Over the last week metals markets has been swept away by turmoil to the downside. Silver fell nearly 30% and gold fell 200 hundred dollars, well north of 10%. As the US dollar firms up, many commentators are calling an end to the precious metals bull market. They ignore that, in fact, the Euro is currently in more immediate trouble than the US Dollar. And so, money has rushed into long-term US treasuries and the dollar so as to escape the uncertainty. It won’t be long before the trouble in which the US Dollar finds itself is once again the main topic on mainstream news shows. It might show signs of strength at certain points during the ongoing economic crisis, but, in the end, physical precious metals are the only means by which to protect ones wealth.
With economic crisis breaking apart the Eurozone, world leaders are calling on the EU to demonstrate “unity” across borders, which has more political implication than it does economic. Instead of economic sovereignty in each nation, more and more pressure will be put on the US and German economies to stabilize the region. A continent-wide bailout program will make more dependent all countries now under the European Union; that is, if the Germans eventually go forward with such a plan. The International Monetary Fund will play a larger and larger role in Europe, using US taxpayer money, perhaps even relying on the structural adjustments and the austerity measures embarked upon in the historically poorer regions.
On Thursday of last week, the DOW moved down 500 points, pulling down metals as it traditionally does on such a violent downward move. On Friday, CME margin requirements were hiked 21% in gold and 16% in silver. CME has hiked gold margins three times for a total of 55% since August 11. On Monday, thus showings its true colors as in the pocket of the international banking cartel, the Shanghai Gold Exchange hiked silver margins 20%.
Silver never even had a chance. When such exchanges hike margins, those traders leveraged must liquidate some or all positions for capital. This drives out weak money and makes room for more long-term holders of the metal. As prices dropped in gold and especially silver, physical holders were buying silver en masse.
It is important to remember why we are buying metals in the first place. Sit tight and be right. The fundamentals are the same in these markets, for, in the long-term, fiat currencies are being devalued in a coordinated manner by central banks. Buy when you can, try and buy the dips. Don’t try and be too smart, because when markets are manipulated in the short term like these, there is no knowing what is right around the corner. In the long term, though, it is rather obvious these prices will be much, much higher in the years to come.
There are many reasons we saw this huge dip in gold and especially silver. Part of it is psychological: the higher the prices of precious metals, the poorer fiat currencies then look, thus making governments and central banks look bad. This then entices people to seek out protection in times of such absolute economic decline. It is also now an opportunity for institutional buyers to scoop up massive amounts of cheap precious metals, in preparation of making huge short term gains on the next run-up. Expect a massive run-up for silver in the next six months. Silver could make a run of 100 to 200 percent in a very short time period. $2,500 gold, furthermore, is by no means out of the question in the coming six months.
The takedown of these markets is an example of what Max Keiser has termed “financial terrorism” by the keystone international banks, such as HSBC and JP Morgan, but also the Federal Reserve and central banks the world over. Make no mistake, this is economic warfare.
Most of the damage is done heading into the end of this week. Silver is firming up quick after testing $26 in Asia on Monday. Keep in mind there has not been much evidence of any real major sales of gold or silver. Some have suggested European banks are selling gold, but it wouldn’t surprise many if these banks didn’t actually own gold. Bob Chapman believes we are seeing another bottom in these metal markets, and I agree. These markets will become more tumultuous over time, but keep in mind that is just the strange new world in which we live.
JP Morgan and other banking establishments which short the metals have made a killing this past week. Not only have they brought down world financial markets 5%, probably with insider knowledge of the selloff, but so too have they made a killing on their shorts in gold and especially silver. The bright side is it is a great buying opportunity. The JP Morgan boys must also be very relieved that their $30 share price does not look so pathetic when compared to silver—at least for this week.
*This is not meant to be taken as investment advice. This blog exists for merely informational purposes. Please be wary and informed whenever you allocate money.
Thursday, September 29, 2011
Wednesday, September 14, 2011
As has been discussed on this blog, the Swiss National Bank (SNB) last week announced that it would buy unlimited amounts of foreign exchange to prevent the Swiss franc appreciating any more in value. Therefore, what they are essentially announcing is a plan to print unlimited quantities of Swiss Francs, thereby pledging to devalue their currency until it can be devalued no further. The currencies that the Bank will undoubtedly be buying, moreover, will certainly depreciate over time, thus increasing the amount of downward pressure on the Swiss Franc.
This gives more credence to the view that essentially all currencies on the planet use the US Dollar, or at least other fiat currencies, as their reserve. This means that, as further downward pressure leads towards Dollar collapse, all currencies will feel the pressure and could, ultimately, collapse before the Dollar.
One of the last remaining 'sound money' systems in the world has effectively announced that it will no longer issue sound money. Whereas, in very recent history, the Franc has been one of the only currencies—if not the only currency—in which gold was not appreciating, this will certainly change in the coming months. There will then be more buying pressure behind gold and silver. Heretofore, Switzerland had been a refuge for the world's flight capital, which led to a currency overvaluation. More evidence that in a global currency crisis like the one we are now experiencing, which transpires alongside the world's banking and sovereign debt crisis, there are no safe-havens.
Unfortunately, one dire outcome of this is that, whilst central banks the world over deceitfully debase their own currencies through “stimulus” (and simultaneously and sneakily buy-up tangible assets such as gold, silver, agriculture and water), hardworking everyday people will, once deflationary periods are shaken out of the mix, see the currencies in which they've taken their hard-earned wages and salaries fall precipitously in value when compared to food, energy and, of course, gold and silver.
Since the beginning of the summer, when gold was trading around $1480 per ounce, it has moved upwards about 30% at its peak of about $1920 an ounce. James Turk forecast in a recent interview with King World News:
I was expecting closer to 50% by the end of September and even though we are not at the end of the month and may not reach that 50%, there is a lot more left in this move... Gold is headed over $2,000 and if it doesn’t happen this month, it will probably happen in October.So look at shakeouts like we have had today as yet another great opportunity to get rid of overvalued dollars, euros, pounds, etc., and trade them in for physical gold.... Importantly, Eric, even though the price of gold has risen for many years, it still remains undervalued by all of my historical measures.... More importantly, we know things have value because of their usefulness and right now physical gold’s greatest attribute is that it does not have counter-party risk....Unlike debtors of all sorts, whether individuals, companies or governments, gold does not default. This is one of the main reasons to own physical gold as the world’s financial system unravels around us….
As reported today by Bloomberg, Treasury Secretary Tim Geithner will implore European governments to set up their fight during the current economic crisis in that region, as the Obama administration begins to imply that it is concerned Europe's woes may hurt the U.S. Economy. This will be the first time that Geithner attends a session of Europe's Economic and Financial Affairs Council or Ecofin.
This comes on the heels of Geithner's trip to Marseille, France, where he told European leaders to “act more forcefully” in a meeting with the Group of Seven finance ministers and central bankers.
Certainly, the administration in the U.S is nervous about the turmoil in Europe, as Obama has recently blamed overseas instability for hurting his efforts to right the American economy.
Essentially, what Obama will prescribe is increased interdependence in Europe, as that continent moves increasingly towards true superstate status. Large European countries “are going to have to get together and make a decision about how they can match currency integration with a more effective set of coordinated fiscal policies,” Obama said.
The European crisis was “very, very damaging in the American economy last summer,” Geithner told Bloomberg. “It’s been a significant cause to the slowdown we’ve had this summer and I think it’s very important to the world that Europeans do what they need to do so that the problems they’re facing don’t spread, don’t add to the pressures on the world economy as a whole.”
*this article is not intended as investment advice, and is strictly informational.
Thursday, September 8, 2011
With the recent announcement that the Swiss Franc will be tied to the Euro, many investors have ceased viewing that currency as a safehaven, and now, as well as in the future, will look more towards precious metals for security, thus resulting in parabolic moves upwards in gold and silver, platinum and palladium. Clearly, fiat currencies of the world have been actively devalued by policy makers in a number of countries, as is evidenced by their simultaneous devaluation.
Granted, the precious metals markets have been violent over past weeks, but, to be certain, so too have all markets. We have seen wicked swings as individuals sell-off at the least bit of uncertainty and buy back quick in anticipation dip buying or in an effort to consolidate companies and assets.
Eventually, however, there will be a sell off without dip buyers, as contagion of economic depression spoil an increasing number of markets. The collapse of currencies and the soaring costs of resources and commodities will fuel huge gains in sectors such as food, energy and precious metals, whilst all paper representations of wealth, in which most people hold their savings and investments, will collapse as does the US Dollar.
We have seen austerity measures grip Europe. This is major news, and most of the world does not understand the implications thereof. The European continent has, for centuries, been viewed by many as the “core” of global trade. Without demand in Europe, there is no way that “peripheral” economies, such as the BRIC nations, can continue to grow. When these nations experience revaluation of their currencies, due to currency devaluation in the Euro and the US Dollar, demand for their products will fall, and they will be left with stalled economies and eventual inflation. Furthermore, many of these countries hold the US Dollar as a reserve currency. Once the US Dollar collapses, so too will these currencies.
The Gold bull run could “end all major bull markets,” according to Urs Gmuer, an asset manager at Dolefin, the Swiss investment advice firm. In the interview with CNBC, Gmuer said that gold prices may reach $6,200 per ounce.
Based on analysis of the last major gold boom in the 1970s, during which the price of gold rose from $35 per ounce to $850 per ounce, Gmuer's insights points towards prolonged economic doldrums as a catalyst for a parabolic price move in gold. This time around, to be sure, the metal’s price run resembles less an investment, and more as an instrument by which one might preserve his or her wealth.
“Gold prices have risen over the last few years, as the macroeconomic picture has become worse. The deterioration of the fundamental situation has now gone even further…Purchases by investors of gold will be based on fears of systemic risk or banking crashes,” Gmuer said.
There are no more safe currencies, said the investment manager. In large part, this is due to all currencies holding the US dollar as reserves, as presidential candidate Ron Paul has pointed out. Ron Paul argues that this dollar and currency devaluation across the world is deliberate policy, which is supported by quantitative easing programs. In the US, this trend is supported by the outsourcing of jobs.
“The ultimate currency, which has stood the test of time, which has no political support behind it, is gold. Nobody can print gold out of a machine or a PC…What the Swiss National Bank did two-and-a-half weeks ago, increasing the supply of the Swiss franc, means the safe currencies are all gone. That is why gold will have a revival,” he said.
Gmuer compared the precious metal “super-cycle” to the 1998-2000 boom in technology media and telecommunications. He said that debt capital is an asset class for which demand and prices would fall.
To be sure, gold is not in a bubble, Gmuer maintained, denying that the rising gold prices would lead to such a scenario.
“If everybody is saying a particular asset is a bubble, that reflects the fact that most people have disposed of it,” he said.
Gmuer also added that markets in all precious metals were benefiting from the surge in demand for commodities, food, and energy in certain parts of the globe.
“Since World War II, the world population has almost quadrupled. However, most of the increase was in countries that had closed political systems, such as the Soviet Union, China and India," he said. “When these countries started to open up in the 1990s, these people saw they could increase their level of well-being. It is pent-up demand.”
Friday, September 2, 2011
The jobs report today showed no net jobs created by the U.S. economy in August. The projected number of new jobs was about 70,000. The unemployment rate remained the same as it was in July at 9.1%. Moreover, the figures from the previous two months were revised down, thus showing weaker jobs growth than originally figured. Ahead of the number, global stock markets had been weak, only to fall further after publication of the new figures. For instance, the Dow Jones Industrial Average in New York opened down 2%.
This marks the first time since 1945 that there has been a zero payrolls figure. Now, the United States and the world await a speech by President Obama next Thursday, in which he will outline a new plan for boosting growth and creating jobs. Many see this as the kickoff to the 2012 Presidential Election. In essence, the speech will signal continued spending on the part of the Federal Government, furthering the official policy of dollar devaluation.
With further downward pressure on the Dollar, not only gold and silver, but also platinum started off a strong Friday, with gold up more than $50 and silver up about $1.50. Platinum was up for the day $27.50 by the end of trading.
This represents the largest jump in nearly a month for gold, and continues its trend of more than doubling since the end of 2008, during the market crash and so-called banking crisis.
“Today is one of a series of data points that, when taken in aggregate, continue to show a weakening U.S. economy and a lack of confidence in our government’s ability to do something about it,” Steve Shafer, who helps manage $300 million as chief investment officer of Covenant Investors, told Bloomberg. “Combined with the problems out of Europe, there’s a depreciating confidence in fiat currencies. All of those funnel into a heightened demand for gold.”
Recently, Bernanke announced that the Federal Reserve will do what it can to keep the costs of borrowing at almost zero percent at least through mid-2013 to support the economy. And so, whilst multinational financial institutions are lent money at near-zero costs, they still cause deflationary scenarios, at least in the near-term, by not lending to consumers. Yesterday, Switzerland decreased interest rates, while the Bank of England and the European Central Bank left their rates unchanged.
That interest rates will not be increased is a bullish sign for gold. This year, the yellow metal has already increased 32 percent, looking towards its 11th straight annual winning streak. In short, gold has had its 50% correction after the last run-up, and now it looks prepared to, once more, target $2,000 in September.
Also, silver is up for the day 171 cents, which represents about a 5% gain. After consolidating in between the $32.50 range and $36 range, having tested that number upwards of ten times, it looks as those silver is ready to target $50. Usually, when a stock tests a price range more than 5 times, and tests it’s about seven times, that signifies a price jump of about 100-150%.