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Commentary by Michael Noonan
There is a decline in the number of reads in our articles that do not provide a fully developed “fundamental” story about why gold and silver should be much higher in price, [but are not]. Relying upon charts to more accurately capture the developing “story” does not capture the imagination of as many readers, for whatever reason. We attribute thisto Confirmation Bias where a reader wants to read an article that confirms his/her beliefs The accuracy/validity/truth may or may not be true, but is satisfies an emotional need foraffirmation.
The true story of gold and silver is a simple one. There is a recognized and acknowledged shortage of supply in opposition to the greatest demand for both precious metals, for at least in recent memory, if not all time. Current prices are in total disregard to the fixed law of Supply v Demand, or perhaps more accurately stated, in total defiance of that law. It is the most reliable of truths that when demand is in far excess of supply, price goes higher.
Der Goldpreis hat sich am Donnerstag um drei Prozent verteuert. Die Marke von 1.300 Dollar wurde zurückerobert. Edelmetall-Guru Johann A. Saiger, Midas Investment Report, hält an seinem Kursziel von 5.000 Dollar fest: "Sollte ich mich aber demnächst genötigt sehen, eine diesbezügliche Korrektur vorzunehmen, dann wohl eher noch in Richtung 10.000 als unter 5.000", so Saiger. Seine Favoriten bei den Goldminen verrät er im Interview.
Bei den Aktienmärkten sieht Saiger nach der vorläufigen Einigung im US-Haushaltsstreit kurzfristig Chancen für eine Jahresendrally. Dennoch gibt es einen faden Beigeschmack: "Wenn man bedenkt, dass dies eigentlich doch nur ein fauler Kompromiss war und Mitte Januar das gleiche Affentheater erneut aufgeführt werden könnte, dann müsste das die Märkte bald schon wieder beunruhigen", so Saiger.Für den Marktkenner ist die Geldpolitik der US-Notenbank ein gefährliches Spiel mit dem Feuer: "Der bekannte US-Ökonom John Williams erwartet für 2014 den Ausbruch einer Hyperinflation. Nur mit dem totalen Öffnen der Geldschleusen wird eine drohende Pleitewelle, also eine echte Deflation, mit allen tragischen Konsequenzen noch abzuwenden sein. Ich sehe dies ähnlich", so Saiger. "Und in diesem Szenario sind Gold-und Silber die großen Gewinner." Mehr dazu im Interview.
„TO CRASH OR NOT TO CRASH?“COUNTDOWN OCTOBER-CRASH 2013
NEW ISSUE: MIDAS INVESTMENT REPORT
There has been much discussion about which banks and other financial institutions are “too big to fail.” In reality, no institution is too big to fail, including any private company or political entity, whether it is Detroit or the former Soviet Union. The more relevant question is, which institutions are “too big to succeed”? When asked about President Obama’s slew of recent troubles, former presidential adviser David Axelrod correctly noted that the U.S. government is too big to manage. It is not only true of the government as a whole, but also true of some of its parts, notably the Internal Revenue Service — which is in the processing of failing.
The IRS has an impossible job: manage and enforce the income tax plus a host of other activities, now including Obamacare. The problems begin with the fact that the tax code misdefines income. The IRS defines cash flow as income, but economists know that real income is the ability to consume. Cash flow resulting from inflation does not increase the ability to consume, yet the IRS often taxes it — and this is just one of many problems with the agency’s income definitions.
By Nick Giambruno
It’s no surprise to anyone paying attention that the pace in which financial privacy is evolving worldwide is accelerating. And unfortunately for the worse. Financial privacy is often viewed in a negative light, though it shouldn’t be. Globally, tax authorities and the media have framed the issue into a “financial privacy means tax evasion or money laundering” message. The Swiss view it as a fundamental right to preserve human dignity, similar to medical privacy. Think about it. Should your government snoop into your medical records and automatically share them with foreign governments?
By Dr. Jeffrey Lewis
Invariably, as the price of silver and gold begins moving higher, more investors will be drawn in to the mostly paper precious metals market.
Most of these buyers will be looking only at the price and could therefore be setting themselves up for a substantial disappointment. Many will simply take their losses and exit the market feeling scorned, perhaps never to return.
Those who see few alternatives, or who perhaps actually take delivery of physical metal will be faced with a steep learning curve that will hopefully be overcome by necessity at the least, and curiosity at best.
The Importance of Asking Questions
All long term precious metal investors will probably at some point end up asking themselves the following questions about the precious metals market. This helps illustrate the complexity of what seems to be on the surface a quite simple and barbarous investment.
Furthermore, it is those who can answer most of these questions that will be more likely to see the connections and the good reasons to keep at least some portion of their wealth diversified into precious metals.
Here are the 40 Questions Long Term Precious Metals Investors Should Look to Answer ...
On behalf of Matterhorn Asset Management, independent German financial journalist Lars Schall talked with U.S. financial investment advisor Catherine Austin Fitts. Inter alia, they discussed: the shift in the global economy; various facets of gold and currency politics; the difference between official reality and reality; some background regarding NSA & Co.; and last but not least the use of the term “conspiracy theorist”. She says: “When I hear people be derogatory about conspiracies basically that to me in my world that I grew up in is simply a symptom that they have agreed to be powerless and wear it like a badge of honor.”
Recently, US Federal Reserve Chairman Ben Bernanke announced that he and the Fed "actively seek economic conditions consistent with sustainably higher interest rates." The implication, of course, is that the Fed may choose to taper off the monthly stimulus known as Quantitative Easing (QE).
Although Mister Bernanke is already backpedaling a bit on his announcement, it has created a mild panic in the markets, as those who are heavily invested in the markets believe that tapering off QE may well cause a crash.
Are they correct?
by Patrick A. Heller, CoinWeek.com:
New York’s COMEX commodity gold market has been one of the two most important venues referenced for determining the price of gold for all other trading purposes. Yet this market, which largely reflects the trading of paper contracts rather than physical metal, is quickly heading toward the point where it may no longer be used in setting the price of gold in the physical cash markets. There are two significant developments which could make the COMEX gold market obsolete within the next 90 days.
The COMEX gold market exists as an easy way for investors to take a position in the price of gold without the necessity of having to bother with possession of the physical metal. The contracts traded on this exchange are for 100 ounce gold bars that are deliverable almost exclusively in some future month. Most traders, since they are only investing in the price, pursue one of two options as a contract nears maturity. They might purchase an offsetting contract to close out their position entirely or, if they wish to continue to invest in gold, they might close the contract by trading it for one with a maturity further into the future. Historically, only a tiny percentage of COMEX gold contracts are held to maturity to take delivery of the physical metal.
Chairman Bernanke last week buttressed global markets with his “If financial conditions were to tighten to the extent that they jeopardized the achievement of our inflation and employment objectives, then we would have to push back against that” comment. In this week’s Congressional testimony, he followed up his market-pleasing ways with a notably dovish spin on the inflation outlook. Bernanke is now signaling that extraordinary monetary stimulus is in the cards until inflation “normalizes” back to the FOMC’s 2% target rate. The markets can also rest assured that he’s prepared to significantly boost the $85bn QE in the event of a downside inflation surprise. From my analytical perspective, there are strong arguments that an inflation rate is an even a poorer data point than unemployment for basing the scope of aggressive experimental monetary stimulus.
So expect the inflation discussion to become even more topical. Bruce Bartlett is in the middle of a series of “Inflationphobia” articles for the New York Times. He compares classical economists to “generals and admirals… always fighting the last war…” with “strategies that are inherently out of date.”
Things That Make You Go Hmmm...
A few weeks ago, I put a chart with which I am acutely familiar up on my Bloomberg. It is a chart I have studied every single day for over a decade, so by now I know pretty much every dip, every rally, and every sideways channel that makes up this particular pattern.
I remember where I was when the big moves took place, and I recall with great clarity my varying degrees of comprehension and incredulity over every meaningful change in direction.
I have lived every Golden Cross and died every Death Cross, cheered every bottoming pattern, and despaired each time the chart patterns signaled a breakdown in an upward trend; but above all, I have continued to remorselessly reassess my view of the investment case for this particular instrument, looking for signs — not evident in the charts — that would suggest it had run its course.
As I stared at the chart again, almost absentmindedly, I put two vertical lines on it, one representing August 17, 2011, and one that marked January 14, 2013; and suddenly, a concept that had been gnawing away at me for a while crystallized in my mind as those two lines pulled in a whole bunch of known knowns, known unknowns, and even a couple of unknown unknowns. It was a truly Rumsfeldian moment.
From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression -- and they're about to do it again.
The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.
Faber: “I think we have many dangers. The biggest danger is governments themselves with their interventions into free markets, and their fiscal policies....
“In other words, increasing or decreasing government spending.
Usually it’s an increase, and as a result the government becomes larger and larger. Of course the larger a government becomes, the less economic growth you will have. The extremist, socialist-to-communist economy that we had in the Soviet Union and China, it was a complete failure economically speaking.
The other danger is that the Federal Reserve and other central banks around the world, they think they can essentially steer economic activity by printing money. This money printing has a number of unintended consequences that will eventually be very costly.
It’s not the first time the Fed has intervened. They intervened after the S&L crisis, after the Tequila crisis, after LTCM in 1998, and then after (the year) 2000 when the Nasdaq collapsed. They kept interest rates artificially low which led to a credit bubble, the housing boom and subsequent collapse.
You can postpone the problems by printing money, but then the problem comes back to an even larger extent.”
“Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system. The financial system still remains in the throes and aftershocks of the 2008 panic and near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government. Further panic is possible and hyperinflation remains inevitable.
Typical of an approaching, major turning point in the domestic- and global-market perceptions, bouts of extreme volatility and instability have been seen with increasing frequency in the financial markets, including equities, currencies and the monetary precious metals (gold and silver). Consensus market expectations on the economy and Federal Reserve policy also have been in increasing flux. The FOMC and Federal Reserve Chairman Ben Bernanke have put forth a plan for reducing and eventually ending quantitative easing in the form of QE3. The tapering or cessation of QE3 is contingent upon the U.S. economy performing in line with overly-optimistic economic projections provided by the Fed. Initially, market reaction pummeled stocks, bonds and gold.
On occasion of the publication of his seventh annual “In Gold We Trust“ report, renowned gold market analyst Ronald Stoeferle discussed for Matterhorn Asset Management / GoldSwitzerland some aspects of his latest report and the larger picture, inter alia: the current bad market sentiment in gold; the rather strange fact that gold is traded like a currency but analyzed like a commodity; the question if it’s a problem that gold is traded now below average cash costs for mining companies; and the most contrarian call at the moment: gold mining equities.
Ronald Stoeferle, managing director of Incrementum AG in Liechtenstein is a Chartered Market Technician and a Certified Financial Technician. He was born October 27, 1980 in Vienna, Austria. During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign in the U.S., he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income / Credit Investments. After graduating, Stoeferle joined Vienna based Erste Group Bank, covering International Equities, especially Asia. In 2006 he began writing reports on gold. His benchmark reports drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. Since 2009 he also writes reports on crude oil. Recently, Stoeferle and his partners incorporated Incrementum AG in Liechtenstein. He will soon launch a global macro fund, based on the thoughts of the Austrian School of Economics. Furthermore, he is now senior advisor to Erste Group Bank and a lecturer at the “Institut für Wertewirtschaft” (“Institute for Value-based Economics“) focusing on the Austrian School of Economics.
The Central Bank of Venezuela recently reported an inflation rate for May of 6.9 6.1 percent, equivalent to an annualized rate of more than 100 percent. Does this mean that Venezuela is on the brink of hyperinflation? A quick look at the relevant economic concepts suggests that hyperinflation is in fact a real danger.
What is hyperinflation and where does it come from?
Hyperinflation has a long history, but no official definition. In an influential 1956 paper, Phillip Cagan suggested limiting the term to a rate of inflation of 50 percent per month or more, which is equivalent to an annual compound rate of about 14,000 percent. That would fit extreme cases like Weimar Germany, Hungary after World War II, or, more recently, Zimbabwe, in which inflation rates reached millions or trillions of percent per year.
On a conference call June 24th, Rick laid out his views on the current markets:
“What we’re seeing now is chaos in the markets – that’s the only way to describe it. Interestingly, we’re seeing chaos, but not volatility, as indicated by the options markets. This type of market environment is unusual, since market declines are typically accompanied by high volatility.”
The Fed’s policies have forced investors to enter stocks instead of safer bond investments, says Rick.
“The markets have been buoyed for several years by a flood of liquidity from Central Banks around the world. Short-term credit markets are awash with cash. This short-term liquidity has led to excessively low interest rates, which were in fact negative on an inflation-adjusted basis. In reaction to low interest rates, investors went looking for yield elsewhere.”
According to Rick, the current turbulence in the markets, following Fed Chairman Ben Bernanke’s comments last Wednesday, shows that the markets are still very uncertain about the merits of the current stock market, despite rising stock prices. “Although the markets are extremely liquid, many of the debtors – in particular government entities – are insolvent. I believe that the wreckage we’re seeing right now is being caused by the realization that liquidity is not a substitute for solvency.”
“Last week, Ben Bernanke whispered the notion that the Fed’s $85 billion a month of money printing might come to an end. The sense that the ‘liquidity faucet’ might be turned off was enough to send bonds, stocks, emerging markets, and commodities – including gold, silver, platinum, and palladium – all down the drain.”
The repercussions of Ben Bernanke’s comments are worldwide, Rick continues:
“While the Fed whispered, China whimpered. Liquidity went wild in China overnight. Unlike the Fed, the Chinese Central bank actually did respond by constraining liquidity. The ‘shadow banking’ market, however, allows banks and other financial institutions to sell ‘wealth management’ products, known to you as ‘term deposits,’ circumventing the credit controls put in place by the Chinese government. The Shanghai index collapsed as a consequence of the poor global forecast for commodities.”
Rick doubts whether QE will actually come to an end, despite what the Fed says:
“Could the Central Banks in fact end Quantitative Easing? I have long believed that the government deficits in the U.S. are so large that the government cannot sell all of its debts, which is the main reason for QE’s existence. The government buys about half of the debt from itself and I doubt there is room in the debt markets to fund the government’s liabilities without support from the Fed.”
Given the near uniform descent across stocks and bonds alike that we have seen in the past week, Rick says: “Can they ever afford to end QE? If they do begin to ‘taper,’ what impacts will that have on a liquidity-driven market?”
Don't fall for propaganda from the Federal Reserve about tapering quantitative easing, says ShadowStats editor John Williams in this interview with The Gold Report. His corrected economic indicators show the U.S. is nowhere near a recovery and the Fed will have to increase rather than decrease bond buying to prop up the banks and push off inevitable dollar debasement. That could be very bad for savers, but good for gold.
My Dear Extended Family,
The economic system is failing, and to counter the now publicly perceived failure, central planners are manipulating the symptoms and not the problem.
Gold has never been easy.Gold is the tell tale of a broken system.Gold therefore is the barometer of the risk factors of economic conditions.
Therefore central planners must make, via paper gold, every effort to make it say, "All is Ok." For this reason I intend, knowing the system is in collapse, to buy gold with every resource I have at my disposal today and tomorrow.
I suggest those of stout heart do the same.
To the others who are committed to their limit, hunker down one more time knowing that in no more than the summer a brand new and most powerful bull market in gold will be at hand.
On Tuesday, May 28, individual retail investors could sell shares of Bankia, Spain’s fourth largest bank, for the first time. This was small consolation, as the bank—in collusion with the Spanish government—had already erased four-fifths of investor value. Unfortunately, the investors were retirees and middle class families, tricked into sinking their savings in the bank’s bottomless pit.
In an attempt to consolidate failed bank assets and limit losses, the Spanish government created Bankia from the smoldering ruins of seven failed savings banks in 2010. Recapitalization of the bank required a whopping €15 billion ($19 billion), pieced together by the Spanish central bank and bailout funds from the European Union. As a condition of the loans, Bankia was required to raise funds on the equity markets via stock sales. Like most companies, Bankia used a two-tier structure for the offering: large investors and funds bought blocks that could then be traded freely on a specific date, while individuals purchased shares that could be traded at a later date, after the “big guys” bought their shares.