Tag Archives: silver eagles

Paper Gold And Silver – A Tragic Reflection Of The U.S. Financial System

Dave, just a moment for some feed back on your Short Seller’s Journal. I just placed an order for 1oz gold eagles thx to my profits off Tesla and BBBY, thx as always. – subscriber email received today – Short Seller’s Journal information

Wow.  The hedge funds are almost net short silver contracts again, having had their algos steered into that predicament by the bullion bank market manipulation.  The fraudulent paper short position in both gold and silver – but especially silver – is many multiples larger than the available supply of physical metal that is supposed to legally back commodity derivatives.  This is evident from the Comex disclosures.

We have no idea what the total net short position would be including LBMA forward contracts and OTC derivatives.  That the entities who are paid by the public to prevent this continue to allow and enable this massive fraud is a tragic  commentary on the current U.S. economic, financial and political systems.

Craig “Turd Ferguson” Hemke invited me onto his weekly subscriber podcast show to discuss the trading action in gold and silver, the catastrophe otherwise known as the Federal Reserve and the slow-motion train wreck occurring in the stock market:

TO LEARN MORE ABOUT THE MINING STOCK JOURNAL OR SHORT SELLER’S JOURNAL – CLICK IN IMAGE:

Why Was Gold Slammed And The Dow/SPX Pushed Higher?

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:

CLICK ON EITHER BANNER BELOW TO LEARN MORE ABOUT EACH

Oil, Gold and Bitcoin

The falling price of oil did not garner any mainstream financial media attention until today, when U.S. market participants woke up to see oil (both WTI and Brent) down nearly $2.  WTI briefly dropped below $43.   The falling price of oil reflects both supply and demand dynamics.  Demand at the margin is declining, reflecting a contraction in global economic activity which, I believe the data shows, is accelerating.   Supply, on the other hand, is rising quickly as U.S. oil producers – specifically distressed shale oil companies – crank out supply in order to generate the cash flow required to service the massive energy sector debt load.

I am quite surprised by the rapid fall of oil (WTI basis) from the $50 level, because I concluded earlier this year that the Fed was attempting to “pin” the price of oil to $50:

The graph above is a 5-yr weekly of the WTI continuous futures contract.  Oil bottomed out in early 2016 and had been trending laterally between the mid-$40’s and $55.  I read an analysis in early 2016 that concluded that junk-rated shale oil companies would implode if oil remained in the low $40’s or lower for an extended period of time.  Note that some of the TBTF banks who underwrote shale junk debt were stuck with unsyndicated senior bank debt (i.e. they were unable to find enough investors to relieve the banks of this financial nuclear waste).  Thus, the Fed has been working to keep the price of oil levitating in the high $40’s/low $50’s, in part, to prevent financial damage to the big banks who have big exposure to shale oil debt.

The problem for the Fed is that it can’t control the global supply of oil.  There’s too many players.  With oil pinned in that trading range, U.S. oil companies have been pumping out oil as quickly as possible.  The oil drilling rig count has risen for 22 weeks – Oilpro.com – the longest consecutive streak since 1987.  Rising production from the U.S. and elsewhere is keeping global stockpiles high, especially relative to demand.  As a result, you get chart of the price of oil that looks like the one above.  Oil is now well below both the 50/200 dma plus the RSI and MACD are pointing  straight south, indicating a high probability of lower prices for awhile.  Also, note the rising volume in conjunction with the falling price.  This is indicates that market participants have been and continues to be better sellers.

The Fed is thus unable to pin the price of oil to $50 on a sustainable basis.  Why? Because it has no control over the global supply and demand, which prevents control the price of oil for any meaningful period of time (just ask OPEC about that).  Similar to the Fed’s price-management of oil, the Fed has been keeping gold pinned under $1300 since early November in an effort to prevent a rising price of gold from undermining the dollar’s reserves status and signalling the escalating economic and financial distress in the U.S. This is despite rising demand for physical gold coming from numerous eastern hemisphere countries.  As long as the Fed (and western Central Banks) can continue delivering physical gold into the massive demand vortex in the eastern hemisphere, it can somewhat successfully manage the price.

Also similar to oil, the Fed has no control over the supply and demand of gold, except to the extent that the Fed/western Central Banks are still holding gold that can be leased out or custodial gold that can be hypothecated for the purpose of enabling a continuous flow of physically deliverable to gold the east.   But the difference between oil and gold is that the supply of mined gold is relatively fixed (and has been over a long period of time).  At some point the western Central Banks will run out of access to enough gold that can be delivered to buyers who paid to settle their purchases upfront.  At that point, the chart of the price of gold will look like the recent graph of Bitcoin, Ethereum, etc.

This brings up a quick point about the cryptocurrencies.   When the U.S. blocked Iran’s access to the SWIFT trade settlement system, India began to pay for the oil it imports from Iran with gold.  These were very large-dollar transactions. We have yet to hear any reports of sovereign nations using Bitcoin or other cryptos for payment to settle trade agreements. For me, this highlights yet another difference between the use of gold as a currency vs the cryptos.  I want to make it clear that I’m not in the anti-cryptocurrency camp, but I do believe that, ultimately, precious metals (gold and silver) are much more functional as a form of money than the cryptos.   Bitcoin debuted for peer-to-peer transactions in 2009. Gold has functioned for this purpose for over 5,000 years.  My preference in this situation is to bet big on the form of money that has pedigree.

GDXJ: Myth vs. Reality

Many of you have contacted me about the sell-off in GDXJ and upcoming re-balancing that will occur at the end of this week (I think). First of all, thank you for your inquiries and please feel free to email me with questions/ideas. The only “dumb” question regarding gold, silver and mining shares is, “should I own any?”

First I wanted to highlight the difference between fact and “propaganda.” The propaganda has led many to believe that the rebalancing of the GDXJ has exerted undue pressure on the mining stocks as a whole and on the GDXJ components specifically. However, a simple graphic analysis differentiates fact from fiction:

The graph above compares GDXJ, the HUI (green line) and GDX (purple line) since the GDXJ rebalancing was announced to the market on April 17th. As you can see, over the time since the GDXJ rebalance was announced, GDXJ has performed in-line with rest of the sector. I was a bit surprised when I ran that chart. In fact, on a YTD basis, GDXJ’s rate of return is almost identical to that of the HUI and GDX:

So where does this leave us? The entire sector has moved lower since early February. Maybe this was in anticipation of the GDXJ rebalancing “whispers” and maybe not. Often the miners will be hit before a manipulated take-down of the gold price is implemented. That narrative fits the chart above as well.

It’s important to distinguish the difference between the propaganda and truth, because that’s where money can be made in the markets. The truth is that the sector has sold off after a nice move from the mid-December 2016 low. But I also believe that the market is setting up for another big move into the 3rd and 4th quarters. It may take all summer for this to materialize, but the economic, financial and geopolitical fundamentals, as they are unfolding, weigh heavily in favor of big move higher in the precious metals sector.

One other point I would like to make – something that you WILL NOT HEAR from Wall Street or from Rickards or from the financial media: since bottoming in mid-December, the HUI is up 14.7%, GDX up 16.1% and GDXJ up 15.3% vs the S&P 500 which is up 7.7%. The mining stocks, since bottoming in mid-December, have outperformed the S&P 500 over the same time period through today (June 15, 2017).

Several of you have asked for ideas on the stocks in the GDXJ index that are “oversold” due to the rebalancing. As I’ve just demonstrated graphically and with ROR numbers, GDXJ has not really sold off since mid-April anymore than the larger-cap mining stocks in the HUI index and in GDX. Those are the numbers. I can’t make those up. It’s “narratives” that are fabricated.

Having said that, I did present two ideas in the Mining Stock Journal which happen to be in the GDXJ.  One is up 6% since May 4th – and it has a lot higher to move – and the other is up 20% since June 1st, with a lot more left in the move.

A subscriber told me yesterday that a well-known subscription service that costs $1500/year is promoting 3 ideas from GDXJ.  This is probably one of the services that is promoting the idea that the GDXJ has been hit unusually hard. I’ve shown above that idea is a false narrative.  The Mining Stock Journal is $20/month with no minimum commitment.  Subscriber turnover is exceptionally low for a reason.  You can find out more about it here:  MSJ Subscription Info.

Is Bitcoin Standing In For Gold?

Paul Craig Roberts and Dave Kranzler

In a series of articles posted on www.paulcraigroberts.org, we have proven to our satisfaction that the prices of gold and silver are manipulated by the bullion banks acting as agents for the Federal Reserve.

The bullion prices are manipulated down in order to protect the value of the US dollar from the extraordinary increase in supply resulting from the Federal Reserve’s quantitative easing (QE) and low interest rate policies.

The Federal Reserve is able to protect the dollar’s exchange value vis-a-via the other reserve currencies—yen, euro, and UK pound—by having those central banks also create money in profusion with QE policies of their own.

The impact of fiat money creation on bullion, however, must be controlled by price suppression. It is possible to suppress the prices of gold and silver, because bullion prices are established not in physical markets but in futures markets in which short-selling does not have to be covered and in which contracts are settled in cash, not in bullion.

Since gold and silver shorts can be naked, future contracts in gold and silver can be printed in profusion, just as the Federal Reserve prints fiat currency in profusion, and dumped into the futures market. In other words, as the bullion futures market is a paper market, it is possible to create enormous quantities of paper gold that can suddenly be dumped in order to drive down prices. Everytime gold starts to move up, enormous quantities of future contracts are suddenly dumped, and the gold price is driven down. The same for silver.

Rigging the bullion price prevents gold and silver from transmitting to the currency market the devaluation of the dollar that the Federal Reserve’s money creation is causing. It is the ability to rig the bullion price that protects the dollar’s value from being destroyed by the Federal Reserve’s printing press.

Recently, the price of a Bitcoin has skyrocketed, rising in a few weeks from $1,000 to $2,200. Two explanations suggest themselves. One is that the Federal Reserve has decided to rid itself of a competing currency and is driving up the price with purchases while accumulating a large position, which then will be suddenly dumped in order to crash the market and scare away potential users from Bitcoins. Remember, the Fed can create all the money it wishes and, thereby, doesn’t have to worry about losses.

Another explanation is that people concerned about the fiat currencies but frustrated in their attempts to take refuge in bullion have recognized that the supply of Bitcoin is fixed and Bitcoin futures must be covered. It is strictly impossible for any central bank to increase the supply of Bitcoins. Thus Bitcoin is standing in for the suppressed function of gold and silver.

The problem with cryptocurrencies is that whereas Bitcoin cannot increase in supply, other cryptocurrencies can be created. In order to be trusted, each cryptocurrency would have to have a limited supply. However, an endless number of cryptocurrencies could be created that would greatly increase the supply of cryptocurrencies. If entrepreneurs don’t bring about this result, the Federal Reserve itself could organize it.

Therefore, cryptocurrency might be only a temporary refuge from fiat money creation. This would leave gold and silver, whose supply can only gradually be increased via mining, as the only refuge from wealth-destroying fiat money creation.

For as long as the Federal Reserve can protect the dollar by bullion price suppression and money creation by other reserve currency central banks, and as long as the Federal Reserve can keep the influx of new dollars out of the general economy, the Federal Reserve’s policy adds to the wealth of those who are already rich. This is because instead of driving up consumer prices, thus threatening the US dollar’s exchange value with a rising rate of inflation, the Fed’s largess has flowed into the prices of financial assets, such as stocks and bonds. Bond prices are high, because the Fed forced up the price by purchasing bonds. Stock prices are high, because the abundance of money bid prices higher than profits justify. As the US government measures inflation in ways designed to understate it, the consumer price index and producer price index do not send alarm systems into the markets.

Thus, we have a situation in which the Fed’s policy has done nothing for the American population, but has driven up the values of the financial portfolios of the rich. This is the explanation why the rich are becoming more rich while the rest of America becomes poorer.

The Fed has rigged the system for the rich, and the whores in the financial media and among the neoliberal economists have covered it up.

Forget GDXJ – Follow The Real Money Into Gold, Silver And Juniors

Silver Doctors / The News Doctors invited me onto their weekly SD Bullion Metals and Markets show to discuss why both the technicals and fundamentals are setting up for an unexpected rally into the summer in gold, silver and the mining shares, specifically the juniors.

Subsequent to our recording, the weekly Commitment of Traders report released Friday showed that the bullion banks continue to cover their net short positions in both gold and silver rather aggressively and the hedge funds are unloading long positions and piling into the short side.  Historically, this has been a set-up for big moves higher in the sector.  The hedge funds chase momentum and they are almost never right in the precious metals sector.  When they pile into short positions, like they are now, it’s always a valid contrarian indicator.  We also discuss why the “summer doldrums” in the precious metals sector is no longer a valid seasonal play.

Another contrarian indicator is the negative sentiment connected to the GDXJ ETF.  Adam Hamilton wrote a non-compelling critique of GDXJ and made the assertion that GDXJ was diverting the flow of capital away from junior companies that deserve to get funding. The problem with this analysis is that retail investor buying of junior mining stocks on the secondary market is not a source of capital for junior mining companies. The secondary trading of stocks is not a source of capital for any stock, for that matter.  ETFs are a “derivative” of the secondary trading market and thus are also not a source of capital for companies.

Junior mining stocks get their capital from new share issuance or from direct investment by strategic investors.  If Hamilton bothered to call on the companies themselves rather than take quarterly filings and throw numbers into a spreadsheet as his primary tool of analysis, he would discover that many junior exploration CEO’s would tell him that they are getting a lot interest from strategic investors. Furthermore, many junior mining companies with investment-worthy stories are having no problem raising capital  through primary share-issuance, notwithstanding the recent turmoil connected to GDXJ. GDXJ is a derivative security. Derivatives are a source of fees for their issuer/sponsors, not a capital raising conduit for companies.

The Mining Stock Journal focuses on the emerging junior exploration mining companies that are seeing an elevated level of investment interest from sophisticated private investment funds and from strategic investors.  These are the stocks that offer the greatest upside-potential in the junior segment of the sector – not the larger-cap, developed companies in the GDXJ Trust.  The latest issue features a company with a potentially prolific gold property that is in negotiations with a strategic investor.  Two juniors featured in the Mining Stock Journal were acquired recently.  Looking at companies one-by-one, not en masse, is how you find the potential home run stocks.  You can learn more about investing in these opportunities here:  Mining Stock Journal information.

Here’s the download for the latest SD Bullion weekly show:  MP3 download  and here’s the podcast:

Phenomenal movement lately with one of your stock picks, Dave, and I have no doubt it’s still in the first inning of what will be a very long game. Superb. Thank you! – subscriber “Mark”

Stock Bubbles, Propaganda And The Deep State

At the close of the Constitutional Convention of 1787, someone asked Ben Franklin: “have we got a Republic or a Monarchy?”  To which Dr. Franklin replied, “A Republic – if you can keep it.”  – from the notes of Dr. James McHenry, one of Maryland’s delegates to the Convention

A “Republic” is defined as a State in which the supreme power is held by the people and their elected representatives.  The critical foundation of a Republic is Rule of Law.  When a person or group of people transcend the Rule of Law, and therefore “rise above” the sovereign power, a Republic no longer exists.

The Republic to which Ben Franklin referred no longer exists in the United States.  It’s debatable as to when the Republic status was lost, but the fact that Rule of Law has transformed into Rule of Man is not debatable.   The “invisible” entity known at the Deep State is the ruling body in the U.S.

Evidence of this is ubiquitous.  For example, Barack Obama’s Attorney General, Eric Holder – the chief enforcer and prosecutor in the United States – said with regard to the obvious crimes committed by the big Wall Street banks:  some banks are too large to prosecute. With that, Holder declared that the Too Big To Fail Banks are above the law.   Wall Street, in fact, is an integral part of the Deep State apparatus.

Another essential tool of the Deep State operation is the proliferation of propaganda.  The socially accepted term for “propaganda” is “alternative facts.”  But propaganda is merely a lie that is formulated and presented in a way that a lazy-minded populace will accept as the truth.   The Iraq war is good example.  The propagandists, like Colin Powell, who helped to enable an illegal attack on Iraq by the Bush regime, have openly admitted they lied to get the public behind the invasion.

The current pre-war “alternative fact” propaganda is this idea that Russia interfered in presidential election in order to influence the outcome.  This lie was floated by Hillary Clinton during one of the debates with Trump.  That lie has disturbingly transformed into an insidious lie that is promoted by the media and happily accepted by most Americans.

Another big lie seemingly accepted as truth is the stock market.  Never before in history has the value of the U.S. stock market been as dislocated from the underling fundamental reality than now.  But as long as the Dow and the S&P 500 keep levitating higher, the politicians and economists can point to the stock market as evidence of a healthy economy and “success” with regard to their policies of money printing, credit creation an unfettered Government spending.

(Of course, don’t pay attention to the fact that the median stock that trades on the NYSE is below its 200 day moving averaging and stocks in certain sectors are testing 52-week lows).

In today’s episode of the Shadow of Truth we apply Orwell’s quote – “In our age, there is no such thing as ‘keeping out of politics.’ All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia” – to 2017 America:

Silver – The Only Commodity 66% Cheaper Than 37 Years Ago

Silver has gone from being the cartel’s kryptonite to being its LHC, or Large Hadron Collider. There are a lot of theories on what is going on with silver but the reality will probably be something even more fantastic. I keep getting back to lumber by way of comparison. The OI in silver is 55 times higher than in lumber, yet the global physical lumber market by dollar volume is actually higher. – quote from LeMetropole Cafe’s “Midas” Report

Those of us who have studied and traded silver for a long time (16 years in my case), have concluded that the Western Central Banks have painted themselves into a corner with their multi-decade effort to control the price of silver. Central Banks ran out of silver to unload on the market a long time ago. As such, they’ve had to resort to using paper derivative silver in the form of Comex futures, LBMA forward and OTC derivatives in their effort to cap the price of silver. In the last year, the amount of paper silver sold short against the available supply physical silver has grown into an astronomical number. At this point the banks can only pray that less than 1% of the longs each delivery period will continue to settle the contracts in cash…

“As a fiduciary, to the extent that you own gold and are going to own it a long time, it is not a trade….in the COMEX warehouse they had $80 Billion of open interest, and $2.7 Billion of deliverables….thats an easy one, you go get it.”  -Kyle Bass

Kyle: “What if 4% of the people want delivery?”
COMEX Delivery Manager: “Oh Kyle that never happens. We rarely ever get a 1% delivery.
Kyle: “Well, what if it does happen?”
COMEX Delivery Manager: “Oh, well price will solve everything.”
Kyle: “I said thanks, give me the gold.”

Here’s the link to that interview with Kyle Bass: “I’ll Take My Gold, Please”

The Daily Coin chatted with GATA’s Bill “Midas” Murphy about the current degree of manipulation in the silver market. The banking cartel is trapped, in a sense. The only resolution of this dilemma is a much higher price of silver – the free market solution – or war:

Silver Demand Shows A Consumer In Trouble

Global demand for silver declined from 2015 to 2016 by 123 million ozs per numbers from the Silver Institute presented in an article on The Daily Coin yesterday.   In fact, for the demand categories primarily driven by the consumer, demand plummeted 125 million ozs, or 15.3%.   Industrial demand for silver increased slightly but this was because of the global expansion in the solar panel industry, primarily in India and China.

The consumer portion of global silver demand is derived from jewelry, coins and bars (investment), silverware and electronics.  The 15.3% plunge in demand reflects the fact that consumer disposable income is drying up.   After making required monthly expenditures – food, mortgage/rent, debt service, healthcare – consumers, especially in the United States, are out of money.

Disappearing disposable income explains only part of the equation.  The illusion of economic improvement in the U.S. was created by debt issuance.   Between Q3 2012 and now, total household debt expanded by $1.38 trillion dollars.  In fact, total household debt is now at an all-time high, driven by auto, student, credit card and personal loans.  The truth is that “discretionary” consumption was fueled by the Fed enabling the average U.S. household to accumulate a record level of debt.

The economy likely hit a wall in late 2016 and is now contracting.   Today’s retail sales report – to the extent that the numbers have any credibility – showed a .4% gain in retail sales for April vs. March.  But these are nominal numbers.   On an inflation-adjusted basis, retail sales declined.

While demand for silver products reflects the fact that the average consumer is out of money, restaurant sales confirm this.   April restaurant sales declined 1% in April and foot traffic into restaurants dropped 3.3%.  This was the 12th month out of the last 13 that restaurant sales fell.  Restaurant sales have dropped five quarters in a row.  The last time a streak like this occurred was 2009-2010.   Sound familiar?

Regardless of what the Fed says in public, the U.S. economy is in trouble.  The illusion of economic growth post-2009 was a product of debt issuance.  Now the consumer – 70% of the economy – has hit a wall with regard to its ability to take on more debt – look out below. In today’s episode of the Shadow of Truth, we review the silver demand numbers and discuss the implications for U.S. and global economy: