices are going higher, then equity prices will follow.
Precious metals are headed higher for reasons we've outlined before: intractable levels of government debt, reckless deficit spending, and worldwide money printing. GDP growth won't be near strong enough to meet future liabilities, and neither politicians nor the public will agree to austerity measures that will be austere enough. Gold and silver will move higher as the value of currencies declines as governments attempt to pay existing and future obligations.
With that in mind, some stocks will certainly do better than others. Recall 2011, when gold continued higher while stocks as a group performed poorly. However, there were still profits to be made…
You can see that while the equity ETFs performed poorly last year, select producers still returned big gains. This is why it pays to be picky.
We won't always be right about which companies will be a given year's trophy, yet there are definitely steps we can take to improve our odds. As 2013 swings into gear and you review your precious-metals portfolio, keep the following in mind…
- Keep share performance in context. Don't sell a stock whose share price has "underperformed" during a period of bearish market sentiment, unless there are also serious operational difficulties that deserve the discount. While some of our picks did poorly last year, I'm convinced we have the best of the best in our portfolio. We'll advise, of course, if we think a company should be sold, but many of our weaker performers simply haven't had their day in the sun yet.
- Don't chase last year's results. Last year's winner is unlikely to also be this year's champ.
- Keep buying physical gold and silver.The metals have advanced every year since 2001 (save silver in '08 and '11), and we fully expect this trend to continue. That means the bullion you buy today should be selling for a higher price by year-end 2013 and entails less risk.Gold and silver should be viewed as money. We believe serious inflation lies ahead from ongoing currency dilution, making it highly likely we'll someday use precious metals to maintain our standard of living.
Buy now before prices break out of their trading ranges.
- Focus on only the strongest companies. Experienced and proven management, robust production growth, low costs, a strong balance sheet, and operations in low-risk political jurisdictions define a solid company. Owning companies that meet these criteria gives us the best shot at owning a 2013 winner, while mitigating risk.
- Diversify your picks. Don't put all your money in one or two stocks. If you already own several strong gold miners, determine if you need to adjust your portfolio so that the risk – and potential reward – is spread around.
Today it's more important than ever to own the right gold stocks; but between market volatility and increasing political uncertainty in several major gold-mining nations, how can an investor separate the best gold stocks from the rest? You can get started for free right here.
The 2012 Gold Investing Guide from Casey Research tells you all about ways to leverage gold – from bullion to stocks to ETFs and more. Get it ABSOLUTELY FREE today.
Kitco Axes Cartel Shill & PM Perma-Bear Jon Nadler!
Posted: 01 Feb 2013 02:40 PM PST
5 Gold & Silver Investment Tips
Posted: 01 Feb 2013 02:21 PM PST
With gold and silver prices range bound for 1.5 year now. After the gold's highs at around $1,920 in September 2011 and silver's highs at $49 in April/May 2011, the prices have been jumping in a fixed trange with support at $1,520 gold and $27 silver.
As true gold or silver investments, the mining shares have performed even worse. Since the highs of the miners early 2011, the mining index HUI has moved from 600 points to 370. The junior miners performed much worse: from 38 early 2011 to 16 early 2012, standing now at about 20.
We wrote earlier about Rick Rule his expectations for the resource market in 2013. In particular the miners will face the following challenges:
- Surging input costs are surging and will continue to do so. The cost for energy, steel, construction, etc are increasing worldwide and are a real challenge for resource companies.
- Because of the tight equity and debt markets, resource companies have no easy access to capital.
- Depletion keeps on challenging resource companies. The likely effect will be acquisitions of high grade discoveries.
The message was simple and clear: to be successful in the mining sector, you need to be very selective. That message was confirmed by Casey Research today. In their 2013 outlook, they shared five gold and silver investment tips with their subscribers:
- Keep share performance in context. Don't sell a stock whose share price has "underperformed" during a period of bearish market sentiment, unless there are also serious operational difficulties that deserve the discount. While some of our picks did poorly last year, I'm convinced we have the best of the best in our portfolio. We'll advise, of course, if we think a company should be sold, but many of our weaker performers simply haven't had their day in the sun yet.
- Don't chase last year's results. Last year's winner is unlikely to also be this year's champ.
- Keep buying physical gold and silver. The metals have advanced every year since 2001 (save silver in '08 and '11), and we fully expect this trend to continue. That means the bullion you buy today should be selling for a higher price by year-end 2013 and entails less risk.Gold and silver should be viewed as money. We believe serious inflation lies ahead from ongoing currency dilution, making it highly likely we'll someday use precious metals to maintain our standard of living. Buy now before prices break out of their trading ranges.
- Focus on only the strongest companies. Experienced and proven management, robust production growth, low costs, a strong balance sheet, and operations in low-risk political jurisdictions define a solid company. Owning companies that meet these criteria gives us the best shot at owning a 2013 winner, while mitigating risk.
- Diversify your picks. Don't put all your money in one or two stocks. If you already own several strong gold miners, determine if you need to adjust your portfolio so that the risk – and potential reward – is spread around.
Investing in the metal should be the core of each portfolio. Casey Research published today an interesting paper today. In it, they wrote that the last time there was such a good buying opportunity in gold was during the financial crisis of 2008. During that year, gold lost 27.7%, only to shoot up 166% over the next three years (from $712.50/oz to $1,895.50/oz). How high it will rebound this time is anyone's guess, but one thing's for sure – Casey believes people should not wait for $2,000 gold to get as prices will go much higher.
Read more in the 2013 Gold Investing Guide from Casey Research. Learn about ways to leverage gold – from bullion to stocks to ETFs and more. Get the full report for free .
Gold & Silver Prices – Counterintuitive Behavior To Continue
Posted: 01 Feb 2013 02:17 PM PST
This article is based on an interview with economic and precious metals analyst Grant Williams. He is portfolio and strategy advisor to Vulpes Investment management in Singapore and the editor of the respected newsletter Things That Make You Go Hmm (subscribe for free).
The gold and silver price have been trading in a quite counterintuitive way lately. It became very obvious after the US Fed announcement on December 13th which was a fundamentally bullish event for precious metals. Gold was trading above $1,700 an ounce but has been trading lower since then. The gold price tried only once to break above $1,700 but did not succeed. Which leaves a lot of believers and investors with the question how that is possible and if more of the same can be expected in the foreseeable future.
Grant Williams confirmed that both gold and silver have been trading in a counterintuitive way. However, the same "behavior" is detected in a lot of other markets for a long time. The reason seems obvious: government involvement. The greater the involvement, the greater the counterintuitive behavior. "The government is never a pure market force," says Williams. "If you think about normally-functioning markets, they have minimal (and ideally zero) government involvement. The fact that we have the government as the biggest participant most notably in the bond market means that natural market forces are being corrupted."
The government is not particularly a market participant that will be out of the markets short to medium term.Counterintuitive price behavior can be expected to continue, throughout (and very likely beyond) 2013.
Gold and silver are very thin markets, so it does not take too much effort and resources to control their direction (at least not for large investors). However, this is a double-edged sword. Because of their scale, these markets can easily reach a tipping point after which it becomes very easy for market forces to overwhelm intervention of any kind. Right now investors' portfolio allocations in precious metals are approximately 0.5%. If that allocation would rise to 0.6% (a 20% increase) or 1% (a 100% increase), the markets would not be able to absorb those significant inflows of money without a significant upside move. "It is a question of being patient and waiting for the reality of the current situation to assert itself," says Williams.
"You cannot expect markets always to go your way or, in fact, the way common sense or circumstance would dictate. Whether their action feels legitimate or illegitimate is besides the point. You have to check your logic for being long gold or silver and act accordingly. In my view, the case for being long precious metals has never been stronger. People should not let themselves get affected by the shadow of intervention and make the wrong decision regarding their investment holdings during periods of weakness."
Central bank and Asia drive physical gold demand
Williams points to the importance of central bank buying. They were the biggest sellers during the first 7 years of the current bull run. Only the IMF sold more bullion, with numerous announcements of future sales in the past decade leading to sharp price drops. Nevertheless the price of gold has been rising steadily during that period. The biggest supplier of gold has, since 2009, turned into the biggest buyer and that is a hugely significant shift for any market.. "While things can look somewhat shaky in the COMEX markets at times, it's important to understand that these prices are based on paper contracts – not physical bullion. Looking at the demand for physical metal would suggest that over time, these markets are poised to go a lot higher." The premiums for gold and especially silver bars and coins in Asia (where Grant Williams lives) are at an all-time high.
In addition, readers should be aware that Western central banks hold between 70% and 80% of their reserves in gold. In contrast, Eastern central banks have much lower allocations. They are buying both continuously andaggressively in order to increase those allocations and decrease their exposure to fiat currency.
As discussed, small markets have difficulties in absorbing significant inflows. The supply of physical silver is already very tight, and it will not take a lot of inflows of money to cause delivery problems. Eric Sprott has witnessed this first-hand when he encountered significant delays in getting the silver delivered that he bought for his Physical Silver Trust (PSLV). In some cases, bars delivered were actually cast AFTER they were purchased. Looking at the stocks in the COMEX warehouses, it is fairly easy to see that any meaningful buying of silver futures which then stood for physical delivery would have a significant impact.
The trigger for a collapse in the confidence game
The level of government debt has become so huge that it is mathematically impossible to pay it back as we all know. Governments are desperately seeking to create inflation in order to "inflate their debts away." Growth is absent in the economic powerhouses (Europe, UK, US). Even Asia has seen slowing growth over the past few years. Genuine growth has become a case of paying debts back through inflation.
Williams has a hard time to find positive economic statistics. Given these dire economic fundamentals, he seesmany potential triggers for an economic breakdown. Such a trigger is likely to come from the bond market. Japan couldpotentially provide the tipping point, as early as 2013. With demographic imbalances, a debt to GDP ratio at an all-time high, increasing money printing from the new government, bond rates cannot go higher. The government is spending nearly 25% of all national revenue on debt service payments despite very low interest rates. With an interest rate rise to 2%, Japan would be paying roughly 50% of all government revenue on their interest alone.
The global bond market is so big and, currently, so overpriced that any kind of shift in sentiment will have ramifications across the entire investment spectrum. It will simply be a matter of time until the investment community realizes that all sovereigns are truly insolvent. "It is a confidence game in the true sense of the phrase," says Williams. "At some point, however, confidence is going to be more inclined to look at the balance sheet."
Suppose the Japanese bond market breaks down. The initial reaction from investors will probably be a quick move towards "safer" bond markets (like the German, UK or US). From that point, it would not require a huge leap of logic for investors to realize that Japan the canary in the coalmine. Precious metals will be positively impacted by any loss of confidence in the bond market as they are the only true safe havens left.
Since QE4, yields in the US and in Japan have started creeping higher, and the new year rally in equities has seen previous safe havens such as Germany and (surprisingly) France see sell-offs in their government bond markets as investors' fear dissipates. These are the first signs that investors have begun adjusting their bond positions. However, as Grant Williams notes, "we are one panic away from getting everyone back in the bond market. From the governments' perspective, should they start losing control over sovereign bond markets, all they have to do is engineer some kind of crisis of confidence and instantly people will jump back into the perceived safety of government bonds." The political willpower is enormous and the head of the European Central Bank has explicitly stated that he will do "whatever it takes" to save the single currency and continue this confidence game."
Subscribe for free to Grant Williams his weekly newsletter Things That Make You Go Hmm.
The 2012 Gold Investing Guide from Casey Research tells you all about ways to leverage gold – from bullion to stocks to ETFs and more. Get it ABSOLUTELY FREE today.
Peter Schiff & Doug Casey About Gold, Dollar Collapse & US Fed
Posted: 01 Feb 2013 02:15 PM PST
In a recent interview, Doug Casey talks with Peter Schiff about his expectations of the gold price and the future of the dollar. They discuss the role of the central bank(s) in today's debt crisis and conclude that the Fed is trapped. They end with some tips on where individuals and investors can go to with their money.
The gold price will exceed $5,000
Peter Schiff believes that the gold price will rise fast in the coming years. His prediction has always been $5,000. In fact, he believes gold will go much higher, but it is impossible to tell when exactly. It will not be in ten or twenty years; the sharp price increase should be rather imminent (somewhere in the coming few years).
In order for gold to rise to those price levels, more people need to recognize what really is going on. History shows that assets can be mispriced for a long time. It all depends on perception. The average investor and certainly the institutional money are clueless with respect to the true state of the global economy, the uglyfuture of the dollar and other fiat currencies, the rate of inflation, etc. Most people just look at the fact that the gold price has risen and think it is sort of a bubble, not understanding the fundamental reasons why it is up.
Peter Schiff says: "I think the day is coming that people will start understanding and then you will see a meteoric rise in the price of gold. Whether it stops at $5,000 or keeps going up from there will depend on how much money will be created between now and then. Although we have created a lot of money in the last two decades, it is nothing compared to how much money we are going to create in the coming decade."
How the US Fed is facilitating the collapse of the dollar
One of the biggest casualties, other than individual liberty, is going to be the value of the dollar. How does the government plan on financing all of its expense as they're not going to raise taxes on middle-class Americans? They are willing to raise taxes on the rich. A lot of this is going to be financed by the central bank.
Inflation is a tax that the government is going to levy. It is going to hit everybody because inflation is a tax on your money. It is also a tax on the value of our wages. The government is going to confiscate the purchasing power of people's assets and spend it on services, social security, national defense, Medicare, etc. To avoid that inflation tax, one has to avoid the currency that is being inflated, which is the dollar. There are ways to do that, for instance by owning gold and silver, foreign assets or foreign stocks … assets that the federal reserve cannot print.
The country that is most likely to print the most amount of money is the US. There is a monthly 50 billion trade deficit. The point is that printing is really not free; it becomes very expensive but people don't necessarily associate the rising prices (think the cost of gasoline or food) with the tax. Most people do not understand that the government is the source of inflation.
The central bankers apply the Keynesian practices by printing money to avoid deflation. Inflation and government stimulus is their salvation. Peter Schiff says:
I think the fed reserve as an entity is dangerous for society. The Fed chairman does not show integrity and understanding. Look at the Q4 2007 minutes, where Ben Bernanke was as clueless as ever, as the major collapse had already started but he did not even see it coming. If we had somebody with integrity and the Fed Reserve was a truly independent central banker who would just refuse to modify these debts and would just let interest rates go up, it would force the government to make the structural reforms that are needed. Yet you hear Ben Bernanke criticizing the government for its long-term deficits without understanding that they are the enabler of the process. The Fed is taking debt and turning it into money. Moreover, they maintain that it is not really monetization because they will reverse the process at some point the future. There simply is no way to withdraw liquidity in the future.
The government runs budget deficits of over a trillion dollars a year. The Fed is printing and monetizing 90% of it. That means the federal government only has to sell 100 or 200 billion dollar of treasuries to private investors. If you take the Fed out of it, the government has to sell a trillion-and-a-half for two trillion dollars. Who is going to buy those bonds?
As a consequence, interest rates (the cost of money) WILL go up. The treasury market is a bubble, just like thebond bubble in Japan which incidentally might actually break before the American one. The US economy is now so addicted to debt that the highest affordable interest rate is zero. The national debt is financed at these low rates. The payments in interest on the 16.5 trillion dollar debt are about 300 billion dollar. What if in two or three years the debts were to be twenty trillion and interest rates five percent. That would result in 1 trillion yearly interest payments.
The only justification for keeping rates so low is that the Fed knows that any increase in rates will collapse the (already phony) economy. The economy is artificial. You can't just keep printing money and monetize the debt and buy bonds without the dollar imploding. What has helped the US recently was the European crisis. Worries about the European debt have led to an increased demand for US Treasuries (even though the US had more debt than Europe). The the fears are subsiding in Europe, be it temporarily. If all of those money flows into the US Treasury reverse, it would cause the dollar to weaken and put pressure on the Fed to raise rates. But the Fed can not raise rates, so they will give investors around the world the perception that they will never really remove the liquidity.
That is when you will really get a run out of the dollar. The Fed will be really trapped as they need to chose between a collapse of the dollar (leading to runaway inflation) or an aggressive rise of the interest rates (collapsing the whole economy in a way worse than 2008).
Where should individuals go with their money
People should get out of US dollars and anticipate the future. Everyone's objective should be to dissipate the revaluation of assets. The main idea is to buy assets when they are cheap and not highly demanded, in order to sell them when they are expensive because of a high demand. The biggest change that is coming in the global economy is the realignment of living standards in the global packing order.
America has been on the top for a long time because:
- there was a limited government
- low cost of government
- high production
- high exports towards the whole world
- huge surpluses that were invested globally.
That is not America of today. Nowadays, the US is characterized by a standard of living which is the result of debt. The US has:
- more regulations than ever
- higher taxes
- no trade surpluses
- enormous deficits
- the US is the world's largest debtor, owing more than all other countries in the world combined
- it has a trade deficit with every country.
Peter Schiff thinks a collapse in the dollar is inevitable, which will dramatically reduce the standard of living of Americans. When the dollar collapses, it is not doing in the vacuum. If the dollar loses value, it is doing so relative to other currencies. It implies that the purchasing power is being shifted to somebody else. Other countries' currencies will appreciate. It means that people in other parts of the world will become wealthier, particularly in emerging markets and Southeast Asia. The hard working people over there, who save their money, will see a big rise in their living standards. "You want to be invested in those economies, in those currencies."
Gold and Quantitative Easing: Inflation All Over Again?
Posted: 01 Feb 2013 01:34 PM PST
Perhaps you have heard that the Fed is printing money to get out of the crisis and that such actions cannot possibly end other than in even more money being printed and in the dollar losing its ability to buy you tangible assets. In our essay on gold and the dollar collapse we pointed out that since 1970 the debt numbers have gone up more than 40-fold (!). In 2002, future Fed chairman Ben Bernanke noted that "the U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." In keeping with these words, Bernanke has played an important role in the introduction of three rounds of what is known today as quantitative easing (QE) – programs expanding the money supply beyond the usual. The bill for QEs is $2.25 trillion and counting. As of January 17, 2013, U.S. debt totaled $16.4 trillion. These extraordinary numbers call for a deeper analysis and today we focus on what QE actually is.
The beginning of the economic crisis is usually linked with the date of September 15, 2008 when the U.S.-based investment bank Lehman Brother filled in for bankruptcy. Lehman Brothers went down with a bang, sending shockwaves through the financial markets and effectively beginning the global banking crisis. Lehman went bankrupt because of its bets on U.S. mortgages which had gone bad. When it became apparent that Lehman would not meet its obligations, everybody in the markets began to fear that everybody else could have excessive exposure to the housing market by holding assets linked to the performance of that market on their balance sheets. The market "dried up" – the lending between financial institutions effectively came to a halt and there was no liquidity in the market. In such an environment the financial markets ceased to channel funds to businesses and the credit market froze. Without credit, companies were not able to operate in a regular way. Such a disruption added to the problems stemming from the declining house prices. So, the lack of liquidity in the financial markets translated into a recession.
Facing the possibility of the further havoc, the U.S. government set the Troubled Asset Relief Program (TARP) into motion under which the U.S. Treasury was buying assets linked to the mortgage market in order to pump money and, therefore, liquidity into the banking system. TARP was a prelude to QE.
Under usual conditions, when the economy is struggling and there is not enough credit available, the central bank can lower the interest rate in order to make credit cheaper and more accessible. A lower central bank interest rate translates into lower interest paid by companies to commercial banks. It has also an adverse effect on savings – it becomes less profitable to keep your money in the bank since the interest you get is also lower. So, central banks tend to lower interest rates in hope of making credit cheaper, stimulating consumers to spend more and companies to invest more. Following the events of September 2008, the Fed brought its federal funds rate close to 0%. However, even combined with TARP, this did not bring the expected liquidity to the market.
Even though bailouts may have prevented the economy from slipping into chaos, the economic environment appeared to be deflationary. This means that with inflation close to 0%, the Fed feared a scenario in which the economy would actually experience deflation. Deflation results in falling prices. At first sight it may be hard to recognize why this would be harmful for the economy. To understand that, we need to consider that falling prices put off people from spending their money. After all, if goods are getting cheaper and cheaper, why buy a car now and not in several months when it costs less than today? Such thinking limits spending and the economy starts to wobble since the producers cannot find enough buyers for their goods. This limits output which, in turn, limits growth. Such an extremely simplified picture shows you why deflation is an unfavorable scenario. Generally, in the long run the market would be expected to fix itself – when prices get low enough, somebody would finally buy and prices would start to rise thus fueling growth of prices and economic activity. However, this is not in tune with what the Powers That Be are concerned with – they don't want to have to tell voters that they have to wait a bit before things get better – they want to show that they can make things better right away.
If you consider that the interest rate can go only as low as 0%, you will come to the conclusion that in late 2008 the Fed practically lost its ability to stimulate the credit market and avoid deflation by lowering interest rates. At that time the Fed wanted to achieve a number of goals, including delivering liquidity and increasing spending to boost up the economy. Since the interest rates were already close to 0%, it adopted an unconventional policy. Namely, it started buying mortgage backed securities (MBS, assets linked to the performance of the real estate market) and Treasury securities. The gist of this approach was that the purchases were covered with newly created money.
Technically, the Fed did not print any new dollars. It took in MBSs and bonds from commercial institutions (e.g. banks) in return for acknowledging a claim against it. The commercial banks and other institutions could use that claim to lend out additional amounts of money. Fed's idea was that buying assets would drive their prices up and simultaneously drive bond yields down (bond yields fall when bond prices rise and vice versa). Lower bond yields would be accompanied by lower interest rates and would make it easier for companies to find access to credit. Low bond yields would also make bond investments unprofitable for those willing to gain stream of income from them and force investors to switch to other assets, mainly to the stock market. This would, in turn, help to channel funds to U.S. companies and give the economy an impulse to grow. All of this would result in higher prices (inflation) and in increased economic activity.
The plan seemed quite simple – more lending, more money, more spending, more growth. There are, however, painful parts to this story. First of all, even though no additional notes were printed, the overall action increased the amount of money in the economy. No more goods were produced immediately but there were considerable amounts of freshly created electronic money hoarded in the accounts of commercial banks. This is potentially dangerous since it is obvious that creating more money, be it paper or electronic, will highly likely lead to inflation.
The chart below presents the expansion of the money supply in the U.S. as measured by the M2 aggregate (one of the definitions of money).
As you can see, the money supply in the U.S. is ever increasing just as it is in all the other developed economies all over the world. Since January 2008, it has increased by 40.4%. Conventional economic theories have it that the money supply ought to be increased roughly at the same pace as the growth of the economy. During the same period, the economy grew by 2.9% which is also displayed on our next chart.
This chart suggests that the U.S. economy may be getting back on the growth trajectory. Such a conclusion is not necessarily supported by other economic data, like unemployment numbers. However, it seems that in terms of real GDP the U.S. economy is slowly moving forward. Does this actually mean that the QEs are doing the trick? The best answer we can get to that question has been given quite bluntly by the BBC economics editor Stephanie Flanders: "Quantitative easing may well have saved the economy from a credit-led depression. We will never know." But we definitely know what's left over from the QEs. Take a look at the chart below which comes from our essay on gold and the dollar collapse.
In the abovementioned essay, we wrote the following:
It belongs to common sense that you can't borrow money forever. Economics has a lot of intricacies and can be quite complicated at times but the basic rules are very simple. You borrow, you have to pay back.
Right now, the Fed's balance sheet is becoming inflated to a point at which it may start to worry even its members. A point of view that it may be appropriate to end QE under several conditions was expressed by James Bullard, president of the St. Louis Fed, who said:
If the economy performs well in 2013, the Committee will be in a position to think about going on pause. If it doesn't do very well then the balance sheet policy will probably continue into 2014.
It turns out, however, that the markets do not necessarily believe in QE ending as soon as this year. A recent survey by CNBC shows that market analysts are of the opinion that Fed will continue to buy assets aggressively and are divided as to when the purchases may end. A similar stance was presented by former Fed vice chair Alan Blinder who argued:
It's never too soon to start thinking about it [but] I'd be very surprised if Fed even starts on its exit starting in 2013. I wouldn't even bet on 2014. (Yahoo!) So, it seems that we might not see QE ending this year or even next year.
So, it seems that there is a lot of uncertainty linked to the growing debt pile but an economic recovery might as well be happening right in front of our eyes. What does it all mean for precious metals investors? The next chart might help clear that up.
This chart shows you the U.S. debt to GDP ratio along with the official rate of inflation. As of 2012, with a debt to GDP ratio of 102.5%, the U.S. is still quite far from where the ratio stood at in 1946, namely from 121.3%. We see that following the peak of 1946, the ratio sank considerably quickly (the red box in the chart). One of the key factors that made it possible was inflation. The annual inflation numbers for 1946, 1947 and 1948 read 8.3%, 14.4% and 8.1%.
It is worth noting that inflation started off for good after the debt to GDP ratio peaked. So, the inflation does not have to be obvious until the end of the debt expansion process. Translating that into the current economic situation: the mere fact that there has been no QE-related inflation so far does not mean that there automatically will be no inflation in the future, after the QE has ended. And the inflationary scenario seems all the more plausible since the government has only a number of ways to decrese the debt pile: economic growth, taxes and inflation (to simplify a bit). Growth is hard to achieve only through policy decisions, the taxpayers strongly oppose any new taxes, so it seems that the easiest way is to inflate the debt away, since a rise in inflation is not easily recognized by the markets (at leas at the very beginning). Naturally, 1946-48 was very different from today but a hike in inflation after the end of QE is still possible. Now, imagine official inflation numbers reading 8% or even 15% just as they did in 1946-48. Such a scenario would be extremely bullish for gold.
To sum up, even if the economy gets back on track, there is still a high probability of a hike in inflation which would bring the real debt burden down but could be very bullish for precious metals. If the economy doesn't improve decisively, there is still a risk of further increases in the money supply, which could fuel uncertainty and translate into higher gold prices. So, no matter if QE saved the economy or just burdened it, it may significantly contribute to the gold bull market. It seems that it already has.
If you have enjoyed this essay, please check our free gold newsletter which covers both gold fundamentals, market timing and other precious metals related topics. If you're an active investor or just begin your adventure with gold and silver, you may want to see our essay on how to build your gold and silver portfolio.
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Thank you for reading. Have a great and profitable week!
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com
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About Sunshine Profits
Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.
Disclaimer
All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Posted: 01 Feb 2013 01:30 PM PST
Read the Thursday Afternoon Wrap-Up for 1/31/2013 and the Friday Morning Commentary for 2/1/2013
From the politician's standpoint, the best part of such an ambiguous "promise" is the near impossibility of measuring it. From time to time, loaded polls suggest constituent "approval"; however, the FACT remains that Obama is currently tied – with George W. Bush, no less – for the most "unpopular" re-elected President since Gallup started taking such polls in 1945…
Obama Job Approval Rating Lower than Nixon's
…while Congress "enjoys" its lowest approval ever; falling to a HORRIFIC 10% last year…
Moreover, despite the government's best efforts to mask REALITY with PROPAGANDA; privately taken polls – like the Bloomberg Consumer Comfort Index – are barely above the 2008-09 crisis lows…
For all the government hype and spin regarding economic "recovery" – an ongoing, NEVER-ENDING LIE; U.S. Labor Force participation is at a 30-year low…
…and REAL unemployment is near DEPRESSION-ERA levels…
…particularly for families in their peak child-rearing years…
…with the prospect of further, dramatic job cuts when the upcoming "fiscal cliff" hits…
New fiscal cliff looms after sequestration put off until March 1
Meanwhile, REAL wages have been declining for nearly three years…
…as job quality plunges…
A Quarter of Jobs in America Pay below the Federal Poverty Line
…as part of a longer-term trend; with no hope of improving…
Consequently, U.S. entitlement growth is exploding…
10 charts showing America's stunning entitlements explosion
…with half the nation dependent on the government; hence, the rising popularity of the Democratic Party…
Source: aei-ideas.org
…including a stunning 47 million people on food stamps…
…and 6% of ALL workers on "disability"…
Meanwhile, there's even less hope for the nation's youth; holding $1 TRILLION of undischargable student loans…
…fighting all the aforementioned, whilst REAL inflation eats away at purchasing power by 8%-10% annually…
Furthermore, if the above didn't sap any remaining hope about America's future; the "icing on the cake" is the fact that while "the 99%" are suffering, "the 1%" are doing better than ever…
…particularly the very same bankers that CAUSED America's ruin…
How the Glorious Socialist Revolution Generated a 681% Return for Goldman Sachs
As we approach the END GAME of currency collapse, America's "DYING HOPE" – above all else – poses the greatest political, economic, and social risks…
Guest Post: Hope Has Changed – It Died
…as from such conditions, powerful demagogues have historically taken power; with devastating consequences to all…
Thus, you MUST…
PROTECT YOURSELF, and do it NOW!
Call Miles Franklin at 800-822-8080, and talk to one of our brokers. Through industry-leading customer service and competitive pricing, we aim to EARN your business.
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Posted: 01 Feb 2013 01:09 PM PST
The PRICE of GOLD held onto most of yesterday's $15 jump at $1676 per ounce Thursday morning in London, ticking back as Asian and European stock markets fell after Wednesday's surprise drop in US economic output figures.
Silver also eased back, but held at 1-week highs above $32 per ounce after rising yesterday in gold's "slipstream" as one bullion-bank analyst put it.
"This Friday's [non-farm US payroll] report remains crucial," says a note from Swiss bank UBS – currently encouraging its institutional clients to buy gold outright rather than as a credit-risk deposit.
"Some adjustments to [gold] positioning are likely to emerge" after Wednesday's 'no change' decision from the US Federal Reserve on zero interest rates and quantitative easing.
"But overall, the gold market should resume subdued trading," says UBS, "as is typical ahead of a key event" such as the monthly jobs report.
Russia's foreign ministry meantime condemned a reported Israeli air-strike on a military research unit inside Syria, saying Thursday that – if confirmed – this "unprovoked attack [would] blatantly violate the UN Charter."
Shares in Italy's struggling Banca Monte dei Paschi di Siena – founded in 1472 – steadied as the Italian central bank weighed MPS's second bail-out request in four years after it hid losses of €500 million on a 2008 derivatives deal.
German banking giant Deutsche Bank lost €2.2bn ($3.0bn) for the last 3 months of 2012, it said today.
"A year ago, the mood in Europe was horrible and nobody could see how on earth stocks could go up," says Gloom, Boom & Doom author and money-manager Marc Faber, who urged CNBC anchor Maria Bartiromo to buy gold earlier this week.
"Now since May 2012, less than a year ago, Portugal, Spain, Italy, France, are up between 30 and 40% and Greece has doubled…!"
Factory-gate prices across France and Italy fell in December from November, new data showed today.
House prices in the year to October fell 2.5% across the 17-nation Eurozone, with Spain's home-price drop accelerating to 15.2%.
"For the first time in four years," Faber continued Wednesday, pointing to the US stock market, "since the lows in March 2009, I love this market. Because the higher it goes the more likely we will have a nice crash, a big time crash.
"You are in great danger if you don't own any gold," Faber had earlier told Bartiromo.
Near-term, reckons Deutsche Bank analyst Xiao Fu – and despite Wednesday's $15 rise on poor US growth data and the Federal Reserve's no-change decision on zero rates and QE – "Gold lacks a convincing catalyst near term to take it convincingly higher and instead remains susceptible to opportunistic selling."
But "Any thought given to reining in some of the Fed's buying power will now be shelved," counters Ed Meir in his daily note for INTL FCStone.
"[Wednesday's] GDP number clearly shows that the US economy is still far from capable to muster its own momentum without key fiscal and monetary stimulus.
"In the least, this should provide an element of support to the precious metals group, at least over the short term."
After creating and spending first $1.4 trillion on mortgage and Treasury bonds in 2008, and then a further $600 of T-bonds starting in 2010, the US Fed will likely acquire a further $1.1 trillion of US government debt with its current program of quantitative easing, according to a Bloomberg survey of analysts.
"Given the sluggish [US] economy," says precious metals strategist Eugen Weinberg at Commerzbank, "it would be premature to discuss [the Fed] abandoning the quantitative easing programme.
"Despite the noticeably higher risk appetite displayed by market players of late, gold demand is thus unlikely to ebb away completely. On the contrary, high sales of US gold coins in January, and renewed inflows into the gold ETFs recently, point to relatively robust demand for gold."
Over in India – most likely the world's #2 gold consumer market in 2012 behind China – the economic affairs secretary contradicted the finance minister yesterday over plans to raise gold import duties again, in a bid to curb household appetite to buy gold, widely blamed for India's yawning trade deficit.
Two days after Palaniappan Chidambaram told the Financial Times that New Delhi is considering "some other steps to moderate the import of gold" further, Arvind Mayaram told Reuters that "I don't think there is any plan as of now."
Adrian Ash
BullionVault
Gold price chart, no delay | Buy gold online
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.
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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Gold Outlook For The Following Months
Posted: 01 Feb 2013 01:06 PM PST
Based on the February 1st, 2013 Premium Update. Visit our archives for more gold & silver articles.
Gold moved sideways for the last six weeks, with each rally and correction sparking either new hopes or new fears about the yellow metal. But focusing on such short-term volatility can rarely bring any good when it comes to long-term investments. That's one of the things that we often stress – one should always analyze the market form different perspectives and keep in mind their order of importance. This week we will focus on the long term.
Another thing, that we have already mentioned, is that such universal commodities, traded on many exchanges and in many currencies, like gold ought to be assessed taking other currencies into consideration. Hence, to get a clearer, distilled from the short-term noise picture of the situation in gold, today we will focus mostly on long- and medium-term charts, as well as on the yellow metal priced in currencies other than the U.S. dollar.
To see what awaits the gold price in February 2013 let's turn to this week's technical part. We will start with the yellow metal's long-term chart (charts courtesy by http://stockcharts.com.)
Little change has been seen in this chart this week, but it is important for a reason which will be touched on when we summarize this essay. The bottom was very likely formed here a few weeks ago when gold prices dipped below the 300-day moving average, which is a very important long-term technical development. Prices now appear to be simply consolidating a bit, which is also in tune with the historical patterns – the rally didn't always start in a volatile way after the final bottom was reached below the 300-day MA – but it happened eventually many times and on each occasion the rally was worth waiting for.
Let us now move on to the yellow metal's medium-term chart – we will use GLD ETF as a proxy.
Here, we see that prices moved lower this week but are still above the declining short-term resistance line. While significant volatility has been seen on a short-term basis, the average price has moved very little over the last month and a half.
The situation is very similar to mid-2012, where back and forth price movement was eventually followed by a huge rally. Those whom were not prepared, say last August, would have missed a large part of the upside move.
The price action seen on Thursday was quite similar to January 11, where gold corrected after a short-term powerful upswing and managed to move higher before the end of the session. The outlook was bullish then and we think it's bullish right now as well.
The rally will likely really pick up after gold moves above the declining medium-term resistance line (black ellipse on the above chart). However, does the move higher have to happen immediately?
Let us have a look at two charts featuring gold from the non-USD perspective – we'll start with gold priced in euro.
In this chart we saw a breakdown below the rising resistance line and the next support line is at the 2012 low. Since this level has not been reached yet, it seems we could see some weakness on a short-term basis.
Does gold have to decline based on that – from the USD perspective? Not necessarily. Quite simply, gold could not rally immediately if the dollar declined. Gold priced in euro could move slightly lower and if gold then catches up or rallies more significantly then the dollar declines, the price of gold in euro would rally. This chart does have some clearly bearish implications, however.
Let us proceed to the second chart that shows a completely different picture – gold from the perspective of the Japanese yen.
Here, the outlook is bullish as a breakout above the 2011 high has been seen. More importantly, the breakout was verified as prices stayed there for more than 3 consecutive trading days.
Summing up, quite a few strong signals are seen in the gold charts this week. Gold price in euro is a bit bearish, and price volatility can be expected in the coming weeks. With so much going on, and so many factors in place, we feel we must emphasize keeping what's most important right in front of you. This is crucial and is why we keep featuring gold from the very long-term perspective, even though quite often, there are little changes from week to week.
The main point is that gold moved below the 300-day moving average (after already a lengthy consolidation) and then back above it. This accompanied major bottoms in the past, and we think that another is once again behind us. The ongoing debate now is whether consolidation will end immediately or if we will witness more sideways trading before the rally proceeds. The fundamentals are in place and gold will seemingly have to eventually rally. Taking all volatility signals along with the long-term gold picture into account, it seems that the next move will be to the upside, not down as the gold in euro picture might suggest. As far as long-term investments are concerned, we believe that staying in the market with your gold and silver holdings continues to be a good idea.
Use the following link to sign up for a free, no-obligation trial of our Premium Service and read the complete version of this study that is over 10 times bigger. You'll also receive Market Alerts when things „get hot" on the precious metals market and when the trial expires, you'll start receiving our free newsletter. Additionally, you will also receive 12 gold best practice emails.
Thank you for reading. Have a great and profitable week!
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com
* * * * *
About Sunshine Profits
Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.
Disclaimer
All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold and Silver Disaggregated COT Report (DCOT) for February 1
Posted: 01 Feb 2013 12:55 PM PST
HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below.
(DCOT Table for February 1, 2013, for data as of the close on Tuesday, January 29. Source CFTC for COT data, Cash Market for gold and silver.) (More...)
In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter.
All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report.
If there is one of our DCOT charts that bears special mention it just about has to be the one below.
For why this chart rates a special mention (hint: something about it is the lowest since May 29, 2012 with then $1,554 gold), Vultures (Got Gold Report Subscribers) be sure to catch our new chart commentary, embedded directly in our GGR charts, at the password protected Subscriber site. Please log in on Sunday evening (above right, "GGR Login") at the usual time and navigate to the GGR charts section then.
We believe there is indeed a "tell" beginning to show in the data as we mentioned last time.
To subscribe to Got Gold Report please click on the "Subscribe to GGR" button, also above right, and thank you for doing so. Subscribers help to make GGR possible.
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