Silver Market Set To Break Out Above 20 Dollars (Video)

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By EconMatters

The Silver Market really broke out this week, far outpacing Gold, and is the market to watch in my opinion going forward regarding more "Central Bank Currency Devaluation QE Stimulus Initiatives" and the resultant implications for financial markets.

 

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The Silent Puerto Rican Debt Default

Written by Nathan McDonald (CLICK FOR ORIGINAL) 

 

Where's all the news - where are all the headlines? A major event has taken place yesterday and another event is about to unfold tomorrow. Puerto Rico is going to default on its debt and the US government is A-OK with it.

 

Once again, the American taxpayers have been on the short end of the stick. This story is receiving little to no press, and it is truly baffling given the ramifications and meaning behind it. Perhaps this is exactly why it is receiving so little attention.

 

The story of the Puerto Rican default is just another example of the crumpling system of the elites. The establishment is desperately trying to keep this broken fiat system together for as long as they possibly can, sucking maximum profits from it before it implodes.

 

The U.S. Senate has done its part in this farce, as they passed the bailout bill with overwhelming support yesterday, ensuring that Puerto Rico, like Greece, can put off its consequences of overspending for the time being and continue to stagnate. It's another stellar example of extend and pretend by the elites.

 

Tomorrow, the government of Puerto Rico was supposed to be paying back $2 billion in debt repayments - no small sum of money, but a drop in the bucket when you look at the massive $70 billion that they owe in debt payments.

 

Fortunately and unfortunately for them, they are being given a "free" pass by the U.S. government this time. I say unfortunately, because the trade-off for them is their freedom and liberty. As part of the bailout deal, the elites will install overseers that will monitor the Puerto Rican government. Essentially, they are giving up their free will.

 

Despite this being a major story, don't expect to hear much about it. The elites don't want to embolden other states or countries to default on their debt as well. The illusion of debt and fiat money must be maintained at all cost, or they risk completely losing the crumbling empire they have built around them.

 

Fortunately for us in the precious metals community, we are not asleep and we are taking our destiny into our own hands, protecting ourselves with the one true, honest form of money: gold and silver.

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

 

The Silent Puerto Rican Debt Default

Written by Nathan McDonald (CLICK FOR ORIGINAL)

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71% of Americans Think the Economy is “Rigged” … They’re RIGHT

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A new poll by Marketplace-Edison finds that 71% of Americans – including “Americans from across the economic and political spectrum” – think the economy is rigged.

They’re right …

They’re also right about how broken and totally corrupt our political system has become …

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This Will Push The Gold Market Over The Edge

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By the SRSrocco Report,

This could be the year that the mainstream investor finally pushes the gold market over the edge.  While a fraction of investors continue to acquire a lot of physical gold, the mainstream investor is the key to driving the gold market and price going forward.

Why?  Because the diehard precious metal investors don't have the sort of leverage as do the mainstream investors, which account for 99% of the market.  I have stated several times in articles and interviews that it will be the surge of gold buying by the mainstream investor that will finally overwhelm the gold market.

This next chart shows just how much leverage the mainstream investor has on the gold market.  When the Dow Jones Index fell a lousy 2,000 points during the first quarter of 2016, mainstream investors flooded into Gold ETF's & Funds.  This continued into the second quarter, including the surge in buying after the BREXIT "Leave Vote" this past Friday:

According to the data put out by Nick Laird at Sharelynx.com, total transparent global gold holdings increased nearly 20 million oz (Moz) since the beginning of 2016.  Nearly half of that figure, 9.7 Moz (supposedly) went into the GLD ETF.  This is an amazing amount of gold as it represents 41% of total global mine supply.

For those investors who don't trust the amount of gold backing these Gold ETF's, I don't either.  However, I could care less if the GLD has all the gold it reports.  What is more important is the mainstream investor LEVERAGE on the market and price.  This is the Key.

This next chart shows the annual net flows of gold into ETF's & Funds:

The record amount of flows into Gold ETF's & Funds took place in 2009.  The majority of the 645 metric ton (mt) figure took place during the first quarter of 2009 when the broader markets were crashing to their lows.  In Q1 2009, a record 465 mt of gold flooded into Gold ETF's & Funds that quarter, accounting for 72% of the year's total.

I explain this phenomenon in more detail in my Bullet Report: The Gold Report: Investment Flows

Something has seriously changed in the gold market this year and I believe that most investors are unaware of how explosive this shift could impact the price of the yellow metal going forward.

 

The Gold Report: Investment Flows is a digital report that provides up-to-date information on the gold market that is invaluable for analysts and investors to presently understand.

 

While many precious metals analysts publish articles that focus on individual aspects of the gold industry, this report combines all of the relevant investment flows to show how significant trend changes are now putting serious strain on global gold supply, elevating gold’s average global value.

 

CLICK HERE to read more about the GOLD REPORT.

However, the first half of 2016 is turning out to be one hell of a strong start as global gold holdings have already increased 622 mt.  Part of this amount includes an approximate 68 mt build (2.2 Moz) in the Comex Gold Inventories.  As we can see, the mainstream investor Gold ETF & Fund demand has driven flows in the first half of 2016 to 96% of the record 645 mt set in 2009.

And this was on the back of a lousy 15% correction in the broader markets in the first quarter of the year.  What happens as the BREXIT contagion continues to spread pushing the broader stock markets lower?

Again, according to the data at Sharelynx.com, an approximate $25 billion of mainstream funds went into Gold ETF's, Funds and Exchanges in the first half of the year:

While this is most certainly a large surge of mainstream investor demand in Gold ETF's & Funds, it's still only a fraction of the overall market.  Matter-a-fact, the top 400 World's Richest people lost $127 billion on Friday after the BREXIT vote to leave the European Union.

Now, what's even more interesting than that tidbit, is that a ONE DAY loss of $127 billion by the wealthiest people could have purchased ALL of the Global Gold & Silver ETFs and Funds in the entire world.

Currently, all the Gold ETF's & Funds are valued at $108 billion while the Silver ETF's & Funds represent a mere $16 billion.  Thus, all the Global Gold-Silver ETF's & Funds equal $124 billion.  Basically, the richest of the rich lost more in one day than the entire Gold & Silver ETF and Fund Market.

The British citizens voting to leave the European Union is the straw that finally breaks the CAMEL's BACK.  It doesn't matter if the politicians force England to stay in the EU, because the MINDSET of the public has been changed.  It's just a matter of time before the inertia grows to a level that finally overwhelms the establishment.

I got a kick out of Zerohedge's article today, President Of The European Parliament: "It Is Not The EU Philosophy That The Crowd Can Decide Its Fate".  This is the epitome of FASCIST 101, where an UNELECTED Parliament can decide the fate of the British or any other European country.

We are experiencing the same thing in the United States as Donald Trump goes against the DEMO-PUBLICAN Establishment Cronies.

At some point in time, the DEBT & LEVERAGE in the system will take down the markets in a serious way, quite quickly.  If you are the 99% of Americans who believe, "You need to stay in your 401K for the long-term", you can't blame Wall Street when you lose it all as you had plenty of chances to WAKE UP.

Please check out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page.

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The True Nature of Gold Is Liberty

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Article By Guy Christopher

“Look at that screen,” exclaimed Fox Business Network’s Stuart Varney, referring to the television graphic showing markets crashing across the globe. “The only thing going up is the price of gold!”   

“It’s always a dangerous thing when you leave democracy up to the people,” joked Varney’s guest – venture capitalist and author Peter Kiernan, as they watched Britain vote Thursday night to escape the European Union

The dust is still settling after Britain’s seismic Brexit vote June 23^rd.  At issue: who should control British economic and immigration policies – Brits themselves, or unelected bankers and their bureaucracy stooges.  A choice between the liberty of self-determination or the tyranny of faraway cronyism.

While the gritty election fallout spread through rattled markets and wafted into plush offices of banking’s money masters, the hard and fast implications were clear.  The British Empire stood tall on what outspoken political leader Nigel Farage called Our Independence Day.

“Only Lunatics Would Consider EU Membership”

The Brit’s dramatic decision is the latest revolt of those fearing the loss of personal and national identities.  Until Brexit, the populist revolution against powerful centralized world order was a series of smoldering brush fires.

The Brexit victory has now kindled a wildfire.

Spanish Catalonia was all set for independence from Spain in 2014, until stopped in its tracks by Spanish courts.  Scotland the same year managed to muster 45% of three million votes in a losing bid to leave the UK. Quebec voted down independence from Canada in 1995, but has never stopped talking about it.

Strong political voices in Italy, France, Austria and even Germany are shouting to preserve national identities or else to leave the EU.   Italy’s Five Star separatists claim support of half that country, and have just elected Rome’s mayor.

Political leaders in the Netherlands and Poland, just hours after the June 23^rd British Revolution, made it clear they will push for a Brexit replay.  Scots lost no time in restating their intention to separate from Great Britain.

Switzerland decided just two weeks ago to drop all plans to join the EU.   “Only lunatics,” said one Swiss official, “would consider EU membership.”

The big loser so far in the fight for economic self-determination is Greece.  Up to their Parthenon in debt for the next hundred years, Greeks elected Alexis Tsipras as Prime Minister, who promised to stiff Greece’s banking creditors and give Greece a new start.

But Tsipras turned on his people, repudiated the cradle of democracy’s historic vote, and left Greece even deeper in debt.  Tspiras was channeling an old political axiom – if voting mattered, we wouldn’t let them do it. 

Here at home, the current and former governors of the always revolution-ready Texas have suggested secession from the United States.  A move to include secession as a plank in the Texas Republican platform came up just two votes short last May.  Secession efforts are now called “Texit.”

Texas isn’t alone.  Some thirty states have circulated petitions recently to gauge interest in secession. Californians have discussed carving their Golden State into three states.

Which brings us to the main event in the United States.  In twenty weeks, Americans will set a course for the world with their own historic choice – either sticking with what America has right now, or demanding monumental changes to government authority over lifestyles and pocketbooks.

The long list of financial crimes by over-bloated centralized governments include trillions in money printing to enrich banks; destructive interest rates to smother savings; punishing taxes; the war on cash to demolish private wealth; suffocating regulations on business owners; and the ongoing crime-in-progress of theft through planned inflation.

Unpopular open border policies toward immigration cannot be overemphasized as a driving factor in Britain’s vote, or in the coming U.S. presidential election.

You wouldn’t know it from watching or reading most lapdog media, but nowhere was the reaction to the Brexit earthquake more stunning than the immediate rush to gold.

Media Overlooked the OTHER Big Story Last Week…

In a matter of a few hours Thursday night, gold shot straight up almost one hundred bucks from low to high, stopping just shy of $1360 per ounce.  The price perfectly tracked media reports of voting results.

As markets cratered worldwide, the message was clear.  Gold was the only safe haven – the blue ribbon champ – the last man standing.

By dawn’s early light, London dealers were reporting record sales of coins and bars to store-front customers standing in line.  Google searches for “buy gold” went soaring 500%.  Online sellers had heavy traffic.

Gold rose 22% overnight in the British pound, 7% in U.S. dollars.

Brexit has been all about wealth and liberty – who will have it, and who will protect it.  Gold buyers knew the most enduring wealth for 5,000 years has been gold and silver you hold in your hand, unlike the trillions in digital wealth evaporating into cyberspace during Brexit’s aftermath.

Wealth is the stored and stockpiled accounting of our labor, time, energy, and talent.  We depend on that store of wealth to ensure financial liberty for our families, to pass on to future generations, or just to enjoy a day at the beach without punching a clock.  And without being told what to think.

Throughout history, gold and silver have been the sole survivors found in the smoking ruins of failed kingdoms, borders, flags and currencies.

As markets began sinking like stones June 23^rd, as bankers panicked, and as media pundits blathered, the price of liberty was paid, and the value of gold embraced.

Both gold, and liberty, were destined to shine that night, no matter what the cost.

Money Metals columnist Guy Christopher is a veteran writer living on the Gulf Coast. A retired investigative journalist, published author, and former stockbroker, Christopher has taught college as an adjunct professor and is a veteran of the 101st Airborne in Vietnam.

 

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Greenspan Warns “Early Days Of A Crisis,” Inflation Coming and Urges Return To Gold Standard

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Alan Greenspan, the former Chairman of the Federal Reserve has warned that Brexit was a “terrible outcome in all respects” and that we are in the “early days of a crisis.” U.K. policy makers miscalculated and made a “terrible mistake” in holding a referendum on whether to quit the European Union, Greenspan said.

That decision led to a “terrible outcome in all respects,” Greenspan, said in an interview with Bloomberg Surveillance yesterday in Washington.

“It didn’t have to happen,” Greenspan said. He warned that it is now likely that Scotland, whose majority of voters wanted to stay in the EU, will have another referendum on its own independence. He predicted such a vote would be successful, and Northern Ireland would “probably” go the same way.

He also warned about the massive entitlements and unfunded liabilities in the U.S. and western world. The U.S. national debt is heading rapidly towards $19 trillion but the U.S. also has unfunded liabilities estimated to be between $100 trillion and $200 trillion.

“The issue is essentially that entitlements are legal issues. They have nothing to do with economics. You reach a certain age or you are ill or something of that nature and you are entitled to certain expenditures out of the budget without any reference to how it’s going to be funded. Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate. That annual growth rate of two percent is not adequate to finance the existing needs.”

“I don’t know how it’s going to resolve, but there’s going to be a crisis.”

He warns that the crisis will likely lead to inflation:

“I know if you look at human history, there are times and times again where we thought that there was no inflation and everything was just going fine. And I just basically say, wait. This is not the way this thing ordinarily comes up. I don’t know. I cannot say I see it on the horizon. In fact, commodity prices are soggy. The oil prices has had a terrific impact on global inflation. It’s not about to emerge quickly, but I would not be surprised to see the next unexpected move to be on the inflation side. You don’t have inflation now. And you don’t have it until it happens.”

Gold in GBP – 1 Year

Finally, Greenspan advocates a return to the gold standard as a way to create financial, economic and monetary stability:

“If we went back on the gold standard and we adhered to the actual structure of the gold standard as it exited prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the United States, and that was a golden period of the gold standard. I’m known as a gold bug and everyone laughs at me, but why do central banks own gold now?”

Gold Prices (LBMA AM)
28 June: USD 1,312.00, EUR 1,185.79 & GBP 985.84 per ounce
27 June: USD 1,324.60, EUR 1,200.49 & GBP 996.36 per ounce
24 June: USD 1,313.85, EUR 1,181.28 & GBP 945.58 per ounce
23 June: USD 1,265.75, EUR 1,112.22 & GBP 850.96 per ounce
22 June: USD 1,265.00, EUR 1,122.31 & GBP 862.98 per ounce
21 June: USD 1,280.80, EUR 1,129.67 & GBP 866.72 per ounce
20 June: USD 1,283.25, EUR 1,132.08 & GBP 877.49 per ounce

Silver Prices (LBMA)
28 June: USD 17.57, EUR 15.84 & GBP 13.17 per ounce
27 June: USD 17.70, EUR 16.06 & GBP 13.40 per ounce
24 June: USD 18.04, EUR 16.32 & GBP 13.18 per ounce
23 June: USD 17.29, EUR 15.16 & GBP 11.61 per ounce
22 June: USD 17.20, EUR 15.23 & GBP 11.72 per ounce
21 June: USD 17.36, EUR 15.34 & GBP 11.78 per ounce
20 June: USD 17.34, EUR 15.30 & GBP 11.85 per ounce

Gold News and Commentary
Gold rose yesterday to €1,205/oz, Climbed 10% in 2 trading days (Irish Examiner)
UK stripped of final ‘AAA’ rating and FTSE 350 surrenders £140bn in Brexit aftermath (Telegraph)
Gold holds steady as global stocks weaken after Brexit vote (Reuters)
Retail gold buyers take profits in bullion after Brexit price surge (Reuters)
Gold Holdings in Biggest One-Day Surge Since ‘12 on Brexit Vote (Bloomberg)

Greenspan Warns A Crisis Is Imminent, Urges A Return To The Gold Standard (Zero Hedge)
Greenspan Calls Brexit a ‘Terrible Outcome’ (Bloomberg Video)
Gold Continues To Shine (FX Street)
Onward Toward Bullion Bank Collapse (Gold Seek)
Gold Veteran Says Brexit May Be Start of ‘Major Bull Market’ (Bloomberg Video)
Read More Here

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Onward Toward Bullion Bank Collapse

Posted with permission and written by Craig Hemke, TF Metals Report (CLICK HERE FOR ORIGINAL)

 

 

 

The events of Friday not only speed the eventual collapse of the Bullion Bank Paper Derivative Pricing Scheme, they also highlight the fraud of this current system and shine light upon the utter desperation of these Banks to maintain it.

 

We've written about this countless times over the past six years. Here are just two recent examples:

• http://www.tfmetalsreport.com/blog/7576/fun-comex-open-interest
• http://www.tfmetalsreport.com/blog/7605/comex-gold-open-interest

 

In short, as a measure of controlling the paper prices of gold and silver, The Bullion Banks that operate on The Comex act as de facto market makers of the paper derivative, Comex futures contract. This gives them the nearly unlimited ability to simply conjure up new contracts from thin air whenever demand for these contracts exceeds available supply and, almost without exception, these Banks issue new contracts by taking the short side of the trade versus a Spec long buyer. Never do these Banks put up actual collateral of physical metal when issuing these paper derivative contracts. Instead, they simply take the risk that their "deep pockets" will allow them to outlast the Spec longs and, without the risk of having to make physical delivery, The Banks almost always win. Eventually, an event like the runup to the Brexit vote or all of the Fed Goon jawboning of May will spook The Specs into selling and this Spec selling is used by The Banks to buy back (cover) their ill-gotten naked shorts and lower total open interest back down. (If you're confused by this, please click the second link listed above for a more detailed explanation of this process.)

 

How this influences price is simple. If the supply of the paper derivative futures contract was held constant on a daily basis, then price would have to rise or fall based upon simple supply/demand dynamics. When the amount of buyers exceeded sellers, price would have to rise to a point at which existing owners would be willing to sell. But this is NOT how the Comex futures market operates! Because the market-making Banks have the ability to create new contracts from whole cloth, they can instead flood the "market" with new supply whenever it's necessary. This mutes potential upside moves by imparting fresh new supply for the Spec buyers to devour. Price DOES NOT have to rise to a new, natural equilibrium. Instead, price equilibrium is found where demand meets this new supply.

 

As a case in point, simply study the "market" impact on gold "prices" in the hours that followed the Brexit decision in the UK. As turmoil shook the global markets, gold shot higher and, at one point, was up nearly $100. However, within hours it had given back nearly half of those gains and then spent the remainder of the day in an unusual and very tight trading range while virtually every other "market" was rocked with volatility throughout the trading day. See below:

 

 

The all-important question of the day is: How and why was this done?

 

First, the "how". At the end of each trading day, the CME Group issues an update that details total open interest changes for both gold and silver. Friday's preliminary totals can be found here: http://www.cmegroup.com/trading/metals/precious/gold_quotes_volume_voi.html What does the data show? On Friday, with global markets in turmoil and precious metals markets rallying significantly, The Bullion Banks on the Comex issued brand new supply of nearly 60,000 new paper gold contracts! At 100 paper gold ounces per contract, this represents a potential future obligation to deliver almost 6,000,000 ounces of gold, should the Spec long buyers ever stand for delivery (which they won't). So, ask yourself these questions:

 

• Did the world's gold producers all suddenly decide to forward sell and hedge 186 metric tonnes of future production yesterday, just as the most significant economic event in eight years was beginning to unfold?
  

OR

• Did the Bullion Banks suddenly put up a few million ounces of their own gold and then lever it up a few times and issue 60,000 new contracts based upon this collateral deposit?
  

 

Obviously, the answer to both questions is a big, bold NO! Instead, the market-making and price manipulating Banks simply played their usual game, writ large. In a desperate attempt to contain price, they simply issued these 60,000 new contracts and fed them to the Spec buyers. So next, ask yourself these vital questions:

1. Without this added supply...which grew total open interest by over 10% in one day!...how much further would the paper price of gold have risen yesterday?
   
2. If a natural equilibrium was forced to be found between buyers and sellers of existing contracts, would price have settled even higher?
   
3. And how much higher? Gold was up nearly $60 yesterday. But without the paper derivative supply increase of 10%, would it have risen $100? $200??
   

 

So now let's address the more important part of the question: "why".

 

Simply put, these Banks are desperate and on the run. However, in their arrogance, they are still flailing away and attempting to postpone their demise. The minimal amount of physical gold that they do hold and utilize to backstop the paper derivative market is shrinking rapidly as investors and institutions around the globe seek gold as a safe haven against the financial devastation of negative interest rates.

 

But not only are The Banks attempting to reverse this trend that is rapidly deleveraging their system, they are also desperate to protect their established NET short positions from additional paper losses. Recall that the CFTC generates something that it calls The Bank Participation Report every month and we write about this report almost every month, too. Here's the latest:
http://www.tfmetalsreport.com/blog/7675/latest-bank-participation-report

 

So let's cut to the chase...

 

With gold at $1060 back on December 1, 2015, the 24 Banks covered by this report were NET short just 30,757 Comex gold
contracts. After running this NET short position all the way to 195,262 contracts on May 3, 2016, the report for June showed a NET short position of 133,396 contracts. However, data for this latest report was surveyed on June 7, with price at $1247 and total Comex open interest of 496,330 contracts. By this past Tuesday, in the days before the Brexit total were announced, price had risen to $1318 and then fallen back to $1270. However, total Comex open interest had risen to 571,517 contracts and, by analyzing the latest CFTC-generated Commitment of Traders Report, we can safely estimate that The Banks were likely NET short at least 180,000 Comex gold contracts.

 

Putting this all together, while price rose from $1060 to $1270, these 24 Banks added about 150,000 contracts of NET short liability to their Comex trading operations. So, with a NET position of 180,000 contracts short and with every contract representing 100 ounces of paper gold, the paper losses to these Banks for every $10 move in the gold price amounts to about $180,000,000. Multiplying that out...When gold was up nearly $100 early Friday, these Banks were on the losing side of a $1,800,000,000 move. Even for the likes of JPM et al, that's a lot of fiat!

 

So, what did they do? Like any arrogant and addicted gambler, they doubled-down! They put "good money after bad" and, in doing so, likely increased their NET short position to nearly 250,000 contracts! All of this in order to suppress price and get it back under their control. This also allows them to somewhat control the message gold was sending. Can you even imagine the headlines if gold was up $200 yesterday? By holding the gains to just $50, The Banks hope to:

• Manage the increased physical demand these higher prices are causing AND
• Mitigate their paper losses. All of those new shorts lowered price by nearly $50 and nearly cut their one-day paper losses in half.

 

In the end, what's the point of this post? First and foremost, it's simply the latest installment of our efforts to shine the light of truth upon the incredible fraud and sham that is the current paper derivative pricing scheme. The Comex-derived price is not at all related to the price/value of true physical gold. Rather, the price discovered on Comex is simply the price of the derivative, itself, with the price of this derivative determined by changes of supply and demand of the derivative. Barely any physical metal ever exchanges hands on Comex so it is entirely inaccurate to say that the price discovered there has any connection at all to the underlying physical.

 

That said, though, we'll leave you with one last link that you simply must read. Mark O'Byrne at Goldcore is closely-connected on the ground in London. In all of the hubbub of the Thursday and Friday, you may missed his daily report. If Mark and his sources are correct, we may be rapidly approaching the demise and destruction of these criminal Bullion Banks and their fraudulent pricing scheme. Demand for unencumbered, true physical gold is the key to ending this system and finding justice for gold holders, miners and producers around the globe...and this link may prompt you to think that we are closer to The End than at any other time in the past 40 years: http://www.goldcore.com/us/gold-blog/gold-lower-despite-panic-due-to-supply-issues-in-inter-bank-gold-market/

 

Friday's Brexit vote truly was a game-changer and the single most important financial event since 2008. That it might accelerate the death throes of the Bullion Bank Paper Derivative Pricing Scheme is not something that is fully appreciated by the global gold "community". Hopefully, this post has helped you to understand where we are at present, the reasons behind the price action of Friday and the
significance of global physical supply/demand versus paper price going forward.

 

Please email with any questions about this article or precious metals HERE

 

 

 

 

 

 

 

Onward Toward Bullion Bank Collapse

Posted with permission and written by Craig Hemke, TF Metals Report (CLICK HERE FOR ORIGINAL)

 

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Americans Are Now The Top Silver Investors In The World

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By the SRSrocco Report,

According to the figures in the 2016 World Silver Survey, Americans now lead the world in physical silver investment.  This is quite an interesting change as India has been the number one market for silver bar demand in the past.

For example, Indians purchased more than 100 million oz (Moz) of silver bar in 2008 of the approximate world total of 125 Moz.  However, silver bar demand is only one segment of total global physical silver investment.  There is also Official Coin demand.

If we look at the data for 2015, India continues to rank as the largest source of silver bar investment int he world:

India purchased 82.5 Moz of silver bar in 2015 while the U.S. ranked second with 51.8 Moz, Europe came in third with 12.7 Moz and China placed last at 3.8 Moz. (2016 World Silver Survey, pg. 22 & 23).

The United States experienced a huge increase in silver bar demand in 2015 due to the inclusion of "Private rounds and bars" now in the data.  So, all private silver bar and rounds sold are lumped into the Silver Bar category.

Even though India ranked first place when it comes to silver bar demand, if we include Official Coin sales, the U.S. is now the global leader of physical silver investment:

In 2015, the U.S. Mint sold 48.6 Moz of Official Silver coins while India ranked fifth at 8.9 Moz.  If we add silver bar demand to these figures, the U.S. was the leader at 100.4 Moz while India came in second at 91.4 Moz. (2016 World Silver Survey, pg. 25).  The rest of the world accounted for the remaining 100.5 Moz of the total 292.3 Moz of Silver Bar & Coin demand.

I could not break down Silver Bar & Coin demand in the 'Rest of World" category because there isn't enough data.  The World Silver Survey's do a much better job than the CPM Group's Silver Yearbook in reporting silver investment figures.  However, they only publish the amount of Silver Coins sold by each of the Official mints, not the actual demand.

There is no way of knowing how many U.S. Silver Eagles end up in foreign hands, or how many Canadian Maples or Australian Kangaroos are purchased by Americans.  The data is not that accurate.  However, I do believe Indians purchased the overwhelming majority of their own Official Silver coins.

Furthermore, the Silver Bar & Coin demand of 100.4 Moz for the United States may be quite conservative.  Why?  Because, Americans buy a heck of a lot more foreign Official Silver Coins to more than make up for the amount of U.S. Silver Eagles exported abroad.  We must remember, Americans don't have to pay a vat tax when they buy silver.

What is also interesting about the data is that China ranked fourth behind Europe in silver bar demand.  Even if we assume that the Chinese purchased all of their Official Silver coin sales of 10.7 Moz in 2015, their total Silver Bar & Coin demand would only be 14.5 Moz.  While the Chinese are the biggest buyers of gold in the world, silver still hasn't caught on as it has in the U.S. or India.

Lastly, according to the data from the 2016 World Silver Survey, Indians purchase their silver bar as a short-term investment vehicle by taking advantage of lower prices or to profit from any differences in the spot or futures market.  However, the majority of Americans purchase their silver for a long term BUY & HOLD strategy.

Which means as the Chinese consume most of the gold in the world, Americans are now the biggest silver investors.

Please check out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page.

Check back for new articles and updates at the SRSrocco Report. 

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Brexit Drives Gold Frenzy, Report 26 June, 2016

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The big news this week was that the British voted to exit the European Union. This was not the outcome expected by pundits, or the polls.

“Risk on” assets were relentlessly bid up prior to the vote. For example, S&P 500 index futures had closed the previous Friday, June 17, at 2059. This Thursday, prior to the vote, they were up 60.5 or 2.9%, to 2119.50.

The British pound began its run up a day earlier than the S&P, closing at $1.42 on Thursday, June 16. This Thursday it was up to a high of $1.50. The same pattern occurred in crude oil (West Texas), up over $4 from the June 16 low to the June 23^rd high, and in other assets.

After the vote, it was a giant blowout. By Thursday evening (Arizona time), the pound had hit a low of $1.32, a drop of about 18 cents or almost 12%. As of Friday’s close, the S&P was down 3.6% but continued to decline after hours with futures ending down -4.16%.

To hear mainstream gold commentators tell it, gold and silver went up whereas (nearly) everything else went down. That is not how we see it. At all.

The pound, euro, and other currencies are dollar derivatives. Therefore, we think it’s appropriate to price them in terms of the underlying thing from which they are derived. The dollar. The currencies went down in dollar terms, as did stocks.

However, for the same reason that the dollar cannot be properly priced in pounds or euros, gold cannot be priced in the dollar. For the same reason that if you fall off a cliff the height of the cliff top cannot be measured in terms of distance above your head, a meter stick cannot be measured in terms of a rubber band.

The dollar must be priced in gold. The dollar is not precisely a gold derivative. However, it is valuable only because, and only for so long as, gold makes a bid on it.

So we look at it like this. Other currencies and risk assets fell in dollar terms. And the dollar fell in gold terms. The dollar hit its high on that same date (June 16), of 24.36 milligrams of gold. It made a low on Thursday June 23, of 22.89mg, down -1.47mg.

The world’s reserve currency fell 6% in a week. Since everything else went down in terms of that currency, in reality they fell even more.

As always when the dollar falls, most people see only the rise in the price of gold. And gold commentators reiterate their call for gold to go up even more. They say that, now, people are starting to wake up (as if the low price of the metal was due to somnolence), and when they do gold will skyrocket.

We concede that, this time, there is more reason to think that the world of paper may have a big decline (and hence the mirror image, the price of gold, will rise). But as always, we want to see if this price move was real or if it was just leveraged speculators taking on even more leverage and going closer to all-in. So let’s look at the only true picture of the supply and demand fundamentals. But first, here’s the graph of the metals’ prices.

       The Prices of Gold and Silver

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio was down a hair this week. 

The Ratio of the Gold Price to the Silver Price

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

       The Gold Basis and Cobasis and the Dollar Price

If you wanted to make a case that the price of gold was going to go higher, a picture of gold abundance (i.e. the basis, the blue line) spiking up would be discouraging. The scarcity (i.e. the cobasis, the red line), already deep into negative territory, fell further in a sharp drop from -1.2% to -1.6%.

One can now make an annualized carry of +1.5% to buy gold metal and sell an August future, which will deliver in two months. Where else can you make that kind of return? For comparison, the LIBOR rate for two-month maturity is 0.52%.

There can be no question that the marginal buyer of gold is the warehouseman. With such an outsized profit to carry it, surely these folks are keeping busy and off the streets.

Why is there such a profit to be made carrying gold? Because current speculators are leveraging up even further, and/or new speculators are entering the game, adding their fresh leveraged bets to the table. After all, gold should go up in an event like Britain leaving the Eurozone.

As we hinted above, there is a case to be made that gold is a better asset to hold than UK gilts, German bunds, or US Treasurys. It’s the same case that could have been made in 2001 when the price of gold was low, in 2011, when the price was high, last fall when the price was lower or Thursday when the price spiked to $1359. However, you can’t trade based on the background story.

Maybe some people will change their preferences. Meanwhile, the debtors are under a rising burden for each dollar of debt due to falling interest rates, not to mention a rising number of dollars of debt as well.

About 18 months ago, the Swiss National Bank had been struggling to maintain a peg to the euro, set at 1.2 francs. While the SNB had been blustering that it had unlimited resources to squander, it finally had to let go when it hit its stop-loss. When that happened, the interest rate in Switzerland plunged. Keith wrote a paper arguing that the Swiss franc will collapse.

Negative interest is not just a disincentive to hold paper currency (though it is, of course). It is not merely that gold becomes more attractive than negative-yielding paper (though it does, of course). More importantly, negative interest is a powerful incentive to destroy capital. If you could borrow at -1% per annum, then you have a license to lose capital at a rate of 0.5%. Would you want to extend credit like this?

We note that the Swiss yield curve has sunk further beneath the surface of zero, since that article in January 2015. The 20-year bond is now drowning, and the 30-year is practically zero. 18 months ago, the 10-year was about -0.25%. Now it is below -0.53%.

At some point, this will begin driving people to gold. Not to make a bet on its price, using leverage, and ultimately to make more dollars. But to own, as a way of avoiding falling rates and rising counterparty risk.

However, it doesn’t look like we’re at that point just yet.

Indeed, despite the rise in the market price, we see a drop in our calculated fundamental price. It’s now a bit under $1,100, or about $230 below the market. As we often say, we do NOT recommend naked shorting a monetary metal. It is always possible that some central bank will do something even more crazy and the price could go +$250 in an instant. Additionally, chartists may be drawn to bet on the gold price because they see momentum. We can tell you that the metal is overpriced, or conversely the dollar is underpriced. By a sizeable amount.

Now let’s turn to silver.

The Silver Basis and Cobasis and the Dollar Price

It’s a similar picture in silver.

The fundamental price didn’t move much, while the market price is up about 27 cents. The price of the metal is about $2.60 over what we calculate is its fundamental.

Interestingly, this puts the fundamental ratio below the market, under 72. We shall see if this state persists.

 

© 2016 Monetary Metals

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Forget Brexit, This Is The Ticking Time Bomb For The Markets

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Low interest rates can be a great tool to get an economy in slow-down mode going again, but there always is an unwanted side effect. If credit becomes too cheap and available for just anyone, there’s bound to be ‘abuse’ in the system, as households (and companies) can spend the borrowed cash on anything they want.

We have already warned you before about the share buybacks on the financial markets, as the increasing profits (per share) are mainly inflated by lower interest expenses and a lower amount of outstanding shares, rather than really seeing a substantial improvement of the business and sector those companies are operating in.

Source: Factset Research

Even though there has been a lot of chatter of a rate hike (which will very likely be completely off the table after the Brexit-vote), S&P 500 companies still seem to be ‘addicted’ to borrowing cash to repurchase shares, and in the first quarter of this year, the 500 companies that are part of the S&P index have spent a stunning $161B on share repurchases, which is the second largest quarterly buyback rate since Q3 2007. And yes, we see the same sort of hubris in the markets today and we don’t think it’s a coincidence the record-high buyback rate was peaking right before the global financial crisis erupted in 2008.

Source: Factset Research

The same alarm bells are ringing now as well, as the world economy is slowing down and central banks are considering rate cuts and new rounds of quantitative easing to keep things going. Granted, this has been going on for a while, but the recent Brexit vote might be the long-awaited catalyst as it’s an indication things are changing in this world…

The massive buyback scheme (with almost $600B spent on buybacks from Q2 2015-Q1 2016) will simply HAVE to slow down as approximately 60% of the free cash flow of the S&P 500 is being spent on these buybacks. Sure, this means there’s an additional margin of 40% to make sure the S&P companies can keep this pace up, but then the next chart is showing there’s no way those companies can keep this thing going when (and not if) the economy will slowing down.

Source: Factset Research

Yes indeed, the dividend payout ratio on a trailing twelve month basis is approximately 40% for the S&P companies, and combined with the 60% spent on share buybacks, these companies have no fully allocated cash flow to fund share buybacks and dividends, rather than investing in growth. And that’s a worrisome conclusion.

After all, the central banks around the world are still playing with the idea to increase the interest rates as they think the world economy has been fixed, but if this indeed happens, the companies will have a serious problem to keep up the appearance as the impact of the higher interest rates on a company with an extensive net debt position could be devastating. Allow us to give you one example. McDonald’s was one of the buyback champions in the past 12 months, having spent in excess of $9B on share buybacks. Its shareholders are obviously pretty happy as this allows McDonalds to continue to boost its EPS, even though the underlying business is clearly slowing down. But there’s another, darker side as well. Right now, the $9B in additional debt will cost McDonald just $75-150M per year (depending on the maturity dates of the debt), but if the average interest rate would increase by 3% to return to the normal historical levels, this $9B will start to cost McDonalds an additional $270M per year in interest expenses. Interest expenses that will cause more cash to flow to its financiers rather than its shareholders, as the operating cash flow per share of McDonalds will decrease by $0.31. And that’s just based on the past 4 quarters. Imagine what the impact would be if McDonalds would be on the hook for the additional interest expenses associated with three years of share buybacks; the total interest expense would increase by $750M or almost a dollar per share. Meanwhile, the additional $750M in interest expenses also means the free cash flow will fall by in excess of 15% (!).

Share buybacks can be a nice tool to create value for your shareholders, but the tool should be used in an efficient way. Whilst it does make sense to repurchase shares at a free cash flow yield of 10%+, it makes absolutely no sense at all to buy back stock if you’re trading at a free cash flow yield of 4%.

Source: ibidem

The market seems to be addicted to cheap debt and associates the cash with spending it on share buybacks to reward its shareholders. That’s fine, but this capital allocation strategy will come back as a boomerang in the proverbial faces of the companies that are overspending on the buybacks and use borrowed cash to fund these repurchases. Right now, almost 30% of the S&P 500 companies are effectively ‘overspending’ on share buybacks.

It’s a ticking time bomb. Read here in our 'Guide to Gold' how you can protect yourself

Secular Investor offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies are transformed into the Gold & Silver Report and the Commodity Report.

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COMEX Registered Silver Now More Leveraged Than Gold

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By the SRSrocco Report,

While the world deals with the ramifications of BREXIT leave vote, the COMEX Registered Silver Inventories reached a new record as it pertains to leverage.  Matter-a-fact, the number of owners per ounce of Registered Silver is higher than gold.  In the beginning of the year, COMEX Gold Registered inventory owners per ounce spiked to over 500 to 1.

However, the situation for COMEX Registered Gold has calmed down quite a bit as its inventories have risen to 1.7 million oz (Moz) from the low of a 89,000 oz in a little more than six months:

Registered Gold owners per ounce have fallen from over 500/1, to 33/1 currently.  On the other hand, the situation in COMEX Registered Silver shows a much different picture:

While owners per oz of Registered Gold have dropped dramatically, Registered Silver Inventories have hit a new record of 44 owners per ounce.  This is nearly three times the rise since the latter part of 2015.

So, why have Registered Silver Inventories continued to decline, while Registered Gold Inventories move significantly higher??  What is even more interesting is that when the price of silver increased from its lows in 2009 to a high of $49 in 2011, the Registered Silver Inventories fell to a low of 26.4 Moz.

Speculation was at the time that industry and investors were acquiring at lot of silver, thus depleting the Registered Silver stocks.  However, something is totally different this time around.  As we can see in the chart above, the Registered Silver Inventories are at the lowest level in more than a decade at 23.3 Moz... but the price is only at $17.

This next chart compares the Registered Silver Inventories during the peak price in 2011 and today:

In April 2011, total Registered Silver Inventories fell to a low of 26.4 Moz as total open interest was approximately 750 Moz.  To get the total open interest in ounces, we multiply the open interest by 5,000 oz (a single contract equals 5,000 oz).  Now, if we look at what is taking place today, the leverage is even higher.

With the Registered Silver Inventories at 23.3 Moz, the total open interest is a staggering 1,028 Moz.  This is why the Owners Per Oz is now at 44/1.... another new record.

So, why would Registered Silver Inventories continue to decline since the beginning of the year while Registered Gold Inventories move up much higher?  Well, part of the reason may be due to the Chinese who are now stockpiling silver.  As I stated in previous articles, silver inventories at the Shanghai Futures Exchange increased from a low of 7.5 Moz in August 2015 to over 60 Moz currently.

Furthermore, if industrial silver demand is weaker, why hasn't the COMEX Registered Silver Inventories increased?  This was the case after the price of silver peaked and fell to $14 at the end of 2015.  Thus, as the price of silver fell from $49 in April 2011, to a low of $14 in 2015, Registered Silver Inventories grew from 26.4 Moz to over 70 Moz last year.

But, something changed in 2015.  Even though the price of silver did not rise all that much, we had the huge spike in Retail Silver Investment starting in June.  This caused Registered Silver Inventories to fall as Indians and North Americans were buying record silver bullion.

Lastly, I am hearing through several sources that Chinese are not only acquiring a lot of silver for industry, they are now buying silver for investment.  It will be interesting to see how things unfold this year, but if the Chinese start really buying and trading silver... we could see serious fireworks in the silver market.

Lastly, if you haven't checked out our new PRECIOUS METALS INVESTING section or our new LOWEST COST PRECIOUS METALS STORAGE page, I highly recommend you do.

heck back for new articles and updates at the SRSrocco Report.

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Historic, Mind Boggling Rise In Gold Open Interest Friday

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June 25 - Gold $1315.60 - Silver $17.72

"There are no markets anymore, just interventions." … Chris Powell, April 2008

GO GATA!

Friday was a historic one for a number of reasons. One of them leaps off the charts this morning in our gold/silver sector world.

Due to the unexpected and stunning Brexit vote, the price of gold began to take off like a cat on a hot tin roof, as you know. At one point gold shot up just pennies shy of $100 an ounce … a price move that my friend John Embry has long said is needed to show The Gold Cartel is in the biggest of trouble. How close that came. Course, the real deal $100 up day has to be on a closing basis.

The jolting uncertainty over how that vote, and developing ramifications, will affect the world economic scene created a surge of interest in gold as the go-to fallout investment play. Zero Hedge reported that on Friday Google showed something like five times the normal hits on gold as a subject matter.

It seems that interest also reverberated into the investment arena.

The gold and silver open interests are tallied on a daily basis. A "Preliminary" tabulation of their changes is usually posted late in the evening with a "Final" number posted mid-morning the following business day. At times the two numbers can be noticeably different, but for the most part, they are in decent sync.

Well, the "Preliminary" gold open interest just released revealed a mind boggling rise of 59,379 contracts to 628,885. The August contract alone was up 49,124 contracts. Throw out the window any over the top adjective you want to describe that number, and what took place on Friday, and it would not do it justice.

A big increase in the gold open interest would be in the 10,000 to 20,000 contract range with a 25,000 increase really registering on the radar screen. For that number to go up nearly 60,000 contracts puts it into seismic earthquake category.

Overnight the gold open interest shot up into multi-year high territory by a huge margin, the latest high being around 608,000. Gold’s all-time high number is around 650,000 when prices were FAR higher than they are at the moment.

Meanwhile, to add to the drama the silver open interest, after soaring into its own all-time high territory by a SIGNIFICANT amount this week, went surprisingly down 636 contracts to 218,343. My expectation was that it would have gone up sharply once again. Scratching head time on that score. However, it is important to keep in mind the silver open interest was already 10% over its latest all-time high number and 15% over its older all-time high set a few years ago. And that is with silver prices in the DUMPSTER!

An explanation perhaps. Thursday is First Notice Day for the July silver contract. The July OI went down 3603 contracts with some spec longs deciding to take some profits ahead of exit time … especially considering the way the silver price was under such obvious JPM/Gold Cartel control on Friday, with the price of gold going bonkers at the same time.

The bottom line: the silver open interest is in all-time high territory, and gold is on its way there, with the prices of both precious metals artificially suppressed to very LOW levels. Simplistically, the gold price is less than half of what it would be if it had kept up with inflation in the U.S. and silver is nearly 1/3 of a price it was able to reach 36 years ago.

The current gold/silver prices of $1315.60 and $17.72 respectively are only that low because of the relentless efforts of The Gold Cartel forces. That their open interest numbers are skyrocketing with prices so low strongly points out the increasingly desperate situation THEY find themselves in.

More simplicity…

*The world financial situation is in a precarious state.
*Quantitative Easing and low/negative interest rates have been undertaken by the world powers to stimulate world economic sluggishness.
*Those efforts have really become stale in the tooth.
*Gold is a barometer of U.S., and world, economic health. Down is good, up is bad. Way up is terrible. Thus the gold price is suppressed over and over again thanks to the elitist/establishment world.
*Silver is allied with gold. It has been put in the penalty box along with gold because a noticeable price dichotomy between the two would attract too much attention to what and why The Gold Cartel is doing to the price of gold.

There have been signs all year that this Gold Cartel is reaching a Tipping Point in which they will be unable to carry on and be effective at the current artificially low gold/silver prices … that they are going to be forced to retreat to MUCH higher price levels to continue their operations … operations which might even not be viable in the years ahead.

As you know, the mantra here this year is that gold and silver will never go up again from current price levels until we get a Commercial Signal Failure … which means The Gold Cartel forces short positions are routed by price explosions … with the weakest cabal members, and followers, forced to cover because the financial pain is too great.

The incredibly high gold/silver open interest numbers strongly suggest that Commercial Signal Failures are getting closer and closer at hand. As those failures manifest themselves, the prices of both precious metals will soar. For if a number of THEM are buying, who in the heck is going to be selling? It certainly won’t be the specs, who based on all of history, will be adding to their positions, like they are doing now.

POINT: the jolting Brexit vote is VERY likely to be the catalyst which finally causes Commercial Signal Failures because of the whopping new interest to buy gold (and silver) all over the world. It is going to be just TOO MUCH for the bums to deal with.

So, no matter what sort of counterattack The Gold Cartel feels compelled to launch in the days ahead, it is going to be overrun and fail. As time goes by these last gasp efforts to keep the gold and silver prices artficially submerged will look both pitiful and pathetic.

The price of gold is going to soar this year.

As for silver, been pounding my thoughts on the table all week. What THEY have done to the silver price is probably unprecedented. As a result, it is a coiled spring that is about to be sprung. Once silver is able to penetrate $18.50 on the upside, it will open Pandora’s Box. The price action at times will be similar to what we saw in gold on Thursday with its $10 higher upticks. Stay tuned!

The price action of the gold/silver shares have been screaming all year that mega upside price moves are in the works for the precious metals prices. The correction in the shares have been few and far between. Big Money (perhaps some of the in-the-know bad guy’s own money) keeps piling in. These savvy investors know what is coming down the pike and many certainly have a clear idea that The Gold Cartel’s jig is soon to be up.

If there ever was a time to be all over the precious metals sector, this is it!
So rule, Britannia -- Britannia, rule thyself

   

Submitted by cpowell on 02:21PM ET Friday, June 24, 2016. Section: Daily Dispatches

By Chris Powell
Journal Inquirer, Manchester, Connecticut
Friday, June 24, 2016

http://www.journalinquirer.com/opinion/chris_powell/rule- britannia----br...

Recognizing that the objective of the European project, ever-closer political and economic union, meant the destruction of democracy, sovereignty, and the country's very culture, Britain has voted in a great referendum to withdraw from the European Union.

The majority arose from a remarkable combination of the free-market, limited-government political right, the core of the Conservative Party, with the working-class political left, the core of the Labor Party, both party cores repudiating their leaderships as well as the national elites.
The result has enormous implications for the United Kingdom, starting with whether it can remain united, since Scotland - - formerly the most industrious and inventive province in the world, now perhaps the most welfare-addled -- probably will make a second attempt to secede, figuring that free stuff is more likely to flow through continued association with the EU than with England, which is growing resentful of the freeloaders up north.

But there are enormous implications for the world as well. The EU project never has won forthright ratification by the people of its member states and indeed has sometimes refused to accept rejection by them. Indeed, the whole EU government is largely unaccountable. So the British vote quickly prompted demands for similar referendums in France and the Netherlands, where conservative populist movements have been gaining strength.

The politically correct elites are portraying the British vote as a "xenophobic" response to free movement of labor across the EU and particularly as opposition to the vast recent immigration into Europe from the Middle East and Africa. This immigration is widely misunderstood as being mainly a matter of refugees from civil war. In fact this immigration has been mainly economic and it has driven wages down in less-skilled jobs while increasing welfare costs throughout Europe, which explains the British Laborite support for leaving the EU.

But it is not "xenophobic" to oppose the uncontrolled and indeed anarchic immigration the European Union has countenanced. For any nation that cannot control immigration isnt a nation at all or wont be one for long. Since most immigration into Europe lately has come from a medieval and essentially fascist culture and involves people who have little interest in assimilating into a democratic and secular society, this immigration has threatened to destroy Europe as it has understood itself. Britain has been lucky to be at the far end of this immigration, but voters there saw the mess it has been making on the other side of the Channel. They wisely opted to reassert control of their borders.

Their example should be appreciated in the United States, which for decades has failed to enforce its own immigration law and as a result hosts more than 10 million people living in the country illegally and unscreened. Fortunately few of this country's illegal immigrants come from a culture that believes in murdering homosexuals, oppressing women, and monopolizing religion. But the negative economic and social effects here are similar to those in Europe and properly have become political issues.

The main lesson of Britain's decision may be an old one - - that nations have to develop organically, arising from the consent of the governed and a common culture, and that they can't be manufactured by elites. Having defended its sovereignty and indeed liberty itself against Napoleon and Hitler, Britain now has set out to defend them again. So rule, Britannia -- Britannia, rule thyself.

The nations not so blest as thee
Must in their turn to tyrants fall,
While thou shalt flourish great and free,
The dread and envy of them all.

-----

Chris Powell is managing editor of the Journal Inquirer.

GATA BE IN IT TO WIN IT!
MIDAS

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A Legendary Day in the Making

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In what was an extraordinary day for global financial markets, and a day which will no doubt become legendary and enter folk memory in the UK and elsewhere, the electorate of the United Kingdom voted 51.9 % to 48.1% to leave the European Union. As the first count results began trickling in during the very early hours of Friday morning London time from northern England constituencies such as Newcastle and Sunderland, the cosy optimism that had prevailed in the Remain camp became increasingly agitated as the voting majority swung to the Leave side and quickly snowballed, in what was a shock to many.

The Sterling – Dollar cable rate plummeted, gold took off, especially in GBP, and BBC presenters became increasingly stony-faced and pale looking. By 3:40am UK time, Leave was ahead by 500,000 votes, and just an hour later the major UK networks of first ITV and then the BBC called the election to the Leave camp. Nigel Farage, promoter of the Leave side and leader of the UK Independence Party (UKIP), who had earlier conceded then un-conceded defeat, reappeared to the press and when asked what he would do next announced that he was going for a celebratory drink. As Farage and his boisterous entourage were undoubtedly finding a suitable early hostelry to settle into in Westminster, an ashen-faced British Prime Minister David Cameron appeared in Whitehall to announce his resignation in what had already become a day of records.

All this time gold was soaring and the British Pound was folding. Gold in GBP started moving at 2:45am UK time when it was at £852, and as the voting tide turned, gold in GBP peaked at 5:30am at approximately £1004, an 18% move in less than 3 hours. GBP gold then fell slightly from the peak and has settled into a roughly £950 to £960 range.

Gold In GBP 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=XAU&toIndex=GBP&period=DAY_1&weightUnit=tr_oz

US Dollar gold, which had been as low as $1250 before the voting pattern emerged, surged past $1300 before 3am UK time, and peaked at just under $1340 before 6am UK time, for an up move of 90 bucks, before it too fell back slightly into a range of $1310 to $1325.

Gold in USD 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=XAU&toIndex=USD&period=DAY_1&weightUnit=tr_oz

Silver also had dramatic gains intraday, especially in GBP.

Silver in GBP 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=XAG&toIndex=GBP&period=DAY_1&weightUnit=tr_oz

GBP - USD suffered an unprecedented fall by over 11% at one stage today, moving down 18 cents at one point from $1.50 to a 31-year low of $1.32, a level not seen since mid-1985. It was since recovered partially to trade at $1.375, still down over 8% on the day.

GBP - USD one day rate, 24th June 2016 https://www.bullionstar.com/charts/?fromIndex=GBP&toIndex=USD&period=DAY_1&weightUnit=tr_oz

The Euro weakened significantly against major currencies, one of the reasons being that the uncertainty of the UK’s exit from the EU may precipitate further defections that could include a Eurozone member country. FTSE equity indices fell sharply intraday before recovering somewhat. Bank shares were hammered especially the shares of UK and European banks.

The massive moves and volatility spikes caught much of the financial markets off-guard, hence the dramatic price movements and flight to safety. As gold was bid, it has yet again proved its role as one of the world’s preeminent safe havens and protectors of wealth that investors will flock to in times of crisis and fiat currency uncertainty. According to ICBC Standard Bank, as cited by the Financial Times, the Shanghai Gold Exchange traded a record equivalent of 143 tonnes of gold during its trading day today – 24^th June. One person who seems to have been confident of a Leave win is Arron Banks, a rich donor to the Leave side. He was said to have commissioned a poll of 10,000 people (which is a large sample size), and the results of this poll, released today, revealed a 52 – 48 win for Leave. So perhaps some hedge funds and investment banks were privy to similar data last night.

The world’s major central banks, who were meeting in Basel at the Bank for International Settlements this week, may appear to have been also blindsided by the election result, however, being the conservative types, they seem to have been prepared for this contingency and have, in a not too subtle way, indicated their collective intention to intervene in the FX and funding markets in a coordinate fashion, and with total disregard of the free functioning of financial markets. Central banks are by their very nature interventionist, meddling and secretive in their interventions, so this is hardly surprising. However, its more blatant than usual.

The Bank of England announced that it “will continue to pursue responsibilities for monetary and financial stability relentlessly”. This use of ‘relentlessly, is quite ominous bank-speak and could even suggest intervention in the gold market, since after all, the Bank of England houses its FX and Gold operations on the same desk and is allowed to use all assets of the HM Treasury’s Exchange Equalisation Account (EEA) to pursue monetary stability. So some ‘smoothing operations’ or ‘stabilisation operations’ on the gold price by the Bank of England (or by the BIS) are not beyond the bounds of possibility. In fact, it is logical for the major central banks to intervene in the gold market since they do not want gold to play the role of canary in the coalmine as this counters their ‘stability’ meme.

The ECB said this morning that it “stands ready to provide additional liquidity in Euro and foreign currency, in close contact with other central banks

In its statement today, the Bank of Japan said that it has ”a network of currency swap arrangements is already established by the central banks of major countries. The Bank of Japan will take appropriate measures as necessary, including activation of this network”.

Meanwhile, the US Federal Reserve announced that it is "carefully monitoring developments in global financial markets, in cooperation with other central banks,….The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets..”

Not to be outdone, the Swiss National Bank (SNB) didn’t just threaten to intervene, it did intervene today as the ‘Swiss franc came under upward pressure’. According to an email sent to Bloomberg by the SNB “has intervened in the foreign exchange market to stabilize the situation and will remain active in that market”.

BullionStar saw noticeably higher website traffic today in its gold and gold bar featured web pages, and somewhat higher demand and sales than normal, but BullionStar does not have the shortages in inventories that are being reported by other dealers. In fact, BullionStar has plenty of stock.

Where there does seem to be tightness in the physical gold market is in the London wholesale market, where gold has now flowed into London from Switzerland for 3 consecutive months (69 tonnes in May, 80 tonnes in April, and over 40 tonnes in March), most likely to top up gold holdings of the SPDR Gold Trust, whose inventory has now recorded a latest multi-year high of 915.9 tonnes. This importation of gold into London from Switzerland does seem to indicate that there is not much free float of gold sloshing around the London Gold Market.

The seismic shifts brought about by today’s extraordinary day in the UK will not settle quickly and may only just be the beginnings of further tremors that have been unwittingly released in into the global economic system. Politically, the UK is in a place where it did not think it would be. Cameron is resigning, Boris Johnson is favourite to take his place, and there is pressure on the opposition Labour leader Corbyn to resign with accusations that he is out of touch with the electorate. In the financial markets, the major banks are in deep trouble and dollar funding is an issue, even according to the central bank interventionalists. In such a climate of evaporating paper wealth, gold, and to an extent silver, are stepping forward to play their traditional roles of war chest assets, assets with real intrinsic value.

 

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Gold Surges 15% To £968 Per Ounce – BREXIT Creates EU Contagion Risk

Published here: http://redirect.viglink.com?u=http%3A%2F%2Fwww.zerohedge.com%2Fnews%2F2016-06-24%2Fgold-surges-15-%25C2%25A3968-ounce-%25E2%2580%2593-brexit-creates-eu-contagion-risk&key=ddaed8f51db7bb1330a6f6de768a69b8

Gold Surges 15% To £968 Per Ounce – BREXIT Creates EU Contagion Risk

– Sterling and euro have fallen sharply on fx markets
– Gold bullion surged 20% in sterling to £1,015/oz
– Gold now 15% in higher in GBP at £967 per ounce
– Gold 8% higher in EUR and 5% higher in USD
– Stocks globally are down sharply – FTSE down 9%
– European stocks down sharply
– Euro Stoxx 50 Futures collapsed over 11% at the open
– Bank shares are down 20% to 25%
– Cameron has resigned – adding to uncertainty in markets
– Record online sales at this time of day for GoldCore
– Nearly all buying with a preference for gold over silver
– Some selling – with some investors choosing to take profits after sizeable short term gains

 

Markets Today (Finviz)

 

Ramifications
– There is the real risk of contagion in the EU
– UK leaving the EU increases the risk of the EU disintegrating as it greatly increases the risk of France, Italy, Spain, Netherlands and Greece following the UK
– This poses risks to the “single currency,” the euro as these nations may revert to their national currencies
– Still fragile UK, French, Italian, Spanish, Greek and Irish banks are coming under pressure
– The uncertainty and shock is likely to undermine business and consumer confidence and likely lead to a recession in the UK and will likely impact an already vulnerable Eurozone and global economy
– Central banks are likely to embark on further QE and further devalue currencies in order to prevent recessions

UK
– The UK is likely to enter recession which will lead to further QE and see sterling devalued more over the long term
– The UK total debt to GDP ratio is over 450% which also poses severe risks to the economy and sterling
– UK banks remain vulnerable and in the event of contagion will likely see bail-ins and deposit confiscation
– British people, companies etc are very exposed to sterling. One way to hedge and protect against that risk is to diversify into physical gold and silver.

Conclusion
– The Brexit vote underlines the importance of owning gold as vital financial insurance in these uncertain times. The degree of risk means that investors should consider having higher allocations of 25% to 30% to physical gold and silver coins and bars.

Gold Prices (LBMA AM)
24 June: USD 1,313.85, EUR 1,181.28 & GBP 945.58 per ounce
23 June: USD 1,265.75, EUR 1,112.22 & GBP 850.96 per ounce
22 June: USD 1,265.00, EUR 1,122.31 & GBP 862.98 per ounce
21 June: USD 1,280.80, EUR 1,129.67 & GBP 866.72 per ounce
20 June: USD 1,283.25, EUR 1,132.08 & GBP 877.49 per ounce
17 June: USD 1,284.50, EUR 1,142.05 & GBP 899.41 per ounce
16 June: USD 1,307.00, EUR 1,161.14 & GBP 922.01 per ounce
15 June: USD 1,282.00, EUR 1,141.49 & GBP 903.04 per ounce

Silver Prices (LBMA)
24 June: USD 18.04, EUR 16.32 & GBP 13.18 per ounce
23 June: USD 17.29, EUR 15.16 & GBP 11.61 per ounce
22 June: USD 17.20, EUR 15.23 & GBP 11.72 per ounce
21 June: USD 17.36, EUR 15.34 & GBP 11.78 per ounce
20 June: USD 17.34, EUR 15.30 & GBP 11.85 per ounce
17 June: USD 17.37, EUR 15.43 & GBP 12.19 per ounce
16 June: USD 17.71, EUR 15.79 & GBP 12.54 per ounce
15 June: USD 17.41, EUR 15.51 & GBP 12.26 per ounce

Gold News and Commentary
GoldCore experienced record online sales for the time of day and may have to restrict trading to existing clients if demand remains high (Bloomberg via Business Times Singapore)
Elderly customer fearing economic collapse asked if she could invest all of her life’s savings in gold, despite the recommended investment level of 15% (WSJ)
Gold Sees Biggest Gain Since 2008 in Rush for Havens From Brexit (Bloomberg)
Gold Soars as Investors Seek Haven Following ‘Brexit’ (WSJ)
‘Buy gold’ searches soar 500pc after Britain votes to leave EU: here’s how to get your hands on the yellow metal (Telegraph)
Pound Plunges to Lowest in More Than 30 Years as Brexit Looms (Bloomberg)
Deutsche Bank to shut 188 German branches, cut 3,000 staff (CNBC)

Gold Soars Most In 42 Years For British Buyers (Zero Hedge)
Britain Votes to Leave E.U., Stunning the World (NY Times)
EU Referendum Live (Telegraph)
U.K. votes for Brexit: Latest on the fallout from the EU referendum (Marketwatch)
Britain votes leave: Don’t panic – this is an opportunity (Money Week)
Read More Here

Recent Market Updates
– BREXIT Day – Markets Becalmed – Gold Panic Prelude – Trading Hours
– Gold Lower Despite “Panic” Due To “Supply Issues” In Inter Bank Gold Market
– Gold Slips Despite UK Gold Demand Surging – Investors “Seek Stability”
– Gold Prices Surge to Highest in Nearly Two Years On FED and Brexit Haven Demand
– Gold Bullion Has Little Downside, Brexit Or Not, Says HSBC
– Central Bank of Ireland Warns Risks are Debt, Brexit, Geopolitical Tensions and Migration
– Gold In Euros Surges 6.5% In June and 17% YTD On BREXIT Concerns
– Soros Buying Gold On BREXIT, EU “Collapse” Risk
– UK Gold Demand Rises On BREXIT “Nerves”
– Pensions Timebomb in “Slow Motion Detonation” In UK, EU, U.S.
– Silver – Perfect Storm Brewing in the Market
– Martin Wolf: There Will Be Another “Huge” Financial Crisis

 

Note
– There has been record online sales on the GoldCore website for this time of day and the phones are ringing off the hook. We have had more sales than during the Lehman crisis and at the height of the Eurozone debt crisis. It is nearly all buying with a preference for gold over silver. We may have to restrict trading to existing clients if we continue to see this level of demand.

– We are seeing more selling then expected and seeing some clients choosing to take profits after the very sizeable short term capital gains. As a percentage of overall trading though, sellers are vastly outnumbered by buyers.

– Bullion inventories had already been increased to record levels and we are confident that the UK leaving the EU will lead to a sustained increase in coin and bar buying in the coming months.

– Sales of Britannias and Sovereigns which are CGT free for UK buyers have been very high and we are replenishing coin inventories this morning.

– We are seeing demand for legal tender British coins, both for delivery to clients in the UK but also for storage in Zurich.

– We are not selling out of any products and do not anticipate we will in the short term unless high net worth clients buy coins and bars in volume.

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