October 2, 2022

American Eagle Silver Bullion Coin Sales Drop Sharply from Previous Month and Year

american-silver-eagleSales of the US Mint American Eagle silver bullion coins dropped sharply during February from both the previous month and comparable prior year period.

The US Mint reported total sales of 3,022,000 ounces during February which is down by 19.4 percent from the comparable prior year period and down by a considerable 45.4 percent from the previous month.  Due to strong January sales, however, total sales of the silver bullion coins is up slightly by 0.3 percent on the year.

There were four months during 2014 in which monthly sales of the silver bullion coins dropped below the 3 million level and yet sales hit an all time record high of 44,006,000 troy ounces.  Average monthly sales of the silver bullion coins during 2014 came in at about 3.6 million ounces per month while the average monthly sales year to date during 2015 is at 4.3 million ounces.  The silver bullion coins remain extremely popular with precious metal investors despite the decline in the price of silver since 2011.  Long term silver investors allocating a portion of their portfolio to physical precious metals view the current bargain price of silver as an opportunity to load up as evidenced by 2014 record breaking sales.

The chart below shows the trend of sales for the US Mint silver bullion coins since 2000.  Sales for 2015 are year to date through February 28, 2015.  Ever since the financial crisis when the banking system can close to completely imploding, sales of silver bullion coins have exploded by about 500 percent and remained strong despite the so called recovery in the economy and banking system.

While the sales of gold bullion coins has declined since the financial crisis, silver bullion coins remain as popular as ever with investors seeking a store of value in physical precious metals.

The price of silver has declined sharply since the highs of 2011 as investors have fled what seems like a losing proposition, especially in comparison to stocks and bonds which have been pumped up in value by the Fed’s easy money policies and zero interest rates.  Silver has seen volatile price action since the financial crisis but most investors who have made purchases since 2008 are now at about a break even price level or sitting with losses making this an interesting price juncture for silver investors.

10 year silver

Whether it be stocks, bonds, or precious metals, it is classic psychological behavior for investors to pile in at the top as prices are reaching bull market highs and then refuse to buy at the bottom when everyone is bearish.  No one can predict the timing of future price moves, but with silver prices in the bargain bin and little interest by investors, this is probably an area that deserves additional investment by long term buy and hold investors.  Silver has been considered money and a store of value throughout the ages and this is not likely to change, especially as desperate and over indebted governments rely upon printing press money from the central banks to keep the wildly over leveraged financial system from crashing again.

The sales of silver bullion coins by year since 2000 is shown below.  The figures for 2015 include year to date totals as of February month end.

American Silver Eagle Bullion Coins

               YEAR

OUNCES SOLD

2000

 9,133,000

2001

 8,827,500

2002

 10,475,500

2003

 9,153,500

2004

 9,617,000

2005

 8,405,000

2006

 10,021,000

2007

 9,887,000

2008

 19,583,500

2009

 28,766,500

2010

 34,662,500

2011

 39,868,500

2012

33,742,500

2013

42,675,000

2014

44,006,000

2015

8,552,000

             TOTAL

 327,376,000

 

American Eagle Silver Bullion Coin Sales Soar 100%

silver eagleSales of the US Mint American Eagle silver bullion coins has been extremely robust ever since the financial system can close to collapse in 2008.  Prior to the financial crisis sales of the silver bullion coins averaged about 9 million coins per year.

Over the past five years, despite the large correction in the price of silver, yearly sales of silver bullion coins have run well over 30 million coins per year with sales reaching an all time record high of almost 43 million coins in 2013.

Purchasers of physical silver bullion coins buy for the long term to diversify their wealth and hedge against ruinous monetary and fiscal policies fostered by both the government and the Federal Reserve.  While the financial system has been held together over the past five years by the Fed’s zero interest rate policy and money printing, the long term financial health of not only the United States but the world is beginning to look increasingly fragile as debt levels continue to explode world wide resulting in a financial system leveraged beyond comprehension.

Silver has dipped below $17 per ounce this year, off 13% on the year after plunging by 36% in 2013.  While this decline has obviously been painful for silver investors, it has put silver in the bargain bin and silver bullion coin investors are responding accordingly.  If silver bullion coin sales continue at the current pace, sales for all of 2014 could hit an all time high.

Courtesy: Kitco.com

Courtesy: Kitco.com

The US Mint reports that September sales of the silver bullion coins for September 2014 totaled 4,140,000 ounces, double August sales of 2,007,500 and up 37.4% from September sales of the prior year.

Due to a slump in sales during the summer months, year to date sales of silver bullion coins through September are running behind comparable prior year sales.  Year to date sales of the American Eagle silver bullion coins through September 30, 2014 totaled 32,251,000 down from 36,088,000 from the prior year.

Since 2000 investors have purchased over 300 million of the one ounce US Mint silver bullion coins as shown below.

A Must Buy Silver Miner That Is Adding New Reserves at Just $0.38 Per Ounce

PAAS silverSilver and gold mining stocks have been indiscriminately sold off during the correction in precious metal prices.  While the sell off has been painful for investors in precious metal mining stocks it also presents profitable opportunities.  The price of gold and silver will not remain at bargain levels forever and now is the time to establish positions in selected mining stocks that offer solid long term capital appreciation.

Investing in precious metal mining stocks has recently been a minefield for investors due to a variety of reasons including poor management decisions, overpriced acquisitions, increased production costs, increased government taxation, and falling gold and silver prices.

One silver mining stock that has rock solid finances, pays a dividend, owns substantial silver reserves, and has excellent price appreciation potential when silver prices go back up is Pan American Silver Corp (PAAS).

Although no one can predict when silver prices will head back up, both PAAS and silver appear to be forming bottoms.  Pan American Silver recently made a multi-year double bottom in the $10 per share range and silver stubbornly refuses to break below the $18 per ounce level despite wide ranging bearish commentary on the metal.

paas

Courtesy: Yahoo Finance

Courtesy: Kitco.com

Courtesy: Kitco.com

Moving beyond technical analysis there are also many fundamental factors in place that could easily send the price of PAAS to much higher levels.  Here’s my list of the top 7 reasons why now is a good time to buy the common stock of Pan American Silver.

  1. According to the company website, over the past ten years PAAS has added almost 270 million ounces of new silver reserves at a cost of just $0.38 per ounce.  The new silver reserves more than replaced the 225 million ounces of silver mined since 2004.
  2. During the first quarter of 2014 PAAS increased its silver production by 5% to 6.61 million ounces.
  3. In order to maintain a strong financial position in the face of declining silver prices PAAS implemented cost cutting measures while improving operational efficiency.  The all-in sustaining cost per silver ounce sold dropped by 20% in the first quarter of 2014 to $15.54 per ounce while cash costs dropped to $8.25 per ounce from $11.33 in the comparable prior period.
  4. Pan American Silver was just upgraded by Charles Schwab from “avoid” to “neutral” and added to the firm’s trigger stock list which identifies PAAS as a buy candidate if the price closes above $13.81.  The reasons listed by Schwab for upgrading the stock include a rising 50 and 200 day moving average which is bullish, an up/down pattern that indicates the stock is under accumulation, and a bullish trend as indicated by the moving average convergence/divergence (MACD).
  5. PAAS is in a strong financial position with ample liquidity.  As of March 31, 2014, the company held cash and short term investments of $394 million and working capital was over $680 million.
  6. The Company pays a current quarterly dividend $0.125 per share or $.50 annually which works out to an annual yield of almost 4% which is about 4% higher than what a saver can currently get from a bank due to the Federal Reserve’s zero interest rate policies.
  7. PAAS sells below its book value of $14.33, has only $40 million in long term debt, and generates operating cash flow of over $123 million.  The Company does not engage in price production hedging so any increases in the price of silver flow right to the bottom line.

A strong financial position, long life low cost silver reserves, a 4% annual dividend, and a currently depressed price of silver all form the perfect recipe that should make the purchase of PAAS common stock a rewarding experience.

Gold Advance Stymied by Investor Worries and High Gold Silver Ratio

feature-300x200The price of gold has held its own this year despite a long list of reasons from bearish analysts for not owning gold.  From a closing price of $1,225 at the start of the year gold has managed to eke out a small gain of 1.8% to a price of $1,247.50 at Friday’s close.  In mid March gold had reached a high of $1,385 but quickly surrendered those gains.

In a recent interview with Bloomberg several analysts listed various reasons for the unease in the gold market including:

  • selling by hedge funds
  • a lack of upward price momentum which is discouraging investors from making new purchases
  • anxiety over future gold and silver pricing as major banks drop out of the market for establishing the daily gold and silver fix price
  • the risk of a large drop in the price of gold if it breaks technical support at $1,230
  • an increase in the gold silver ratio to almost 70 from the more normal long term average of around 55 to 60.
Courtesy: stockcharts.com

Courtesy: stockcharts.com

One analyst interviewed by Bloomberg expects the gold silver ratio to converge via a drop in the price of gold, which is one possibility.  Another way in which the gold silver ratio could drop, of course, is if silver outperforms gold.  Since mid 2012 gold has outperformed silver by a relative percentage of about 17%.

gld vs slv

On an absolute basis silver has experienced a major price decline from almost $50 per ounce in March 2011 to $19.94, a price last seen in early September 2010.

slv

Is it time to buy or sell gold and silver?  Based on information from precious metal analysts, which is probably already fully discounted by the markets, the risks of buying gold and silver today are very high.  Kinda reminds me of what stock analysts were saying about buying stocks in early 2009.

Silver Remains in a Tug of War Between Supply and Demand

proof-silver-eagleAfter a fierce correction from the highs of 2011 have  the market forces of supply and demand resulted in a stabilized silver price?

On the demand side the industrial use of silver is at a nine year high with fabrication usage expected to rise to over 890 million ounces.   A wide variety of businesses use huge amounts of silver in the production of such items as jewelry, solar panels, electronics, cars, tableware, and photography.

Although silver is most commonly associated by many people as a precious metal investment the industrial demand for silver far exceeds investment demand.  For example, sales by the U.S. Mint of the ever popular American Eagle silver bullion coins hit a record last year of almost 42 million ounces (see Silver Bullion Coin Sales Soar) but this amount is a fraction of industrial usage. Since 2000 to date the U.S. Mint has sold over 292 million one ounce American Eagle silver bullion coins which amounts to only 32% of  estimated industrial demand for just one year.

Even as industrial demand for silver booms, Bloomberg News reports that investment demand for silver has diminished due to tapering of quantitative easing by the Federal Reserve, reduction of the safe haven appeal of silver, reduced demand by China, and the correlation coefficient between gold and silver.

Silver is being undermined by its association with gold.

gold-bullion

While makers of everything from jewelry to solar panels are buying the most silver in nine years, prices are languishing. Investors are dismissing industrial demand and instead focusing on the waning appeal of precious metals as a haven, with the Federal Reserve paring economic stimulus measures, inflation muted and equities rallying.

Silver has been dragged down by a yearlong slump in gold, the commodity most widely held by investors in exchange-traded funds, following a decade-long rally that saw prices for both surge more than sixfold. The five most-accurate precious-metals analysts tracked by Bloomberg over the past two years predict silver will average $18.80 an ounce in the third quarter, the lowest since 2010, and gold will drop 7.3 percent.

“The industrial driver can help, but I don’t think it’s as influential as the investor,” said Robin Bhar, head of metals research at Societe Generale SA in London and the most-accurate forecaster tracked by Bloomberg. “Investors were bullish silver because gold was in a bull market. Now that we have gold in a bear market, there’s less enthusiasm coming from investors.”

The correlation has been strong. From December 2008 to June 2011, silver tripled and gold surged 70 percent, with both touching all-time highs, as the Fed pumped more than $2 trillion into the financial system and cut interest rates to a record in a bid to boost the economy. Last year, when signs of economic growth sent gold down 28 percent, silver plunged 36 percent. The declines were the most for both metals since 1981.

Goldman said in an April 13 report that in the long term, silver tends to track gold, and its forecast reflects the historical ratio to gold. An ounce of gold bought 67.21 ounces of silver in London on April 30, the highest since July. The average over the past 30 years is 64.8.

The link with gold is stronger than that with industrial metals. The mean of silver’s 30-week correlation coefficient to gold was 0.86 over the past five years, compared with 0.51 with the London Metal Exchange Index of industrial metals, data compiled by Bloomberg show. A figure of 1 means two assets always move in the same direction.

“The precious-metal characteristic is likely to dominate,” said Barnabas Gan, an analyst at Oversea-Chinese Banking Corp. in Singapore, and the second-most accurate precious metals forecaster over the past two years. “The risk of higher real interest rates may likely magnify in the middle-long run, and thus raises the opportunity cost for holding silver. The improving global economic picture is also likely to pale safe-haven demand.”

Concern over the value of haven assets is trumping signs that industrial demand is improving. Half of silver supply is used to make things, more than the 10 percent for gold, and demand is picking up as economic growth fuels sales of electronics and cars from China to the U.S.

Since precious metals generally earn returns only through price gains, silver investors were “disillusioned” by the slump over the past year and put their money elsewhere, New York-based researcher CPM said in an April 29 report. Investment demand tumbled 42 percent last year to 105.3 million ounces, the lowest since 2008, according to CPM, which forecast average prices in 2014 will be lower for a third straight year.

SILVER DOLLARS

At the same time, fabrication usage including by makers of cars, jewelry and tableware will rise 2.9 percent this year to 890.7 million ounces, the most since 2005, CPM said. Silver content is increasing in vehicles with more electronics, according to Metals Focus Ltd., a London-based research company. After dropping last year, demand from electronics and battery makers will rebound in 2014, CPM forecasts.

Most industrial metals will get a boost from growth. The world economy expanded 2.1 percent in 2013 and will increase 2.8 percent this year and 3.1 percent in 2015, according to economists surveyed by Bloomberg. While that will help spur a 2.1 percent gain in industrial and photographic demand for silver, investors will sell 250 metric tons from funds backed by the metal, Barclays Plc estimates.

“Silver is not benefiting even though it has so much industrial use as people still call it a precious metal,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $357 billion in assets, said. “Its a tug of war between its safe-haven appeal and its use as industrial metal.”

Hedge funds have cut their bets on higher silver prices by 90 percent in the past two months on the Comex in New York, holding a net-long position of 2,620 futures and options in the week to April 22, U.S. Commodity Futures Trading Commission data show. The five-year average is about 20,510 contracts.

Despite a huge appetite for silver by industrial users, the reduction of investment demand and a production oversupply may continue to pressure silver prices. During 2014 HSBC is projecting an increase in silver supply to 1.09 billion ounces with demand remaining flat at 938 million ounces.

Until the financial system blows up again, the tug of war between supply and demand in the silver market is likely to restrain silver prices for the immediate future.

Gold Bullion Coin Sales Rise, Silver Bullion Coin Sales Could Hit All Time Record High in 2014

american-silver-eagleGold and silver bullion coin sales by the U.S. Mint during April turned in mixed results with gold sales up and silver sales down.  Despite the fact that gold and silver are in the bargain basement due to price declines, investment demand remains relatively subdued due to tapering of money printing by the Federal Reserve and the apparent recovery of the U.S. economy.

Investor perceptions of precious metals as a safe haven appear diminished despite the ongoing and unprecedented monetary easing by central banks and unrestrained government borrowings.  Gold began the year selling for $1,225 per ounce.  After reaching a high of $1,385 on March 14 gold  declined to a current price of $1,281.25 leaving it up on the year by 4.6%.

The U.S. Mint reported that sales of the American Eagle gold bullion coin in April totaled 38,500 ounces up 83% from 21,000 ounces sold in the previous month but down by a substantial 81.6% from April of 2013 when the Mint sold 209,500 ounces.  After dropping for three years in a row since 2009, sales of the American Eagle gold bullion coins increased in 2013 to 856,500 ounces up by 13.7% from total sales of 753,000 ounces in 2012.

(Sales figures for gold bullion coins on the charts below are as of April 30, 2014.)

 

Gold Bullion U.S. Mint Sales Since 2000
         Year                            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 856,500
2014 182,000
TOTAL                               9,041,000

Total sales of gold bullion coins year to date total 182,000 ounces.  Based on the current sales rate through April 30th, annualized sales of gold bullion coins would come in at 546,000 ounces, the lowest amount of sales since 2007 when only 198,500 ounces were sold.

Silver Bullion Coin Sales Could Reach Another Record in 2014

Sales of the American Eagle silver bullion coins remained strong in April with a total of 4,590,500 coins sold, down slightly from the previous month’s sales of 5,354,000.

The one ounce American Eagle silver bullion coin remains extremely popular with investors.  Total coin sales during 2013 reached an all time high of 42,675,000.  The previous record sales year going back to 2000 occurred in 2011 when investors scooped up 39,868,500 coins.  If the current sales pace continues, total sales of the silver bullion coin during 2014 could reach a record breaking 55 million ounces.

Why Gold and Silver Could Outperform Every Other Asset Class in 2014

gold-buffaloAfter almost a three year bear market in gold and silver it’s safe to conclude that most of precious metal bears have sold out and moved on.  As gold and silver prices corrected sharply over the past three years, the chorus of bearish sentiment in the mainstream press has become endemic, thus setting the stage for a powerful and unexpected contra rally.

What will set off an explosive rally in precious metals remains to be seen but there are plenty of potential triggers including war in the Ukraine or South Korea as well as the significant financial risk of collapsing asset bubbles engineered by the extremely loose monetary policies of the world’s central banks.

Here’s some of the most interesting recent commentaries on why 2014 could be a big year for gold and silver.

Gold and Silver Are Almost Ready to Rally

While every journey does begin with the first step, we need more evidence than a minor rally day to declare that a bull market has arrived. For the SPDR Gold Trust ETF (ticker: GLD), the April 24 rally was not very remarkable other than the fact that the day started with a loss and ended with a gain.
Now let’s talk about what it was rather than what it wasn’t.

For starters, it was an encouraging hold of short-term support from March. And the failure to set a lower low for the current two-month decline also falls on the bullish side of the ledger.

But more importantly, it was a suggestion that prices will not travel to the bottom of a giant year-long trading range again. In other words, any further strength now would tell us that investors are ready to buy. They will not wait for “better” prices to buy at the bottom of the range, and that means a shift in sentiment for the better.

Finally, the gold market has a “golden cross” in place. This is a condition where the 50-day average crosses above the 200-day average, and while it is really a stock market indicator, the macro look and feel are the same to me. After a long decline and period of sideways movement, this is the market’s first sign it has had enough healing. As long as the sideways trading range is not so long that the averages are completely flat, I think the signal is worthy of respect.

We can also we look at rising momentum indicators as bullish. Weekly charts show the relative strength index (RSI) setting higher lows between June and December even as prices set equal lows. This means the bears were tired as 2013 ended, and the fact that this indicator continued to rise this year suggests the bulls are starting to wake up.

Silver also had a bullish short-term reversal last week, but it has a lot more technical damage to repair. It does not have a moving average golden cross in place, and has already fallen rather close to its previous major lows from last year. Generally, that’s not a good sign, but in this case it’s not so clear cut.

When we look at the bigger picture using the iShares Silver Trust (SLV), we will see something really interesting. Recall 2010, when both gold and silver shot higher, but silver moved at a much faster pace than gold did. On the charts, we can see the technical launching point and breakout in August of that year.

As we see in many markets that appear to be bubbles, with such steep gains and ever-accelerating trends, the “bubble” part of the rally is often completely erased before conditions stabilize and then improve. Silver’s rally is now erased, which means the market is likely washed out and left for dead. Even so, there is a bullish RSI condition in place for the white metal, just as there is for gold.

 The Long Goodbye – by Andy Xie

The recent tumbling of Internet and biotech stocks may indicate that the speculation in such stocks has peaked. But, unlike in 2000, the bursting will occur in slow motion. The financial market structure has radically changed in the past 15 years. Too many money managers have a one-sided incentive to long such stocks.

The global financial system has experienced one bubble after another because major central banks have kept monetary policy loose. Prolonged loose monetary policy has made the financial system extraordinary large relative to the real economy. This change forces central banks to respond to negative shocks, like the bursting of a bubble, from the financial system. Such responses make the financial system even bigger. This vicious cycle explains why speculation has become such a powerful force.

A bubble cannot expand forever, even in an environment of loose monetary policy. The balance between fear and greed can tip over when the price of an asset becomes too high, like Internet stocks now relative to the average. The subsequent deflating bubble, in a continuing environment of loose money, just shifts air into other assets.

The talk of monetary tightening in the United States or China will not be followed up with strong enough actions. Real interest rates will remain negative until another crisis, like high inflation or hyperinflation or political crisis, force the hand.

Gold is the safe asset in today’s environment. As paper currencies lose credibility, the demand for gold will surge. The alternative digital currencies are fool’s good, really scams to take advantage of people’s fear over the potential collapse of paper currencies.

Two changes in the past 15 years have made bubble formation a constant feature of financial markets around the world. The inefficiencies in capital allocation and income redistribution to finance are the main reason for today’s sluggish global economy.

At the macro level, globalization has made inflation slow to emerge, as multinational companies can shift production around the world in response to cost pressure. This force has given central banks more room in increasing money supply without facing the inflation consequences for years. Hence, central banks around the world have become more active in response to economic fluctuations. The consequence is a rising ratio of money supply or credit to GDP. By definition, this means a bigger and bigger financial system, which needs more and more income to survive.

The real economy, as the previous analysis indicates, can only bear so much. Bubble formation has become central to supporting a bloated financial system. A large and bubbly financial system is unstable. Its periodic collapse brings down the economy, which triggers more monetary stimulus. Hence, constant monetary stimulus and an ever-expanding and bubbly financial system have formed a vicious cycle.

What’s Up With Gold and Silver? (Market Anthropology)

Anecdotally, we are seeing and hearing from those anxiously long the precious metals sector and contentiously short. With gold and silver down sharply in the early morning session – then reversing violently higher, the emotional spectrum in the market is likely diverged at or near another extreme. Over the past 10 months, both bulls and bears alike have been waiting for the next leg to commence. Instead, the market has played the jester – traversing a narrowing range and taking turns at frustrating both sides.

When will the argument resolve itself ?

Although it’s felt like a standing room only performance of Waiting For Godot, we expect long-term yields still hold the key to the next chapter for precious metals and the broader market story. We continue to view the move in 10-year yields as historically stretched to a relative extreme (see chart), a notion apparently lost on many participants as the Fed tapers their way to the end of QE and through an esoteric Fed cycle.
Just this week we saw that a Bloomberg survey of 67 economists unanimously expected 10-year yields to rise over the next six months (see Here). From a contrarian point-of-view, this should wake up participants that underlying sentiment is dangerously listing towards one side and the downstream and kinetic effects could be severe in many markets. The ratio chart below depicts the relationship between gold and 10-year yields, which as we noted last December had also reached a historic extreme. If and when long-term yields breakdown, we suspect a much stronger tailwind to develop behind precious metals.

As the Nikkei was breaking down at the start of the 1990’s, risk appetites changed and developed a palette for the Nasdaq. After the Nasdaq cracked going through the Millennium, investors turned to precious metals. The cycle can also come full circle, as we believe the performance and seasonal presentments of the current risk du jour describes. As the biotech index now turns down just past its zenith, we expect silver and the precious metals sector to begin making their way materially out of the trough they have trended towards over the past three years.

The Reformed Broker

Jeff Gundlach looks at the gold market. He’s not a big gold guy, but says that if you’ve held it this long (and through this much pain), “for god’s sake don’t sell it here!” He thinks the holders who remain are the quintessential, proverbial “strong hands” and that gold miner equities are completely underpriced for the potential of the metal running back up again. He’s more positive on commodities now in general, given how uninterested the investment community seems to be.

http://www.thereformedbroker.com/wp-content/uploads/2014/04/25.jpg

14 Tough Questions Gold Investors Have for the Federal Reserve

Liberty-EagleBy: GE Christenson

“Those who cannot remember the past, are condemned to repeat it.” George Santayana.

1. What mistakes from the past are we condemned to repeat?

2. Since unbacked paper currency systems have always failed in the past, why have bankers and economists promoted an unbacked paper currency system since 1971?

3. Would the Federal Reserve, which is owned by private banks, seek to enrich its member banks and the financial elite by implementing monetary policies such as QE that purchase distressed bank assets and boost the stock and bond markets?

4. Janet Yellen is the new leader of the Fed and new leaders are almost always confronted with a financial crisis early in their term. What should we expect during the next 18 months?

economic collapse

5. ALL paper money systems have eventually failed due to excessive “printing” of the paper currency. How many years of “printing” $85 Billion per month qualifies as excessive “printing”?

6. Human nature changes very slowly if at all. Politicians have lied to most of the people most of the time during the past several thousand years to serve their own self-interest. Are politicians currently lying about ObamaCare, strength of the economy, employment, the NSA, big banks, the IRS, Syria, and so much more?

7. Why does gasoline currently sell for approximately $3.50 per gallon even though it cost only $0.15 per gallon about 50 years ago? Why does a cup of restaurant coffee no longer sell for $0.10? Why do $20 gold coins containing nearly an ounce of gold now sell for over $1,250?

8. The S&P 500 Index is trading near an all-time high and is by most measures and sentiment severely over-bought on a weekly and monthly basis. Is it ready to correct downward?

9. Why is the official unemployment rate falling even though fewer Americans are working and the labor participation rate is at 30 year lows?

10. The Federal Reserve has been levitating the stock market and bailing out banks. Is it possible the Fed policies will backfire and those policies will eventually accomplish the opposite of what the Fed wants?

11. If the national debt of $17 Trillion can never be repaid, and if the U.S. government must borrow to pay the interest every year, and if the Federal Reserve must “print” those dollars, what is the real value of that debt? Is it $17 Trillion or perhaps a great deal less? The economist Hyman Minsky called this “Ponzi Finance” – the final stage of a debt based economic system when payments on the debt must be made from additional borrowing.

money printing

12. If a soaring gold price encouraged people to question the value of the U.S. dollar, and if the U.S. government had the means to suppress the price of gold, would the U.S. government manipulate the price of gold lower?

13. Germany requested their gold be returned from the NY Federal Reserve vaults about a year ago. It has NOT been returned. What happened to the German gold? Further, how much, if any, of the gold supposedly stored in Fort Knox is physically there and not “leased” or otherwise encumbered?

14. Gold has been money – a store of value, divisible, a medium of exchange, a unit of accounting, and intrinsically valuable – for 5,000 years. Paper money has usually been little more than a politician’s promise of integrity and responsibility. Which do you trust – gold or a politician’s promise?

These questions and their answers suggest that:

Drastic restructuring of the current monetary system seems inevitable, whether or not it is imminent.

Before the system resets it seems likely that governments around the world will scramble to locate and nationalize assets in order to maintain their power for a while longer. Capital controls and financial repression via artificially lowered interest rates are already in place. Pension plans, savings accounts, and IRA and 401(k) plans seem vulnerable to partial confiscation, bail-ins, or mandatory investment in government bonds. Such confiscations and bail-ins have already occurred in other parts of the world and could easily happen in the United States.

toned-morgan-dollar

Gold and silver have protected purchasing power and assets for 5,000 years. In this twilight period of the current debt based monetary system it seems likely gold and silver will increasingly be necessary for protection of purchasing power and assets. Are you prepared?

GE Christenson

aka Deviant Investor

Silver Fundamentals Guarantee Gains For Long Term Investors

american-silver-eagleBy: GE Christenson

Ryan Jordan, Ph.D., is a professional historian, author, and college professor. He is the author of
Silver – The People’s Metal, which I highly recommend.

He sees silver fundamentals from the perspective of a historian and as an astute observer of present conditions. He studies the drivers of the silver market, supply, demand, mining, inflation, investment sentiment, central bank bond monetization policies, and politics.

What does he think?

Demand for silver is strong!

Silver Demand As Guide for Silver’s Next Price Move

“Yesterday, the US Mint confirmed a record year for sales of silver coins– and we still have six weeks in the year to go. Yes, the roughly 40 million ounces of silver only accounts for maybe 5% of overall demand, but it also represents a huge increase from a decade ago when it comes to investor interest in physical metal. In fact, globally, silver investment demand is up essentially from ZERO just 10 short years ago (take some time to allow that to sink in when thinking about the change in investor sentiment toward precious metals in recent years.)

And demand for silver isn’t just an American phenomenon. Last month, somewhat surprising news came out of India of a roughly 130 million ounces of silver imported into that country in just the first six months of the year. This was in response to the shutdown of gold imports into that country.”

Inflation will be increasingly important. As long as the world monetary systems are run by central banks, particularly the Federal Reserve, we can expect inflation in the money supply, debt, and consumer prices. The weakness in gold and silver since 2011 is, in our opinion, a temporary correction in the four decade uptrend for debt, spending, and gold and silver prices.

silver treasure

Gold and Silver: The Big Picture

“Another long term, fundamental factor in the rise of gold and silver comes from the belief of central planners that inflation is nonexistent currently and actually needs to increase. This is the view held by many among western central bankers, and is part of the reason why FED bond purchases will not decline much from the nearly 1 trillion a year mark, as made clear this week by the US central bank. FOMC statements released Wednesday continue to affirm that the deflationary threats from the 2008 crisis remain. The ultra-loose stance of the world’s largest central bank should be of concern to anyone who wonders if inflation might one day get out of hand.

And in India, known as one of the world’s leading gold markets, inflation is already making its presence felt. The Indian central bank continues to raise interest rates while attempting to curtail demand for gold among Indian citizens. Many observers note the similarity to policies once adopted by the US government in the late 1960s and 1970s, and how those policies failed to dampen demand for gold as both inflation and interest rates rose strongly.

My question for any gold or silver bear is this: if gold and silver went up nearly 7 times over the last 10 years with no meaningful inflation in western nations, how much more will the metals go up when inflation is officially recognized as a problem by those in charge?”

Precious metals have been largely ignored for over 30 years. Yes, they are occasionally mentioned in the mainstream media and on financial television, but the media’s primary focus is on stocks and bonds – paper promises and paper debt – not on something real like a gold bar or a stack of silver coins. Dr. Jordan thinks that gold and silver will become an increasingly important part of more investment plans and that this transition will accelerate.

Silver ETF

Precious Metals: The Emerging Asset Class

“Over the past year, the cult of equities has made a return, as indices roar to all-time highs, and as many look to cash in on new IPOs like they did in the last tech boom 15 years ago.”

“But I’d like to make some historical comparisons between the two periods, to explain how even with stocks catching all the attention, this hardly means that gold and silver will continue to be left out in the cold.

Here are three main reasons why I do not believe gold, silver, PGMs, or mining shares will behave as they did in the 1980s and 90s:

 

  1. Just last month, President Obama actually made reference to the reserve status of the U.S. dollar as being in jeopardy based on current dysfunctional behavior in Washington, D.C. I don’t ever recall Presidents Reagan through Clinton saying something similar– and for good reason. To take the case of President Reagan’s first term in office, the US Dollar rallied something like 50% at one point. While I don’t expect the dollar to crash anytime soon, too many players globally are looking to diversify away from the greenback for the dollar to re-enter a secular bull market. A big question mark remains over the US dollar’s reserve status and this represents one of the most powerful reasons to continue to own precious metals– or even to acquire more.
  2. The challenges facing mining companies these past couple of years signals a downshift in global gold and silver production. This decline won’t happen immediately, since it takes a while to shudder mine projects – but ore grades can only decline so much before it becomes uneconomical to attempt to increase overall mine output. This reality stands in marked contrast to the 1980s and 1990s, where mine output for both metals made significant increases during those decades. Supply constraints – especially if they are coupled with new industrial demand for the white precious metals – will eventually lead to higher prices.
  3. The growth in the global middle class outside of the West is a trend that began 20 years ago, but the trend has accelerated in recent years. Many commentators believe that the shift in wealth from west to east will mean that upwards of 50% of new entrants to the global middle class in future years will come from areas outside the U.S. and Western Europe. As has been seen all year, buyers in Asia and the Middle East possess an attachment to physical gold- ranging from the person buying jewelry to the central banker buying bullion bars– that is hard to break. Oftentimes these attachments speak to the cultural memory of volatile local currencies or political malfeasance in these nations.

Overall there remain some big differences between today and 20 or 30 years ago when it comes to precious metals. While faith in central planners and their ability to levitate equity markets is strong among some, there are others like myself who do feel that 2008 mattered–and not in a good way. Zero percent interest rates, a stagnant economy for upwards of 80% of people in the U.S. and Western Europe, continued discussion of unsustainable debt levels, and the existence of a black hole of derivatives and other “off balance sheet” financial sleights of hand are just a few issues facing investors currently.

It may be hard to believe it now, but I don’t think the precious metals will remain under-owned forever.”

Dr. Jordan encourages us to believe that the conventional investment perspective is not the only valid approach.

Don’t Drink Too Deeply From the Well of Conventional Thought

“The inability of people to see the world for what it is was quite apparent with the nonsensical discussion of Fed tapering over the last several months. Many in positions of power sought to convince the unwashed that somehow these extreme monetary measures can be undone, or taken back. And many still believe them. As part of this naivety we then get people believing that entire asset classes, like gold, silver and mining shares are only for crazy people- that genuine tangible asset investing need not play any role in a given portfolio. My only advice for people is to please be very careful about drinking too deeply from the well of conventional thought. It is not that the world is going to end, but by the same token the days of 4 or 5% economic growth coupled with a strong and growing middle class are gone for a long time. This new reality requires a new attitude towards investing. Don’t let the recent weakness in the precious metals sector mislead you.”

Conclusions

silver

Ignore for the moment moving averages, technical analysis, relative strength indicators, partial differential equations, econometric analysis, Federal Reserve economic models, and all the other tools of the technician and just listen to the historian. He thinks:

  • Demand for silver is strong in the United States, India and China.
  • Central banks are printing currency and attempting to create inflation.
  • The reserve status of the dollar is weakening. Many countries are bypassing the dollar in their international trade.
  • Mining companies will have reduced output because their revenues have declined while expenses have increased. Hence the supply of silver and gold will remain relatively flat while demand is increasing.
  • The global middle class will demand more gold and silver for savings. Americans may not understand gold and silver but over 2,000,000,000 Chinese and Indians do, and that demand for actual physical metals will grow.
  • The cult of equities is flying high but it may not last. There is room for a shift from equities and bonds to precious metals. Even a small shift in demand away from stocks and bonds could cause the relatively tiny gold and silver markets to rise to new highs.
  • Fundamentally and historically speaking, there are many reasons to own gold and silver.

GE Christenson
aka Deviant Investor

No Silver Manipulation Says CFTC After Five Years and 7,000 Hours of Work

proof-silver-eagleThe case has been conclusively settled.  All those paranoid people who have been claiming manipulation of the silver market are wrong according to the Commodities Futures Trading Commission (CFTC).

After a five year investigation and 7,000 hours of investigativing silver trading the CFTC says there is no “viable case” for charging anyone with manipulating the silver market.  To prosecute a case the CFTC must prove the intention to manipulate prices along with proof of the actual trades involved in the manipulation.

Casting doubt on the CFTC’s decision was none other than CFTC Commissioner Bart Chilton who implied that even if there was manipulation, the standards for proving manipulation are so difficult that a lot of the bad guys are escaping justice.

CFTC Commissioner Bart Chilton, a vocal backer of the probe, said the decision shows it remains difficult to mount a case even after the Dodd-Frank financial overhaul eased some restrictions.

“It’s been the most frustrating and disappointing non-policy related item since I joined the CFTC in 2007,” Mr. Chilton said. “Our manipulation standard remains too high a hurdle for regulators to overcome; not enough bad actors are being punished.”

The CFTC has won recent acclaim for aggressive enforcement efforts in markets including interest rates, crude oil and platinum. But even with expanded powers to police derivatives markets stemming from Dodd-Frank, the agency has successfully concluded just one case–In the power market–from trial through appeal in its 39-year history.

The conclusion comes as policy makers reassess the banking industry’s role in commodity markets. The participation by firms such as J.P. Morgan and Goldman Sachs Group Inc. in businesses such as aluminum warehousing and power marketing have been the subject of congressional hearings and enforcement actions this year. The Federal Reserve is expected before 2013 ends to issue new rules governing banking companies’ participation in these markets.

Translation:  Even though the too big to fail banks such as JP Morgan have been found guilty of manipulating everything from the LIBOR rate to the price of aluminum the CFTC can’t find any evidence to prove that they manipulated the price of silver.

For an alternate view on silver market manipulation see How the COMEX Crashed the Silver Market and How Wall Street Pros Made Huge Profits On Silver ETF Crash As Small Investors Sold