2018 Stock Market Bubble vs. Gold & Silver

The U.S. Stock Market is reaching its biggest bubble in history. When the price of the Dow Jones Index only moves in one direction… UP, it is setting up for one heck of a crash. While market corrections aren’t fun for investors’ portfolios, they are NECESSARY. However, it seems that corrections are no longer allowed to take place because if they did, then the tremendous leverage in the market might turn a normal correction into panic selling and a meltdown on the exchanges.

So, we continue to see the Dow Jones Index hit new record highs, as it moved up 765 points since the beginning of the year. Now, if we go back to 1981 when the Dow was trading about 800 points, it took five years to double itself by another 800 points. However, the Dow Jones Index just added 765 points in less than two weeks. It doesn’t matter if the (1) point increase in the Dow Jones today is insignificant compared to a (1) point increase in 1981, investors feel rich when the numbers are increasing in a BIG WAY.

This is the same phenomenon taking place in the Bitcoin-Crypto Market. Crypto investors who are used to 10-20 baggers (10-20 times increase) no longer have the patience to invest in a real company that might grow on a 10-25% basis annually. Why the hell put money in a real business that employees a lot of people when you can turn $ 1,000 into $ 50 million in a few weeks?

Unfortunately, the Bitcoin-Crypto Market has destroyed the new Millennials ability even to consider making old fashion sound investments in real capital-intensive companies. Today, the Entrepreneurs rather make money trading Cryptos on their I-Phone, sporting a few thumbs-up Selfies, compared to the previous generation of business people doing deals out of their briefcases.

Regardless, as the stock markets head even higher, it should provide a big RED WARNING LIGHT to investors that all is not well. I put together my first YouTube video titled, THE STOCK MARKET BUBBLE vs. GOLD & SILVER;

In my video, I show how the Dow Jones Index and certain stocks are truly in bubble territory. I also explain why the gold and silver values compared to the Dow Jones and these stocks are tremendously undervalued. Furthermore, I provide an update on the cost to produce Bitcoin versus Gold.

I plan on putting out 1-2 new videos each week on various subjects and believe the video platform will be able to explain some difficult concepts and analysis about how Energy and the Falling EROI will impact precious metals, mining, economy, financial system and our future society.

Precious Metals News & Analysis – Gold News, Silver News

Silver Antidote to Bubble Craziness


  • U.S. stocks, according to many measures, are the most over-valued in history. We live in a Bubble Zone!
  • Bitcoin and other cryptos are definitely in a bubble, but they could rise even higher.
  • Bonds yield little, and in many European countries, less than zero. Central banks have created this distortion to the detriment of savers, insurance companies and pension funds.
  • Real estate: Some locations, such as New Zealand, Canada and Australia are up a factor of 8 to 20 since 1980. Houses have become unaffordable for many, even with historically low interest rates.
  • Silver and gold: No bubble since 1980. Prices have been repressed since 2011 and are attractive now.


  • Institutions buy stocks because bonds yield so little. This works until the inevitable crash. Think tech stocks in 2000 or 2018(?).
  • Institutions and central banks buy bonds trusting the “greater fool” theory. Argentina sold 100 year bonds. What happens when the world runs out of “greater fools?”
  • People buy Bitcoin because it is going up, and it might double again from here. Are you comfortable investing savings with that plan?
  • Others deposit their digital currency units into a “high yield” checking account that yields 0.01% interest. Or they “invest” in a CD that guarantees a yield of 1% per year in a currency that will be devalued by far more. Others buy a motor coach that depreciates $ 100,000 when they drive it from the dealer lot. Or they purchase a house that costs $ 10,000 to $ 50,000 per year in taxes, insurance, maintenance and utilities before principal and interest.
  • Demand value! Not doing any of the above! Avoid fads, bubbles, central bank distortions and obvious financial insanity.


  • What has been money for thousands of years?
  • What is more permanent than ephemeral digital currency units that are continually devalued?
  • Asia has aggressively accumulated it for decades.
  • What has been secretly sold from western vaults and shipped to Asia?
  • What is used in thousands of industrial and medical applications?
  • What has been suppressed by governments and central banks because they promote their own digital and paper currencies which have zero intrinsic value?


  • But “they” claim gold and silver are volatile and dangerous. Gold and silver might go up or down (for a few years) when measured in digital currency units created from “thin air” by corrupt central banks. Gold in 1971 was $ 42 and is about $ 1,300 today. Silver prices have increased similarly as central banks devalued the dollar.
  • For other examples of volatile and dangerous prices, consider the price chart for Global Crossing stock or Enron stock. Or the NASDAQ 100 from 2000 to 2002 (down 84%). Or the S&P 500 Index from 2007 to 2009.
  • But “they” claim gold and silver are relics of a bygone era, and digital is the wave of the future. So why are Russia and China accumulating gold bullion? What happened to Iraqi gold, Libyan gold, and Ukrainian gold, and who wanted it?
  • Do dictators escape while carrying paper currency units or gold bullion?
  • Would you prefer 100 ounces of gold or 130,000 paper dollars in a ten year time capsule?
  • Central banks create trillions of U.S. dollars, euros, pounds, yen and Swiss Francs each year. The Swiss central bank “creates” currency units and buys U.S. stocks. The media thinks “creating from nothing” is normal and healthy, yet informs us that investing in gold, to protect from devaluing currencies, is silly and dangerous!


U.S. dollars are created as debt. Central banks and governments want more currency units so debt, deficits and expenses exponentially increase.

Graph the price of silver (times a trillion) divided by the national debt. The ratio is low because debt has increased rapidly and silver is inexpensive.

Silver times 1 trillion to total debt: ratio

Graph the price of silver (times a trillion) divided by U.S. government annual expenses. The ratio is low and silver is inexpensive compared to total U.S. government expenses.

Silver times 1 trillion to U.S. govt. expenditures: ratio

Graph the price of silver (times one trillion) divided by currency in circulation as measured by M3 (St. Louis Fed).

Silver times 1 trillion to M3: Ratio

Graph the ratio of silver to the Dow Jones Industrial Average over 30+ years. The ratio is low, as it was in 2001 when silver sold for under $ 5.00. In early 2018 the DOW is too high and silver is inexpensive. Both will reverse.

Silver times 1,000 to DJIA Index: Ratio


Graph the ratio of silver to gold. Since 1971 a high ratio has indicated the top of a bull market in both silver and gold. But when the ratio is low (silver is inexpensive compared to gold) both silver and gold are cheap, especially compared to other paper and digital assets – like now!

100 times Silver to Gold: Ratio

The lows in the ratio show excellent times to purchase both silver and gold, particularly silver. Silver prices are listed in the boxes at the ratio lows. Expect the ratio to increase as both metals rise in price during the metals bull market that restarted in December 2015.


  • Bonds, most stocks, and Bitcoins are too expensive and have risen too far and too fast.
  • Some, perhaps most, real estate is overpriced and ready to fall.
  • Silver in early 2018 is inexpensive compared to M3, National Debt, government expenditures, the Dow and gold.

Republished with permission by The Deviant Investor.

Gold and Silver: “Perfect Hedges” Against a Recession? Hardly.

Get an eye-opening insight into the timing of four separate silver crashes

By Elliott Wave International

No one likes them, and financial authorities do everything they can to avoid them…

…but economic recessions do happen, nonetheless.

The official definition of a recession is a period of economic decline marked by a fall in GDP in two successive quarters.

So, how should investors protect themselves in such a scenario?

Well, as you may know, many investors believe precious metals are the perfect hedge against an economic downturn. They believe that, unlike stocks, gold and silver either maintain their value or go up in price during a recession or even a depression.

But you might be surprised to learn what the historical evidence says about this widely held belief.

Let’s start with gold. Our Elliott Wave Theorist has been sharing market observations with subscribers since 1979. Once, it noted:

The first thing to point out is that gold did not make a nickel of U.S. money for anyone in any of the recessions and depressions from 1792, when the gold-based dollar was adopted, through 1969, a period of 177 years…

In 1970, things changed dramatically. Investors lost interest in stocks and preferred owning gold instead, for a period of ten years. The same change occurred again in 2001 … but recession had nothing to do with either of these periods of explosive price gain in the precious metals.

During the 1970s, and following 2001, gold’s biggest price gains came as the economy was expanding, not shrinking. Why? Because when the economy grows, liquidity becomes available and must go somewhere — and it goes into everything, from stocks to real estate, including investments like gold.

The same is true of silver prices during economic expansions. Our November 2011 Elliott Wave Theorist showed this chart and said:


Silver has an even more pronounced relationship to economic cycles than gold does. The chart shows the history of silver prices and economic conditions going back 40 years. … Notice that all of silver’s strong price gains came during economic expansions. Then observe that all seven recessions since 1970 have coincided with falling silver prices. Finally, note that all four crashes in silver–those of 1973, 1980, 1982 and 2008–came during recessions.

Bottom line: It’s a myth that gold and silver are ideal hedges against economic downturns.

Another pervasive Wall Street myth is that the markets are random, and therefore unpredictable. From observing market behavior for almost 40 years — and not just the U.S. markets, but global trends, as well — we can tell you from experience that all liquid markets, including precious metals, are, in fact patterned. Their prices follow the Elliott wave model.

Here at Elliott Wave International, we help traders and investors see what’s really driving financial markets. To learn more, please continue reading below.

The 10 Most Dangerous Investment Myths BUSTED

Learn why you should think independently rather than relying on misleading investment commentary and advice that passes as common wisdom — like the myth that gold and silver are good hedges against a recession.

This free 33-page ebook takes the 10 most dangerous investment myths head on and exposes the truth about each in a way every investor can understand.

Get the 33-page Market Myths Exposed eBook for FREE

This article was syndicated by Elliott Wave International and was originally published under the headline Gold and Silver: “Perfect Hedges” Against a Recession? Hardly.. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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

A Collapsing Dollar Will Trigger The Next Big Move In Gold And Silver

When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. – from “Atlas Shrugged”

Sorry MAGA-enthusiastics, it’s all a lie.  The tax legislation just passed will lead to higher Government spending deficits, a near-parabolic acceleration in Government debt issuance and a possible collapse of the dollar.  The U.S. is in systemic collapse.  Perhaps the biggest manifestation of this is the grand money-grab by the elitists enabled by blatant political corruption.

Alasdair Macleod published an essay that I highly recommend reading as you gather together your thoughts heading into 2018. 2018 will possibly see the next stage in the collapse of the dollar. I disagree with Alasdair’s attributing the control over the formation and implementation of economic and geopolitical policy to Trump. Notwithstanding this disagreement,  I believe Aladair’s analysis of monetary events unfolding during 2018 deserves careful perusal.  This includes his delineation of the rise in the petro-yuan as a precursor to the demise of the dollar, an acceleration of dollar-derived price inflation and an escalation in the price of gold.

The general public in the West is hardly conscious of these developments, only being vaguely aware that more and more products seem to be imported from China. They are certainly not aware that America has already lost its position as the world’s policeman, the guarantor of economic freedom and democracy, or whatever other clichés are peddled by the media. And only this week, President Trump in releasing his National Security Document, and pledging “America would reassert its great advantages on the world stage”, showed the American establishment is similar to a latter-day Don Quixote, unaware of the extent of change in the world and the loss of its power.

Like a monetary embodiment of Cervantes’ tilter at windmills, the world’s reserve currency is rapidly becoming an anachronism. And for China to realise her true destiny, it must dispense with dollars, and if in the process it crushes them, then so be it.

You can read the rest of Macleod’s brilliant essay here:   2018 Could Be The Year For Gold

Contrary to the views expressed by recent crypto-currency proselytizers, I believe that if gold heads higher in the next year then silver will soar.

Investment Research Dynamics

WORLD SILVER PRODUCTION: 3 Charts You Won’t See Anywhere Else

The rate at which global silver production increased over the past century is quite astonishing. When Columbus arrived in America (1492), the world was only producing 7 million oz of silver a year. Today, the world’s largest primary silver mine, Fresnillo’s Sauicto Mine, produced three times that amount in just one year (22 million oz, 2016). Yes, we have come along way in 500 years.

Just think about that for a minute. One silver mine last year produced three times the global amount in 1493. According to the U.S. Bureau of Mines 1930 Report on Summarized Data of Silver Production, the average annual silver production in the world from 1493 to 1600 was 6.9 million oz (Moz). If we look at the following chart, we can see how world silver production increased over the past 500+ years:

World Silver Production (Avg. Annual) 1493 - 2017

As we can see, average annual world silver production increased from 6.9 Moz during 1493-1600, to 13 Moz from 1600-1700, 18 Moz from 1700-1800, 51 Moz from 1800-1900, 274 Moz from 1900-2000 and a stunning 722 Moz from 2000-2017. Again, these figures represent the average annual silver production for each time period.

In the current period, 2000-2017, the world has produced 103 times more silver per year than from 1493-1600. However, the next chart shows the total silver production for each period. From 1493-1600, the world produced a total of 747 Moz of silver, compared to 13,000 Moz (13 billion oz) in just 18 years from 2000-2017:

World Silver Production 1493 - 2017

Now, the reason the last silver bar on the right of the chart is lower than the previous one has to do with comparing 18 years worth of silver production (2000-2017) versus 50 years (1950-2000). It took 50 years to produce 17,061 Moz during 1950-2000 versus 13,000 Moz in the 18 years from 2000-2017.

If we compare world silver production from the different periods, here is the result:

Percentage Of World Silver Production (1493-2017)

2000-2017 = 26.4%

1950-2017 = 61%

1900-2017 = 82%

While a little more than a quarter of all world silver production (1493-2017) was produced in the past 18 years, 82% were produced since 1900. That is a lot of silver. It turns out that 40.4 billion oz was produced from 1900-2017 out of the total 49.3 billion oz produced since 1493. Interestingly, more than half of that silver was consumed in industrial silver applications. I will be writing more about that in future articles.

The last chart I find quite interesting. If we go back a little more than a century, the United States was the largest silver producer in the world. In 1915, the U.S. produced 75 Moz of silver out of the total 189 Moz mined in the world that year:

United States vs. World Silver Production

Thus, in 1915, the U.S. produced 40% of all world silver production. Mexico came in second in 1915 by producing 39.3 Moz. However, U.S. silver production in 2017 will only be 34 Moz versus the estimated 870 Moz globally. Thus, U.S. silver production only accounts for 4% of world mine supply versus 40% back in 1915. What a change in 100 years.

Lastly, the U.S. imports approximately 22% of world mine production each year. That is 193 Moz of the total 870 Moz in 2017. While domestic mine supply is only 34 Moz, the United States has to import more than a fifth of global mine production to meet its silver market demand.

Precious Metals News & Analysis – Gold News, Silver News

SILVER MANIPULATION: What Some Analysts Miss

One of the major topics discussed in the precious metals community is the manipulation of the gold and silver prices by the large bullion banks. Many precious metals analysts point to the massive commercial short positions held by JP Morgan and Scotiabank as the root cause for the low silver price. While I agree that the bullion banks’ massive short contracts are controlling the silver price to a certain degree, there’s another factor that is overlooked by the majority of precious metals analysts.

According to Ed Steers’ recent article titled, JPMorgan’s Silver Short Position Now At 195 Million Ounces, he stated the following:

For the current reporting week, the Big 4 are short 148 days of world silver production-and the ‘5 through 8’ large traders are short an additional 62 days of world silver production-for a total of 210 days, which is seven months of world silver production, or about 510.3 million troy ounces of paper silver held short by the Big 8. [In the COT Report last week, the Big 8 were short 203 days of world silver production.]

Concentration of Traders in the CFTC COTs

As I also stated in the above COT Report, Ted pegs JPMorgan’s short position at about 39,000 contracts, or around 195 million troy ounces, which is up about 35 million troy ounces from what they were short in last week’s COT Report. 195 million ounces works out to around 80 days of world silver production that JPMorgan is short. That’s compared to the 210 days that the Big 8 are short in total. JPM is short about 38 percent of the entire short position held by the Big 8 traders.

The two largest silver shorts on Planet Earth-JP Morgan and Canada’s Scotiabank-are short about 111 days of world silver production between the two of them-and that 111 days represents 75 percent of the length of the red bar in silver in the above chart… three quarters of it. The other two traders in the Big 4 category are short, on average, about 18.5 days of world silver production apiece, which is unchanged from last week — and the prior week. The four traders in the ‘5 through 8’ category are short, on average… 15.5 days of world silver production each, which is up a hair from last week’s COT Report.

Ed Steer is making the point that two banks, JP Morgan and Scotiabank control approximately 53% of the 210 days worth of global silver production to cover these short positions. If we look at the chart above, we can clearly see that silver has the highest amount of short positions in days of a production compared to any other metal or commodity.

Furthermore, Ted Butler, well-known silver analyst, made the following remarks in his recent article, Life Under Manipulation:

We as individuals have little or no control over the state of markets, all we can do is adapt to market realities. In the case of silver, the reality is that it is in the grip of a price manipulation. History shows that various world governments have often artificially set the price of silver and gold in connection with official monetary policies. However, for the past 35 years a specific type of price manipulation has existed in silver via futures contract positioning on the Commodities Exchange, Inc. (COMEX).

Nothing can be more significant than the fact that silver is manipulated. Whether to participate in a manipulated market is something everyone must decide. To me, the choice is easy. Virtually all price manipulations in history have been of the upside variety which caused prices to be higher than they should have been. Buying an asset priced artificially high is a surefire prescription for eventual financial loss. But because the manipulation in silver is of the rare downside variety, the price of silver is artificially low, thereby guaranteeing eventual profits for those taking advantage of the opportunity.

Please understand that if the bulk of the COMEX silver short position was held by hundreds or thousands of separate traders, there would be no manipulation possible and I wouldn’t contend otherwise. But the COMEX silver short position is held by very few traders and it is that concentration that equals price manipulation. Since there is no obvious explanation why just 4 and 8 large traders would be more heavily short silver than in any other commodity, away from seeking to cap and control prices, the most plausible conclusion is that they are protecting and continuing their perfect trading record scam.

Ted, like Ed Steer, is implying that the silver market price is being manipulated by the bullion banks massive short positions. While I agree with these analysts that silver does indeed have the largest concentration of short positions compared to any other metal or commodity, there is another factor that needs to be considered.

As I have mentioned in many articles and interviews, the prices of energy, metals, and commodities are based on their cost of production, rather than supply and demand forces. Yes, it is true that supply and demand forces impact the price, but on a short-term basis. If we take a look at the following two charts, we can plainly see that cost to produce gold and silver parallel the market price:

Barrick & Newmont Production Cost vs Gold Price

Pan American Silver Estimated Break-Even

In the first chart, Barrick and Newmont’s cost of production was always lower than the gold market price. Even though these gold miners may have suffered net income losses during certain periods, I used “adjusted income,” rather than net income. The same was done for Pan American Silver. When the silver price was $ 35 in 2011, Pan American Silver enjoyed a $ 9 profit per ounce. However, as the price fell, so did its cost of production. The reason for the lower silver cost at Pan American Silver was due to falling energy prices and massive cutbacks in exploration and spending.

The following chart shows how Pan American Silver’s cost of production paralleled the change in the price of oil:

Pan American Silver Estimated Break-Even Price vs. Brent Crude Oil Price

Regardless, the cost to produce silver has always been tied the market price. This is also true for gold and copper. I looked at the top gold, silver and copper miners’ Q1-Q3 2017 financials, and here were their profit margins:

Top Gold, Silver, & Copper Miners' Profit Margin

According to Barrick and Newmont’s financial results, the average profit margin for these two gold miners was 9% versus 6% for Pan American Silver and Coeur Mining, and 5% for Chile’s Codelco and Freeport McMoRan. Thus, the cost to produce gold, silver, and copper by the top major companies was still less than the market price.

So, if we take the Concentration of Traders Short Positions in days of production and add the profit margin, we can see that there’s more to the story:

Concentration of Traders in CFTC COTs | Profit Margins

While it’s true that silver has the largest concentrated short position of any other metal or commodity, most of the silver miners are still making profits. Furthermore, it is also true for companies producing platinum:

Estimated Break-Even of Various Precious Metals

Now, this is an older chart from 2015. However, we can see that even platinum’s production cost was very close to its market price. Even though platinum has the second largest concentration of short positions in days of production, the market price is still very close to its cost of production.

Unfortunately, Ted Butler and Ed Steer do not include the cost of production in their analysis of the silver market price. While I agree that the banks are controlling the silver price, the majority of manipulation is taking place by the propping up the STOCKS, BONDS & REAL ESTATE values. According to the Savills World Research, the value of global assets in 2015 equaled $ 372 trillion. With the majority of the world’s wealth invested in stocks, bonds, and real estate, the Central Banks’ manipulation is focused on keeping these values from falling.

The coming surge in the silver price will be due to the disintegration of the global oil industry and the negative impact on the value of stocks, bonds, and real estate, rather than the number of bullion banks silver short positions.

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

Global Silver Demand Still Double Pre-2008 Market Crash Level (Despite Decline)

While physical silver investment demand experienced a pronounced decline this year, the volume is still much larger than the level prior to the 2008 U.S. Housing and Banking Crash. Investors frustrated by a silver market plagued with lousy sentiment and weak demand, may not realize that silver bar and coin demand is projected to be double what it was in 2007.

Thus, long-term precious metals investors continue to acquire silver on price dips while others may be selling out and placing their bets into the bubble stock market or cryptocurrencies. It’s not the larger precious metals investor who is worried about the short-term price, rather its the smaller investor.

Regardless, according to the Silver Institute’s 2017 Interim Report, global silver bar and coin demand are projected to fall to 130 million oz (Moz) in 2017 compared to 206 Moz last year. Even though physical silver investment demand will drop by 37% this year, it will still be more than double the 62 Moz in 2007:

Global Silver Bar & Coin Demand (2007-2017f)

Furthermore, silver bar and coin demand in 2012 was only 29 Moz higher than the estimate for this year, but the price was nearly double at $ 30 an ounce. As we can see, precious metals investors continued to purchase record amounts of silver bar and coins in 2013, 2014 and 2015 with the hope that prices would eventually start to head higher. However, the majority of the market’s funds since 2012 flowed into STOCKS, BONDS, and REAL ESTATE.

Then after the election of President Trump to the Whitehouse, along with falling precious metals sentiment, investors pulled back on gold and silver investment purchases. From what I have heard through the grapevine, precious metals dealer sales this year are down about 40% across the board. And of course, the massive price increase in Bitcoin and the cryptocurrencies starting in March of this year funneled money away from the metals.

With the new rush of investors into the Bitcoin market mania, several alternative media analysts have given up on precious metals and are now touting cryptocurrencies as the best place to be. In fact, some have stated that gold is no longer useful as a monetary instrument because cryptos will take over this role. Unfortunately, these analysts, just like our mainstream media counterparts, have simply forgotten about the terrible ENERGY PREDICAMENT we are facing. It’s almost as if the lure of $ 100,000 Bitcoin has totally destroyed their ability to understand that fundamentals still matter…. especially the Falling EROI – Energy Returned On Investment.

Yes, it’s nice to have been one of the fortunate individuals who purchased Bitcoin back when it was $ 100 (or even less). But, as I stated, the world is still facing a severe energy predicament that Bitcoin or the cryptos can’t solve. When I listen to interviews where analysts say we are moving into a new high-tech world, I wonder where on earth they think we are going to get the energy to run all this stuff. Even though I enjoy watching Sci-Fi movies, it’s totally unrealistic to build spaceships that can be a mile long. The very day after the spaceship is built, all its components and parts start to break down. The more complex the parts, the faster they breakdown.

People need to realize that technology won’t solve our energy predicament, it only makes it worse. Thus, the more complex the technology, the more energy it consumes. So, when someone thinks that, “technology will solve our problems,” then they must also believe in the ENERGY TOOTH FAIRY… a term coined by Louis Arnoux.

I bring up these points because precious metals will still be one the best stores of value in the future as global oil production peaks and declines. We also must remember, the world runs on liquid fuels, not electricity. Even though we see more electric vehicles on the road, they can’t be manufactured without the burning of COAL, NATURAL GAS or OIL. Hence, renewable energy sources such as wind, solar and electric cars are nothing more than fossil fuel derivatives.

Okay, getting back to silver. The GFMS Team at Thomson Reuters, who provide the data for Silver Institute, forecast that global silver production will decline to 870 Moz in 2017:

World Silver Mine Production (2007-2017f)

As we can see in the chart, world silver mine supply peaked in 2015 at 894 Moz and will decrease by 24 Moz in 2017. However, I believe actual global silver production will be less when all the data comes in. Regardless, once the U.S. and worldwide markets finally crack, world silver production will fall even faster. This will be due to the drop in demand for base metals where 58% of global silver production originates (35% byproduct of zinc-lead production and 23% byproduct of copper production).

One segment of the silver market that experienced an uptick was industrial silver fabrication. Global industrial silver fabrication is projected to increase by 19 Moz this year to a total of 581 Moz. However, this increase is still far below the record high of 661 Moz set in 2011:

Global Silver Industrial Fabrication (2007-2017f)

The majority of the rise in world silver fabrication was due to higher usage in solar PV manufacture and electronics. Even though the global demand for silver by the solar industry will continue to increase over the next few years, it won’t be the driving force in determining the silver price in the future. Instead, the collapse in the value of STOCKS, BONDS, and REAL ESTATE, due to the disintegrating oil industry, will be the factor that forces investors to protect their wealth in gold and silver.

Precious Metals News & Analysis – Gold News, Silver News

Two-Thirds Of The Top Primary Silver Miners Suffered Production Decline

It has been a rough year for many primary silver miners as two-thirds have suffered declines in production. Also, many high ranking silver producing countries are also experiencing a pronounced reduction in their domestic silver mine supply. According to the data put out by World Metal Statistics, Chile’s silver production is down 20% in the first eight months of the year, while Australia is down 19%, Mexico declined 2% and Peru lower by 1%.

The Silver Institute will be releasing their 2017 Silver Interim Report shortly which will provide an update on current silver production and forecasts for the remainder of the year. However, I believe global silver production will take a big hit this year due to several factors including, falling ore grades, mine closures, and strikes at various projects.

For example, Tahoe Resources was forced to shut down its Guatemalan Escobal Mine in July due to a temporary suspension of its operating license by the country’s Supreme Court. However, even after the Guatemalan Supreme Court reinstated Tahoe Resources Escobal Mine’s license in early September, an ongoing road blockade has hampered the ability of the project to continue mining. Regardless, Tahoe’s silver production declined a stunning 6.7 million oz Q1-Q3 2017 versus the same period last year.

Now, on the other hand, silver production at Fresnillo’s operations in Mexico jumped by nearly six million oz during the first three-quarters of 2017 primarily due to the start-up of its San Julian Mine phase II expansion and a ramp-up of its phase I:

Top Primary Silver Miners Q1-Q3 Production

While the gain in silver production at Fresnillo’s operations helped to offset the significant decline at Tahoe’s Escobal Mine, two-thirds of the top primary silver companies in the group experienced a reduction in mine supply this year. Hecla’s silver production fell by 3.7 million oz in the first three-quarters this year due to an ongoing strike at its Lucky Friday Mine in Idaho. Moreover, output at Silver Standard’s Puna operations in Argentina fell by 3.2 million oz due to a 36% decline in ore grade at is open-pit Pirquitas Mine. Silver Standard’s Pirquitas Mine is one of the few open-pit silver operations in the world. The overwhelming majority of primary silver mines in the world are underground operations.

Overall, production at these top primary silver miners fell 9 million oz in 2017 compared to the same period last year:

Top Primary Silver Miners Q1-Q3 2017 Production

Now, if Tahoe Resources Escobal Mine was not forced to shut down or if Hecla’s Lucky Friday Mine’s strike was resolved, overall production at these top primary silver miners would have likely increased by approximately one million oz this year. Unfortunately for Tahoe’s Escobal Mine and its investors, it may be quite some time before full production resumes. As I have mentioned in previous articles about the troubles plaguing the Escobal Mine by the local and indigenous peoples living by the operation, there are two very different opinions on the underlying problems.

While I have stated that the negative issues put forth by the local and indigenous peoples about the Escobal Mine are likely more valid than the pro-western stance taken by the Tahoe Managment or the Mainstream financial media, time will tell how this is resolved. However, the notion put forth by Tahoe Management that the problems are stemming from “non-locals” who are supposedly radicalizing the locals around the plant, is unfounded when we understand that it is a huge ground-roots movement led by a large percentage of the inhabitants surrounding the mine.

According to the article, Tahoe Resources’ Social Licence in Guatemala Non-Existent, as Uncertainty Plagues Escobal Permits:

Tahoe CEO Ron Clayton is also wrong when he states in a recent press release that community opposition comes from “non-locals”. Lack of social license has dogged Tahoe Resources since the beginning of its project. Since 2011, tens of thousands of residents in eight municipalities around the Escobal mine have voted in municipal plebiscites demonstrating their opposition to the project, or any mining in the area, out of concern for their water supplies, health, and local agriculture. Five municipalities refuse to receive any royalty payments from Tahoe’s mine operations and are now parties to the legal proceedings over discrimination of the Xinka Indigenous population and the Ministry of Energy and Mines’ failure to consult with them.

As the article states, five municipalities refuse to receive any royalty payments from Tahoe’s mine operations and are now supporting legal proceedings. This does not sound like a small group of non-locals instigating trouble. Rather, this has been an ongoing issue ever since the Escobal Mine was initially planned, during its construction phase and ever since it produced its first ounce of silver in 2014.

Lastly, it looks like global silver production will take a big hit this year. We could see world silver mine supply fall by 40-50 million oz in 2017 if the trend continues for the remainder of the year. One country that I did not report on about silver production was China. According to the World Metals Statistics, they show Chinese silver production down by a stunning 25% in the first eight months of 2017. However, I don’t believe the decline is that high. Even though the World Gold Council stated that Chinese gold production was down 10% so far this year, I doubt their silver production fell 25% this year.

We will have to wait and see what production figures the Silver Insitute will release in their 2017 Silver Interim Report when it’s published in the next few weeks. Regardless, the world’s economies are being propped up by a massive amount of debt, derivatives and money printing. When the markets finally crack, global silver production will fall considerably as for demand for base metals will drop like a rock. We must remember, 58% of world silver production is a by-product of copper, lead and zinc production. So, when base metal demand falls, so will base metal production.

Thus, as the market and economy continue to disintegrate, global silver supply will fall right at the very same time investment demand surges.

Precious Metals News & Analysis – Gold News, Silver News