Thursday, August 14, 2014

The Case for SIlver from Casey Research

Though physical silver is recommended you may also want to look at silver stocks for your IRA or 401k like Silver Wheaton Corp (SLW) . It produces over 26 million ounces and sells over 29 million ounces of silver mined by other companies as a by-product.

Below is partially edited

Submitted by Jeff Clark via Casey Research,
....... Well, it’s not the metal’s ever-increasing number of industrial uses… or exploding photovoltaic (solar) demand… nor even that the 2014 supply is projected to be stagnant and only reach 2010’s level. No, the connection is…

Financial Heroin

The drugs of choice for governments—money printing, deficit spending, and nonstop debt increases—have proved too addictive for world leaders to break their habits. At this point, the US and other governments around the world have toked, snorted, and mainlined their way into an addictive corner; they are completely hooked. The Fed and their international central-bank peers are the drug pushers, providing the easy money to keep the high going. And despite the Fed’s latest taper of bond purchases, past actions will not be consequence-free.

Monday, July 28, 2014

Gold and Stock Market Updates

Not much has changed in markets. The trend continues: physical gold moves from West to East and the stock market bubble continues.

Below are some noteworthy updates:

Monday, July 7, 2014

In a New Recession, QE Could Explode

Read this very carefully. All bold emphasis is mine.

The Game We Know is Over – A New Game About to Begin!?!
By Chris Hamilton

Since 2009, a lot of analysts have learned the hard way not to play Chicken Little and scream the sky is falling.  However, after last week’s FOMC meeting as a capper to so many other economic and geopolitical issues brewing, seems things are getting serious.  Take a looksee at yet another chart…

Food Inflation at 24%

Click image to enlarge .Reposted from Zerohedge.

Sources: Thomson Reuters & FT Research

....and bonus post 4th of July burger inflation: 

Monday, June 23, 2014

Dear Germany, We're Very, Very Sorrry.....

Germany Gives Up On Trying To Repatriate Its Gold, Will Leave It In The Fed's "Safe Hands"

Several months after it was revealed that Germany was able to only recover a miserable 5 tons of its gold in all of 2013 (under 10% of the 84 tons it was scheduled to repatriate), Germany appears to have given up entirely in its attempt to recover gold which simply is not there, and as Michael Krieger reports, citing Bloomberg, has decided to keep "it" (by "it" we don't mean the gold since that clearly has not been at the Fed for decades, but merely the paper promises of ownership: for more see China's gold rehypothecation scandal and how the unwind works) at the NY Fed after all. That is to say, in the "safe hands" of former Goldmanite Bill Dudley.
Via Mike Krieger's Liberty Blitzkrieg blog,
Just last week, I published a post titled, Video of the Day – “End the Fed” Rallies are Exploding Throughout Germany, which subsequently went viral. Interestingly, only a few days later we find out that Germany’s very own criminal political class has decided it will continue to store the nation’s gold in New York rather than bring it back home as had been the intention. It’s quite ironic that just as protests against the fascist Federal Reserve are spreading throughout the land, the political class officially decides to keep Germany’s treasure across the Atlantic, in care of none other than The Fed itself.
To be fair, this merely seems like a way for Angela Merkel and the rest of her German cronies to save face. After all, it was very clear that the Federal Reserve had already told them “no” when they asked for the gold back in the first place. Why else would it take almost a decade to transport the gold from the U.S. to Germany, which was the latest repatriation schedule.
We learn from Bloomberg that:
Germany has decided its gold is safe in American hands.

Surging mistrust of the euro during Europe’s debt crisis fed a campaign to bring Germany’s entire $141 billion gold reserve home from New York and London. Now, after politics shifted in Chancellor Angela Merkel’s coalition, the government has concluded that stashing half its bullion abroad is prudent after all.

The Americans are taking good care of our gold,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic bloc in parliament, said in an interview. “Objectively, there’s absolutely no reason for mistrust.”

Ending talk of repatriating the world’s second-biggest gold reserves removes a potential irritant in U.S.-German relations. It’s also a rebuff to critics including the anti-euro Alternative for Germany party, which says all the gold should return to Frankfurt so it can’t be impounded to blackmail Germany into keeping the currency union together.

The Bundesbank, Germany’s central bank, sent a delegation to the New York Fed’s vault in 2012 for spot checks on the hoard. As the gold’s guardian, the Frankfurt-based Bundesbank is obliged to ensure its safety. It says it’s sensible to store part of the reserves outside the country so they can be swapped more easily for foreign currency in an emergency.
This last sentence is absolutely incredible in its Orwellian irrationality. Swap gold easily for foreign currency? Foreign currency can be conjured up in infinite amounts at will by crooked bankers in suits with phony smiles and calming words filled with complex economic jargon. So Germany needs to be able to swap its gold for that? Well, it seems many nations are falling for this simple, yet effective scam, as I outlined in my post: Ecuador to Transfer More Than Half its Gold Reserves to Goldman Sachs in Exchange for “Liquidity.”
German gold reserves, the second-biggest in the world after those of the U.S., totaled 3,386.4 tons on March 31, according to World Gold Council data. Due to German postwar history, the biggest part is stored at the Federal Reserve Bank of New York; the rest is in London, Paris and Frankfurt.

Right now, our campaign is on hold,” Peter Boehringer, a Munich-based euro critic who co-founded an initiative to bring home all of Germany’s gold in 2012, said in an interview.

Wednesday, June 18, 2014

Bill Fleckenstein on the Irrational Markets

From KWN (Bold emphasis is mine):

“The stock market still believes that the Fed is going to be able to taper to somewhere near zero and not have an accident.  The stock market is wrong.  There will be an accident....
“A tapering is a reduction in the amount of easing but people need to keep in mind that the Fed is still easing.  In any case, the Fed is totally misreading the economy because it’s not as strong as they think and housing is rolling over.  There are also other signs of weakness.

So the Fed is in for a rude awakening about economic strength and they are also going to be in for a rude awakening about the amount of inflation they are going to be able to engender because it’s going to be a lot more than they want.  Today’s announcement was exactly as expected and I doubt Janet Yellen is going to say anything of any consequence in her press conference.  The stock market is continuing it’s game of chicken and the metals are trying to decide if they want to get going to the upside or not.”
 “The miners have acted much better in the last week or so.  Look, at the beginning of June there was a breakdown in the price of gold from the $1,280 level.  A lot of the gold-haters thought that the gold price was going to go test $1,250, then $1,220, then $1,175, and then we were going to trade at $1,000, $800, $500, $200, and then zero.

Well, that hasn’t exactly played out.  The so-called breakdown didn’t turn into anything.  This gives strength to the argument that the gold market might resolve itself to the upside sooner rather than later.  The miners have acted unbelievably well for some time now and this is just an extension of that.

Today the miners are really strong with gold being just flat.  That could be an indication that we could be about to have a big pop in the price of gold.  Usually when the miners diverge, the direction of gold stocks is the direction that gold goes.  Arguing for higher prices has been somewhat futile in the last few years for gold but I think that’s going to change pretty soon.”

Fleckenstein added:  “The Fed bought $1 trillion worth of paper last year.  Their balance sheet is $4 trillion now.  That doesn’t include what the other central banks have done in terms of the upside pressure on major markets they have exerted because of their operations.

The global stock markets are where they are because of the unfathomable amounts of monies that have been printed.  That is why this fall we will have a crash or some sort of dislocation.  At that point there will be so many people with expectations so high they can’t possibly be met and they will all be stuck looking at each other and then the market will hit an elevator shaft.

What we are talking about is a change in psychology but the question is, when does psychology change and what makes psychology change?  I don’t know what will be the tipping point but anybody who thinks there isn’t a fair amount of inflation or believes in deflation is in denial.

In 2007 the very first payment defaults started in January.  That was a sign that they had found the marginal buyer in housing and they were sending the keys back to the bank.  Meanwhile, the stock market didn’t figure out that mattered for another seven or eight months.  So psychology is a big component and when psychology changes there will be plenty of profit opportunities in different directions for years to come.”
 “They have to take a step back.  Last year the Fed printed over $1 trillion and they are still printing money.  In 1999 the liquidity injection for Y2K was about $40 billion and that was enough to blow the top off the stock market.  So anyone who believes that one plus one makes two has to be frustrated. 

The reason they are frustrated is because you can’t own stocks, you can’t own bonds, you can’t trust the dollar, and if they try to make an investment in the metals that hasn’t worked in the last few years.  So rational investors are understandably frustrated, just as they were in 1999 and in 2007.

I will say that this period of impossible things happening has gone on longer than most anyone anticipated.  But no one has seen what happens when the world’s central banks print this much money and we don’t have a currency that’s anchored to anything.  No one has any experience in this because no one has ever seen it.  It’s never happened in history. 

So the reality is we are all flying blind and it’s impossible to have any decent kind of handicap as to when things will begin to matter.  We know these policies will lead to destruction but we don’t know when.  And now more than ever we don’t know when, we just know that a day of reckoning is coming and there will be hell to pay.”

Monday, May 26, 2014

Fear of Missing Gold is Spreading

Austria now wants to verify their London held gold. From ZH:
First it was Germany, now another AAA-rated European country is starting to get concerned about its hard assets.
Overnight Bloomberg reported that following in Bundesbank's footsteps, Austria will audit its gold reserves located in the UK, which represent 80% of its total gold holdings. This gold reserve reviews held at Bank of England in London will be first conducted by external auditors, Christian Gutleder, a spokesman for the Austrian central bank, says via telephone.
As a reminder, Austria held 80% of its roughly 280 tons of gold in U.K., according to last annual report.

Tuesday, April 22, 2014

Percent of IPO's with Negative Earnings

Having lived in San Francisco both then and now I can say it does all look and feel familiar.

Friday, April 11, 2014

"Its Worse Than 2007"

Its been a while since I've posted because, frankly, nothing has changed. Markets seem to be as irrational as ever until just the last few days. It remains to be seen whether this is a brief pause or the beginning of a more substantial re-evaluation of market prices. Nearly every single asset class is over valued by nearly every metric. Yet, until the last two days the market has completely ignored the economic data and blaming every data point on the cold weather of the 1st QTR. Never mind that the data has been poor around the world, not just north America.

Below, William White of the Bank of International Settlements (BIS) provides a rare dose of reality:

Via Finanz Und Wirtschaft,
William White is worried. The former chief economist of the Bank for International Settlements is highly sceptical of the ultra loose monetary policy that most central banks are still pursuing. "It all feels like 2007, with equity markets overvalued and spreads in the bond markets extremely thin", he warns.
Mr. White, all the major central banks have been running expansive monetary policies for more than five years now. Have you ever experienced anything like this?
The honest truth is no one has ever seen anything like this. Not even during the Great Depression in the Thirties has monetary policy been this loose. And if you look at the details of what these central banks are doing, it’s all very experimental. They are making it up as they go along. I am very worried about any kind of policies that have that nature.
But didn’t the extreme circumstances after the collapse of Lehman Brothers warrant these extreme measures?
Yes, absolutely. After Lehman, many markets just seized up. Central bankers rightly tried to maintain the basic functioning of the system. That was good crisis management. But in my career I have always distinguished between crisis prevention, crisis management, and crisis resolution. Today, the Fed still acts as if it was in crisis management. But we’re six years past that. They are essentially doing more than what they did right in the beginning. There is something fundamentally wrong with that. Plus, the Fed has moved to a completely different motivation. From the attempt to get the markets going again, they suddenly and explicitly started to inflate asset prices again. The aim is to make people feel richer, make them spend more, and have it all trickle down to get the economy going again. Frankly, I don’t think it works, and I think this is extremely dangerous.

Saturday, March 8, 2014

Bitcoin & Gold

From Zerohedge:
Bitcoin And Gold
Only in a bull market could an online “currency” dubbed bitcoin surge 100-fold in one year, as it did in 2013. The phenomenon spurred The Wall Street Journal to call it a “cryptocurrency” craze, with dozens of entrants. Bitcoin now has an estimated market “value” in excess of $6 billion, leaving alphacoin, fastcoin, gridcoin, peercoin, and Zeuscoin in its wake. Now most sell-side firms are rushing to provide research on this latest fad, while “bitcoin funds” are being formed. Recent recruitment e-mails to staff such a platform reassure that even though experience is preferred, it is not required.
While bitcoin is yet another bandwagon we are happy to let pass us by, the thinking behind cryptocurrencies may contain a kernel of rationality.
If paper currencies – dollars and yen – can be printed in essentially unlimited volumes, and just as with all currencies are only worth what recipients on any given day will exchange in goods or services, then what makes them any better than the “crypto” kind of money? The dollars and yen are, of course, legal tender issued by governments, but in an era in which governments are neither popular nor trusted, that is not necessarily a big plus.
Gold, at least, has been regarded as “money,” for thousands of years, and it is relatively stable and widely accepted store of value and medium of exchange. It’s a well-known monetary “brand.” It doesn’t exist only (or at all) in cyberspace, and it cannot be printed on the whim of authorities. Ironically and perplexingly, while gold, the hard money alternative to the printing press kind of money, dropped 28% in 2013, the untested and highly speculative bitcoin went completely through the roof.
And this is why the Gold Bullion Debit Card has much greater potential around the world than Bitcoin. Gold has a history as money that no other currency can match. Enabling it to be "spent" through a debit card will make it nearly universal as a method of payment.


What it is

DebitCarduseAround the world, people see central banks printing money at historic rates and devaluing their own currencies. As a result, consumers are responding by buying physical gold as a store of value proven to be money for thousands of years.
However, despite gold's recognition as money for over 5,000 years, its not convenient for making day to day purchases at your local store. Gold is not readily accepted by merchants still tied to paper currencies and is not easily divisible.
GoldBullionDebitCard revolutionizes money by solving these two problems.
The debit card is widely recognized by both consumers and merchants and makes for ease of transactions. The patent pending GoldBullionDebitCard payment system allows account holders to sell extremely small amounts of gold, converting only the amount desired into local currency while leaving the balance of gold available for future purchases at the future price which may help hedge inflation.
This process changes the nature of gold investing by making physical gold holdings a much more liquid asset class which empowers consumers who want to hold less paper wealth and more physical gold.

How It Works

After opening an account online, you can use the ADD GOLD function to indicate what type of gold you plan to deposit with our gold bullion dealer partner outside of the banking system. You will then receive a free postage paid packet to send in your gold. Just drop it in the mail. envelope
We will e-mail you immediately once it's received and credit your account in milligrams of gold. You will then receive an ordinary debit card that can be used exactly the same as a traditional bank card to make purchases anywhere that debit/ATM cards are accepted.
The amount of gold debited from your account will depend on the price of the purchase and the day's closing price of gold as determined by the LBMA, COMEX or Shanghai Gold Exchange.
The merchant receiving the payment will be paid in local currency. Your account is debited in milligrams of gold, selling just enough to make the payment in the merchant's local currency.

This product is under development. Patent pending (13/926,948).

Thursday, March 6, 2014

What Happens When There Are No More Bears?

Back when I posted Classic Sign of a Market Top margin use was extremely high and the contrarian in me thought we must be near the top. Today, via Zerohedge, we see that the Bullish/bearish ratio is the most out of balance its been since at least 1989.

Just 15% surveyed are bearish on the market, even less than in the bubble of 1999. Near term that's very bullish on stocks. But it also means markets are more irrational than they've been at any time in the last 25 years.

And from Dallas Fed's Richard Fisher concerned about "Eye popping levels":
In his speech in Mexico City, Fisher said some indicators like the price-to-projected forward earnings, price-to-sales ratios and market capitalization as a percentage of GDP, are at levels not seen since the dot-com boom of the late 1990s.

He noted that margin debt is pushing up against all-time records.

"We must monitor these indicators very carefully so as to ensure that the ghost of 'irrational exuberance' does not haunt us again," Fisher said. While a few Fed officials have mentioned unease about stock prices, Fisher's comments are the most pointed to date.

Fisher did not spare the bond market, saying that narrow spreads between corporate and Treasury debt "reflect lower risk premia on top of already abnormally low nominal yields."
And finally, from  Cyniconomics blog:

As shown, the aggregate equity allocation for U.S. households is now at a level that’s only ever been reached in the Internet bubble years of 1998 to 2000.

Tuesday, February 25, 2014

The Next Real Estate Crash

The next housing downturn may soon be here. The S&P Case-Shiller US National home index declined in the last quarter of 2013 possibly marking the end of the QE fed housing recovery.

Dr. Shiller doesn't see a downturn yet in 2014 but noted on a CNBC interview that it looks like the peak that we previously saw in 2005.

What's concerning though is that this time the housing "boom" has been primarily driven by investors rather than traditional home buyers making a first purchase or existing homeowners looking to upgrade to a bigger home.

Indeed, Diana Olick reporting for NBC noted in November last year:
First-time buyers, who usually represent 40 percent of the market, have been falling steadily out of the market, especially lately, with the surge in mortgage rates. While this annual report puts them at a 38 percent share, the Realtors' September home sales report shows they bought just 28 percent of the homes sold in the month.
She also notes the importance of first time buyers to the economy, beyond the real estate market:
 First-time buyers are also considered instrumental to a recovery historically, because they create the move-up market, but investors, largely using cash, have replaced them.
Those first time buyers buy furniture, appliances and household goods. We should be seeing the millenials, a large demographic cohort buying new homes in large numbers. Unfortunately, many are unemployed and living with their parents. And in the video below you'll learn the number of first time buyers is still declining

 So now that the investors are done bidding up home prices using money borrowed at 0% who will be left to support housing prices?

Sunday, February 9, 2014

Comparing the Reagan Vs Obama Economic Recoveries

I've previously written about the differences between our current recovery and the previous one during the Reagan era. The purpose was not to make a political statement but to comparethe strong recovery of the 1980's which had huge jobs gains, (As a high as over one million in a single  month) to the current phoney recovery where a few hundred thousand jobs are treated as big news . Its important to know the difference because if we keep lying to ourselves that prosperity is "just around the corner" we will not have the courage to make the changes we need to get the economy moving again. As a reminder, we are following Japan's course, which has left them in their third decade of economic stagnation.

The following post from Zerohedge is an excellent companion to my two previous comparisons.

One of the biggest accomplishments of the president, in his own words, is managing to push the official (U-3) unemployment rate, from its post-Lehman high of 10% hit in October 2009 to only 6.6% as of January 2014 as Friday's jobs report revealed. This rapid drop in unemployment - call it the "Obama Recovery" - caught none other than the Fed completely unaware, whose 6.5% unemployment rate tightening threshold is now in tatters, as it the credibility of the Fed's forward guidance as the Fed will have no choice but to scrap all unemployment QE ending, rate hiking "thresholds" at its next FOMC meeting.
So what happened to the unemployment rate that it dropped so fast it surprised and embarrassed even the "venerable" Federal Reserve, which had initially expected a 6.5% unemployment rate some time in 2015. To get the answer we go back in time to the last (and only previous) time when the US unemployment rate dropped from roughly 10%, which was in June 1983, to 6.6%, which took place three and half years later, in December 1986 - let's call it the "Reagan Recovery" in short.
Here is how the old normal compares to the "New Normal."
  • US unemployment dropped from 10.1% to 6.6% between June 1983 and December 1986: an interval of 43 months.
  • US unemployment dropped from 10.0% to 6.6% between October 2009 and January 2014: an interval of 52 months.
So far so good: one can expect the "Obama Recovery" from the Great Financial Crisis to take a little bit longer than "Reagan's."
But what about the internals. This is where things start getting weird.
First, we look at the number of actual jobs added (according to the Establishment survey) from the 10% point at the peak to the 6.6% at the bottom. What we find is that despite the US workforce being over 30% larger today than it was 28 years ago, it took far less actual jobs created to drop the unemployment rate by 3.4%. Specifically, while the "Reagan Recovery" resulted in the creation of 10.5 million jobs, the "Obama Recovery" achieved the same low unemployment rate with only 7.5 million jobs added.

The difference between the Old and New Normal is even more acute when one looks at the change in average monthly job gains over the "recovery" period: as noted, in 1986 the duration of the rate drop period was 43 months, where currently it has taken 52 months. This means that the Obama recovery has resulted in just 145K job additions on average per month while the unemployment rate has dipped from 10.0% to 6.6%, compared to the far more impressive 244K - and indicative of a real recovery - that marked the 1983-1986 period.

However, nowhere is the distinction more acute when comparing the two "recoveries", then when one looks at the underlying population and labor force trends.
First, here is what a normal recovery looks like: during the Reagan Years, the Civilian, Non-institutional population - or the total number of Americans eligible for work whether they are part of the labor force or not - increased by 7.4 million, while the labor force increased by 6.7 million - as close to a linear relationship as possible, and also a correlation which any rational person would expect.
So how about the Obama recovery: well, we find that between October 2009 and January 2014, the civilian, non-institutional population rose by 10.4 million, to be expected considering the far greater general population of the US - it is also a number which, on average, increases by about 230K or so every month. So what about the labor force? It is here that things get zany (as we predicted they would many years ago), because it is here that the Obama Recovery has somehow only managed to add a paltry 1.7 million people to the workforce: from 153.8 million to 155.5 million!

Of course, the above unleashes the avalanche of "demographic" excuses which we have all grown to know and laugh at, because when economists can't explain something, they promptly fall back to patently false "justifications" - recall that as we explained the collapse in the labor force has very little to do with demographics, something which the BLS itself thought as recently as 2004 when it projected a rising labor force participation into the coming years only to readjust it lower in the coming years.
The real reason for this ongoing collapse in the labor force, is the same that the CBO used to explain why - in politically correct terms - Obamacare will adversely impact the labor force over the next decade: Americans will have to earn less to get full coverage, or said otherwise, they are less incentivized to work more. This is precisely the US welfare state at work, and when one extends the Obamacare "rationale" one sees that the administration's core goal is to make increasingly more people reliant on handouts than on labor, as we explained in "When Work Is Punished: The Tragedy Of America's Welfare State" in which we showed why "for increasingly more in America, it is more lucrative to sit, do nothing, and collect various welfare entitlements, than to work" as can be seen in the "welfare cliff" charts below (source).

Alas, that is the real reason why the labor force collapse continues and will continue even as America enters its next recession. Or depression.
So what happens when one renormalizes the unemployment rate calculation and uses a 30 year average labor force participation rate as a constant instead of a variable to be plugged by the BLS to goalseek a desired result? This happens:

What the chart above shows is that the "real" unemployment rate in October 2009 was 11.2%. Where is it now? 11.1%.
And there is your "Obama Recovery", when stripped of all the fancy veneer and TOTUSed propaganda, right there.

Thursday, February 6, 2014

Our Disappearing Middle Class

From The Economic Collapse Blog:
Submitted by Michael Snyder of The Economic Collapse blog,
The death of the middle class in America has become so painfully obvious that now even the New York Times is doing stories about it.  Millions of middle class jobs have disappeared, incomes are steadily decreasing, the rate of homeownership has declined for eight years in a row and U.S. consumers have accumulated record-setting levels of debt.  Being independent is at the heart of what it means to be "middle class", and unfortunately the percentage of Americans that are able to take care of themselves without government assistance continues to decline.  In fact, the percentage of Americans that are receiving government assistance is now at an all-time record high.  This is not a good thing.  Sadly, the number of people on food stamps has increased by nearly 50 percent while Barack Obama has been in the White House, and at this point nearly half the entire country gets money from the government each month.  Anyone that tries to tell you that the middle class is going to be "okay" simply has no idea what they are talking about.  The following are 28 signs that the middle class is heading toward extinction...

Monday, February 3, 2014

Worst February Start Since 1933

Got your attention?

From CNBC:
Since 1971, when January was negative, the S&P 500 extended its losses into February 72 percent of the time, falling on average 2.4 percent. That ratio stands at 65 percent for the Dow and 57 percent for the Nasdaq.
 The S&P 500 settled at 1,741 on Monday, its lowest close in more than three months. In fact, it was the worst start to February for the Nasdaq on record, and the worst for the S&P since 1933 and 1982 for the Dow.
 Of course, those are just statistics from the past. The recent data is much more to be concerned with.

Monday, January 27, 2014

Mints Running 24 Hours a Day To Keep Up With Demand

I've mentioned previously that Swiss gold refiners are running flat out 24 hours a day, 7 days a week to keep up with demand from Eastern central Banks. Now Bloomberg reports that demand for gold coins around the world has increased due to lower prices in 2013.
Austria’s mint is running 24 hours a day as global mints from the U.S. to Australia report climbing demand for gold coins even while Goldman Sachs Group Inc. says this year’s price rebound will end.
Austria’s Muenze Oesterreich AG mint hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint rose 20 percent this year through Jan. 20 from a year earlier. Sales by the U.S. Mint are set for the best month since April, when the metal plunged into a bear market.
Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains helped bullion rally for five straight weeks, the longest streak since September 2012. That won’t be enough to stem the metal’s slump according to Morgan Stanley, while Goldman Sachs Group predicts bullion will “grind lower” over 2014.
“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes, the chief executive officer of American Precious Metals Exchange, an online bullion dealer. “We have witnessed some top selling days in the past few weeks.”
 This follows a recent story on US Mint demand:
  The United States Mint's bullion program delivered stellar results during the fiscal year ended September 30, 2013. A sharp increase in demand drove record sales volume of 45,862,000 ounces of gold and silver bullion. Total revenue for the segment grew by 31.8% to more than $3.2 billion with net income more than doubling to $59.3 million.
After two previous years of declines, the US Mint saw gold bullion sales rebound sharply during the year. American Gold Eagle sales grew by 51.9% to 983,000 ounces and American Gold Buffalo sales grew by 66.7% to 235,000 ounces. The increased demand was driven in part by a decline in the market price of gold. When gold posted its largest one day percentage drop in 30 years on April 15, 2013, authorized purchasers ordered more than 100,000 ounces of gold during the next three days. The jump in demand resulted in the temporary sell out of the one-tenth ounce sized American Gold Eagles.
The US Mint achieved record breaking volume in silver bullion coin sales at 44,644,000 ounces across the two offerings. Sales of the American Silver Eagle bullion coins grew by 29.2% compared to the prior year, while the lower volume America the Beautiful Silver Bullion Coins saw growth of 143.8%. Amidst high demand, the Silver Eagles remained subject to allocation from January 28 through the end of the fiscal year.
During times when demand exceeds available supply, the US Mint has used an allocation program to ration the available number of coins amongst authorized purchasers.
During the fiscal year, the average daily spot price of gold was $1,521.61 per ounce, down by 8.4% from the prior year. The average daily spot price of silver was $26.79 per ounce, down by 13.4% from the prior year.

Monday, January 20, 2014

Gold Should be at $1,900

click to enlarge

Last December I pointed out that gold has until 2011 been for 30 years highly correlated with the US money supply. If gold still followed that traditional correlation, gold should be trading around $1,900.

Its in 2011 that what had been a .84 positive correlation turned to a negative .34 correlation. To me this is a sure sign of central bank intervention.

Sunday, January 19, 2014

Where is Germany's Gold?

Last July I wrote about this same subject. You may recall an interview with William Kaye who said:
Regarding that gold, which could have had the symbol of the Bundesbank on it when it arrived in Hong Kong, a leading refiner, one of the biggest in the world that deals with the People’s Bank of China (PBOC), certified that, ‘Yes, we’ve got gold available that we can deliver.  We’ve melted it down, we’ve tested it.  It may have had the Bundesbank symbol on it when it arrived, but now it’s melted down .9999 (fine) gold.’ 

Saturday, January 18, 2014

COMEX Is Almost Out Of Gold

From BNN via Zerohedge:

Pointing to recent Comex futures data, Knippa says there may not be enough gold to go around if everyone with a futures contract insists on taking delivery of physical bullion. He believes gold shot through $1,900 in 2011 before plunging last year because of an explosion in the amount of gold futures contracts – setting up separate markets for “real” and “paper” gold.
“Maybe the reason gold prices went up is an expansion of that multiple of the amount of paper gold versus real gold,” Knippa tells BNN. “So maybe the market has come back down as the people who are holding the paper gold start to liquidate it.”
“But the underlying story here is that the people acquiring physical gold appear to be continuing to do that. And that’s what I think is important,” Knippa adds, noting large investors like hedge fund manager Kyle Bass are taking delivery of the gold they're buying.
Knippa points out it could take just a few people to ask for delivery of physical gold to put the Comex into default. Were this to happen, it would become clear to the world that the Comex is a "paper only" market.

You can watch the entire 7 minute video here.

Friday, January 10, 2014

Poor Holiday sales in 2013 Followed by Poor Jobs Numbers in 2014

Despite last years huge gains in stocks, holiday sales were poor, raising the question of whether the economy really is as strong as some believe. Financial Times reports:

Limited spending by US consumers produced a lacklustre holiday shopping season for many retailers, which are likely to face pressure on profits and questions over whether they should have fewer stores.
Sales at stores open for at least a year rose on average 2.3 per cent in December among the 19 retailers that reported figures on Thursday, according to Thomson Reuters. That compares with a 3.5 per cent rise in the same month last year and headline inflation currently running at 1.8 per cent.
 A sampling of recent headlines:

 Sears' sales tumble during disappointing holiday season
 Pier 1 Imports holiday sales disappoint
 Bed Bath & Beyond shares plunge after Union-based retailer reports ...
 Retailers of all stripes sing holiday blues - USA Today