April 29, 2024

Where Does Silver Go From Here?

April 15, 2013 by 1 Comment

silver-eagleBy: GE Christenson

You bought silver with high expectations! Then it crashed while endless news reports informed you that silver would drop even further. Frustration! Misery! Despair! Depression! You have lived it all. There was no light at the end of the tunnel.

Darkness and despair covered the land of silver. There was no joy in silver-ville.

But, then from the depths of despair and ugly bearish sentiment, a rally materialized. But, not just a small rally, a HUGE RALLY – TOTALLY AWESOME! The price doubled in a few months. Then it paused, scared some of us out, and rallied even further. You heard that silver was going to $100 or maybe $200 per ounce. Analysts outdid each other with higher and higher projections. You congratulated yourself on your foresight and financial acuity by investing in silver – sheer genius – forgetting that you almost sold out for a loss at the bottom. The manic phase is great while it lasts…

Silver rallied, and you waited for even higher prices before you sold. If you were rational or just lucky, you sold out before it crashed 25% in a week. If you did not sell out, you screamed to anyone who would listen, “they crashed it,” and “I should have sold out before the crash,” and “it’s not fair.”

Silver investing felt like a bipolar roller coaster ride – manic up followed by depressing down. You began to self-medicate with alcohol and wishful thinking. You sought out others who agreed with you, told you what you wanted to hear, and…

… it goes on and on.

STOP!

I repeat. STOP with the bipolar behavior, the delusional thinking, the self-medicating, and the emotionally debilitating ups and downs. It is not good for your physical, emotional, or financial health. Just stop, hit the silver reset button, and reassess.

  • Silver is heavily manipulated by the big players (JP Morgan, etc.) – what else would you expect? They are in the business to make profits, and their profit at YOUR expense is just fine with them. No need to worry about the DOJ, congress, or any regulators … for obvious reasons. So just admit it, the price is managed and manipulated, the “fix is in,” and that is exactly what we should expect. But, it is still a better investment than most paper.
  • Silver has gone up, from January 1, 2000 (a good place to start) to the LOW in April 2013 about 14% per year. One more time, what is wrong with 14% per year?
  • Silver rallied from under $9 in October 2008 to a high of nearly $49 on April 29, 2011. The next week it crashed to a low of about $35, briefly bounced, and then fell again to a low of about $26 in June of 2012, rallied to about $35 in October, and fell again to about $27 in early April 2013. That was a wild ride on the bipolar silver roller coaster.
  • Since 1971 when Nixon severed the already tenuous link between the dollar and gold and encouraged money creation to accelerate, silver has risen, on average. about 7% per year, compounded annually, for 42 years. It will go higher because the value of paper currency is almost certain to continue its decades’ long decline.
  • Central banks around the world are printing money, expanding the money supply, and doing what they can to suppress the price of gold and silver. Given the financial mess they have created, what choice do they have? So expect money printing and erratic silver rallies to continue.

For your emotional and financial sanity and physical health, get off the bipolar silver roller coaster, buy physical silver, relax, and watch the spectacle as the central banks of the world drive the value of paper currency toward zero and the value of silver to $100 or $200 or $300 per ounce. You own it for insurance and to preserve purchasing power, so there is no need to fixate on the daily or weekly price, except to buy more at bargain prices – like now.

Again: Why do we own silver?

Read:

GE Christenson
aka Deviant Investor

Filed Under: Currency debasement, Featured, Silver Tagged With: , , , ,

Will John Paulson Dump His Gold Holdings?

April 15, 2013 by Leave a Comment

John Paulson, famed for making billions ahead of the financial crash, is taking heavy losses on his gold holdings. According to Bloomberg, Paulson’s gold fund is down 28% as of March 31st.

As of the latest reporting period, Paulson hedge funds hold 21.8 million shares in the SPDR Gold Shares ETF (GLD), worth a massive $3.1 billion as of Friday’s closing price of $143.95. Whether or not Paulson decides to cut his losses or double down could have a major impact on the future price of gold.

 

Filed Under: Featured, Gold Tagged With: , , ,

Physical Gold Inventories Plunge As Gold Market Crashes – How Can That Happen?

April 15, 2013 by 1 Comment

worldKyle Bass recently summed up the thoughts of many gold investors when he said “the largest central banks in the world, they have all moved to unlimited printing ideology.  Monetary policy happens to be the only game in town.  I am perplexed as to why gold is as low as it is.  I don’t have a great answer for you other than you should maintain a position.”

Gold investors can easily be forgiven for being perplexed, especially when considering that gold prices are plunging at a time when stocks of physical gold are being rapidly depleted at the COMEX warehouses.  Is this just one of life’s unsolvable mysteries or is the gold market being manipulated?  Bill Downey at Gold Trends lays out a solid case on how market manipulation caused last week’s gold collapse and why it makes more sense than ever to increase holdings in physical gold and silver.

 

There’s been a recent huge draw down of physical gold at the New York COMEX and at the JP Morgan Chase depository. Look at the physical market draw down on the charts below. It has taken a drastic plunge.HOUSTON — we have a problem.Physical inventory drawdown at JPM
Charts by Nick Laird of www.sharelynx.com

GoldInventoryJPMAPril2013
Physical Drawdown at COMEX
Charts by Nick Laird of www.sharelynx.com
GoldInventoryComexApr2013
You can imagine the dilemma this is causing for the market interests behind these inventories. If the inventory runs out and one cannot meet deliveries then it has to be bought on the open market. Not only that but it could cause a run up in prices that would hurt the shorts in the market.So what to do?There is only one way out of this for the market controllers would be to devise a plan that would collapse the market and trip up all the stops at the correction lows in gold of 1525 thereby setting off the stop loss orders under this important market low. And what if the plan included a way to stop the physical market from purchasing gold under 1525 while that correction was underway?

And how can that happen?

They have to hatch out a plan and carefully orchestrate it in a series of events that takes the gold market by surprise and force the players out of their positions.

Read on for today’s lesson in market manipulation and allow me to relay my speculation about what transpired last week.

A successful ambush usually involves surprise.

One of the main new weapons in the FEDS arsenal is TRANSPARENCY.

After a lifetime of silence the FED all of a sudden has come out of the closet and has decided that the best thing for the market is to be transparent and to that end they now have televised communication meetings with the general public so chairman Bernanke can explain the FED policy and answer any questions that the market has on its mind as well as the usual minutes that get released to the markets that review the policy decisions and discussion of prior meetings.

Why does the Fed need to explain what they are doing now?

Well it isn’t because everything is going just fine. Put it this way. They must figure when you have 50 million people on food stamps and the Dow Jones is going up a few hundred points a week and making all time highs and you have 16 trillion dollars in debt and interest rates are zero, its best to have a communiqué every month before someone asks you to explain what is going on. It’s called staying ahead of the curve if you will. If you tell them what’s going on it makes it look like you know what you’re doing. Otherwise all we have is the statistics and by themselves they tell you something is wrong, something is terribly wrong. So they have become transparent.

During the last communiqué the chairman made it abundantly clear that QE was here to stay until the unemployment rate reached acceptable levels. This communiqué whether by personal appearance or by releasing the FOMC minutes of the prior meeting is something the FED relies on so market participants can remain comfortable and abreast of Fed monetary policy.

Three strikes and you’re out

The FOMC minutes from the last meeting were due for release during last week. But a funny thing happened. They got released EARLIER than expected. It was all a big mistake and the FED let the SEC and the CFTC know right away that the error had occurred. And lo and behold even with all its transparency there happened to be some language we didn’t get updated on until the FOMC minutes were released. The notes say that several members have been discussing cutting back on the stimulus. That was strike one. It got the gold market thinking that stimulus cuts might be coming.

Strike one

Surprise number two

Then a bombshell was released from news sources. It was reported that Cyprus would have to sell 400 million Euro’s of gold as part of the bailout package of raising money for their failed banking system. Gold prices came down to 1550 on the news and the day passed by. Even though Cyprus bankers tell us the next day that they didn’t discuss selling any gold, market jitters seemed to remain and Friday was just around the corner. This was strike two.

Now we need a strike three and you’re out. Gold is a nervous market to begin with as a lot of people have already lost a lot of money in the last six months.
With Gold at 1550, all that is needed for the market to drop is to get one more push where all the stops are (just below the 2 year low of 1525).

The selling began in the Friday sessions overseas. By time we got to the New York COMEX gold open, the price was down to 1542. Now all the players are there and the volume and liquidity is there to create the final blow to the market.

And then the attack began. Wave after wave of selling until gold got to 1525. Then they break down the price below the two year low and all the stops that have been accumulating there start getting tripped up and the selling accelerates as it begins to feed on itself. The physical market for gold sees this as a gift and gets ready to make their move and buy up the gold.

Now comes the part that is pure genius or a total coincidental thing that just so happens to be a gift to those who are short the market and those who would be responsible to deliver gold should the inventory deplete.

ALL OF A SUDDEN THE LONDON PHYSICAL PLATFORM THAT BUYS AND SELLS PHYSICAL GOLD GETS LOCKED UP. THE SYSTEM FREEZES.

continue reading here.

 

Filed Under: Currency debasement, Featured, Gold, Silver Tagged With: , , , , , , , , ,

Panic Selling Crushes Gold and Silver Prices – Bearish Sentiment Reaches Extreme Levels

April 12, 2013 by 4 Comments

goldThe precious metal markets, which have been under a constant drumbeat of negative news and bearish price forecasts for months, sold off sharply today.   Bearish investors seemed to reach the “give up” stage as gold and silver fell below key technical levels.  Panic selling continued to cascade throughout the day as precious metal investors hit the sell button and buyers stepped aside.

By the end of the trading day, gold dropped an astonishing $84 per ounce to close at $1,478, down over 5% on the day and below $1,500 per ounce for the first time since July 5, 2011.   Silver had an even worse day with a price decline of 6.5%, closing down $1.81 per ounce at $25.95.

Analysts had multiple reasons for the huge decline in gold and silver prices including the belief that inflation will remain subdued and the Federal Reserve would begin to slow the pace of monetary stimulus later this year.  In addition, many trend following investors are repositioning out of precious metals into other investment opportunities such as stocks which have appreciated by over 100% since the depths of the financial crisis.  By contrast, gold and silver  have been unable to breach highs reached in mid 2011.

Also weighing on investor’s mind was the fear that the proposed sale of over $500 million of Cyprus gold reserves would further pressure gold prices.  Comments in the Wall Street Journal suggested that other countries may also be forced to sell their gold reserves.

The news about Cyprus “gets people to wonder: Will there be central-bank liquidation of gold when other countries get into trouble?” said Adam Klopfenstein, senior market strategist with Archer Financial Services in Chicago. “Selling gold might be the new caveat for any future [bailout] deals.”

The match that ignited the explosive move to the downside was struck on Wednesday when Bloomberg reported that Goldman Sachs predicted sharply lower gold prices and suggested that investors actually short the gold market.

The turn in the gold price cycle is accelerating after a 12-year rally as the recovery in the U.S. economy gains momentum, according to Goldman Sachs Group Inc., which reduced forecasts for the metal through 2014.

The bank cut its three-month target to $1,530 an ounce from $1,615 and lowered the six- and 12-month predictions to $1,490 and $1,390 from $1,600 and $1,550. Goldman recommended closing a long Comex gold position initiated on Oct. 11, 2010 for a potential gain of $219 an ounce, analysts Damien Courvalin and Jeffrey Currie wrote in a report today.

“Despite resurgence in euro-area risk aversion and disappointing U.S. economic data, gold prices are unchanged over the past month, highlighting how conviction in holding gold is quickly waning,” the Goldman analysts wrote in the report. “While higher inflation may be the catalyst for the next gold cycle, this is likely several years away.”

Goldman cut its 2013 gold estimate to $1,545 an ounce from $1,610, trimmed its 2014 forecast to $1,350 from $1,490, and set year-end targets of $1,450 in 2013 and $1,270 in 2014. Goldman recommended starting a short Comex gold position, targeting $1,450 with a stop at $1,650, the analysts wrote.

Ironically, the biggest worry for gold and silver investors now comes from the precious metal ETFs, which greatly contributed to the precious metals bull market as investors poured billions of dollars in the SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV).  If investors in the GLD and SLV initiate panic liquidations, a sharp rebound in gold prices may be wishful thinking despite today’s huge sell off.  According to Goldman Sachs,  “The fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across Comex futures and gold ETFs remain near record highs.”

COURTESY: STOCKCHARTS.COM

COURTESY: STOCKCHARTS.COM

COURTESY: STOCKCHARTS.COM

COURTESY: STOCKCHARTS.COM

The bearish sentiment and price action on gold and silver seemed to have reached extreme levels.  Does anyone hear a contrarian bell ringing?

Filed Under: Featured, Gold, Silver Tagged With: , , , , , , , ,

The Financial System Has Reached The Implosion Point

April 5, 2013 by Leave a Comment

coinA profound thanks to all the short term fickle speculators in gold and silver who have shifted their portfolio allocations to stocks, bank accounts and certificates of confiscation government bonds .  The shift to paper assets has provided what will in hindsight be the best buying opportunity for gold and silver since the crash of 2008.

BY:  GE Christenson

March and April 2013 may go down in history as the tipping point for the western financial system.

We have already seen:

  • Lehman Brothers and many other financial firms collapse.
  • $700 Billion in TARP funds arranged by banking insiders for banking insiders at the expense of US taxpayers.
  • Over $16 Trillion in bailouts, guarantees, swaps, and loans created by the Fed and given to various banks, nations, and other insiders.
  • MFGlobal took “segregated” customer funds, the exchange provided no compensation to customers, and yet no criminal indictments have been issued.
  • Global derivatives total $700 Trillion to well over $1,000 Trillion, depending on who is counting. Some are “toxic waste.”
  • Many European bailouts and “fixes.”
  • Spain, Italy, Slovenia, and perhaps France in trouble.
  • US official debt approaching $17 Trillion with unfunded liabilities many times larger.
  • The Federal Reserve creating $85 Billion per month (over $115,000,000 per hour) to support banks and the US government.

So what other disasters could occur? In a word, Cyprus!

  • Not because the EU and Cyprus took Russian money.
  • Not because several banks will close.
  • Not because some deposits will be confiscated and/or frozen.

In my opinion, the sign that a tipping point has occurred in the financial system is the real story:

  • The veil of banker honesty has been lifted. The EU/IMF/ECB will do whatever is necessary to support the banks, even if it means they will confiscate (tax, steal, bail-in) customer deposits.
  • Customer deposits are NOT assets held in the bank for safe-keeping, but are liabilities of the bank and are not guaranteed to be made whole.
  • Billions of dollars were removed prior to the Cyprus freeze, so insiders clearly knew in advance of the ordinary depositors (see below). There is no “level playing field” when billions of dollars/euros are in play.
  • According to Jeroen Dijsselbloem, Dutch finance minister and Euro Group President, this is “the template for any future bank bailouts.” In other words, your deposits are considerably less safe than you thought. Your bank could fail, and your deposits might be used to compensate for derivative losses or other losses that the bank incurred.
  • The FDIC in the US, as well as England, Canada, and New Zealand, has announced similar policies, agreements, and plans to confiscate deposits in the case of an emergency. Is this a sign that an emergency is not only possible but probable and imminent?
  • Confidence in the banking and financial system has been seriously damaged, perhaps irreversibly.

Following are a few quotes from respected commentators:

Jim Sinclair: If the fools that have attacked Cyprus persist then it is the start of an avalanche that will destroy confidence in fiat currency, the fractional reserve system and central banks. What are the central bankers terrified of? My answer is the mountain of old OTC derivative coming home to roost.” Link.

Tyler Durden: “With every passing day, it becomes clearer and clearer the Cyprus deposit confiscation “news” was the most unsurprising outcome for the nation’s financial system and was known by virtually everyone on the ground days and weeks in advance: first it was disclosed that Russians had been pulling their money, then it was suggested the president himself had made sure some €21 million of his family’s money was parked safely in London, then we showed a massive surge in Cyprus deposit outflows in February, and now the latest news is that a list of 132 companies and individuals has emerged who withdrew their €-denominated deposits in the two weeks from March 1 to March 15, among which the previously noted company Loutsios & Sons which is alleged to have ties with the current Cypriot president Anastasiadis.” Link.

Peter Cooper: “Depositors in the beleaguered Bank of Cyprus are now facing losses of 60 per cent on deposits over 100,000 euros as the Cyprus Government seems to have woken up to the fact that this is its last chance to steal money off these mainly foreign depositors. It’s an absolute travesty and a red letter day for European Union banks…

“Money in EU bank accounts is clearly now up for grabs by any government that recapitalizes its banking sector. Moreover, the Cyprus precedent is going to cause a run on the weaker banks that will make this sort of recapitalization inevitable. Standby for a systemic banking crisis in the EU…

“What the EU has done in Cyprus is the modern equivalent of the failure of the Credit Anstaldt in 1931 that brought on the Great Depression with thousands of banking failures around the world.” Link.

Jim Sinclair: “I believe Cyprus is the defining moment whereby the physical market for gold overtakes the paper market for gold as the arbiter of price. When that occurred in 1979 the price of gold began its move to seek its maximum valuation.” Link.

Julian DW Phillips: “When it was announced [in Cyprus] that both large and small depositors were to have a percentage of their deposits seized, it was not the amount that horrified the world but the discovery that you do not own your own bank deposits… Most investors worldwide are of the belief that when you deposit your money in a bank, it simply has safe-keeping of that money. The realization that you have lent the bank your money and are an “Unsecured Creditor” of the bank is an unpleasant revelation.” Link.

Michael Snyder: “What you are about to see absolutely amazed me when I first saw it. The Canadian government is actually proposing that what just happened in Cyprus should be used as a blueprint for future bank failures up in Canada.

The following comes from pages 144 and 145 of “Economic Action Plan 2013″ which you can find right here. Apparently the goal is to find a way to rescue “systemically important banks” without the use of taxpayer funds…”

“In addition, branches of the two largest banks in Cyprus were kept open in Moscow and London even after all of the banks in Cyprus itself were shut down. So wealthy Russians and wealthy Brits have been able to take all of their money out of those banks while the people of Cyprus have been unable to…”

“The global elite are fundamentally changing the game. From now on, no bank account on earth will ever be able to be considered “100% safe” again. This is going to create an atmosphere of fear and panic, and no financial system can operate normally when you destroy the confidence that people have in it.

Confidence is a funny thing – it can take decades to build, but it can be destroyed in a single moment.” Link.

Ellen Brown: “Confiscating the customer deposits in Cyprus banks, it seems, was not a one-off, desperate idea of a few Eurozone “troika” officials scrambling to salvage their balance sheets. A joint paper by the US Federal Deposit Insurance Corporation and the Bank of England dated December 10, 2012, shows that these plans have been long in the making; that they originated with the G20 Financial Stability Board in Basel, Switzerland (discussed earlier here); and that the result will be to deliver clear title to the banks of depositor funds.” Link.

Richard Russell: “I’ve been asked to name one future situation of which I’m most certain. My answer is this – I believe the surest situation (change) in America’s future is a decline, even a drastic decline, in our standard of living. We’ve spent it; we’ve spent what we didn’t have. And somewhere ahead, probably much sooner than we think, will come payback time. And it won’t be pretty.” Link.

Summary

GE Christenson
aka Deviant Investor

Filed Under: Currency debasement, Featured, Gold, Silver, US Debt Crisis Tagged With: , , , , , , ,

Why The Long Term Price of Silver Is Guaranteed To Rise

April 3, 2013 by 1 Comment

By: GE Christenson

Walking-Liberty-HalfBegin the analysis in 1971 when Nixon dropped the link between the dollar and gold. A pack of Marlboros cost (depending on local taxes) about $0.39. We paid about $0.36 for a gallon of gasoline. The DOW Index was about 850. Silver was priced at about $1.39.

Times have changed! Read Part 1 of Silver – Keep It Simple!

Today we have more currency in circulation, far more debt, and much higher prices – what does it mean?

Examine Graph 1. The prices for retail cigarettes, crude oil, national debt, silver, and the true money supply (TMS) (see notes at end) are shown on a log scale graph with all prices normalized to start at 1.0 in 1971.

Click on image to enlarge.
  • National debt (green line) has increased rapidly since 1971 and even more rapidly, on average, than the other items. (National debt has increased over 12% per year for the last five years.)
  • Silver (black line) and crude oil (red line) prices have been erratic with peaks in the early 1980s, troughs in the late 1990s, and substantial rises since 2001.
  • Cigarettes and TMS have increased steadily since 1971.
  • TMS (also M2, M3, etc.), debt, and most commodity prices have increased exponentially since 1971. Because the dollar was not backed by gold, dollar creation, total debt, and prices increased rapidly.
  • Not shown are some prices that increased more rapidly (medical costs and college tuition) and some that increased more slowly (postage and bread).

Graph 2 shows annual silver and crude prices smoothed with a centered five period moving average. This removes much of the “noise” in the price data and shows longer term trends better. Note that the price of silver actually reached about $50 per ounce in early 1980, but the average daily price in 1980 was only $16.39; the smoothed daily average was about $11.

Click on image to enlarge.

Statistical Correlations

  • Silver prices in dollars (annual average of daily price) correlated with crude prices in dollars (annual average of daily price) at 0.83 – a good correlation. Both are commodities, both are affected by politics, and both are sensitive to money supply, actual inflation, and inflationary expectations.
  • TMS correlated with national debt at 0.99 – a tight correlation. When budget deficits increase the national debt, the money supply expands accordingly.
  • Silver prices (annual average shown) correlated with national debt at 0.67 and with TMS at 0.58. The smoothed silver price correlation to national debt was 0.76 over 40 years and much higher over the past 13 years.
  • Silver prices (smoothed) correlated with crude prices (smoothed) at 0.93 – an excellent correlation.

So What?

  • National debt correlates tightly with TMS. Smoothed silver prices correlate well with both national debt and TMS. We may be apprehensive about future silver prices, but we can be 99.99% certain about the inevitable increase in national debt. Based on the 40 year correlation between silver and national debt, silver prices will continue to rise.
  • Both crude oil and silver are commodities that experience large price volatility. On average, they go up and down together; and, over a 40 year history, their prices have clearly moved substantially higher. I see many reasons to expect both to move higher in the long term.
  • Crude oil is the most important commodity in the world. Its per capita use, on average, is rising and the world’s population is increasing, so demand will remain strong, unless the world suffers a massive financial and economic collapse. Further, the easily available oil has been taken so there is little chance that inexpensive supply will increase. More demand coupled with flat or declining supply requires higher future prices. Higher crude oil prices strongly suggest higher silver prices.
  • Central banks are “printing money” in their desperate attempt to fight deflation, levitate asset prices, bailout banks and countries, and encourage inflation. This guarantees further increases in national debt and TMS and price increases for most commodities including crude oil, cigarettes, and silver.

Price of Silver as a Projection Based on Other Variables

We can construct a calculated price for silver based on three variables – national debt, TMS, and the price of crude oil. Examine Graph 3 of smoothed silver prices and the calculated price of silver based on those three variables. Note that the correlation is 0.86 – quite good. The silver price has both a monetary component (national debt and TMS) and a commodity component (crude oil). Together they produce a simple but effective projection for the smoothed average price of silver over the past 42 years.

Click on image to enlarge.

For the Future

Assume national debt increases 12% per year for the next five years like it has for the past five years. Assume TMS and crude continue their past five year growth rates (11% and 8%). The estimated price for the smoothed average price of silver is about $55 in 2016. The peak price on a spike higher could easily be triple the smoothed price. Look for $100 silver in 2015 – 2017 unless a deflationary collapse occurs – to the detriment of everyone including banks, politicians, and national governments.

Conclusion

Debt, money supply, and the prices for most commodities have exponentially increased over the past 42 years. Prices for crude oil and silver have substantially increased but inconsistently. I can be certain of death and taxes, and I feel confident that the national debt and prices for crude oil, cigarettes, silver, and most other consumer items will drastically increase in the next few years – under circumstances similar to the past 40 years. A hyperinflationary increase is also possible, in which case, all commodity prices will be unbelievably higher. Assuming no deflationary collapse, expect $100 silver relatively soon – perhaps in 2016. Read Past & Future Speculative Bubbles – What They Indicate for Gold and Silver!

GE Christenson
aka Deviant Investor

Filed Under: Bullion Sales, Currency debasement, Featured, Silver, US Debt Crisis Tagged With: , , , , ,

Silver Bullion Coin Sales Heading for Record Highs In 2013

April 1, 2013 by Leave a Comment

Sales of the American Eagle silver bullion coins soared in March, continuing a trend of record breaking sales that has been in force for the past five years.

american-silver-eaglePrior to the financial crisis, sales of the one ounce American silver eagles averaged about 10 million coins per year.  The near collapse of the financial system in 2008 raised profound questions about the integrity of the financial system and the rush to precious metals was on.  Since 2008, annual sales of the American Eagle silver bullion coins have soared with average annual sales of over 31 million coins.

According to the U.S. Mint, sales of the American Eagle silver bullion coins totaled 3,356,500 ounces in March, up 32% from comparable sales of 2,542,000 ounces during March 2012.   Total sales of 14,223,000 ounces through March 31, 2013 soared by 40.3% over the comparable prior year period.

The previous record year for silver bullion coins was in 2011 when 39,868,500 coins were sold. The 2011 record may wind up looking like a low number compared to projected total sales for 2013.  Based on sales for the first three months of the year, annualized sales for 2013 could hit a record shattering 57 million ounces although even this estimate may be too low.  As the slow motion collapse of the European banking system speeds up, the looming specter of  huge losses by bank depositors could create a total loss of confidence in paper money and ignite a panic move into gold and silver.

The U.S. Mint has vastly underestimated demand for the American Eagle silver bullion coins and was recently forced to suspend sales twice as physical demand for silver soared (see U.S. Mint Sold Out).

Since 2000, investors have purchased almost a quarter billion ounces of silver bullion coins from the U.S. Mint, worth almost $7 billion based on the current price of silver.

American Silver Eagle Bullion Coins

YEAR

OUNCES SOLD

2000

                 9,133,000

2001

                 8,827,500

2002

               10,475,500

2003

                 9,153,500

2004

                 9,617,000

2005

                 8,405,000

2006

               10,021,000

2007

                 9,887,000

2008

               19,583,500

2009

               28,766,500

2010

               34,662,500

2011

               39,868,500

2012

33,742,500

2013

14,223,000

TOTAL

            246,366,000

Total sales for 2013 are through March 31, 2013.

Filed Under: Bullion Sales, Currency debasement, Featured, Silver, US Mint Tagged With: , , , , , , ,

How To Buy, Store and Sell Gold and Silver

March 20, 2013 by Leave a Comment

By: GE Christenson

You want to buy silver and gold. There is much to consider!

safe

  • Physical metal or paper promises?
  • From which supplier will you buy it? Price is not the only consideration.
  • Where do you store it? Your sock drawer, a safe, insured and secure vault, or in another country?
  • How do you sell it and when?
  • IRS Rules

 

Physical, ETF, or Paper?

Do you want actual physical silver and gold that you can hold in your hand? If you do, then buy coins or bars and skip ahead.

If you want to buy and sell easily without taking delivery of actual metal, then perhaps you should invest in an ETF (Exchange Traded Fund) for gold and silver. The fees are minimal; ETFs are convenient and good for frequent trading. The two most popular are GLD and SLV. They are also criticized by many analysts, so I encourage you to also consider PHYS, PSLV, GTU, and others.

If you want paper, then buy options or futures contracts and be careful. When elephants fight, the grass gets trampled – and most of us are merely grass in the world of futures trading.

You Want to Buy Physical Gold and Silver Coins and Bars. Good! Where?

There are many dealers who will sell over the internet and ship to your home or to a secure storage vault. Their prices will vary slightly and so will their terms for payment and delivery. See the partial list and brief comments at the end of this article to get started. There are many other fine dealers in addition to the few examples I have listed.

Storage

More important than where you buy is whether you will buy for delivery to your home, delivery to a secure domestic storage facility, or for delivery to a vault outside of the United States.

Your home – Convenient and close but vulnerable to fire and theft. Your sock drawer is not recommended – buy a safe, hide it, and tell very few.

Safe deposit box at local bank – Secure, less convenient, probably not insured, and vulnerable to a search warrant, court order, and banking shutdown. Use a local bank, not a branch of a huge mega-bank.

Secure storage in the USA – Very secure and safe but may not be close or convenient. Are you comfortable with such storage? If so, then this is an excellent choice. Choose a vault OUTSIDE the banking system.

International Storage – You can store in commercial vaults in London, Canada, Switzerland, Hong Kong, Singapore, Australia, and other locations. The IRS MAY want to be told what you are storing and its value if you are an American citizen and storing internationally. See IRS Rules.

How Do you Sell Your Gold and Silver?

If you are buying for insurance against devaluing paper currencies, perhaps you intend to hold it for a long time or expect to will it to your family. In either case, don’t sell it.

If your gold and silver coins are in your possession, then you can sell via the internet or take them to a local coin store. Most companies that will sell to you via the Internet or a phone call will also buy back at a slight discount to sales price (they have to sell at a mark-up to stay in business). You can also sell on eBay or to private individuals. There probably will be tax implications, so consult with your tax advisor.

When to Sell Gold and Silver?

Again, there is no right answer for everyone. Some will argue that gold and silver are essential insurance against unbacked paper currencies and so should never be sold. Investors may want to hold until they see some large price, say $150 silver and $4,000 gold. Others wish to trade in and out, buying low and selling high. Your choice will help determine if you want paper silver, an ETF, coins, or bars, stored domestically or offshore. It is easy to sell paper or an ETF. It may be less convenient to sell coins and bars that you have stored in a safe deposit box. It probably will be easy to sell gold stored in Switzerland.

Jim Sinclair, legendary gold trader and investor, says buy “fish lines” and sell “rhino horns.” What he means is that markets, especially gold and silver markets, often move too far, too fast, both up and down. The down moves – the fish lines – scare out leveraged speculators and “weak hands” and usually indicate good buy points for long-term investors. When leveraged speculators, hot money, and the public drive the market higher in a parabolic spike upward, the chart looks like a rhino horn, and that often indicates a good time to sell. There will be many more signals, but most of us are overwhelmed by greed and fear, especially panic, and we often miss the signals. In 1929 the “signal” was to sell when shoeshine boys were giving stock tips. Something similar will happen at the next panic high in gold and silver, but that may be years away.

IRS Rules

The IRS has instituted new rules for United States taxpayers. We are now required to report holdings of foreign assets on form 8938 (Statement of Specified Foreign Financial Assets) and form TD F 90-22.1. Consult with your tax attorney and financial advisor, but the simple interpretation is this:

If you own financial assets in another country worth more than certain amounts, usually you must report these assets on form 8938 with your federal tax return and on form TD F 90-22.1 due June 30 of each year. It is wise to comply with IRS requirements as the penalties can be severe. There may be exceptions that your professional advisor can discuss, but these relatively new requirements may influence your choice of investments and their storage locations.

Alphabetical (partial) list of gold and silver vendors with brief comments on each.

Please do your own research before making a purchase.

APMEX – Large gold and silver bullion and coins dealer operating out of Oklahoma. They maintain a sizeable inventory and will buy and sell online in several currencies with reasonable commissions. Apmex will “lock-in” a purchase price online and accept a personal check in payment (with delayed delivery). If you wish, they will also arrange for secure storage with a subsidiary company and ship directly to that insured storage facility. Apmex will assist with the purchase of silver and gold for investment in your qualified IRA.

Bullion Vault – Secure insured vault storage in London, Zurich, and New York for both gold and silver. Purchases can be arranged quickly and online in different currencies with low costs for storage and insurance. It is easy to sell or take delivery of your metals.

Global Gold – Secure insured vault storage in Switzerland, Hong Kong, and Singapore for both gold, silver, platinum, and palladium. Purchases can be arranged quickly and online with low costs for storage and insurance. It is easy to sell or take delivery of your metals. Ownership is physical and fully allocated.

GoldMoney – Secure insured storage in the UK, Switzerland, Hong Kong, Canada, and Singapore for both gold and silver. Purchases can be arranged quickly and online in different currencies with low costs for storage and insurance. It is easy to sell or take delivery of your metals.

GoldSilver.com – Large gold and silver coin and bullion dealer operating out of California. They maintain a sizeable inventory and will buy and sell online with reasonable commissions. GoldSilver.com will arrange storage in Singapore, Hong Kong, Canada, or the USA. You can easily sell your gold and silver holdings or take delivery. They also will assist with purchasing gold and silver coins and bullion for your retirement accounts. If you have time, watch their instructional videos.

Hard Assets Alliance – This is a relatively new company that attempts to meet many needs including convenient gold and silver purchases with secure insured and allocated storage for gold and silver. Silver can be stored in the US but currently only gold can be stored offshore in several countries. Their downloadable information booklet states:

“Exempt from US reporting requirements. As a domestic institution, GBI’s US customers are exempt from both the FBAR and Form 8938 filing requirements if offshore metal storage is elected.”

In some circumstances, this exemption from US reporting requirements may be important in your decision-making process.

Lear Capital – Large gold and silver coin and bullion dealer operating out of California. They maintain a sizeable inventory and will buy and sell online with reasonable commissions. Lear Capital will assist with purchasing gold and silver coins and bullion for IRA and 401k retirement accounts.

Liberty Gold and Silver – A smaller gold, silver, and platinum coin and bullion dealer operating out of Oregon. Liberty Gold and Silver will assist with purchasing gold and silver coins and bullion for IRA accounts and can arrange secure allocated storage in the USA, Canada, Germany, Switzerland, and Singapore.

Perth Mint – Located in Australia, the Perth Mint has been in business for over 100 years and is owned by the Government of Western Australia. The mint refines and produces a variety of products, special coins, and commemoratives in gold, silver, and platinum. The Mint receives over 70,000 visitors each year. You can purchase coins and bullion for delivery and arrange for allocated or pooled storage of your metals.

SilverSaver – Secure insured storage in the USA for gold and silver. You can make convenient periodic purchases by direct withdrawal from your checking account. This allows for a signup and forget “dollar-cost averaging” purchase plan. You can also take delivery of your gold and silver or easily sell it back to SilverSaver.

The Ultimate Gold Trust – Gold can be purchased and held in Switzerland. This storage solution is recommended by Julian D. W. Phillips, a frequent commentator on gold and gold storage options. Read his latest article on the safety of offshore storage.

GE Christenson
aka Deviant Investor

Filed Under: Bullion Sales, Featured, Gold, Perth Mint, Silver Tagged With: , , , , , , , , , ,

COMEX Price Manipulation Forces Silver Price Down Despite Demand Increase

March 6, 2013 by 2 Comments

By: Mike McGill of Liberty Gold and Silver

Let’s begin with a definition. Investopedia.com defines the Law of Supply and Demand as follows:

The effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be.

A solid definition, agreed? The Law of Supply and Demand should be the core premise of all economic studies as it has proved itself to be historically true.

How can we explain what has happened recently with the price of silver? In about three months, silver has declined from its late-November price of about $34 per ounce to its current price of about $28.50 as of today’s close (February 28, 2013). That’s a drop of about $5.50, which equates to a decline of over 16% in about 90 days. An economist with a solid grounding in the supply and demand theory, when viewing this decline, would have to conclude one of two things. Either the supply of silver had recently rapidly expanded or the demand for the precious metal had substantially decreased over the same period. These would appear to be the only logical explanations for this situation.

However, in the alternate universe of manipulated markets, insane derivatives, massive criminal fraud in both the banking and commodities markets, central bank machinations with currency handouts, and complete dereliction of duty on the part of regulatory bodies, it seems that the basic laws of economic price discovery no longer apply.

We need to ask ourselves how is it possible for the price of silver to undergo a substantial drop in price while simultaneously experiencing extremely tight supplies and burgeoning demand. In order to make a professional inquiry regarding this conundrum, we will dispel all the blather from the CNBC crowd that precious metals are in a bubble (they are NOT; both gold and silver remain firmly in a ten year upward channel of growth) and adopt an attitude like Dragnet’s Sergeant Friday, “Just the facts, ma’am, just the facts.”

Here are those facts:

In 2012, silver sales soared. The US Mint reported that the sale of American Silver Eagle bullion coins topped off at the third highest annual total in the twenty-seven year history of the series. Just past mid-December, the US Mint told its distributors that it had “sold all remaining inventories of 2012 American Eagle Bullion Coins,” adding that “no additional coins will be struck.” Until the sell-out, Silver Eagles were on pace to eclipse the second best annual sales in history. Even more amazing was the ratio of sales of Silver versus Gold Eagles – over fifty to one. In total dollars, the sale of Silver Eagles almost matched that of Gold Eagles – nearly 98%.

In January of this year, the sale of Silver Eagles was tremendous. So strong was the demand that the US Mint notified all its distributors shortly past mid-month that it had halted all new orders because it had run out of bullion supply. Despite two production shutdowns in January, the US Mint sold a record breaking 7.13 million Silver Eagles in ONLY TEN BUSINESS DAYS, shattering the previous monthly record set in 2011. Currently, the US Mint is on allocation rationing to its distributors – and we’re into this year only eight weeks!

Another instance of extreme silver shortage that has seen little to no reporting is the near total annihilation in the availability of “junk silver” (pre-1965 US silver coins). As of the beginning of this week, almost none could be found anywhere in the country except in extremely tiny amounts. Nearly every wholesaler and retailer in the nation was completely sold out. Waiting time for orders is at least a month with six weeks being quoted as a reliable delivery date.

Just a week ago, it was reported that Apple will be delaying its new 21.5 iMacs because of a shortage of silver in China. Silver is used extensively in iMacs. The production delays are already three months and counting.

On the demand side of this equation, wholesale premiums over the silver spot price have risen as much as six-fold in the past two months. Retail mark-ups for these coins have never been greater since the 1980 high when silver topped $50.

What is one to conclude with this incredible contradiction of drum-tight silver supply and record breaking demand weighed against a silver price decline of nearly 16% in the last three months? It is difficult not to conclude that there has been market intervention and/or price manipulation occurring.

As we’ve reported several times over the last few years, the spot price of precious metals is set almost entirely by the bid-ask trading action in the world’s commodity pits, principally the COMEX in New York and the London Bullion Market Association. These exchanges have been notorious for allowing massive naked short selling by large investment banks such as JPMorgan Chase and Goldman Sachs without these firms having to post either the normally required margin deposits or having adequate silver on deposit with these exchanges to satisfy delivery requirements for those traders who might wish to take physical delivery of the silver upon contract expiration. Both of these activities are violations of the rules of the futures exchanges involved as well as federal requirements that are supposed to be enforced in the US by the Commodities Futures Trading Commission (CFTC). The CFTC itself has been repeatedly accused by the Gold Anti-Trust Action Committee (GATA) and many others of being derelict, if not outright complicit, in allowing these trading violations to continue. Link is here.

What we’re seeing is a big disconnect between silver’s paper price and its actual physical availability. It is not inconceivable that what is occurring is similar to what happened to markets in the old Soviet Union. The communist ruled markets quoted cheap prices for products that were chronically in short supply. The real market, the “black market,” was where you could purchase real goods with fair price discovery. When this dichotomy completely broke down, so did the Soviet Union. It is not difficult to foresee that a breakdown and growing distrust of the paper silver markets could well cause a price explosion in physical silver.

We have been warning for years that paper markets in general and precious metals markets specifically, should be viewed with suspicion, as they all contain counter party risk, which cannot be honored. The only sure way to fully protect oneself is to own physical coins and bullion. Do it today while the “paper price” is still low.

Filed Under: Bullion Sales, Currency debasement, Featured, Silver, US Mint Tagged With: , , , , , , , ,

Gold and Silver Bullion Coin Sales Soar In February

March 1, 2013 by 2 Comments

Sales of both the American Eagle gold and silver bullion coins soared in February compared to the previous year.

According to the U.S. Mint, sales of the American Eagle gold bullion coin totaled 80,500 ounces in February, up 283% from comparable sales of 21,000 ounces during February 2012.  During January, the Mint sold 150,000 ounces of the gold bullion coins compared to 127,000 ounces during January 2012.  January gold bullion sales were the six largest on record and the most since July 2010 when the Mint sold 151,500 ounces.

Total 2013 sales of the American Eagle gold bullion coin through February are up 56% over the comparable period for last year.  Year to date, the U.S. Mint has sold 230,500 ounces of gold bullion coins compared to a total of 148,000 ounces during the first two months of 2012.

The American Eagle gold bullion coin is available in one ounce, one-half ounce, one quarter ounce and one-tenth ounce versions.   The vast majority of gold bullion coins are purchased as one ounce coins as can be seen from the February sales breakdown listed below.

FEB 2013 GOLD BULLION SALES
OUNCES # COINS
ONE 68,000 68,000
HALF 2,500 5,000
QUARTER 3,000 12,000
TENTH 7,000 70,000
80,500 155,000

Sales of the American Eagle silver bullion coin also remained robust after last month’s record shattering sales total.  During January, the U.S. Mint sold 7,498,000 silver bullion coins as public demand for physical silver coin soared.  The huge demand for the American Eagle silver coins forced the U.S. Mint to suspend sales twice as they sought to ramp up production to meet demand.  Ever since the financial crisis and the subsequent open ended money printing operations by the Federal Reserve, demand for physical silver has continued strong.   Prior to 2008, total annual sales of the silver bullion coins averaged only around 9.5 million coins.  During 2012, the U.S. Mint sold 33,742,500 silver bullion coins.

During February, the U.S. Mint reported that 3,368,500 American Eagle silver bullion coins were sold, an increase of 126% over sales of 1,490,000 ounces during February 2012.  Year to date sales of the silver bullion coins through February total 10,866,500, up by 43% over the comparable two month period during 2012 when 7,597,000 silver bullion coins were sold.

Long term investors are taking advantage of temporary price weakness in precious metals to add to positions (see APMEX Reports Sales Spike).   Virtually every major central bank in the world is now engaged in open ended money printing operations and blatant attempts to competitively devalue their currencies.  The public is not stupid and continued demand for physical gold and silver proves that gold and silver are becoming the default store of value.

Both the American Eagle gold and silver bullion coins are sold to the Mint’s network of authorized purchasers who buy the coins in bulk based on the market value of the precious metals and a markup by the Mint.  The public is not allowed to purchase bullion coins directly from the Mint but are allowed to buy numismatic versions of the coins.  The gold and silver bullion coins are sold by the authorized purchasers to the public, other bullion dealers and coin dealers.  The rationale for the Mint’s use of authorized purchasers is that this method makes the coins widely available to the public with reasonable transaction costs.

Filed Under: Bullion Sales, Featured, Gold, Silver, US Mint Tagged With: , , , , , , , , , , , ,