Tuesday, October 31, 2017

Daily Litecoin Price Forecast – Can LTC Profit from Bitcoin’s Civil War?

By Unknown | 12:03 PM | economics, finance, investing, precious metals, silver | No comments

Published here: https://www.profitconfidential.com/cryptocurrency/litecoin/daily-litecoin-price-forecast-31-oct/

It’s often said that Litecoin is the “silver to Bitcoin’s gold.” In fact, it’s said so often that investors often forget gold is tough to destroy. It can be melted, but not burned; buried, not vanished.

By contrast, Bitcoin goes through an existential crisis every month.

First, there was Bitcoin Cash, then recently Bitcoin Gold, and now SegWit2x lies before us. It seems like the Bitcoin community is perpetually at war with itself.

What happens if investors grow tired of these fights? Do they simply pull their money out of the industry altogether? Or, and this is where it gets interesting, do they switch to Litecoin?

We believe there is some possibility for the.

The post Daily Litecoin Price Forecast – Can LTC Profit from Bitcoin’s Civil War? appeared first on Profit Confidential.

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Stumbling UK Economy Shows Importance of Gold

By Unknown | 9:58 AM | economics, finance, investing, precious metals, silver | No comments

Published here: http://www.zerohedge.com/news/2017-10-31/stumbling-uk-economy-shows-importance-gold

Stumbling UK Economy Shows Importance of Gold

- UK economy outlook bleak amid Brexit, debt woes and rising inflation
- Confidence in UK housing market at five-year low
- UK high street sales crash at fastest rate since 2009
- Number registering as insolvent in England and Wales hit a five-year high in Q3
- UK public finance hole of almost £20bn in the public finances set to grow to £36bn by 2021-22
- Protect your savings with gold in the face of increased financial woes in UK

This week markets will be watching the UK with baited breath as the Monetary Policy Committee meets this Thursday to discuss a potential rate rise.

Expectations of a rise have increased to 80% in the last week. If the Bank of England does raise rates it will be for the first time in a decade. It is unlikely to be a dramatic increase though, probably a rise of 25 basis points to reverse the emergency rate cut which followed the Brexit vote.

Should the UK decide to raise rates this will likely boost confidence somewhat in the economy. However any increase in positivity regarding the UK will be short lived once markets realise it will take more than a small rate rise to get the country out of the huge red hole it is currently digging its way into.

Brexit is being blamed for the majority of the UK's woes at present, however this is merely a politician's scapegoat. Confidence in the UK housing market has slipped to its lowest level in five years, family spending power has declined in five out of the last six months, the hole in public finances is likely to increase over 100% from the initial forecast by 2020, personal insolvencies are at a five year high and inflation has hit 3%.

These plus many more financial and economic problems have long been brewing. Problems with money naturally lead to social problems which end up exacerbating themselves further as individuals find continue to struggle on a daily basis.

Sadly the UK is in a real state of limbo thanks to Brexit, how the government will manage to solve the other significant issues such as rising debt levels (public and private), inflation and a slowing economy whilst managing EU negotiations is a feat yet to be witnessed.

We have been approaching a juncture for some time where we must decide as individual savers, investors, pensioners and future pensioners what the best way to prepare for the future is. Do we stand back and believe that the government has our best interests at heart or do we prepare for their failure? Their inability to support the value of the pound, protect interest rates, avoid bank bail-ins and solve the debt crisis are all situations that could see our own savings put at real risk.

Falling confidence both in and inside the UK

Despite expectations of a rate rise, sterling stumbled in October thanks to weak economic data and more negative headlines regarding Brexit.

What's the one thing governments like to say positively about a weak currency? That it's good for exports...but not in the UK it's not.

As we explained earlier this month, a much revered boost to UK exports following the Brexit vote was most likely down to our gold market. Now that the Chinese have calmed down on their gold shopping spree we are seeing what state the rest of the export market is really in.

The Guardian explains:

The trade deficit in goods hit a record high, as the gap between what the UK bought and sold widened in August to £14.2bn. That was much bigger than expected, and up from £12.8bn in July. Imports surged by 4.2% during the month, while exports only rose by 0.7%. The overall trade deficit, including services, widened to £5.6bn in August from £4.2bn in July.

...and from within things aren't much better

Currency and export markets are not the only ones having a problem with the UK. There are nervous feelings much closer to home - in people's own homes and on the high street.

A Halifax bank survey found one in five British adults surveyed expect house prices to fall over the next 12 months. This is the weakest reading for consumer expectations since October 2012.

This negativity regarding the housing market is thanks to concerns over the economy, weak wage growth and concerns over rising inflation. For years the UK government has rallied around the UK housing market, convincing citizens that owning a home was a right of passage. It seems the jig is up.

Most new buyers are losing faith in the housing market as not only is the cost of borrowing set to raise but raising the funds for a deposit is near impossible. In the three months to August there was negative wage growth, bringing the total number of months of negative growth to six for 2017, alone.

In all regions of the UK incomes have failed to rise by more than the current inflation rate of 3%. This is not only placing pressure on the housing market but also on consumer spending.

A 'steep drop' in retail sales was reported in the CBI survey this month, alongside orders placed with suppliers dropping at their fastest rate since the spring of 2009.

But people still need to eat, clothe themselves, keep a roof over their families' heads and this is where the government has gone so badly wrong. By fuelling an era of cheap credit, stealthflation, zero-hour contracts and low wage growth families and individuals no longer know how to survive on their wage packets.

The annual rate of growth of consumer credit climbed is currently at 9.9%, having been as high as 10% in the summer.

According to Bank of England data, another £641m was put onto plastic in the month of September, the sharpest increase in debt since May 2016. The total credit card debt stock reached £69.4bn, the highest on record.

Unsurprisingly, this isn't sustainable. The number of people registering as insolvent in England and Wales hit a five-year high in the third quarter

The number of those registering as insolvent is only set to get worse should interest rates rise. A hike would push up the cost of both secured and unsecured borrowing.

As Gillian Guy, the chief executive of Citizens Advice, told the Independent:

“The rise and rise of consumer debt is a cause for alarm at a time when large numbers of people are already in financial difficulty."

Broken government = broken economy

Of course, very little of the 'on the ground' problems such as wage growth and consumer debt levels are making the headlines.

The headlines are the same as they have been for the last 18 months or so: BREXIT DISASTER.

Is it a disaster? Who knows, but what we do know is that it is costing a huge amount of money with even more expected to be paid out in the coming years. This is all money that the UK simply does not have.

It was only a fortnight ago that we found out Britain’s stock of wealth had fallen from a surplus of of £469 billion to a net deficit of £22 billion. This is down to a massive write-down of the UK’s assets and a drop in foreign direct investment (again, a lack of confidence in the UK).

Meanwhile the gap between government spending and tax receipts is also expected to 'outperform' expectations. The Institute for Fiscal Studies (IFS) expects it to reach £36bn by 2021-22, more than twice the initial official forecast of £17bn.

On the issue the IFS said:

“It is hard to see how the chancellor can both maintain the credibility of his fiscal targets and respond effectively to the growing demands for spending”

Quite. The outlook is not good. Productivity is expected to decline in the UK as the majority of jobs being created are low-skilled, low-wage jobs created for those in need. How this helps the UK tax receipts? It doesn't.

The Office for Budget Responsibility (OBR) has said the UK government will need to significantly lower its estimates for the economic output per hour worked in Britain. In a massive miscalculation admission it states that it views the 0.2% rate of productivity growth over the past five years as a better guide for 2017 than its forecast of 1.6% in March.

EU, it holds the first charge

Not only does the UK government not have the income to sort out its deficit or increase spending but the EU is coming after us for more money.

No one quite knows just yet what the 'divorce bill' will be, but more worryingly it looks like we can't get back the money we placed in a bank we own 16% of.

According to Alexander Stubb (vice president of the European Investment Bank) the UK may have to wait 30 years to get its £3bn back from the EU’s bank after Brexit and could be on the hook for £30billion if “things go sour”.

As bad as this sounds, can we at least enjoy the hint of irony in this situation. A UK government that has done very little to support customers from the tyranny of British banks, supported bail-outs and pushed for bail-ins is now facing its own problems getting back its money from a bank.

UK savers need to start learning from the mistakes of their leaders.

Conclusion: prepare for the long-term

The 2008/09 financial crisis was not the first economic disaster to hit the United Kingdom. Consider the Wall Street crash on 1929. It very quickly affected this small island nation, causing the economy to shrink by more than 5% and unemployment to spiral to 17%. All in just three years.

Today we find ourselves on arguably scarier ground. Despite lower unemployment, it is an increasingly unproductive labour force with which we find ourselves. It's nine years ago that the last financial crisis started and the economy has rebounded by less than 10% - a far slower pace than after the Great Depression.

The difference? In the 20th century the government put in place policies that worked for the long-term health of the economy. Today, governments are not looking at anything other than day-to-day results. They no longer prepare for the long-term health of the economy.

They are looking at Brexit and how to boost confidence in the UK. They have no idea how to do anymore, Brexit has got their knickers in a twist. This is unlikely to help struggling savers and consumers in the meantime.

Very often plans that result in positive outcomes a few years down the line aren't good for an election just a couple of years away. This means that we live in a five-year cycle of economic policies, budgets and grand plans.

Unfortunately this leaves savers and investors fending for themselves when it comes to planning their long-term finances. This is made more complex by the increasingly uncertain times in which politicians and central bankers are inevitably navigating us towards.

With this in mind we need to take our finances into our own hands. As we explained last week, we must prepare. Failure to prepare is preparing to fail.

Investors should protect themselves from the financial risks of the UK government by diversifying their savings and owning physical gold -not paper or digital gold.

Physical gold that is allocated and segregated cannot fall victim to bail-ins when the government is short of cash or inflation when the central ban needs to print more money.

Physical gold in your portfolio reduces the level of counterparty risk your savings are exposed to and ensures some level of sovereignty and financial safety and freedom when it comes to your wealth.

These financial risks including bail-ins are a threat to all savers in the western world.

News and Commentary

Small Caps Routed as U.S. Stocks Fall, Bonds Rise (Bloomberg.com)

Gold price rises 3.2% in Q3 (MiningWeekly.com)

Gold notches a gain for a second day as strong dollar pauses its climb (MarketWatch.com)

Gold steadies ahead of bumper week for central bank news (Reuters.com)

Trump likely to pick Jerome Powell as next Fed chair: source (Reuters.com)

Credit: Wall Street Journal

This Could Be Huge: Gold Bar Certified By Royal Canadian Mint Exposed As Fake (ZeroHedge.com)

Why Are Markets Rising Everywhere? Investors Can’t Stop Buying Every Dip (WSJ.com)

The US government quietly added $200+ billion to the debt this month alone. (SovereignMan.com)

Are ICOs Replacing IPOs? (USFunds.com)

The economy is failing. We need to think radically about how to fix it (TheGuardian.com)

Gold Prices (LBMA AM)

31 Oct: USD 1,274.40, GBP 964.21 & EUR 1,095.60 per ounce
30 Oct: USD 1,272.75, GBP 966.91 & EUR 1,093.80 per ounce
27 Oct: USD 1,267.80, GBP 968.35 & EUR 1,090.18 per ounce
26 Oct: USD 1,278.00, GBP 968.34 & EUR 1,082.34 per ounce
25 Oct: USD 1,273.00, GBP 964.81 & EUR 1,081.67 per ounce
24 Oct: USD 1,278.30, GBP 970.36 & EUR 1,087.32 per ounce

Silver Prices (LBMA)

31 Oct: USD 16.82, GBP 12.72 & EUR 14.45 per ounce
30 Oct: USD 16.74, GBP 12.69 & EUR 14.39 per ounce
27 Oct: USD 16.72, GBP 12.76 & EUR 14.38 per ounce
26 Oct: USD 16.97, GBP 12.84 & EUR 14.37 per ounce
25 Oct: USD 16.89, GBP 12.75 & EUR 14.34 per ounce
24 Oct: USD 17.04, GBP 12.92 & EUR 14.49 per ounce

Recent Market Updates

- Wozniak and Thiel Fuel Bitcoin-Gold Debate: Gold Comes Out On Top
- Russia Buys 34 Tonnes Of Gold In September
- Gold Will Be Safe Haven Again In Looming EU Crisis
- Gold Is Valuable Due to “Extreme Rarity” – Must See CNN Video
- Gold Is Better Store of Value Than Bitcoin – Goldman Sachs
- Next Wall Street Crash Looms? Lessons On Anniversary Of 1987 Crash
- Key Charts: Gold is Cheap and US Recession May Be Closer Than Think
- Gold Up 74% Since Last Market Peak 10 Years Ago
- How Gold Bullion Protects From Conflict And War
- Silver Bullion Prices Set to Soar
- Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures
- Puerto Rico Without Electricity, Wifi, ATMs Shows Importance of Cash, Gold and Silver
- U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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Monday, October 30, 2017

Falling Discount, Gold and Silver Get Powelled, Report 29 Oct 2017

By Unknown | 9:14 AM | economics, finance, investing, precious metals, silver | No comments

Published here: http://www.zerohedge.com/news/2017-10-30/falling-discount-gold-and-silver-get-powelled-report-29-oct-2017

Warren Buffet famously proposed the analogy of a machine that produces one dollar per year in perpetuity. He asks how much would you pay for this machine? Clearly it is worth something more than $1.00. And it’s equally clear that it’s not worth $1,000. The value is somewhere in between. But where?

This leads to the concept of discount (which we mentioned in Falling Productivity of Debt two weeks ago). A dollar to be paid next year is worth less than a dollar in the hand today. One reason is that we are mortal beings. In order to be alive next year, we must remain alive every single day between now and then. There are natural reasons for time preference—the desire to have a good today, and not postpone it. We are also not omniscient. Something may come up, such as an illness, which forces us to consume what we did not plan to consume.

Another reason is, of course, risk. Unlike the magic machine in our example, a business enterprise may cease to make money for any number reasons including a new competitor or changing customer preferences.

For many reasons, a dollar to be paid next year is not worth a dollar today. A dollar to be paid in ten years is worth even less. Future payments must be discounted. The discount is related to the interest rate, and it shares many of the same causes.

It can be quoted as a yield, if you look at earnings divided by share price. We aren’t going to go through the formula to discount future earnings into perpetuity here. However, the math works out. The current P/E ratio of S&P 500 stocks is 25.74. This is the same as saying the E/P ratio is 3.89%. If you discount a dollar of earnings every year into perpetuity, at 3.89%, you get 25.74. So we use discount rate and earnings yield equivalently, depending on context and the point we want to make.

The higher the price of the share, the lower the yield. With each halving of discount rate and hence earnings yield, the share price doubles. A nifty trick to create free money, eh? Just somehow lower rates and yields across the economy…

It should not be surprising that discount has been falling along with the interest rate. Let’s look at earnings yield again (ignoring dividend yield which is under the control of corporations, who have broad discretion to set the dividend, and hence not as clear a signal).

This chart is showing three things. First and most obvious, the earnings yield on stocks falls with the interest rate (as does marginal productivity of debt as we showed last week). And it makes sense, the more the Fed pushes down interest, then equities become more attractive. At least until their yields are pulled down closer to Treasury yields.

Second, yield purchasing power is falling. This is not how many groceries you could buy if you liquidate your stocks (as the mainstream view would have you think). It is how many groceries you can buy with the earnings of the businesses you own. Stocks are partial ownership of businesses, and as a shareholder you have a portion of the earnings. As yield purchasing power falls, it takes more and more capital to generate enough income to buy food. At the current level of 3.89%, if you need $50,000 a year to live, you need about $1.3 million worth of S&P shares.

And it’s actually worse than that. Corporations do not pay 100% of their profits to shareholders. At present, they pay out a bit under half of their profits. To live on the dividends, you would need about $2.7 million worth of shares. But as we noted above, equities incur significant risk that the business will become less profitable. Debt must be paid. Dividends are optional.

Third, and you probably saw this coming, discount is falling. The market price of that dollar of earnings way out in the futures, years away, is rising. It is saying that a dollar to be earned by the corporation in a decade, is worth over 67 cents today. And a dividend to be paid out in a decade is worth 83 cents.

I hardly think we would be alarmists or perma-bears to say that at such a low discount, investors have a razor thin margin of safety. This is without getting into the rising debt level to maintain even this profit. Nor the problem of borrowing to pay dividends.

We want to underscore one final point here. When the Fed pushes down interest rates, it manipulates discount and hence measurement of both time and risk. It is toying with powerful forces, which should not be toyed with. All the king’s horses and all the king’s men know little about the damage they wreak. They focus only on the rate at which consumer prices are rising, or perhaps GDP. Meanwhile, investors are forced to pretend that a bird 10 bushes away is worth almost as much as a bird in the hand.

We can only shake our heads again, and refer to the impotence of governments to repeal natural law with legislative law. We can only point to the example of King Canute. The tide did not roll back for his command, nor does time preference and discount bend to the will of King Fed.

We love to hate the expression “it’s not a problem until it’s a problem,” but it seems so apropos to the unsustainable trends of falling discount, rising corporate debt, and falling marginal productivity of debt.

The above, by the way, describes a process of consumption of capital. Of eating the seed corn (two processes, if you count corporate borrowing to pay dividends). With each new speculator buying shares at ever-higher prices, there is a transfer of wealth from the buyer to the seller. The seller receives it as income, and spends some of it. The sellers are consuming some of the buyers’ wealth. These buyers fork over their wealth in the expectation that new buyers will come along soon, and give them even more wealth.

This is also known as the wealth effect, without any apparent irony. The people it harms most, the owners of capital, seem to like it. The way a junkie seems to like heroin. It may be destroying him, but the euphoria blots out other considerations.

We will close with two separate thoughts about gold. These thoughts should be kept separate, as far too often proponents of buying gold (e.g. dealers) mix up monetary economics with the driver to buy the metal.

One, in a free market for money (aka gold standard), no one has the power to manipulate interest rates, hence asset prices, yield purchasing power, and discount rates. The time preference of the savers has real teeth. This is the principle virtue of the gold standard (not static consumer prices, aka inflation, which is neither possible nor desirable).

Two, the falling marginal productivity of debt and falling discount is pathological. If one wants to avoid (well, minimize) one’s exposure, then one buys gold. Not out of hopes of a higher price (and the same seed-corn eating process of speculation described above). But simply as the alternative to equities with too little discount, and bonds with too little interest.

The prices of the metals dropped a bit more this week, -$7 and -$0.16.

We all know the dollar is going down, that it is the stated policy of the Federal Reserve to make it go down. We all know that gold has been valued for thousands of years. So why do we measure the timeless metal in terms of paper currency? It should be the other way around. We therefore encourage people to think of the price of the dollar measured in gold, rather than the price of gold measured in dollars.

This week, the dollar was up to 24.43 milligrams of gold.

On Friday, we had a curious thing. A report came out that Jerome Powell, who is on the Board of Governors of the Federal Reserve, is now the leading candidate to replace Janet Yellen as Chairman. This was deemed by the market to be good for gold and especially silver. Powell is not only an establishment guy, he has been part of the decision making body which has brought you the monetary policy which has caused/coincided with the drop in the price of gold from $1,558 when he took office.

Presumably the reason why he is a candidate, and the reason why the gold market bid up the price of gold, is that he will continue the current central plan. This plan could be charitably dubbed “monetary largesse”. Notwithstanding the theory held by both the mainstream Fed apologists and alternative Fed critics, this policy has not resulted in skyrocketing prices of either consumer goods or gold. But no matter, the likely appointment of the mainstream insider (as opposed to the other leading candidate, John Taylor, who is an academic and not a Fed official) is good news. For gold. For now.

Despite that this same policy over the last 6 years has caused /coincided with falling and more recently sideways or weakly rising gold price action, Powell is deemed good for gold. Speaking of more recent weak rising price action, we know technical traders who see the small size of this move as proof of another down leg to come in the price.

In the short term, of course, the price will bang about due to such Kremlinology. In the long term, equally of course, the price will change due to the fundamentals. That is what this Report is all about. We have invested in many years of research and development (and a license to a tick history database that contains every bid and offer with sub-millisecond resolution, going back to 1996). The output of our data science work are graphs showing the internal structure of the market, with unprecedented accuracy and clarity.

Below, we will discuss both the long-term big picture supply and demand fundamentals, and the intraday action around the Powell news. But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.

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

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer 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 showing gold basis and cobasis with the price of the dollar in gold terms.

We see a rising cobasis (our measure of scarcity) along with a rising price of the dollar (i.e. falling price of gold, in dollar terms). This is not surprising; it is the typical pattern nowadays.

Our calculated Monetary Metals gold fundamental price fell $10 to $1,347.

Now let’s look at silver.

We also see a rising cobasis along with rising price of the dollar in silver terms (i.e. falling price of silver in dollar terms). Much of this rise is the mechanics of the contract roll, as traders start to sell the contract before expiry and buy the next month.

Our calculated Monetary Metals silver fundamental price fell $0.05 to $17.03.

Now, on to Friday’s “Powell Spike”. Somebody thought Powell would be good for gold. The price rallied four bucks in a minute, and then another three bucks within 8 minutes. But who? Was it stackers loading up on coins, prepping for inflatiocalypse? Or was it speculators loading up on leverage, betting on futures?

In Part II of this article, we answer this question by analyzing intraday graphs of the gold and silver basis.

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Wozniak and Thiel Fuel Bitcoin-Gold Debate: Gold Comes Out On Top

By Unknown | 7:13 AM | economics, finance, investing, precious metals, silver | No comments

Published here: http://www.zerohedge.com/news/2017-10-30/wozniak-and-thiel-fuel-bitcoin-gold-debate-gold-comes-out-top

Wozniak and Thiel Fuel Bitcoin-Gold Debate: Gold Comes Out On Top

- Gold versus bitcoin debate makes further headlines as tech experts weigh in
- Peter Thiel tells Saudi conference he believes bitcoin is underestimated and compares to gold
- Steve Wozniak tells Money 20/20 that bitcoin is a better standard of value than gold and U.S. dollar
-Both men recognise that the US dollar has little value and there are worthy competitors to its crown as reserve currency
- Gold continues to hold its value and has multiple uses, bitcoin remains volatile and difficult to use
- Experts are pushing an unnecessary debate as gold and bitcoin state more about fiat than each other

Lords of the tech world Peter Thiel and Steve Wozniak are the latest to add fuel to the bitcoin versus gold debate.

At separate conferences both told audiences that they had great hopes for bitcoin, comparing it to gold. The co-founder of Paypal and the Apple co-founder both expressed views that suggest they believe the world's biggest cryptocurrency is superior to the world's oldest form of money.

Each of their comments demonstrated some ignorance when it came to how gold operates and also in how they believe the two assets need to be considered competitors.

Their comments were really about the badly managed US dollar and how its time is limited. Yet as we have seen throughout the year, thoughts by experts return to bitcoin replacing gold rather than being a statement on the pushback against fiat money tyranny.

Misinformed with misdirection

At first Thiel's comments were relatively positive towards gold and he showed that he understood why investors choose to invest in both assets:

[Bitcoin is] like a reserve form of money, it's like gold and it's just a store of value. If Bitcoin ends up being the cyber equivalent of gold, it has a great potential left.

But Thiel also believes it has more potential than gold due to a misinformed belief about mining differences:

So bitcoin is also, it’s mineable, like gold it’s hard to mine, it’s actually harder to mine than gold and so in that sense it’s more constrained,”

Wozniak also had some interesting comments on how bitcoin and gold mining compared to one another:

“There is a certain finite amount of bitcoin that can ever exist. Gold gets mined and mined and mined. Maybe there’s a finite amount of gold in the world, but Bitcoin is even more mathematical and regulated and nobody can change mathematics.”

Wozniak @stevewoz likes bitcoin because it is based on mathematics pic.twitter.com/keanqCxf43

— Finom (@finom_company) 22 October 2017

Wozniak then described the US dollar as “kind of phony,” while describing Bitcoin as more “genuine and real.”

All about the dollar

To cut to the chase what Wozniak and Thiel are really saying is not that bitcoin and gold are competing with one another but instead that they are better than the US dollar.

This should be the main takeaway - the US dollar does have major problems. It has lost over 90% of its value, is controlled by one central bank and holds a huge amount of power over the rest of the world.

Things are so bad with the US dollar that the likes of Russia and China no longer want to hold it in reserve and are rapidly increasing their exposure to physical gold bullion.

This is where the crux of any debate should be, why is bitcoin so successful and can it follow in gold's footsteps when it comes to holding its value and outperforming fiat currencies. The two assets are so dramatically different that there should be little airtime given to an either/or debate.

Instead finance and tech commentators should recognise that if managed successfully bitcoin could join gold in its role as an alternative and powerful currency that operates outside of centralised markets and the clutches of central banks.

Bitcoin versus gold is an unnecessary debate that distracts from the main issue: both history and new technology are now offering investors and savers great opportunities to save and spend outside of the fiat system.

Forced to choose for no reason

What is fascinating about comments made by the likes of Thiel and Wozniak is that they force investors to believe an unnecessary choice is necessary.

Why do investors have to choose between gold and bitcoin? It's like saying you must choose between gold and silver or Apple and Amazon stock, there's no need. You can invest in both.

Thiel and Wozniak's comments do not add anything interesting to the discussion about the opportunities and risks of investing in bitcoin. Instead they merely add fuel to the headlines that ask if cryptos are 'killing gold' or if bitcoin is gold 2.0.

This line of thinking has been particularly popular this year as bitcoin has surged over $6000 whilst gold has climbed by 10%. There is no doubt that bitcoin has energised investors, especially those in the tech space and younger generations.

But because one asset is outperforming the other, does this make them substitute assets or should we consider them complementary?

Gold and bitcoin: Substitutes or complementary?

- Both are clearly seen as safe havens: Take gold's reaction when events such as North Korean sabre-rattling happen, or bitcoin's reaction to the Catalonia crisis.

- Both are decentralised: Neither asset relies on a central bank to manage supply, demand or price.

- Both have limited supply: Gold and bitcoin are mined. Gold relies on physical mining, bitcoin is mined mathematically.

The above three reasons show there are clear similarities between the two assets. They are also the main reasons why people choose to invest in gold and/or bitcoin. But differences do remain, making bitcoin and gold ideal complementary assets whilst showing the precious metal to be the ultimate safe haven against fiat tyranny.

- Gold is held by central banks, bitcoin is not. Currently the majority of central banks hold gold as part of their reserves.

The most recent example is Russia who added 1.1 million ounces to reserves last month in an ongoing diversification from USD. So far there is no evidence of central bank investment into bitcoin, suggesting that they do not have an interest in supporting its role in the economy.

- Gold is a highly liquid market. According to the LBMA some £13.8 billion worth of physical gold are traded just in London alone.

Despite the huge influx of investment into both the bitcoin and blockchain arena there is still some way for the cryptocurrency market to go before it reaches the level of liquidity we see in the precious metals' space.

- Bitcoin does have enormous potential as a medium of exchange. Currently it is mainly bought by traders looking to bet on price movements. Very little of the daily support behind the price is thanks to it being used in transactions.

The beauty of gold is that it has multiple uses. No longer is it used in minor hand-to-hand transactions to the extent we would have seen last century but it used in international trade agreements as well as in other areas such as medicine, technology and jewellery.

- This leads on to the final and very, very important point: gold does not rely on electricity in order to be traded. It is a physical asset, unlike bitcoin. In Puerto Rico 95% of citizens are without electricity. If the entire monetary system were based on an electronic form of cash, such as bitcoin, this would cause multiple problems for those in disaster struck areas, or even places where electricity just isn't as reliable. Gold bars or coins do not rely on electricity in order to be used in exchange for cash or goods.

Conclusion

Much of this debate fails to look at gold's USP that has allowed it to survive as an asset and form of money for millennia: its ability to hold its value.

Bitcoin may well retain its value, but for something that has climbed 6,000% in less than a decade, without much evidence of its key selling points the jury should perhaps step outside for a bit longer.

This does not mean that bitcoin does not have potential. There are clearly some returns to be made. If the likes of tech billionaires such as Thiel, Wozniak and Musk are getting involved then there could be some interesting developments on the horizon.

However, discovery of an asset that is posting incredible returns does not mean sensible investing needs to go out the window. Consider the approach of Frank Holmes, CEO of San Antonio-based US Global Investors, which has $2.6 billion in assets under management and is one of the definitive top precious metals funds.

Holmes has recently backed and become chairman for HIVE, a gold-miner-turned-bitcoin-miner. Holmes is still a big investor in gold but sees the complementary potential for bitcoin. As anyone should approach investing, Holmes is diversifying his portfolio.

This brings us back to our main point, the debate is not about bitcoin versus gold but instead about investors and savers protecting themselves from the rapid devaluation of fiat currencies.

Bitcoin is new and volatile, with much to prove. Gold has been in existence as money and a store of value for millennia, not to mention all of it's other roles.

Investors should continue to pay attention to the bitcoin chatter due to the narrative it offers around changing attitudes to money and the economy. However, they must remember that the debate is about security of savings and value. This is where gold is currently the only real contender for protecting your diversified portfolio.

News and Commentary

Gold edges down on caution over next Fed chair (Reuters.com)

Asian Stocks Mixed as Chinese Shares, Bonds Tumble (Bloomberg.com)

London Metal Exchange lays out timeline for reform (Reuters.com)

Three money managers who lived through the 1987 stock-market crash warn of danger today (MarketWatch.com)

Kuroda looks favored to get second term as Bank of Japan chief (Reuters.com)

Source: US Funds

The World Is Running out of Gold Mines (ValueWalk.com)

The Bitcoin Boom: Asset, Currency, Commodity Or Collectible? (BloombergQuint.com)

Opinion: How you’ll know when it’s time to buy gold (MarketWatch.com)

EU’s united front on Catalonia disguises a weak link or two (FT.com)

What Could Pop The Everything Bubble? (ZeroHedge.com)

Gold Prices (LBMA AM)

27 Oct: USD 1,267.80, GBP 968.35 & EUR 1,090.18 per ounce
26 Oct: USD 1,278.00, GBP 968.34 & EUR 1,082.34 per ounce
25 Oct: USD 1,273.00, GBP 964.81 & EUR 1,081.67 per ounce
24 Oct: USD 1,278.30, GBP 970.36 & EUR 1,087.32 per ounce
23 Oct: USD 1,275.25, GBP 967.79 & EUR 1,085.62 per ounce
20 Oct: USD 1,280.25, GBP 974.27 & EUR 1,084.76 per ounce
20 Oct: USD 1,280.25, GBP 974.27 & EUR 1,084.76 per ounce

Silver Prices (LBMA)

27 Oct: USD 16.72, GBP 12.76 & EUR 14.38 per ounce
26 Oct: USD 16.97, GBP 12.84 & EUR 14.37 per ounce
25 Oct: USD 16.89, GBP 12.75 & EUR 14.34 per ounce
24 Oct: USD 17.04, GBP 12.92 & EUR 14.49 per ounce
23 Oct: USD 17.00, GBP 12.90 & EUR 14.47 per ounce
20 Oct: USD 17.08, GBP 12.96 & EUR 14.46 per ounce
20 Oct: USD 17.08, GBP 12.96 & EUR 14.46 per ounce

Recent Market Updates

- Russia Buys 34 Tonnes Of Gold In September
- Gold Will Be Safe Haven Again In Looming EU Crisis
- Gold Is Valuable Due to “Extreme Rarity” – Must See CNN Video
- Gold Is Better Store of Value Than Bitcoin – Goldman Sachs
- Next Wall Street Crash Looms? Lessons On Anniversary Of 1987 Crash
- Key Charts: Gold is Cheap and US Recession May Be Closer Than Think
- Gold Up 74% Since Last Market Peak 10 Years Ago
- How Gold Bullion Protects From Conflict And War
- Silver Bullion Prices Set to Soar
- Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures
- Puerto Rico Without Electricity, Wifi, ATMs Shows Importance of Cash, Gold and Silver
- U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold
- Global Outlook – Mad, Mad, Mad, MAD World: News in Charts

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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Saturday, October 28, 2017

SIGNIFICANT DEVELOPMENTS IN THE PRECIOUS METALS MARKET: Where We Go From Here

By Unknown | 10:16 AM | economics, finance, investing, precious metals, silver | No comments

Published here: http://www.zerohedge.com/news/2017-10-28/significant-developments-precious-metals-market-where-we-go-here

By the SRSrocco Report,

As the U.S. Stock Market Bubble continues upward toward a giant pin, there are some interesting developments that precious metals investors will find quite interesting. Yes, there's still a lot of life left in the precious metals, even though pessimistic market sentiment has frustrated a lot of gold and silver investors.

Also, even though precious metals investment demand in the U.S. has fallen 40+% compared to the same time last year, it continues to be strong in other parts of the world. For example, German physical gold bar and coin demand increased 8% in the first half of 2017 versus the same period last year, while U.S. fell by 45%. Moreover, flows into European Gold ETF's hit a record during the second quarter of 2017:

Now, if we look at what is going on with gold and Central Bank demand, Russia takes the first place. According to the article by Smaulgld, Russia Steps Up Gold Purchase With Massive Buy In September:

In September 2017, the Central Bank of Russia added 1.1 million ounces (34.2138 tons) of gold to her reserves, raising her total to 1779.119 tons or 57.2 million ounces.

Central Bank of Russia has added 5.3 Million ounces (approximately 165 tonnes) in 2017 through September.

If you haven't already checked out Louis's work at Smaulgld.com, I highly recommend you do. So, as the German public and Russian Central bank continue to increase their gold holdings, Americans have cut back considerably, or worse... have been liquidating. Furthermore, the U.S. gold market is suffering another supply deficit this year. As of July 2017, U.S. gold mine supply and imports totaled 288 metric tons (mt) while exports were 290 mt. Thus, we have exported ALL of our gold mine supply and imports overseas. (NOTE: 1 Metric Ton = 32,150 troy oz.)

You see, the Federal Reserve and Wall Street have done a marvelous job in totally lobotomizing the American public in regards to gold as money. American citizens have no idea that the printing cost of $1,300 worth of $100 bills (13) costs $1.95, whereas one ounce of gold valued at $1,300 production cost is $1,150-$1,200. The U.S. Dollar was backed by gold up until 1971 but is now backed by the $20+ trillion in debt.

Surge In U.S. Debt Props Up Stock Market

As I mentioned in a previous article, it was uncanny how the ONE-DAY $318 billion increase in the U.S. debt on Sept 8th marked the peak in the precious metals prices while the Dow Jones Index bottomed. The next two charts show how an increase in debt impacted REAL MONEY negatively while it pushed the DOW JONES further into bubble territory:

You will notice in the GOLD chart that the Dow Jones Index remained flat right up until Sept 8th. Since Sept 8th, the Dow Jones Index increased 1,670 points (+8%) while gold fell $85 (-6%) and silver declined $1.30 (-7%). I get a laugh at the news how the U.S. hit an astonishing 3% GDP in the third quarter. It's amazing what debt can do to prop up markets and GDP.

So, how much has the U.S. Debt increased since Sept 8th? According to the figures at the TreasuryDirect.gov, a bunch:

In just seven weeks the wizards at the U.S. Treasury increased the total government debt by a whopping $600 billion (actually $595 billion to be exact). Again, amazing things can be done to the economy when you pump $600 billion into the market. Who the hell knows where this money goes, but I can guarantee that it continues to allow Americans to buy cars, homes and the millions of products and gadgets we most certainly can't live without.

UPDATE: The folks at TreasuryDirect.gov just updated the total public debt for Oct. 26th. I thought you would like to know they added another $14 billion yesterday, to $20,453 billion up from $20,439 billion on Oct 25th:

So, another $14 billion to make sure everything continues to run smoothly... or they hope and pray.

U.S. Interest Expense On Its Debt Hits Record In 2017

The downside to printing money and increasing debt is the little annoying problem called rising INTEREST PAYMENTS. Even though the Fed has been successful in lowering the interest rate, the U.S. Government paid the largest amount of interest expense ever this year. In fiscal 2017, the U.S. Treasury forked out $458 billion worth of the American's hard earned money just to cover its interest expense:

If we look at the historical data on the annual interest payments, this year's $458 billion was not much higher than the $454 billion in 2011. The reason for that was the average interest rate on our debt in 2011 was 3.1% versus the 2.3% for fiscal 2017. Thus, a falling interest rate on rising debt levels keeps the interest payment from surging higher.

For example, in 1988, the interest expense was $214 billion on total public debt of $2.6 trillion. However, the average interest rate on our interest expense was much higher at 8.2% in 1988. Can you imagine what the interest expense would be today at an 8.2% rate? It comes out to be a cool $1.67 trillion. Well, that just couldn't fly, could it? If the U.S. Treasury had to pay $1.67 trillion to service its debt today, it would go belly up.

Now, there's a good reason I selected 1988 interest rate and expense as an example. It has to do with the next section and the 1987 market crash.

U.S. Stocks Setting Up For Another 1987 Market Enema All Over Again

Investors who have been around for a while, certainly remember the 1987 market crash. In just one day, the Dow Jones Index lost 25% of its value. I bring this up because there seem to be some striking similarities between the market today and the time leading up to "Black Monday," in 1987.

According to the Zerohedge article," The Nightmare Scenario" Revisited: Albert Edwards Lays Out The Next Black Monday:

A retrospective macro-narrative was inevitably wrapped around the "Black Monday" 19 October 1987 equity market crash. My 30-year recollection is pretty good: 1987 saw a buoyant equity market rising briskly through most of the year as the oil price recovered from the previous year's collapse (from $30 to $8, see chart below). After a year in the doldrums the US economy started to accelerate notably through 1987 as the impact of 1986 interest rate cuts and a lower dollar worked. By the time of the Oct crash the US ISM had surged from 50 at the start of the year to over 60 - a level seldom ever reached (see chart below). Amazingly the ISM has just last month exceeded 60.0 for only the second time since 1987. Spooky!

I am clear in my mind both at the time and now, that the US equity market was priced for a continuation of rapid economic and profit growth and this was under threat. The Dow was on nose-bleed valuations, especially as it had ignored the bond sell-off for most of 1997 (was it really 30 years ago that US 10y yields briefly crawled back above 10% - the last time we would see double-digit yields). None of this would have mattered if the US equity market had been cheap. In my view the record 25% ‘Black Monday’ October 19 decline was due to a horrendously expensive equity market suddenly confronted with the fear of recession. Equity valuations matter.

To summarize Albert Edwards, he shows that the rebound in the oil price allowed the markets to recover in '86 and '87 as manufacturing (ISM) improved significantly. Furthermore, he says the ISM manufacturing number last month has exceeded the 60.0 mark, only for the second time since 1987.

Edwards concludes by saying the 1987 "Black Monday" crash would not have taken place if equity valuations were "cheap." Unfortunately, for the investors today, the valuation of the Dow Jones Index is most definitely in NOSE-BLEED territory (and then some), as Edwards suggests.

While mainstream investors and many frustrated precious metals holders have totally dismissed fundamental valuations, all bubbles come to an end. However, it seems to many; this one will go on forever. It won't.

Again, we can't forget about the $600 billion worth of U.S. Treasury Green Juice that was pumped into the market over the past seven weeks. To put that $600 billion into perspective, look at the following:

What $600 billion would buy:

2.0 million new homes worth $300,000 (New home sales Sept 2017, annualized = 677,000 units)

17.9 million new vehicles worth $33,560 (Total U.S. vehicle sales 2016 = 17.5 million)

15,000 metric tons of gold or five years of global mine supply (482 million oz)

The $600 billion pumped into the market over the past seven weeks would have purchased two million new homes or three years at the annual rate of 677,000 units. Furthermore, it would have purchased 17.9 million vehicles, more than the 17.5 million sold in 2016. Lastly, it would have purchased 15,000 metric tons (482 million oz) of gold.

Just think about that for a minute. The $600 billion of U.S. Treasury Green Juice would have purchased a year's worth U.S. citizens' vehicle purchases and three years worth of new homes. That's one hell of a lot of propping.... AND IN LESS THAN TWO MONTHS... LOL.

When the stock market finally does a nose-dive as its nose-bleed valuations finally succumb to investor FEAR, the price of gold and silver will head in the opposite direction, and violently. Yes, I realize it has been a bit of a long haul and a lot of frustration, but it will be worth it.

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.

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

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Friday, October 27, 2017

Russia Buys 34 Tonnes Of Gold In September

By Unknown | 8:20 AM | economics, finance, investing, precious metals, silver | No comments

Published here: http://www.zerohedge.com/news/2017-10-27/russia-buys-34-tonnes-gold-september

Russia Buys 34 Tonnes Of Gold In September

- Russia adds 1.1 million ounces to reserves in ongoing diversification from USD
- 34 ton addition brings Russia’s Central Bank holdings to 1,779t; 6th highest
- Russia's gold reserves are at highest point in Putin's 17-year reign
- Russia’s central bank will buy gold for its reserves on the Moscow Exchange
- Russia recognises gold's role as independent currency and safe haven

Editor: Mark O'Byrne

Prior to World War I Russia held the world's third largest gold reserves, behind America and France. In the subsequent Russian Revolution, civil war and the rise of communism, they dropped down the table of nations with large gold reserves and the U.S. became the largest holder of national gold reserves.

In recent years, since 2007, an increasingly powerful and assertive Russia has worked hard to reprise its place in the world's top gold reserve rankings, quadrupling its purchases in the period to June this year.

A 34 ton purchase of gold (1.1 million ounce) in September has put Russia firmly back in the golden spotlight. The country now holds 1,779 tons of gold, placing it sixth in the world and just behind China.

In the first two quarters of the year the CBR purchased 129 tons, making the late-summer purchase the best since October 2016. Taking into account the September purchase, Russia needs to buy just another 37t in order to purchase 200t by the end of the year - the amount it has done each year, for the last two years running.

In order to support gold purchases, the CBR announced this week that it would start purchasing gold on the Moscow Exchange.

Why the obsession with buying up gold and increasing their gold reserves? It is primarily about protecting the ruble and combating US petrodollar hegemony.

Not just about gold purchases

Today, Russia is a prominent player in the global gold market, both on the supply and demand side. It is the world’s third-largest producer, with a 200-year history of gold mining, and the most significant official purchaser of gold.”
World Gold Council

Russia isn't just making headlines for the amount of gold it is buying, but also for the amount it is producing.

The country is the world's third largest gold producer, snapping at the heels of Australia in second. The most recently available figures from Metals Focus show Russia produced 274 tonnes of gold in 2016. The majority of which appears to have been bought by the Russian Central Bank.

Polyus, Polymetall, Kinross, Petropavlovsk, and Nordgold are the country's top gold producers. Between them they produce more than 120 tons of gold a year, just under 50 percent of Russia’s total production, last year.

In the last decade the country has mined over 2,000t. According to Sergey Kashuba, Chairman of Russian Gold Producers Union this year's production is expected to exceed 300t, and increase very significantly to 400t by the end of 2018.

Why the gold diversification?

Whilst the Russian Central Bank has been stocking up on gold reserves it has noticeably not been increasing its foreign exchange reserves, especially the US dollar.

This is a similar approach to fellow-gold buyers China who have also been reducing their holdings of and dependence on the dollar. Both Russia and China have created mechanisms for trading nations to use gold rather than the US dollar in bilateral trade arrangements.

US dollar hegemony has given the United States unparalleled strategic advantage, notably preventing Russia and China from creating an economic area of integration. For years this has worked in the United States' favour, however when Putin came on the scene Russia almost immediately began to gradual move away from US dollar dependency.

Today the country has one of the lowest levels of dollar-denominated private and public debt, in the world. The country has also decreased the share of euro in its foreign reserves from 40% to 26%.

The danger with holding lots of dollars is if the US wanted to damage Russia's finances, this would be possible through currency manipulations and sanctions. Iran is an example of country holding gold is insurance against such an event. There is also the very real risk that the U.S. with sharply devalue the dollar in the coming months and years. This would result in Russia's dollar reserves becoming worth a lot less and in a worst case scenario become worthless.

China and Russia's frustration at the over reaching of the United States and the power it yields with the US dollar has seen both countries accelerate both gold mining and purchases in recent years. Note the contrast with the United States which is not topping up (or even auditing) its own gold reserves.

Often the argument for holding foreign currency in reserve is to provide liquidity in time of need. Most analysts forget that in this day and age one of the most liquid currencies remains gold. Therefore, it cannot be argued that Russia and China are not stocking up their reserves adequately.

Independent of any government and arguably more liquid than any other sovereign currency, gold is the ultimate currency for countries such as Russia, especially in the face of sanctions.

Dmitry Tulin, the First Deputy Governor, has also stated that the Bank of Russia increased gold purchases because only this reserve asset provides total protection against legal and political risks - “100% guarantee from legal and political risks.”

Learn to invest like the Russians

When asked about the central bank's gold purchases Elvira Nabiullina, Governor of the Bank of Russia said

“We are adhering to the principle of reserve diversification. This principle remains unchanged. From this perspective, our reserves do include gold."

Savers should take note, diversification should be the number one priority when it comes to protecting and growing your wealth in these uncertain times. This is for precisely the same reasons the Russian Central Bank is doing so - in order to protect against legal and political risks (Brexit, Trump etc) , but also economic and financial risks.

The risks to a saver may seem vastly different to those of a central bank but really they are quite similar. Both are exposed to the decisions made by politicians around the world. Like Russia, we too are awaiting with baited breath what President Trump will do next or what the EU will soon decide is the best way to 'protect' the Super state bloc. We are exposed, as are our savings and investments.

Gold cannot be devalued as fiat currencies can, allocated and segregated gold cannot be confiscated thanks to the irresponsible actions of a counterparty. It is a borderless, free currency that acts as the ultimate reserve in a diversified portfolio.

Russia and China have a plan to take charge of their financial future and gold is at the heart of that plan.

Gold Bullion Is A “100% Guarantee from Legal and Political Risks” – Russia

Russia Buys Gold Bullion For “Principles Of Diversification” – Central Bank Governor

News and Commentary

Gold edges higher in euro after dovish ECB (Reuters.com)

Gold steady as dollar gains versus euro on ECB policy (Reuters.com)

ECB warily starts pulling back from loose money (Reuters.com)

Dow Flirts With New High on Earnings, Euro Sinks (Bloomberg.com)

“Irrational exuberance on a scale not seen since the last financial crisis is pushing stocks to new record highs" said #GoldCore (MarketWatch.com)

Gold in Euros (1 Week)