There’s No Fever Like Gold Fever…

Published here: http://goldsilverworlds.com/gold-silver-price-news/theres-no-fever-like-gold-fever/

In late December 2019, a bill from the German finance ministry – which had passed the lower legislative house – proposed lowering the “anonymous purchase limit” for precious metals from €10,000 to €2,000 (about $2,200), a reduction of 80%.

At the current price, one could buy less than one and one-half troy ounces of gold without activating customer ID paperwork, and for businesses – a criminal background check!

This is an additional decline from the €15,000 mandated just two years ago. Set to become law in early 2020, the effect was immediate, as long lines outside a coin shop in Cologne show.

Some of the world’s largest banks – including several in Germany – have long made a habit of laundering literally billions of dollars, euros, and assorted financial instruments from questionable customers.

This all begs the question as to how further squeezing “the little man” by imposing onerous reporting over relatively tiny amounts of gold sales is going to accomplish anything constructive.

It turns out that this legislative effort is directly tied to European Union (EU) guidelines laid out in the anti-money laundering directive (AMLD5), requiring member state compliance. And some people wonder why Britain’s Labour Party – whose platform proposed adding still more regulatory burdens to the population – recently suffered such a devastating defeat.

Bitcoin.com reports the EU’s 5th anti-money laundering directive dictates that “non-transparent assets, accounts, and even private safety deposit boxes will now be subject to state information gathering by law.”

A user on Reddit remarked:

“They don’t want normal people to bank run their scam paper. Gold and hard assets is how you protect yourself from inflation. They (the governments/banks) want to know every single person that tries to get out of their cage…”

“…Gold is thus seen as one of the final hedges against irresponsible government policy, and the proposed new limits on precious metals, will leave residents of Germany with even fewer options.”

 A German citizen remarks:

“I live in Germany and the thing is we have had a full-blown shortage going on for weeks now. All these people in the line will go home empty handed. The smart ones have been exchanging paper for gold weeks and months ago… you have these (off-putting) ones who think the supply will wait for them when they lift (themselves up) in the last second. The retailers have been sold out for weeks already. It might clear up in January when the new law is in place, but I am not betting on it. It could also indicate that we are close to something bigger.”

Here’s the rub, and you can take this to the bank…

Authorities in most countries in the world, and sadly becoming more common by the day in that bastion of “democracy” – the U.S., at every level equate the desire for privacy with doing something “nefarious.” Some of Merriam-Webster’s numerous words define the term as “bad, evil, unethical, unlawful, wicked, wrong,” etc. Take your pick.

Ignore the clueless non-observer who reels off the knee-jerk comment that “If I don’t have anything to hide… It’s a very dangerous slide from “Innocent until proven guilty” to just the opposite.

It’s a corrosive trend that has all too-commonly become the operative principle of those whom we’ve elected to serve us, but who have now decided, in their finite wisdom, that we should serve them.

Not just “the man in the street.” Despite the excitement (and profit-building opportunities) offered by gold and silver from 2001-11 affected not just “the man on the street” but CEOs of most mining companies who continue to project the future by looking into the rearview mirror.

(1948) 40 grams (a tael) equals about 1-1/4 oz of gold

The knock-on effect meant that less money was spent on discovery, leading inexorably to lower production.

The overall result is that from the last decade, 2020 Reserves (the highest and most economically recoverable category of known ore deposit) for the world’s largest gold mining companies are down fully 26%.

David Morgan has long counseled newsletter subscribers to The Morgan Report, in addition to the tens of thousands who (weekly) receive The Free Morgan Report to start an accumulation program by acquiring physical gold and silver – viewing its role as insurance first, profit-potential second.

Own precious metals – i.e. honest money – paid for by fiat “paper promises.” On numerable occasions, over the thousands of years in which it has reliably fulfilled these roles, gold (and silver) have turned out to be literal life-savers in their own right.

Richard Davies toured Aceh, Indonesia after the 2004 tsunami that killed 250,000 people. He noted, “I met many survivors who were able to sell jewelry they were wearing… Wearing a gold bangle is like having enough cash on your wrist to employ a builder for a year… This traditional form of finance insulated Aceh and provided its entrepreneurs with rapid access to cash.”

If this doesn’t get your attention, then you’re just not paying attention!

Long before the move into gold becomes a full-fledged “rush,” smart money with deep pockets will have been activating their own accumulation plan.

The chart below from Goldman Sachs research indicates what’s been going on under the radar. Gold ETF (visible) accumulation – which by the way has now officially reached record levels – is being substantially eclipsed by the build in non-transparent gold investment, as it is ensconced around the world in private vaults, kept “in hand” near one’s residence, or simply buried in the back yard.

It’s not too late to accumulate! These and other data points, such as the current low level of U.S. Mint American Gold Eagle production – which follows demand – indicate that the majority of potential investors have yet to enter the gold space.

Act to strengthen your financial immune system by accumulating the desired level of metal now, before the ongoing gold-build morphs into a public-mania-infused “gold fever.” And before the concept of financial privacy and flexibility has become a relic of the not-too distant past.

 

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.

 

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Michael Pento: THIS ONE THING Will Tell Us When the Bubble Economy Is Bursting…

Published here: http://goldsilverworlds.com/economy/michael-pento-this-one-thing-will-tell-us-when-the-bubble-economy-is-bursting/

Mike Gleason: It is my privilege now to welcome back Michael Pento, President and founder of Pento Portfolio Strategies. Michael’s a well-known money manager, market commentator and author of the book, The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. He’s been a regular guest with us over the years and we always love getting his fantastic insights.

Michael, thanks for the time again today, and welcome back.

Michael Pento: It’s always a pleasure to be on with you. Thank you for inviting me back on the program.

Mike Gleason: Well, we’re having a hard time seeing a big move higher in metals prices until one of two things happen. We’ll start here. The first would be a pickup and safe haven demand. In our view there is too much investor complacency given the circumstances as has been the case for a while now, equity market valuations are sky high. Now we’ve got an election coming up, and there is at least some chance our next president will be an avowed socialist. This does not seem like the time for investors to be all in on risk trades, but we suppose the only thing that really matters is the Fed. They are going to do whatever it takes to keep the party in the stock markets going.

But what are your thoughts? Are we likely to see the markets get a wakeup call anytime soon or is the Fed likely to maintain complete control for the foreseeable future? Let’s start there.

Michael Pento: What a great question. Geez, you hit me over the head with a, a big anvil. That’s the $20 trillion question. I mean, can the market continue to defy gravity – and it is defying gravity, make no mistake about it. If you look at the total market cap to GDP, I look at the Wilshire 5000, that doesn’t have 5,000 stocks anymore. I think it’s like 3,500 but it’s the widest measurement of stocks, their market cap, to the underlying economy. That ratio is now 155%. Outside of March of 2000 when it was 145 or 148 around there, it’s never been near this. The average ratio is 0.8%… 80% or 0.8 in the ratio. So 155%, 1.55% above where the underlying supporting economy is. I mean it’s never been anywhere near this outside of that epic bubble in the NASDAQ debacle where the NASDAQ lost 80% of its value.

So that is where we are. We have S&P 500, year-over-year earnings are going to be negative. Margins are shrinking. Four quarters in a row of negative earnings per share growth, and profit margins are shrinking. You have the most overvalued market on the planet, that the planet has ever seen, and yet you wonder how much longer can it go? Well, think about it. The Fed said they were going to raise rates in December of 2018. Do you remember Jerome Powell said, “Hey, we raise rates and we’re going to 3.5% on the Fed funds rate, and we’re going to continue to drain our balance sheet. We’re going to continue quantitative tightening.” How long did that last, Mike?

They did a panic about face, took rates down to 1.5% on the overnight borrowing costs for banks, and they went back into QE. They’re doing $60 billion worth of money printing every month, and they have a repo facility on top of that. Hundreds of billions of dollars trying to keep the money markets liquid. So the Fed’s balance sheet was going to be drained back to normal, it went from 400 trillion from 800 billion. It was supposed to go back down to 800 billion or around there, but guess what? It’s now increased by a half a trillion dollars since mid-September.

So why is the market in a bubble? Why is the bubble getting bigger? Is because the Federal Reserve, and the ECB, and the Bank of Japan, and the Bank of India, and the People’s Bank of China, they’re all in a frantic to keep this artificial bubble alive. The only question I have is, you asked me, when is it going to end?

I’ll tell you when it’s going to end. I can’t tell you the date but I have a model that lets me know when to short the market, and believe me when I tell you, this crash is going to be something like we’ve never seen before. It could even dwarf the NASDAQ debacle of 2000, from 2000 to 2002.

I’m looking for a bust in junk bond yields. When junk bond yields implode, because that’s the nucleus of the crisis, that is when you’ll see me go net short the market in my portfolio, in the inflation/deflation and economic cycle model. And when will the junk bond market implode? Whenever the U.S. enters a recession and/or, because it could be both, and/or inflation begins to run intractable. That is when the market will implode. That is when we’ll have our reality check. That is when hopefully we make a lot of money for our investors while the chaos runs rampant around the world.

Mike Gleason: Sticking with the stock market theme here, you just published a note talking about Zombie Companies. What we’re seeing in the stock markets is truly amazing. You talk about defying gravity. That’s a great way of explaining it. You observed, in this piece, that stocks are at an all-time record highs, but at the same time we have 40%, nearly half of listed companies losing money. And 97% of CFOs in a survey published by Deloitte say a slowdown is either already started or will start this year. Talk a bit about the total and complete disconnect between stock prices and reality.

Michael Pento: Well, as you mentioned, there’s a record number of IPOs that don’t make any money. So, if you look at the trailing 12-month earnings, 40% of listed U.S. shares don’t make any money. And if you go back, it’s not just 12 months, if you go back three years, 30% of all listed companies haven’t made a nickel in the last three years and nobody seems to care.

This is the truth… Central Banks on a global basis have the global economy and global markets in the ICU unit, and they are on the life support system of money printing. I’ll give you an example. So, let’s look at the global debt scenario. Global debt is now $255 trillion, Mike, that’s up 50% since 2008. Government debt is up 80%, nearly 80% since 2008, the great credit crisis. But you ask yourself, what is the Portuguese, for example? The Portuguese 10-year note yields in this tsunami of new debt that’s been issued?

You know, back in 2000 as well, the PIGS, remember the PIG countries, their debt, Greek debt, the yield was 40%, Portugal and they were up at double digits. Italy, Greece, Ireland, Spain. The Portuguese 10-year note yield is 0.4%. Now on what planet does that make any sense at all? I mean, let’s just do a thought experiment for a second, Mike. Let’s just say that you knew that tomorrow the ECB, the Bank of Japan, and the Fed were going to make announcement. The announcement is that we will be ending QE and we will not buy when the assets mature… we will not roll over any more of that debt, corporate debt, sovereign debt, all that will be rolled off. What do you think would happen to the stock market? I think that it would be lock limit down.

Circuit breakers would be hit for many consecutive days, shutting down the exchange eventually. That’s what will happen. That’s the truth. So central banks have no choice, they’re trapped. They have no choice because, the world was ending in 2008, instead of taking our medicine then and allowing for a deflationary depression to wipe out all the imbalances, we levered up on everything. We increased debt on the government side by 80%, as I mentioned, $255 trillion, 330% of global GDP, total debt. We’ve created a massive corporate bond bubble, which I’d love to touch on in a second, unprecedented in the history of the planet. And interest rates, instead of being at five and a quarter percent like they were in the start of the crisis in 2008, they’ve gone to zero around the world, and in some cases negative, and have stayed there for a decade or more. And, of course, the consequences of that are massive intractable asset bubbles.

So, they’re trapped, there’s nothing they can do. They’re going to keep on printing money because they have no choice until the market decides that fiat currencies no longer deserve our trust, that inflation will run intractable, and then the junk bond market will implode.

And when that happens, what are you going to say to the central bank? You’ve reached your asinine 2% inflation target, even though we’re already there, that’s not good enough for them. The way they measure it, they want it at three or four, then they’ll be happy. Of course, by that time inflation will be running their double digits, and then they’re going to say, okay, we have intractable inflation and bond yields they’re starting to go crazy. They’re spiking uncontrollably. And the central banks are going to do what about that, exactly?

Are they going to print more money to combat an inflation problem? Are they going to then purchase every single fixed income asset in the globe? Corporate debt, municipal bonds, all sovereign debt. It doesn’t make any sense. That’s where we’re headed.

So, the problem here is you have to be on the vanguard, very vigilant for a recession in the United States, or for inflation to run intractable, that is when this thing will end. And it will end, it will go supernova. It’s not going to end in a quiet whimper.

Mike Gleason: Obviously the bigger the bubbles get the worse the bursting of that bubble if and when that does come, and it’s probably more a matter of when, not if at this point.

How about metals? Michael gold had nearly a 20% gain last year. Silver lagged a bit but still was up about 15%. Do you envision 2020 being better or worse or what compared to 2019 in the metals?

Michael Pento: Well, you had a big rise in the dollar, about two years ago starting. And then we see it had a nice run in 2019, but it is starting to top out and rollover. When I look at gold, I look at three factors. I want to see rising debt as a percentage of GDP. Check. I want to see a dollar that is rolling over, or at least topping out. Check, you’re getting that. And then, of course the most important thing is falling real interest rates. And usually these things are all part and parcel with a U.S. economy that is faltering. Right now I have 10% of the portfolio in physical gold doing very well, I’m happy with that. But you want to add miners to that when you see all those three things I just mentioned taking place.

So, the missing piece for me to get really heavy into miners, and even increase my position into physical gold, is I want to see the U.S. economy really take a dive to the South. So I’m going to need to see not only the manufacturing ISM, which is already plunging, I want to see the service sector ISM catch up with that.

I’d like to see that the initial unemployment claims spike above the 200,000 level where they’ve been for a long time. And that is when I’ll know… and I have eight more components to my economic cycle model… but those type of things will let me know when it’s time to not only get net short the stock market in the portfolio, but also to increase my exposure to gold and the miners.

Mike Gleason: Well, as we begin to wrap up here, Michael, any final comments? Some other things that you’re looking for that you think investors ought to be thinking about and watching for? Let’s hear some of that before we close.

Michael Pento: Well, I mean I just want to mention, the middle-class continues to be eviscerated. I don’t think the central banks of the world quite are on their side. They’re on the side of (JPMorgan chairman and CEO) Jamie Dimon, et al. So if you look at the combined assets and liabilities of the bottom, 50% of Americans, for example, it’s now become negative. 80% of Americans now live paycheck to paycheck because they spend so much of their income on food, clothing, shelter, energy. But the richest among us get to enjoy multiple homes and big stock portfolios. So that’s a trench in gap is getting wider and wider.

And I just want to say a couple of things about corporate debt. I mean, business debt surged by 60% since 2008. Triple B, the tranche of investment grade debt that’s on the lowest rung, comprises 50% of all investment grade. That yield is just above 3%. It’s never been this low in history. The construction of corporate debt, the record net debt as a percentage of EBITDA, so it’s the worst composition of corporate debt. The amount has surged, the levels of debt has surged, and the yields have never been lower. So, that’s the nucleus of next crisis.

Please keep in mind, if you’re not with me as an investor… also, you know, you can become a podcast subscriber, so I’ll let you know about a lot of this stuff on a higher level…. but please keep a close eye on the investment grade and junk bond corporate debt market, not only here in the United States but around the world. That is what you should be myopically focused upon, that’ll be your warning sign. That’ll be the canary in the coal mine to let you know when it’s time to sprint for the very narrow emergency exit.

Mike Gleason: Well, we’ll leave it there for today. Thanks so much again, Michael. We certainly appreciate the time and look forward to following these markets with you as we go through the year here in 2020. Now before we let you go, please tell people a little bit more about Pento Portfolio Strategies, where they can get the podcast, for instance, and follow you more closely.

Michael Pento: Sure. The podcast and my website is Michael Pento:. On that website you’ll be able to avail yourself of a free trial, five-week trial of my podcast called the Mid-Week Reality Check. I give you a whole bunch of data that Wall Street isn’t very proud of so they don’t tell you about it. But it’s all real, it’s all there.

I give you some high-level functionality on that analysis so you can understand when you should be long stocks, and when you should be out of the market. And of course, if you have a $100,000 or around that, you can join me in my firm and I’ll take care of your money personally. And my goal here is to participate in the bubble while it lasts, but most importantly to protect and profit.

I will personally make sure, and do the best I can, to make sure you’re not only protected when this crisis comes, but you actually make money when the reality check comes. And believe me, for this great nation, the sooner this occurs, the better off it will be for all involved.

Mike Gleason: Yeah, very well put. Michael’s obviously got a fantastic handle on these markets and he’s not one of these cheerleaders for the mainstream financial media. That’s, I guess, the reason why they’ve blackballed him on places like CNBC, but we’re very happy to have him on our podcast here on a regular basis.

Michael Pento: Mike, you probably have more viewers and listeners so, I’m happy to be with you.

Mike Gleason: Well we appreciate it. All the best to you in the new year, Michael, and thanks again. Have a great weekend, my friend.

Michael Pento: Thank you.

Mike Gleason: Well, that will wrap it up for this week. Thanks again to Michael Pento of Pento Portfolio Strategies. For more info please visit Michael Pento. You can sign up for his free email list, get a free trial of his weekly podcast, and get his fantastic market commentaries on a regular basis. Again just go to Michael Pento.

 

 

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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Precious Metals Set to Keep Powering Ahead

Published here: http://goldsilverworlds.com/gold-silver-price-news/precious-metals-set-to-keep-powering-ahead/

Precious metals got off to an explosive early start to 2020 as tensions between the U.S. and Iran drove safe-haven buying.

Of course, gold and silver markets will need more than a geopolitical flare up to drive a long-term bull market advance.

The question for investors is whether the fundamental picture now looks promising or fleeting.

In our view, the fundamentals are turning in favor of higher gold and silver prices.

From fiscally reckless trillion-dollar deficits in Washington, to a Federal Reserve obsessed with generating higher rates of inflation, to mining supplies of gold and silver tightening, the ingredients for a big bull market are in place.

Fed Doubles Down on Higher Inflation

With the Fed now on pause with interest rates after having thrice cut in 2019, it is also engaging in massive backdoor debt monetization (“not QE”). Its balance sheet will likely rise to an all-time record sometime this spring, further cheapening the real value of the Federal Reserve Note in the process.

Loose monetary policy should continue being supportive of higher asset prices in general.

During a press conference in late 2019, Fed Chairman Jerome Powell indicated he would like to a see a significant and sustained rise in inflation before hiking rates again.

Earlier this month, John Williams, president of the New York Federal Reserve Bank, said the Fed should consider “doubling down” on its inflation target – pushing consumer prices higher by reinforcing public expectations that the Fed will remain accommodative.

Higher inflation coupled with low interest rates could potentially be rocket fuel for precious metals markets.

Why Silver May Be the Metal to Own in the 2020s

One of the most remarkable technical developments of 2019 was the gold:silver ratio spiking to 95:1 – its highest level since the early 1990s. It finished the year at 85:1.

A continued decline in the gold:silver ratio toward more historically normal levels would entail not only an outperformance in silver – but also likely a bull market in both gold and silver.

The last powerful decline in the gold:silver ratio from 2009 to 2011 translated into silver surging up over $49/oz and gold making a record high at $1,900/oz.

Silver may be the metal to watch (and own) in 2020 and beyond. If global industrial and investment demand picks up even slightly, supply will struggle to keep pace.

In fact, silver mining supply is heading in the opposite direction. The Silver Institute’s World Silver Survey shows production falling at an annual rate of 2%.

Mines have been depleting their silver reserves and haven’t had the incentive to develop new projects given low spot prices and geological challenges due to declining ore grades.

According to Katusa Research, “The average head grade has fallen by over 50% since 2010. This is not a good situation for a miner. In a world where input and production costs are rising yet profit per tonne of rock has fallen by 50%, this poses serious long-term potential problems.”

Investing in a miner is always in iffy proposition, even if you do your homework. The busts tend to outweigh the booms.

And in the case of silver miners, most are primarily in the business of mining other metals (such as lead, copper, nickel, zinc, or gold) – and only mine silver as a byproduct.

The lack of a healthy primary silver mining industry can work to the advantage of physical silver investors. It means that supply will remain constrained in the years ahead.

Even if higher spot prices begin to make mining silver more profitable, the beaten and battered industry won’t have the immediate capacity to grow production to any significant degree. It will take years of rebuilding.

In the meantime, once silver breaks above overhead technical resistance from $20-$21/oz, the path should be clear for a run toward its old record high.

The Platinum Wild Card

The other metal with big upside potential in the 2020s is platinum. It has gotten clobbered by palladium and rhodium in recent years. But the extreme price disparity between platinum and those other two platinum group metals makes it a compelling alternative for automakers and other industrial users.

“Platinum had fallen out of favor among investors after Volkswagen AG’s emissions-cheating scandal in 2015 prompted commuters to turn away from diesel vehicles. The market has overestimated the decline in demand for autocatalysts,” reports Bloomberg (via Mining.com)

“By 2025, about 850,000 metric tons of palladium used in autocatalysts could be substituted with platinum…”

Although downside is likely limited, platinum could spend much of 2020 basing out before substitution kicks in to push prices much higher in the years ahead. Adding to the fundamental story will be a rise in the use of fuel cells for power generation, which use platinum.

The Gold Safe Haven

As always, precious metals investors should first stake out core positions in gold and silver. They are money, first and foremost.

Monetary demand for gold – led by central banks in Russia, China, and elsewhere – is likely to remain strong.

Even if the global economy falters and causes industrial demand for the white metals to slip, gold buying won’t necessarily go down. It could even increase on a flight to safety.

Gold may not be the cheapest metal, but it is cheap relative to the U.S. stock market. And the protection physical gold provides from the risks of financial turmoil is invaluable.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator

Published here: http://goldsilverworlds.com/physical-market/yes-china-is-a-currency-manipulator-and-the-u-s-banking-system-is-a-metals-manipulator/

The U.S. Treasury Department announced Monday that China is no longer on a list of countries deemed to be “currency manipulators.” The timing was awfully convenient, coming just ahead of an expected Phase One trade deal between the two powers.

Nobody actually believes China has stopped manipulating the value of its yuan versus the U.S. dollar.

But the Trump administration is apparently willing to accept a certain degree of currency rigging in exchange for other concessions on trade.

It’s not as if the U.S. government has a stellar record when it comes to heeding principles of free and fair currency markets. It (through the Exchange Stabilization Fund and other vehicles) is constantly trying to manage the value of the dollar versus the currencies of trading partners, too.

It’s not as if equity markets, interest rate markets, and precious metals futures markets are free from manipulation, either. Price rigging schemes of various sorts – ranging from small-scale “spoofing” to large-scale suppression – occur practically around the clock.

Occasionally, there are prosecutions.

Last year, for example, the U.S. Department of Justice criminally charged several JPMorgan traders for fraud and racketeering in a conspiracy to rig precious metals markets.

Yet previous criminal investigations by federal regulators have often gone nowhere, with evidence of manipulation inexplicably disregarded.

Congressman Alex Mooney from West Virginia has asked Attorney General Bill Barr to look into price rigging, particularly within the silver market which is regularly subjected to artificial volatility induced by large institutional traders (i.e., bullion banks) with outsized positions.

The manipulation may be occurring on an even larger scale if the Federal Reserve or the U.S. government or its agents are involved. It is widely suspected but difficult to prove since the Fed operates in secret and the government isn’t keen on investigating itself.

Regardless of what the motivation may be, it is an objective fact that the supply of futures contracts surged last year in both gold and silver markets.

Open interest in gold was up over 70%. Put another way, the supply of paper gold rose by 70% or 33 million new ounces – absorbing much of the growing demand for the metal and preventing prices from rising even more than they did.

Even as vastly more contracts for gold exchanged hands, the amount of physical gold available for delivery in vaults barely budged. Thus, while gold itself is scarce and highly sought after, futures contracts can seemingly be generated in unlimited quantities to divert buyers away from the real thing.

According to Dave Kranzler of Investment Research Dynamics, “Since the introduction of paper gold, the Comex – gold and silver trading – has evolved into what can only be described as a caricature of a ‘market.’ The open interest in gold contracts is nearly 10 times the amount of physical gold reportedly held in Comex vaults. It’s 60 times the amount of ‘registered’ gold, the gold designated as available for delivery.”

Some gold bugs expect an eventual COMEX default – a force majeure, a run on the bank for physical metal that sends prices explosively higher. While such a scenario is possible, it is not necessarily probable.

The powers that be have been adept at playing the paper charade to their advantage for decades. They may be unscrupulous or even evil, but they are not dumb.

The campaign popularized briefly a few years ago of “Buy Silver, Crash JPMorgan” was based on a misunderstanding of the mega banks’ short exposure to silver.

The banks aren’t making an enormous long-term bet that silver will fall and risking everything on it. They are in the markets with complex hedges and trading algorithms that can generate micro-profits on minute-by-minute moves up or down.

Yes, the banks can suppress rallies and trigger sell-offs by going heavily short – even selling more ounces than they could possibly deliver. But the reality is, they will never have to settle their contracts in physical metal.

Financial institutions are playing in a cash market tied to precious metals, not the actual physical market.

The best physical investors can hope for is that the cash/paper markets for gold and silver lose credibility and diverge from real-world pricing for industrial users and wholesale bullion buyers.

Or, alternatively the powers-that-be could avoid such an embarrassment by standing aside while prices reset higher, and then choose a new level at which to try to hold the line.

Ultimately, however, the supply of physical precious metals cannot be manipulated into existence any bank or government. Either it’s real and it’s available or it isn’t.

The key to defeating market riggers – or at least rendering their paper shenanigans irrelevant – is for buyers to avoid derivative markets and insist on obtaining physical metal from physical sources.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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Fighting the Fed (and the Crooked Banks) by Holding Gold

Published here: http://goldsilverworlds.com/gold-silver-insights/fighting-the-fed-and-the-crooked-banks-by-holding-gold/

Market forecaster Martin Zweig famously warned investors against underestimating the power of the Federal Reserve Bank to control markets. He coined the phrase “Don’t fight the Fed” back in the 80’s. Precious metals investors are wondering if this is still good advice.

On one hand, it is pretty hard to argue with that bit of wisdom.

The Fed Zweig was referencing had begun taking a more overt role in markets, using interest rates as a tool for managing the economy.

Paul Volcker dramatically raised interest rates to put price inflation from the late 1970’s back under control.

Zweig hailed from an era of less irresponsible central bankers. He expected them to use their immense power in rational ways.

Today he might be disturbed by just how vast the powers of the central bank have become. Officials there recognize no limits on their authority. They buy stocks, spearhead bank bailouts, monetize federal debt, and act as a lender of last resort in the repo markets.

The Fed’s balance sheet exploded to 4 trillion dollars over the past decade. It is stuffed with assets few others wanted to buy; U.S. debt with very low yields, dodgy mortgage securities and who knows what else.

Officials there have unlimited power, but the way they use it undermines – not inspires – confidence. The feeble attempt to normalize interest rates and unload some of the junk on their balance sheet failed a year ago when the stimulus addicted equity markets went into withdrawal.

Past assurances about being able to throttle back when the economy recovered proved to be worthless. They are back to spiking the punch bowl, and investors have to worry about how crazy things will get this time around.

Fed bankers won’t give an honest accounting for their extraordinary intervention in the repo markets, but it smells like trouble. If it spreads, rates will be headed back toward zero.

They talk openly about even more bizarre and extreme policies, including negative interest rates, as tools to combat an economic slowdown.

The power of the Fed isn’t the only consideration when deciding how to invest. It is just as important to think about who wields that power and how well they do it.

For the most part, today’s central bankers lack wisdom or principles. They have Politburo-like arrogance in their ability to centrally plan the economy. And they lack Volcker’s tolerance for pain which explains why the bubbles they blow just keep getting bigger and more dangerous.

Fighting the Fed may be a bad idea. But so is climbing on board with the people running policy there. We suggest the best plan is to try and get out of their way. That is what an investment in physical gold and silver is really about.

 

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

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Bullion Banks Used Paper Gold and Silver to Restrain Price Advance in 2019

Published here: http://goldsilverworlds.com/physical-market/bullion-banks-used-paper-gold-and-silver-to-restrain-price-advance-in-2019/

Gold and silver investors buy metals because they are scarce. Precious metals are by nature difficult to find, and hard to produce. Consequently, above ground stocks are limited and valuable, particularly when priced in unlimited fiat currencies.

The bankers and government officials behind these fiat currency systems don’t like stable monetary benchmarks such as gold putting their inflation schemes on full display. They absolutely hate that gold works as a refuge.

Inflation is a stealth tax. Instead of overtly raising taxes, politicians simply borrow and print the money needed for more government. They just need people not to notice.

Which brings us to the futures markets for gold and silver. They are the solution to the difficult scarcity problem that metals pose for bankers and bureaucrats. The futures markets are the primary tool for managing prices and discouraging people from turning to metals as a hedge against inflation.

Craig Hemke of the TF Metals Report published a recap of futures market activity in 2019. It perfectly captures how their tool works. They replaced real markets for actual gold and silver with a market for paper gold and silver proxies. Then they severed all connection between the proxies and physical metal.

Hemke writes with regard to gold:

For the year, Comex Digital Gold was up 18.75% from $1,280 to $1,520. An 18.75% gain is certainly impressive, and we’ll take every basis point. However, it’s even more impressive when you pause to consider that the total amount of Comex contracts was increased by 74.2% from 451,460 to 786,166. That’s an increase of 33,480,600 digital, pretend ounces all while the total amount of vaulted gold in the Comex depositories was barely changed.

 And for silver:

For the year, price rose 15.1% from $15.55 to $17.90. Total contract open interest rose from 176,159 to 229,680 for a total of 30.4%. Again, that’s a total of 1,150,000,000 ounces of fantasy silver on an exchange when the ENTIRE WORLD produces less than 900,000,000 ounces in a year.

 The bullion banks are selling a lot of paper gold and silver.

Imagine the gold price if demand for more than 33 million ounces were actually directed into the physical bullion markets, where supply is scarce and limited, rather than the futures markets where banks supply contracts for all the buyers who show up.

And barely an ounce of actual metal has to be found, mined, refined and moved into bullion bank vaults.

This mechanism works beautifully for those who prefer to keep a lid on prices. Precious metals and the topic of honest money get almost zero attention.

Almost no one is talking about the trillion-dollar federal deficits. In 2019, the Federal Reserve returned to monetizing hundreds of billions in federal debt. Most people now assume that is normal.

Perhaps most important for the central planners trying to maintain the fiat dollar, there is very little discussion about why gold and silver prices are rising.

Bankers and bureaucrats are trying to herd people into the Federal Reserve Note and other preferred asset classes, including bonds. They don’t want people buying, or even talking about inflation and financial turmoil hedges like precious metals.

These people are not good shepherds, and they don’t have the public’s best interest at heart. As such, it is probably not a good idea to follow the herd.

 

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

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Weldon: “This Opportunity Here Is As Good As It Gets…We’re Playing Gold & Silver Very Aggressively.”

Published here: http://goldsilverworlds.com/gold-silver-experts/weldon-this-opportunity-here-is-as-good-as-it-getswere-playing-gold-silver-very-aggressively/

Mike Gleason: It is my privilege now to welcome back our good friend Greg Weldon, CEO and president of Weldon Financial. Greg has decades of market research and trading experience specializing in the metals and commodity markets and even authored a book back in 2016 titled Gold Trading Boot Camp where he accurately predicted the implosion of the US credit market and urged people to buy gold when it was only $550 an ounce.

He’s made a lot of great calls right here on this podcast this year and it’s great to have him back on with us. Greg, thanks for the time again and welcome. How are you?

Greg Weldon: I’m great, Mike. My pleasure, anytime. You do a great job, so I’m always happy to contribute.

Mike Gleason: Well, it’s great to get people like you on as frequently as we have. We’re very fortunate, so thank you. Well, Greg as we’re talking here on Wednesday afternoon, the stock markets sold off yesterday and we got a rally in metals, this morning is as if by magic in the equity markets are levitating and metals are being sold.

Some unnamed official reportedly said the U.S. and China are close to a trade deal. Where have we heard that before? The sort of rumor of an imminent deal on trade has been floated about 84 times over the past couple of years now and somehow the markets appear to keep buying it every time. We aren’t sure why real people would still be responding to this news. Are the algorithms completely in control of things here, Greg, what’s going on?

Greg Weldon: Wow. I mean I don’t know about the algorithms, but I can tell you this whole situation on trade makes it virtually impossible to handicap what the market is going to do on a short-term basis, that’s for sure. And like you said, it’s dark out one day and the sun shining right the next day, and you can never tell what the forecast is going to be. So, having said all that, and I will make three points.

Number one, I mean, a trade deal is not an engine of global growth. A trade deal evens the playing field that is uneven and if you were to completely wipe out the U.S. trade deficit on the annual basis with China, it would be less than 2% of U.S. GDP. So, anticipating a trade deal is going to be the cure all here for the economy and it’s going to be the next day and that creates $1 trillion of wealth in the stock market, I don’t see that. That’s number one.

Having said that, you might even make a case that has been a good thing that you’ve had this level of uncertainty around trade and you’ve had the focus on trade be so myopic as to be, keystone in its nature in terms of trying to trade the markets. That the good news here is that the kind of the attention on trade has drawn attention from other places that have suddenly turned kind of sour, man.

When you look at the U.S. consumer, I think the setup here and Powell made it very clear in his most recent press conference out there, the recent monetary policy statement, that we’ve kind of reacted on a preemptive basis on trade it probably will get worse, we might act again but right now it’s kind of wait and see. We anticipate something will get done. But even if it doesn’t, the U.S. consumer strong enough to carry the load here.

Everyone that seems to be so complacent about how strong and that word is, the word is used, the consumer is, and I beg to differ in the most vehement terms possible. Because, and I could lay it out for you if you want to go into the stock market here, but it really comes down to looking at the growth numbers and looking at some of the dynamics that again, again are even hidden. And this is why I love to dig down so deep into the, into the numbers because you kind of get the real story.

When you look at inflation, all right, now the headline numbers being held down by energy, which went from 76 to 42 last year at this time. You’re going to get the reversal of that, but it’s going to be short lifts, so maybe two or three months where the energy kicks in on a year over year basis in the inflation numbers. That would lift the headline rate to where the core rate is or maybe higher. You could be pushing 3% all right? How is the Fed supposed to respond to a weakening consumer when you’re looking at potentially inflation, two and a half to three?

Within that inflation number, what you have is a rise in the prices of necessities. Stuff like bus fares, urban bus fares, parking. Medical insurance. Motor vehicle repair. Shelter we know, medical care we know, medical care services through the roof. These inflation numbers are really high and in a lot of cases, I mean well north of 3%. Well north. And in that vein what you’ve done is at the same time with the kind of the rise in the core rate to above 2% you’ve also seen shrinkage in the nominal levels of growth in both retail sales and in average weekly earnings.

And I watch average weekly earnings as opposed to average hourly earnings for one very simple reason. You can get paid more per hour, but if you work less hours, you’re going home at the end of the week with less money. So much more important is the average weekly earnings in the labor markets report coming up this Friday. So within that context I’ll point out two things and it’s really simple, man.

Average weekly earnings on a real basis have gone from just under 2% a year ago to 0.2 year over year. 0.2% year over year, not two, 0.2. And in the same time retail sales, all retail sales including the pockets of strength, the year over year, real rate against the correlate of inflation is 0.7. It was above four a year ago. That is a real testament to how much the economy and the consumer has eroded that is not being paid attention to seeing or shrugged off potentially, because of the situation with the trade deal and China.

So, it has bailed a consumer who has had their position weakened dramatically because if you’re going to have to pay more for stuff like childcare, for stuff like parking, for stuff like bus fares to get the work. You’re going to have less money to spend on discretionary items and we see that flow through perfectly in the numbers. And to think that a trade deal is going to spark enough confidence to reverse that without lifting income is shortsighted.

It might happen for a while. You might get a boost of competence that stimulates borrowing, all right and we’re watching the consumer credit numbers very closely, because that should be the next thing to roll over. I take it a step further though, the XLY, the consumer discretionary ETF, the S&P consumer discretionary. It is flatlined. It’s going nowhere. It is hugely owned. It has not made a new high in this run in the stock market. So it’s not confirming. And that’s important. Why? Because it peaked first in 2007 and led the way down. It bottomed first in 2009 and led the way through the 2014 tap out.

Then you had 2015 you had all of a sudden you thought, Hillary Clinton was going to win the election and so on and so forth. Trump gets elected from 2016 to 2018, the XLY was once again leading the way. If you go back 10 years, you lay out the XLY consumer credit retail sales, the Fed’s balance sheet and the stock market, it was all the same plot. More recently, you’ve had fiscal QE from Donald Trump. What’s next? Where’s the next QE? Where’s the next tax cut? Where’s the next big tree and dollar push that’s going to drive consumer spending on discretionary basis when income is not growing?

And what’s happened is the XLY has rolled over relative to the staples and more importantly relative to the S&P itself. And if you overlay the XLY, S&P ratio against the S&P 500, it always leads both higher and lower. It always peaks and bottoms first every single time going back 25 years, and it has peaked already in 2018 and is now breaking down. And that is a major yellow caution flag waving wide and high in front of the U.S. stock market.

So yeah, all the attention on trade. Well. Frankly trade gets done is going to be like, everyone’s going look around at each other and go, “Now what?” And there really isn’t anything now what on the horizon that I see this is going to be positive enough to get you the kind of growth numbers that people have in their heads.

Mike Gleason: Yeah, certainly those are going to be much more important indicators of what the economy’s going to look like moving forward. I’m glad you touched on that. You mentioned briefly there, the election from several years ago. I suppose we should touch on politics here since the 2020 election is likely to dominate headlines in the financial press next year. Our take is that president Trump isn’t likely to have much trouble beating every one of the current Democratic roster.

It looks to us like the democrats somehow managed to find candidates who are even more unelectable than Hillary Clinton, believe it or not. The one wild card is lots of people talk about the U.S. economy. If the country slides in a recession, Trump could have some trouble. What are your thoughts on the possibility of a serious downturn in the months ahead and do you think we’re maybe underestimating the chances that a Democrat can win?

Greg Weldon: Is there an election here next year? I mean, you just want to say landslide. I mean, gosh, I hate talking about politics. I really do. I’m not a Republican or a Democrat. I’m a libertarian. Less government is good. You’d have certain social programs you need. You need defense. You need some social support for the less thans and the people that don’t have and through no fault of their own. But this thing has gotten completely blown out of the water.

You want to talk politics? I’m going to talk about budget deficits. I want to talk about the U.S. debt. And people might want to put this back on Trump. It has nothing to do with Donald Trump. The fact we had a $984 billion deficit in the most recent fiscal year ended September. We’re already on track to beat that by 20% already. Already this year in the new fiscal year!

The two biggest problems are Social Security and then Medicare. You’re talking entitlements. What politician out there wants to talk entitlements? What politician out there has a plan to fix Social Security? What politician out there in their right mind since Paul Ryan? Look at the destruction of his career for suggesting that we have to cut entitlements, we have to end Social Security, we have to grandfather people in somehow and make people responsible for their own retirements.

This has to happen or none of the rest of the stuff even matters, man. And you’re looking at a shortening fuse on this time bomb. It really is. You’re talking now something in potentially the 15-year range if not for sure within 20 years. I want to talk about that. None of the politicians wanted to talk about that, because it’s political suicide. So, it almost doesn’t even matter. Does it matter? Of course it matters. It matters huge. It’s a binary situation.

Donald Trump gets elected. It may not be good, but it’s not a disastrous scenario that you will have if any of these Democrats get elected. And I like the two guys that have come in more recently. I just love this kind of stuff. The one guy, I swear to God, I’ve seen his commercial five times, I still can’t remember his name. But he gets on there and he says, “Trump’s a loser. Trump is bankrupt. Trump’s never been successful doing anything. I built a $36 trillion company.” And it’s kind of like, “Well, the difference between Donald Trump and you is everyone knows who Donald Trump is. Nobody knows who you are, guy.” Okay? So, you have zero chance of winning and you have so many of these guys.

Who the heck are the democrats going to put up? Elizabeth Warren’s a nightmare. These people are, they have no sense of reality. And the real dynamic here is they’re willing to buy this election through any means necessary. And I think most people see through that. So to me, thank God that Donald Trump, whether you like them or not, he can be a fricking bully, a buffoon, a blowhard. He acts out like a five-year-old sometimes. His vocabulary sucks. He’s not as intelligent he’d like you to think he is, but the guy is American number one.

His passion is there. His work ethic is there, his ideas are there and the programs are there that have helped the country. So, you can’t argue against that. And guess what? It’s the silent majority out there that elected him and that silent majority is bigger now than it was four years ago. So, to me in the longer term, it really doesn’t matter. It’s just Democrats hasten the end game because they’re going to blow out everything in the budget.

But either way, we’re staring down a budgetary situation that’s already in crisis mode. 4.6% of GDP last year the deficit was, 4.6. If you’re in Europe, you’re getting fined by the EU commission right now.

Mike Gleason: Yeah, I think that’s well handicapped. I guess it’s kind of akin to, it’s like, “Well do you want to go towards that cliff at a hundred miles an hour or just 50 miles an hour.” It kind of seems like. Maybe it’s a good way of summarizing.

Well, you’ve made some tremendous calls on this podcast over this past year. Back in May, we spoke and you called the gold breakout point to a T and we saw the yellow metal rocket up to about $1,500 and then beyond, it’s about a $200 move before it found some resistance late this summer.

Then we spoke to you in late June and with silver severely lagging gold’s move at that point you called for silver to outperform and it went from the low 16s to over $19 an ounce before it ran into trouble. So, you called silver’s breakout point perfectly as well. So with all that said, I’m going to put you on the spot here again and ask you how you think the metals will perform at the end of the year and into next year.

It’s been a rough couple of months for metals investors after those big moves. But, in your studied view is gold and silver ready to break out one way or the other? Are you ready to make another bold call here, Greg?

Greg Weldon: Yeah, actually I am. And the one thing I’ll add to that, not to be full of myself, but we got out of those positions very well too. We saw the correction coming. We played out the correction. There was one point I thought the correction was over and we got a long silver and we got smacked. So, two good calls then one little misstep and that’s kind of how trading goes. I mean, if you can be right 50% of the time in your actual positions, you can make a ton of money doing this. Anything above that is just gravy.

We’ve been good on it because I think I’m really seeing the ball clearly here, man. Everything’s crystallized for me when you go back to August of a year ago, and that’s how long this evolution has taken place. We have not only called this, we’ve called the Fed, we’ve called the economy. Everything is in sync here. And that’s what makes it so exciting and yet at the same time kind of scary. And one of the things that I like to tell people, and we started a website on this, you remember we did the Gold Investor Bootcamp?

Because, we think there’s opportunities here and we want people to understand how futures work, how this works. Do you do coins and bars? We actually featured your company because we think you guys are as good as is out there and better than most anyone that I’ve seen, do it as well as you guys do, Money Metals Exchange, in terms of facilitating physical metals transactions and buying of gold bars, silver bars, gold and silver coin.

That’s one way to go. The mining shares is one way to go. If you didn’t do the mining shares do the small cap, the venture cap, or you do the big cap behemoths, blue chips. In terms of futures, in terms of ETF. And then when you get to the futures market, wow. I mean futures is the greatest tool out there. It’s also the most misunderstood still to this day.

I’m 36 years in this business, started on a commodities exchange floor where they filmed Trading Places for crying out loud and the World Trade Center. I worked at Lehman Brothers, I worked at Prudential, I’ve worked at two of the largest and most successful hedge funds in the world and I’ve been doing this 21 years on my own. I think this opportunity here is as good as it gets.

It is a decade long opportunity within a generational opportunity. And within the context of the recent correction we called it, we got back in on silver a little early. We got out real quick. We’re wrong, I’m out, man. I mean, hey, I’m not right all the time. It’s just that simple. You can have that kind of mindset, but within the context of what’s happened recently, silver has already completed a perfect, a textbook, A-B-C what I call double kills zone correction.

The double kill zone for me is very simple. It’s between two of the major Fibonacci’s and two of the major moving averages. I use the same moving averages in everything; bonds, currencies, metal. I want my indicators to be robust to the point where they work all the time, good enough to be used all the time across every market. And when you look at the 100-day and 200-day exponential moving averages on daily charts and the 52-week and two-year exponential moving averages on the weekly charts and you throw in the Fibonacci retracements, you get windows, man, that are so reliable. It’s almost uncanny.

Silver mapped out an A-B-C double kill zone correction that got to the 200-day moving average almost to the T the 61% retracement of the first big wave here last year. Gold did not. Gold barely had a correction. Gold didn’t even get to the 100-day moving average. Gold didn’t reach the first of the Fibonaccis, the 38%. And gold had big open interest. So, the question was, is this such a bullish scenario where we can rally from here gold dragging all this weight or does gold need to crack and get down to at least one of these retracement levels before we cleared the decks?

And that was uncertain because frankly it’s almost such an exciting potential scenario that you might not have cracked gold. What we keyed off was AU, AngloGold Ashanti. It had a beautiful pattern, same kind of thing. It was an upside leader, number one during the rally. The downside didn’t reach the Fibonacci, didn’t reach the moving averages. Something like Ken Ross for example, reached the 61% retracement.

AU didn’t even get to the 38%. It set up a perfect double bottom, I believe it’s $18.04 and then the last three or four sessions, it has soared. So, to me that was huge. I said the end of last week, Wednesday before we went on holiday, AU is going to be the litmus test for this market, whether it’s ready to rock and roll again or whether it gold needs a little more clearance.

What changed in gold is you had liquidation of open interest without having to have a price decline, and that’s pretty powerful stuff too. Because people bought that last little leg up and they got out real quick. They got trapped. I think these markets are poised. I think it’s time to be aggressive. When I see the SIL outperforming everything, the silver mining ETF. The SIL right now, yesterday’s Gold Guru, great chart yesterday, the SIL is breaking out against the price of silver.

And one of my all-time favorites is back. Underperformer the last year and a half to the enth degree that was so disappointing. Not that we were long, but when I see this setup, I want to see certain stocks really be leaders. Pan American Silver is one of those stocks. Pan American Silver has exploded. Pan American Silver has a great chart relative to the price of silver, and then when you bring the dollar into play, Mike? Holy mackerel.

What’s changed with the dollar is in this phase of interest rates coming down again all of a sudden, the bond yields are coming down again all of a sudden because guess what? You got 0.7 real retail sales. You got 0.2 average weekly earnings. You have the ADP numbers today set up a potential really weak BLS employment report number. The ISM numbers have been weak. The economy is kind of choking a little bit here. And you see the now the yield curve flattening actually means something.

It is now. It is the yellow caution flag that it hasn’t been the difference here, Mike, and it’s subtle, but it’s significant. Is that the last time you had curve flattening and bond yields dropping like this, it was happening in a more intense way in Europe. So, the rate differentials between the U.S. and Europe, we’re actually expanding a U.S. rate premium to record highs that supported the dollar through all of this.

That’s not happening now, man. You are seeing those rate differentials come under big pressure. You’ve moved about 70 basis points on the 30-year U.S. T-bond to (German) bund yield spread. You have broken down. You’re through the trendlines. You’re through the two-year moving average. The moving average has rolled over. These interest rate differentials are narrowing. It’s putting pressure on the dollar.

If the dollar gets below 97.10 then you open up the door for 95.50, which means 88. So, you could have a stair step move down here in the dollar that causes these metals to explode. We’re very bullish right in here, we’re playing it very aggressively. For our Gold Guru clients, we just put it out there actually last week and still very much applicable. We call it our triple play micro caps. This is the way to be aggressive.

We want to be diversified in not only just holding other things to metals but also in our metals investments as well. And in this case, I think some money taking a risk capital, treating some of these literally under a dollar a share silver miners, we picked three of them. Two Australian, one Canadian. And you take some money and put these as if it’s a call option, i.e. you’re willing to risk every dollar you put in. So, you don’t put a huge amount of money in. But guess what? I mean, the upside potential of these stocks, Mike, is like 10 to one.

And then you want to blend that with some of the upside leaders. Pan American’s a great name. We love First Majestic, which has been an upside performer. AngloGold Ashanti. Sibanye, the South African PGM miner. We recommended them for our clients below five bucks is now trading $8.83. That’s another good opportunity.

I think some of these smaller, lesser known, maybe a little more risky, smaller cap mining shares, particularly in silver, provide tremendous opportunity here. Because like I said before, we started the Gold-Guru.com as a means to help people and to help them navigate and survive. But it’s not about survival because these opportunities coming to me are so phenomenal. You don’t just survive, you thrive.

Mike Gleason: Yeah. As we wrap up here, Greg, go ahead and give him the website addresses. I know the Gold-Guru site is still pretty new and now there’s some fantastic information on there you just talked about. People can start following you there and get some great advice, tell them how they can do that and follow you more closely as we wrap up.

Greg Weldon: Sure, Gold-Guru.com. Yeah, it is new. It’s inexpensive. We just threw it together out of need when I did the Gold Investor Bootcamp, which we gave your listeners an opportunity to check out. The demand was huge and people are asking me, “How at this stock and what do we do today?”

And now I’m getting emails and I’m like, “Well, let’s just start a newsletter.” I mean, I remember I used to do before WeldonLive, which is our other product available at www.WeldonOnline.com, that encompasses everything. We do the bonds, we do the currencies, we do global macro, we do the Ags. I mean there’s great opportunities in the Ags… look at coffee taken off, we caught that for our WeldonLive clients big time.

JO, with the ETF there. It’s short this this week already. And I think those are some of the opportunities that is going to stem out of the dollar decline that’s coming too. So the broad based opportunities, not just in the metals but in a whole range of commodities, but for the metal-specific people, which I know a lot of your clients, very inexpensive. We charge 60 bucks a month. We produce almost daily.

Since I do all of this by myself, I don’t have a staff or deem here, it’s me and Katelyn. She’s my COO and I do everything else including taking out the garbage at night and thank God I love what I do because I’m here 14, 16, 18 hours a day doing this, trying to help people and the Gold-Guru.com 60 bucks a month. I mean that is a steal. We are giving this stuff away and if you buy a year, you get two months free. So, that’s a pretty good deal, so feel free to visit and sign up now.

Mike Gleason: Yeah, I certainly urge people to do that. You can get a great sense of how well Greg handles these markets and really have has his finger on the pulse and yeah, people definitely need to check that out. It’s fantastic information. Well, it’s been wonderful to speak to you again, Greg and all year long. We really appreciate having you on as a guest.

Thank you for making yourself available once again. Hope you have a terrific holiday season and look forward to catching up with you again in the New Year. Thanks again for the time and keep up the good work my friend.

Greg Weldon: My pleasure, Mike is going to be an exciting 2020. That’s all I can say.

Mike Gleason: Well that will do it for this week. Thanks again to Greg Weldon of Weldon Financial. For more information simply to go to either WeldonOnline.com where you can sign up for a free trial if you haven’t already had one of those, and then be sure to check out Gold Investor Bootcamp and now the new site, Gold-Guru.com. Be sure to check all that out.

 

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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Supply Crunch Coming as Silver Miners Scale Back

Published here: http://goldsilverworlds.com/category-mining/supply-crunch-coming-as-silver-miners-scale-back/

Through the first half of 2019, silver significantly underperformed gold. Put another way, gold gained relative to silver – culminating in the gold:silver ratio registering a 27-year high of 95:1.

That market signal was received by the mining industry. Since there are few primary silver producers, and those that do mine silver also typically mine gold and some base metals, precious metals miners had an incentive to invest more into gold production and less into silver.

Precious metals analyst Adam Hamilton wrote in a recent commentary, “As silver wasted away in recent years, its bombed-out prices heavily impaired silver mines’ ability to generate operating cash flows and profits. The silver miners were forced to adapt and shifted their focus and capital into adding gold production rather than boosting silver output.”

Hamilton notes that the top 17 components of the GlobalX Silver Miners ETF (SIL) produced a total of 72.2 million ounces of silver last quarter, amounting to a 4.4% year over year decline. At the same time, their total gold output increased by 11.9%.

What this suggests is that the silver market is being under-supplied. In fact, the Silver Institute recorded a 2.4% global silver supply shrinkage in 2018.

And things certainly aren’t looking up this year.

Silver’s mining supply problem could be a super-bullish driver of higher prices. Higher prices will eventually incentivize increased production from the mining industry. But it will take much higher prices sustained for some time in order to move the needle of mining production in any significant way.

Silver Mining ETF Sham: These Stocks Are Primarily in Other Metals

As silver miners have become less silver-centric, their stocks can be expected to show less correlation to the silver price. In fact, some stocks that have “silver” in their name derive a large majority of their business outside of the white metal.

Consider Pan American Silver (PAAS), a $3.6 billion company that makes up a 5.4% weighting in the Silver Miners ETF (SIL).

While Pan American is indeed a producer of silver, its business comes mainly from other metals. According to BMO estimates, only 33% of Pan American Silver’s revenue in 2019 will come from silver production.

SIL’s third-largest holding is Korea Zinc. It is base metals smelter, not a silver miner. It processes some silver, but that particular aspect of its business amounts to just 17% of annual revenue.

Rare is the “silver” company that actually derives most of its revenue from silver. Since silver deposits tend to accumulate around other metals, valuable byproducts will be extracted during the mining process. Most silver is produced as a byproduct of mining for base metals, so primary silver mines are few and far between.

One exception is First Majestic Silver (AG). It is the purest major producer, with 62% of its revenue attributable to its namesake metal.

Of course, you will never find a purer silver play than actual .999 pure silver bullion products.

The further your silver-related investments get from the underlying metal, the more they will be driven by other factors you may not necessarily understand or believe in.

When silver starts becoming a hot commodity again, Wall Street will surely supply a bevy of new “silver” equities and exchange-traded derivative products – most of which will serve to divert casual investors away from investing in silver itself.

Physical Silver Outperforms Corporate Silver

Silver bullion investors have tended to fare better than silver stock investors in recent years. Since its inception in 2010, the Silver Miners ETF has underperformed the silver price by a net 25%. See the chart below…

Despite an impressive spike in 2016, silver equities have languished before and since versus silver itself.

Silver companies – especially those that actually derive the bulk of their business from silver – could certainly see the value of their shares multiplied during the next big precious metals run-up. But investing or speculating in mining companies is inherently riskier the owning the metal itself.

Silver is plenty capable of delivering eye-popping gains far in excess of gold’s when market conditions are favorable for the white metal. Silver’s volatility is more than some investors can stomach – in which case gold may be more suitable in a more conservative portfolio.

Silver, however, currently offers the more compelling supply story – combined with a heavily discounted relative valuation.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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Outlook 2020 (Part 2): Key Fundamentals and Technicals for Precious Metals

Published here: http://goldsilverworlds.com/gold-silver-price-news/outlook-2020-part-2-key-fundamentals-and-technicals-for-precious-metals/

The first part of our 2020 Outlook covered the Big Picture Backdrop for Precious Metals. This second part focuses on the fundamental and technical setup for gold and silver markets.

Precious metals markets enter the New Year with some impressive upside momentum. Are gold and silver poised to deliver big gains in 2020?

Before answering that question, let’s review the year-end closing prices and yearly gains the metals recorded in 2019:

• Gold: $1,519 (+18.9%)
• Silver: $17.91 (+15.3%)
• Platinum: $970 (+22.1%)
• Palladium: $1,954 (+59.5%)

Gold and silver each notched their best annual gains since 2010. Meanwhile. platinum emerged from its most deeply depressed levels since 2004 to make a run for a new bull market. And palladium posted record high after record high.

All in all, it was a constructive year for metals bulls – though it could have been better. Gold and silver finished strong but below their high points from early September (when gold traded just above $1,560 an ounce and silver hit $19.75).

Gold:Silver Ratio Begins to Fall from Extreme High

One of the most remarkable technical developments of 2019 was the gold:silver ratio spiking to 95:1 – its highest level since the early 1990s. It finished the year at 85:1.

A continued decline in the gold:silver ratio toward more historically normal levels would entail not only an outperformance in silver – but also likely a bull market in both gold and silver.

The last powerful decline in the gold:silver ratio from 2009 to 2011 translated into silver surging up over $49/oz and gold making a record high at $1,900/oz.

Spotlight on Silver

Silver may be the metal to watch (and own) in 2020. If global industrial and investment demand picks up even slightly, supply will struggle to keep pace.

In fact, silver mining supply is heading in the opposite direction. The Silver Institute’s World Silver Survey shows production falling at an annual rate of 2%.

Mines have been depleting their silver reserves and haven’t had the incentive to develop new projects given low spot prices and geological challenges due to declining ore grades.

According to Katusa Research, “The average head grade has fallen by over 50% since 2010. This is not a good situation for a miner. In a world where input and production costs are rising yet profit per tonne of rock has fallen by 50%, this poses serious long-term potential problems.”

Investing in a miner is always in iffy proposition, even if you do your homework. The busts tend to outweigh the booms.

And in the case of silver miners, most are primarily in the business of mining other metals (such as lead, copper, nickel, zinc, or gold) – and only mine silver as a byproduct.

The lack of a healthy primary silver mining industry can work to the advantage of physical silver investors. It means that supply will remain constrained in the years ahead.

Even if higher spot prices begin to make mining silver more profitable, the beaten and battered industry won’t have the immediate capacity to grow production to any significant degree. It will take years of rebuilding.

In the meantime, once silver breaks above overhead technical resistance from $20-$21/oz, the path should be clear for a run toward its old record high.

The Platinum Wild Card

The other metal with big upside potential in the 2020s is platinum. It has gotten clobbered by palladium in recent years. But the extreme price disparity between the two now makes platinum a compelling alternative for automakers and other industrial users.

“Platinum had fallen out of favor among investors after Volkswagen AG’s emissions-cheating scandal in 2015 prompted commuters to turn away from diesel vehicles. The market has overestimated the decline in demand for autocatalysts,” reports Bloomberg (via Mining.com)

“By 2025, about 850,000 metric tons of palladium used in autocatalysts could be substituted with platinum…”

For now, though, platinum remains in a supply surplus while high-flying palladium is in a chronic deficit. An investment in platinum should therefore be regarded as somewhat speculative.

Although further downside in price is likely limited, platinum could spend much of 2020 basing out before substitution kicks in to push prices much higher.

The Gold Safe Haven

As always, precious metals investors should first stake out core positions in gold and silver. They are money, first and foremost.

Monetary demand for gold – led by central banks in Russia, China, and elsewhere – is likely to remain strong in 2020.

Even if the global economy falters and causes industrial demand for the white metals to slip, gold buying won’t necessarily go down. It could even increase on a flight to safety.

Gold may not look “cheap” at over $1,500/oz, but it is cheap relative to the U.S. stock market. And the protection physical gold provides from the risks of financial turmoil is invaluable.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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Outlook 2020: The Big Picture Backdrop for Precious Metals

Published here: http://goldsilverworlds.com/gold-silver-price-news/outlook-2020-the-big-picture-backdrop-for-precious-metals/

The year ahead promises to be an eventful one. It will, of course, be dominated by political headlines leading up to the 2020 election. It could also be a big breakout year for precious metals.

In the second part of Money Metals’ 2020 Outlook, we’ll drill down on the fundamental and technical setup for gold and silver…

However, in this first part, we’ll set the stage by digging into the macro forces at play in the economy, monetary policy, politics, and geopolitics.

Economy

Over the summer, the mainstream financial media ran hard with the “recession” angle. A manufacturing slowdown seemed to be afoot. But the main impetus for all the recession talk was an inversion of the yield curve – putting short-term bond yields below those of longer-term bonds.

Democrats were nearly gleeful at the prospect of a recession. But such thinking proved to be premature.

The economy does not appear to be headed into recession as we begin 2020. Official employment numbers continue to come in historically strong. And GDP growth, though modest at 2.1% as of Q3, is still indicating an overall expansion.

As for the yield curve inversion, the Fed got the message and drove short-term rates back below long-term rates. The inversion still serves as a possible precursor to a recession, but it may not actually hit until 2021 or later.

Continued global economic growth in 2020 could drive a late-cycle bull market in commodities, including the metals complex.

Leading up to a recession, the energy and materials sectors tend to outperform the broad market before rolling over. Gold and silver tend to peak later, with gold often rising counter-cyclically to economically sensitive assets.

Monetary Policy

In 2019, the Federal Reserve did a dramatic about-face on interest rates. Instead of hiking, as was widely expected by mainstream forecasters, the Fed paused… then cut rates three times.

By the fall, it was engaging in massive interventions to prop up the repo market and launching what is effectively a new Quantitative Easing program.

Nobody in the financial “mainstream” saw that coming at the beginning of the year!

The Fed is now back on pause for an unknown period. At his latest press conference Fed Chairman Jerome Powell indicated he would like to a see a significant and sustained rise in inflation before hiking rates again.

Higher inflation coupled with accommodative monetary policy would potentially be rocket fuel for precious metals markets.

A weaker Federal Reserve Note “dollar” versus foreign currencies isn’t necessary for hard assets to gain, but it certainly wouldn’t hurt. The U.S. Dollar Index peaked for 2019 in late September after a modest run-up. It has since retraced and will finish the year nearly flat.

The dollar has fallen in the fourth quarter along with the QE surge in the Fed’s balance sheet. The central bank’s net asset purchases are up by $400 billion already. Its balance sheet will likely rise to an all-time record by spring 2020, further cheapening the real value of the Federal Reserve Note in the process.

Politics

There is no shortage of opinion on who will, and who should, win the 2020 election. But we’ll stay out of the political “horse race” debate that fills the airtime on all of the cable news channels hour after hour, day after day.

We note only that political prediction markets currently give the upper hand to President Donald Trump. As long as the economy doesn’t dip into recession, the smart money seems to be on Trump to triumph over a weak Democrat field.

Should the economy falter or Trump get bogged down in a new controversy that erodes his support, the political dynamics could shift – and potentially roil markets.

Several outspoken billionaires – from Ray Dalio to Paul Tudor Jones to Stanley Druckenmiller to Leon Cooperman – have each warned that a Democrat victory over Trump could trigger a stock market meltdown (especially if the victorious Democrat is a Bernie Sanders or Elizabeth Warren-type anti-capitalist firebrand).

Such an event, in turn, would enhance the safe-haven appeal of precious metals.

So far during the Trump presidency, “fear trade” demand for physical precious metals has been mostly muted. The metals have made modest gains based on other factors. But before we see truly spectacular gains in gold and silver, we will likely need some sort of economic, political, or geopolitical black swan event to shake investors out of their complacency.

Geopolitics

The big geopolitical story of 2019 was the trade standoff between the United States and China. Every week, seemingly, brought us either one step closer or one step further behind a trade deal.

Much – perhaps too much – was made of the impact of trade wars on market trends. But a favorable outcome in 2020 would certainly go toward boosting manufacturing activity and demand for industrial metals.

Other geopolitical threats loom in 2020 as well.

As the U.S. continues to ramp up economic sanctions on Russia, the Russians continue to look for ways to retaliate. One if its long-term strategic aims is to secure international trade deals outside the Federal Reserve Note dollar system. It is finding willing partners in U.S. adversaries who have been hit or threatened with sanctions.

The U.S. has shown in the past that it is willing to go to war to defend its fiat dollar.

A possible war with Iran, North Korea, Russia, or China – or a shutdown of oil production from the Middle East – would be extremely disruptive to markets and could send safe-haven demand for precious metals skyrocketing.

Barring an unforeseen black swan event or crisis, the big picture backdrop for precious metals looks constructive for another year of significant but not necessarily spectacular gains.

At some point, though, whether next year or in future years, mounting risks will propel gold and silver higher with explosive force.

 

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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