Something ugly could be hitting the financial/economic system soon. To blatantly hit gold like this when no one is around is a sign of desperation. The FANGS had an brutal reversal today despite the squeeze higher in the broad indices. TSLA soared early on Elon Musk’s shameless puffery – which often borders on outright fraud – and reversed to the downside, while the SPX and Dow were being pushed higher by the Plunge Protection Team. Both indices closed well of their higher. Auto sales for June were once again well below expectations. GM’s inventory soared despite a stated goal to reduce it inventory from over 110 days to 70. A lot of workers will lose their jobs. Household debt – mortgage, auto, credit card – will go unpaid…
The Trump Presidency is floating on the fumes of questionable sanity as an impeachment Bill is being sponsored in the House by 25 Reps. The case to be made that Trump is not mentally competent enough to have his index finger on the red button that launches nukes at Russia grows stronger by the day.
Doc and Eric Dubin invited me on to their weekly Money and Markets weekly market recap/analysis to discuss – today notwithstanding – very interesting trading action in the gold/silver paper “markets” in the west and the physical, real markets in the eastern hemisphere:
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JBGJ regards Indians buying less gold as cash crunch bites primarily as evidence that FOBs (Friends of Bloomberg) are not in gold. If India’s domestic gold market was as weak as presented there would be a significant discount to the world price…In reality the Government has struck a shattering blow at the trust Indians have in holding wealth in any form accessible to the Authorities. When things finally unglue, India’s propensity to hold gold will probably be found to have risen – John Brimelow’s Gold Jottings report – LINK.
Yesterday’s sell-off in gold occurred after the Comex floor had closed for the day. The period of time between when the Comex closes – 1:30 p.m. EST – and the CME’s Globex computer system trading closes for about an hour – 5 p.m. EST – is one of the least liquid trading periods of the 23 hour, 5-day trading week. It makes that period of time susceptible to manipulative price take-downs.
As it so happens, likely not coincidentally, Janet Yellen began speaking about monetary policy at 2 p.m. EST. She stated that the Fed expects a few interest rate hikes per year until 2019. Geez, that would take the Fed funds rate up to maybe 2%? Of course, helped along the by the bullion banks, the hedge fund trading algos grabbed the soundbytes spewing forth from Yellen and concomitantly sold paper gold and bought dollars. The dollar spiked up and gold was taken down to $1200. It traded below $1200 overnight on the “fumes” of yesterday.
Gold, silver and the mining stocks have had a nice move from late December to now. They will not go straight up. Technically the sector was set up to be susceptible to trading activity related to Fed soundbyte propaganda like yesterday. This is yet another buying opportunity. Buy a little every month when the price gets taken down in the paper market. According to the Indian data presented by Brimelow, India is a huge buyer of gold below $1200. China is a steady buyer regardless of the price.
The Trump presidency will usher in a period in which Orwell’s prophecies will shift into overdrive. Popular mistrust of anything and everything Government will accelerate and Big Government’s attempt to counter-act this movement will take place in the form of intensified propaganda and a further reduction in civil rights. Along with this influx of political and media chaos will be an increasing distrust of fiat paper “fake” currency, which means the public will likely buy even more gold and silver than it did in 2016. Note: the U.S. mint sold a record amount of gold eagles in 2016.
In today’s episode of the Shadow of Truth, we continue our discussion of the precious metals sector, including some analysis of the gold / silver ratio:
In the absence of the extreme degree of price intervention being conducted by the western Central Banks and bullion banks in the paper gold and silver markets, the price of both precious metals would be several multiples higher. That this intervention occurs not only has become overtly visible to all market participants, but recent prosecution/settlement events have rendered this assertion indisputable.
After a massive move that started in mid-December 2015, the sector began selling-off in early July. This correction was a function of both characteristic market technicals and conspicuous paper market manipulation in the New York and London paper gold/silver “markets.”
But after nearly five years of oppressive, unfettered market manipulation, the physical market has put a floor beneath the market. After a price “correction” of 8% in gold and 16% in silver, the metals are now ready to go higher from here. This was “telegraphed” by the recent price-action in the junior mining stocks as represented by the GDXJ junior mining stock index:
The junior mining stocks – especially the smaller exploration companies – similarly signaled the move higher in the metals ahead of the rest of the sector beginning in early December 2015.
While the Central Banks would love nothing more right now than to take gold and silver down to zero, the markets – driven by the physical deliver bullion markets in the eastern hemisphere, appear to want the market to move higher. The sequence of trading events beginning yesterday through today illustrates this dynamic.
After a big rally in the mining stocks and metals in the first half of the trading on Wednesday, the miners slammed after the FOMC meeting statement was released in the afternoon. The HUI was taken down from its high of 226 (up 7 pts) to close down down 4 points at 215. This signaled a likely price ambush in the metals, which occurred just after midnight EST, taking December gold down $14 from $1301 to $1287 – silver was taken below $18.
The mind-set going into the NYSE was that the HUI would get slammed again. But the market had different ideas. The HUI began moving up at the open. It’s been up as much as 2.5% from yesterday’s close. Shortly thereafter, the metals began to rally as well. Historically, after a reversal like yesterday, the metals and miners typically continue lower for at least few days. But with the mining stocks leading the way, it is highly probable that the next move from here will be higher (with plenty of manipulated volatility, of course).
In today’s episode of the Shadow of Truth, we explain why the precious metals sector has shifted into a trend in which every price pullback should be used to accumulate and add to positions in gold, silver and your favorite mining stocks.
Below is a highly engaging interview with James Turk in which he discusses the key indicators to watch in order to anticipate the next big leg of the precious metals bull market. “To me the real bull market in gold began in 1913 with the creation of the Federal Reserve.”
By law the U.S. Mint is supposed to produce enough silver eagles to meet demand. Originally the law stated that the silver used in U.S. minted coins had come from U.S. mines. The U.S. produces roughly 40 million ounces of silver per year. About five years ago the demand for silver eagles began to outstrip the amount of silver sourced from U.S. mines that could be made available for silver eagle production. The law was amended to enable the mint to use silver imported from Mexico.
From time to time since the summer of 2008, the U.S. mint has had to halt its silver eagle sales because of a shortage of silver. This occurred once again in the middle of 2015 and the production halt lasted about 3-4 weeks. Since that time, the mint has limited the amount of silver eagles to one million coins per week. In 2015 the mint sold 47 million silver eagles, an amount which was stunted by the production halt. It is likely that the mint would be able to sell in excess of 60 million silver eagles in 2016 in the absence of production limits.
Make no mistake, curtailing production like this is nothing more than a form of price control. If the demand for silver eagles outstrips the supply, then the price should rise. “Price” is the ultimate mechanism by which supply and demand is equalized. That is a law of economics. If the demand for silver eagles is greater than supply because the mint can’t secure enough silver to meet demand for its product, then let the price of silver rise to the point at which supply and demand equalize. That’s how free markets are supposed to function.
They can force a market into a certain price level but that has to be met with metal if people are asking for metal to be delivered at those low prices and metal is getting scarce. – James Turk
The fact that the U.S. Government has had to impose production controls on the production of silver eagles is one of the many indicators which reflect the fact that the Government is losing control over the financial and economic system.
The relative price of gold and silver is a thermometer that measures the degree of systemic health at any given point in time. Since gold and silver hit interim bull market highs in 2011, the western Governments and Central Banks have colluded to suppress the price of gold and silver. This was imperative to their ability to continue the massive transfer of wealth from the middle class to the ruling elite through the use of Wall Street’s financial Ponzi schemes and the Fed’s ongoing debasement of fiat currency.
The Shadow of Truth hosted Bitgold’s and Goldmoney’s James Turk for a highly engaging discussion about the current move in the precious metals market. Mr. Turk sees it as yet another signal to the markets that Governments are losing control:
Both gold and silver are so cheap relative to historical norms and historical valuations that it doesn’t matter if it’s overbought, it can stay overbought on a short term basis for a long time – longer than we can possibly expect. What’s important is not short term overbought or oversold indicators but what the trend is. And to me the trend is higher in both gold and silver. I’m measuring this by saying that gold is above all of its short term moving averages. – James Turk
Declining above ground inventories of physical silver and the ratio paper claims against those stocks is going parabolic. When the music stops, do you want to be holding real silver in your hand or a fraudulently-issued paper claim on silver?
I happened to notice yesterday that premiums for silver eagles have been creeping higher recently. The mint is on allocation for 1 mm coins per week, I believe it is, and I’ve been told from a few sources that the mint could easily sell a lot more.
I’m starting to warm up to the idea that the fraudulent silver price fix on the LBMA a couple weeks ago marked the final “capitulation” of the nearly 5-year price pullback in silver and 4+ year pullback in gold. We have yet to hear a satisfactory explanation from the LBMA for the exceedingly odd price behavior of silver seconds before the a.m. London silver price was set on January 28th.
I believe that event marked the “last gasp” effort by the highly corrupt LBMA bullion banks to shakedown the physical silver market in order to get their hands on as much physical silver as possible at as cheap of a price as possible. I believe, not uniquely by the way, that the synthetic short interest (paper derivatives shorts) in silver is even worse than for gold, which we know is at least 100:1.
Big banks hate losing money and will do anything – legal or illegal – to avoid losing money or to minimize losses. I saw this first-hand and peripherally participated in activities designed to minimize losses when I worked on Wall Street in the 1990’s. Everything is worse now in that regard and the people who are supposed to enforce the laws and oversee trading activities at these banks are now in on the corruption.
With that as the preface, I believe silver is beaten down and cheap relative to gold and any other investment alternatives and I think buying silver now – at it’s current price – will prove to be the trade of the decade.
Right now gold is outperforming silver on up-days BUT silver outperforms gold when the metals sell off. Typically gold will outperform silver in the early stages of a big bull market move. Gold current outperformance vs. silver is reflected in retail activity, as noted by Doc at Silver Doctors and some other bullion dealers to whom I spoken about the market recently, in which sales volume of gold coins is outpacing volume in silver.
But this will soon crossover as gold appreciates in price and waves of new buyers flock to silver rather gold because it feels better to buy more ounces of silver than gold. Silver is poor man’s gold and always has been for 1000’s of years. When this dynamic kicks in, the gold/silver ratio will drop quickly from its current 78x. I suspect before this bull market is over, the GSR will drop well below 20, if not 10.
We saw this in 2011, when silver began to go parabolic before the western Central Banks had seen enough and began to throw 100’s of tonnes of paper gold and silver at the market in order to not only prevent the metals from moving higher but to beat down the price on gold and silver to their current levels. In the bull move from late 2008 to April 2011, the GSR dropped from 100 to 32.
Eric Dubin and “Doc” hosted me for their weekly metals and markets podcast last week. We discuss a range of topics but focus on the precious metals. Note: I mention a new emerging junior exploration silver miner that I featured in a recent issue of my Short Seller’s Journal. Anyone who subscribes to the SSJ and mentions that they heard about it on the Silver Doctors podcast will receive a copy of that back-issue when they subscribe:
“What caused me to almost fall off my chair when I read that article (San Francisco Fed President John Williams gave a speech in which he stated that he Fed would raise interest rates 3-5 times in 2016 and asserted that the economy “is in good shape”) was when he said the economy was doing fine. I’m not really sure what data he’s looking at or if he’s being completely disingenuous for the sake of being a cheerleader on the economy…We would have to sit down with him in private and show him the data and say, “what are you really looking at here, John, because your statement makes you look like a complete idiot to everyone out there who knows the truth.”
“Anyone who wants to buy precious metals now and they understand the reason why and they want to convert their fiat currency into precious metals – buy as much silver as can…silver is extraordinarily cheap outright and its extraordinarily cheap vs. gold.”
What we’ve got now with Central Banks and their financial repression with zero interest rates and destruction of fiat currencies, they’re destroying the inherent nature of capitalism itself: the inherent nature of the accumulation of capital by the productive middle class – this is all being destroyed...one way or another, the world is going to go back to gold and silver [as the primary form of currency] – it’s just a matter of time. – James Turk on the Shadow of Truth
Gold and silver appear to have found their final bottom in the nasty 4-plus year price correction that began in May 2011. Too be sure, this “correction” was largely a product of Central Bank intervention which was implemented to prevent gold and silver from signalling to the world that Governments globally, especially the U.S. Government, are in the process of destroying middle class wealth through the incessant debasement of paper currencies.
Since late July/early August, gold has moved up over 9% from its bottom ($1085, futures basis) and silver is up 14.5% from its bottom ($14.07, futures basis). Of course, it remains to be seen if this is going to be more than a dead-cat bounce before the metals head back to re-test their bottom or set new lows, but specific market signals are suggesting that there’s a strong probability that the precious metals have embarked on the the long-awaited resumption of their secular bull market.
One of the primary signals is the persistent price “backwardation” observed in the London gold market since 2013. As Turk explains in the podcast:
Backwardation shouldn’t happen in the gold market. The arbitrage opportunity should take it away. But we saw it 1999 for a couple of days when gold was its low and we saw in 2008 for a couple of days when gold reached its low then. We’ve seen backwardation more often than not since January 2013 when the Fed’s QE3 program started.
While backwardation occurs when there’s a shortage of physical gold available for immediate delivery on a “wholesale” basis – i.e. very large quantities – it also reflects that fact that investors prefer to hold onto the gold they have in possession rather than lend it to the market in exchange for the market’s promise to re-deliver that gold in the future at a lower cost to the investor.
In addition to backwardation, Mr. Turk discusses some other indicators which are signalling the likelihood of much higher gold/silver prices going forward plus his views on the “re-monetization” of gold – i.e. the market’s push to insert gold into the global financial system as a currency (it’s always been used as an asset). Or, as Mr. Turk prefers to say, “the re-currencyzation” of gold:
There’s always a higher risk in fiat currency than there is in gold because gold can not be created out of thin air like paper currency can be created out of thin air. – James Turk, Shadow of Truth