2018 Should Be Bullish For The Precious Metals Sector

Usually I’m loathe to stick out price targets on the markets, especially gold and silver, because of the undeniable market intervention of the Central Banks – market manipulation which is blatant to the point at which it is now denied only by card-carrying idiots.

Gold and silver had a sharp run-up in the last two weeks of 2017. However, the abrupt move in gold was accompanied by a rapid rise in the gold futures open interest on the Comex. The “commercial” – aka “the banks” – net short position in Comex gold futures has increased by 100,000 contracts (from 120 net short to 220k net short) in just four weeks through the most recent COT report. That’s a net paper gold short of 22 million ozs, or 623 tonnes of paper sold short. As of yesterday (Tues, Jan 16), the open interest in gold futures increased another 27,000 contracts, most of which, based on the trend in the COT positions,  can be attributed to a continued increase in bank short interest.

To put this paper gold short position in perspective, the Comex reports that its warehouses “safekeep” 9.2 million ounces of gold (this number is unaudited). That’s 11 million ounces less than the bank net short position. However, only 586k ozs of gold are reported to be “registered,” or available for delivery. The ratio of the paper gold short to deliverable gold is 37:1. In other words, each ounce of deliverable gold has been “hypothecated” and re-sold 37 times.

I guess if you are a card-carrying idiot, you have every right to deny that these numbers reflect the flagrant disregard of securities laws by the banks. But of course, the very people appointed to enforce these laws are from law firms that make millions defending the banks’ legal rights to ignore Rule of Law.

On the other hand,  offsetting the attempted control of the price of gold using derivatives, the eastern hemisphere demand for physical gold continues to be immense. It looks like, based on SGE gold withdrawals, China as a whole “consumed” over 2,000 tonnes of gold in 2017. India likely imported and smuggled into the country close to or more than 1,000 tonnes. Turkey imported 370 tonnes of gold in 2017. This exceeded the previous record in 2013 by over 22%. I would note that the size of Turkey’s demand was not expected. I don’t have Russia’s import numbers off the top of my head but Russia imported more in 2017 than has been typical.

The point here is that the eastern hemisphere’s demand for gold on an annualized basis is increasing as the price of gold increases. It’s important to know that, on a seasonal basis, imports into China and India tend to slow down in late January through February before picking up again. My hunch is that the paper gold manipulators are looking to hold down the price of gold as much as possible and wait for eastern demand to subside before attacking the price. 

This will serve as a catalyst to launch another surge higher in the price of gold driven by physical demand.  Demand which might get a boost from the ongoing crash of the cyptocurrencies.

Having said all of that, I believe there’s a good chance that gold will move toward and possibly over $ 1400 during 2018. This Trump tax cut will negatively impact the Government’s spending deficit by a meaningful amount and the U.S. will be forced to issue well over $ 1 trillion in Treasury debt this year. Moody’s placed the U.S. Government’s rating on watch for a possible downgrade. During the course of the year I expect to see the dollar index drop below 90, which is a key technical support level. If this occurs, gold will quickly move over $ 1400.

A portion of the commentary above is an excerpt from the latest  Mining Stock Journal.

Investment Research Dynamics




Precious Metals Markets 2018

The first trading days of 2018 are confirming signs of renewed investor interest in the precious metals sector after a long period of malaise.

Gold Bull

Gold and silver markets entered the year with some stealth momentum after quietly posting gains late in 2017. Gold finished the year above $ 1,300/oz. – its best yearly close since 2012.

Over the past five years, the yellow metal has been basing out in a range between $ 1,050 and $ 1,400. A push above $ 1,400 later this year would therefore be significant.

It would get momentum traders and mainstream financial reporters to take notice.

The alternative investing world was enthralled by Bitcoin in 2017. While we don’t expect a Bitcoin-like mania to take hold in precious metals in 2018, we do expect gold and silver markets to make some noise.

Stimulus to Push Up Commodity Prices Again

Even as the Federal Reserve vows to continue raising its benchmark interest rate and “normalizing” its balance sheet, a flood of new fiat stimulus is set to hit the economy. The recently passed tax cuts will cause hundreds of billions – perhaps eventually trillions – of dollars to be repatriated back to the United States.

For years, many corporations have hoarded business assets overseas in more favorable tax environments. The U.S. had one of the world’s least competitive corporate tax structures. With the corporate rate dropping to 21% in 2018, the U.S. suddenly becomes a much more attractive place in which to set up shop.

The good news is that dollars are coming back home and getting reinvested in capital projects, wage increases, new hiring. The potentially bad side effect is that higher inflation increasingly shows up in consumer prices.

An inflation uptick would likely cause long-term interest rates to rise, which would dig the government’s $ 20.6 trillion debt hole deeper. (Federal deficits are expected to grow by more than $ 1 trillion under the GOP’s latest budget, which fails to pair tax cuts with spending cuts.)

The flood of deficit-financed stimulus sets the economy up for a short-lived spurt of gains… followed by longer duration debt and inflation pains. For now investors are still enjoying gains, as reflected by the ongoing strength of the stock market. But inflationary pressures are already building in raw materials markets.

Mining Output Continues to Decline

The supply and demand fundamentals for precious metals are improved in 2018. Low gold and silver prices over the past few years have hurt the mining industry. Although it has continued to operate existing mines – sometimes even at losses – it has slashed exploration and development of new projects. That will means years of stagnating or even declining output ahead.

Miner

Metals Focus projects mining output of gold in 2018 will be 3,239 tonnes, a slight decrease from 2017. Analysts expect a more significant drop could occur in 2019.

A similar pattern is expected to play out in silver, though it’s more difficult to forecast since few primary silver miners exist (most silver comes as a byproduct of base metals mining operations). Demand for silver is also more variable, with investment demand being the biggest wild card.

Commodity markets analysts at TD Securities believe silver may be the metal to own in 2018. According to TD’s 2018 Global Outlook, silver prices should hit $ 20/oz this year (after finishing 2017 just under $ 17).

Palladium Is on a Tear

Turning to the platinum group metals, platinum is widely expected to go into a supply deficit this year or next after finishing 2017 at a small surplus. Its sister metal palladium experienced an annual supply deficit of 680,000 ounces last year and growing concerns of shortages, helping drive its big price gains.

Even with palladium prices now touching all-time highs, available supply is still on the wane. HSBC forecasts an expanding palladium deficit in 2018 to more than 1 million ounces.

The growing shortage figures to continue pressuring palladium prices upward. It’s also bullish for platinum. That’s because automakers and other industrial users of palladium now have an incentive to switch to less expensive platinum where possible.

Large-scale substitutions don’t take place immediately. But in 2018, demand drivers could finally start shifting back in favor of platinum.

Platinum, silver, and gold investors who have sat patiently on their positions waiting for them to break through to the upside will be rewarded. It’s a question of whether that happens early in 2018 with the economic stimulus, late in 2018 as a reaction to potential tremors in bond and stock markets, or in 2019 when supply destruction starts to kick in more strongly.

Only “Mr. Market” knows for sure.

While you can still buy gold under $ 1,400 and silver under $ 20, they remain (for now) compelling values. Silver looks especially compelling given its cheapness relative to gold and virtually every asset on the planet.

Precious Metals News & Analysis – Gold News, Silver News




Precious Metals Finish Strong, Investors Eye Silver in 2018; David Morgan: Smart Money

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Morgan of The Morgan Report joins me for a replay of one of the very best interviews we did in 2017. David talks about the metals and the markets and shares his insights on what the smart money is already doing, the dangers of complacency and the importance of limiting counter party risk. Back by popular demand, don’t miss this wonderful interview with the Silver Guru, David Morgan, coming up after this week’s market update.

As markets close out their final trading day of 2017, it’s a good time to review the year that was in precious metals and look forward to the year that might be in 2018.

Even though gold and silver markets spent most of 2017 mired in unremarkable trading ranges, they are each managing to post decent gains for the year. Of course, those gains are being overshadowed by the relentless push higher in the stock market and the explosive spike in digital crypto-currencies. Overheated markets can stay overheated for some time. But the longer they go without shaking out leveraged speculators and late comers, the greater the risk of an eventual crash.

The stock market will enter 2018 with record levels of margin debt and cyclically adjusted valuations at their highest since the 2000 bubble. By contrast, gold and silver markets will enter the New Year with open interest on the futures exchanges at relatively low levels and retail bullion demand also on the low side.

The hot money isn’t betting on metals – at least not at this point in time. From a contrarian perspective, that suggests the precious metals space has lots of room to run on the upside after it finds the catalyst it needs to spark renewed investor interest.

Turning to this week’s market action, gold prices are up 2.2% since last Friday’s to come in at $ 1,303 an ounce. The yellow metal will finish 2017 close to 13% higher for the year. Gold outperformed silver again this year. The white metal is now up about 6% for 2017 after rising 3.2% this week to bring spot prices to $ 16.98 per ounce as of this Friday morning recording.

The best and worst performing precious metals of 2017 are palladium and platinum, respectively. Palladium prices surged more than 55% this year and currently come in at $ 1,059. Upside momentum could take palladium to new all-time highs in the first few trading days of 2018.

If the momentum is with palladium, then the value may be with its sister metal platinum. Platinum finds itself in the extremely rare position of trading at a discount to BOTH palladium and gold. Platinum prices currently check in at $ 936 per ounce, higher by 1.7% for the week and 3.5% for the year.

So which metals will perform the best in 2018? It depends largely on whether the economic growth story has legs. If the economy heats up due to tax and regulatory reform, then industrial metals including copper and perhaps silver as well could see impressive gains. If the economy falters and the stock market rolls over, then the safe-haven metal of gold will be the place to be.

Of course, we recommend keeping both gold and silver bullion as core holdings. But we do see more long-term upside potential in silver at these levels. By long-term, we’re looking further out than just the next 12 months. The silver to gold ratio has been depressed for the past few years. We expect a strong move in favor of silver to put the ratio back at more historically normal levels, a ratio which currently stands at a whopping 76.7 to 1.

We can’t guarantee the big move in silver will happen next year. But as long as the silver-to-gold ratio remains relatively depressed, it’s a relatively favorable time for long-term investors to be accumulating silver.

There is a very real chance that inflation could reemerge as a concern for investors in the coming year. Inflation – at least as it’s reported officially – has been nearly dormant for the past few years. In 2018, the combination of higher economic growth and higher federal deficits could reawaken inflationary fears.

Yes, the Federal Reserve stands ready to raise interest rates a few more times, or so they say. Precious metals naysayers will cite that as a reason why the U.S. dollar should gain versus other currencies.

For now, though, monetary policy is taking a back seat to fiscal policy. The tax cutting, de-regulating, spending, and borrowing policies of the Trump White House have the potential to be highly stimulative. Big on Donald Trump’s agenda in 2018 will be a push for new infrastructure spending. Infrastructure programs would directly stimulate the real economy and boost demand for raw materials.

An uptick in inflation in 2018 may well be in the cards. It may even be the catalyst that drives investors back into precious metals in big numbers.

Before we move on, I want to thank each and every one of you for tuning into the Money Metals podcast this year, and we hope 2018 brings you financial prosperity, good health, and happiness. For our part, we’ll be there again for you in 2018 – providing more great interviews and news content, plus top-notch service as we work to meet ALL your needs in the precious metals markets.

Now let’s get right to our Money Metals exclusive interview.

David Morgan

Mike Gleason: It is my privilege now to welcome in our good friend David Morgan of The Morgan Report. David, it’s always a real pleasure to have you on with us and I’m especially excited to talk with you about some of the topics we’ve got on tap today. How are you?

David Morgan: I’m doing well Mike, thank you very much.

Mike Gleason: Well, as we begin here David, I want to talk to you about the danger of complacency because I think it’s a very appropriate topic for the times we’re in right now. To you and me and to many others in our space with a similar world view, we see a whole slew of reasons to own precious metals. We have threats of war in many places throughout the globe. We have a president here in the U.S. who the establishment hates and is hoping to oust if they get the chance. We have nation central banks printing new fiat currency at unprecedented levels all throughout the world.

An entire continent over there in Europe that appears to be potentially at risk of seeing their political and currency union falling apart, terror threats all over the place, the refugee crisis, the list goes on and on. But all the while we have this stock market continuing to make all-time highs with most people seeming to believe that everything is hunky dory while completely ignoring all of those geopolitical and monetary headwinds, or for those who seem to grasp all of that, all that’s going on, maybe starting to believe that it doesn’t matter. Because, after all, the feds and the central planners are going to be able to manage this thing forever.

So, talk about complacency here David, why aren’t we seeing more flock to safe havens, at least not here in the Western world, and discuss the dangers that exist if we let ourselves fall into the complacency or the “nothing is ever going to change” type of mindset.

David Morgan: Well, that’s a tough one. I would say first is eternal vigilance, I mean freedom depends on it, so my idea or ideal from the beginning has been that all fiat currency will eventually fail. And I also believe that it would happen within my lifetime and I’m certainly older than I was when I held that belief, yet I still hold it. So, really there’s a mandate to hold some portion of your wealth in a savings, in other words, the way capitalism is supposed to work you build from a savings base and that savings is put into a capital formation, which means you construct something be it software, hardware, a building, automobile, whatever, and that becomes a benefit to society at large and they vote in the marketplace with their dollars to further the projects so to speak. Make a profit, which returns to the initial investors and on it goes. So that’s the ideal.

My statement was that in times like these rather than be a true capitalist – which is what I just outlined – it requires further savings because there’s too many uncertainties out there with one certainty: every fiat currency on planet Earth in all of recorded history has always failed. So, to say that the dollar won’t is a misstatement, at least based on past history. Is it going to, for this time, be different? Eh, I guess it’s possible. But if we look at it objectively and we state, well, let’s really see what’s gone on with the U.S. dollar, if you look at the Federal Reserve Board’s own website, they will freely admit that the 1913 dollar is worth about three cents today. So you have a 97% loss when their mandate was to basically keep the currency stable. They have failed miserably.

Most people that follow what you do, what I do, what the hard money camp, the gold/silver guys talk about, they understand this, but they are very tired out, worn out. I mean I coined the phrase a long time ago that “the silver market would either scare you out or wear you out.” We are definitely at the wear you out phase. And this is where complacency sits, in where they’ve manipulated the market, we even have proof Deutsche Bank admits it, there is a new CFTC ruling that’s gone on, that they’ve singled out an individual that’s going to turn over evidence and probably bring others into the mix on spoofing the market in the silver market, and yet we don’t really see any real significant price change.

So, the complacency (mindset) is, look, I know what’s going on but it doesn’t matter because these guys have got control and they are always going to have control. You know, it brings to mind, the adage, the dark comes before the dawn, the big struggle for seed to germinate, that last little oomph that is required and I think we are very close to the tipping point and I’ll add onto that.

First of all, I want to back up a second Mike. As you know, and you’re on my service, I put an alert early in the morning about the second week of May and I said I think this is it. Meaning, the fundamental significant shift between paper assets and hard assets, I think, we don’t know yet, that gold and silver had turned to the up-side and stocks to the down-side. Now, since I made that statement, stocks have made a new high, so let me get that on the record. However, it looks to me as if we are getting a confirmation on that with gold right now. Because gold is right at the breakout point from a six year down trend and it’s mostly safe haven buying, but it’s not the people that I just referred to, it’s basically the smart money, which means big investors, large hedge funds, and China primarily.

China’s gold demand is set to surge about 50% to about 1,000 metric tons this year. Their demand for gold bars are on track to make a 50% move in 2017. The geopolitical risk internationally is probably at an all-time high and this is leading to safe haven demand again, for smart money, nation states, people in the know, people that have basically sold off their stocks quite some time ago near the highs, that have capital sitting on the side lines and that is starting to filter into the gold market. And then you’ve got of course, a lot to do with the U.K. election, terrorism, the risking tensions in the middle east, and all of this is supportive of the gold, especially after the attacks in London that took place recently.

And the other fact, is that gold is 12% higher for the year and it’s actually out performing stocks. Yet, if you stopped the average investor on the street and asked them what’s doing better this year, I’d say about 90%, probably higher than that, probably 98% would say, well stocks are doing better than gold.

Mike Gleason: Yeah, it’s a very valid point. As a follow up here, and this is kind of an open ended and very broad topic, but comment on counterparty risk, because I know that is something that you’ve been covering in The Morgan Report recently. Take it wherever you want, but share your thoughts there, because part of this complacency is failing to recognize the tremendous amount of counterparty risks that exist in the world today, give us your thoughts there David.

David Morgan: Yeah, I could go on, I’ll try to be succinct. First of all, the belief system is so strong, and yet the truth is sometimes actually opposite of a very, very strongly held belief. The belief globally for all of the establishment economic system, which means all nation states, big hedge funds, all banks, etcetera, believe that the safest place that you can be in is the United States bond market, be it a treasury bill, a T-note, a long bond, anything in between. If you own the full faith and credit of the United States debt, you are buying something extremely safe. And the truth is, it’s the exact opposite. It is probably the once place that at some point in time, everybody is going to want to get out of it, perhaps at the same time or close to it.

How can I say that? Well, going back to what I stated, all fiat currencies eventually fail, so this is proven time and time again, yet the belief system has yet to shift in a dramatic way. However, the cryptocurrencies are a bit of a tip off that somebody understands what is going on, and I admit, the best place that you could have possibly been over the last 30 years, for a long term buy, hold and forget it trade, would have been the U.S. bond market, this is true. But nothing grows to the moon. I mean, all trees grow as high as they grow and then they stop. It’s the same thing with the bond market.

So, there is a huge debt bomb that we talked about in The Silver Manifesto, that’s waiting to go off and when that happens, and it doesn’t necessarily mean one day, boom it goes, and everybody understands it. It’s more likely to take place slowly, slowly, slowly and then all of a sudden. Which means that a lot of savvy people will be exiting the dollar, which we have seen for years now. We’ve seen a lot of nation states that have basically abandoned the dollar slowly, sometimes fairly quickly: China, Russia settling their payments between each other in their own currencies. A lot to move from the AIIB (Asian Infrastructure Investment Bank). I mean there is a lot of periphery situations that savvy people are aware of that have been a way for, not only individuals through the cryptocurrency situation, but nation states to exit exposure or much exposure, or to mitigate their exposure to the U.S. dollar. And this is a harbinger for what will take place at some time in the future. So, these things always end, the longer you add, to coin (a phrase) and give credit to Jim Sinclair, “pretend and extend,” you pretend that everything is okay and these guys pretend they can manipulate it forever and extend the problem, the worse it becomes, and this is the state that we’re in right now.

Mike Gleason: A follow up there on cryptocurrencies, David we’ve seen a real boom in those lately. Now, I think we would probably both see value in owning some Bitcoin or one of the alternatives, but one thing that we should say is that digital currencies are not and should not be viewed as a substitute for owning gold and silver, which have stood the test of time as money and have been money all throughout history, comment on that if you would.

David Morgan: Well, there’s two theories on money. One is that money is whatever the government says it is, which is a legal fiction, and of course you could be the argument that it’s salt, or it’s cow hides or it’s sheep or it’s whatever. Well, certainly that’s been tried throughout history, but the argument is either it is a legal fiction or it’s specie: it’s something of value that has value in and of itself and I would argue silver actually has more value than gold, because you can use silver for medicinal purposes, you can use it for electronics, you can use it as money or barter, and it fulfills actually more services to whoever owns it than gold does. But regardless of my thoughts on the two metals, gold and silver from time in memorial all of recorded history have been chosen by the free market as money of substance. And this is where you can’t get around the argument, I mean, a lot of people have been brainwashed into believing that gold and silver have no purpose today, they really aren’t money, and on and on it goes. So, the idea that you can create something out of nothing and it has value has been tested time and time again, and again they always fail.

On the cryptocurrencies, I’m not against them first of all, in fact I just gave a lecture about them. I talked about gold, silver and the blockchain, of course I mentioned Bitcoin primarily because it’s the leader, bitcoin is unusual, I mean let me again back up slightly Mike.

First of all, to be intellectually honest, would a cured fiat system work in theory, and the answer is probably yes, to be intellectually honest. If and only if you had a limited supply of dollars and they only grew as the economy grew, you would have in theory, a pretty good paper system.

However, that has never been the case, even when the gold-standard-basher’s bash gold, they’ve said well, the gold standard has never worked. Well, yes and no. The gold standard would work because what gold’s purpose is, is to keep that money supply growing basically at 2% a year, which is probably what a lot of the people on the left side would like, which is sustainable growth. And in a real, true economic system that is backed by physical reality rather than a make believe set of derivatives that is unimaginable at this time, you have an economic system where each dollar over time becomes more and more valuable. But that is not where we’re at. So, we’re in a situation where there is a challenge to the system, and the main challenge really isn’t coming from the precious metals, the main challenge is coming from the cryptocurrencies.

Bitcoin is obviously the leader, I look at it Mike, right now with 750 different cryptocurrencies out there, being similar to what happened in the tech wreck, where a lot of these domain names were getting huge valuations for a very short time and a lot of people were piling in. And yet today we still have Yahoo.com, Amazon is a big leader, there are certainly companies out there that were the real deal, stood the test of time, and a lot of these dogs and cats went away very rapidly. I think the same thing will take place in the cryptocurrencies. I do think that some of them are here to stay, I think Ethereum is really not a coin, I think it’s a platform. I think few people really understand it’s potential. I think it’s one I’m favorable to. Bitcoin, it’s hard to argue against, I mean, the markets certainly voting very strong for that one. Dash is an interesting one, I certainly don’t know them all, I don’t claim to be an expert.

But one place I really do have some concerns is security. And I gave that main concern at this lecture I did in Vancouver recently, and of course I got some blow back on it and people were telling me, you can take your account and write it down on a piece of paper and hide it under your desk and that type of thing, I get that, I understand that. But there’s already been security issues with Bitcoin and a lot of people won’t do that. I mean, just because you have the potential to make it more secure doesn’t necessarily mean that most people will. So there is some vulnerabilities out there and this is not me speaking, these are someones at a recent tech conference, and these were high level people that were talking about the internet of things and how vulnerable all this internet of things model is with this, what’s called big data, that is taking place before us right now, has security issues. And they do, so that’s something to bear in mind.

Now, as far as, how much to put into Bitcoin or whatever, certainly I’m free market, you decide for yourself, but I think Bitcoin’s got a long ways to go and I say that based on technical work. I mean, I looked at the chart before I did my presentation because I work pretty hard on these presentations as you know, and the volume was tremendously large in Bitcoin over the last couple months, which means it’s got a lot higher to go, there’s no question about it. And momentum feeds on momentum, especially when you’re making new highs, there is nothing more bullish to the market than a new high because everyone that owns it wants to hold it, because they don’t know how high is high, so there is very little that sells back. There will be some profit taking, but not much, because everyone is concerned with, “wow, I made this much percentage today, I wonder how much I’ll make tomorrow.” So, there’s not much selling pressure. And it will continue to go up. Very interesting market, from a couple places, the main one I would emphasize, which is a probably a different view point from many, is it is a competing currency to the present system and obviously it’s taking off rapidly.

Mike Gleason: You’ve always focused primarily on the silver market throughout your career and I know part of why you’re such a big believer in the white metal over the long run – and feel that it could really outperform gold and all other hard assets for that matter – is that fact that the moves can be so explosive because it’s such a small market, something like 1/10th the size of the gold market I believe. So, talk about that dynamic and then remind folks about the need to recognize that the moves can be pretty substantial in the silver market and not just to the down side but also to the up side.

David Morgan: Well, exactly. What I just outlined earlier was China’s buying more gold this year, and the last, and the smart money can move into gold, I mean, gold is a small market relative to the total financial markets. But they can protect themselves with gold. It’s impossible for really big money to move into the silver market, it’s just too small a market. And what will happen, is once gold breaks free, whatever that means, actually we’re at the cusp of breaking through a 6-year down trend, and it’s not going to be the next day, David. It’s going to be in a time frame, probably 2018 when we’re going to really see some momentum in both of these markets.

But if you look at the total asset base of the world, physical gold makes up about 1%, but silver makes up .02%, and there is a lot of people that at some point will want to turn some of their Bitcoin profits into hard metal. I’m not saying everyone, I’m saying some percentage, but there will be a move into the metals, and once the move into the metals starts in earnest, like we saw in 2011, you will see a lot of money, “money”, moving into the precious metals because it will be apparent at some point in time, that what I started this interview with, that the dollars demise is upon us and no one is going to trust it. It’s a confidence issue, it’s a trust issue. And what’s trusted more than anything else, even more than Bitcoin, at least history shows, is the precious metals.

So, there will be people that will be exchanging some of their Bitcoin profits for metal, there will be people on other currencies doing the same, there will be people that have huge bond holdings that will want to get out and move into the metal. And once gold starts moving to a level that a lot of people question if they can afford it or not, that will spill over into the silver market. But the silver market is so tiny, that it will take it much higher, because people really won’t care too much about the price, they’ll care about protection at that point. And that means, that “while I can afford silver it’s only, we’ll think of a number, $ 50, and gold is at $ 5000, its a 100 to 1 ratio, I can buy silver, I can afford it so I’m going to buy it.”

We will see, this is what happened in the 1980’s model, and this is what basically some Arabs and the Hunts taking a large position in silver early, before it made its big move. It was actually retail buying that took it to the height, it wasn’t Hunt, he was already positioned. It will be similar, I think, this time, except it’s a global based market, and we have the internet. Which means, that people that have never bought a silver or gold coin in their lives can almost instantly google how to buy silver, look it up and see how to do it and do it within a matter of a few minutes on the internet, so this is going to put huge pressure on the markets that they’ve never experienced in the past.

Mike Gleason: As an aside, we have been seeing a big uptake in the Bitcoin orders that we have been taking on our website MoneyMetals.com, we have accepted bitcoin for a good two years now and it’s really starting to actually move the needle, believe it or not.

Well, David as we begin to close here, the metals markets of course are a major focus for you, but we’ve also come to value your insights when it comes to broader issues such as, honest money and personal freedom.

Now, the Liberty Movement got an enormous boost in 2008, the financial crisis and Ron Paul’s rise to prominence were among the major catalysts. A whole lot of people were confronted with the problems in our governments and our monetary system. However, nearly 10 years have gone by since the financial crisis and precious little has been fixed, but people have gotten tired or complacent like we talked about at the top of the interview. Take an issue like Audit the Fed for instance, college kids chanted that slogan at rallies a few years back, but the establishment fended off the effort and the momentum appears to have faded there. Now, a good argument can be made about that effort being a waste of energy because beating Congress and Wall Street in their own rigged game is never going to happen, but what are your thoughts on the state of the Liberty Movement today. What efforts do you see working and where are the challenges?

David Morgan: Oh, well that’s a real tough one. First off, I’ll start from the bottom up. Number one is take care of your personal self and your family, I mean, you want to be healthy, wealthy, and wise to coin Ben Franklin. So, really change what you can, make sure that you’re eating right, make sure that you’re exercising, make sure that your health is number one. When I sign off the Morgan Report, from day one, I always sign it off “wishing you health above wealth.” There is a reason for that. Wisdom beyond knowledge. Having the knowledge of something doesn’t mean much unless you implement it. Being wise is meaning you know how the world works and working with it and that’s working with the truth. So that’s the bottom line, I think control what you can.

Moving up from there, what can you do. Well I’m more or less a pacifist, so I think for example, what Ted Butler did over all these years, to give a shout out to Ted, I mean he was instrumental and spearheaded this whole idea of what was going on in the CFTC and it’s been pretty thankless for him for a long time, yet he has maintained his position and asked people to help him write to the CFTC and investigate the manipulation of the silver market, and for years nothing really happened. But this little guy that is being held up as someone spoofing the market and then building a case against him, is probably due to some of the efforts that Ted did, in fact most recently.

So, you can make your voice heard, you certainly don’t want to give up. Congress does respond to the populous, it really, really does. So a phone call is much better than an email, and a written correspondence carries a lot more weight than an email and it doesn’t have to be a lengthy manifesto, it can just be simply, “I support freedom and you aren’t,” or something even better from my politically, perhaps questionable point of view, but it’s spot-on legally, is “you took an oath to defend the constitution from all enemies, foreign and domestic and I’m starting to question whether or not you are upholding that oath, write me back.” Something along those lines will wake them up, whether or not you’ll get a response I doubt it, there’s probably a computer form letter that has anything with the word Constitution in it that will probably pop out a form letter and send it back to you.

But regardless of that, you certainly can make it. And I’m for peaceful protest, the problem we have now is this “anarchy” with what’s going on from a certain political belief system, where burning things up and bashing windows, that doesn’t solve anything and it’s deconstructive, not constructive. Yet, there seems to be an element that actually relishes making that kind of a statement, which is very sad indeed, and it falls back on us as a society on what’s really being taught to the population at large and what are the moral values and what does make us great. What makes us great is we have high integrity, we were telling the truth. That’s what made America great, it wasn’t the financial system. If the financial system was honest, that helps a great deal. But as I’ve said many times, but probably bear repeating one more time Mike, as I close out, is there is a direct correlation between the integrity of the money system and the moral integrity of the population at large. The more the monetary system deteriorates, the more the moral society deteriorates with the population. They go hand in hand and we are witnessing that as we speak.

Mike Gleason: Very well put, we’ll leave it there. Well, as we wrap up here David, talk about some of the things you’re working on there at the Morgan Report, maybe mention the recent book and let people know how they can get their hands on that if they haven’t already, and anything else you want to leave our listeners with today.

David Morgan: Yeah, just go to the main website, TheMorganReport.com. If you’re already on the email list, you can go ahead and download that for free. The system is smart enough to know if we already have your email. And then if you’re interested in the book, just pull down the books tab on the website, you can order either book, The Silver Manifesto or Second Chance. And Mike I appreciate you mentioning that for me.

Mike Gleason: Well, outstanding insights as usual David, it’s wonderful stuff to hear and we’re very grateful for your time and for giving us your thoughts on these important matters. We appreciate talking to you today and look forward to catching up with you before long. Take care my friend.

David Morgan: Thank you very much.

Mike Gleason: Well, that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David just visit TheMorganReport.com. We urge everyone at the very least to go ahead and sign up for the free e-mail list and start getting some of his commentary on a regular basis. And if you haven’t already, check out The Silver Manifesto and his new book, co-written with our mutual friend David Smith, titled Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave. Both of which are available on MoneyMetals.com and other places where books are sold. Be sure to check those out.

And don’t forget to check back here next Friday for our first Market Wrap Podcast of 2018. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend, and Happy New Year everyone.

Precious Metals News & Analysis – Gold News, Silver News




Be a Precious Metals’ Winner with a Mind Like Water

We’re in the midst of a massive, transformational change that will redefine where we are, what we think is true, and where we believe the future is headed.

With sensory input from across the political and economic spectrum of the Internet bombarding us 24/7, it’s understandably difficult to follow through on a decision once made, even if you’ve researched carefully and thought things through beforehand.

Nowhere is this more difficult right now than the decision of whether or not to invest in – or add to – one’s position in the physical gold and silver space.

Not only that, but when you add all the noisy arguments from competing investments which seem to be doing much better while the precious metals slumber, it’s understandable why some long-term information-overloaded investors have decided to sell their metal.

I’d like to suggest that those who hesitate to buy, or worse, decide to sell what they already have are going to experience considerable remorse – and soon.

A potent way to avoid such a struggle and stick with your original decision is to practice developing mizu no kokoro – Japanese for a “mind like water.”

In this state, thinking is minimized, listening/watching emphasized. To get an idea of the clarity that can be achieved, look at the picture below.

I took this photo during a rare moment when all the elements necessary to build such a scene were present. The water is dead calm; the sky is so full of more-or-less stationary cloud formations that it’s difficult to see where one begins and the other ends. At the same time, nothing is distorted. The glassy water “mirrors” the clouds exactly as they look in the sky.

Mind Like Water

Being in the moment mostly involves paying attention.

There’s a lot to be said for “planning your work”; then “working your plan.” At some point you’ve taken your position and set aside money to buy more metal, either at certain intervals or into declining prices.

Then just let things be. Try not to be swayed by counter opinions, even if they seem to make sense. If this is difficult, don’t feel so bad about it. Even the investing greats have to remind themselves from time to time.

Jesse Livermore, one of the greatest speculators who ever lived, wrote a book titled Reminiscences of a Stock Market Operator. Still relevant almost a century later, it stands as one of the half dozen titles any serious investor should read. In it, Livermore made a comment about staying the course that is absolutely germane to our discussion. He said,

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!

It is no trick at all to be right on the market. I’ve known many [traders] who were right at exactly the right time, and began buying or selling stocks when prices were at the very level that should show the greatest profit. And their experience invariably matched mine; that is, they made no real money out of it. Those who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make the big money.

Steve St. Angelo’s excellent world physical silver demand chart shows a powerful 4x increase during the last decade. This “trend in motion” will continue.

World Physical Bar & Coin Demand (Chart)

Realize that the blockchain and gold (+silver) will coexist.

Yes, the current hyperbolic rise in bitcoin may be side-tracking some funds that otherwise would find a home with precious metals (though there has been no major outflow from metals’ ETFs). But in this writer’s view, an even bigger reason is that some long-term holders have developed a level of fatigue waiting for metals to rise while the stock market and bitcoin seem to be on a never-ending run. This, in spite of the fact that gold is actually up around 10% in 2017.

Stewart Thomson’s view, as editor of GU Blockchain , to which I fully subscribe (both literally and figuratively!) is this:

(I will) state adamantly that blockchain will increase demand for gold. Indian investors will seek to put a portion of their huge blockchain profits into physical gold because they are essentially mandated to do so by their Hindu religion. Western investors will do the same when the stock market finally rolls over.

If gold-backed blockchain currency goes mainstream, demand for gold would increase even more significantly, and do so in a sustained way.

Gold Bull Markets 1970 vs 2000 (Chart)

When, not if?

How you can apply “Mind like Water”

Step back from the “noise” (charts, talking financial heads and top-callers) that blurs your vision. Work your plan by continually adding – via dollar cost averaging, regular buying or “taking some money off the table” from other winnings and plowing it into precious metals. Let your mind (and emotions) rest on the picture above and you’ll achieve a level of clarity most others will not. Be right. Sit tight.

Raise your odds of success by keeping in mind the following words from Rick Rule, a man who over several decades, has made a career out of being consistently right – and making big money in the process. He says, “I prefer to ask myself investment questions where the answer begins with when, not if. If the outcome is certain, but the timing is uncertain, my only risk is patience.”

Few eyes are being focused on the powerful base-building action of the metals and miners that has been taking place over the last 18 months. The odds are excellent that we’ll soon see much higher prices, just like we did in 2016. So, be a contrarian. Take your position in gold, silver and possibly some palladium. Then let your mind become like water, as you wait for “when, not if.”

Precious Metals News & Analysis – Gold News, Silver News




Money Metals Exchange Is Also Your Crypto/Metals HQ

Money Metals Exchange began accepting Bitcoin payments for gold and silver bullion nearly 3 years ago, putting us among the very first in our industry to do so.

Today, we are announcing expanded services – both when buying and selling precious metals – using several crypto-currencies.

We believe honest money is core to liberating people and protecting their savings. History is clear as to how the game of unrestrained government borrowing, printing, and spending will end. The holders of the world’s fiat currencies will wind up holding the bag.

Crypto-Currencies

There can be no doubt that tangible, off-the-grid, gold and silver – which feature zero counterparty risk – will have a key role to play in the future, just as they have in the past. It may well be that crypto-currencies will also have a role to play.

Crypto-currencies provide a method of sending payments anywhere in the world, without permission and with little cost. It is possible to do so securely and privately, without relying upon bankers as middlemen.

If Bitcoin, or one or more of the alternatives, can solve scaling problems, it could be a revolution in which individuals and liberty are the victors.

Our clients have long been able to make payment for metals using Bitcoin at MoneyMetals.com, as noted above. But that is just the start. Very soon we will be able to accept online payments in Bitcoin Cash and other major crypto-currencies.

But we can already do a much larger variety of crypto-currency transactions with clients who call us rather than order online.

Transact with Money Metals Using Bitcoin, Ethereum, Litecoin, Ripple, Bitcoin Cash, and More!

It is possible now for those doing transactions by phone to make payment or receive payments using crypto-currencies other than Bitcoin. By arrangement over the phone (1-800-800-1865), we can transact in Ethereum, Bitcoin Cash, Ripple, and Litecoin. (We may also engage in transactions with other coins and tokens if liquidity is sufficient, please just ask.)

People who wish to make purchases larger than our online maximum (meaning in excess of $ 100,000) can also call for help with that. We can generally offer lower premiums on the metals and the process is easy.

Aside from our ability to accept payment in other crypto-currencies besides Bitcoin, what further sets Money Metals Exchange apart from other merchants in our space is our ability to make payments TO clients using crypto-currency. We can purchase your metals and send you the digital coin of your choice as payment.

Simply email or call 1-800-800-1865 to let us know you will be sending bullion you wish to exchange. When we receive the metal, we will contact you to lock the exchange rate and get the wallet address for sending the payment. Fees for this service are currently 3%, or less, and we can deliver a wide range of tokens and coins.

Money Metals is also a great platform for crypto-currency speculators who want to use precious metals as a safe haven. Our customers can swap Bitcoin (and other coins) for gold and silver to be stored by Money Metals Depository. Storing with us makes it quicker to swap back into crypto-currency when the time comes, and avoid the cost and hassle associated with shipping metals.

Crypto-Currencies

We have seen interest in this program grow significantly in recent weeks. Some crypto-currency holders seek to take profits after the extraordinary move higher and reallocate funds to precious metals.

Others plan to head to the sidelines for a period of time while questions and concerns over Bitcoin scaling and the health of some major exchanges, such as Bitfinex, get resolved.

For many, parking capital in U.S. dollars is not an attractive option. We make it easy to park in physical gold and silver instead. Clients can do that with confidence. Money Metals Depository provides fully segregated (and independently audited) storage in a state-of-the-art Class III vaulting facility located in Idaho. The cost of storage starts at just $ 96 per year.

A few metals investors are excited by what is happening in the crypto sphere and are looking to join in. Others want nothing to do with digital currencies or are looking to get out. Regardless of what you are planning to do on the crypto-currency or hard currency front, Money Metals can help you do it!

Precious Metals News & Analysis – Gold News, Silver News




Precious Metals and A Bit of Tax Planning

The IRS classifies bullion coins and bars which carry zero collectible value the same way it categorizes a collection of baseball cards. Because of the IRS’s dishonest interpretation of tax law, gold and silver bullion is currently subject to the higher 28% long-term capital gains rate for “collectibles.” By comparison, the rate for Wall Street and government approved assets – just about everything else – is 15-20%, depending upon the taxpayer’s income.

Investors might as well use this punitive long-term capital gains rate to their advantage. Metal purchased more than a year ago at a higher price can be sold to unlock losses and reduce taxes. Individuals can claim up to $ 3,000 in losses against ordinary income, and more if they have capital gains on another asset. (Check with your own tax advisor.)

Tax Breaks

Now is certainly not a great time to exit the metals markets, in our opinion. Fortunately, realizing capital losses can be done without relinquishing a position in metals for more than a few seconds. Investors can immediately buy replacement metals without having the transaction classified as a wash sale (wash sale rules do NOT apply to precious metals – only to securities).

Taking losses now does lower the investor’s cost basis going forward. The new basis becomes the price at which replacement metals are purchased. That could mean larger taxable capital gains down the road if they are sold at a profit. There are a couple of ways to address this…

The first is to transfer the metals to heirs as part of an estate. For investors with no plans to sell metals going forward, the gains may never be taxed. Profits which go unrealized before the owner dies are not subject to the IRS rake, provided the total value of the estate is below the cap. Currently, estates worth $ 5.49 million per individual or $ 10.98 million for a married couple will transfer to heirs tax free.

Heirs receive the bullion without liability and the cost basis is adjusted to whatever the value of the metal happens to be upon inheritance. Taxes will only be due on gains from that moment forward – and only when they are finally sold by the inheritor.

Likewise, any capital losses on metals will not be transferred to heirs. So it is good tax planning to realize any losses before the metals wind up in an estate.

The other way to address higher capital gains taxes associated with precious metals is to hold them inside a self-directed IRA. Metals investments held that way appreciate tax deferred.

One very effective tax strategy for those who have losses they can unlock is to sell metals they hold personally and use the proceeds to either start a self-directed precious metals IRA or contribute to an existing one. The investor gets to claim the losses AND take advantage of the deduction for contributions to a retirement plan on this year’s tax return.

It is worth noting that the tax treatment of your non-retirement metals is the same regardless of whether you own the metal in physical form or as shares in one of the big gold and silver exchange traded funds (ETFs). These funds are organized as trusts and they get taxed as if the assets they hold – precious metals bars – were held directly by the ETF’s shareholders.

That makes now a great time for investors to dump any paper gold and silver they may hold as ETF, and upgrade to physical bullion which offers zero-counter party risk.

Money Metals Depository

If storing physical metals is a concern, Money Metals Depository can handle that for you starting for as little as $ 96 per year. MMD’s storage rates for segregated storage are the absolute lowest available in the industry.

For less than one might pay in ETF management fees, investors can place their metals into fully segregated storage in our new high-security vault. Bullion that you purchase from Money Metals Exchange will be delivered into your storage account without the cost or delay associated with shipping.

Metals investors would rather be talking about higher prices and profits to be sure. But there are ways to turn the lemons the markets have handed out in recent years into lemonade.

Precious Metals News & Analysis – Gold News, Silver News




Quiet Metals Markets Catalyst

Fear and greed drive the precious metals markets, but there hasn’t been much of either pushing gold and silver prices lately. Investors have grown tired of worrying about geopolitical events, ever increasing federal debt ceilings and ever inflating equity bubbles.

Meanwhile, greedy trend traders continue piling in to hot markets.

With the exception of palladium, metals prices have been stagnant for most of the year. For the time being, gold and silver are looking pretty boring relative to the hefty gains in stock prices and the explosive rise in Bitcoin.

Goldbugs are still waiting for a catalyst to shift investor attention back to the metals markets. Let’s take a look at some of the possible near-term drivers for gold and silver…

The equity markets remain overdue for a significant correction, and that would definitely stir some safe-haven demand. Yes, we have been expecting a correction in stocks for some time and prices are still moving higher.

There is, of course, no telling when the next bear market in stocks will arrive. But price-to-earnings valuations have only moved higher into nosebleed territory and shares are truly priced for perfection. A good-sized hiccup could have investors heading for the exit.

Bitcoin prices may also correct, diverting some of that capital instead into gold and silver. Cryptocurrencies are an entirely different kettle of fish when it comes to valuation. If Bitcoin can deliver on its promise to revolutionize payments and finance, today’s prices will ultimately look cheap.

Bitcoin Caution

However, no one should expect Bitcoin to continue moving higher in a straight line, with price corrections measured only in days or hours. There are a couple of developments right now with the potential to derail the extraordinary bull run in Bitcoin – at least temporarily.

A number of major cryptocurrency exchanges have grown reliant on a token called “Tether.” The Tether token is supposed to be backed 1 to 1 with U.S. dollars held by the company behind the Tether. Traders swap Bitcoin and other coins into Tether, assuming it is akin to cash. However, there are serious questions about whether or not the backing exists.

If confidence is lost in the nearly $ 1 billion of Tether tokens floating around exchanges, much of which has been used to make leveraged purchases of Bitcoin, it could be a disaster rivaling the collapse of Mt. Gox.

Bitcoin is also getting a boost in anticipation of institutional money pouring into the markets. The CME Group (COMEX) will launch Bitcoin futures trading later this month and lots of people expect the influx of capital to be very good news for the price. Our perspective is a bit different given that the nearly unlimited supply of paper futures contracts has undermined precious metals prices.

We think Bitcoiners should be wary of the participation of establishment institutions, such as JPMorgan Chase, which are likely to heavily short Bitcoin. These banks have a record of defeating limited supply by selling paper contracts in unlimited quantity and profiting as prices fall. People should also understand that many of the institutions who will be playing in Bitcoin futures are not fans of Bitcoin.

There are also a couple other developments of particular interest for metals investors in the coming weeks. Tensions with North Korea and Iran are still escalating. And Michael Flynn, President Donald Trump’s former National Security Advisor, has taken a plea deal. The President’s many enemies in Washington DC are hoping Flynn will testify to some impeachable offense.

Should these players finally hang something serious on the President, we can definitely expect some turmoil in conventional markets.

It is quiet in the metals markets now, but there are plenty of ways for this quiet to be broken at any time.

Precious Metals News & Analysis – Gold News, Silver News




Precious Metals Analyst Totally Omits Silver Investment Demand From Market Fundamentals

The motivation to write this article came from several of my readers who sent me an interview by CPM Group’s Jeff Christian, at the San Franciso Gold and Silver Summit. In the video, Jeff claims that there has been a silver market surplus for ten years and those industry analysts, who have reported deficits, “Are simply wrong.” Jeff goes onto to say, “they have been wrong the entire time they have been on the silver market.”

Jeff continues by explaining that to analyze the silver market correctly, you must look at surplus and deficits based on total supply versus total fabrication demand. Furthermore, he criticizes industry analysts who may be promoting metal by throwing in investment demand to arrive at a deficit. He says this is not the proper way to do “commodities research analysis.”

Jeff concludes by making the point, “that if you keep silver investment demand as an “off-budget item,” then the price matches your supply-demand analysis almost perfectly.” Does it? Oh… really?

If we look at the CPM Group’s Supply & Demand Balance chart, I wonder how Jeff is calculating his silver price analysis:

Silver Supply and Demand Balance (CPM Graph)

This graph is a few years old, but it still provides us with enough information to show that the silver price has nearly quadrupled during the period it experienced supposed surpluses. According to the CPM Group’s methodology of analyzing total fabrication demand versus supply, how on earth did the silver price rise from an average of $ 5.05 during the deficit period to an average of $ 19.52 during the surplus period? I arrived at the silver prices by averaging the total for each time-period.

Again, Jeff states during the interview that their supply-demand analysis, minus investment demand, provides an almost perfect price analysis. According to the CPM Group’s 2016 Silver Yearbook, the total surplus for the period 2008-2016 was approximately 900 million oz. With the market enjoying a near one billion oz surplus, why would that be bullish for a $ 20 silver price?? It isn’t… and I will explain why.

As I have mentioned in many articles and interviews, the price of silver has been based upon the price of oil which impacts its cost of production. If we look at the following chart, we can plainly see how the price of silver has corresponded with the oil price going back until 1900:

Annual Silver Price vs Oil Price: 1900-2016

You will notice the huge price spike in the 1970’s after Nixon dropped the Gold-Dollar peg causing inflation to run amuck in the United States. Now, the oil price didn’t impact just silver; it also influenced the value of gold:

Annual Gold Price vs Oil Price: 1940-2016

As with the oil-silver trend lines, the gold and oil price lines remained flat until the U.S. went to a 100% Fiat Currency system in 1971. So, if we decided to throw out all gold and silver supply-demand forces, we can see that these precious metals prices paralleled the oil price. Now, the reason the price of silver shut up to an average of $ 19.52 from 2006-2017 was due to its average cost of production. Today, the market price of silver is $ 16.42, and the average cost of primary silver production is between $ 15-$ 17 an ounce. According to my analysis of the top two gold mining companies, their cost of production is about $ 1,150. Hence, the 71-1 Gold-Silver price ratio.

Did Jeff Christian include the cost of production in his analysis of the silver price? How many silver mining companies are producing silver for $ 5 an ounce and making an $ 11 profit? Or how many silver mining companies are producing silver at $ 35 and losing nearly $ 20 an ounce? I will tell you… ZERO.

The only way an individual would believe that the primary silver mining companies are producing silver at $ 5 an ounce is if they believe in the investor presentations that report CASH COSTS. Anyone who continues to use CASH COST accounting needs to get their head examined. It is by far the most bogus metric in the industry that has caused more confusion for investors than anything else… well, if we don’t include faulty analysis by certain individuals.

I find it utterly amazing that the CPM Group entirely omits silver investment from their fundamental analysis. Here is a chart of their total world silver fabrication demand from their 2016 Silver Outlook Report:

Annual Silver Fabrication Demand

If you are a silver investor, your demand doesn’t count. It doesn’t matter if you purchased 100 of the half a billion oz of Silver Eagles sold by the U.S. Mint since 1986. How many Silver Eagles have been sold back, melted down and returned to the market to be used for industrial applications?? According to the 2017 World Silver Survey (GMFS), total Official Silver Coin sales were 965 million oz (Moz) since 2007. If we add Official Silver Coin sales for 2017, it will be well over one billion. I highly doubt any more than a fraction of that one billion oz of Offical Silver Coins were remelted and sold back into the market.

Moreover, what term do we give to companies who produce Silver Eagles or private silver rounds?? Aren’t companies fabricating silver bars and coins? While it is true that physical silver bar and coins can be sold back into the market, a lot of new demand is coming from fabricating new silver bullion products.

CPM Group only values silver as a mere commodity for the sole purpose of supplying the market for industrial, jewelry, silverware, photography and photovoltaic uses. I gather 2,000+ years of silver as money no longer matters. Yes, I would imagine some precious metals investors are feeling a bit frustrated as they watch Bitcoin go vertical towards $ 12,000. But a word of caution to Bitcoin investors who are dreaming about sugar plums dancing in their heads and dollar signs in the eyes.

Now, when you see an article titled, Signs Of A Market Top? This Pole Dancing Instructor Is Now A Bitcoin Guru; it might be prudent for you to recall a memorable part of the move in The Big Short:

There is a wonderful scene where a pole dancer is explaining to a fund manager how she’s buying five houses.

A lowly paid pole dancer who survives on unpredictable tips should not be able to afford multiple houses, but this was the sub-prime USA where the ability to repay a loan was apparently not a prerequisite.

What a coincidence… ah?? Pole dancers buying five homes and becoming a Bitcoin Guru. What’s next? LOL.

Regardless, the notion by CPM Group that investment demand shouldn’t be included in supply and demand forecasts suggests that the gold market has experienced a total 418 million oz (Moz) surplus since 2006. Yes, that’s correct. I calculated total global gold physical and ETF investment demand by using the World Gold Council figures:

Total Net Global Gold Investments (Physical & ETF)

The reason for the drop-off in net gold investment in 2013-2015 was due to Gold ETF liquidations. For example, 915 metric tons (29 Moz) of Gold ETF inventories were supposedly liquidated into the market. Even though the gold market experienced a record 1,707 metric tons of physical bar and coin demand in 2013, the liquidation of 915 metric tons of Gold ETF’s provided a net 792 metric tons of total gold investment. Please understand, I am just using these figures to prove a point. I really don’t care if the Gold ETFs have all their gold. I look at Global Gold ETF demand (spikes) as an indicator for gauging the amount of fear in the market.

The CPM Group does the same sort of supply and demand analysis for gold. They omit investment demand from the equation:

Gold Fabrication Demand (Annual, Projected Through 2015)

(CPM Group Chart Courtesy of Kitco.com)

Again, according to the CPM Group, gold bar and coins aren’t fabricated. They must be produced by Gold Elves in some hidden valley in the Grand Canyon. No doubt, under the strict control by the NSA department of the U.S. Government.

For anyone new to reading my work… I am being sarcastic.

Moreover, the significant change in gold investment demand is a clear sign that investors are still quite concerned about the highly inflated bubble markets. If we go back to 2002, total gold investment was a paltry 352 metric tons compared to 358 metric tons of technology consumption and 2,662 metric tons of gold jewelry demand. However, in 2011, the gold market experienced a massive 1,734 metric tons of total gold investment versus 2,513 metric tons of jewelry and technology fabrication.

What is significant about this trend change? In 2002, global gold investment was a mere 10% of total gold demand. However, by 2011, gold investment demand surged to 41% of the total, not including Central Bank demand. Even in 2016, global gold investment demand was still 40% of the total. As we can see, investors still represent 40% of the market, whereas they were only 10% in 2002.

Precious metals investors need to understand there is a huge difference between Gold and Silver versus all other metals and commodities. The overwhelming majority of commodities are consumed while gold and to a lesser extent, silver, are saved. And, they are being purchased as investments and saved for an excellent reason.

The world continues to add debt at unprecedented levels. In just the month of November, the U.S. Government added another $ 137 billion to its total debt. This doesn’t include the $ 610 billion of additional debt added since the debt ceiling was lifted on September 8th. So, the American public is indebted by another $ 747 billion in less than three months.

Getting back to silver, according to the GFMS team at Thomson Reuters, who provide the World Silver Survey for the Silver Institute, the market will experience a small annual silver surplus this year for the first time in several decades:

Global Annual Silver Net Balance 2004-2017

The reason for the surplus has to do with a marketed decline of silver investment demand this year. With the election of President Trump to the Whitehouse and the “Pole Dancing Guru” Bitcoin market moving up towards $ 12,000, demand for the silver investment fell by 50% this year. However, I don’t look at it as a negative. Oh no… it’s an indicator that the market has gone completely insane.

This reminds me once again of the movie, The Big Short. In the movie, the main actor bets big against the Mortgaged-Backed Securities. Unfortunately, just as the housing markets start to crash and the mortgage-back security market begins to get in trouble, the bets that the main actor in the movie made, began to go against him. That’s correct. His short bets against the market should have started to gain in value, but the banks wanted to dump as much of that crap on other POOR UNWORTHY SLOB INVESTORS before they would let it rise.

We are in the very same situation today. However, the entire market is being propped up, not just the housing market.

It is impossible to forecast a more realistic gold and silver price when 99% of the market is invested in the wrong assets. So, for the CPM Group to value gold and silver based on their fabrication demand totally disregards 2,000+ years of their use as monetary metals.

Thus, it comes down to an IDEOLOGY on why Gold and Silver should be valued differently than mere commodities, or even most STOCKS, BONDS, and REAL ESTATE. Valuing gold and silver can’t be done with typical supply and demand fundaments. The only reason I analyze supply and demand fundamentals is to understand what is happening to the market over a period of time.

For example, if we look at total global silver investment demand and price, there isn’t correlation:

Total Global Silver Demand vs Silver Price

But, if we look at what happened to silver investment demand since the 2008 Housing and Banking collapse, we can spot a significant trend change:

World Physical Silver Bar & Coin Demand

As we can see, world physical silver bar and coin demand nearly quadrupled after the 2008 Housing and Banking collapse. This is the indicator that is important to understand. While silver investment demand after 2008 has increased partly due to the higher price, the more important motivation by investors is likely a strategic hedge against the highly-leveraged fiat monetary system and stock market.

Investors who follow the CPM Group’s analysis on gold and silver based upon fabrication demand only, are being misinformed. Jeff Christian who runs the CPM Group has no idea about the Falling EROI – Energy Returned On Investment or does he understand the dire energy predicament we are facing. Thus, Mr. Christian and the CPM Group still look at the markets as if they will continue business as usual for the next 50 years.

We are heading into a future that we are not prepared. The economy and markets will likely disintegrate much quicker than anything we have experienced before. I believe the Bitcoin-Cryptocurrency market is going to collapse shortly due to what I see as extreme leverage in the system with very little in the way of cash reserves. I hear stories that trading in and out of cryptos isn’t a problem until you want to receive a substantial amount of funds in your bank. That is a huge RED FLAG.

So, take this warning… as well as the knowledge that pole dancers are becoming Bitcoin gurus. If it’s too good to be true, it’s likely too good to be true.

Precious Metals News & Analysis – Gold News, Silver News




Choosing a Precious Metals IRA Firm

Self directed IRAs are increasingly popular as investors discover they can use them to escape the ring fence represented by traditional IRA accounts.

Banks and brokerages successfully cultivated the idea that IRAs should contain only conventional securities – stocks, bonds, and mutual funds. The truth is that they get paid handsomely for selling those paper assets, so that is all they put on the menu.

But word is getting out that it is perfectly legal and easy to own tangible assets, including real estate and precious metals, in an IRA. Investors just have to leave Wall Street and find a custodian which specializes in self-directed IRA plans. Today, there are a number of firms offering this sort of plan, so it is worth covering how an investor might go about choosing one.

Secure Your Retirement with a Precious Metals IRA | Learn More >

You’ll want to start by evaluating the basics. Choose a firm with a reputation for providing great service at competitive fees. You might give extra points for a firm which is well established in the industry. There has been a fair bit of consolidation and changes in the space recently.

We would not recommend custodians charging more than $ 150 in annual fees or those charging more than $ 50 for each transaction. There are some very good firms with fees significantly below those levels.

The capability to enroll, view and manage transactions online should be a big consideration if you prefer the convenience of managing affairs electronically. Those people who prefer to deal in person should inquire by phone to see if you can reach a service rep easily and get good care.

Storage of your IRA metals is also an important consideration. Custodians will require you to store in a Depository they have vetted and approved. Each will have limited options, so keep that in mind.

Many clients may want to store metals closer to where they live. Others will want to store with a specific depository they know to be reputable and secure. Make sure the custodian you choose has a depository option that works for you.

If you would like to store your IRA metals with Money Metals Depository and take advantage of zero shipping costs and instant delivery from Money Metals Exchange, you’ll want to choose New Direction IRA in Colorado. Our new Depository in Idaho will be approved by additional custodians shortly.

But New Direction IRA is going to be hard to beat. They come very highly recommended by our IRA clients for low fees and great support.

We also recommend segregated storage, which is the only type offered at Money Metals Depository.

Money Metals Depository

Pooled or unallocated storage presents risks. One of those risks is that you buy and store metals which are in good condition, but when you remove metals from storage the depository staff can arbitrarily select scratched, dented, or tarnished items from the pool to send.

If you don’t use segregated storage, you may wind up with metals which will be discounted based on condition when it is time to sell. It happens more often than you might think.

You should avoid custodians who want to steer you into particular products or programs. Some “rare” and “proof” coin dealers have special arrangements with custodians in order to steer people into high premium coins.

Those over-hyped coins generally do not perform well for anyone but the dealers selling them and should be avoided like the plague. In fact, the Wall Street Journal just published an extremely damning article about the proof coin market.

Likewise, we would steer well clear from any custodian pushing “self-storage” metals IRAs and downplaying the risks associated with that program. Taking possession of metals held inside an IRA means taking significant risks that the IRS will disqualify your IRA down the road, subjecting you to taxes and penalties on your entire IRA balance.

IRS officials are already signaling their disapproval. If they decide to clamp down on self-storage (or LLC IRAs) it will be YOU holding the bag, not your custodian – despite the handsome fees you paid for the set-up and administration.

If you need a specific recommendation on an IRA custodian based on your circumstance, please just give one of our Specialists a call at 1-800-800-1865. We will be happy to make a recommendation based on your preferences. To get started with a precious metals IRA, visit this page.

Precious Metals News & Analysis – Gold News, Silver News




Will the Tax Reform Debate Impact Precious Metals?

November 20, 2017 — Precious metals got a boost last week as investors were reminded that stock prices move in two directions — up and down. The S&P 500 and the Dow both finished the worst two weeks they have seen since August.

The selling certainly wasn’t dramatic (both indexes remain within about 1% of their all time highs), but it does represent the recent negative correlation between stocks and metals. Absent the return of an inflation trade, any sustained rally in metals will likely have to be fueled by investors fleeing the stock markets. We’ll see how the equity indexes fare this week. 

Taxes

Wall Street is focused on the debate over tax reform. Whether Congressional Republicans will muster the majority needed to pass a tax bill remains too close to call. We remain skeptical given the combined animosity of the Republican leadership and Democrats towards the president.

At least metals investors who would like some tax relief may get higher gold and silver prices as a bit of a silver lining. Should tax reform fail, it will likely hurt the stock markets and prompt some flight to safety. Trading figures to be lighter this week given the Thanksgiving holiday, but there is some significant economic data due out. We’ll see reports on existing home sales, durable goods, and the FOMC minutes from the Nov. 1st committee meeting. 

Precious Metals News & Analysis – Gold News, Silver News