May 10, 2024

Gold and Silver Soar On Fears Of Massive Central Bank Stimulus

September 3, 2011 by 2 Comments

Precious metals soared across the board this week.  The dismal jobs report released on Friday showed that the American economy has come to a standstill with zero new jobs added in August.

The specter of the US economy plunging back into recession along with imminent banking crises in Europe and the US have fueled speculation that the Federal Reserve is on the verge of conducting another massive wave of monetary stimulus which will further debase the value of the US dollar.  Apprehension is also growing that the magical Obama plan for “creating” new jobs will involve further borrowing by an already bankrupt  American empire.

Also lurking in the background is the fear of coordinated US and European central bank intervention (money printing) to contain the collapse of the European banking system.  Despite the purchase of hundreds of billions of dollars of Spanish, Greek and Italian debt by the European Central Bank, rising interest rates are forecasting default by numerous sovereign states in the European Union.   Rates are rising again on Italian debt and the rate on one year Greek paper now exceeds 70%.  The yields on Greek debt indicate that default is now a certainty and the losses by insolvent European banks holding PIGS debt will require unprecedented government bailouts to prevent complete financial chaos.

Soaring gold prices have been predicting the collapse of paper money currencies.  As measured by the closing London PM Fix Price, gold soared on Friday by $54.25 to $1,875.25.  In later New York trading, gold continued higher closing at $1,885.20.  Gold is only $2.25 below the all time London close of $1,877.50 reached on August 22nd.

Precious Metals Prices Sept 2
PM Fix Since Last Recap
Gold $1,875.25 +87.25 +4.88%
Silver $42.50 +1.44 +3.51%
Platinum $1,873.00 +61.00 +3.37%
Palladium $785.00 +38.00 +5.09%

As measured by the closing London PM Fix Price, silver gained $1.44 on the week to $42.50 and continued to rise in later New York trading to $43.35.   After consolidating in the $34 range, silver has resumed its uptrend and is likely to hit new all time highs before year end.

 

Silver - courtesy stockcharts.com

Platinum soared by $61 on the week to close at $1,873 while palladium finished up $38 to close at $785.

Precious metals may correct after strong advances, but the fundamental case for owning them is growing geometrically.  Expanding deficits and wild money printing will continue as policy makers continue their futile attempts to produce economic recovery by adding more debt to a system already collapsing from the burden of excessive debt.   Continue to increase gold and silver positions on any pullbacks.

 

Gold - courtesy stockcharts.com

Filed Under: Featured, Gold, palladium, Platinum, Silver, Weekly Recap Tagged With: , , , ,

Ultimate Price Of Gold Will Shock The World As Loss Of Global Confidence Leads To Economic Collapse

August 13, 2011 by 1 Comment

Gold had another stellar week while stock markets gyrated wildly.   As measured by the closing London PM Fix Price, gold gained $77.25 on the week, hitting all time highs and closing at $1,736.   After the London close, gold recovered from an earlier pullback and closed in New York trading at $1,747.30, up $11.30 from the London close.

Silver ending the week down slightly at $38.29 while platinum gained $91 to $1,800 and palladium edged up $5 to $747.

Gold has gained $253 or 17% since July 1st when it closed at $1,483.00.  The rapid price gains have pushed gold above its long term trend line.  Gold is now trading at $290 (or 20%) above its 200 day moving average.  On previous occasions in late 2009 and the fall of 2010 gold also traded more than $200 dollars above the 200 day moving average and the result was a minor pullback or sideways consolidation.

 

Gold - courtesy kitco.com

Gold may be overbought on a short term basis but the fundamental reasons for owning gold are expanding exponentially.  Public realization that dysfunctional governments are incapable of solving our economic problems is resulting in a loss of confidence.  A loss of confidence combined with a debt crisis and out of control spending can have only one result – increasingly worthless paper money and stocks as the  world central banks attempt to prevent an economic collapse with zero interest rates and printed money.

Gold Outperforms paper stocks

Government and  central bank policies have been destroying the value of the US currency for decades and have given birth to crashing housing markets, lower incomes, depression level unemployment and numerous stock market crashes.  When one  considers that the last hope of preventing an all out depression now lies in the hands of the very central banks who have already brought Hell down upon us, we should all be very, very scared.

If the last ditch efforts of the Central Banks fail to contain the financial collapse that is imminent, expect to see governments institute totalitarian measures in order to maintain a semblance of organized society.  As bankrupt empires collapse, they also attempt to expropriate every last dollar of wealth from its citizens in order to maintain their grip on power as long as possible.

The most recent large scale example of the implosion of an empire was the USSR, whose sudden collapse surprised CIA analysts who had been studying the Soviet Empire in detail for decades.  Ironically, those even more surprised by the collapse of the USSR were the politicians and bureaucrats who ran the country into the ground as they remained oblivious to their economy killing policies.  Tragically, misguided and misinformed middle class citizens of the USSR saw the value of their rubles collapse along with pension plans, bank savings and other financial assets.  Those who walked away with more than they had, other than corrupt politicians, were those few citizens who converted paper money into gold or silver before the financial system imploded.

A potential short term price correction in gold is a meaningless concern.  Developed world economies are in inexorably decline from which there is no escape.  The primary concern for most US citizens should be to develop a financial strategy that does not leave them impoverished when the end game arrives.

Unfortunately, most Americans have a religious conviction that “The Government” will save and nourish them as has been promised by every politician of this century.  These promises will all be broken but Americans won’t believe it until it happens, at which point there is no financial escape.

As a worldwide systemic financial collapse grows more probable with each passing day, Americans remain in denial and place their life savings in US government debt and bank accounts, secure with the promise that they are “guaranteed by the government”.   Sorry folks, bankrupt governments don’t keep promises.  The proof of American citizens’ faith in paper assets is their very low commitment to gold and silver.  The public will belatedly turn to gold and silver en masse when the system starts crashing down around them.  This event will be the real rush to gold and at that point, prices will rise thousands of dollars per week.

When establishment journalists warn of a “bubble” or “top” in gold, don’t get annoyed – simply buy more gold, especially on pullbacks.  The ultimate price of gold will wind up shocking even the biggest gold bulls.  When gold demand is insatiable and supply very limited, attempting to figure out the ultimate high price for gold is a fruitless exercise. (see Why There Is No Upside Limit For Gold and Silver).

Precious Metals Prices 8/12/11
PM Fix Since Last Recap
Gold $1,736.00 +$77.25 +4.66%
Silver $38.29 -$0.95 -2.42%
Platinum $1,800.00 +$91.00 +5.32%
Palladium $747.00 +$5.00 +0.67%

 

Filed Under: Featured, Gold, palladium, Platinum, Silver, US Debt Crisis, Weekly Recap Tagged With: , , , , , , , , ,

Gold Rallies On Week – Is The World Economy At The Precipice?

July 30, 2011 by Leave a Comment

Gold continued its winning ways this week.  As measured by the closing London PM Fix Price, gold gained $26.50 to close the week at all an time high of $1,628.50.

Gold has closed higher for the past four consecutive weeks.  The rally that began at the beginning of the month has pushed gold higher by $145.50 or 9.8% since July 1st.  Investors worried about the solvency of sovereign states in Europe have now switched their focus to the United States.

The impasse over raising the US debt limit has morphed into a crisis of confidence over the ultimate value of the US dollar.  There is no clear consensus on how the debt limit negotiations in Washington  will be resolved.  The only certainty is that, regardless of how the debt limit crisis ends, confidence in the “full faith and credit” of the United States will be greatly diminished.

China and Russia, two large holders of US debt, have watched in horror as the US deliberately debases its currency value through money printing and a parabolic increase in debt.  At a time when the US needs to borrow trillions of dollars in new debt, there is likely to be a greatly diminished appetite to purchase additional US debt.

The global debt crisis and a lack of confidence in paper money has resulted in a steady increase in the price of gold.  Will gold continue to soar if global economies start collapsing or will gold be drawn into the deflationary abyss along with all other asset values?  Opinions vary but here are some good thoughts on the matter.

-John Browne of Euro Pacific Capital warns that gold could be subject to a price pullback based on the deflationary impact of a global recession or short term optimism over the US avoiding default.

–Decision Point’s Carl Swenlin wonders if gold is too much of a “sure thing” investment and ponders the fate of gold in a deflationary collapse.

-A Citigroup analyst speculates that gold could quickly reach $5,000 based on a “worst case scenario for Euro sovereign debt and USA fiscal problems”.

Confidence is vital in a fiat money based world.  The ongoing global debt crisis may be the trigger that ultimately destroys faith in paper currencies.

Precious Metals Prices 7/29/11
PM Fix Since Last Recap
Gold $1,628.50 +$26.50 +1.65%
Silver $39.63 -$0.04 -0.10%
Platinum $1,779.00 -$14.00 -0.78%
Palladium $824.00 +$17.00 +2.11%

Silver and platinum were essentially unchanged on the week after posting strong advances since the beginning of July.  Palladium advanced by $17 or over 2% on the week and is up $74 since July 1st.

Filed Under: Featured, Gold, palladium, Platinum, Silver, US Debt Crisis, Weekly Recap Tagged With: , , , , ,

As World’s Most Predicted Financial Crisis Approaches Precious Metals Move Higher

July 23, 2011 by Leave a Comment

Precious metals gained across the board for the third week in a row.  Silver and palladium were the top performers this week with each advancing almost 4%.

July has seen an explosive move in the precious metals group as worries intensify about the twin debt crises in Europe and the U.S.  In both cases, governments and central banks are avoiding the tough choices that must be made when debt levels reach unsustainable amounts.  Common sense dictates that over leveraged borrowers with insufficient income to service debt must eventually default, or gradually reduce the debt through a combination of austerity measures and income growth.

Common sense, however, is a trait sorely lacking in politicians.  Nor does preaching austerity to your constituents enhance the odds of being re-elected.  The preferred solution, which has been employed since the 1980’s, is to add more debt and let the future take care of itself.  What’s different this time is the growing realization that at some point the compounding of debt becomes unsustainable, enslaving future generations and inhibiting economic growth.

The widely discussed study by Rogoff and Reinhart definitively documents that when public sector debt to GDP approaches the 90% level, economic growth slows dramatically – (see This Time Is Different: Eight Centuries of Financial Folly).  Since most of the developed world economies are already at or above the 90% debt to GDP ratio, the prognosis for future economic growth to gradually reduce debt levels becomes a tenuous prospect.

Despite the obvious risks of a growing debt burden, a significant number of the Washington elite insist that the debt limit be raised by another $2.5 trillion which would represent a doubling of the national debt in a little over five years.

Raising the debt limit, which became a routine ritual in past years, has suddenly morphed into a potential default situation as a growing number of responsible political leaders refuse to rubber stamp another massive increase in public borrowing.  As debt limit negotiations broke down today, the odds of a potential default by the United States became a distinct possibility.

Will a temporary default become a seismic event?  Who knows, but if gold had advanced by one dollar per ounce for each time I’ve seen an article predicting financial Armageddon, if the debt limit was not raised, gold would be well over $4,000 per ounce.   If the U.S. does “default”, it will not be the end of the world.  In the best case scenario, a brush with default may convince more members of our EZ spending Congress to come around to the financial common sense of men such as Ron Paul.

http://youtu.be/sEP8cQF-QC4

Summary of Ron Paul’s comments to Congress:

  • Countries that are as indebted as the U.S. always default.
  • The real increase in the debt this year, counting entitlements, is $5 trillion.
  • In the past 3 years, the dollar has been devalued by 50% against gold.
  • Default will be through inflation.

Gold advanced by $15 on the week and is up $119 since July 1st.  Silver advanced by $1.50 on the week and has gained $5.82 since July 1st.

Platinum and palladium both advanced on the week by $33 and $30 respectively.  Platinum has gained $85 and palladium $57 since the first of the month.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,602.00 +$15.00 +0.95%
Silver $39.67 +$1.50 +3.93%
Platinum $1,793.00 +$33.00 +1.88%
Palladium $807.00 +$30.00 +3.86%
Filed Under: Featured, Gold, palladium, Platinum, Silver, US Debt Crisis, Weekly Recap Tagged With: , , , , , ,

Gold and Silver Rocket Higher As Bernanke Oils Up The Printing Presses

July 15, 2011 by 1 Comment

The precious metals group continued higher this week, with standout performances by gold and silver.

As politicians continue to engage in reprehensible scare tactics in order to increase the debt limit by another $2.5 trillion, it has become increasing clear that the policies of more debt and dollar debasement will continue.  In an interview today, Ron Paul said that he expects “nothing will change” and that the U.S. is already defaulting on the debt via the devaluation of the dollar.

Gold and silver, which had already been strongly advancing in the prior week, soared after Fed Chairman Bernanke spoke before Congress on Wednesday.   Mere days after the end of QE2, Bernanke said that he stands ready to rescue the American economy with more accommodative monetary measures.   Although the exact mechanism by which future monetary easing  will be deployed remains to be seen, the end result will be the further debasement of the U.S. dollar.

As measured by the London PM Fix Price, gold hit new highs, soaring by $45.50 on the week, putting its two week gain at $104.00 per ounce.  Gold prices continued higher in New York trading with gold closing at $1,594.30, up another $7.30.

Gold has become the currency of last resort as it becomes clear that money printing is the only option left to prevent massive sovereign debt defaults by world governments.   Accordingly, there is really no upside limit for gold and silver prices.   Legendary trader Jim Sinclair told King World News that the stage has been set for gold to move up to $12,000 per ounce.

Silver has been the standout performer in the precious metals group.  After basing in the mid 30’s range after the May correction, silver has exploded upwards.

 

Silver - courtesy kitco.com

After rallying by over 7% last week, silver tacked on another 5% this week.  As measured by the closing London PM Fix Price of $38.17, silver has advanced by $4.32 or 12.8% over the past two weeks.   After the close in London, silver continued to gain in New York trading, closing at $39.37.

Silver is in a long term super cycle advance backed by fundamentals that guarantee higher prices. The accelerating exodus from paper money will quickly push silver prices to new highs – see For Silver , This Time Is Different.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,587.00 +$45.50 +2.95%
Silver $38.17 +$1.89 +5.21%
Platinum $1,760.00 +$20.00 +1.15%
Palladium $777.00 +$1.00 +0.13%

Platinum advanced by $20 on the week after a $32 dollar advance in the previous week.  Palladium ended essentially unchanged on the week after an advance of $26 last week.

Filed Under: Featured, Gold, palladium, Platinum, Silver, Weekly Recap Tagged With: , , , , ,

Precious Metals Advance Strongly On Week

July 9, 2011 by Leave a Comment

Precious metals roared back this week after consolidating in the previous week.

Gold gained $58.50 on the week closing at $1,541.50.  As measured by the London PM Fix Price, gold reached a closing high this year of $1,552.50 on June 22nd and has stubbornly refused to decline.  Gold’s technical position looks excellent and a breakout above June’s high should set the stage for the next major advance.

Meanwhile, depending on how you look at it, the comedy or tragedy unfolding in Europe continues as insolvent nations line up for handouts.  The credit rating agencies are falling over each other in a race to downgrade the debt of country after country, adding Portugal’s debt this week to the status of junk paper.  Quite a difference from how they bestowed  A+ credit ratings on every piece of toxic mortgage paper produced by the banks prior to the financial crisis.

As Europe keeps center stage on the debt crisis, attention has been diverted from some other looming train wrecks, including Japan, the world’s third largest economy.   From a debt standpoint, Japan is in solid first place for the highest ratio of debt to GDP of almost 250%.  Can Europe forestall a debt crisis by piling up even more debt like the Japanese?  Who knows, the story is still unfolding, but the one certainty is that not only Europe, but the entire world is moving inexorably to a major financial crisis as debt burdens reach the level where massive defaults become the only option.

Investors in gold, meanwhile, can take comfort in the fact that gold has no credit risk.

Silver rebounded strongly this week, closing at $36.28, up over 7% on the week.  Prior to this week’s rally, silver had declined for three consecutive weeks, dropping by $4.10 per ounce.

Platinum rally strongly, climbing $32 to $1,740, after a $12 advance in the previous week.

Palladium jumped $26 or 3.5% on the week to $776, continuing last week’s rally of $11.

 

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,541.50 +58.50 +3.94%
Silver $36.28 +2.43 +7.18%
Platinum $1,740.00 +32.00 +1.87%
Palladium $776.00 +26.00 +3.47%

 

 

 

 

Filed Under: Featured, Gold, palladium, Platinum, Silver, Weekly Recap Tagged With: , , , ,

Gold and Silver Decline As World Turns Upside Down After Resolution of Debt Crisis

July 2, 2011 by Leave a Comment

It wasn’t supposed to be like this.

A default on Greek debt was supposed to have set off a chain reaction collapse of other weak sovereign debtors including Ireland, Spain, Portugal and Italy.   European banks holding huge amounts of Greek debt would be rendered insolvent pushing Europe into a banking crisis.  U.S. banks, holding large positions in credit default swaps and derivatives would follow the European banks into a downward spiral as both confidence and liquidity evaporated.

Money market funds, piled high with toxic debt securities issued by insolvent European banks would be facing a massive run by nervous shareholders.  Central banks, the last great hope of insolvent nations, would be forced to come to the rescue with oceans of printed money.  Nervous holders of paper currencies would rush into gold driving prices sharply higher.

The plausible scenario of default by insolvent members of the European Union suddenly got turned upside with stocks exploding higher and gold prices hitting a six week low.

Bloomberg – Gold Falls to Six-Week Low Amid Reduced Concern Greece May Default On Debt

Gold futures tumbled to a six-week low as Greece progressed in staving off a default, curbing demand for the metal as an investment haven.

Greece may get as much as 85 billion euros ($124 billion) in new financing, including a contribution from private investors, in a second bailout aimed at preventing default and ending the euro region’s debt crisis, according to an Austrian Finance Ministry official. Gold dropped 2.2 percent last month.

“Gold’s inability to extend further gains in recent sessions, despite a weaker dollar, could be a warning sign heading into the third quarter,” Australia & New Zealand Banking Group Ltd. (ANZ) said in a report.

The Austrian finance official effectively said that the euro region’s debt crisis was solved by extending further credit to a blatantly insolvent Greece – too much debt was cured with more debt.

The extend and pretend policies, used extensively by policy makers in every past crisis would be employed again, this time to a nation with the lowest rated sovereign debt in the world.

The success of extending further loans to Greece would be guaranteed by the sale of Greek national assets and forcing every citizen of Greece to endure a depressionary lifestyle.  Other members of the EU facing a debt crisis could be handled in the same manner.  The European Central Bank and Wall Street popped the champagne corks and celebrated the end of the debt crisis.

The surreal events of the past two weeks only reinforce the certainty of a greater debt unwind at a fast approaching future date. Expecting Greece to repay its obligations is simply not economically feasible.  Greek citizens, rioting against austerity measures, have made it clear that default is the best option.  Political leaders of Greece, the birthplace of democracy, must eventually accept the public will.

The debt crisis has not been resolved, it has been expanded.  Investors foolish enough to convert precious metal holdings back into paper currency are giving serious long term gold and silver investors a gift opportunity to accumulate at bargain prices.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,483.00 -31.75 (-2.10%)
Silver $33.85 -0.88(-2.53%)
Platinum $1,708.00 +12.00 (+0.71%)
Palladium $750.00 +11.00 (+1.49%)

Gold  and silver both declined on the week by over 2%, while platinum and palladium saw modest gains.

As measured by the closing London PM Fix Price, gold has declined by $69.50 since June 22.

Silver has now declined three weeks in a row.  Since June 1st, as measured by the London PM Fix Price, silver has declined by $4.10 per ounce or 10.8%.

Filed Under: Featured, Gold, palladium, Platinum, Silver, Weekly Recap Tagged With: , , , , ,

Gold, Silver, Platinum and Palladium All Decline On Week

June 25, 2011 by Leave a Comment

It was a dismal week for precious metals as prices declined across the board.  Platinum declined by over 3%, palladium and silver by 2% and gold by 1.5%.

As measured by the London PM Fix Price, gold declined on the week by $22.75 after a gain of $8.25 last week.  After closing Wednesday at $1,552.50 gold was hit by selling that drove the price down by $37.75 at Friday’s close.  Gold has now dipped below its 50 day moving average as it has done on numerous occasions since early 2009 but remains solidly above the 200 day moving average.  Since early 2009 the price trend of gold has remained in a solid uptrend and every sell off to the 200 day moving average was followed by significant upward price moves.  The 200 day moving average for gold is currently at $1,410.

 

Gold - Courtesy Stockcharts.com

Silver declined modestly on the week, losing $0.66 and has remained in a tight trading range over the past two weeks between $36.22 and $34.68.

Platinum was down $55 on the week, closing at $1,751, after losing $78 in the previous week.  Palladium was also weak, falling $15 to $739 after retreating $61 in the previous week.  Both metals have large industrial uses and sold off as numerous economic indicators suggest a slowing world economy.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,514.75 -22.75 (-1.48%)
Silver $34.73 -0.66(-1.86%)
Platinum $1696.00 -55.00 (-3.14%)
Palladium $739.00 -15.00 (-1.99%)

Markets had been positioned for an improving economy, higher interest rates, higher inflation and additional monetary stimulus by the world’s central banks.  Since early May, the consensus has reversed considerably.  Commodity prices have declined substantially and U.S. interest rates, contrary to the expectations of many, have declined sharply.  Contributing to the sell offs in equity and precious metal markets were midweek comments by Fed Chairman Bernanke that, despite lower expectations for economic growth, the central bank had no plans for QE3.  Markets, confronting the loss of both fiscal and monetary stimulus along with slower economic growth, sold off sharply.

The Dow Jones has plunged over 900 points since early May.

 

DOW JONE - COURTESY YAHOO.COM

Commodities have tanked by 16%.

 

COMMODITIES - COURTESY YAHOO.COM

Oil, after peaking in early May at over $112 per barrel, has declined to the low $90’s.

 

OIL - COURTESY STOCKCHARTS.COM

Interest rates, expected to soar after QE2 ended, have declined substantially with the 10 year Treasury note dropping from 3.6% to 2.9%.

10 year treasury - Courtesy yahoo finance

 

The massive amounts of debt in the system can no longer be supported by economic growth.  Bernanke knows this which is why he is terrified of deflation.  The collapse of asset bubbles have resulted in debt that is now unsupported by collateral value, threatening the solvency of banks and countries.

As the current market sell offs turn into a rout, the Fed will again turn to the only option left – money printing on a scale that will dwarf QE2.  As reported by Bloomberg, former Fed Governor Lyle Gramley said,  “The hurdle for QE3 is obviously high. But if large downside risks materialize and the economy slows enough so that the unemployment rate starts to increase again, QE3 would have to be considered.”

The Federal Reserve can’t create jobs, increase incomes, reduce unemployment or maintain the integrity of the dollar.  The one thing the Fed can and will do is produce dollars in infinite quantities to prevent a 1930’s type debt induced deflationary depression.

Filed Under: Featured, Gold, palladium, Platinum, Silver, Weekly Recap Tagged With: , , , , ,

Gold Gains Slightly On Week While Silver, Platinum and Palladium Decline

June 18, 2011 by Leave a Comment

Precious metals had a tough week as silver, platinum and palladium all declined, while gold registered a small gain.

As measured by the closing London PM Fix Price, gold gained $8.25 on the week after declining by $10.75 in the previous week.  Gold remains in a solid long term uptrend.  Since early 2009, gold has remained above its 40 day moving average and every dip to the 40 day moving average has followed with rallies to new highs for gold.

Gold’s last decline to the 40 day moving average in January of this year was subsequently followed by a rally of over $220 per ounce.  A correction to the 40 day moving average would bring gold back to the $1,400 level.

 

GOLD - COURTESY STOCKCHARTS.COM

Gold has held above $1,500 as world financial markets, oil and other commodities have declined substantially over economic worries.   As the European Central Bank struggles to prevent a Greek default that could trigger a series of other sovereign defaults, debt yields are soaring not only in Greece but also Spain, Portugal, Italy and Ireland.

Markets are beginning to reflect the unavoidable truth that we are reaching an end game where sovereign governments have become the new systemic risk to the financial system.  As debt burdened governments face the prospect of financial collapse and political unrest, the only option will be to sell new debt to the central banks who will buy the debt with newly printed money.  As central banks worldwide compete with each other in massive currency debasement, gold will soar to new highs beyond predictions of the boldest gold bulls.

As the slow motion collapse in Europe unfolds, investors in the U.S. seem resolute in the belief that “it can’t happen here, we are not Greece.”  This argument is rejected by Bill Gross who runs Pimco, one of the largest bond funds in the world.  According to Gross, who recently announced that he would stop buying U.S. Treasury debt, the U.S. is actually in worse shape than Greece.

The total debts of the U.S. government, including off balance sheet obligations for open ended social programs, totals $100 trillion.  Gross notes that “To think that we can reduce that within the space of a year or two is not a realistic assumption.  That’s much more than Greece, that’s much more than almost any other developed country.”

Critics who dismiss the warnings of Bill Gross point to the current level of low yields on U.S. treasury debt.  Why would the U.S. be able to sell its debt at such low rates if the finances of the United States are worse than Greece?  The answer is that crises develop in a linear fashion.  Investors don’t worry about credit risk until the crisis is upon them and suddenly everyone wakes up and panics.

Carmen Reinhart of Harvard and formerly of the IMF correctly predicted that a sovereign debt crisis would follow the financial crisis of 2008.  In a study of bond markets as a forecasting tool, Reinhart showed that rates are a poor forecaster of  repayment risk.  According to Reinhart, “Very often, interest rates are a coincident, rather than a leading indicator” of a looming financial crisis.

Preserving wealth during the next financial meltdown will require taking steps before the inevitable crisis develops.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,537.50 +8.25 (+0.54%)
Silver $35.39 -1.99(-5.32%)
Platinum $1,751.00 -78.00 (-4.26%)
Palladium $754.00 -61.00 (-7.48%)

Platinum had a volatile week, declining by $78 on the week to $1,751.00.  After moving up by $650 per ounce between July 2009 and May 2010, platinum has been consolidating its gains.  During 2011, platinum has remained in a narrow but volatile trading range between $1,700 and $1,850 per ounce as traders try to sort out whether the predominant demand for platinum is industrial usage or investor demand.

PLATINUM - COURTESY STOCKCHARTS.COM

Palladium had the biggest decline in the precious metals group, falling by $61 per ounce for a loss of 7.48%.  After reaching a high on the year of $858 in February, palladium has been correcting in a sideways pattern.

 

PALLADIUM - COURTESY KITCO.COM

Silver declined by $1.99 on the week to $35.39 after a gain of $2.19 in the previous week.  After the sharp decline in early May, silver has been building a base in the $34 to $38 range.

 

SILVER - COURTESY STOCKCHARTS.COM

Filed Under: Featured, Gold, palladium, Platinum, Silver, Statistics Tagged With: , , , , , ,

Gold Down Slightly On Week While Silver, Platinum and Palladium Advance

June 11, 2011 by 1 Comment

Gold pulled back slightly on the week while silver, platinum and palladium registered strong gains.

As measured by the London PM Fix Price, gold gave up $10.75 on the week, while silver advanced by $2.19 for over a 6% gain.  Gold remains in a solid uptrend while silver has traded in a narrow range in the mid to high $30’s after the early May sell off.

Platinum continued its winning ways with a $22 dollar gain after picking up $21 in the previous week.  As noted last week, platinum sells below the price at which new mine expansion is profitable.   A price of $2,100 per ounce in necessary in order to motivate platinum miners to expand exploration and production.

In addition, the platinum to palladium ratio is only 2.2 compared to a historical ratio of 3.0 to 4.0, suggesting that platinum is undervalued relative to palladium. Platinum prices have been in a narrow price range between $1,500 and $1,840 since the beginning of 2010.   A breakout above $1,900 could lead to sharply higher prices.

After advancing by $13 per ounce last week, palladium jumped by $45 on the week.  Palladium had a huge run from 1996 to 2000 when the price moved up from $100 to $1,100.  During the worst part of the financial crisis in 2008, palladium dipped below $200 but has since been in a strong uptrend.

 

Palladium - Courtesy kitco.com

Although some might have expected gold to move up strongly in the face of steep sell offs in the financial markets and the looming threat of a debt ceiling stalemate, the uptrend in gold remains intact.

Anyone doubting the long term value of gold as a store of value versus the paper dollar can reflect on this week’s USA Today column  disclosing the precarious state of U.S. government finances.  Unfunded and off balance sheet financial commitments of the U.S. for government pensions, social security and medicare amount to $527,000 per household.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,529.25 -10.75 (-0.70%)
Silver $37.38 +2.19(+6.22%)
Platinum $1,829.00 +22.00 (+1.22%)
Palladium $815.00 +45.00 (+5.84%)

The Government has clearly made promises that are economically unfeasible.  What will happen when millions of people, with a strong sense of entitlement and blind belief in the Government, suddenly stop receiving benefit checks?  Or if the checks do keep coming (by virtue of the printing press) of what value will they be?

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