The US stock market is showing increasing volatility on lower optimism for good earnings growth. Gold is continuing to gain momentum as the 20 and 50 day moving averages turn positive. A golden crossover of the 50 and 200 day could be only a week or two away. Its been a rough four years for junior mining investors as the Venture hits 2008 and 2002 lows. However, there could be a good chance from both a technical and fundamental standpoint that the correction cycle in precious metals is coming to a conclusion.
Ted Butler: I believe that the big buyer of the 10 million ounces of gold liquidated in the GLD was JPMorgan, either alone or with other collusive commercial banks. The same methodology I’ve previously attributed to a potential Mr. Big in SLV (also probably JPMorgan) is at work in GLD.
It is clear that much is brewing below the surface of the gold market. There are too many significant evolutions related to PHYSICAL gold. The most credible assumptions we can come to are threefold (1) Strong hands are positioning themselves for the fundamental risks that are inherent in the present monetary system. (2) There is tightness in some specific vaults specifically the ones from US market participants. (3) When it comes to central bank gold, a final clearing out of the vaults of central banks in countries that are part of the «golden billion» zone is currently underway.
Are we right to conclude that consumers (at least in the US, and very likely in Europe as well) do not have the ability AND willingness to take on more debt in order to spend more? Maybe there is some spending fatigue. As the French use to say: c’est trop.
All the evidence is there. Cyprus was indeed a “pilot” to determine the resistance against a bail-in from savers. Apparently the reaction of the Cypriot people and savers in the rest of the world, was too weak. The path of less resistance was the most likely one. This is truly frightening. Up until this point the suspicion was too high to ignore but still we all somehow hoped this was not true. This brings up the question what exactly is going wrong with the banking system.
In this piece we will look at what interest actually is from the viewpoint of the Austrian School of Economics and how the setting (manipulation) of the interest rate by central banks negatively impacts the economy in the long run. In essence, interest is the ratio between the value assigned to specific goods today, to be exact, the goods themselves are irrelevant but rather the underlying want satisfaction, in comparison to the identical goods at a future point in time.
The international monetary system based on credit and debt is, in truth, a confidence game in which gold was once a critical component. But when ties between paper money and gold were severed in 1971, confidence in the bankers’ paper money began to falter; and, today we are witness to what happens when confidence in a global confidence game begins to evaporate.
Any rational person should question whether long term silver investors are 100% wrong, especially in light of the recent notable decline in the price of silver. Nevertheless, if they ultimately conclude that silver investors are probably not wrong, then prudence would dictatethat at least some allocation of their investment portfolio to properly held precious metals would be appropriate.
As history has shown, the government can control the monetary system for a certain time but not endless. As time progresses, the market can take over control. With the global monetary system at risk levels never seen before, Holders of paper money should ask themselves what exactly they are owning … and what would happen if history is about to repeat itself.
Inflation – a few percent seems unimportant, but over a decade, it becomes very important. Look at the calculation in this article. According to several 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?
What will the monetary system look like once a collapse occurs, which Rickards expects in the coming 3 to 5 year time frame. In his view, which he describes in great detail in his book Currency Wars, there are four possibilities: multiple reserve currencies, SDR’s, a gold standard, chaos.
Currency controls, confiscation, taxation, … all of these types of measures are about to hit ordinary and hard working people. Yes there is a way out. Smart people can not only diversify their assets and wealth in different types of hard assets, but also internationally. Doug Casey from Casey Research shares some insights in how to do it.
If you have the printing press you can let it run for yourself, the governments and the banks. Central banks gain enormously when they print the money first before anyone else get inflationary losses which is exactly a hidden tax on everybody’s bank account in dollar denominated value. It is like raising taxes without raising taxes.
There should be no doubt that when the US government decides to implement capital controls or other restrictive measures, it will likely have the near-total support of the media and by extension the majority of the people. The time to internationally diversify your assets is running out.
This piece seeks to make the economic case for savers to allocate wealth to physical gold (in proper form) and for investors to allocate capital to precious metal miners. Our argument orients readers with our economic and market predispositions, seeks to explain current macroeconomic events within that context and outlines gold’s fundamental valuation framework.