October 2, 2022

Gold and Silver Investors Need to Ask Themselves 10 Basic Questions

1933-double-eagle1Rick Rule listed 10 key questions regarding today’s economy. They are:

10 Questions for Precious Metals Investors

  • Is the financial crisis in the Western world over?
  • Have the G20 countries balanced their budget?
  • Did the commercial banks manage to become solvent?
  • Are (real) interest rates positive or negative?
  • Is a global competitive devaluation to increase exports still ongoing?
  • Is the European periphery still financially challenged?
  • Do the Asian countries still have a cultural affinity with precious metals?
  • Which are the US budgetary issues and solutions?
  • Are the derivatives from large banks still a problem for economies and client portfolios?
  • Can liquidity solve the issue of insolvency?

If these are the questions, then gold and silver are two good answers.

But, let’s approach these questions from a different direction.

  • Have gold or silver ever defaulted?
  • Do gold or silver have counter-party risk like EVERY paper investment?
  • On January 1, 2000 the Dow was about 11,500, gold was priced at $289, and silver was priced at $5.41. As of May 24, 2013, those numbers were: Dow: 15,303, gold $1,386, silver $22.49. Which was the best investment?
  • Gold fell (in 21 months) from over $1,900 to about $1,320. Does that mean the gold bull market is over? The Dow crashed from 14,100 (October 2007) to about 6,500 (March 2009), and then rallied back to new highs. Don’t exclude the possibility of new highs for gold and silver in the coming months.
  • Why are Chinese businesses, individuals, and their central bank buying gold as rapidly as possible? Why does the Chinese government refuse to allow any gold to be exported? Why does China (world’s largest gold producer) additionally import a massive amount of gold every year?
  • Ask the same for Russia, India, and much of Asia. What do they know about the VALUE of gold that the EU and the USA (who are selling gold) don’t understand?

Further:

  • Gold and silver have gone up and down, when priced in unbacked paper currencies. The same is true for trucks, diamonds, the Dow Index, laundry detergent, gasoline, cigarettes, and wheat. Price increases and volatility will continue.
  • Gold, silver, and the national debt have increased exponentially since Nixon severed the link between the dollar and gold in 1971. All three will continue to rise. Gold and silver will occasionally rally too far and crash, while the national debt will increase until politicians no longer enjoy spending other people’s money.
  • Goldman Sachs (and many others) have said gold is in a bubble. The same individuals and groups probably did not see the bubble in Internet stocks and housing. Do you trust them or the 3,000 years of history during which gold and silver have been real money and a store of value?
  • If JP Morgan (and others) can make huge profits using computers, complex mathematical algorithms, and High-Frequency-Trading, then they will. Often their trading temporarily drives the prices for gold and silver down. After the markets have been driven far enough down, the same trading process is used to drive the prices higher. Expect it!
  • Silver has dropped from about $49 (April 2011) to just above $20 (May 2013) – almost a 60% drop in price. Does that mean it will continue to drop more – perhaps to $10? Silver has retained its value, on average, for 3,000 years but has fallen in price for two years. On the basis of price action in those two years, most individuals (based on sentiment measures) have chosen to trust unbacked paper currencies issued by an insolvent central bank and an insolvent sovereign government instead of silver. This is typical of market bottoms, even if it is not sensible.
  • About 4.5 years ago (October 2008) silver crashed to a price bottom where “everybody felt” like it was hopeless to expect silver to rally again. About 4.5 years before that (May 2004), silver also crashed to a price bottom where “everybody felt” like it was hopeless to expect silver to rally again. But, in fact, the silver rally off the low in 2008 was over 450%, and the rally off the 2004 low was over 175%. Silver will rally again.
  • We may not trust bankers and politicians to effectively run the country, but we can trust them to “print money” and to spend in excess of their revenues. Consequently, we should trust them to drive the prices, as measured in unbacked paper currencies, for gold and silver – MUCH higher.

GE Christenson
aka Deviant Investor

Why All Governments Hate Gold

bars-of-goldMOTIVE: The various governments of the world and their central banks produce and distribute a product – paper currencies. Those currencies are backed by confidence, faith, and credit, but not by gold, oil, or anything real. Those currencies are digitally printed to excess, since almost all governments spend more than their revenues. The UK, Japan, and the USA are prime examples.

Politicians want to spend more money, but they also need to maintain the illusion that the money is still valuable, that it will retain most of its purchasing power over time, and that inflation is under control. The illusion weakens when food, gasoline prices, and other consumer goods are wildly rising in price. At a more abstract level, gold indicates the same lack of confidence in the printed pieces of paper that our central banks distribute.

Hence, central banks and governments have a strong motive to “manage” the inevitable price increases in gold. They have a motive to suppress the price and to allow it to rise gradually over time, while occasionally smashing it down and temporarily destroying confidence in gold as an alternative to unbacked paper currencies. The press helps by regularly claiming gold is in a “bubble.”

Yes, there is a clear and compelling motive.

MEANS: This brings up a heavily debated topic – do governments and central banks have the means to manage the price of gold? Ask yourself these questions:

  • Did banks manipulate rates in the LIBOR market?
  • Does the Federal Reserve (and other central banks) set (manage – manipulate) interest rates in the credit markets?
  • Do banks exercise considerable influence over regulators and Congress?
  • Are the various central banks of the world centers of power and wealth?
  • Do they use their wealth and power to achieve their policy objectives?
  • If the Fed can create and lend/loan/swap/give away over $16 Trillion dollars after the 2008 crisis, is it possible that some of that $16 Trillion was used to influence the gold market?
  • Did Greenspan, when he was Chairman of the Federal Reserve, make a statement in 1998 that central banks were ready to lease gold if the price of gold rose? Link is here.
  • If central banks lease gold to bullion banks and those banks SELL that gold into the market, would that have any influence on price?
  • Are central banks allowed to claim leased gold, which they no longer physically possess, as an asset on their balance sheet? (Lease it into the market but still claim they have it – this works until they run out of gold or the physical gold is audited.)

Yes, central banks and governments have the MEANS to suppress the price of gold.

OPPORTUNITY: As long as:

  • Governments spend more than their revenues
  • Central banks and governments control their gold in secrecy
  • Physical gold is not audited (last real audit of the USA gold was about 60 years ago)
  • Gold can be leased out while being listed as owned,

then there is opportunity.

Further, if a few billion dollars can be created and then used by a futures trader, and that trader sells (naked shorts) a large number of gold contracts on the futures exchange, that will drive the gold price down rapidly. Look at the chart of gold prices for April 11 – April 16 and ask yourself if that looks like a managed market.

Yes, central banks and governments have the OPPORTUNITY to suppress the price of gold.

But there is more to the story!

Central banks and governments have, to one degree or another, the motive, means, and opportunity to manage the price of gold. Clearly, their bias is to hold the price of gold low and to restrict its upward movement. Similarly, they want bond and stock markets to move higher, but that is another story.

YOU have motive, means, and opportunity to protect yourself and to profit from this process.

You know that unbacked paper currencies are declining in purchasing power. The path is erratic but clearly lower over the last four decades. You want to protect your purchasing power – you have a MOTIVE to own gold instead of owning devaluing currencies that pay next to nothing in interest.

You probably have paper dollars that are “invested” in stocks, bonds, IRAs, and other savings. You have the MEANS to protect yourself. Sell some paper and buy gold. The Chinese and Russians are doing it as rapidly as they can. What do they see that you might not fully understand?

You have the OPPORTUNITY to buy gold and silver at a huge discount to their real value – just my opinion – but both are “on sale” at current prices. (Gold is currently priced about the same as in late 2010.) “But can’t they go lower?” Yes, of course, gold could drop to $1,000, the Middle East could be transformed into a region of tranquility, peace, and cooperative people, and the US Congress could balance the budget. But as long as governments and central banks are “pushing paper,” digitally printing unbacked currencies, and overspending their revenues, the price of gold will increase – just my opinion – to much higher than it is today.

Gold and silver are in long-term bull markets. One of the objects of a bull market is to arrive at the peak with very few long-term participants. The “bull” wants to buck you off periodically. It usually happens. Basic human nature – fear and greed – makes it difficult to ride the bull most of the way up and exit at the proper time. Fortunately for gold and silver bulls, there are many more years of deficit spending and increasing debt that will push metals prices much higher.

Read from the DI: Why Buy Gold?

GE Christenson
aka Deviant Investor

Why I Will Always Own Gold and Silver

What I Know for Certain –  By:  GE Christenson

gold-dollar

      • Death and taxes!
      • Fear and greed are powerful motivators.
      • Individuals, businesses, and governments do what they think is beneficial for them.
      • Businesses and governments protect their products and territory and resist competition and enemies.
      • Concentrated wealth creates power and corruption. The greater the concentration of wealth, the larger and more pervasive the power and corruption.
      • Gold and silver have been money for over 3,000 years.
      • Unbacked paper money systems have always failed.

What I Think is True

      • The basic product of a central bank is the unbacked paper currency it prints in ever-increasing quantities.
      • Central banks will fight all competitors to their currencies. The oldest competitor to unbacked paper currencies is gold, ancient money.
      • Politicians want to spend money and increase their power.
      • Bankers want to create money, lend it to governments, and thereby secure a permanent and increasing revenue stream.

What I Think the Consequences Are

      • Bankers use their wealth to “influence” politicians. Politicians respond with favorable legislation. It has worked for centuries.
      • Central banks want an expanding money supply and ever-increasing debt. The consequence is that consumer prices inevitably increase.
      • A currency collapse is like a bank run – everyone scrambles to remove his/her wealth from the currency (or the bank) due to a loss of confidence. In fractional reserve banking systems, bank runs are inevitable. Even though they may last for many decades, unbacked paper currencies inevitably devalue and eventually collapse.
      • Bank runs and currency collapses are feared by bankers and politicians; they do what they can to support confidence in their products and to squash their competitors.

In the United States

      • Debt and government spending seem likely to increase until a crash-reset occurs.
      • The crash-reset will involve a dollar collapse.
      • Gold and silver will eventually reach much higher prices due to the loss of value and confidence in the dollar, the banking system, and the sustainability of the current financial system.
      • “Paper gold” will be seen for what it is – a promise that might not be paid.
      • Physical gold will be seen for what it is – real wealth.
      • The USA and Europe are sending their real wealth – gold – to China, India, Russia, and the Middle East. China, India, and Russia are buying aggressively and know that exchanging paper dollars and euros for gold will strengthen their economies and governments tomorrow.
      • It is openly speculated that much of the sovereign government and central bank gold supposedly owned by the USA and Europe is either gone, leased, or otherwise committed.

Read: The Crash Before the Climb

Accept what you cannot change and act based on facts, not our current financial and economic fictions. Protect your financial well-being with physical gold and silver safely stored in a secure location.

GE Christenson
aka Deviant Investor

Gold Demand Drops By 13% In First Quarter Due to ETF Outflows

tenth oz gold-eaglesLarge scale liquidation of gold backed exchange-traded products (ETP) sent gold prices into a tailspin during April.  Billionaire investor George Soros, who had sold 55% of his holdings in the SPDR Gold Shares (GLD) during the last quarter of 2012, further reduced his gold positions during the first quarter.  Soros is a legendary trader and investor who has made billions moving ahead of the crowd.

In an interview published by the South China Morning Post on April 8, Soros said that gold was no longer a safe haven after the metal failed to rally last year despite fears of a euro collapse.  Shortly after Soros made his comments, other investors  began to sell and within days gold had tumbled by $200 per ounce.  Northern Trust Corp and BlackRock Inc also made large cuts in their holdings of ETPs, while John Paulson lost about $165 million by maintaining his stake in the GLD.

According to Bloomberg, assets held by ETPs declined in value by $42 billion as gold prices tumbled.

Global ETP holdings have tumbled 16 percent in 2013 after rising every year since the first product was listed in 2003, according to data compiled by Bloomberg. Assets in SPDR have plunged 22 percent, and they will probably drop by an additional 2 million to 4 million ounces after slumping 9.7 million ounces since mid-December, Deutsche Bank AG said in a report on May 14.

Further Drop

While the selloff has been faster than expected, a further drop in ETP holdings will probably mean more price declines, Goldman Sachs Group Inc. analysts including Jeffrey Currie wrote in a report dated May 14.

Northern Trust cut its SPDR stake by 57 percent to 6.9 million shares, according to a filing dated May 1. The asset-management company, as a custodian, holds assets without discretion over how they are invested, Doug Holt, the head of global corporate communications, said yesterday in an e-mail.

“We made one change to our global tactical asset allocation policy this month: eliminating our tactical position in gold,” Jim McDonald, chief investment strategist in Chicago at Northern Trust, which oversees about $810 billion, said in a report on March 13.

BlackRock, the world’s biggest money manager, trimmed its holdings by half to 4.1 million shares, a filing dated April 12 showed. On May 9, Robert Kapito, president of the New York-based company, said that he would still buy the metal.

The large scale liquidation of gold exchange traded funds was confirmed today in the latest quarterly demand and supply statistics published by the World Gold Council.  Overall gold demand for the first quarter declined by a considerable 13% with outflows from gold ETFs accounting for the bulk of the decline.  During the first quarter there were outflows of 177 tonnes from global gold ETF holdings.

The sale by large speculators of the gold ETPs seem to be the trigger that set off last month’s decline in gold prices.  The drop in gold could turn out to be a temporary factor as other buyers eagerly absorb supply by adding to their gold holdings at lower prices.

Aside from the sale of gold by holders of exchange traded products, demand for gold in the first quarter remained robust.  The World Gold Council noted that almost every other category of gold demand increased even as supplies are being constrained by lower mine output.

  • Mine production of 1,052 tonnes during the first quarter showed no growth and supply from scrap gold declined due to the drop in gold prices.
  • Jewelry demand surpassed the previous quarter and hit a new record with sales of $28.9 billion.
  • Demand from India and China, who collectively consume 62% of global gold jewelry sales, increased by 15% and 19% respectively.
  • Physical bar and coin demand during the first quarter increased by 8% and 18% respectively.  Demand for gold bar and coins in China exploded to 110 tonnes, double the average of the last five year quarterly sales.
  • Central banks added 109 tonnes of gold to their reserves in the first quarter, accounting for 11% of total gold demand.  Central banks have increased their purchases of gold for nine consecutive quarters.

Wholesale liquidation of gold positions by very large and wealthy speculators adversely impacted gold prices this year.  As gold demand from virtually every other sector continues to grow, the increased gold outflows from ETFs will eventually be absorbed.  In addition, as central banks continue to print money on an unprecedented scale, it would not be surprising to see large investors once again pour money into the gold ETFs.

Gold and Silver Bearish Sentiment Is At Extreme Levels

By:  John Townsend at The TSI Trader.

The usefulness of sentiment’s stealth crystal ball is about to be revealed to the litany of unsuspecting precious metal bears and skeptics who have convinced themselves that gold’s bull market is either over or, at the minimum, in need of lengthy ongoing retesting, restructuring and consolidation.

This article will bring us up to date as to the degree of current bearish sentiment regarding both gold and silver using no fewer than 5 sentiment indicators (with 9 illustrative charts), as well as provide the reader with an opportunity to observe the price outcome of previous bearish extremes using these sentiment indicators.

But first, let’s briefly consider the concept of investor sentiment.

Sentiment extremes, simply put, tell us that there are too many traders at one end of the boat and therefore the boat is about to tip over. Sentiment can strongly suggest that the trade, as some say, has become “crowded”. When someone finally yells “fire” in the “crowded” room there are so many of the market’s participants motivated to get out the same door and in the same direction that most get trampled – unable to reverse their trade fast enough.

Another way of characterizing a sentiment extreme is to say that the trade simply runs out of buyers or sellers, as the case may be. The extreme price momentum in one direction “exhausts” itself of all available ammunition to continue the trend and is sometimes signaled when someone yells “fire” in the “crowded” room, but often comes to a conclusion unrecognized by most traders as price reverses direction in an unassuming manner.

You may have heard comments when a particular market bottoms and then begins to trade higher and then continues to trade even higher yet, despite “bad” news, the assertion that the bullish price movement seems to make no sense – that it cannot possibly be sustained. At this time it appears to nearly everyone the common sense question to ask is how “bad” news that used to cause a market to go into free fall now seems to have absolutely no negative effect? And to observe that as this market continues higher, it always leaves behind those traders stuck in pessimism to declare that the market is “climbing a wall of worry”. That is, the “bad” news continues in the media, yet this particular market’s price reversal continues upwards.

We will begin with the put / call volume ratio of the options trade of the Silver Trust ETF (SLV) and the SPDR Gold Trust (GLD). Charts courtesy of Schaeffer’s Investment Research.

Click on image to enlarge.

The red line in the charts are the ETF’s price movement over the recent 2 years (GLD above, SLV below). The blue line is the put / call volume ratio. This considers the trading day’s volume of puts traded and is divided by the volume of calls traded. Generally, the higher the put / call ratio, the more bearish traders are about the ETF’s likely price movement, while the lower the put / call ratio, the more traders believe the ETF is bullish and going to rally higher.

Click on image to enlarge.

Undoubtedly you have noticed that both charts reveal that the put / call ratio is at the highs of the past two years; meanwhile price is at the lows of the past two years. I will leave it to you to observe the repetitively flip flop relationship between this sentiment indicator and price movement. For me, anyway, this indicator leaves little doubt as to the upcoming direction of GLD and SLV.

Next up is the Hulbert Gold Sentiment Index. This chart courtesy of Mark Hulbert’s Newsletters.

Click on image to enlarge.

This first Hulbert Gold Sentiment Index chart shows us that gold sentiment at present is even more depressed than at gold’s infamous 2008 low.

So there you have it. Sentiment on GLD and SLV options is crazy extreme, Hulbert’s Gold Sentiment Index reveals sentiment is not only more bearish than the 2008 bottom – it’s more bearish than anytime in the past 17 years (at least).

Read complete article here.

Is The Decline In Gold Predicting Deflation?

bernanke's paperBy GE Christenson

We all know that our cost of living in increasing, but how much?

The official government statistics assure us that inflation is running around 2% per year. It reminds me of the line attributed to Groucho Marx, “Who are you going to believe, me or your own eyes?”

But, your cost of living increase – your personal inflation rate – may be much larger or smaller than that of the person next door. Your spending choices matter a great deal in determining your personal inflation rate.

  • I think we can all agree that some items are increasing much faster than others. A few that come to mind are college tuition, medical care, hospital costs, and health insurance. Several that increase more slowly are postage and milk. If you spend more on medical care and health insurance than on postage, your cost of living increase will be much larger than the person who buys more stamps than health care.
  • If the official CPI goes up, then social security payments increase and total government expenses increase. Hence, government has an incentive to want low CPI inflation statistics. The US government has changed the process and the formula several times since the 1980s. The result, of course, is that the official CPI is low. Maybe it is fair, maybe not, but it is the official story, and it helps keep social security payments low.
  • The various statistical measures used to calculate the CPI have been discussed and criticized in detail in many other publications. In the opinion of many people, they don’t reflect economic reality for most people.
  • Other writers disagree and assure us the inflation rate is low.
  • John Williams, a competent economist and statistician, computes the annual inflation rate at about 9%. He uses the statistical calculation process that was used by the government in 1980.
  • Dennis Miller did an inflation rate survey. It was not intended to be statistically robust – just practical. His readers responded with an average inflation rate of 8%, but 23% of the respondents thought their personal rate of inflation was over 11% per year.
  • The Deviant Investor did a similar survey and received a large number of responses. Our readers thought their average inflation rate was nearly 8% per year, while 39% thought it was higher than 9% per year.
  • Rex Nutting thinks it is close to 3% per year and that most of us are “CPI Deniers.” Mainstream media mostly agrees – but I can’t find anyone (in casual conversation) in a grocery store who thinks food prices are only increasing 2 – 3% per year.

I estimate my personal inflation rate at about the average found in the surveys – around 8% per year. I am one of those “CPI Deniers.” Most people I know are “CPI Deniers.”

So How Important is a Few Percent Per Year?

A few percent seems unimportant, but over a decade it becomes very important. Let’s assume in this very simple example that your expenses increase 8% per year, and your income increases 3% per year. In year one your income was much larger than your expenses, and you saved the difference.

Sample Inflation Calculation

Year Income Expenses Net to
Savings
1 80,000 60,000 20,000
2 82,400 64,800 17,600
3 84,872 69,984 14,888
4 87,418 75,583 11,835
5 90,041 81,629 8,411
6 92,742 88,160 4,582
7 95,524 95,212 312
8 98,390 102,829 (4,440)
9 101,342 111,056 (9,714)
10 104,382 119,940 (15,558)

By year 8, in this simple example, the cost increases overwhelmed your income, and you were forced to withdraw from savings. Of course, in the real world, there are more variables and adjustments. We cut back on expenses, increase credit card debt, take a second job, win the lotto, file for bankruptcy – whatever. But the critical point is that your personal inflation rate is important, and a few percent over a decade can make a huge difference.

What to Do?

      • Cut back on expenses.
      • Get out of debt, and stop paying interest.
      • Increase your income.
      • Start a business, or take a second job.
      • Make investments that pay more than the minimal interest provided by savings accounts and certificates of deposit.
      • Invest in real things – gold, silver, diamonds, land, rental property.
      • Invest in “ABCD,” which for David Stockman is “Anything Bernanke Can’t Destroy.” We Have Been Warned!

According to the surveys, real people think their personal inflation rate is around 8% per year with a significant percent of the responders claiming 9 – 11% or more per year. Are you going to believe what the government is telling you or your own experience?

GE Christenson, aka Deviant Investor

US Mint Gold and Silver Bullion Sales Soar In April

geThe exploding demand for physical gold and silver has become a worldwide phenomenon.  Shortly after the price plunge of early April buyers rushed in to take advantage of bargain prices.  Dealers and mints worldwide have reported off the charts demand for physical gold and silver.

Intense demand across Asia has resulted in shortages of gold and silver in both India and China as dealers struggle to keep up.  Singapore’s largest supplier of coins and bars reports depleted stocks of silver and long delivery delays.

The surge in physical demand is also rapidly depleting U.S. gold inventories according to Reuters.

Physical gold held at CME Group’s Comex warehouses in New York have dropped to a near-five year low in a further sign that gold’s price crash unleashed a frenzy of demand as investors scramble to buy bars and coins.

U.S. gold stocks, comprised of 100-troy ounce COMEX gold bars, have fallen almost 30 percent since February, as dealers have switched to selling into the burgeoning Asian market, where prices and demand are higher than in New York.

But the pace of the outflows from vaults has accelerated since bullion’s historic sell-off, falling more than 7 percent last week for its biggest weekly drop since 2005.

The latest sales figures from the U.S. Mint for April are further confirmation of  the voracious demand for physical gold and silver.  Sales of both the America Eagle gold and silver bullion coins skyrocketed in April.

According to the US Mint, sales of the American Eagle gold bullion coin totaled 209,500 ounces in April, up a stunning 948% from the previous year and up 22% from the previous month.  The gold bullion coins had the largest amount of sales since December 2009 when 231,500 ounces were sold.

Gold and silver bullion coin sales have soared since the financial crash of 2008 and the subsequent repetitive use of the print button by the world’s central banks.  In order to get a perspective on the flight to precious metals, consider that over the entire year of 2007, the US Mint sold a total of only 198,500 ounces of gold bullion coins – less than montly sales during April 2013.

Sales of the American Eagle silver bullion coins were also very strong.  During April 2013, the US Mint sold 4,087,000 silver bullion coins, up 169% over April of last year and up 22% from the previous month’s sales.  The US Mint has struggled to keep up with demand even before the April surge.  Sales of the American silver eagles was recently suspended twice and in late April the US Mint suspended sales of the one-tenth ounce American eagle gold bullion coin due to inventory depletion.

Based on sales to date, it would not be surprising to see an all time record high amount of the American Eagle silver bullion coins sold in 2013.

 

The Gold Crash – Why It Doesn’t Matter

Physical-GoldBy:  GE Christenson

The NASDAQ 100 index peaked at 1,485 in July 1998. It subsequently crashed to below 1,070 in October 1998, a loss of about 28%. But, it climbed back to nearly 5,000 in March 2000, a rally off the low of over 350% in 17 months.

The S&P 500 index peaked in October 2007 around 1,575. It subsequently crashed below 670 in March 2009, a loss of about 57%. But, it climbed back to nearly 1,600 in April 2013, a rally off the low of over 135% in 49 months.

Gold was priced at nearly $200 in January 1975. It subsequently crashed to about $100 in August 1976, a loss of about 50%. But, it climbed back to over $850 in January 1980, a rally off the low of over 750% in 41 months.

Crude oil peaked at over $147 in July 2008. It subsequently crashed to under $36 in December 2008, a loss of about 75%. But, crude climbed back to over $114 in May 2011, a rally off the low of over 210% in 29 months.

Natural gas exceeded $15 in December 2005. It subsequently crashed to under $5.50 in September 2006, a loss of over 64%. But, natural gas climbed back to over $13 in July 2008, a rally off the low of over 130% in 22 months.

Gold was priced at about $1,920 in August 2011. It subsequently crashed to about $1,350 in April 2013, a loss of about 30%. Gold will probably climb back to a large number in the relatively near future, a rally off the low that will be really impressive.

Silver climbed to over $48 in April 2011. It subsequently crashed to under $23 in April 2013, a loss of over 52%. Silver will probably climb back to a very large number in the relatively near future, a rally off the low that will be quite impressive.

Markets rally, correct, rally, and correct again. Some of the corrections are so severe we call them crashes. In the big picture, it hardly matters whether the crashes were accidental, encouraged, manufactured, or all three. In the big picture, what matters are the market fundamentals. After the correction, have the fundamental drivers of the market changed?

Important Questions for Gold & Silver Investors

    • Are the central banks of the world still rapidly expanding the money supply?
    • Are the derivatives and currencies bubbles in danger of crashing?
    • Are governments still spending much more than their revenues?
    • Are central banks, governments, and wealthy individuals continuing to buy gold?
    • Is total debt rapidly increasing?
    • Is consumer demand for gold and silver increasing?
    • Is faith in unbacked paper money decreasing?
    • Are faith and trust in banks and politicians decreasing?
    • Does the financial world appear to be more dangerous and unstable each year?
    • Are the above imbalances unlikely to improve in the next few years?

If YOUR answer to most of the above questions is “yes,” then regarding YOUR big picture perspective, gold and silver are probably very good investments, in addition to being valuable insurance in case some or all of the above imbalances do NOT resolve favorably and safely. Yes, this is likely to end badly.

The recent crash in silver and gold was one of many for the record books. But, gold is not the same as Enron stock. Tangible physical metals that have been a store of value for over 3,000 years are not the same as a paper promise made by less than reputable individuals and organizations. In the world today, it seems there are many disreputable individuals, corporations, and governments, all pushing paper. We have been warned!

History suggests we should side with 3,000 years of history during which gold and silver have been a store of value and the ultimate real money. History suggests that we should not trust our savings with either the paper pushers or their unbacked paper money.

For silver and gold investors, there are 3,000 years of history supporting your viewpoint and your commitment. There have been many rallies and crashes in both markets; but, even at their recent crash lows, the price of both is over five times higher than their lows in 2001. New highs will occur. Don’t let the paper pushers frighten you out of your investments.

GE Christenson
aka Deviant Investor

U.S. Mint Runs Out of Gold Bullion Coins

tenth oz gold-eaglesWe already knew from numerous previous reports that demand for physical gold and silver has soared since the early April precious metals crash.  Further confirmation of vanishing physical gold and silver inventory was provided today by the Untied States Mint.  Authorized purchasers of gold and silver bullion coins were informed by the U.S. Mint that sales of the one-tenth ounce American Eagle bullion coin would be immediately suspended due to depleted inventories of the coin.

As short term paper speculators run from the precious metals markets, long term investors have been lining up around the block to buy physical gold and silver.  Numerous coin and bullion dealers have reported growing shortages of gold and silver and premiums have expanded as demand overwhelms supply.

Based on mid month sales reports for the American Eagle gold bullion coins, it looked like monthly sales would exceed 167,000 ounces, the highest since December 2009 when the financial system was still in a meltdown.  As of today, U.S. Mint sales of gold bullion coins has reached 183,500 ounces, an astonishing increase of 818% over the prior year’s monthly sales of 20,000 ounces.  April sales to date have increased by 196% over March sales.  For all of 2012, average monthly sales of the American Eagle gold bullion coin were 62,750 ounces.  Gold bullion coin sales by the U.S. Mint are shown below; figures for 2013 are through April 23rd.

 

Gold Bullion U.S. Mint Sales Since 2000
Year Total Ounces Sold
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
2013 476,000
TOTAL                                      8,478,500

Sales of the American Eagle silver bullion coins, which had already been selling briskly before the April silver smash-down, continue to sell at a rapid pace.  Total monthly sales as of April 23rd have reached 3,232,000 ounces, almost as much as the previous month’s total and 112.6% higher than the comparable month of 2012.

The steep correction in gold and silver prices that occurred in early April has certainly not disturbed the fundamental long term reasons for buying precious metals.  Expect the buying stampede to continue.

Physical Demand For Gold and Silver Skyrockets – Gold Bullion Coin Sales Highest Since December 2009

1881-CC-Morgan-DollarWe have probably all heard enough already from the mainstream nitwits who are forecasting the end of the gold bull market and further price declines.  Funny thing though, most precious metal investors don’t need advice from self proclaimed experts on how to invest their money.  The explicitly stated goal of central banks to increase the rate of inflation through currency debasement is blatantly obvious.  Investors are acting accordingly by taking advantage of the recent decline in precious metal prices.

A look at product availability and pricing at some major coin and bullion dealers shows spot shortages of gold and silver as well as large premiums as investor demand overwhelms supply.

The Perth Mint reports that retail customers are increasing purchases at a record rate even as gold slumps to a 21 month low.  As the experts were proclaiming the “Death of Gold”, the Perth Mint website recorded the highest activity of the year and one of the best days of the past year.  Bargain prices on gold and silver have greatly increased the demand for physical gold and silver by the public.  Demand for gold coins have skyrocketed with sales of Australian gold bullion coins increasing by 48% in the first quarter over the comparable prior year period.

2013-Australian-Kangaroo-1oz-Gold-Bullion-Coin-Reverse-S

Buying by U.S. investors of the American Eagle gold and silver bullion coins has also increased dramatically.  Through April 16th, sales by the U.S. Mint of the American Eagle gold bullion coins have already exceeded total monthly sales for the previous two months.  At the current sales pace, sales of the gold bullion coins in April will total over 167,000 ounces, an increase of over 260% from the prior month.  The last time sales of gold bullion coins exceeded 167,000 ounces was in December 2009 when the U.S. Mint sold 231,500 ounces.

Sales of the American Eagle silver bullion coins are also strong in April, continuing a trend that began with the financial crisis in 2008.  Sales of the silver bullion coins through April 16th total 2.2 million ounces.  If the current sales pace continues through the end of April total sales of the Silver Eagle coins will increase by 31% over the previous month.

Short term speculators may be crashing the precious metals markets, but long term investors in gold and silver see this as the ultimate golden opportunity to increase positions.