April 20, 2024

Gold Bullion Coin Sales Drop For Fourth Straight Year, 2013 Sales Off To Strong Start

January 3, 2013 by Leave a Comment

According to the latest U.S. Mint report, sales of the American Eagle Gold bullion coins for December 2012 totaled 76,000 ounces, up 16% from December 2011 when 65,500 ounces were sold.  Sales for the month were down 44.3% from November sales which totaled 136,500 ounces.

Sales of the gold bullion coins can vary dramatically from month to month.  The highest sales month was November with sales of 136,500 ounces and the lowest sales month was April when only 20,000 ounces were sold.  Average monthly sales of the gold bullion coins for 2012 was 62,750 ounces with total sales for the year coming in at 753,000.   The gold bullion coins are available in one ounce, one-half ounce, one quarter ounce and one-tenth ounce.

Sales of the American Eagle Gold bullion coins have now declined for four straight years in a row.  The all time record sales year was 2009 when the U.S. Mint sold 1,435,000 ounces.   The value of the gold bullion coins purchased since 2000 totals almost $13.5 billion.

The U.S. Mint only sells the gold bullion coins to a network of authorized purchasers who buy the coins in bulk based on a markup and the market gold value.  The primary distributors who buy the coins then resell them to other bullion dealers, coin dealers and the public.  By using this type of distribution channel, the U.S. Mint believes that the coins can be made widely available to the public with reasonable transaction costs and at premiums in line with other bullion programs.

The 2013 American Gold Eagle bullion coins were first available to authorized purchasers on January 2, 2013.  Demand for the newest gold bullion coins was very strong with 50,000 ounces sold on the first day.  For the entire month of January 2012, a total of 127,000 ounces of the coins were sold.

Gold Bullion U.S. Mint Sales By Year
Year Total Sales Oz.
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000
2007 198,500
2008 860,500
2009 1,435,000
2010 1,220,500
2011 1,000,000
2012 753,000
Total 8,002,500

After a volatile year, gold ended with a strong note for 2012, up by 7.1% and rising for the 12th year in a row as global central banks ramped up the printing presses in an attempt to “stimulate” the world economy.  In his annual “10 Surprises ” list for 2013, Byron Wien, Chairman of Blackstone Group’s advisory unit predicted that gold would reach $1,900 as “central bankers everywhere continue to debase their currencies and the financial markets prove treacherous.”  Based on the way things are going and the speed at which central banks are joining the money printing race, Mr. Wien’s forecast is likely to prove extremely conservative.

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

Gold Has Outperformed Housing By 600% Since 2001

December 28, 2012 by 3 Comments

Anyone predicting that gold would outperform housing in 2001 would likely have been viewed as being seriously deranged.  After all, housing prices had increased for decades and by the peak of the housing market in 2007, real estate was believed to be a “can’t lose investment.”  The mantra that housing values only go up proved to be disastrous for many Americans as the over-leveraged real estate market imploded, shattering the wealth dreams of both naive homeowners and investors.

Despite the trillions of dollars of direct support from both the Federal Reserve and Congress, real housing values have yet to recover a fraction of their losses.  Mainstream press reports of a solid recovery in housing markets usually neglect to mention, that according to the Case-Shiller National Index, housing prices are still lower than they were at the turn of the century.

Courtesy: calculatedriskblog.com

Gold, meanwhile, unloved and ignored by most Americans is set to make its 12th straight annual gain.  From a yearly low of $255 per ounce during 2001, gold settled in New York trading on Thursday at $1,663.90, up 653% over the past 12 years.

Chart of the Day has some interesting data on the performance of gold versus housing, as represented by the Home Price/Gold Ratio.  Based on current prices, 105 ounces of gold will buy you the median priced single family home.  In 2001, a home buyer would have needed 601 ounces of gold to buy the same house.  Housing, when priced in gold, in down 80% from 2001.

Courtesy: chartoftheday.com

Despite gold’s proven ability to preserve wealth over time, most Americans still seem indifferent to allocating part of their portfolios into gold – something to think about as central banks ramp up the printing presses at an increasingly furious pace.

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

Gold Demand In Asia Remains Insatiable

December 20, 2012 by Leave a Comment

As gold demand in Asia soars, vault companies are racing to keep up with storage demand.  In July, Gold and Silver Blog reported on a massive new gold vault being constructed in Hong Kong by Malca-Amit due to unrelenting physical demand for gold in Asia.  The new vault was designed to hold 1,000 metric tonnes of gold and as of July, had already taken in 2,400 tonnes of gold owned by gold exchange traded funds.

It turns out that Malca-Admit should have built a much larger vault.  As demand for physical gold continues to increase, other companies have joined the race to provide secure depositories for wealthy investors.  The Wall Street Journal reports that demand for high-security vault capacity in Asia is soaring in Singapore, Hong Kong and Shanghai.

Brink’s Co., for example, has increased its storage space for precious metals in Singapore more than threefold over the past year, to 200 square meters, and is building a bonded warehouse in Shanghai to store high-value consumer goods and precious metals.

“We are growing, and driving that growth is the storage of precious metals and also bank notes,” said Jos van Wegen, the company’s senior manager of global services in Singapore.

Comprehensive data on the volume of high-security storage capacity in the region isn’t available. But demand for gold is clearly rising.

China’s gold demand in the third quarter of this year was 176.8 tons—16% of global demand and up 47.1% from the same period three years ago, according to the World Gold Council. Hong Kong’s demand totaled 6.9 tons in the third quarter this year, up 56.8% from the third quarter of 2009.

Singapore imported 36.7 tons of gold in the first 10 months of this year, well down from 62 tons in the full year 2011. The government’s announcement in February that, in a bid to become a gold-trading hub, it would scrap a 7% goods and services tax on gold, silver and platinum hurt imports for much of the year. Fourth-quarter gold-import figures for Singapore are expected to be stronger, World Gold Council executives say.

While physical gold requires storage space, it does offer a lot of value in a relatively small package. At around $1,690 a troy ounce, a metric ton of gold is valued at $54.3 million, but would take up only slightly more space than a standard case of 12 wine bottles—though most gold is stored in ingots.

Malca-Amit, a company that stores and transports diamonds and precious metals, has lockups in Hong Kong and Singapore, and is preparing to open one in Shanghai in the first quarter next year. The Shanghai vault will also hold art and luxury goods such as high-value mobile phones and designer handbags.

Malca-Amit’s Singapore vault, capable of holding 600 tons of gold, is almost full, and the company is seeking more space. The amount of gold stored there has increased 200% from a year ago, it says.

Its recently opened Hong Kong vault can hold 1,000 tons of gold, which would be worth more than $54 billion. It is almost large enough to hold the official reserves of China, which total 1,054 tons, according to World Gold Council data.

Malca-Amit has gold-storage sites in New York and Zurich, but the focus of its expansion is firmly on Asia, executive director Joshua Rotbart said. Some Asian investors who are storing their gold in the U.S. and Europe are keen to move it closer to home as more storage space becomes available, he said.

The recent price weakness in gold is apparently viewed as a buying opportunity by sophisticated Asian investors seeking to protect their wealth from the torrential flood of printed money being produced on a global basis by central banks (see Central Banks Pledge Unlimited Money Printing).

On a recent visit to the Chinatown section of Bangkok, I witnessed first hand large crowds of customers in Chinatown’s numerous retail gold stores.  Gold has never defaulted on its promise as a means of wealth preservation, something clearly understood by the citizens of a country whose history goes back thousands of years.

Customers at Bangkok retail gold store

Chinese Gold

Chinese Gold

Filed Under: Bullion Sales, Currency debasement, Featured, Gold Tagged With: , , , , , , , ,

The Hidden Risks Of Money Printing

December 20, 2012 by Leave a Comment

By Axel Merk

While Treasuries are said to have no default risk as the Federal Reserve (Fed) can always print money to pay off the debt, hidden risks might be lurking. As oxymoronic as it may sound, the biggest risk to the economy and the U.S. dollar might be, well, economic growth! Let us explain.

The U.S. government paid an average interest rate of 2.046% on the $11.0 trillion of Treasuries outstanding as of the end of November. Treasuries include Bills, Notes, Bonds and Treasury Inflation-Protected Securities (TIPS). At 2.046%, the cost of carrying the Treasury portfolio currently costs the government $225 billion per annum; about 6% of the federal budget was spent on servicing the national debt. 1

While total government debt has ballooned in recent years, the interest rate paid by the government on its debt has continued on its downward trend:

We only need to go back to the average interest rate paid in 2001, 6.19%, and the annual cost of servicing Treasuries would triple, paying more than Greece as a percentage of the budget. Not only would other government programs be crowded out, the debt service payments might likely be considered unsustainable. Except for the fact that, unlike Greece, the Fed can print its own money, diluting the value of the debt. In doing so, the debt could be nominally paid, although we would expect inflation to be substantially higher in such a scenario.

These numbers are no secret. Yet, absent of a gradual, yet orderly decline of the U.S. dollar over the years – with the occasional rally to make some investors believe the long-term decline of the U.S. dollar may be over – the markets do not appear overly concerned. Reasons the market aren’t particularly concerned include:

  • The average interest rate continues to trend downward. That’s because maturing high-coupon Treasury securities are refinanced with new, lower yielding securities.
  • Treasury Secretary Geithner has diligently lengthened the average duration of U.S. debt from about 4 years when he took office to currently over 5 years.

For the U.S. government, a longer duration suggests less vulnerability to a rise in interest rates, as it will take longer for a rise in borrowing costs to filter through to the average debt outstanding. The opposite is true for investors: the longer the average duration of a bond or a bond portfolio one holds, the greater the interest risk, i.e. the risk that the bonds fall in value as interest rates rise.

Debt management by the Treasury only tells part of the story on interest risk. When the Treasury publishes “debt held by the public,” it includes Treasuries purchased in the open market by the Fed. By engaging in “Operation Twist”, the Federal Reserve stepped onto Timothy Geithner’s turf, manipulating the average duration of debt held by the private sector. Notably, the private sector holds fewer longer-dated bonds, as the Fed has gobbled many of them up.

However, investors may still be exposed to substantial interest risk in their overall fixed income holdings as, in the search of yield, many have doubled down by seeking out longer dated and riskier securities.

The Fed, many are not aware of, employs amortized cost accounting, rather than marking its holdings to market, thus hiding potential losses should interest rates go up and its portfolio of Treasuries and Mortgage-Backed Securities (MBS) fall in value.

Quantitative easing to increase interest risk

Whenever there’s a warning that all the money created by the Federal Reserve is akin to printing money, some dismiss these concerns as the money created out of thin air to buy securities has not caused banks to lend, but park excess reserves back at the Federal Reserve. As of December 14, 2012, $1.4 trillion in excess reserves is parked at the Fed. Substantial interest risk might be baked into reserves:

Consider that the Fed has been paying about $80 billion in profits to the Treasury in recent years. Think of it this way: the more money the Fed “prints”, the more (Treasury & MBS) securities it buys, the more interest it earns. That’s why Fed Chair Bernanke brags that his policies have not cost taxpayers a cent, even if the activities may put the purchasing power of the currency at risk. Now, Bernanke has also claimed he could raise rates in 15 minutes. In our assessment, it’s most unlikely he would do so by selling long-dated securities; instead, in an effort to keep long-term rates low, the most likely scenario is that the Fed will pay a higher interest rate on reserves. Up until the financial crisis broke out, the Federal Reserve would have intervened in the Treasury market by buying and selling securities to move short-term interest rates. In the fall of 2008, the Fed was granted the authority by Congress to pay interest on reserves.

As interest rates rise, not only will Treasury pay more for debt it issues, it may also receive less from the Fed. Interest rates would have to rise to about 6% for the entire $80 billion in “profits” to be wiped out assuming a constant $1.5 trillion in reserve balances ($1.4 trillion in excess reserves and $0.1 trillion in required reserves that also receive interest); that assumes, the Fed does not grow its balance sheet in the interim (in an effort to generate more “profits” for the Fed) and would not reduce its payouts in the interim as a precaution because bonds held on the Fed’s books may be trading in the market at substantially lower levels.

Should interest rates move up, the Treasury may no longer be able to rely on the Fed to finance the deficit (while the Fed denies the purposes of its policies is to finance the deficit, the Fed is buying a trillion dollars in debt as the government is running a trillion dollar deficit).

Biggest risk: economic growth?

In our surveys, inflation tends to be on top of investors’ minds, no matter how often government surveys show us that inflation is not the problem. Should inflation expectations continue to rise – and a reasonable person may be excused for coming to that conclusion given that the Fed appears to be increasingly focusing on employment rather than inflation – bonds might be selling off, putting upward pressure on the cost of borrowing for the government.

But if we assume inflation is indeed not an imminent concern (keep in mind that the Fed is also buying TIPS and, thus, distorting important inflation gauges in the market), we only need to look back at the spring of this year when a couple of good economic indicators got some investors to conclude that a recovery is finally under way. What happened? The bond market sold off rather sharply! A key reason why the Fed is increasingly moving towards employment targeting is to prevent a recurrence, namely a market-driven tightening, pushing up mortgage costs.

The government should be grateful that we have this “muddle-through” economy. Let some of that money that’s been printed “stick;” let the economy kick into high gear. In that scenario, the “good news” may well be reflected in a bond market that turns into a bear market.

Historically, when interest rates move higher in an economic recovery, the U.S. dollar is no beneficiary because foreigners tend to hold lots of Treasuries: should the bond market turn into a bear market, foreigners historically tend to wait for the end of the tightening cycle before recommitting to U.S. Treasuries.

The point we are making is that for bonds to sell off and the dollar to be under pressure, we don’t need inflation to show its ugly head; we don’t need China or Japan to engage in financial warfare by dumping their Treasury holdings. All we may need is economic growth! And while Timothy Geithner has studiously been trying to extend the average duration of U.S. debt, Ben Bernanke at the Fed has thrown him a curveball.

Perception is reality

One only needs to look at Spain to see that a long average duration of government debt is no guarantor against a debt crisis. Spain has an average maturity of government debt of 6 years, yet it does not take a rocket scientist to figure out that borrowing at 6% in the market is not sustainable given the total debt burden. As such, markets tend to shiver when confidence is lost, even if, technically, governments could cling on for a while when the cost of borrowing surges.

History may repeat itself

It was only 11 years ago that the US government paid and average of 6% on its debt. Sure the average cost of borrowing has been coming down. But no matter what scenarios we paint, if the average cost of borrowing can come down to almost 2% from 6%, we believe it is entirely possible to have the reverse take place over the next 11 years. Given the additional risks the Fed’s actions have introduced, the timing could well be condensed. But even if not, we believe it is irresponsible for policy makers to pretend interest rates may stay low forever (except, maybe, Tim Geithner’s steps to increase the average maturity of government debt; but as pointed out, his efforts may be overwhelmed by those of the Fed).

Fiscal Cliff

What’s so sad about the discussion about the so-called fiscal cliff is that even the initial Republican proposal results in approximately $800 billion deficits each year. Financed at an average 2%, this would add over $900 billion in interest expenses over ten years; financed at an average 4%, it would add almost $2 trillion in interest expense over ten years. Mind you, this is a politically unrealistic, conservative proposal. Democrats pretend we don’t even have a long-term sustainability problem, only that the wealthy don’t pay their fair share.

In our humble opinion, both Republicans and Democrats are distracted. In many ways, the simultaneous increase in taxes and cut in expenditures of the fiscal cliff is akin to European style austerity: if the cliff were to take place in its entirety, we would a) suffer a significant economic slow down; b) continue to run deficits exceeding 3% of GDP before factoring in any slowdown; and c) still not have fixed entitlements.

Entitlements

While our discussion focused on $11 trillion in Treasury securities, the so-called “unfunded liabilities” go much further than the $5 trillion in accounting liabilities set aside. Depending on the actuarial assumptions, unfunded liabilities may be as high as $50 trillion to $200 trillion or higher.

In our assessment, the only way to tame the explosion of government liabilities over the medium term is to tame entitlements. But it is very difficult to cut back on promises made. As Europe has shown us, the only language that policy makers understand may be that of the bond market. As such, unless and until the bond market imposes entitlement reform, we are rather pessimistic that our budget will be put on a sustainable footing. Put another way, things are not bad enough for policy makers to make the tough decisions.

Different from Europe, however, the U.S. has a current account deficit. As a result, a misbehaving bond market may have far greater negative ramifications for the dollar than the strains in the Eurozone bond markets had for the Euro. In the Eurozone, the current account is roughly in balance; while there was a flight out of weaker Eurozone countries, that flight was mostly intra-Eurozone towards Germany and Northern European countries.

So while the default risk of U.S. Treasuries may be less than that of Eurozone members, the risks to the purchasing power of the U.S. dollar might be substantially higher. On that note, while the Fed has indicated to buy another approximately $1 trillion in assets over the next year, we would not be surprised to see the balance sheet of the more demand-driven European Central Bank shrink as some banks pay back loans from the Long-Term Refinancing Operation (LTRO) early.

In early January, we will be publishing our outlook for 2013; Please also sign up for our newsletter to be informed as we discuss global dynamics and their impact on gold and currencies. Additionally, please join us for our upcoming Webinar on Tuesday, January 15th, 2013.

Axel Merk

Axel Merk is President and Chief Investment Officer, Merk Investments.

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

Gold and Stocks Diverge As Central Banks Pledge Unlimited Money Printing

December 20, 2012 by Leave a Comment

Both the Federal Reserve and the Bank of Japan have gone all in with their attempts to revive weak, debt burdened economies with a pledge of unlimited money printing.

Japan’s incoming Liberal Democratic Party Prime Minister Shinzo Abe, who ran on a platform of unlimited quantitative easing and higher inflation, has quickly forced capitulation by the Bank of Japan to surrender its independence from political influence.

The Bank of Japan pledged Thursday to review its price stability goal, admitting that the move was partly in response to incoming Prime Minister Shinzo Abe’s aggressive calls for the central bank to step up its fight against deflation.

At its two-day policy board meeting, the BOJ decided to expand the size of its asset-purchase program—the main tool of monetary easing with interest rates near zero—and promised to review next month its current inflation goal, something Mr. Abe demanded during Japan’s parliamentary campaign.

Countering speculation that the board’s decision-making process is being driven by politicians, Gov. Masaaki Shirakawa said the bank reviews its price goal every year. But he acknowledged that the policy board had taken Mr. Abe’s request into account.

The Bank of Japan’s quick surrender of monetary policy independence reflected the fact that they had little choice in the matter.  Mr. Abe had previously threatened a  “law revision to take away the BOJ’s independence if it didn’t comply with his demands.  Mr. Abe said the election shows that his views have the support of the people, and, on the night of his victory, he specifically said he expected the BOJ to do something at this week’s meeting.”

The policy of unlimited money printing by Japan came shortly after similar actions were announced by the U.S. Federal Reserve in early December.  Fed Chairman Ben Bernanke, architect of the U.S. “economic recovery” announced that the Fed would purchase $45 billion of US Treasuries every month in addition to the open ended monthly purchase of $40 billion of mortgage backed securities.  The Fed’s expanded “asset purchase programs” will be monetizing over $1 trillion of assets annually, effectively funding a large portion of the U.S. government’s annual deficit with printed money.

The impact of blatantly unlimited money printing by two of the world’s largest economies surprised many gold investors as the price of stocks and gold quickly diverged, with gold selling off and stocks (especially in Japan) gaining.

Why would gold, the only currency with intrinsic value that cannot be debased by governments, sell off as governments pledged to flood the world with freshly printed paper currencies?  Here’s one insight from John Mauldin.

When you reduce the amount of leverage in the system, you’re actually reducing the total money supply. So the Fed can come in and print money, and the money supply – the total amount of credit and leverage and material that’s going through the system – really hasn’t increased.

A lot of monetary economic theories say “the money supply is directly related to inflation.”

It is, but the amount of leverage and credit in the system is also directly related to inflation. It becomes a much more complicated mix. What happens at the end of the debt supercycle, as you’re reducing that leverage, you’re actually in a deflationary world. That is the whole debate between deflation and inflation.

If you read the polls in the United States, we’re just totally dysfunctional. We want to pay less taxes and we want more health care – that doesn’t work. We are going to have to be adults and recognize that problem.

The reason is the Fed is going to do everything they can to fight deflation. The only thing they can do is to print money. They’re going to be able to print more money than any of us can possibly imagine and get away with it without having inflation.

Mr. Mauldin may have a valid point, but a more likely explanation is the suppression of gold prices by governments and central banks as voluminously documented by GATA.

“Those who follow GATA may not be surprised when the monetary metals markets don’t make sense, since they really aren’t markets at all but the targets of constant intervention by governments.”

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

Gold Has Outperformed Stocks By 300% Over The Past Decade

November 28, 2012 by Leave a Comment

By Axel Merk

Superior Performance of Gold

Over recent years, gold has performed remarkably well relative to other asset classes, in terms of both absolute performance and risk-adjusted performance. Over the preceding 10 years, an investment in gold would have significantly outperformed a corresponding investment in the S&P 500 Index or U.S. bonds, not to mention international and emerging market equities. Over the past 10 years, gold outperformed U.S. equities by over three times:

Courtesy: merkinvestments.com

Gold Shines even when Under-performing

Note that even during time periods when gold underperforms other asset classes, as it did during the 20-year time period analyzed above, the addition of a gold component improves the overall risk-adjusted return profile of a risky portfolio. We consider this to be largely driven by the low levels of correlation between the two assets and thus the positive impact it has on the volatility profile of the hypothetical portfolio above. For example, we find that a portfolio comprised 50% gold and 50% the S&P 500 would have exhibited an annualized standard deviation of returns of 12.7% over the 20-year period ended September 30, 2012.  This is a significant reduction to the annualized standard deviation of returns exhibited by a portfolio comprised 100% the S&P 500, which was 19.2% over the same time frame.

Read the full article here.

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

Gold Becomes The Ultimate Store Of Value As Central Bankers Create Unlimited Fiat Money

November 28, 2012 by 1 Comment

By Vin Maru

Lately we have seen many articles about China and many other central banks continuing to buy and increase their holdings of gold as part of their effort to continue diversifying out of foreign paper currencies. Who can blame them? Would you want to hold paper promises to pay off financial obligations from countries that are essentially bankrupt as a part of your currency reserve? China is doing what is the right thing and in the best interest of China, buying more gold to hold as a part of your reserves in order to make your currency more marketable. They want to make the yuan a competing currency to the other major currencies around the world and they will succeed and owning gold is part of their strategy.

There is some speculation that China is increasing its gold holding to make the yuan a gold-backed currency in an effort to make it a world currency reserve. While it is an interesting concept, it will most likely never happen. In order to back a currency, their gold holdings must increase or decrease alongside the increase or decrease in the number of currency units in the system. A gold backed currency would entail having a fixed rate of convertibility for each ounce of gold to a specific number currency units issued by that country. There is probably no country in the world that will honour convertibility on a fixed basis, it would be financial suicide and is part of the reason why Nixon closed the gold window. Also having a gold backed currency would mean the country would be continually increasing gold purchases to match the inflation of currency units issued. Tracking the amount of gold that is backing currency would also be next to impossible since there is a complete lack of transparency around the amount of currency units being issued by central banks and the amount of gold held by them. Currently currencies can be converted to gold on a floating basis at market price, but going to a gold backed currency would likely never happen.

China is making its currency more readily available for trade, thus bypassing the US dollar and making its currency the payment of choice for its export. Currently the yuan is fixed to the US dollar, but over time it will most likely have to adopt a floating currency like the rest of the world. Until then, expect China to continue adding to its gold reserve in an effort to make the yuan a competing currency for international trade. The US will lose its reserve currency status over time (most likely some time this decade) but it most likely will never go away completely and the yuan will not take over completely. We will most likely just have bi-lateral trade agreements with several national currencies being used for payments. The yuan is just the new kid on the block but there is still the Euro, British pound, Japanese yen, the US$ and probably the IMFs SDR that will also be used. Even the Canadian dollar has been strengthening lately, as the IMF said it’s considering classifying the Canuck buck and the Australian dollar as reserves currencies.

While gold may not be convertible at a fixed rate any time soon, VTB Group is Russia’s first lender to sell perpetual bonds and debt linked to the country’s benchmark equity index and is now selling the nation’s debut notes tied to the price of gold (see Bloomberg article). VTB is offering 1 billion rubles ($32 million) of securities that will be redeemed in December 2013 that will pay a rate on returns based on the gold price up to a limit of 20 percent. Being a pioneer in the Russian market, VTB is the 2nd largest bank and will provide pension funds an alternative to invest in gold without the limits placed on commodity holding by regulators. The article even talks about how even Western financial institutions such as JP Morgan, Barclays, and Credit Suisse are issuing notes tied to gold this month. This is just another example of how gold is becoming an important financial asset. The need to diversify and protect wealth becomes more apparent in an era of currency wars which will destroy the value of fiat money. Financial institutions realize that central banks will continue down the path of printing money, inflation and currency devaluation, there is no other choice. They see the writing on the wall and are now capitalizing on a new markets by providing financial assets tied to the price of gold price.

All these currencies will continue to inflate and I doubt the bankers will allow gold to become a competing currency for everyday transactions. However its role as a store of value will continue to appreciate as long as fiat money continues to exits. So we should be happy that government and central bankers will continue to use and expand fiat currency, it makes their currency worth less and gold will continue to benefit in the long run.

What we are seeing now, with short term fluctuations in the price of gold is just market noise and short term trading opportunities created by the gold market high frequency traders and bullion banks. This will come to pass as the price of gold gets smoothed out and then slowly advances higher with a two steps forward one step back dance along a rising trend. All this talk about gold by mainstream media is just market noise to try and explain very short term movements in price. They have very little understanding of gold and the role it will play in the future as a store of value. Being the good slaves and puppets for the central bankers, MSM is only good at misdirecting the public and they are paid very well for doing so. Once gold finishes this consolidation, the price should continue to advance to all time highs in 2013 and 2014 with a possibility of doubling from the current price to reach a minimum target of $3500 in the next few years.

If you enjoyed reading this article and are interested in protecting your wealth with precious metals, you can receive our free blog by visiting TDV Golden Trader. Also learn how you can purchase and protect your gold holdings by getting a copy of our special report Getting Your Gold out of Dodge or protecting the stock investments you currently own with Bullet Proof Shares.

Regards,

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

Gold In The News – German Gold, Gold Confiscation, Technical Charts, New Perth Mint Coins

November 1, 2012 by Leave a Comment

Gold news from around the web-

Gold Confiscation?

Are those predicting the confiscation of gold by the U.S. government simply seeking headlines or seriously misguided?  Jim Sinclair has the answer.

I am sick of all this confiscation talk of gold and even gold companies. It emanates from gold people who do not know or understand the history of gold. We condemn MSM for inaccurate, false and misleading news. I condemn gold writers who practice sensationalism, who offer their opinions as if they were facts and simply make things up out of thin air as if they were insiders privy to things that no one else is. Right now leaders of this community are printing stuff as misleading as MOPE or MSM ever have.

Eric De Groot put what I have been trying to teach you perfectly today. In the 1930s gold was to the monetary system what QE is today, a means of increasing the supply of money for Fed and Treasury discretionary use. The US Secretary of the Treasury and President Roosevelt set the gold price higher at their daily breakfast together arbitrarily. Higher because to create money then the system required a higher value of gold to have more money outstanding. This is why Roosevelt ordered the confiscation of gold in order to unfold his type of monetary stimulation, his QE. This is what confiscationophiles simply do not know.

 Your fears and the outrageous untrue statement by the Scottish hedge fund manager are based on totally wrong reasoning and misunderstanding. Gold was not confiscated because it was going up in price. Gold’s order of confiscation came as a tool of monetary stimulation in order to create monetary creation in order to attempt to increase employment.

So, Exactly Where is Germany’s Gold?

The Germans, tough with monetary policy, turn out to be wimps when it comes to safeguarding their own massive 3,396 ton gold stockpile.  Turns out that the Germans, who allegedly hold most of their gold in French, British and U.S. vaults, never even bothered to conduct a physical audit of their holdings – talk about trusting your neighbors! After severe criticism and a national “Bring Back Our Gold” campaign, the Bundesbank is finally promising to conduct audits and bring their gold back home.  MarketWatch wonders if the expatriation of German gold may be the beginning of a move to a gold backed currency.

Gold and Silver Technical Charts

Some really amazing gold and silver charts suggest that we may be in the initial stages of a massive gold and silver rally.

Gold and Silver – The Ideal Holiday Gift

A stunning selection of new gold and silver coins from The Perth Mint  provides the answer to “what should I get her for Christmas?”  Included in the November product releases are some unique rectangular colored silver coins.

Gold Through the Centuries

One of the largest Roman gold coin hoards every found was discovered in Great Britain.  The coins are approximately 1600 years old.  Any guesses on what $10,000 of U.S. currency buried today would be worth in the year 3612??

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

Why Are Americans Underinvested In Gold and Silver?

October 27, 2012 by Leave a Comment

Although there are no definitive statistics on how many Americans own gold or silver, the number is certainly small.  A Gallup poll earlier this year showed that 28% of respondents thought that gold was the “best investment” but the actual number of people actually owning some form of gold or silver bullion is far less.  A Kitco poll indicated that the number of Americans owning precious metals may be as low as 1%.

Despite the steady erosion in the purchasing power of the U.S. dollar, Americans retain their faith in paper money, apparently oblivious to the destruction of their wealth.  Monetary debasement is an insidious process that few Americans fully understand as explained by economist John Maynard Keynes in 1921.

“By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some …. Those to whom the system brings windfalls …. become “profiteers” who are the object of the hatred … the process of wealth-getting degenerates into a gamble and a lottery .. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

Most Americans don’t bother trying to understand economic theories but it is not hard to understand the following charts.

courtesy: kitco.com

When the average American finally realizes what is happening to the value of the dollar, the rush to gold and silver will result in a massive upward surge in precious metal prices.  That day has not yet arrived and until it does, buy gold and silver with impunity, especially on corrections.

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Sound Money Advocate Faces Terminal Jail Sentence

October 25, 2012 by 2 Comments

The New York Times reports on the “domestic terrorism” case of Bernard von NotHaus who awaits sentencing for minting private money known as the Liberty Dollar.  At the age of 68, Von NotHaus is facing the equivalent of a terminal jail sentence since he faces 20 years in prison.

By Alan Feuer, New York Times

Prison May Be the Next Stop on a Gold Currency Journey

MALIBU, Calif. — High above the cliff tops and the beach bars, up a winding mountain road, in a borrowed house on someone else’s ranch, an unusual criminal is waiting for his fate.

His name is Bernard von NotHaus, and he is a professed “monetary architect” and a maker of custom coins found guilty last spring of counterfeiting charges for minting and distributing a form of private money called the Liberty Dollar.

Described by some as “the Rosa Parks of the constitutional currency movement,” Mr. von NotHaus managed over the last decade to get more than 60 million real dollars’ worth of his precious metal-backed currency into circulation across the country — so much, and with such deep penetration, that the prosecutor overseeing his case accused him of “domestic terrorism” for using them to undermine the government.

Of course, if you ask him what caused him to be living here in exile, waiting with the rabbits for his sentence to be rendered, he will give a different account of what occurred.

“This is the United States government,” he said in an interview last week. “It’s got all the guns, all the surveillance, all the tanks, it has nuclear weapons, and it’s worried about some ex-surfer guy making his own money? Give me a break!”

The story of Mr. von NotHaus, from his beginnings as a hippie, can sound at times as if Ken Kesey had been paid in marijuana to write a script on spec for Representative Ron Paul. At 68, Mr. von NotHaus faces more than 20 years in prison for his crimes, and this decisive chapter of his tale has come, coincidentally, at a moment when his obsessions of 40 years — monetary policy, dollar depreciation and the Federal Reserve Bank — have finally found their place in the national discourse.

A native of Kansas City, Mr. von NotHaus first became enticed by making money while living with his companion, Talena Presley, without a car or electric power in a commune of like-minded dropouts in a nameless village on the Big Island in Hawaii. It was 1974, and Mr. von NotHaus, 30 and ignorant of economics, experienced “an epiphany,” he said, which resulted in the writing of a 20-page financial manifesto titled “To Know Value.”

In it he described his conviction that money has a moral aspect and that any loss in its value will cause a corresponding loss in social and political values. It was only three years after President Richard M. Nixon had removed the country from the gold standard, and Mr. von NotHaus, a gold enthusiast, began buying gold from local jewelers and selling it to his friends.

One day, he recalled, “we were all sitting around thinking, ‘Wow, we ought to do something with this gold.’ And I said: ‘Yeah, we could make coins. People love coins. We could have our own money!’ ”

Within a year, he had established the Royal Hawaiian Mint, a private — not royal — producer of collectible coins. Hitchhiking to a library in the county seat of Hilo, he said, he looked up “minting” in the encyclopedia and soon was turning out gold and silver medallions with images of volcanos and the Kona Coast.

So went the better part of 20 years. Then came 1991, which saw the emergence of a successful local currency in Ithaca, N.Y., called the Ithaca Hour. The 1990s were a time of great ferment in the local-money world with activists and academics writing books and papers, like Judith Shelton’s “Money Meltdown.” Mr. von NotHaus, traveling with his sons, Random and Xtra, to adventuresome locations, like Machu Picchu, read these seminal works.

“I had been working on it since 1974,” he testified at his federal trial in North Carolina. “It was time to do something.”

The Constitution grants to Congress the power “to coin money” and to “regulate the Value thereof” — but it does not explicitly grant an exclusive right to do such things. There are legal-tender laws that regulate production of government currency and counterfeiting laws that prohibit things like “uttering” gold or silver coins “for use as current money.”

Mr. von NotHaus claims he never meant the Liberty Dollar to be used as legal tender. He says he created it as “a private voluntary currency” for those conducting business outside the government’s purview. His guiding metaphor is the relationship between the Postal Service and FedEx. “What happened in the FedEx model,” he testified, “is that they” — a private company offering services the government did not — “brought competition to the post office.”

To introduce the Liberty Dollar in 1998, Mr. von NotHaus moved from Hawaii to Evansville, Ind., where he joined forces with Jim Thomas, who for several years had been publishing a magazine called Media Bypass, whose pages were filled with conspiracy theories and interviews with militia members, even Timothy McVeigh.

Working from the magazine’s office, Mr. von NotHaus lived in a mobile home and promoted his nascent currency to “patriot groups” on Mr. Thomas’s mailing list while reaching an agreement with Sunshine Minting Inc., in Idaho, to produce the Liberty Dollar. His marketing scheme was simple: he drove around the country in a Cadillac trying to persuade local merchants like hair salons and restaurants to use his coins and to offer them as change to willing customers.

Banks, of course, did not accept his money; however, to ensure that it found its way only into hands that wanted to use it, Mr. von NotHaus placed a toll-free number and a URL address on the currency he produced. If people mistakenly got hold of it, they could mail it back to Evansville and receive its equivalent in actual dollar bills.

Now jump ahead to 2004. A detective in Asheville, N.C., learned one day that a client of a credit union had to tried to pass a “fake coin” at one its local branches. An investigation determined that some business acquaintances of Mr. von NotHaus were, court papers say, allied with the sovereign citizens’ movement, an antigovernment group.

Federal agents infiltrated the Liberty Dollar outfit as well as its educational arm, Liberty Dollar University.

In 2006, with millions of the coins in circulation in more than 80 cities, the United States Mint sent Mr. von NotHaus a letter advising that the use of his currency “as circulating money” was a federal crime.

He ignored this advice,and in 2007, federal agents raided the offices in Evansville, seizing, among other things, copper dollars embossed with the image of Mr. Paul.

Two years later, Mr. von NotHaus was arrested on fraud and counterfeiting charges, accused of having used the Liberty Dollar’s parent corporation — Norfed, the National Organization for Repeal of the Federal Reserve — to mount a conspiracy against the United States.

At his federal trial, witnesses testified to the Liberty Dollar’s criminal similitude to standard American coins. They said his coins included images of Lady Liberty and cheekily reversed “In God We Trust” to “Trust in God.” Then again, his coins were made of real gold and silver, as American coins are not, and came in different sizes and unusual denominations of $10 and $20.

In his own defense, Mr. von NotHaus testified about a “philanthropic mission” to combat devaluation with a currency based on precious metals and asserted that he was not involved in “a radical armed offense against the government or their money.”

It was, of course, to no avail; and in 2011, a jury found him guilty after a 90-minute deliberation.

These days, Mr. von NotHaus paces shoeless in a mansion, in the hills above the ocean, that was lent to him by a friend. His sentencing has yet to be scheduled, and this leaves time for reflection. He feeds the hummingbirds outside his window. He reads books on fiat currency. He is even writing a book — on the gold standard, of course.

“The thing that fires me up the most,” he will say, “is this is what happens: When money goes bad, people go crazy. Do you know why? Because they can’t exist without value. Value is intrinsic in man.”

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