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Wednesday, November 5, 2014

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Ron Paul: If you want to know when the dollar will collapse, keep an eye on this

Posted: 05 Nov 2014 12:25 PM PST

By Nick Giambruno, Senior Editor, InternationalMan.com:

The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.—Ron Paul

Dr. Paul is referring to the petrodollar system, one of the main pillars that's been holding up the US dollar's status as the world's premier reserve currency since the breakdown of Bretton Woods.

Want to know when the fiat US dollar will collapse? Watch the petrodollar system and the factors affecting it. This is critically important, because once the dollar loses its coveted reserve status, the consequences will be dire for Americans.

At that moment, I believe Washington will become sufficiently desperate to enforce the radical measures that governments throughout world history have always implemented when their currencies were threatened—overt capital controls, wealth confiscation, people controls, price and wage controls, pension nationalizations, etc.

And there's more. The destruction of the dollar will wipe out most people's wealth, leading to political and social consequences that will likely be worse than the financial consequences.

From Bretton Woods to the Petrodollar

The dollar's role as the world's reserve currency was first established in 1944, with the Bretton Woods international monetary system. The US—victorious in WWII, and possessing the overwhelmingly largest gold reserves in the world (around 717 million ounces)—could reconstruct the global monetary system with the dollar at its center.

The Bretton Woods arrangement linked another country's currency to the US dollar at a fixed exchange rate, and the US dollar was tied to gold, also at a fixed exchange rate. Countries accumulated dollars in their reserves to engage in international trade or to exchange them with the US government for gold at $35 an ounce.

By the late 1960s, exuberant spending from welfare and warfare—combined with the Federal Reserve monetizing the deficits—drastically increased the number of dollars in circulation in relation to the gold backing it.

This monetary inflation caused nervous countries to accelerate their exchange of dollars for gold at $35. The result was a serious drain on the US gold supply (from 20,000 tonnes to around 290 million ounces by 1971, an amount it supposedly still holds).

With gold reserves shrinking rapidly, President Nixon officially ended convertibility of the dollar to gold, thus ending the Bretton Woods system on August 15, 1971. It was a default, and it took with it the main reason countries primarily held their reserves in dollars. The buck's preeminent value in international trade was gone. Demand for dollars by foreign nations was sure to fall, along with its purchasing power.

That hurt OPEC, whose members were the world's leading suppliers of a commodity even more valuable than gold: oil. OPEC countries needed a way to retain the real value of their earnings in the face of a declining currency, without having to jack the price of oil sky high.

If the dollar was to remain strong, it had to reinvent its status as the world's reserve currency, and that required a new world financial arrangement, one which would give foreign nations an ironclad reason to hold and use dollars. Nixon dispatched his National Security Advisor Henry Kissinger to Saudi Arabia.

The Petrodollar System

Between 1972 and 1974, the US and Saudi governments created the petrodollar system.

Saudi Arabia was chosen because of its vast petroleum reserves, its dominant influence in OPEC, and the (correct) perception that the Saudi royal family was corruptible.

Under the new petrodollar system, the US guaranteed the survival of the House of Saud by providing a total commitment to its political and military security. In return, Saudi Arabia agreed to:

  • Use its dominant influence in OPEC to ensure that all global oil transactions would be conducted only in US dollars.
  • Invest a large amount of its oil revenue in US Treasury securities and use the interest income from those securities to pay US companies to modernize the infrastructure of Saudi Arabia.
  • Guarantee the price of oil within limits acceptable to the US and act to prevent another oil embargo by other OPEC members.

No dollars, no access to the world's most important commodity. It's a very compelling reason to hold your reserves in dollars.

For example, if Italy wants to buy oil from Kuwait, it has to first purchase US dollars on the foreign exchange market to pay for the oil, thus creating an artificial demand for US dollars that wouldn't exist if Italy could pay in euros.

The US is just a toll collector in a transaction that has nothing to do with a product or service. But that translates into increased purchasing power and a deeper, more liquid market for the dollar and Treasuries.

Additionally, the US has the unique privilege of using its own currency—which it can print at will—to purchase its imports, including oil.

The benefits of the petrodollar system to the US are impossible to overstate.

What to Watch For

Today, the geopolitical sands of the Middle East are rapidly shifting.

The faltering strategic regional position of Saudi Arabia, the rise of Iran (which is not part of the petrodollar system), failed US interventions, Russia's increasing power as an energy giant, and the emergence of the BRICS nations (which offer the potential of future alternative economic/security arrangements) all affect the sustainability of the petrodollar system.

My colleague Marin Katusa's mentioned in his book; The Colder War, you need to be aware of what Vladimir Putin is doing. Putin would like nothing more than to sabotage the petrodollar, and he's forging alliances across the planet that he hopes will help him achieve his goal.

At the same time, you should watch the relationship between the US and Saudi Arabia, which has been deteriorating.

The Saudis are furious at what they perceive to be the US not holding up its end of the petrodollar deal. They believe that as part of the US commitment to keep the region safe for the monarchy, the US should have attacked its regional rivals Syria and Iran by now. And they may feel they are no longer obliged to uphold their part of the deal, namely selling their oil only in US dollars.

They're already heavily involved with China and could also tilt toward Russia. Oil traded in rubles or yuan could be the future result—a death knell for the petrodollar.

Conclusion

It was evident long before Nixon closed the gold window and ended the Bretton Woods system in 1971 that a paradigm shift in the global monetary system was inevitable.

Now another shift also seems inevitable. Ron Paul's words alert us as to when a dollar collapse is imminent.

"We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros."

Someday, perhaps soon, Americans will wake up to a new reality, like they did on August 15, 1971.

To learn more about the coming death of the petrodollar and how it will directly affect you, I recommend you read Marin's new book, The Colder War.

Dr. Ron Paul has fully endorsed it and inside, you'll discover the web alliances and deals Putin has forged to break the monopoly of the dollar in the global energy trade and what a flight from the dollar will look like.

Before Putin makes another move against America, get the full story by clicking here to get your copy of this eye-opening book.

Metals market update for November 5

Posted: 05 Nov 2014 12:21 PM PST

In London, gold reached $1,143.76, the lowest price since April 2010. In New York, Comex gold for December delivery slipped 1.9% to $1,145.10. The gold futures market saw huge dumping of gold in illiquid Asian markets overnight, according to Zero Hedge.

Porter Stansberry and “Dr. Doom” Marc Faber just “faced off” against former Fed chair Alan Greenspan

Posted: 05 Nov 2014 11:59 AM PST

From The Gold Report: 

When Dr. Alan Greenspan became chairman of the Federal Reserve, he moved from the world of rhetorical economics to the world of action. His most recent memoir, “The Map and the Territory 2.0: Risk, Human Nature, and the Future of Forecasting,” attempts to make sense of how the financial crisis of 2008 came to be and how we can better predict future crises, along with the role of gold in a global monetary system. In this excerpt from Greenspan’s appearance at the New Orleans Investment Conference with Navellier & Associates Senior Writer Gary Alexander, Gloom, Boom & Doom Report Publisher Marc Faber and Stansberry & Associates Investment Research Founder Porter Stansberry, The Gold Report delves into the role of gold versus fiat currency, why central banks own so much gold if it is truly “a barbarous relic,” and the reason China is buying so much gold today.

Gary Alexander: You said that when you were named to the position of Federal Reserve chair you left the world of theoretical economics philosophy and entered the arena of action. You moved beyond the role of pamphleteer on the sideline to being part of the action. In what way did your objectivist teaching from your time with Ayn Rand and your belief in the gold standard influence the people around you? How did you convince people to see things your way or did you feel that most of the compromise went the other way?

Alan Greenspan: When I wrote a paper on how agricultural subsidies made no sense to the farmers in the long run, two Republican senators from Nebraska taught me the reality of actually implementing the values we hold as best we can in the context of a political environment. I never changed my fundamental views because they were rational. President Ronald Reagan advised that other than your core beliefs, which are protected by the Constitution, sometimes you have to compromise. We learned to change the world bit by bit.

GA: When you took office in August of 1987, the gold price was $460 an ounce ($460/oz) on your first day. It peaked at $504/oz in December of 1987. Over the next 12 years, it was cut in half to $252/oz by August of 1999. Many believe that during that time, the Fed must have been selling gold or manipulating the market in some way to push the price of gold down. Was anything like that happening?

AG: No. Some central banks were major sellers of gold in that particular period. We were very concerned about that. If all the central banks sold gold at the same time, it really would have brought the price down. So they set up a partitioning scheme—some called it a cartel—where individual central banks were given quotas of what they could sell at certain times. The United States abstained from that group.

In my new book, I cover the role of gold and why the U.S doesn’t sell all of its gold. If it’s a barbarous relic, as some say, and it earns nothing and it costs money to store it, why are central banks holding so much of it?

GA: That’s a question I was going to ask you. Ron Paul asked Ben Bernanke in Congressional testimony that simple three-word question “Is gold money?” which got a one-word answer, “No.” What do think?

AG: It’s currency, of course. Gold, and to a lesser extent silver, are the only major currencies that don’t require a third party credit guarantee. Gold is inbred in human nature. Gold is special. For more than two millennia, gold has had virtually unquestioned acceptance as payment to discharge an obligation. Remember, Germany could not import any goods in the last part of World War II unless it paid in gold.

Today, China is beginning to convert part of its $4 trillion ($4T) foreign exchange reserve into gold as a partial diversification out of the dollar. Irrespective of whether the yuan is convertible into gold, the status of the Chinese currency could take on unexpected strength in today’s fiat money, floating international financial system. It would be a gamble for China to try to buy enough gold bullion to displace the United States’ $328 billion of gold reserves as the world’s largest holder of monetary gold. But the cost of being wrong, in terms of lost interest and cost of storage, would be quite modest.

If China embarks on a gold accumulation program, global gold prices will rise, but only during the period of accumulation.

GA: One of your statements in your book is that even though the gold standard was not practical, you still believe in the theory of the gold standard.

AG: A return to the gold standard in any form is nowhere on anybody’s horizon.

GA: The Fed has now been around for a hundred years. Would the Fed be considered a successful manager of the value of the dollar over the last century?

AG: Remember, what the Fed does is what Congress requires of it. When the Fed started out, U.S. currency was still on the gold standard. It was set up largely in response to the panic of 1907 as the lender of last resort. The gold standard was abandoned in 1933 because it appeared to be depressing the general price level and inhibiting recovery out of the Great Depression. More important, the restrictive nature of gold undermined the fiscal flexibility required by the New Deal’s welfare state. Some blamed gold for the depression, but the problem wasn’t convertibility to gold, it was a problem with the people pricing it.

What followed was fiat money price inflation. Between 1933 and 2008, prices for personal consumption increased more than thirteenfold. Central banks were then ceded the role of controlling the supply of money, and hence prices. The goal became keeping the rate of inflation down rather than the level of prices unchanged.

As the world adopted a welfare state psychology, challenges began to emerge. Values, culture, ideas and philosophy determine what economic policies look like. Unless and until you change that, nothing will happen. It is ideas that matter in economics.

GA: Interest rates remained very low from 2001 to mid-2004. The Fed funds rate was around 1% from 2004 to 2006. Do you regret, in retrospect, keeping rates so low? Might that have contributed in any way to the housing and real estate bubble?

AG: It became apparent after the dot-com boom that the central banks had lost control of the wrong end of the money. In other words, the Federal Reserve and all the central banks fixed the short end like the federal funds rate, but not the real rate on 10-year notes. We began to see a huge amount of international arbitrage in the bond markets. The result was the federal funds rate went down for a year to 1% because we hadn’t seen price inflation. Money supply growth, long-term rates, all of the measures of inflation were unchanged. No one raised the issue at the time. Indeed, Economist Milton Friedman praised Federal Reserve policies. It wasn’t until 2006 or 2007 that there was a retrospective look at what occurred.

GA: We all saw the headlines about people flipping homes and borrowing and refinancing homes and turning them into ATM machines. Wasn’t that an indication that something was out of control?

AG: That had nothing to do with Federal Reserve policy. That was Fannie Mae and Freddie Mac keeping their debentures at an extraordinarily low level subsidized by the Federal government guarantee that they wouldn’t be allowed to fail. Then the Department of Housing and Urban Development required that the two lenders invest a significant amount of their balance sheet into affordable housing loans. That led to huge numbers of subprime mortgages with low down payments and adjustable interest rates. Eventually, it blew the system apart.

Q: I’d like to turn now to the years after you left the Fed, which you wrote about in “The Age of Turbulence.” We’ve now had almost six years of effective zero interest rate policy and not much measurable inflation. You wrote: “Thus without a change of policy, a higher rate of inflation can be anticipated in the United States. I know that the Federal Reserve left alone has the capacity and perseverance to effectively contain the inflation pressures I foresee. Yet to keep the inflation rate down to a gold standard level of under 1% would have to constrain monetary expansion so drastically that it could temporarily drive up interest rates in the double-digit range.” However, they have done the opposite. The balance sheet has exploded, and yet rates have stayed so low. Inflation is not that measurable, and people are fearing deflation. Could you please explain the map of this territory?

AG: Money supply hasn’t grown. The reason is very little of those excess reserves has been re-lent into the market to IBM or General Motors. That is because there is too much uncertainty, banks are better off holding it for 25 basis points. So we are left with this huge potential inflationary explosion tinder. Once those assets are triggered into the marketplace, then inflation will rise. It has to rise.

GA: My theory is the federal government doesn’t want to raise rates because it has a $17T budget deficit to pay with interest, and that’s going to hurt.

AG: When I was at the Fed, there was never a discussion between the Fed and the Department of the Treasury about the impact of rates on paying the deficit. With the size of the outstanding debt that we now have, the deficit could become fairly crippling if rates go up.

GA: I want to ask you about banks. You say three times in your book that banks have failed terribly in regulating themselves and it’s usually the whistleblowers who draw attention to it. Today, we have the concept of too big to fail. Do you think we should allow big banks to fail?

AG: The premise of a financial system is to facilitate the movement of society’s savings into productive capital assets, which will create a rising standard of living. To the extent that you don’t allow creative destruction of companies, you do not optimize the use of the savings of a society. The issue that people don’t want to address is the fact that creative destruction is an essential characteristic of a market economy, but it does have two aspects to it: creative and destructive. People like the creative, but they don’t want the destructive. You cannot have it both ways. You either have a high standard of living by allowing the savings of society to increase productive assets or you finance everybody—creative or not—and by doing that, you’re creating real serious problems.

Porter Stansberry: The thing that I think has changed in our economy during my lifetime is that debt has gotten so cheap. Debt used to be the last resort for people, now it seems to be the first choice. It makes our institutions fragile in a way that they were not before. The investment banks that blew up in 2008–2009, requiring huge bailouts from taxpayers, were fragile because they were leveraged 50:1. People who ran those institutions thought that was normal and sane. And it wasn’t. We’ve all seen the culture of our country change. In my view, that’s because we’ve gone from the role of the creditor to the role of the debtor. There are many institutions that enabled that process. The Fed is one of them.

AG: The standard of living in the economy is fundamentally tied to the issue of productivity and the degree of independent innovation. We have a very substantial degree of entitlements within this economy, an aggregate of Medicare, Medicaid, Social Security and a whole variety of other programs, all of which are mandated, not appropriated, by Congress under both parties. This leads to a reduction in the level of gross domestic savings, which immediately translates into lower capital of stock and lower standards of living. There is no way out of this arithmetic through bookkeeping. We are eating our seed corn.

Marc Faber: There are many reasons the Western economies are slowing down. One is government spending. Between 1870 and 1910, nowhere in Europe or in the U.S. was it above 15% of the economy. Now, U.S. government spending, including states and municipalities, is at around 40% of gross domestic product (GDP). In France, government spending is 57% of GDP. The larger the government becomes, the less economic growth there will be. So Dr. Greenspan and I agree on the problem, but who financed all these entitlements? I believe the central banks with their artificially low interest rates are deliberately creating bubbles even though in a bubble, the majority loses, and the minority makes a lot of money.

AG: The presumption is that if the Federal Reserve were not funding the deficits, they wouldn’t happen. You have it backwards. Politicians mandate the degree of expenditures and taxes. What would happen if there is no central bank is that interest rates would push up and crowd out the private sector. That is what actually occurs unless the central banks intervene. Central banks are not the primary cause of this problem, they are responding to government spending. If the government spending weren’t there, the issue wouldn’t arise.

GA: With the current Federal Reserve probably winding up quantitative easing (QE) soon, what do you see as the outcome of the current Fed policies under Janet Yellen over the next year?

PS: I really think that the current Fed is in a terribly difficult situation. The federal government is way over its head in debt. It’s $150,000 per taxpayer in debt. There is just no way politically to cut these expenditures nor is there a way to generate enough in income taxes or corporate taxes to cover the shortfall. I’ve looked at the data. It shows that even if you doubled the amount taken in income taxes, we’d still be running a deficit. So the Fed is in a really tough place. It is in charge of financing the government’s runaway spending and uncontrollable debt.

Regardless of what the hawks may say, I just don’t believe that the Fed is ever going to become very aggressive with the purse strings. I think that we’re locked into a pattern of larger and larger QEs, lower and lower rates, until finally something breaks, whether that’s the commodity markets or the bond markets. I actually sort of feel sorry for the folks who are at the Fed currently because they’re stuck between a rock and a hard place.

MF: My sense is that the Fed and other central banks around the world will keep interest rates at very low levels for a very long time. The whole investment world has been distorted by essentially zero interest rates and expansionary monetary policies.

AG: If the Federal Reserve wants to keep the same degree of tightening, it has to actually raise the rate it’s paying on the money. There’s no other alternative. The issue of the size of the balance sheets is beyond comprehension. We are going to have to wait and see what happens when the huge amount of unused reserves starts moving. We have never seen anything like this before. If anyone has the guts to go out and forecast five years out from now, good luck.

PS: Dr. Greenspan, you famously said while you were at the Fed that spotting bubbles is notoriously difficult until in retrospect. There are a couple of things going on today that strike me as bubble-like behavior: NASDAQ trading at almost seven times earnings, high-yield corporate debt offering less than 5%, beachfront condos in Miami selling for $30 million. Do any of those things strike you as being in bubble territory?

AG: Commercial real estate, which was dead in the water with respect to price and volume, has now had a significant change in pricing. Prime areas have seen a surge in funding, but the volume of activity is not back to where it was. Multifamily is doing better because a lot of people have shifted from home ownership to rental status. You will know you are in very serious trouble when there is price inflation but no buyers; that’s suggestive of something not well going on. Yes, I think there are many signs.

The stock prices have been very surprising. This is not sustainable, but we are not seeing any signs of inflation or real interest rates rising. . .yet.

Bubbles are easy to see, but difficult—if not impossible—to pinpoint when they implode because of the way markets work. If people see it coming, it won’t happen. No one can forecast when those bubbles will break.

GA: Marc Faber, what is the significance of the Swiss referendum coming up next month to have 20% gold backing, repatriated gold and forbid gold selling?

MF: I think it will be rejected. If the proposal was for 100% backing, I would more enthusiastically endorse it. Twenty percent, in my opinion, is neither here nor there. I believe that smart investors need to have their own gold reserves. I would never trust anyone to hold these gold reserves on my behalf because they can lease it out or they can sell it.

GA: Dr. Greenspan, did you in July 1998 testify that the Fed stands by, ready and willing to buy gold should the situation rise where it’s necessary?

AG: No. But I have been writing about the significance of the gold standard since the 1960s. The crucial question is not the amount of gold individual countries own, only if they are willing to convert their currency into gold. The rest is strictly an investment position.

This interview was condensed and edited from a transcript of the conversation at the New Orleans Investment Conference and Dr. Greenspan’s book, “The Map and the Territory 2.0.” You can order audio CDs and video DVDs of the conference here.

Gary Alexander is senior writer for Navellier & Associates. For the previous 20 years, he was senior executive editor at InvestorPlace Media. From 1983–1989, he edited Gold Newsletter and Wealth magazine for Jim Blanchard.

Swiss-born Marc Faber, who at age 24 earned his Ph.D. in economics magna cum laude from the University of Zurich, has lived in Hong Kong nearly 40 years. He worked in New York, Zurich and Hong Kong for White Weld & Co., an investment bank historically managed by Boston Brahmins until its sale to Merrill Lynch in 1978. From 1978 to 1990, Faber served as managing director of Drexel Burnham Lambert (HK), setting up his own investment advisory and fund management firm, Marc Faber Ltd. in mid-1990. His widely read monthly investment newsletter Gloom Boom & Doom Report highlights unusual investment opportunities. Faber is also the author of several books, including “Tomorrow’s Gold: Asia’s Age of Discovery” (2002), which spent several weeks on Amazon’s bestseller list and is being translated into Japanese, Chinese, Korean, Thai and German. He also contributes regularly to leading financial publications around the world. Much also has been written about Faber. Nury Vittachi, one of Asia’s most popular writers and speakers, published “Riding the Millennial Storm: Marc Faber’s Path to Profit in the Financial Markets” (1998). The Financial Times of London described him as “something of an icon” and Fortune called him a “congenital contrarian and shrewd Swiss investment advisor.”

Former Federal Reserve Chairman Alan Greenspan (1987–2006) also served as chairman of the Federal Open Market Committee. From 1954–1974 and 1977–1987, he was chairman and president of Townsend-Greenspan & Co. From 1974–1977, he served as chairman of the President’s Council of Economic Advisors under President Gerald Ford and from 1981–1983 as chairman of the National Commission on Social Security Reform. Before his appointment to the Federal Reserve Board, Greenspan served as a director of numerous corporations, including J.P. Morgan & C., Mobil Corporation, General Foods Corp. and Capital Cities/ABC. He was a term member of the Board of Trustees of the Rand Corporation, a member of the Board of Overseers of the Hoover Institution and vice chairman and trustee of the Economic Club of New York. He is the author of “The Age of Turbulence: Adve

Global scramble for silver

Posted: 05 Nov 2014 11:58 AM PST

Silver has had a torrid time in recent months and has fallen nearly 40% since July. The selling has accelerated in recent days and silver has fallen from $17.20/oz on October 28 and is down 12% in the last week.

Historical Figures’ Salaries in Gold: Leonardo da Vinci

Posted: 05 Nov 2014 11:30 AM PST

It's incredible how effective precious metals are as a long-term store of value.   Even going back over 500 years, we can match up Leonardo da Vinci's salary as being similar to what he might receive today. Imagine for a moment that time travel were possible, and Leonardo could transport himself to today's time—he would […]

The post Historical Figures' Salaries in Gold: Leonardo da Vinci appeared first on Silver Doctors.

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Trader alert: This chart predicted the declines in gold and silver. Here’s what it could be saying now.

Posted: 05 Nov 2014 11:27 AM PST

From Chris Kimble at Kimble Charting Solutions:

CLICK ON CHART TO ENLARGE

The “Power of the Pattern” attempts to find key tops & bottoms (see my strategy here).

A few days before the all-time highs in gold (around $12 from highs) I shared the upper-left chart, reflecting that an “Eiffel Tower” pattern in gold looked to be at hand (see post here).

At the time, the gold ETF “GLD” had become the largest ETF in the world!

The lower right chart is an update on gold’s Eiffel Tower pattern. As you can see, gold has lost over a third of its value since the original posting, falling around $800.

Important price action of late: Gold at (1), is attempting to break below a one-year support shelf.

One of the challenges to the “right side” of an Eiffel Tower pattern is this: Often assets fall back to where the entire rally got started!

The above-mentioned post shares a few key assets that have retraced huge upside moves over the past 20 years. (see here).

When silver was still trading around $30 a couple years ago, the Power of the Pattern started suggesting that the $15 level was the target of a measured move projection. Well folks, guess where silver is trading this morning?

If you like to buy and hold metals, trade them, or think a potential buying opportunity in this hard hit area is near, I am sharing these type of thoughts with our Metal Members on a weekly basis. If this type of research could be of value to you, I would be honored to have you as a member.

Are we in unique times in the metals complex? Only time will tell, but in my humble opinion, I believe we are!

Gold, economic theory and reality: A conversation with Alan Greenspan

Posted: 05 Nov 2014 11:10 AM PST

When Dr. Alan Greenspan became chairman of the Federal Reserve, he moved from the world of rhetorical economics to the world of action. His most recent memoir attempts to make sense of how the financial crisis of 2008 came to be and how we can better predict future crises, along...

CNBC Can’t Hide Its Disdain For Gold

Posted: 05 Nov 2014 10:48 AM PST

Originally appeared at GoldSilverBitcoin

The mainstream is alit with stories covering gold and silver now that each has fallen through any semblance of resistance.  CNBC is leading the charge, having published six stories in the 24 hours preceding 4:30pm PST on Tuesday.

This might be a very bearish sign for gold and generally mainstream media ignores metals. Now they’re giving it much attention, kicking it while it downs almost.

Read more to learn about the stories.

The six stories are as follows:
What caused the ‘Vomiting Camel’ pattern in gold?
Gold edges up from 4-year low as dollar rally pauses
Here’s the tragic irony of the gold bubble: Pro
Charts suggest sub-$1000 gold is likely
Chinese unmoved by gold price drop, see it cheaper still
Allied Nevada Gold misses 3Q profit forecasts

They all cover gold and silver, with one thing in common. They all have a negative slant towards the gold price. This makes sense considering the gold chart in recent years.

Screen Shot 2014-11-04 at 1.25.53 PM

It isn’t merely CNBC. The increased coverage, with a negative slant, seems to be widespread. Click here to see for yourself.

SALES STRONG

Despite the bearish sentiment from financial journalists, sales remain stalwart at the US Mint.

American Silver Eagle sales increased 40 percent in October to the highest levels in 21 months. This is an increase of 87.6% compared to one year ago, October 2013, when sales reached 3,087,00. On the year Silver Eagle bullion sales have reached 38,041,000. The current annual sales record was last year at sales of 42,675,000.

Sales increased to 5.79 million ounces, the most sold since January 2013, which set an all-time high at 7.5 million. September’s total was 4.14 million.

Silver and gold fell today to the lowest since 2010 as the dollar increased to a four-year high against a basket of 10 currencies and equities climbed to a  record.

Silver futures for December dropped 1.9 percent to close at $16.106 an ounce on the Comex in New York. The price earlier touched $15.635, the lowest for a most-active contract in since February 25, 2010.

US Mint American Gold Eagle sales were even better, recording their second highest monthly sales total of the year.

American Gold Eagle bullion coin sales were 57,500 for the one ounce size, 6,000 for the one-half ounce size, 8,000 for the one-quarter ounce size, and 50,000 for the one-tenth ounce size, making up a total of 67,500 ounces, a 39.2% gain compared to a year ago when sales reached 48,500 ounces. The latest sales total represent the highest monthly sales figure for this year.

BEARISH SENTIMENT CONTINUES IN OVERNIGHT

Overnight someone sold 1.2 million ounces of gold and it brought the price of gold down $12. That’s about a billion dollar trade. Here’s the chart showing the liquidation. As ZeroHedge writes,

For the 5th day in a row, “someone” has decided that 0030ET would be an appropriate time(assuming the ‘seller’ is an investor who prefers best execution rather than the standard non-economically-rational share-repurchaser in America) to be dumping large amounts of precious metals positions via the futures market. Tonight, with over 13,000 contracts being flushed through Gold – amounting to over $1.5 billion notional, gold prices tumbled $20 to $1151 (its lowest level since April 2010). Silver is well through $16 and back at Feb 2010 lows. The USDollar is also surging.

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Gold has not rebounded from western softness in Chinese trading, and has only trend downwards. At press, gold is trading $15 in the eastern markets.

In July 2014 a similar trade took place in illiquid hours.

As Mark O’Byrne writes,

Massive concentrated selling on the futures market at times when there was no breaking news or market moving developments led to sharp price falls yesterday. Nearly $1.5 billion of gold futures contracts was dumped on the market in minutes at the open on the COMEX.

The selling was confined to the paper market as mints, refineries and dealers did not report any sudden bout of selling. Indeed, holdings in the largest gold exchange-traded product expanded to the highest level since April yesterday.

Do you agree that the mainstream media has picked up their negative news coverage? Let us know in the comments.

Originally appeared at GoldSilverBitcoin

Justin O’Connell is the Head Researcher at Dollar Vigilante and Chief Executive Officer of GoldSilverBitcoin.  He is also the author of the first full-length bitcoin book, Bitcoinomics, and administrator of the Bitcoinomics website. Justin is also a co-host at Our Very Own Special Show, a lifestyle podcast about music, news, life and other topics.  He lives in San Diego, California. His writings mostly deal with gold, silver, bitcoin, technology and culture.

More “War on Terror” Abuses – Spying Powers Are Used for Terrorism Only 0.5% of the Time

Posted: 05 Nov 2014 10:15 AM PST

The Patriot Act continues to wreak its havoc on civil liberties.   Section 213 was included in the Patriot Act over the protests of privacy advocates and granted law enforcement the power to conduct a search while delaying notice to the suspect of the search.   Known as a "sneak and peek" warrant, law enforcement was adamant Section 213 […]

The post More "War on Terror" Abuses – Spying Powers Are Used for Terrorism Only 0.5% of the Time appeared first on Silver Doctors.

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*Breaking Alert: US Mint SOLD OUT of Silver Eagles! 2 Million Coin Surplus Sold in Under 2 Hours!

Posted: 05 Nov 2014 10:09 AM PST

The US Mint has just issued an alert to Primary Dealers across the US that Silver Eagle inventories, which according to the Mint began today at over 2 million ounces, are now SOLD OUT as of 12:30pm EST.        The Mint has reportedly sold through over 2 million ounces in less than 2 […]

The post *Breaking Alert: US Mint SOLD OUT of Silver Eagles! 2 Million Coin Surplus Sold in Under 2 Hours! appeared first on Silver Doctors.

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Gold falls below $1200 on US dollar, Palladium bucks trend: ETFS

Posted: 05 Nov 2014 09:48 AM PST

Year-to-date, gold ended the week with a loss of 3.3%. Accentuating the increase in currency volatility, gold in Euro terms ended the week up 6.2% YTD while the US dollar index has gained 8.6% in 2014 (+9.4% since early May). Defensive assets suffer as cyclical equities regain vigour.

Florida Cop Rapes 20-Year Old Woman at Gunpoint While on Duty

Posted: 05 Nov 2014 09:00 AM PST

Police are starting to treat the general public like Central Bankers have been doing for years. Boynton Beach police officer has been arrested after he allegedly raped a 20-year-old woman at gunpoint while he was on duty, police said. Submitted by Michael Krieger, Liberty Blitzkrieg:  Officer Stephen J. Maiorino, an eight-year veteran of the department who […]

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The West Greets Gold with More Selling

Posted: 05 Nov 2014 08:16 AM PST

The selling kicked off in gold last evening when the comments from the Bank of Japan's Kuroda hit the newswires and has not let up as trading moved into the West.

Please refer to the chart I posted last evening showing the various support levels for the metal. The first zone of support, near the $1150 level, has been shattered conclusively. Gold now looks to have its eye on the psychological round number of $1100.

As usual, the gold perma-bulls are screaming their usual nonsense about "Flash Crash" once again. Funny how we never hear a peep out of these nitwits when we get what I have contemptuously dubbed, "the Reverse Flash Crash".

The point they are making is what? That big sellers unloaded on the metal during the Asian trade? And this is supposed to be proof of what?

Has it ever occurred to these Johnnie one-notes that there are some longs in SERIOUS trouble in the gold market? The latest Commitment of Traders report showed large speculators overwhelming LONG and WRONG in the gold market ( and this does not even include the over the counter markets). They are abandoning gold in droves.

The assumption that these perma gold bulls sites make is that "this would not be done if a LEGITIMATE SELLER wanted to ensure the best possible price". Again, who says that a trapped long wants the best possible price? The only thing a trapped long wants is "OUT".

"GET ME OUT before I am ruined" is what the motivating force is behind such moves.

I have to shake my head at the appalling ignorance that somehow passes for sound analysis in the gold bug community when it comes to the breathless commentary on gold whenever there is a sharp fall in price. Those of you who are regular readers at this site are keenly aware of what has been transpiring in the soybean markets of late. I have been especially detailed in discussing the meal markets in particular. If you want to see a market in which one group was "engineering a reverse flash crash" ( My words denoting sarcasm) just go back and look at the price chart of December meal. Panicked shorts were saying the same things as panicked gold longs were saying: " GET ME OUT AT ANY PRICE BEFORE I AM COMPLETELY RUINED".

These huge volume spikes speak of fear, panic and devastating losses all being compounded by margin calls from busy margin clerks at the various brokerage houses.

The idea that somehow huge sell orders in gold indicate the presence of "market manipulation" is patently absurd. We see this sort of thing all the time in the futures markets as one side or the other gets run over whenever a key technical support level gives way to the downside or a key technical resistance level is taken out on the upside.

Of course those that are on the winning side of a market move are going to press their advantage. That is a REGULAR occurrence in the futures market and is simply how they work. Ask the feeder cattle bears who had been obliterated by the bulls in that market since late August until only just recently if the ones doing the buying were interested in "buying at the best possible price". That one should even venture to ask such an insipid question would betray a breathtaking ignorance.

The simple facts are that gold is in a bear market and those who remain long are losing tremendous sums of money. Some have had enough and are done with the metal from the long side. Expect to see more of this the longer it takes gold to show any signs of stability. Each fresh push lower will take its toll, both psychologically and financially on the remaining longs. Bears will push until the downside momentum slows and then they will halt their selling. It really is that simple.

At some point the bleeding with temporarily halt and a respite will follow. Objective traders will watch key indicators to see if they can discern where and at what level.

I might point out here at the risk of incurring even more wrath from the gold cult members, but in the hope of waking some of them up, that their whistleblower hero and priest, the one who keeps regaling them with claims of special insider information about "massive gold buying", "massive rally of epidemic proportions", etc,. has once again proved to be nothing but a bag full of hot air. Wake up out there. Gold is in a bear market. That is what you really need to realize.

Until such time as the charts indicate a true bottom and a true turn in the direction of the main trend, rallies are going to be sold. Maybe the US Dollar will become weak, maybe inflation will begin to become a problem, maybe the commodity sector will turn sharply higher, maybe the GLD will start showing strong inflows of money with rises in its reported holdings, maybe this and maybe that, but until you see something on the fundamental front change that favors sharply higher gold prices, just remember a very simple but always ignored axiom: " The trend is your friend".

American Austerity

Posted: 05 Nov 2014 08:14 AM PST

So now the R-republocrats will be in charge again for the next 4-6 years until the D-republocrats get voted back in. This, of course means that austerity reigns and all of America's fiscal issues have been solved, thus the rallying dollar, which means the yen is lower, which means gold and silver are down.

read more

10 Examples Of The Extreme Incompetence That Now Pervades The Federal Government

Posted: 05 Nov 2014 08:00 AM PST

There has always been a substantial level of incompetence at federal agencies, but under the Obama administration incompetence has risen to unprecedented levels.  This year the incompetence of the Secret Service, the Veterans Administration, the Department of Homeland Security and the CDC have all made national headlines.  The launch of Obamacare was such a failure […]

The post 10 Examples Of The Extreme Incompetence That Now Pervades The Federal Government appeared first on Silver Doctors.

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Stewart Thomson: Yen Massacre & Gold Muscle

Posted: 05 Nov 2014 07:00 AM PST

Gold itself continues to face modest headwinds from the crashing Japanese yen. I've predicted that a global fiat crisis is coming, and that it would begin in Japan. By 2016, I expect it to begin enveloping most of the Western world.    Submitted by Stewart Thomson, Graceland Updates:  In January of 2011, I swapped a […]

The post Stewart Thomson: Yen Massacre & Gold Muscle appeared first on Silver Doctors.

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Anatomy of a Failing State: Japan’s Budgetary Nightmare

Posted: 05 Nov 2014 06:44 AM PST

Once the global economy rolls over into contraction, the tide will recede and Japan’s fiscal and monetary bankruptcy will become painfully apparent.

What do you get after 25 years of stagnation and Keynesian Cargo Cult monetary stimulus? A failing state, that’s what. The intellectually bankrupt ruling Elites of Japan have no solution for Japan’s slow stagnation, as real reform would diminish their wealth and power.

So their only “solution” is to double-down on monetary stimulus: flood the enfeebled Japanese economy with more credit and fiscal stimulus, a.k.a. building bridges to nowhere: Japan’s Monetary Pearl Harbor.

But reality isn’t as immobile as failed policies.

While Japan’s ruling Elites fiddled away the past 25 years propping up sclerotic cartels and phantom loans, Japan’s population has aged and its primary sources of wealth creation have atrophied.

We can see these trends in Japan’s national budget. Before we dig into the numbers, we need to note that Japan’s Ministry of Finance routinely announces an austerity budget for the next fiscal year around 92-95 trillion yen (TY), and then supplemental spending during the fiscal year pushes actual expenditures up to 100 TY.

According to Highlights of the Budget for FY2013/2014, the initial 2013 budget was 92 trillion yen, while the actual 2013 spending came in 10 trillion yen higher, at 102 trillion yen.

According to Japan’s government looks to trim budget deficit, the national budget has hovered around 100 trillion yen for years.

So we have to take these 2013 spending estimates as lowball estimates that are 5%-10% below actual spending.

REVENUES: 92.6 trillion yen

Tax revenues: 43.0 TY
Other revenues: 4.0 TY

Government Bond Issues (borrowing): 42.8 TY

EXPENDITURES: 92.6 TY

National Debt Service (interest & bond redemptions): 22.2 TY

Social Security: 29.1 TY

Other: 41.2 TY

Debt service and Social Security are 120% of tax revenues. In other words, tax revenues don’t even cover debt service and Social Security.

An astonishing 46% of the governments budget is borrowed money. Even with near-zero yields on Japanese government bonds (about 1%), 51% of tax revenues in 2013 were spent on national debt service.

The 2014 increase in the national consumption tax rate from 5% to 8% is expected to raise an additional 6 trillion yen of revenue in 2014, but that remains to be confirmed. If history is any guide, increases in national consumption taxes (a.k.a. value-added taxes or VAT) fail to generate the expected windfall of additional revenue, as consumers spend less.

Since Japan’s GDP fell an astounding 6.8% after the tax increase took effect in April, it seems likely the revenues will disappoint official expectations.

Even if this new revenue comes in as expected, the amount being borrowed to fund government spending will only drop a modest amount, from 42.8 trillion yen to 41.2 trillion yen. Yee-haw.

Meanwhile, national debt service is expected to rise from 22.2 trillion yen to 23.2 TY.

It’s difficult to see the tax increase as a panacea, as borrowing barely declines and debt service costs actually increase.

For context, we need to look at Japan’s tax revenues, borrowing and spending over the past decade. Only then can we see why Japan is a failing state: tax revenues are as stagnant as the real economy, while spending rises as Japan’s population of retirees soars.

In the decade since 2005, tax revenues actually declined slightly while annual borrowing increased by 8 trillion yen and expenditures rose by 10 TY. Virtually all of this increased spending comes from higher Social Security costs, which rose from 20 TY to 30 TY as the demographics of Japan’s aging population inexorably pushes retirement and healthcare costs up.

You see what’s happening: tax revenues are unchanged while interest and Social Security costs keep rising. A relatively modest increase in the consumption tax triggered a major meltdown in Japan’s gross domestic product, and the planned increases in this tax from 8% to 10% are attracting criticism: Next consumption tax raise painting Abe into a corner.

If it turns out that the tax hike generates little additional revenue, Japan’s path to failed-state will be set: a stagnant economy generating stagnant tax revenues, a central state that funds half its spending with new debt, and rapidly rising social welfare and debt service costs that are already consuming all the tax revenue and then some.

Can Japan continue down this path indefinitely? Many believe the answer is “yes,” but we cannot base the next 10 years on the previous 25 years. Since Japan’s financial bubble popped in 1989, the Internet and China greatly boosted global growth, enabling Japan to live off its well-oiled export and debt machinery.

But the engines of global growth have reached diminishing returns, and a prolonged global recession looms just ahead. Playing games such as devaluing Japan’s currency and monetizing Japan’s ballooning debts with freshly issued money does nothing to fix the rot beneath the bright neon lights of superficial wealth.

Once the global economy rolls over into contraction, the tide will recede and Japan’s fiscal and monetary bankruptcy will become painfully apparent.

How to forge a career in the New Economy:
Get a Job, Build a Real Career and Defy a Bewildering Economy,
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Silver lining in precious metals' rout catches out coin mints

Posted: 05 Nov 2014 05:57 AM PST

Silver coins and bars have reached their cheapest level relative to gold in more than five years.

Massacre in metals and oil

Posted: 05 Nov 2014 05:09 AM PST

Stacy Summary: Precious metals and oil continue to behave as if it’s 2008; whilst equity markets and property markets continue to soar. Either pm’s and oil are signalling a massive deflation on the horizon; or central bankers have won – they, indeed, can command markets as Apollo could command the seas. In which case, one should not fight Apollo and one should do as he commands. Hopefully, he will take care of us all should we please him.

The dollar soars - as in deflationary times? Or as Apollo commands?

The dollar soars – as in deflationary times? Or as Apollo commands?

Oil continues to tumble. Bad news for shale oil producers in America? Or will Apollo take care of them?

Oil continues to tumble. Bad news for shale oil producers in America? Or will Apollo take care of them?

By the way, many say that tumbling oil prices is the result of some sort of economic war against Russia. And maybe those analysts are right, but, as I see it, the ruble is also down against the dollar in which oil is priced, thus remaining neutral for their budget (which is all cold war financial press focuses on rather than their cost of production which is much lower than US and/or Canada):

Ruble falling along with oil price, thus keeping state revenues flat?

Ruble falling along with oil price, thus keeping state revenues flat?

Here is a piece on how this collapse in price of oil could lead to a price spike due to expensive projects in the US.

And here are the not so precious metals, now, as with oil, trading below cost of production:

Still up over four-fold since 2000; but painful for those who bought high.

Still up over four-fold since 2000; but painful for those who bought high.

Again, painful for those who bought high but record demand for coins suggests many are happy with new price.

Again, painful for those who bought high but record demand for coins suggests many are happy with new price.

While some are unhappy with low prices, just as many are happy with lower prices:

Gold prices swoon, coin sales surge as buyers seek bargains

A sharp break in gold prices to their lowest levels in more than four years has unleashed a surge in demand for coins, with buyers in Germany queueing out the door and some U.S. investors returning to the market for the first time in years.

Coin dealers and mints from North America to Europe are reporting a surge in coins and small bars that are favored by retail investors, after spot gold on Friday broke below a key technical support at $1,180 an ounce. It was the biggest buying binge since April 2013, when prices fell by $200 in two days.

Activity at Germany’s Degussa, one of the largest European gold and silver dealers, was three times the norm, said CEO Wolfgang Wrzesniok-Rossbach.

“We had to open for half an hour longer across Germany on Friday evening because there were so many people queuing up in the branches,” he said.

On Friday alone, the U.S. Mint sold 1,425,000 ounces in American Silver Eagle bullion coins, the highest one-day tally since Jan. 13 when the new 2014-dated coins first became available. It also accounted for one-quarter of sales for the entire month of October. Sales on Monday were also above average.

Someone is selling them their metals; and we’ve seen this record demand all the way down. The world’s most successful investor, Warren Buffett, always says he buys when things are cheap and everyone hates it. In the end, however, either the mere people and their physical defeats the fiat Apollo gods in the central banks or Apollo wins and convinces them to believe.

Silver Analyst Who Predicted Silver’s Crash to $15 Three Years Ago Says Massive Rally to $1,000/oz Next!

Posted: 05 Nov 2014 05:00 AM PST

Nearly 3 years ago, with silver trading near $40/oz and gold near all-time nominal highs, SD gold & silver analyst Marshall Swing shocked the PM community by warning that silver would crash to $15/oz, then rocket past $1,000/oz as fiat collapses!  Fast forward to Oct 31st, 2014, and silver has indeed crashed to a $15 handle. […]

The post Silver Analyst Who Predicted Silver’s Crash to $15 Three Years Ago Says Massive Rally to $1,000/oz Next! appeared first on Silver Doctors.

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“Global Scramble” For Silver – Coins “Hard To Get,” “Premiums Likely To Jump”

Posted: 05 Nov 2014 04:22 AM PST

"Global Scramble" For Silver – Coins "Hard To Get," "Premiums Likely To Jump"  

Silver has had a torrid time in recent months and has fallen nearly 40% since July. In less than four months, it is down from $21.40/oz to $15.45/oz today. Silver is 70% lower since reaching over $49/oz in April 2011. The selling has accelerated in recent days and silver has fallen from $17.20/oz on October 28 and is down 12% in the last week.

There is blood in the streets of the silver market with futures speculators long silver, again having their heads handed to them on a plate and incurring sharp losses. However, the silver sell off has again seen a global scramble for physical silver.


Silver in USD – Year to Date 2014 (Thomson Reuters)

In recent days, there has been a global scramble to acquire silver bullion coins and bars after the price falls according to Reuters. Maple Leaf silver coins are difficult to acquire according to bullion dealers, with the  Royal Canadian Mint on allocation from September. There is a concern that supply times will increase and premiums are likely to jump according to Reuters.

"A tumble in silver prices to four-year lows has triggered a global scramble by consumers to purchase silver coins and bars, as the spread between the price of the metal and gold reaches its widest in five years.

Retailers and distributors in Asia and the United States said they were struggling to get supplies of items such as Canadian Maple Leaf silver coins.

While demand for silver has been strong over the last few months, retailers say buying interest soared in recent days as the metal fell towards its lowest since 2010, along with gold.

Demand for silver coins and bars accounted for more than a fifth of total demand in 2013, according to a report by the Silver Institute. A sustained jump in demand should support silver prices, currently at just over $15 an ounce.

The price of silver is currently around 74 times cheaper than gold – the biggest spread since early 2009. Due to its greater affordability, silver sales tend to outstrip gold in volume terms and attract a lot more retail buyers.

The Royal Canadian mint had started allocating, an industry term meaning rationing, its popular Maple Leaf silver coins in September in response to high demand, according to a spokesman.

With the allocation of silver coins in place, the mint continues to produce and take orders for 2014 coins with no anticipated stoppage in shipments, he said.

But retailers are already finding it hard to get hold of the mint’s products as they sell out their existing stock.

Some Asian dealers said they have had to pull Maple Leaf coins from their lineup until they get the mint’s 2015 products.

In mid-April 2013, silver lost nearly a fifth of its value in two days, tracking a rout in gold, prompting a rush to snap up both the metals at a bargain price.

While the Royal Canadian Mint is rationing silver coins, it has no such system for gold.

The U.S. Mint is not allocating silver or gold at the moment. In June, the mint lifted its ration on silver American Eagle coins that had been in place since January last year as strong demand had depleted silver coin blanks.

The U.S. Mint sold 1.4 million ounces of silver American Eagle coins on Friday alone, the highest daily sales since Jan. 13 when the new 2014-dated coins first became available. October was the fourth highest month of silver eagle sales ever.

The Perth Mint, which runs the only gold refinery in No. 2 gold producer Australia, said it was not facing any supply issues as it usually launches a new line of products from September, unlike the other mints.

“We built up a lot of stock for those releases. So we have quite a few months worth of stock,” said Neil Vance, wholesale manager at the Perth Mint.

“If this had been a different time of the year, it would have been a different story.”

Reuters

Silver in USD – 5 Years (Thomson Reuters)

We have seen a significant uptake in demand for silver this week both for maples and philharmonics and for larger 1,000 oz bars. Silver maples are being snapped up by U.S. and Asian buyers as the premiums are lower than that for silver eagles. Silver philharmonics continue to be popular in Europe as they too are less expensive than the eagles and have a similar premium to maples.

Silver coin demand is for both delivery and storage, while bar demand is primarily for bullion storage in Zurich and Singapore. The demand is broad based and coming from both retail investors and indeed high net worth.

Silver is down 70% in less than four years as stock and markets have surged to record highs. The gold: silver ratio has surged to a peak of 75.4 this morning, its highest since early 2009, as silver underperforms falling gold.

Silver is great value today versus stocks and bonds and indeed versus gold. The smart money accumulates on dips and buys low, to sell high.

Get Breaking News and Updates on the Gold Market Here

MARKET UPDATE
Today's AM fix was USD 1,169.25, EUR 933.91 and GBP 730.55 per ounce.
Yesterday's AM fix was USD 1,170.75, EUR 936.90 and GBP 731.90 per ounce.

Gold rose $0.80 or 0.7% to $1,167.60 per ounce yesterday and silver fell $0.13 or 0.8% at $16.03 per ounce. Gold in GBP is now marginally lower year to date after also taking a beating in recent days.

Gold in GBP – Year to Date 2014 (Thomson Reuters)

In London, gold reached $1,143.76, the lowest price since April 2010. In New York, Comex gold for December delivery slipped 1.9% to $1,145.10.  The gold futures market saw huge dumping of gold in illiquid Asian markets overnight, according to Zero Hedge:

"For the 5th day in a row, “someone” has decided that 0030ET would be an appropriate time (assuming the ‘seller’ is an investor who prefers best execution rather than the standard non-economically-rational share-repurchaser in America) to be dumping large amounts of precious metals positions via the futures market. Tonight, with over 13,000 contracts being flushed through Gold – amounting to over $1.5 billion notional, gold prices tumbled $20 to $1151 (its lowest level since April 2010). Silver is well through $16 and back at Feb 2010 lows."

Zero Hedge

ETF holdings dropped 3.7 metric tons to 1,643.4 tons yesterday, the lowest since August 2009, Bloomberg data showed. The value of holdings has fell to about $60.6 billion from $78.5 billion in March. SPDR Gold Trust, the biggest ETP, are at the lowest since September 2008, which is when Lehman Brothers Holdings Inc. collapsed.

ETF investors may be selling due to poor sentiment but we are continuing to see a move towards owning physical bars in an allocated format outside the banking system.
Silver slid 4.6% to $15.2878 an ounce in London, continuing declines into a sixth day. It reached $15.2051, the lowest level since February 2010. Platinum was off 2.2% to $1,198.63 an ounce, and hit a four-week low. Palladium fell 2.9% to $763.50 an ounce.

Silver's drastic dip has started a global scramble by store of wealth buyers to acquire silver coins and bars, as the spread between the price of silver and gold reaches its widest in five years (see above).
Distributors and retailers in Asia and the U.S. noted they were struggling to get supplies of coins such as Canadian Maple Leaf silver coins. We reported yesterday very high gold and silver demand in Europe and especially Germany as brokers witnessed a 'run' on silver coins.

While demand for silver has been strong over the last few months, buying interest soared in the past few days as the metal slid to its lowest since 2010, along with gold (see above).

“Global Scramble” For Silver - Coins “Hard To Get,” “Premiums Likely To Jump”

Posted: 05 Nov 2014 04:03 AM PST

gold.ie

Gold price fall continues to be brutal

Posted: 05 Nov 2014 03:42 AM PST

Julian Phillips says it was not dollar strength that dropped the gold price overnight, but the U.S. elections.

Gold funds down by 80pc: should you invest?

Posted: 05 Nov 2014 03:07 AM PST

The price of gold bullion has fallen by 35pc in three years but every gold fund has more than halved, with some losing even more.




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Capitulation day for gold and silver as huge price manipulation ends or is gold going to $1,000 an ounce?

Posted: 05 Nov 2014 02:43 AM PST

With gold prices off almost two per cent and silver down closer to five per cent today we could be seeing a capitulation phase to the recent sell-off. Or will the gold price drop to $1,000 an ounce as the bears predict?

Perhaps it is more a matter of whether the unbelievably large price manipulation of the past five days is finished, with $1.5 billion dumps of gold futures at 0030ET every day (click here).

Coordinated intervention

This would appear to be part of the same central bank collusion that gave us the sychronized ending of QE3 by the Fed and starting of Japanese QE9 last week. Pulling down the gold price as a smokescreen for inflationary action by the central banks is par for the course; 0030ET is the Japanese lunchbreak in Tokyo.

Below Barry Dawes, head of resources at Paradigm Securities, explains why gold prices could tumble to $1,000 an ounce, although he does not sound very convinced by his own argument…


Video link click here!

The gold price is the currency of fear

Posted: 05 Nov 2014 02:11 AM PST

The latest decline is saddling higher-cost producers with losses and pushing others to the brink of slipping into the red.

Centamin cuts gold output forecast at Egypt mine

Posted: 05 Nov 2014 01:46 AM PST

Cites lower grades of the underground ore being mined in the current quarter.

Gold, diamonds fuelling CAR conflict - U.N. panel

Posted: 05 Nov 2014 01:43 AM PST

A U.N. panel of experts says gold and diamond sales are being used to finance conflict in the Central African Republic.

Gold, Economic Theory and Reality: A Conversation with Alan Greenspan

Posted: 05 Nov 2014 12:00 AM PST

When Dr. Alan Greenspan became chairman of the Federal Reserve, he moved from the world of rhetorical economics to the world of action. His most recent memoir, "The Map and the Territory 2.0: Risk,...

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Because Nothing Says “Best Execution” Like Dumping $1.5 Billion in Gold Futures at 00:30 EST

Posted: 04 Nov 2014 10:13 PM PST

"The HFT boyz and their algorithms have been hard at work"

¤ Yesterday In Gold & Silver

The gold price didn't do much of anything---and the smallish rally that began shortly after the London open, wasn't allowed to get far---and it didn't do much after that.

The gold price traded in a nine dollar range on Tuesday---and the highs and lows aren't worth looking up.

Gold finished the Tuesday trading session at $1,168.20 spot, up $2.90 on the day.  Net volume was decent at around 128,000 contracts.

Of course silver was under selling pressure right from the 6 p.m. open in New York on Monday evening---and was down two bits by 11 a.m. Hong Kong time.  It traded flat from there until about 9:30 a.m. GMT in London, before rallying a bit, but wasn't allowed to get above its Monday closing price.  From there it chopped sideways to lower for the remainder of the Tuesday session.

The high and low ticks are barely worth looking up---$16.165 and $15.905 in the December contract.

Silver closed yesterday at $16.03 spot, down 11.5 cents on the day.  Net volume was 31,500 contracts.

Platinum attempted to rally at the open on Monday evening, but ran into the HFT boyz within 30 minutes---and was down over fifteen bucks by 11 a.m. Hong Kong time.  It rallied a hair after that, but ran into more selling pressure just before lunch in New York---and at one point was down $21 dollars, but was closed down 16 bucks.

Palladium got sold down five bucks in early trading, but was back to unchanged by noon in Zurich.  But that was it for the day, as the HFT boyz were relentless after that, snuffing out every rally attempt---and guiding the price lower.  'Da boyz' closed palladium down 19 dollars on the day.  It should be obvious from the chart that $800 was the 'do not cross' line for this metal.

The dollar index closed late on Monday afternoon at 87.29---and traded lower for the entire Tuesday session---and a rescue attempt was made when it fell below the 87.00 mark.  The index closed at 86.995.

The gold stocks opened down---before rallying a bit into the London close, which was 11 a.m. EST in New York.  After that it was all down hill---and the HUI finished the Tuesday session down 3.91%, barely off its low tick.

The silver stocks got crushed, as Nick Laird's Intraday Silver Sentiment Index closed down a whopping 5.53%.

Although it's convenient to blame darkling forces, I would think that a large mutual fund or two had to liquidate positions for redemption reasons whether they wanted to or not, as the shares were brutalized far worse than the price action would indicate possible.  We've certainly seen a lot of this in the last 30 days.

But the question still remains on down days like this---who were the buyers?

The CME Daily Delivery Report for Day 4 of the November delivery month showed that 3 gold and 8 silver contracts were posted for delivery within the Comex-approved depositories on Thursday.

The CME Preliminary Report for the Tuesday trading session showed that gold open interest for November dropped 10 contracts to 55 contracts---and silver's November o.i. declined by 8 contracts down to 125 contracts.  All of this minus the contracts in the paragraph above for delivery on Thursday.

There were withdrawals from both GLD and SLV yesterday.  Authorized participants withdrew 76,592 troy ounces of gold---and a chunky 2,073,283 troy ounces of silver.

The good folks over at Switzerland's Zürcher Kantonalbank updated their website with their gold and silver ETF data as of the close of trading on Friday, October 31.  Their gold ETF declined by another 22,500 troy ounces---and their silver ETF shed another 44,260 troy ounces.

There was no sales report from the U.S. Mint yesterday.

It was a big in/out day for both gold and silver at the Comex-approved depositories on Monday.  In gold, 23,469 troy ounces were reported received---and a whopping 345,120 troy ounces were shipped out.  The link to that activity is here---and it's worth a quick peek.

In silver, there was 600,508 troy ounces received---and 910,229 troy ounces shipped out the door on Monday.  And, like Friday, all the activity was concentrated in the CNT Depository and Canada's Scotiabank.  The link to that action is here.

I don't have all that many stories today, so that makes your final edit much easier.

¤ Critical Reads

Singer's Elliott Says U.S. Growth Optimism Unwarranted as Data 'Cooked'

Paul Singer’s Elliott Management Corp. said optimism on U.S. growth is misguided as economic data understate inflation and overstate growth, and central bank policies of the past six years aren’t sustainable.

The market turmoil in the first half of October may be a “coming attractions” for the next real crash that could turn into a “deep financial crisis” if investors lose confidence in the effectiveness of monetary stimulus, Elliott wrote in a third-quarter letter to investors, a copy of which was obtained by Bloomberg News.

“Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth,” New York-based Elliott wrote. “When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”

Well, dear reader, that last paragraph pretty much sums it all up.  This Bloomberg article was posted on their Internet site at 12:18 p.m. Denver time yesterday---and it's the first offering of many from Roy Stephens.  It's certainly worth reading.

Why There is no Escape Velocity: Household Spending is Chained to Income Absent a Credit Bubble

It should not have come as a surprise to convention that the PCE component of GDP was not going to be leading economic gains. The monthly PCE series has been “better” in later 2014 than the winter, but that is far too narrow a context in which to draw any conclusions. No matter how you measure, American consumers continue to be unwilling or, more likely, unable to spend at levels consistent with policy reflections (clogged transmissions and all that).

There has been an curious stability in the spending rate that belies much of the deeper problems that are revealed quite easily by historical comparison.

Even with July’s new benchmark, Real PCE continues to be stuck at levels that were consistent with the dot-com recession (and elongated cycle into housing bubble “recovery”). I think that reflection is quite revealing in the lengths at which the consumer remained disengaged and that it was only the last phase of the housing bubble, ultimate mania, that finally “pushed” consumers to increase spending. But even then consumers with the housing bubble as a “tailwind” were only spending at rates previously considered unsatisfactory.

This essay, with lots of good charts, appeared on David Stockman's website on Tuesday---and it's the second offering in a row from Roy Stephens.

Percentage of First-Time Home Buyers Drops to Lowest Since 1987

The portion of home purchasers who are first time buyers dropped to 33 percent for the 12 months through June, the lowest since 1987, and down from 38 percent a year earlier, according to a survey by the National Association of Realtors.

The average since 1981 is 40 percent.

"Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce," Lawrence Yun, the NAR's chief economist, said in a statement.

Average hourly wages for all workers rose only 2 percent in the 12 months through September.

This news item appeared on the newsmax.com website at 9:35 a.m. EST on Tuesday morning---and I thank West Virginia reader Elliot Simon for sharing it with us.

GM Channel Stuffing Surges Most Since November 2013

Moments ago, GM was pleased to report that its dealers delivered 226,819 vehicles in the United States in October leading to "the company’s best October sales in seven years." GM added that Chevrolet sales were up year over year on the strength of the Silverado, Cruze, Traverse and Equinox, and "Buick had its best October in more than a decade." Alas, Cadillac did not, October sales tumbled -8.0%, and are down -4.6% on a YTD Y/Y basis. Bottom line: total GM sales increased a tiny 0.2%, well below the 3.1% expected.

But it could have been much worse if GM had not resorted to its favorite sales "boosting" gimmick: channel stuffing. Indeed, as GM reported, in October, total units at dealer lots, rose to 792,489, or a whopping 94 days supply, up from 753, 928 (81 days) in September, and up a whopping 8.9% from the 728K in October of last year, when, again, sales were only 0.2% lower. This was the biggest one month jump in "dealer stuffed" vehicles since November of 2013.

This brief article appeared on the Zero Hedge website at 10 a.m. EST on Monday morning---and I found it in yesterday's edition of the King Report.  The embedded chart is worth the trip.

U.S. Trade Deficit Widens More Than Expected Amid Drop In Exports

Reflecting a notable pullback in the value of exports, the Commerce Department released a report on Tuesday showing that the U.S. trade deficit widened by much more than anticipated in the month of September.

The report said the U.S. trade deficit widened to $43.0 billion in September from a slightly revised $40.0 billion in August.

Economists had expected the deficit to tick up to $40.2 billion from the $40.1 billion originally reported for the previous month.

While the value of imports was nearly unchanged at $238.6 billion, the value of exports fell 1.5 percent to $195.6 billion. The drop in exports came after they reached a record high in August.

This story appeared on the rttnews.com Internet site at 9:30 a.m. EST yesterday---and it courtesy of reader Peter Berge, for which I thank him.

Unanimous No More, as Central Banks Split as Unknowns Top Knowns

About an hour after cutting interest rates in June, European Central Bank President Mario Draghi realized the assembled reporters had failed to ask one of their favored questions.

“Now let me say something I haven’t said,” Draghi interjected after answering four rounds of other queries. “The first question you ask in these press conferences: ‘Was it unanimous?’ Now this time it was unanimous.”

After Governing Council push back on previous non-standard measures, Draghi clearly felt the need to declare agreement on introducing a negative deposit rate from the rooftops even without being asked. Of the major central banks, his 24-member council is likely the most unwieldy and politically-charged, with frequent discord.

This article showed up on the Bloomberg website at 5:57 a.m. MST yesterday---and it's the second offering of the day from Elliot Simon.

Monetary Fallacy? Deep Divisions Emerge over ECB Quantitative Easing Plans

At first glance, there's little evidence of the sensitive deals being hammered out in the Market Operations department of Germany's central bank, the Bundesbank. The open-plan office on the fifth floor of its headquarters building, where about a dozen employees are staring at their computer screens, is reminiscent of the simple set for the TV series "The Office". There are white file cabinets and desks with wooden edges, there is a poster on the wall of football team Bayern Munich, and some prankster has attached a pink rubber pig to the ceiling by its feet.

The only hint that these employees are sometimes moving billions of euros with the click of a mouse is the security door that restricts access to the room. They trade in foreign currencies and bonds, an activity they used to perform primarily for the German government or public pension funds. Now they also often do it for the European Central Bank (ECB) and its so-called "unconventional measures."

Those measures seem to be coming on an almost monthly basis these days. First, there were the ultra low-interest rates, followed by new four-year loans for banks and the ECB's buying program for bonds and asset backed securities -- measures that are intended to make it easier for banks to lend money. As one Bundesbank trader puts it, they now have "a lot more to do."

Ironically, his boss, Bundesbank President Jens Weidmann, is opposed to most of these costly programs. They're the reason he and ECB President Mario Draghi are now completely at odds. Even with the latest approved measures not even implemented in full yet, experts at the ECB headquarters a few kilometers away are already devising the next monetary policy experiment: a large-scale bond buying program known among central bankers as quantitative easing.

This very interesting story showed up on the German website spiegel.de at 1:38 p.m. Europe time on Tuesday---and it's worth reading.  It's another contribution from Roy Stephens.

ECB takes control as E.U. bank supervisor

The European Central Bank (ECB) formally assumes its new role as the chief supervisor of EU banks on Tuesday (4 November), a major milestone in the creation of the bloc's banking union.

The making of the banking union, whose legal framework was agreed by lawmakers inside two years, is the biggest shift of power over economic policy making since the introduction of the euro.

The chair of the Single Supervisory Mechanism (SSM), Daniele Nouy, who was speaking at a hearing with the European Parliament's economic affairs committee on Monday, said the main task of the SSM would be to restore public confidence in the banking sector.

The SSM is the ECB unit tasked with carrying out its new oversight responsibilities.

This news item appeared on the euobserver.com Internet site at 9:27 a.m. Europe time on Tuesday---and it's courtesy of Roy Stephens.

NATO not to recognize elections in Donetsk, Luhansk republics

NATO members will not recognize elections in the self-proclaimed Donetsk and Luhansk People’s republics (DPR and LPR), the alliance’s Secretary General Jens Stoltenberg said Tuesday.

Stoltenberg claimed the elections of the heads of state and lawmakers held November 2 in the DPR and LPR are illegitimate.

Russia’s Foreign Ministry earlier said it respects the “will expression of the residents of (Ukraine’s) southeast”.

According to the U.N., more than 4,000 people have been killed and hundreds of thousands have fled Ukraine’s southeast as a result of clashes between Ukrainian troops and local militias in the Donetsk and Lugansk regions during Kiev’s military operation, conducted since mid-April, to regain control over the breakaway territories, which call themselves the Donetsk and Lugansk People’s republics.

This story, filed from Brussels, showed up on the itar-tass.com Internet site yesterday sometime---and I thank Roy Stephens for sending it.

Hungarian law gives green light to South Stream in defiance of E.U.

The Hungarian parliament has approved a law on Monday which allows building the South Stream gas pipeline without approval of the European Union. The European Commission has already demanded an explanation from Hungarian authorities.

The European Commission’s spokesperson said at a press briefing in Brussels on Tuesday that the EC was in contact with Hungarian authorities to get an explanation for their decision.

The law was passed with 132 votes in favor and 35 votes against, allowing a company to construct a gas pipeline even if it doesn’t have the licenses needed to operate it. According to the new law the only requirement for a company which wants to take part in construction is approval from the Hungarian Energy Office.

“This is meant to give a boost to South Stream and is to show Russia that Hungary is taking the project seriously,” Attila Holoda, an expert on energy regulation, said as cited by Bloomberg.

This article showed up on the Russia Today website at 3:03 p.m. Moscow time yesterday---and it's also courtesy of Roy Stephens.

Ukraine's Naftogaz pays Gazprom $1.45 bn in first tranche for gas debt

Naftogaz has transferred $1.45 billion in the first tranche of gas debt repayment to Russia's Gazprom, said the press service of the Ukra

Calm before another storm in global financial markets?

Posted: 04 Nov 2014 10:05 PM PST

The US stock market increasingly looks like the best house on a worsening global block, but it’s far from a no-brainer, RiskReversal.com’s Dan Nathan said Monday. ‘But I think it’s a sucker trade, to be very frank with you…

‘When you think about the dollar and the strength that we’ve had and you look at the course ECB and the BOJ. They are debasing their currencies. We’ve gone through this for six years. I think a strong dollar is going to be a massive headwind for large US multinationals.’

Heading lower

New intraday records were set in the Dow Jones Industrial Average, as well as the S&P 500, before stocks closed slightly lower. The slide in stocks comes after Japan announced economic stimulus measures that sent the market to fresh highs all-time on Friday…


Video link click here!

Exploding the Myth of Unbacked Silver Certificates and Phony Silver Storage

Posted: 04 Nov 2014 10:00 PM PST

Gold University

Bank of Japan's Kuroda Talks Stimulus

Posted: 04 Nov 2014 09:52 PM PST

There are two things working against gold this evening. The first is the election results showing a wave election in favor of the Republicans which can be interpreted as a repudiation of Obama and his policies. Equities seem to like the results and are moving higher. In the current environment, rising stock markets work against gold.

The second item is the set of comments coming from Bank of Japan governor Kuroda. He is essentially confirming the view that deflation is the major concern of his Central Bank. Along that line, he has noted that "falling commodity prices are positive for the Japanese economy in the long run". Such comments undercut any reason to own gold in the mind of most investors.

Gold has responded accordingly by plunging below last week's low.


In trying to find support levels for the metal, I am forced to move to the long term monthly chart. Please note that gold has fallen to the first Fibonacci retracement level noted by the shaded ellipse. That comes in near $1155. Failure there and gold is set for a test, first of psychological round number support at $1100 but more critically, technical chart support near $1088.

Gold short term cycle and support and resistance line update

Posted: 04 Nov 2014 07:20 PM PST

Commodity Trader

Harvey Organ: Gold & Silver Mutiny at the ECB!

Posted: 04 Nov 2014 07:15 PM PST

Today, we had a huge withdrawal of gold Inventory at the GLD of 2.39 tonnes/ inventory rests tonight at  738.82 tonnes. I am deeply concerned that most of the gold that enters as a deposit at the comex are of the kilobar variety i.e. exact multiples of 32.15 oz! Let's head immediately to see the […]

The post Harvey Organ: Gold & Silver Mutiny at the ECB! appeared first on Silver Doctors.

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  1. Harvey Organ’s Weekend Update: 4.5 Tons of Gold Removed from GLD, Headed to Shanghai!
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  3. Harvey Organ’s Gold & Silver Update: BACKWARDATION!!

Jim Willie: Systemic Breakdown & Economic Collapse GUARANTEED!

Posted: 04 Nov 2014 07:00 PM PST

In this stunning and MUST WATCH interview with Finance & Liberty’s Elijah Johnson, Hat Trick Letter Editor Jim Willie releases a shocking and emphatic prediction as he GUARANTEES a systemic breakdown and complete economic collapse! Willie addresses the latest take-down, whether the Fed has really ended QE, and whether China is now controlling the strings […]

The post Jim Willie: Systemic Breakdown & Economic Collapse GUARANTEED! appeared first on Silver Doctors.

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  3. Jim Willie: The Petro-Dollar Sunset

GLD Holdings Continue to Fall

Posted: 04 Nov 2014 02:49 PM PST

Gold continues to rapidly lose friends over here in the West as the steady fall in holdings indicates the growing disillusionment of those who bought the metal thinking it would respond upward during this period of Central Bank actions to provide low interest rates and more liquidity.



One gets the distinct sense from watching the price action that even some of the more resolute bulls are now reading the handwriting on the wall and getting out as the bear market in gold becomes more deeply entrenched.

Look at the updated chart of the holdings of GLD, the big gold ETF. They fell another 2.39 tons since Friday of last week to sink to 738.82 tons. That is the lowest level of reported holdings since the last week of September in 2008. In other words, a fresh 6+ year low!

To further add insult to injury, both the HUI and the GDXJ, the latter which is especially pulling a disappearing act, surrendered their feeble gains from yesterday closing down near session lows.

As a matter of fact, one must go all the way back to October 27, 2008 to find a LOWER CLOSING PRICE in the HUI. Just for the record, the closing price of the HUI on that date was 151.57. We are talking about 6 years here as well. Prior to that, we are talking about going as far back as July 2003 to find a lower closing price. In other words, we are a mere 3 points away from seeing an ELEVEN YEAR LOW.

Of course we have the gold perma bulls talking the usual "capitulation" but such a "strategy" is the last resort of those who have lost so much money in an asset class that they have nothing else to lose at that point. Capitulation does one no good whatsoever if the stock they are invested in disappears from sight and the company ceases to exist as a viable entity. I expect we shall be seeing this occur.

There is no lesson that bites as harshly and stings so fiercely as a financial one. Listening to others without listening to the voice of the market itself is courting financial ruin. No man alive knows the future and those who speak with a feigned authority as if they do, prey on the unsuspecting and the naïve.

 The vast majority of people who have set aside some money with which to invest have worked very hard to secure that. It represents their life, their dreams, their hopes for their children or grandchildren or their security in their old age. To lose it, to watch it go up in smoke is a bitter, bitter thing but to realize that they have blindly followed someone else to their own ruin makes it an even more bitter pill to swallow.

It would be well to keep in mind an admonition from the Scriptures against those who mislead or deceive others.

"Hear this, you who trample the needy, to do away with the humble of the land, saying, "When will the new moon be over, so that we may sell grain, and the Sabbath, that we may open the wheat markets, to make the bushel smaller and the shekel bigger, and to cheat with dishonest scales, so as to buy the helpless for money and the needy for a pair of sandals, and that we may sell the refuse of the wheat."
...
The Lord has sworn by the PRIDE of Jacob, "Indeed, I will never forget any of their deeds... Then I shall turn your festivals into mourning and all your songs into lamentation; and I will bring sackcloth on everyone's loins and baldness upon every head, and I will make it like a time of mourning for an only son, and the end of it will be like a bitter day".   Amos 8: (4-10)

The LAST Move Before Checkmate…

Posted: 04 Nov 2014 02:39 PM PST

When the Shanghai exchange runs dry out of silver, they will use the event as a legitimate checkmate excuse to revalue both silver and gold.  This ties in with Dr. Jim Willies “GRAND GOLD SHOCK EVENT” prediction.  China’s physical gold holdings will go up in value all while they rake in their paper shorts on the other […]

The post The LAST Move Before Checkmate… appeared first on Silver Doctors.

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  3. 41 Metric Tons of Silver Withdrawn From The Shanghai Futures Exchange

Is The Swiss Gold Referendum Impacting The Price Of Gold

Posted: 04 Nov 2014 01:50 PM PST

The "Save our Swiss Gold" referendum is currently making headlines around the world.  For those who haven't followed this story, here's a short recap [you may jump to the charts below if you are already up to date]: the Swiss will vote on the 30th of November to force the Swiss national Bank (SNB) 1. into increasing Gold reserves to 20% of its balance sheet, 2. to forbid it from selling any of its Gold in the future and 3. to force it to hold all these Gold reserves within the country.  What the referendum is really after is to curb the SNB's rapid expansion of foreign currency reserves (now totalling almost U$500bn, or more than 80% of its balance sheet or circa 75% of the Swiss economy's national output).  In a world of central bank balance sheet expansion and concerns over "fiat" money, this goal may seem a reasonable one.  Now consider the historical context. These reserves started to accumulate in the wake of the 2008 financial crisis and during the subsequent Eurozone debt crisis as the SNB attempted to mitigate the Swiss Franc's "Save haven" status and its rapid appreciation vs the Euro by buying foreign denominated securities.  Indeed, from 2007 to 2011 EUR/CHF had dropped almost 40% from 1.60 to near parity pushing Switzerland into recession and deflation (the Eurozone is Switzerland's largest trade partner representing more than 45% of its exports and 65% of its imports).  In August 2011, the SNB introduced a 1.20 floor level on EUR/CHF committing to defend it and triggering a further acceleration of foreign denominated asset purchases.  If this intervention cannot go on for ever, it is widely accredited for having put Switzerland back on the growth path.

Now, the latest polls are tight with 44% in favour of the referendum, 39% against, with 17% still undecided.  The Swiss National Bank is voicing aggressively against it (a rare event in Swiss politics) and to be fair, we would agree with it, as passing this referendum will significantly reduce its ability to defend the floor with dire economic consequences if it were to break.  Analysts do believe the bill has limited chances of making it through as most major parties are against it and historically, the undecided do end up voting against what they don't understand.

Accept our apologies for this long introduction, but isn't it a dream come true for many gold bugs out there?  In a recent study, a large US investment bank estimates that in order to comply with the referendum (the initial 20%), the SNB would need to buy circa 1'500t of gold, spread over 5 years (300 t/year) and that "while gold liquidity should be efficient to accommodate these purchases, this dynamic would reinforce a firm floor at $1'200/oz, with price potentially rallying to $1'350/oz in the intermediate aftermath of a possible referendum".  Although low probability, anticipation of the referendum should at least have some impact on the market discounting machine.  Let's look at the charts (they are quite unilateral for now).

gold spot 31 october 2014 price

This Investor's View of Gold (a Weekly, Daily, Hourly chart combination) is labelled a "Potential Continuation downtrend".  Our Weekly charts, which have been negative for almost 2 years, still show some downside potential in price and time with our possible target range between $1'175 and $961 (or an $1068 mid point possibly towards late this year, 1st half next year).  On our Daily charts, the lower range of our targets seem to lead towards 1'130 over the next few weeks (the $1'160 mid point has just been achieved and the trend is still heading down).  On our Hourly chart, impulsive targets are fulfilled, but our time targets are still outstanding (red timing sphere still outside of the chart) and our risk index is not yet oversold.  No sign of any Swiss Gold referendum anticipation yet.

Now let's turn to the Trader's View of Gold, a 60min, 15min and 4min combination:

gold spot intraday 31 october 2014 price

It is also in a "Potential continuation downtrend", although targets have been reached on all three frequencies.  This may point to some exhaustion in the recent acceleration.  What is more interesting in our view is what triggered the latest acceleration: the more hawkish than expected FOMC Statement on Wednesday 29th of October.  Not much of a Swiss referendum influence there.  The breakdown was triggered by the expectation of timely interest rate hikes next year (and the related Dollar strength), or the cost of holding gold in an improving economy.

Finally, we will look at an Investor's View showing the relative chart of the HUI Gold Bugs Index to the GLD –SPDR Gold Trust (HUI/GLD or Gold Mines vs Gold):

HUI 31 october 2014 price

Over the last ten years, this relative chart has often accelerated up in the early stages of any bullish Gold move: mid 2005 to early 2006, end 2008 to end 2009, mid 2012 and to some extend earlier this year (naturally mines are leveraged to the price of Gold).  At present, it is still showing some downside potential on all three frequencies.  It is interesting to note that Gold's recent bounce off $1'200 earlier this month, did not produce much of a reaction.  We will however be watching this pair closely over the following months for any earlier indications of a sustainable reversal (linear fall for now on our Daily charts).

So is the Swiss referendum having any influence?  From our selection of charts, the dynamics seem to be elsewhere.  Gold is still sought as a protection and with the US economy on the road to normalization (growth and expected interest rates hikes) and the S&P flirting with new highs, the cost of holding it is increasing everyday.  Now, Bear markets don't last forever and this one does recall the one on Gold between end 1974 and late 1976 (a drop from circa $195 to $103 before resuming its secular uptrend).  Our Weekly charts on Gold, although still in a descent, are getting closer to their targets in price and time.  As for the referendum, the recent drop in the price of Gold may help the SNB convince voters that holding 20% of its reserves in non-saleable Gold isn't that good an idea after all.

One last chart for the road, an Investor's view (Weekly, daily, Hourly) on Brent vs Gold:

brent vs gold spot 31 october 2014 price

The relationship came close to breaking into downside Impulsive territory on our Weekly charts earlier this month (only corrective down for now), the Daily chart did reach their downside targets and our Hourly charts are starting their correction up.  This chart is extraordinarily similar to the one we presented last week (SPY vs TLT) and in a way, may reflect the same thing, an uptake in inflation expectations and sustained growth in the economy.  Let's hope this relation holds and reinitiates its Daily and Weekly uptrends.

For more information on our methodology click here and then visit 'About Us/Press release' and 'User Guide' sections of our website.  Clicking that link also qualifies you for a 7 day demo and a 10% discount on our services if you choose to subscribe.

Have a great weekend,

J-F Owczarczak (@fingraphs)

National Economic Suicide: The U.S. Trade Deficit With China Just Hit A New Record High

Posted: 04 Nov 2014 01:09 PM PST

Economics - Public DomainDid you know that we buy nearly five times as much stuff from the Chinese as they buy from us?  According to government numbers that were just released, we imported 44.9 billion dollars worth of stuff from China in September but we only exported 9.3 billion dollars worth of stuff to them.  And this is not happening because our economy is so much larger than China's.  In fact, the IMF says that China now has the largest economy on the entire planet on a purchasing power basis.  No, the truth is that this is happening because our economy is broken.  Every month, we consume far more wealth than we produce.  Because the outflow of money is far greater than the inflow, we have to go to major exporting nations and beg them to lend our dollars back to us so that we can pay our bills.  Meanwhile, the quality of the jobs in this country continues to go down and our formerly great manufacturing cities are rotting and decaying.  We are committing national economic suicide, and most Americans don't seem to care.

Barack Obama is constantly hyping a "manufacturing resurgence" in America, but the numbers don't lie.  In September, our manufactured goods trade deficit with the rest of the world soared to a new all-time record high of 69.16 billion dollars.  For the year, we are nearly 12 percent ahead of last year's record pace.

When we buy far more things than we sell, we get poorer as a nation.

How do you think that we ever got into a position of owing China more than a trillion dollars?

We just kept buying far more from them than they bought from us, and their money just kept piling up.  Now it has gotten to the point where our politicians literally beg them to lend our money back to us.  They are the head and we are the tail.

And we did this to ourselves.

Once upon a time, the United States was the greatest manufacturing powerhouse that the world had ever seen.  But now China manufactures more stuff than us and China also accounts for more total global trade (imports plus exports) than us.

This should never have happened.  Several decades ago, the Chinese economy was a complete joke.  But decades of incredibly foolish decisions by our politicians have resulted in the loss of tens of thousands of manufacturing facilities, millions of good paying jobs and the destruction of vast stretches of our economic infrastructure.

During the same time frame, gleaming new manufacturing facilities have gone up all over China.

China is literally wiping the floor with us on the global economic stage and most Americans don't even understand what is happening.  Here is more on the trade deficit numbers that were just released from the RealityChek Blog...

>The China goods deficit of $35.56 billion blew past the old mark of $30.86 billion, set in July, by 15.23 percent. The new deficit also represented a 17.77 percent increase over the August level of $30.20 billion.

>U.S. goods exports to the still strongly growing Chinese economy fell on month in September from $9.63 billion to $9.33 billion (3.12 percent). U.S. merchandise imports from China jumped by 12.70 percent over August levels, from $39.83 billion to $44.89 billion – itself an all-time high.

>The U.S. goods deficit with China this year is now so far running 5.62 percent ahead of 2014's record pace.

>The longstanding U.S. manufacturing trade shortfall shot up from $59.10 billion in August to $69.16 billion in September. This 17.02 percent jump resulted in a beat of the old record of $67.33 billion, also set in July, by 2.72 percent.

And it isn't just cheap plastic trinkets that China is selling to us.

In fact, their number one export to us is computer equipment.

Meanwhile, one of our main exports to them is "scrap and trash".

For much more on how China is absolutely dominating us, please see my previous article entitled "Not Just The Largest Economy – Here Are 26 Other Ways China Has Surpassed America".

Sadly, there are a couple of factors that will probably make our trade deficit with the rest of the world even worse in the months ahead.

Number one, the currency war that I wrote about earlier this week will probably push the U.S. dollar even higher against the yen and the euro.

You might think that a rising dollar sounds good, but the truth is that it will make our exports less competitive in the global marketplace.

Nations such as Japan devalue their currencies so that they can sell more stuff to us.  But that hurts our own domestic industries.  And when our own domestic industries suffer, that means less jobs for American workers.

Secondly, the collapse in the price of oil could have very serious implications for the shale oil industry.

In recent years, the shale oil revolution has caused local economic booms in states such as Texas and North Dakota.  But shale oil tends to be quite expensive to extract.  As I write this, the price of U.S. oil has fallen to about 77 dollars a barrel.  If it stays at that level or keeps going down, shale oil production in the United States will slow down dramatically.

In other words, a lot of these shale oil "boom towns" could go "bust" very rapidly.

If that happens, the amount of oil that we import will rise substantially and that will add to our overall trade deficit.

But of course the biggest factor fueling our trade deficit is that the vast majority of Americans simply do not care that we are committing national economic suicide.

When we buy products made in America, we support American businesses and American workers.

When we buy products made overseas, we hurt American businesses, we kill American jobs and we make ourselves poorer as a nation.

Of course there is nothing wrong with buying a foreign-made product once in a while.  But this holiday season, most people will fill their shopping carts to the brim with foreign-made goods without even thinking twice about it.

The next time that you go into a huge retail establishment such as Wal-Mart, start picking up products and look to see where they were made.

I think that you will be shocked at how few of them are actually made inside the United States.

When are Americans going to get sick and tired of making China wealthier at our expense?

We are willing participants in the destruction of the U.S. economy, and yet only a small minority of people seem to care.

What is it going to take for people to finally wake up?

Gold Manipulation - Is It Treason?

Posted: 04 Nov 2014 11:52 AM PST

David Jensen

Who really runs the United States? The answer might surprise you.

Posted: 04 Nov 2014 09:03 AM PST

From Bill Bonner, Chairman, Bonner & Partners: 

An old friend responds to our recent comments about war:

I can tell you that I fully agree with your points about the war. It was particularly interesting to me to read your thoughts, as I was born and lived in Leningrad, where everyone remembered the blockade during 1941-1944. 

When I was a teenager, I went to the famous Piskaryovskoye Memorial Cemetery, where, in a small museum, the Savicheva diary [the diary of a Russian girl who endured the Siege of Leningrad] is displayed.

Have you been there too? I still remember reading it, like it was yesterday. Very emotional stuff, indeed. Now, we are having over 3,000 dead in Ukraine. What a pity! And what for?

Another reader (a German immigrant to Canada) adds:

My dad was near Leningrad, and he was very fortunate that he was wounded. That was the only way he was able to escape the carnage. Since at that time wounded soldiers were sent back by airplane to the nearest hospital.

He survived but did not return to our hometown of Berlin until the end of 1946. My mother and I assumed he was dead. The stories my dad told me later on did not make pleasant reading.

I was also fortunate that I was not hurt during the war years in Berlin. Although there were many times my mother and I had to walk over dead or dying people to escape shelters that were bombed.

 War Is Hell

What we’ve been reaching for in these last few entries is a way of understanding why governments do what they do – even when it is unproductive, expensive, and dangerous.

“War is hell,” William Tecumseh Sherman told the graduating class of the Michigan Military Academy in 1879. But governments go to war. Sometimes because they have to. But often because they want to.

The Siege of Leningrad was particularly hellish. It left 3 million dead. Those who survived lived with appalling memories: of war, cannibalism, frostbite and starvation.

And now, people who’ve never missed a meal in their lives are calling for more war.

Why?

As Michael Glennon, a professor of international law at Tufts University, showed us yesterday, there are two parts to a modern democracy. There are the voters. And there are the elites.

Each operates in a completely different way. The elites figure out what is best for them… and plan how to get it. The voters respond emotionally… with no real knowledge of what is going on.

The voters don’t have time to deconstruct the backstory. They can barely keep up with the front-page headlines.

They have real lives, nagging wives or layabout husbands, football games, drug problems and funerals. They can’t parse the conflicting claims or disentangle motives.

And it would be a waste of their time to try; they have little influence over public policy. The best they can do is to use their instincts – using brains that evolved over millions of years in entirely different circumstances.

All they know is what they want… and what they fear.

A Fabricated Enemy?

More health care spending? You bet!

They can’t follow the money and see that most of it goes to the insurance and health care industries.

What politician stands up and tells them he is opposed to giving them more free education? The voters can’t see how the system is rigged so that the additional spending goes into the elites’ pockets.

And pity the poor president who is seen as “weak” in defending the nation. The voter can’t tell a real enemy from a fabricated threat. He can’t know when it makes sense to intervene in a country he’s never heard of… and when it makes sense to butt out.

And how is he to know where the money ends up?

Elites calculate. The masses react.

But if you want to understand why our government does what it does, follow the money. For example, voters are told that the Fed helped protect them from another Great Depression.

Who could be against that?

The Fed bought roughly $4 trillion of bonds with newly created dollars and bank reserves.

“QE?” asks the voter. “What’s that?” Good luck explaining it!

And where did it go? Did you get some, dear reader?

We didn’t. Not directly. Neither did the typical voter. It’s been the weakest recovery in the postwar period. Since 2008, US GDP grew at only a third of the average rate during the 20th century. And average household income fell!

But a few people made a killing.

The financial industry has been in high clover for the last six years. Stocks, bonds, real estate – everything floated higher on a flood tide of new money.

And practically every major central bank joined in, increasing their balance sheets more in the last five years than in the last 100 years combined.

The typical guy might have less in his bank account, but the world’s filthy rich are filthier than ever. Stocks alone added about $22 trillion to their wealth.

“Why use the $4 trillion relief fund to hoover up financial assets held by the financial elite instead of simply crediting the bank accounts of all Americans?” asks Dutch investment adviser Jaap Westerling in a recent letter to the Financial Times.

Ah… Mr. Westerling, that’s not how it works, is it?

Regards,

Bill

Crux note: Bill has done something he’s never done before… In his latest book, he explains in detail the simple secret that’s allowed him to build a near-billion dollar fortune… and turned 50+ of his employees into millionaires.

If you’re looking to build real, lasting wealth for your family, this is required reading. Click here now to get your copy.
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