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Not Losing Its Luster Yet: Market Rallying Events to Watch for Gold and Silver

Gold Market Discussion

As Metals Continue to Perform, These Are the Market Rallying Events to Watch for Gold

Gold and Silver Maple LeafPrecious metals continued their winning streak this week, and there are several market rallying events to watch for gold over the next year. Gold rose above $1,290 an ounce this week before pulling back slightly towards the end of the week. This pull back was in part due to some profit taking and the dollar going up some points.

Gold is moving in a similar way to how it did at this time last year. However, while last year had some unexpected events that caused it to jump initially (notably Brexit and Trump’s election), this year is heralding even more uncertainty in the economy.

What this means for investors: Investors are looking for stability for their savings, and with gold up 10% this year, it is looking like the safest right now. The wild ride that the stock market has been on is coming to an end as investors are growing more risk adverse. Strategists are seeing that now is the time to take earnings and move it into safe havens before the next major market moving event occurs.

Geopolitical Power Plays and European Elections

Marine Le Pen
Marie Le Pen, President of the National Front, a French Political Party

Some of the possible market rallying events for gold are going to come from how the situations in Syria and North Korea play out. Increasingly hawkish rhetoric out of the White House and State Department has been triggering price movement in gold. Words have been translating into action with U.S. aircraft carriers re-directing to the Korean peninsula and airstrikes rocking Syria.

The rise of populism and anti-establishment sentiment in Europe (as well as the U.S.) is spooking investors. Marine Le Pen’s rise to prominence in the French presidential election is proof that the same popular sentiment that shocked the establishment by voting for Brexit and President Trump is persisting.

What this means for investors: The VIX is signaling investor fear as well. The VIX (the CBOE Volatility Index) measures confidence going forward, and the data is showing a lack of it. As it goes up and the dollar strength pulls back, gold will likely go up in correlation.

Trump-o-nomics at Work

President Trump campaigned on promises of defense and infrastructure spending increases. Former Fed Chairman Alan Greenspan is warning that the U.S. can’t afford Trump’s spending plan, however. He warns that there is no way to pay for it with the amount of debt the government holds, and yet Trumps proposal would add $1 trillion to updating infrastructure.

What this means for investors: Inflation will skyrocket as spending floods the markets with fiat money to pay for the projects. Watch more here.

Don’t Forget Silver As It Poises to Rally

Silver bugs are getting excited watching their metal climb too. The market rallying events to watch for gold will certainly boost silver as well. Silver has already risen 14.3% in the first quarter of 2017. It had a similar trajectory through the first half of 2016 (outperforming gold for the year), but this year has even more bullish elements in place.

What this means for investors: Three key indicators are in appearing to fall into place that historically have preceded significant silver price runs. These are a bottoming of interest rates, a peak in the stock market, and significant monetary change or collapse. In the past, these events were spread out a little over a decade before silver’s big take-off in 1941. They could be happening right now in a more concentrated manner though. The stock market is showing worrying jitters that it’s bull run is about to sharply correct. Interest rates and inflation are rising. See the correlation between these macro trends and silver here.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold not Losing Its Luster Yet: Market Rallying Events to Watch for Gold

Read Here

Geopolitical Power Plays and European Elections

Read Here

Trump-o-nomics at Work

Read Here

Don’t Forget Silver As It Poises to Rally

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold bars as investments

Geopolitics Spark Flight to Safety and Gold

Gold Market Discussion

Gold Posts 10% Gains, 5-month High as Geopolitics Spark Flight to Safety and Gold

syria in crisis

Developments in geopolitics spark flight to safety and gold by investors this week. Gold has posted 10% gains for the year now. It broke out Tuesday over $1,270, and by Wednesday, it had hit a 5-month high. It continued these gains through the end of the week.

U.S. airstrikes in Syria last week boosted the gold market’s rally this year, and this week prices climbed further as uncertainty levels increased. Silver also saw gains. The white metal hit a six-week high on global unrest, and continues to be an effective safe haven bet.

What this means for investors: Safe haven demand amidst global, geopolitical unrest is the key element driving this rally right now. Not only in Syria, but uncertainty around Brexit, European elections, and North Korea are making significant impact. Gold and silver are safety nets for wealth preservation during war and economic downturn. Because of the tangibility and universal value, it’s the investment of choice during uncertainty.

However geopolitical uncertainty is not the only factor impacting the markets. The dollar’s recent strength is finally faltering, which is boosting precious metals prices. Trade, interest rates, and the winding down of the Trump rally in the stock markets are also favoring gold demand right now.

 

White House Warnings to Syria and Russian Relations Increase Market Unrest

Nikki Haley
Nikki Haley, U.S. ambassador to the U.N.

Escalation of hawkish rhetoric on Syria is at the root of heightened fear in the markets. Both Nikki Haley – U.S. ambassador to the U.N. – and President Trump said this week that more airstrikes are not out of the question. The U.S. also asserted that Russia (the chief ally of President Bashar al-Assad) knew of the alleged chemical attack by Assad’s forces on the rebel-held village last week. On the other hand, Russian foreign minister Sergey Lavrov strongly denied this, and questioned the U.S. motivation behind the strikes. Russia and Syrian ally Iran also ominously warned the U.S. of retaliation if “red lines are crossed again.”

Against this backdrop, Secretary of State Rex Tillerson met with his Russian counterpart and Vladimir Putin in Moscow this week. The two statesmen acknowledged that U.S. – Russian relations are currently “very weak.” The tension between the two states over Syria is too volatile right now. Russia also accused the U.S. of attempting to disrupt the peace talks that Russia is brokering in Astana, Kazakstan between the Syrian government and some of the rebels.

What this means for investors: In addition to gold hitting a 5-month high on safe haven demand, oil also rallied, while currencies (the dollar, ruble, euro, pound sterling) fell. It is worth recalling President Trump’s campaign promises to increase defense spending. Escalating military action in Syria and other parts of the Middle East would likely necessitate higher spending increases than initially anticipated. With government spending will come inflation, and gold could be in for an unprecedented run.

On Thursday the Dow plunged again when the U.S. dropped the largest non-nuclear bomb ever used in combat on an ISIS stronghold in Afghanistan. The markets are interpreting this as even further uncertainty and conflict ahead.

Trade with China and the North Korea Crisis

North Korea

Last week President Trump met with Chinese President Xi about trade, currency manipulation, and the North Korea crisis. The talks seemed to have policy effects on both nations. Trump labeled China a “currency manipulator” on the campaign trail, and lambasted China recently on Twitter for not solving the North Korea crisis. China appeared to be readying its economy for the intense summit ahead of time based on Trump’s positions. The trade deficit also fell in February with fewer Chinese imports.

Trump admitted after the summit that the relationship between China and North Korea was much more complex than he had anticipated. Subsequently, the U.S.-China relationship seems to be strategically shifting. On the Chinese side, the People’s Liberation Army deployed 150,000 troops to the border with North Korea. The U.S., meanwhile, is sending ships towards the Korean coast, while North Korea purports to be preparing more ballistic missile tests.

What this means for investors: It is difficult to gauge the direction the U.S. – China relationship is going to take. There is an elaborate geopolitical theater happening between the two right now, and at the centerpiece is the rogue, unpredictable North Korea. Relations between the two superpowers heavily influence the markets. If Trump continues to pursue the protectionist trade policies he has been touting since the campaign, it will be to the detriment of China and economic growth. On the other hand, if he scales back his aggressive rhetoric in favor of compromise to secure Chinese assistance in halting North Korean nuclear expansion, volatility around military conflict could impact the markets. There is potential either way for safe haven demand to go up.

Trump Says Dollar Is Too Strong, Favors Low Interest Rate Policy

Donald Trumps Says Dollar is WeakNot only did geopolitics spark flight to safety and gold this week, but comments from President Trump to the Wall Street Journal also helped spur the rally. Trump claimed that the dollar is too strong – in part due to over-confidence in him – and that it will be detrimental long term for growth. It is not the first time that he has made this claim. He also said this week that he favors a low interest rate policy. With the Fed promising a couple more rate hikes this year, this could lead to clashes between the central bank and White House.

What this means for investors: A weaker dollar will break some of the resistance gold prices have been experiencing. Likewise, lower interest rates benefit gold in general and could help rein in the greenback. Analysts are also saying that the “Trump Rally” in the stock markets could be on its last legs. These are all economic conditions in which gold and silver could rally for a while.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Posts 10% Gains, 5-month High as Geopolitics Spark Flight to Safety and Gold

Read Here

White House Warnings to Syria and Russian Relations Increase Market Unrest

Read Here

Trade with China and North Korea

Read Here

Trump Says Dollar Is Too Strong, Favors Low Interest Rate Policy

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Trade War with China

Gold Surges after Airstrikes in Syria: What’s Next?

Gold Market Discussion

Gold Surges after Airstrikes in Syria by the U.S.

Gold surges after airstrikes in Syria on Thursday night to end the week hitting the $1,270 mark on Friday. In retaliation for an alleged Syrian chemical attack on civilians last week near Idlib, the U.S. fired 59 Tomahawk cruise missiles at Shayrat Air Base late Thursday night. The international community had mixed sentiment. Some key U.S. allies (including Turkey, the U.K., Germany and others) praised the military action saying that Syrian president Bashar Al-Assad brought this strike upon himself by dropping sarin gas on a rebel-held village that resulted in women and children casualties. However, Assad has denied government responsibility for the attack.

Russia, on the other hand, quickly condemned the U.S. strike against a foreign power. Russia has committed air support and troops to the Syrian government, and cautioned the U.S. against engaging militarily against Assad’s forces. Warning was given to Russia of the impending missiles in a short window before they struck to ensure Russian men and equipment would not be attacked.

By Friday afternoon, gold pulled back some of its gains, but still settled above $1,256.

What this means for investors: As many investors moved into gold for its safe haven aspects, some investors did some profit taking during the week, which could have depressed prices somewhat.

The amount of geopolitical tension this situation has augmented is not to be underestimated even though the markets appeared to be holding for now, waiting for a sign  of what actions are next from Syria and Russia. Secretary of State Rex Tillerson and President Trump have been definitive that further military action could be taken. Russia, meanwhile, has sent a warship towards the two U.S. destroyers in the Mediterranean that fired the cruise missiles. Russia also suspended two key military agreements designed to reign in potential Russia-U.S. conflict in Syria.

President Trump Meets with Chinese President Xi

President Xi Jinping

In more news of heightened geopolitical tension, President Trump hosted Chinese President Xi Jinping at Mar-a-Lago in a two-day summit. The aim of the summit was to alleviate some of the tension between the world leaders. Some of these tensions revolve around Trump’s accusations of unfair Chinese trade policy, Chinese military build up in the South China Sea, and “One China” policy.

The hot issue, though, between the two countries that got (it seems) less attention was that of North Korea. In the wake of more ballistic missile tests from North Korea, Trump has taken to Twitter to call our China for not “reigning in” the rogue nation and announce that the U.S. will deal with it alone, if need be.

What this means for investors: Gold was up ahead of the Trump-Xi summit as investors saw risk and uncertainty for the markets. Stocks pulled back. It is no coincidence that North Korea’s latest ballistic test was timed so close to the Chinese summit. It is probably also no coincidence that Trump’s show of force against Syria was made more impactful by the timing of the summit. Regardless, expect fear in the markets over heightened tension in these regions.

Markets Spooked By the Federal Reserve Last Week

Federal Reserve Building

 

Gold also got a boost from the news of the Federal Reserve’s release of the minutes from the latest FOMC meeting. The minutes indicate that there will be another quarter point rate hike, but also that the Fed is getting nervous that the market is overvalued. The Fed wants to reign in reign in their policy of re-investing in Treasury bills and mortgage backed securities soon. After the financial crisis, the Fed bought these to keep interest rates low in an effort to boost economic growth. Now they want to reduce that balance sheet.

What this means for investors: Jamie Dimon and Larry FinkIf the Fed is trying to get an overvalued stock market to correct, gold demand is going to go up. Many analysts have been saying for sometime that equity market is overvalued. Two of the most influential financial CEOs – say the economy is flashing ominous signs of slowing, despite the stellar rallies that extended into the beginning of 2017. Now is the time to prepare your portfolio for this potential downturn.

Jobs Data Report Misses Expectations

US Jobs and Labor ForceThe Labor Department released its jobs data report for March on Friday. The numbers fell short of expectations, which caused stocks and the dollar to pull back. 98,000 jobs were added, but economists had been projecting 180,000. It came as something of a shock, given the robust figures for January and February. Perhaps the outlook for business growth is not as promising as it appeared at the start of the year.

What this means for investors: Investors are starting to fear that the Trump rally could be coming to an end. The unemployment rate fell marginally despite the weak growth, but earnings were also down. The weaker dollar that accompanied the report’s outlook gave a boost to gold and silver.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Surges after Airstrikes in Syria

Read Here

President Trump’s Meeting with Chinese President Xi

Read Here

Markets Spooked By the Federal Reserve Last Week

Read Here

Jobs Data Report Misses Expectations

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold bar on grains

3 Things That Will Fuel Gold Rally Are Here

Gold Market Discussion

3 Things That Will Fuel Gold Rally

There are 3 things that will fuel gold rally that are abundantly transparent in the markets already. This week, gold continued its upward climb touching above $1,250.  Take a look at what’s driving this rally.

Euros

1. Inflation

Some analysts are predicting gold to soar to $1,500 soon as inflation continues to creep up.Lately the dollar has been over strengthened as many analysts and decision makers – including President Trump – have stated. Some of this strength is slipping and as it corrects, gold is reaping the benefits.

2. Market Uncertainty

Along with inflation, market uncertainty is undermining the Trump rally we saw in the stock market and dollar after Donald Trump was elected President. These uncertainty factors are due as much to geopolitical factors as to monetary and fiscal decisions. Potential developments in the French elections, trade relations with China, and unpredictable black swan events could lift metals. Keep an eye on developments with the U.S. debt ceiling as well as President Trump’s proposed spending increases become more likely even as the ceiling hits its limit.

3. The Euro

Europe is gearing up for significant volatility thanks to Britain (see more about that below). This week the euro was  at a five week low due to Brexit news and dove-ish tones coming out of the European Central Bank. Safe haven demand is going up. But data is also showing that inflation is picking up in the European markets as well, which is a further boost for gold.

What this means for investors: For more on how inflation and the euro could drive the gold rally to $1,500, see the below video. Alan Knuckman also predicts stronger technicals for silver to rally.

 

Brexit Makes a Case for Gold. Here’s Why

 

On Wednesday last week, Prime Minister Theresa May performed the formal and official motion for the U.K. to leave the European Union. May signed Article 50 of the Lisbon Treaty, which gives provision to member nations to leave, and the official letter was delivered to the EU heads in Brussels.

The EU response from European Council President Donald Tusk was, “We already miss you. Thank you and good bye.” Later Tusk stated that the EU would not attempt to punish Britain in the negotiations, since Brexit was “punishment enough.” The EU also was emphatic that exit terms will come before trade deal terms in negotiations.

Great Britain was rocked by further volatility on Friday when First Minister Nicola Sturgeon formally requested May to allow for a second Scottish referendum on independence from Britain. Scotland voted against Brexit due primarily to a desire to remain in the EU.

What this means for investors: The British pound is probably going to get hit hard for a while. After the referendum in June last year, it fell to 30 year lows. Furthermore, Brexit could mean the departure of many financial firms and multinationals headquarters from London to the continent. Gold will be a safer alternative to the week pound and reprise its role as a hedge against currency inflation. As currencies weaken, gold, which is both a commodity and currency alternative, becomes a better store of value (as illustrated by charts here).

Remember When We Called the Bottom for Gold Prices? We Aren’t the Only Ones

Certified Investment Grade Coins

In January I called the bottom for gold prices. At the time, gold was trading at around $1,151. In only a couple months, it is now flirting with a break out point over $1,250. The metal is up about 8% for the year now, and has been extending rallies for a couple weeks now.

Other analysts are calling the lows of last December as a bottom as well and seeing conditions as only favorable for gold and silver prices to go up.

What this means for investors: Gold sank towards the end of 2016 during the height of the Trump rally in the stock market and after a Federal Reserve interest rate hike. Charts and figures are suggesting this year’s upswing could continue though. We are seeing similar rallies in silver as well as it catches the tail winds of gold.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

3 Things That Will Fuel Gold Rally

Read Here

Here

And Here

Brexit Makes a Case for Gold. Here’s Why.

Read Here

Remember When We Called the Bottom for Gold Prices? We Aren’t the Only Ones

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold in the news

Gold Rally Continues on Safe Haven Demand – Should Investors Be Preparing for Black Swan Events?

Gold Market Discussion

Gold Rally Continues from Last Week’s Jump

Gold coins saved

Last week’s gold rally continues this week with gold toying with the $1,250 mark. Gold is now up 8.5% this year. On Tuesday, the Dow had its worst day yet in 2017. It experienced some shakiness after the Fed announcement last week, and volatility rocked stocks this week. Fear is entering the markets right now, and investors are looking for safer options. Silver is moving in conjunction right now, and some analysts think it is poised for a rally as well.

What this means for investors: A couple things were giving the markets jitters this week. Congress was locked in a feud over President Trump’s health care bill with opposition on both sides of the aisle. Notably, the vote was originally scheduled for Thursday and got postponed with concerns that it could not pass. Hence, on Friday, the markets plunged prior to the schedule vote. Finally though, the bill was pulled Friday afternoon, which triggered a stocks rebound. The President has indicated that the next step for the administration will be tax reform rather than health care.

Furthermore, Britain announced officially that March 29th would be the date (as suspected) of triggering the process to begin Brexit. EU Commission chief Jean-Claude Juncker anticipates that the exit from the union will cost Great Britian $50 billion.

There are some factors that could hold back precious metals prices in the near term. Crude oil prices are in a slump, and these tend to have a negative pull on gold. While the gold rally continues, some investors are also profit-taking this week. However, long term, there are enough uncertainty factors that safe haven demand for gold and silver is going to continue, and we expect a volatile climate in which the gold rally continues.

Black Swan Events that Could Shake the Markets

black swan events

Black swans are events that are unforeseen and deviate from what is expected. While the events impacting the markets this week (health care bill, Brexit vote, etc.) are not unpredictable enough to be dubbed “black swans”, they are helping to further an air of uncertainty in the markets that is putting the fear of black swans into some investors.

Events in history that are more aptly described as black swans would be the financial crash during the housing market crisis of 2008 or the 2001 dot-com bubble. These were events that impacted investors on a massive scale due as much to their unexpectedness as their fundamental disruption to the markets.

What this means for investors: Non-financial black swans can also influence the markets. Events like the lone wolf terror attack in London this week and upset elections cause market volatility. Since the nature of black swans is, obviously, that they occur unexpectedly, it is impossible to ever plan perfectly for them. However, a portfolio diversified into gold ahead of time (even if there is no immediate fear of a crash) sets many investors at ease.

G20 Finance Ministers Reverse Position on Trade Protectionism

G20

The finance ministers of the G20 nations met this week. The statement – usually unremarkable – that came out of the summit caused a stir. The ministers historically dropped a decades long pledge that rejected protectionism. The bloc of nations has always ended these summits with a statement that rejects any tariffs or rules that favor one country’s economy over another, but that was missing this time around. This was due to pressure from the U.S. Secretary Treasury Steve Mnuchin strongly indicated that the U.S. full intends to forward with the trade policy campaign promises from Donald Trump that could possibly include border taxes and import tariffs in an effort to spur U.S. manufacturing.

What this means for investors: While the promise of reviving U.S. manufacturing is an attractive one, some of the proposed trade policies may not necessarily achieve this goal. Looking back at history – particularly President Hoover’s administration – there are some important lessons to learn about protectionism and trade wars. Read more about the impact on the economy and markets.

OECD Warns about Global Economic Growth Projections

OECD Conference Centre in Paris
OECD Conference Centre in Paris

The Organization for Economic Cooperation and Development (OECD) is not optimistic about global growth projections. Every year the organization (comprised of 35 member nations that focus on stimulating economic progress and world trade) releases a report on a general global growth outlook. The report this year was more optimistic than last year’s, yet it still anticipated slower than ideal growth prospects.

What this means for investors: Political instability is a major factor that could undermine growth, according to the report. It also pointed to some shaky fundamentals in the markets and protectionist trade policy. It is most significant that although the report was not warning of crisis-level threats, there is a real concern of swift derailment of the modest pick-up in growth.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Rally Continues from Last Week’s Jump

Read Here

Black Swan Events that Could Shake the Markets

Read Here

G20 Finance Ministers Reverse Position on Trade Protectionism

Read Here

OECD Warns about Global Economic Growth Projections

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Interest Rates are Going Up in 2017

Metals Rally This Week as Gold Reacted to the Fed Announcement on Interest Rates

Gold Market Discussion

Gold Reacted to the Fed Announcement on Interest Rates with Rally

Fed Rate Hike Coming?

On Wednesday, gold reacted to the Fed announcement with a rally that broke over the $1220 mark by Friday. Janet Yellen announced – in a rather positive communiqué – that rates would go up a quarter point, and that we could anticipate a couple more hikes this year.

It may seem counter-intuitive that gold went up after a rate hike announcement. However gold reacted to the Fed Announcement with a “buy the fact” move. Generally, higher interest rates means lower gold (and other commodities) as interest-bearing assets become more attractive. For example, last week, gold moved lower in anticipation of an announcement on an interest rate hike. But inflationary pressures and underlying implications in Yellen’s more dove-ish language proved to be favorable to gold and silver.

What this means for investors: Yellen had a dearth of positive economic indicators to call on when arguing for the rate hike, but there are also significant factors countering them.. Employment numbers are better, the stock market is hitting highs, and inflation is on track to rise. However, investors expected a more hawkish tone on GDP growth. The lack of significant signs of economic growth acceleration was underlying the announcement. Furthermore, as inflationary pressures rise (as expected), gold will get even more of a boost. Silver also got a boost this week for the same reasons and factors as gold.

Dollar Strength Down after Rate Hike

Weak DollarWhile gold reacted to the Fed announcement with a rally, the dollar did the opposite. The dollar was at a five-week low on Thursday while bond yields rose. Analysts are projecting the dollar strength to come off even more by mid-year. Investors are watching the G20 finance minister meeting taking place this week for further indications on how currencies are going to move.

What this means for investors: Many investors (as well as President Trump) have been saying for some time now that the dollar is too strong. It resilience the past few months have been holding back gold prices, which usually correlate inversely to it. If inflation creeps higher and the dollar’s strength ebbs, expect precious metals to see a lift.

 

President Trump Releases Budget Blueprint As U.S. Hits Debt Ceiling

Budget Blueprint

On Thursday, the U.S. debt limit was restored after being suspended. This sets a legal limit on how much the U.S. can borrow. Astoundingly, there was barely a mention of it from the mainstream media.

The national debt is over $19 trillion. Lawmakers will have to raise the debt ceiling by sometime this autumn to avoid defaulting on essential payments to service this debt. Already it is shaping up to be a vicious, partisan political battle. Speaker Paul Ryan guessed that it won’t be a “clean debt ceiling hike” and Secretary Treasury Steve Mnuchin stated that it will require “extraordinary measures.”

President Trump’s budget blueprint made bigger headlines. The proposed blueprint made some significant – and controversial – cuts, but also added a $54 billion defense spending increase. The plan also did not cover the 70% portion of the budget that is non-discretionary spending.

What this means for investors: The past couple Gold Market Discussions have spent some time on this looming issue of the potential debt ceiling crisis. It seems unlikely that spending is going to get cut back in an impactful enough way to prevent rocketing inflation, despite the President’s proposed cuts. First of all, he will have a tough political battle to even pass some of these. Secondly, the proposed increases will likely exceed the cuts. Finally, with a deficit already over $19 trillion, nothing short of drastic measures will chip away at this balance. As some of these inevitabilities come closer to being realized, investors will start choosing gold for larger parts of their portfolios for its long-term protection value.

By Royal Assent, Article 50 for Brexit Can Now Be Officially Triggered

Brett or Bregret

Queen Elizabeth gave royal assent this week to the Brexit bill. This means that Prime Minister Theresa May can now officially begin negotiations with the European Union to leave the economic union. The House of Lords attempted to pass an amendment that would prolong the process to trigger Article 50 of the Lisbon Treaty, but the Queen’s assent nixed it. It is expected that May will begin the process sometime after March 29th.

In other news out of Europe this week, right wing populist Geert Wilders lost the Dutch Prime Minister election, but his party gained parliamentary seats. The Netherlands and Turkey also traded diplomatic jibes and rhetoric over the Dutch forbade a Turkish minister from campaigning among the many immigrants living there for a Turkish referendum that would expand presidential power.

What this means for investors: There are high levels of uncertainty coming out of Europe right now. It is important for investors to bear in mind that events in the European markets significantly impact precious metals as well. Some of these uncertainty factors were also responsible this week for gold’s rally. Furthermore, as uncertainty increases, safe haven demand will continue to rise.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Reacted to the Fed Announcement on Interest Rates with Rally

Read Here

Dollar Strength Down after Rate Hike

Read Here

President Trump Releases Budget Blueprint As U.S. Hits Debt Ceiling

Read Here

By Royal Assent, Article 50 for Brexit Can Now Be Officially Triggered

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

This Week Gold Lower on Upcoming Rate Hike – Fed Behind the Curve?

Gold Market Discussion

Gold Lower on Upcoming Rate Hike and Animal Spirits, but is the Fed Behind the Curve?

John Maynard Keynes
John Maynard Keynes, Economist who coined the term “Animal Sprits” in 1936

Gold prices were weighed down heavily this week mostly due to the upcoming rate hike.. The dollar is maintaining its strength right now, which is pushing down gold prices. Moreover, strong indications that the Federal Reserve will hike rates a quarter point next week were also negative for gold for now. Finally, the animal spirits are strong right now with the stock market showing positive trends. Investors are still hoping for some steam, as the stock market appears to be continuing its bull run for now.

Charts are showing that the Fed may be behind the curve with this rate hike though. The rate is not where it should be for inflation levels. The last time this happened was in 1977. See more in this video.

What this means for investors: Probability of a rate hike is at nearly 100% now, and investors are reacting as expected. They are moving into interest-bearing assets right now rather than precious metals, and the lower demand is depressing the price. It is an expected pattern for gold in these circumstances.

There is a rat among the animal spirits though. Gold is still up 7% for the year, which indicates that all is not optimistic looking ahead. Investors are still buying up gold as a safe haven against uncertainty. Furthermore, these physical gold acquisitions are in significant part by central banks (notably Russia, China, and Germany) as well as private individuals. When gold goes “on sale” during these dips, it is a prime opportunity to protect against the future.

Falling Crude Oil Prices Weigh on Metals

Crude oil pricesoil falling plunged this week and pulled the whole commodity sector along. This also contributed to the pull back from gold and silver. Oil and gold prices often show correlation, so it is not surprising gold pulled back with some bear-ish signs from oil.

What this means for investors: There is an oversupply of crude oil right now. This is due in part to a spike of U.S. shale production and additionally, reduced demand.

Weak oil price is just one of many factors sending ripples through the gold market, though. There are still strong indications that inflation and correction are approaching. The gold market could remain in this holding pattern in the near-term, but certainly not forever. There are too many fiscal policy risks and political unknowns around the globe.

 

Following on Last Week’s Debt Ceiling Discussion…


As anticipated in last week’s post, treasury Secretary Steve Mnuchin started the conversation last Thursday about Congressional approval to lift the debt ceiling. The deadline is fast approaching, and the debt limit will have to be raised to accommodate President Trump’s spending plans.

What this means for investors: See last week’s analysis on what a debt limit crisis could mean here.

Market Uncertainty Ahead with Brexit Deadline and Dutch Elections

Uncertainty could be rattling the markets next week with events coming out of Europe. Great Britain is approaching its deadline to trigger Article 50 (in order to leave the European Union as decided by the Brexit referendum last year), and is still running into legislative hold ups. The EU looks like it will be keen to demand a hefty fine for the divorce.

Eyes are on the Netherlands as well to see if the country follows the current sociopolitical, populist trend that events like Brexit and Trump’s election are indicative of. Geert Wilders is a right wing, anti-EU, anti-immigration, populist candidate that is taking a lead in the race. His election would probably be another beat of doom for the EU. More significantly (because it was a founding EU member and one of the largest economies), France faces a similar upcoming presidential race soon.

What this means for investors: There might be a spike in precious metals prices next week if this demand for security from volatility happens in Europe. The fact that two founding members of the EU – not to mention the populist, right wing resurgence in multiple other EU members – are so dissatisfied with the EU after approximately 50 some years speaks to the massive global shift that is occurring right now.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Lower on Upcoming Rate Hike and Animal Spirits, but is the Fed Behind the Curve?

Read Here

Falling Crude Oil Prices Weigh on Metals

Watch Here

Last Week’s Debt Ceiling Discussion

Read Here

Market Uncertainty Ahead with Brexit Deadline and Dutch Elections

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

debt black hole

Is the U.S. Approaching Its Worst Debt Crisis In History?

Gold Market Discussion

The U.S. is on the Brink of a Major Debt Crisis

US Debt trap

With a $20 trillion national debt, it sure appears the U.S. is approaching a debt crisis. This past week President Trump addressed Congress with a pro-jobs and growth message that prompted a stock market rally the next day. As a result, gold saw some push back.

However despite this optimism, there are some longer term aspects of the President’s fiscal policy that will probably be deleterious long term. Notably, that this administration will significantly add to the national debt with increased spending as well as tax cuts.

When President Trump took office, there was $382 billion cash in the treasury. It’s now at $178 billion. In In addition, the U.S. is fast approaching its debt ceiling. In 2015, Congress and President Obama suspended it until March 15, 2017. The debt ceiling is set at $20 trillion, so the only solution will likely be to raise the ceiling again. However this is probably going to turn into a heavily politicized vote with both parties becoming even more bipartisan. Consequently, delay in reaching a budget and debt ceiling decision could lead to another government shut down.

What this means for investors: Sovereign debt crises can lead to financial collapse and volatility. Furthermore, inability or delay to reach a debt ceiling solution will lead to safe haven demand for gold picking up. Watch below as David Stockman (President Reagan’s budget chief) discusses what he is reading for an approaching debt crisis.

David Stockman, Budget Chief to Ronald Reagan, on Debt Crisis – Watch Here

Trouble Seeing Video? You can also click here to watch

“There is going to be a debt ceiling crisis like never before this summer, and that’s what people don’t realize” – David Stockman on Fox Business Network with Neil Cavuto

5 Notable Debt Crises in Modern History

debt ball and chain
1.) 1980s Latin America

In the 1970s, the governments of Mexico, Brazil, and Argentina had borrowed heavily to fund industrialization. By the 80s, the region was over 50% debt to GDP and couldn’t pay back loans. The 300% rise in oil prices certainly worsened the crisis. Growth slowed, and currencies depreciated.

2.) 2008 – 2009 Europe

The collapse of financial institutions triggered the European sovereign debt crisis. These collapses are attributed to high levels of government debt and rapidly rising bond yields. The crisis started in Iceland and spread rapidly to Greece, Portugal, and Ireland (the hardest hit countries).  In addition to these three, Cyprus and Spain were unable to pay off or re-finance their debt without ample assistance from the ECB and IMF. The bailed out countries have been forced to utilize austerity measures while the EU attempts to use quantitative easing to promote some economic growth. Growth is still rather sluggish, and the crisis caused a lack of confidence in governments.

3.) 2013 U.S.

This was more of a debt ceiling crisis rather than debt crisis. As the U.S. approached its debt ceiling, there was fierce debate on whether House Republicans would vote to raise the ceiling. In the past, votes to raise the debt ceiling usually passed without questions. However in 2013, Republicans demanded a reduction in spending in exchange for a vote to lift the ceiling. It led to a sequester and government shut down before the budget was resolved. It brought up the dangers of government over-spending, but it seems many politicians have already forgotten their principles.

4.) 2015 – 2017 Greece

Greece has never really recovered from its sovereign debt crisis. In fact, its outlook is looking dire again. The government cannot pay off its loans from the ECB and IMF. Germany is heavily opposed to bank rolling more loans, but in fact might need to to keep the Eurozone together. The IMF does not want to fund more bail out, and Greece is refusing more austerity cuts. Furthermore, Europe is a highly politically volatile region right now, and this debt crisis will trigger significantly more uncertainty.

5.) 2016 China

China’s debt in 2016 reached more than 250% of GDP. In 2009, China launched a $600 billion economic stimulus that has rather proving to stymie growth now. China missed growth projections for last year, and it seems like it also could his year as well.  This would probably trigger a significant financial crash.

Gold Pulls Back this Week, 2-Year Bond Yields Climb

gold barsGold closed the week with some price pull back. Some of the reasons were a stronger dollar, high chance of an interest rate hike this month, and a solid week for the stock market. The dollar and stock market also got boosts from the President’s address to Congress this week. Silver is more or less tracking gold right now.

The U.S. dollar was at an 8-week high this week. This was anticipation of a rate hike coming this month. On Friday, Yellen confirmed that the case for a rate hike had strengthened, and that we would possibly see a couple more before the end of the year.

What this means for investors: Some investors used the dip as a prime buying opportunity. Precious metals are following their standard pattern of moving inversely to the dollar. As David Stockman and many other analysts have pointed out though, there is a long-term trend in effect in this market and fiscal plan that will eventually lead to crisis.

 

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

The U.S. is on the Brink of Debt Crisis

Read Here

Budget Chief David Stockman Video

Watch Here

5 Notable Debt Crises in Modern History

Read Here

Gold Pulls Back this Week, 2-Year Bond Yields Climb

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Overvalued Stock Market

The Stock Market Is Overvalued – When Is It Going to Blow?

Gold Market Discussion

11 Straight Record Closes, But This Market is Overvalued

Stock Market BubbleDespite 11 straight record closes, investors are starting to worry the market is overvalued. Investor pessimism is rising as they start to fear a correction is coming.

Friday marked the first record 11-day win streak for the Dow Jones since 1987. In 1987, the Dow Jones posted a 13-day streak of record closes before abruptly and chaotically crashing in October. This past Friday did see some pull back from stocks early in the session, but as the trading day winded down, the Dow rose enough to achieve the landmark close.

It’s not just the Dow. Gold and bonds are also showing similar patterns to those before the 1987 crash. Gold prices and bond yields are both rising.

What this means for investors: The 1987 Crash saw $500 billion lost in a single day. Many investors are preparing now with gold in case this market experiences a similar crash. Growing pessimism and gold’s 8% rally this year indicates that there is a growing, tangible fear among investors that a sharp correction – if not crash – is imminent.

Gold Breaks $1,250 on Friday and Silver Follows Trend

Gold and silverGold is up 8% this year compared to the 4% roaring rally that the stock market is experiencing. On Friday gold spot price pushed above $1,250 while silver eked out gains to close just over $18. It is no surprise that there is an upswing in safe haven investing as pessimism in the stock market’s rally becomes more apparent.

On Wednesday the Federal Reserve announced that there could be a rate hike next month amid rising inflation pressure. Gold only pulled back modestly following the announcement. Generally, such an announcement would prompt more of a pull back because gold is a non-interest bearing asset.

What this means for investors: Alan Greenspan, former Federal Reserve chairman, issued a caution to investors this week to start buying gold now. Silver looks poised to follow a similar bullish rally. Both metals are off to an optimistic start for the year, and rising inflation and safe haven investing will likely spur them further.

Treasury Secretary Mnuchin Scales Back Growth Projections Moderately Amid Rising Inflation

Secretary of Treasury Steven Mnuchin
Secretary of Treasury Steven Mnuchin

Comments by Treasury Secretary Steven Mnuchin this week pushed the dollar down slightly. In interviews with Fox Business News and CNBC, he stated that tax reform was a priority and sounded markedly less protectionist on trade and border tax than the White House.

The Treasury Secretary also scaled back economic growth projections from what the Administration has been hoping for. Mnuchin stated that 3% growth will take longer than initially expected.

What this means for investors: President Trump and other prominent figures have been saying that the dollar is too strong for some time now. A strong dollar tends to hold back gold prices, which is why gold saw a boost from Mnuchin’s comments. The data is showing that inflation is rising. When the dollar’s current strength breaks down, demand will increase for precious metals.

Russia Increasing Gold Holdings Again

Russian President Vladimir Putin Meets Head of Russian Central Bank Elvira Nabiullina
Russian President Vladimir Putin Meets Head of Russian Central Bank Elvira Nabiullina

Russia has started buying up significant quantities of gold on the price dip at the end of 2016. The Russian Central Bank bought 6.4 million troy ounces of gold in 2016, and has already bought over a million troy ounces in 2017. Russia is fortunate that it can mine and refine gold within its vast borders, which aids in part with its gold reserve holdings.

This report by economic think tank OMFIF states that central banks around the world are upping their gold reserve holdings, and that this trend will continue. The central banks of Russia, China, and Kazakhstan led the way in buying gold in 2016, but they are certainly not the only ones. Germany, for example, has been making vigorous efforts to repatriate all of its overseas gold back to Frankfurt.

What this means for investors: Are central banks finally coming to terms with the array of pitfalls of fiat currency? Gold and silver backed money is the most assured way of ensuring value to currency. The monetary experiments of this decade have served to temporarily plug holes of a broken, global financial system, but there is growing fear – among governments, banks, and individuals – that the levy is going to break.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

10 Straight Record Closes, But This Market is Overvalued

Read Here

Gold Breaks $1,250 on Friday and Silver Follows Trend

Read Here

Treasury Secretary Mnuchin Scales Back Growth Projections Moderately Amid Rising Inflation

Read Here

Russia Increasing Gold Holdings Again

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

inflation chart

Rising Inflation Will Boost Gold Prices Down the Road

Gold Market Discussion

Rising Inflation Will Boost Gold and Silver

Rising Inflation

The current economic outlook is anticipating inflation in the not-so-distant future, and rising inflation will boost gold and silver prices. Consumer prices are up 0.6% in January and 2.5% over the last year. Price seem to be rising at the fastest pace in about six years.

Rising inflation is to be expected over the near future. Current fiscal policy of President Trump has all the indicators to spur inflation. He has promised government spending increases on infrastructure and defense with, so far, not significant budget cut backs. This will add to the already skyrocketing budget deficit.

What this means for investors: The markets are currently seeing an exceptionally rare event where gold is rising despite a strong dollar. This is a sign that the markets and investors are anticipating rising inflation. Investors are buying gold now while prices are still relatively low. Silver is moving in tandem with gold, and can likewise be a lucrative investment for many.

Germany Is Bringing Back Its Gold Held Overseas

German gold holdings

Germany has started to repatriate much of its gold. During the Cold War when the Soviets occupied much of central and Eastern Europe, West Germany sent much of its gold out of the country to protect it in case the Soviets invaded.

There is over 3,000 tonnes of German gold out of the country. They have moved nearly 600 tonnes of it back to Frankfurt from Paris and New York, and plan to have half of the total amount repatriated by the end of the year.

What this means for investors: Germany is repatriating its gold because of instability fears surrounding the Euro. In fact, there is a significant amount of political uncertainty around the future of the EU and Europe in general. There are those who argue in Germany that they need their gold bullion within German borders to back the Deutsche mark in the event of a Euro currency collapse.

Janet Yellen on Capitol Hill This Week

Janet Yellen Capital Hill

Janet Yellen attended congressional hearings this week to discuss the economy and the possibility of future rate hikes. The Fed chair gave a hawkish impression for future monetary policy stating that the economy seemed strong enough for three rate hikes this year.

Yellen’s speech raised trader expectations of a rate hike to come in March this year. Republicans on the House Financial Services Committee sparred with Yellen over the extent of financial recovery that the Fed’s monetary policy experiment actually brought about.

What this means for investors: Gold pulled back following Yellen’s comments on a potential interest rate hike. This was to be expected because it is a non-interest bearing asset. However, it went up again during the week and finished the week just shy of $1,240.


Gold Hedge against Geopolitical Conflict

BlackRock HQ
BlackRock Headquarters

One analyst at top money management firm BlackRock Inc. is predicting that trading is not reflective enough of the geopolitical risk in the markets right now. Stocks are still riding the Trump rally, and just posted the longest rally in three years this week. This is happening though while global uncertainty gauges this year have climbed to the highest level on record.

What this means for investors: Some of these uncertainty levels are being driven by unknowns around what Brexit terms will look like, a looming debt crisis in Greece, potential collapse of the Euro, and political uncertainty in the U.S. around foreign policy. The stock rally is partially based on hope of tax cuts, deregulation, and fiscal stimulus coming out of the Trump administration. There is still much uncertainty about timing and levels though. Meanwhile gold has rallied 8% this year so far, and is expected to rise further due to rising inflation and safe haven demand.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Rising Inflation Will Boost Gold and Silver

Read Here

Germany Is Bringing Back Its Gold Held Overseas

Read Here

Janet Yellen on Capitol Hill This Week

Read Here

Gold Hedge against Geopolitical Risk

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

the EU

Increasing European Political Uncertainty Will Be a Driver for Gold

Gold Market Discussion

Increasing European Political Uncertainty and Populism Will Fuel Safe Haven Demand

Plummeting levels of confidence in national governments (and even more so in the EU) is leading to increasing European political uncertainty. This is true in the U.S. as well. Donald Trump’s election and the Brexit vote are indicators of rising populism and uncertainty.

Other prominent indicators are upcoming elections in France and furthering issues with Greek debt. In France, right wing leader Marine Le Pen could be the first Front National (FN) candidate elected President. She is topping the polls and gathering working class, traditional socialists who are dissatisfied with the establishment. Industrial regions in France are stagnating and job prospects are dismal. Le Pen, an outspoken EU critic, has also spoken out about France holding its own Brexit-style referendum on membership.

Greece’s debt problem – which has never been resolved, merely stymied by bail out funds – has reared its head again to haunt the EU. Greek debt is at 175% of GDP and payment deadlines to the IMF and EU for previous bail outs are approaching. The IMF is unwilling to lend more due to its pessimistic outlook, and Germany is reluctant to continue to prop up Greece without IMF assistance as well. Greece declares it is politically impossible to meet EU deadlines. This is because it has already endured eight years of austerity with little growth resulting.

What this means for investors: Euroskepticism is pervading the EU, and France and Britain are leading the way. Experts and analysts are predicting populism, rather than monetary policy, could be the biggest market driver in the near future. Populist movements tend to spark volatility in the markets, which will be beneficial to gold and silver. Furthermore, as resistance to the establishment and elites grows, people will feel safer holding their investment in hard, tangible form.

EU Commission Publishes “War on Cash” Roadmap

In further EU news, recently, the EU Commission (the most powerful branch of the organization) published a roadmap to limit – and eventually do away with – cash transactions. The reasoning behind it is that terrorists and criminals conduct transactions with cash. The likes of Ken Rogoff and Joseph Stiglitz are advising the Commission in this blatant attempt to move to a cashless society, disregarding the vast number of EU citizens who use it for peaceful business means.

There are numerous regulations at place at national levels to limit cash transactions. Moreover, any harmonious EU-level directive is going to inevitably hurt the smaller, less wealthy EU economies. This plan is more than likely an attempt to solidify greater control in the hands of the EU.

What this means for investors: With increasing European political uncertainty, this is an ominous sign. Perhaps this is further attempt to maintain establishment authority and crack down on populist resistance to the EU.

Cash in the bank is never 100% safe. Financial and economic collapse can wipe away savings in the blink of an eye. Furthermore, you do not always have access or control over it once you have trusted it to a bank. Having some gold and cash outside the control of banking institutions is the only way to guarantee your direct control.

Trump Bullish for Gold? Watch the Signals from Gold and Bonds

There is a strong case for buying gold in a Trump economy. The bullish case for metals is getting stronger, and more investors are changing their tune on buying precious metals now. The initial stock market rally after the election pushed gold prices down, but prices have been mostly rising through 2017 on uncertainty and protectionism.

Gold prices pulled back Friday, but had climbed to just over $1,240 during the week, which was a 2.5 month high. Now gold and bonds are flashing signals similar to those that preceded the 1929 and 1987 financial collapses. Bond yields are rising too with gold. Rising yields and rising gold signal inflation.

What this means for investors: Rising inflation will lift gold prices. Not only will gold become a more attractive investment than other assets for its rising value, but it will also be a safe haven. If the historic parallels for bond yields and gold hold true again, the economy could be steered towards a painful correction. Use opportunities like Friday’s pull back to protect your wealth with gold and silver.

Iran Rejects the Dollar for Basket Currencies as Reserves

iran Market volatility can be triggered by geopolitical events. There is likely going to be increasing volatility coming from Iran as tensions escalate. Recently, Iran ditched the U.S. dollar for its official financial reporting. They have said that they will use either a basket of currencies or pin their currency against that of their closest trading partner (likely the Euro). The shift from the dollar by Iran came in ‘retaliation’ for the immigration ban issued by President Trump against seven countries, which included Iran.

What this means for investors: The dollar is used as a global standard, so there is often high demand for the dollar. This contributes significantly in strengthening the dollar. Its strength (which has been at raging highs lately) will take a hit if demand for it as a common gauge goes down. This also highlights the scaling tension between the U.S. and Iran.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Increasing European Political Uncertainty and Populism Will Fuel Safe Haven Demand

Read Here

EU Commission Publishes “War on Cash” Roadmap

Read Here

Trump Bullish for Gold?

Read Here

Iran Rejects the Dollar for Basket Currencies as Reserves

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Dodd-Frank Act Repealed

President Trump Repeals Dodd Frank Regulations; Gold Breaks Above $1,200 Again

Gold Market Discussion

President Trump Repeals Dodd Frank Regulations Triggering Stock Market Rally

President Donald J Trump Official PortraitThe Dow closed 187 points up on Friday settling just over 20,000. Investor confidence got a boost as President Trump repeals Dodd Frank regulations. Goldman Sachs and other banking institutions were once again the big winners (unsurprisingly).

The boost came Friday afternoon after President Trump signed an executive order halting some of the regulations of the Wall Street Reform and Consumer Protection Act (better known as the Dodd Frank Act). The executive order will allow banks to leverage more with fewer regulations inhibiting lending and trading.

What this means for investors: For now, the order is a temporary suspension to assess which components of the act will be repealed and replaced. The act was designed to prevent another financial crisis akin to 2008 by putting checks on financial institutions. Some argue that the act did not go far enough or that its regulations actually benefited bigger institutions while hurting small, community banks. Regardless, a repeal is going to raise uncertainty in the markets and ultimately benefits Wall Street.

Gold Breaks Above $1,200 Mark after Pull-Back Last Week

After a modest pull-back on price at last week’s close, this week the spot price of gold broke above $1,200 again. Silver was trading up slightly as well. Many of the same factors affect both metals. dollar and gold unorthodox correlationSome of the events that gave metals a boost include a weaker dollar, safe haven demand in the U.K. and U.S., and the Federal Reserve decision not to raise interest rates.

Gold demand in the U.K. spiked this week. British Parliament voted overwhelmingly to approve the triggering of Article 50 to begin the process of leaving the EU. Investors in the U.K. are seeing gold as protection against the volatility this will bring to the pound. Last year after the Brexit referendum vote, metals prices got a massive boost.

What this means for investors: The Dow climbed back to 20,000 on Friday. It initially broke the historic mark last week, but struggled to maintain it until Friday. Gold prices were also up on Friday, so the stock market strength appears to not be adversely affecting metals at this time.

Why Are President Trump and Bill Gross Predicting the Dollar Is Too Strong?

The US Economic Growth?As gold breaks above $1,200 this week, weakness from the dollar spurred gold’s rise in part. Lately, the dollar has been showing considerable strength, which generally weighs negatively on gold prices. A weaker dollar may become the new norm though.

President Donald Trump made comments to the Wall Street Journal this week that the dollar is too strong. Billionaire investors Bill Gross echoed these sentiments this week, saying that a strong dollar is a threat to growth. A strong dollar makes U.S. goods and exports less attractive to foreign buyers.

What this means for investors: Weakening the dollar will drive long-term growth overall by making products cheaper, and hence more will be sold overseas. For gold and precious metals, a weaker dollar means prices will go up. The dollar also showed considerable strength last year, but uncertainty has been driving gold. We have already called the low for gold prices for 2017, and this trend could be an important factor in driving a gold rally.

The Federal Reserve Decides to Keep Interest Rates Low

The Federal Reserve left interest rates unchanged on Thursday following their meeting in Washington. Janet Yellen noted that there were increasing levels of optimism among investors and Federal Reserve Buildingconsumers, but not enough for a rate hike.

What this means for investors: Low interest rates are favorable to gold. The Fed appears to be maintaining a similar, dove-ish position as last year where Yellen talks ambiguously of improvement to the economy, but displays hesitancy towards lifting rates.

Fiscal policy rather than central banks’ monetary policy is becoming increasingly heftier in terms of effect on the economy though. The focus is shifting to Trump’s economic policy rather than central banking activity.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

President Trump Repeals Dodd Frank Regulations Triggering Stock Market Rally

Read Here

Gold Breaks Above $1,200 Mark after Pull-Back Last Week

Read Here

Why Are President Trump and Bill Gross Predicting the Dollar Is Too Strong?

Read Here

The Federal Reserve Decides to Keep Interest Rates Low

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Hoover and the Soup Kitchens

History Repeating Itself? Lessons from Hoover on Trade Policy

Gold Market Discussion

Lessons from Hoover on Trade Policy: The Smoot-Hawley Tariff Act

Smoot-Hawley
Smoot and Hawley on April_11,_1929

As the Trump administration starts enacting new policy, history can illuminate some valuable lessons from Hoover on trade policy and its implications. These implications could have especially relevant repercussions today.

Trade has been an cornerstone of Trump’s campaign. This week he signed an executive order canceling the Trans Pacific Partnership Treaty. Furthermore, with a focus on securing and bringing back U.S. jobs (particularly manufacturing) to our shores, the new President is floating ideas of imposing tariffs on imported goods. This likely would ensure more goods are made and bought domestically rather than abroad.

Yet President Herbert Hoover attempted a similar policy in 1930 with opposite results. He signed the Smoot-Hawley Tariff Act that raised tariffs on over 20,000 goods coming into the U.S. In theory, this was to protect U.S. manufacturing jobs. In reality, U.S. trading partners counter-imposed tariffs on U.S. goods and prices rose deepening the Depression.

What this means for investors: Most economic historians view Smoot-Hawley catastrophic. It ended up hurting a multitude of sectors of the economy including agriculture (to a significant degree) and manufacturing. In the 1930s it prolonged the Depression. Nowadays similar tariffs could stymy the recovery most Americans are expecting.

How Do Tariffs Affect the Economy?

Herbert Hoover
Herbert Hoover

Tariff wars are the result of protectionist policy like the Smoot-Hawley Act. If one country raises tariffs on another, then that country will be forced to raise its prices to maintain revenue. In retaliation – such as what happened in 1930 after Smoot-Hawley – the country now burdened by tariffs will put into place its own tariffs.

Furthermore, tariff wars lead to trade wars. Trade wars can begin in one sector and spill over into others and result in the warring countries’ other partners being affected by higher prices and declining output.

What this means for investors: It seems likely that these kinds of protectionist measures could further inflation. As prices go up, the dollar (or other currency) loses its purchasing power. In a rising inflation environment, gold prices will also go up. Silver would probably also increase in tandem with gold.

Dow Jones Hits 20,000

Dow Jones 20,000

This week the Dow Jones hit the important 20,000 milestone. It has been toying with hitting the mark since December, and it finally reached it on Wednesday. Investors are calling this the “Trump Rally” after the market’s run-up following the election. The market, however, had been performing strong for months before after making a remarkable recovery in the fall.

The market hit the 20k mark following news from the White House on trade negotiations and the re-instatement of construction of the Dakota Access Pipeline project. One of the greatest contributors to the milestone though was Goldman Sachs. The Wall Street juggernaut’s bank stock has risen 30% since the election and accounted for more than 20% of the Dow’s rise.

What this means for investors: Some analysts are predicting that a correction is imminent in the markets. Even traditionally bullish analysts are warning that this market is overbought and therefore in an environment ripe for a drop. When the market does drop, demand will likely shift to safe havens such as gold and silver.

Gold Prices Could Be Set for a Rebound Despite Some Pull-Back

Gold prices pulled back this week dipping below the $1,200 mark. A pull back like this is more or less expected during a week like this with a historic stock market high. In addition the dollar saw some strengthening following some of the Trump executive actions this week.

Precious metals could be set for a rebound though. A report from UBS scaled back investor optimism that has been fueling the Trump rally. Market uncertainty, particularly around fiscal and economic policy, is increasing and this will fuel gold and metals.

What this means for investors: A few weeks ago we called the low for gold prices in 2017. The macro trends that will lift prices are falling into place. These include government spending fueled inflation, protectionism in trade, and deficit spending. Price dips like this are usually an optimal time to hedge against the future with gold or silver.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Lessons from Hoover on Trade Policy: The Smoot-Hawley Tariff Act

Read Here and Read More Here

How Do Tariffs Affect the Economy?

Read Here

Dow Jones Hits 20,000

Read Here

Gold Prices Could Be Set for a Rebound Despite Some Pull-Back

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Ray Dialo Fund Manager

How Populism Will Be Biggest Driver of Markets in the Future

Gold Market Discussion

Why Populism Will Be Biggest Driver of Markets According to the Largest Hedge Fund’s Manager

Ray Dalio
Bridgewater Associates Fund Manager Ray Dalio

Ray Dalio, founder of Bridgewater Associates (considered the world’s largest hedge fund), believes that populism will be biggest driver of markets and money in the future. Populism will be even more influential than monetary policy from the Federal Reserve and other central banks. Dalio was speaking at a debate panel with International Monetary Fund chief Christine Lagarde and Harvard professor Larry Summers (among others).

The billionaire hedge fund manager emphatically stated that populism “scares him”. He went on to say that it is now the most important global issue. Populism scares him, in his words, because of its “extremism” (in both the right and left wings) and could lead to attacks against the top 1%. He compared the increasing wealth gap now to the increasing wealth gap in the 1930s. He correlated the rise of populist government and sentiment in the 1930s to that of today. Dalio equated populism to protectionism and nationalism

What this means for investors: Events like Trump’s election, the Brexit referendum, and elections of other populist leaders around the globe prove Dalio’s point. Societies and governments are experiencing a shift away from Establishment norms. That shift is rapidly increasing in pace. Dalio’s fears underly the threat to his elitist position in the finance world from populist disenchantment. There are countless geopolitical unknowns on the horizon that this shift is bringing. These will surely increase demand for safe haven metals.

 

Gold Hits 2-Month High this Week While Global Leaders Meet at Davos for World Economic Forum

The headline news of the week was, of course, Donald Trump’s inauguration as the 45th President of the United States. The markets and precious metals were both up Friday morning as he took the oath of office and delivered a staunchly patriotic and populist address.

In other news, the global elite ascended to the mountain resort in Davos, Switzerland this past week for the annual World Economic Forum (WEF) discussing macro trends such as how populism will be biggest driver of markets and other macro trends.

Meanwhile gold rallied to a 2-month high breaking over $1,210 this week. Silver experienced a similar boost hitting a 1-month high of $17. Both metals pulled back slightly on Thursday on hawkish comments from Fed chair Janet Yellen.

What this means for investors: Last week we called the price bottom for gold. This sentiment is echoed by other analysts such as Dennis Gartman, who sees positive long-term prospects for gold. Investors are starting to worry about rising inflation under some of Donald Trump’s economic plans for increased spending and tax cuts and avoiding too much risk while increasing precious metals holdings.

 Theresa May States that Brexit will be a “Hard Brexit” from the European Single Market

Britain Prime Minister Teresa May
Britain Prime Minister Teresa May

On the subject of populism, in a highly anticipated speech Tuesday, U.K. Prime Minister Theresa May stated that the U.K.’s “exit” from the EU will be a “hard Brexit” with Britain leaving the free trade market, which is the foundation of the organization. May also indicated that the final Brexit legislation will go before Parliament to be ratified, which means perhaps the break will not be so severe in the end after all.

May outlined demands for the negotiations that would include an amenable, visa-free solution for British citizens living in the EU and vice versa. She also expressed hope that positive trade agreements could be realized between Britain and its European trading partners. Reaction from Europe was mixed. Some saw it as too “take” and not enough “give” and found it over confident on European concessions.

What this means for investors: The British pound posted its largest gain since 1998 after the speech, while the FTSE 100 index fell (as did the Euro). Many investors had anticipated a downward move from the pound. Instead the markets seemed reassured by the specifics of May’s speech. As Britain prepares to trigger Article 50 and officially commence negotiations, expect more volatility. Precious metals were up Wednesday following the speech.

Chinese President Xi Jinping at Davos on Globalization, Trade War, and Trump

Xi Jinping
Chinese President Xi Jinping

Davos saw a first this year as President Xi Jinping of China addressed the World Economic Forum. It was the first time the Chinese President has attended, and he gave the keynote address.

In sharp contrast to the overarching question of rising populism that permeated Davos, Xi praised globalization. Without directly naming Trump, Xi criticized the “protectionist” trend towards trade policy that is associated with the new President’s platform.

What this means for investors: China is worried about the approach that the U.S. is turning towards in regard to free trade. Trump’s emphasis on “America first” in regards to domestic manufacturing will weigh heavily on an already sluggish Chinese economy. Overall, the sentiment among the elite in Davos was strongly indicative of unease by the populist departure from the globalization that has empowered them.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Why Populism Will Be Biggest Driver of Markets According to the Largest Hedge Fund’s Manager

Read Here

Gold Hits 2-Month High this Week While Global Leaders Meet at Davos for World Economic Forum

Read Here

Theresa May States that Brexit will be a “Hard Brexit” from the European Single Market

Read Here

Chinese President Xi Jinping at Davos on Globalization, Trade War, and Trump

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Market May Bull

Gold Has Hit the Low for 2017 and Climbs This Week on Uncertainty

Gold Market Discussion

Gold Has Hit the Low for 2017 and Is Set to Climb

Gold Market MayIn December 2015, RME called the gold price bottom, and 2016 followed with a rally in metals.  Once again, we are calling that gold has hit the low for 2017 already. In 2015 the price bottomed at $1,055. On January 3rd this year, gold was at $1,151.

Gold was up 4% overall for 2016. Earlier in 2016 it was up over 20% before pulling back. Investors were predicting a new bull market last year, and the signs are becoming even more apparent now that we can expect this gold bull market to run for a while.

What this means for investors: Buy gold and silver now while prices are still low against a strong dollar. When gold prices dipped last fall on a strong dollar and stock market rally, gold “went on sale.” When inflation hits, dollars will have less purchasing power, so gold will increase in value against the dollar.

Gold Prices Rally This Week on Global Uncertainty, Hitting 6-Week Highs

Global Risk

This past week gold was trading at 6-week highs breaking through the $1,200 mark. It got its boost in part from signs of weakness from the dollar, which slipped from some of its recent strength.

Gold is also rising on investor confidence. Investors are starting to fear the imminent burst of an overvalued stock market. After coming within a few points of 20,000 in the past couple weeks, the dow retreated over 100 points this week, and has yet to reach that milestone.

Uncertainty around President-Elect Trump and his first term fueled safe haven metals buying as well. The stock and bond markets showed signs of increased volatility during his press conference. When these markets get jittery, gold prices gain. Regardless of whether you are pro-Trump or anti-Trump, Democrat or Republican, there are many unknowns ahead as geopolitical tensions shift and morph. Just this week, the U.S. has deployed an armored tank division into Poland as part of the ongoing Operation Atlantic Resolve. Fear around these global trends is going to boost safe haven buying.

What this means for investors: Investors around the globe are preparing to hedge against uncertainty. With renewed demand in India and China and sell-off starting to pick up pace in the stock and bond markets, gold will become more desirable.

Gold at a Historic Breakout?

Gold just achieved a rare break out. It is indicated by a crossing over of the 50-WMA above the 200-WMA in a bullish break out. The last time the markets saw such a break out was in 2002, and it was the beginning of the last major bull market. These charts illustrate exactly what this has meant historically for gold prices, and what it could mean for the future bull market.

What this means for investors: The last time this breakout occurred, gold prices rose 429% over the course of nine years. Gold has shown time and again that it the most reliable long-term investment, and as we prepare to move into a new bull market, metals will prove their historic worth once again.

Silver is Poised to Rally Again

stacked silver barsSilver made headlines throughout 2016 for its – at times – 30% gains. The white metal pulled back with gold in the fall, but still closed out the year with 17% gains. Silver, like gold, is positioned for a bull market this year. Analysts say that silver will fall only if investment demand does, and so far, it appears investment demand is positioned to increase in the long term. Silver also has more industrial uses that factor into its spot price, and these uses are not likely to decrease anytime soon.

What this means for investors: Silver is perfect for investors who cannot afford a gold portfolio. It is also useful for diversifying a gold portfolio to hedge with different options. Gold has hit the low for 2017, and silver could have as well.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Has Hit the Low for 2017 and Is Set to Climb

Read Here

Gold Prices Rally This Week on Uncertainty, Hitting 6-Week Highs

Read Here

Gold at a Historic Breakout?

Read Here

Silver Is Poised to Rally Again

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

trump wins election

The 5 Biggest Stories for Gold and the Markets in 2016

Gold Market Discussion

This week we will take a look back over the 5 biggest stories for gold and the markets in 2016 and how they impacted investors.

Donald Trump Wins the Election

trump-wins-election-gold

The election of Donald Trump was, of course, the pivotal story of 2016. His shock win took most of the world by surprise and contradicted many analysts’ predictions of how it would affect the markets. Strategists had been adamant that a Trump win would tank stocks and boost gold due to uncertainty factors. The opposite happened. Gold initially spiked, but by November 9th prices pulled back and the stock market rallied.

What this means for investors: The markets have been riding the “Trump Rally” since the election. Yields on bonds jumped with massive sell off by investors. Metals took a hard blow with confidence in the dollar and markets high. With Trump’s spending plans expected to increase the deficit though, inflation is going to reverse these trends.

Dollar at 14-Year High While Global Currencies Falter

dollars gauging volatility

The dollar had a strong year. The effects of the Brexit vote and quantitative easing in Europe and Japan contributed to strengthening the dollar in an inverse correlation to these currencies. Trump’s economic promises of spending and tax cuts boosted the dollar even further. Continued devaluation of the Chinese yuan and a slow Chinese economy also played a part.

The dollar’s strength is a significant reason that gold and silver prices pulled back in November and December. The dollar and metals tend to be inversely correlated.

The stock market has also been performing at new highs. The Dow came within a few points of hitting 20,000 before the new year.

What this means for investors: The dollar is at 14-year highs, but it cannot hold this strength forever. When “Trumpflation” hits, the dollar will go down, lifting gold prices. Safe haven gold buying outside of the United States is increasing, particularly in China.

 

Britain Votes to Leave EU in “Brexit” Referendum

The Brexit

The June Brexit vote came as an equal shock as the U.S. presidential election. Most had expected the U.K. to vote to remain in the EU. In the aftermath of the referendum, the pound fell to a 30-year low and gold prices jumped. There was a surge in safe haven gold buying in the U.K.

After a couple months the stock market had recovered, although the pound and euro still faltered. The process to leave, however, will be a complicated and arduous one. The full economic impact of the vote has yet to be realized.

What this means for investors: The Brexit referendum was an example of how uncertainty can throw the markets into chaos. The volatility around major geopolitical events is always favorable to gold.

More significantly, the referendum showed a widening gap between the populace and the governing elites in the same manner as Trump’s win did in the U.S. This trend is growing around the world, and we can expect more uncertainty as society and politics shifts.

Gold and Silver Start New Bull Run

Gold was up 10% overall for 2016. During the first half of the year, the metals made spectacular bull runs. Silver was up 30% and performing better than gold going into the summer. Investors and hedge fund managers were moving into physical gold and silver and warning about an impending stock bubble burst.

What this means for investors: Gold still has a ways to go in the bull market in 2017. Many are taking advantage of the current price dip to buy now. Investors and strategists are warning that the stock bubble is going to burst any time, and when it does, investors will flock to gold.

 Federal Reserve Raises Interest Rates

Fed Rate Hike Coming?At the end of 2015, the Fed raised interest rates for the first time in x years and promised four hikes in 2016. The economy never showed strong enough signs to actually follow through with these hikes, however. The Fed gave mostly vague statements about a “rate hike soon” until December. In December they lifted rates a quarter point.

What this means for investors: Low interest rates make gold an attractive investment as metals are a non-interest bearing asset. The lack of a rate hike earlier in 2016 helped the gold bull run. In an economic climate that is not strong enough for higher rates, gold will be more effective for preserving wealth.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Donald Trump Wins the Election

Read Here

Dollar at 14-Year High While Global Currencies Falter

Read Here

Britain Votes to Leave EU in “Brexit” Referendum

Read Here

Gold Starts a New Bull Run

Read Here

Federal Reserve Raises Interest Rates

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Hit as Dollar Reaches 14-Year High and Interest Rates Hike

Gold Market Discussion

DOLLAR REACHES 14-YEAR HIGH AND FED RAISES RATES

dollar-14-year-highGold was hit hard this week as the dollar hit 14-year highs and the Federal Reserve raised interest rates a quarter point. Janet Yellen – Chair of the Fed – also announced that we can expect one more hike in the first half of 2017 and three in the latter half. In a rising interest rate environment, gold tends to pull back as a non-interest bearing asset. The strength of the dollar is also holding back gold prices.

U.S. stocks rose Thursday in anticipation of the rate hike, and the Dow nearly reaching 20,000. The markets, however, pulled back some when Yellen’s announcement finished as she cautioned against over-stimulative fiscal policy in the coming months – a direct jab at some of the policies President-Elect Trump has pledged for his term.


What this means for investors:
 The markets and analysts have been anticipating an interest rate hike for sometime now, and had mostly adjusted accordingly for the hike already. However, the strength of the stock market rally is beginning to trigger fear that it is overvalued and vulnerable to a burst soon. The U.S. market strength is also beginning to raise fear of a negative effect on company earnings with too much overseas exposure.

CHINESE BOND MARKET CLOSES THURSDAY TO AVOID PANIK SELLING

chinese-bond-market-closesThis week the Chinese bond market plunged so spectacularly that it was forced to close during the trading day on Thursday. This followed after the Federal Reserve rate hike announcement that same day. The 10-year Chinese treasury yield experienced its steepest drop off in history. There was massive sell off with yields jumping to 3.45%. Yields and prices move inversely to each other, so a rise in yields means the bonds are undesirable and investors are selling.

After the beating that the bond market took, Chinese firms were forced to cancel over $7 billion worth of debt issuance. They cited unfavorable market conditions, higher borrowing costs, and expected inflation as the reasons. Afterwards, premiums on physical gold in Shanghai spiked. A further indicator of the constraints was the yuan hitting its lowest level against the dollar since 2008.

What this means for investors: The Chinese economy is becoming increasingly vulnerable. The Chinese central bank is running out of monetary options, and if the Fed does follow through on its promises to hike rates next year, Chinese bonds will continue to feel the pain.

China is currently the world’s largest gold market. If the economy continues to decline, expect demand for safe haven metals to go up if their economy continues to trigger panic.

News out of China gave gold a slight lift on Friday. China captured a U.S. unmanned underwater vehicle in the South China Sea causing some geopolitical tension. However, the latest out of the Pentagon indicates that the UUV will be returned.

CURRENCY INFLATION IN EMERGING MARKETS REACTS TO STRONG DOLLAR, LIFTS GOLD

dollar-strong-emerging-marketsChina was not alone among the emerging markets to take a dire blow from the surging dollar. Across the board – from South Africa to India to South Korea – emerging market currencies felt the shockwaves. Demand for physical gold in these markets went up and helped to shore up prices on Friday.

Turkey is one of the emerging market countries and an important geopolitical player in its region. Recently, it has recently gone as far as indicating it would welcome a gold backed economy. Turks have increased their gold holdings in recent months. They are favoring the metal over both lira and dollars. President Recep Tayyip Erdogan called on Turkey to embrace gold to combat “economic sabotage” that the global financial system is playing. The Turkish lira took a hit this week, but not as drastically as some of the other currencies.

What this means for investors: The emerging currency markets are already seeing inflation creeping in. Premiums for gold were higher in many of these markets than they were in the U.S. because of safe haven demand. The dollar is likely going to retain its strength for sometime. This will weigh on gold prices. As Turkey’s example indicates though, countries (particularly emerging markets) are beginning to look at alternatives to the dollar as reserve currency.

VIDEO:WILL GOLD RALLY UNDER A PROTECTIONIST TRADE POLICY?


The head of FX strategy at HSBC, Daragh Maher, spoke about the decline of gold and the direction it will take under Trump protectionism. Problem loading video? Click Here to View.

What this means for investors: Maher believes gold will rally again after sometime under a Trump presidency. Right now the dollar and markets are responding to promises of tax cuts and infrastructure spending. Some of the protectionist policies Trump has pledged will eventually drive a gold rally though, in Maher’s assessment.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Dollar Reaches 14-Year High and Fed Raises Rates

Read Here

Chinese Bond Market Closes Thursday to Avoid Panic Selling

Read Here

Currency Inflation in Emerging Markets Reacts to Strong Dollar, Lifts Gold

Read Here

Will Gold Rally Under a Protectionist Trade Policy?

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The Gold Market Discussion

Gold Continues to Pull Back as Stock Market Continues Climb – Is This Sustainable?

Gold Market Discussion

Gold Continues to Pull Back, but Has Positive Long Term Prospects

Gold American Eagles at RME
Gold American Eagles at RME

Gold prices continued to show retreat this week. The stock market has been hitting “lifetime highs” for the past couple weeks with the Dow at nearly 20,000. The stock market experienced a sharp upswing after the election and has been hitting new highs every week since.

Some Wall Street analysts are warning now that the market is overvalued and heading towards a reverse. Part of the overvaluation is coming from investors who had anticipated a low rate environment for longer. The markets are heading into the later stages of an 8 year business cycle, but the market is performing as if coming out of a recession. No matter how business-friendly Trump’s economic policies are going to be, a market reversal is likely inevitable at this stage.

What this means for investors: The market rally is negatively impacting gold and silver. Gold is still up over 10% for the year, however. For investors who want gold for its long term value preservation, this is a perfect buying opportunity. Gold, in a sense, is “on sale” when prices dip like this. When gold was over $1,900 in 2011, buyers flocked to metals, and are now waiting for prices to climb back up. Buying when prices are low is strategically a better value. Investors are going to start fleeing from stocks and equity to cash and gold as the current market rally begins to top out.

Monetary Policy from the U.S. and Europe Hitting Gold This Week

European National BankThe Federal Reserve is most likely preparing to raise interest rates next week to a target range of 0.5 – 0.75 %. The last time the Fed raised rates was almost exactly a year ago to the day. The Fed’s inflation target of 2% is still not quite there, and with the prospect of Congress cutting taxes next year and increasing monetary stimulus, it is likely inflation is going to increase significantly. Fed chair Janet Yellen has been consistently saying since June that low interest rates are only “moderately juicing the economy.”

Across the Atlantic, the European Central Bank announced a continuation of quantitative easing, but at a gradually slower pace. The euro fell in strength against the dollar, and the dollar’s strength in turn had a negative impact on gold.

Italy’s referendum over the weekend could play a significant role on the strength of the Eurozone in the future and lead to more economic crisis in the EU. It was an overwhelming “No” result, and seen as a vote against the establishment. Prime Minister Matteo Renzi is resigning, as he promised he would in the event his referendum failed. The upcoming snap election might likely lead to a rise in the anti-Establishment Five Star movement, and recent talk of an Italian referendum on EU membership could be realized.

What this means for investors: Gold is retreating right now due to the strength of the dollar. A prospective rate increase is also subduing prices, since gold is a non-interest bearing asset. If the Euro heads for another political and economic crisis like Brexit earlier this year, safe haven demand will boost metals.

Gold and the New Fiscal Policy

Trump nominates Steve MnuchinTrump promised drastic change if elected, and certainly in fiscal policy that is the course he is setting. Steve Mnuchin, the Secretary of Treasury pick, stated this week that Americans can expect the “largest tax change since Reagan” with tax slashes to corporate, income, and estate tax. Trump has also pledged a Keynesian style $1 trillion stimulus on infrastructure spending. Some analysts whether such a stimulus is prudent after a 7-year recovery cycle has already been playing out. The greater concern, however, is how a government already nearly $20 trillion in debt can afford such a spending spree without serious repercussions. Regardless of the stimulating effect, inflation rates will soar.

Oil prices are worth paying attention to as well. Oil prices have been up 14% in recent weeks. Higher oil prices can also contribute to boosting inflation. They can also restrict economic growth, however, which would turn investors back to safe haven precious metals.

What this means for investors: Nearly all the charts had gold set to skyrocket if Trump was elected. The opposite happened, however, in the weeks after the election. This is going to be a short-term price retreat. Expect prices to go climb when the new administration’s fiscal policy sets in and stokes inflation.

New Market for Gold Opens Up in Islamic Finance and Expected to Spur Demand

AAOIFI

Gold is going to experience a surge in demand from a new source. This week the Accounting and Auditing Organization for Islamic Financial Institutions and the World Gold Council approved a new gold standard specifically designed for compliance with Shariah Law (law derived from the Koran). The CEO of the World Gold Council announced it was “groundbreaking,” since the world of Islamic finance has had little to no exposure to precious metals previously. There has been lack of clarity up until now about how gold investing complied with Islamic rules on investing.

What this means for investors: The world of Islamic finance is valued at over a $2 trillion industry. Demand for gold is going to go up in a global financial sector where it was previously almost nonexistent. This will give prices a boost.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Gold Continues to Pull Back, but Has Positive Long Term Prospects

Read Here

Monetary Policy from the U.S. and Europe Hitting Gold This Week

Read Here

Gold and the New Fiscal Policy

Read Here

New Market for Gold Opens Up in Islamic Finance and Expected to Spur Demand

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Bull Market Coming

Re-thinking Gold Buying Opportunities and the Current Price Dip

Gold Market Discussion

RE-THINKING GOLD BUYING OPPORTUNITIES & TAKING ADVANTAGE OF CURRENT PRICE DIP

Gold Bars

Gold prices have been falling since Donald Trump’s election win, and as price dips, it is an optimal time for strategically re-thinking gold buying opportunities of the wealth preserving asset.

Most analysts predicted that a Trump win would be positive for gold due to the uncertainty factor that his presidency would mean. However instead, the appetite for risk has increased rather than decreased and the stock market has been hitting new record highs. Treasury yields have rallied as well, which has been negative for gold as treasuries are considered as an alternate safe haven investment. Yields on treasuries have reacted to Trump’s economic proposals for increased spending and tax cuts and upcoming “Trumpflation”.

What this means for investors: During the gold peak in 2012, demand surged and buyers were queuing up to buy. In the past couple years, it has not yet reached these levels again. Those who bought when gold prices were low, however, saw a fantastic return on their investment. Buying during price dips is strategically sounder than during price peaks, yet most investors do the opposite.

Long term, massive government spending during the Trump administration is going to lead to even greater levels of national debt than what we have currently. With it will come inflation and dollar devaluation. This will boost gold prices, and demand will shift back to the safe haven metal.

It is a strategic time to buy silver as well. The same economic factors that affect gold affect silver. The white metal is another way to hedge against inflation.

GOLD REACTS TO JOBS REPORT DATA 

December Jobs Report

The U.S. Department of Labor released its monthly jobs report for November this week. The data gave gold its first upward push this week back into positive movement. Jobs were added to the economy, but the data indicates that growth is slowing. The labor participation rate is still lower than average with 95 million Americans not in the labor force and the participation rate of workers aged 25-54 below the 25 year average. Most of the jobs added were part time as well.

The fact there was some positive growth, however, will likely strengthen the Federal Reserve’s case to raise rates, which is something gold has been reacting to this week as well. With only a few weeks left until the end of the year, will the Fed finally push for a rate raise? Last year they promised four in 2016 and there has yet to be one. Analysts have been predicting one for December with greater fervor since the November 8th election.

What this means for investors: A lack of sufficient growth is what has been preventing the Fed all year from raising rates. When they do finally raise, gold will take a hit in the short term as investors will look for interest bearing assets that will have a higher return with higher rates. It will be optimal buying opportunities of both silver and gold to protect against a devalued dollar in the future.

Gold prices rose on Friday on the jobs data release. The dollar receded from some of its recent strength.

STRATEGIC GOLD BUYING FROM FOREIGN GOVERNMENTS

foreign government currencies

India’s decision to demonetize its currency has weighed on gold prices this week. In a bold move by the government, India, which is one of the largest markets for gold, did away with its 500 and 1000 rupee notes – essentially declaring them worthless – in an effort to crack down on corruption, laundering, and counterfeiting. In the immediate aftermath, demand for gold skyrocketed. Metals preserve wealth when paper currency is worthless.

Russia and China are two of the other major buyers of gold on the world stage, and they are continuing their gold buying sprees. In October, Russia bought its biggest allocation since 1998. The Russian ruble is relatively strong at the moment, which makes gold cheaper, and it appears Russia is taking advantage to shore up its reserves.

China ended November by buying the most gold in months. Physical demand is strong in China for metals, as indicated by premiums that are above the global average. China will likely remain bullish for sometime on gold.

What this means for investors: Foreign governments buy gold for the same reason as private investors. It is the surest guarantee against political and economic crises. The biggest buyers – China and Russia – are continuing to protect their economies with gold.

UPCOMING GEOPOLITICAL EVENTS FOR GOLD INVESTORS TO MONITOR

geopolitical eventsItaly is about to vote on a referendum that will alter its constitution. This result is be significant for a number of reasons. Italy has been ravaged by economic turmoil since the financial crisis hit in 2008. Youth unemployment is at 36%, the country is mired in debt, a fragile banking system, and the middle class has been stagnant for over a decade.

The constitutional reform spearheaded by Prime Minister Matteo Renzi is intended to break some of the legislative deadlock that is characteristic of the Italian government and to reinvigorate the economy by a political restructuring. After World War II, the government was designed to keep any one party from having too much power, but it has resulted in being too restrictive to get anything done. The referendum would break up some of these deadlocks. Renzi campaigned on a promise of change and reform, and has implied he would resign if the referendum does not pass.

The referendum is ultimately a referendum on the establishment and could lead to a vote on EU membership, which some in Italy have already been calling for.

What this means for investors: This could be Italy’s “Brexit” moment. The Brexit vote and Trump’s election went against the establishment and came as shocks to many. The Italian referendum could be another defining political turning this year.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Re-Thinking Gold Buying Opportunities

Read Here

Gold Reacts to Jobs Report Data

Read Here

Strategic Gold Buying from Foreign Governments

Read Here

Upcoming Geopolitical Events for Gold Investors to Monitor

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

dollars gauging volatility

Does the VIX Still Accurately Measure Fear?

Gold Market Discussion

DOES THE VIX STILL ACCURATELY MEASURE FEAR? OR IS IT NOW THE DOLLAR?

Is the US Dollar now the volatility indicator?
Is the US Dollar now the volatility indicator?

The VIX does not seem to accurately measure fear anymore. The VIX – or volatility index – shows the markets’ 30-day forecast for volatility. It describes implied volatilities, is constructed partly from both calls and puts, is forward-looking, and referred to as a “fear gauge” used by investors to anticipate risk. Quantitative easing as monetary policy is partly to blame. It has caused a break down in the relationship between the VIX index and implied volatility in equity markets and banks’ willingness to use leverage.

The dollar seems to be the new measuring index of market volatility risk. It hit a 14-year high this week. The last time it was this high was April of 2003 in the wake of the U.S.-led invasion of Iraq. The dollar’s rising strength is accompanied by a rise of interest rates. A rise in rates is correlated to a rise in risk.

What this means for investors: The reason for the dollar’s surge in the wake of Trump’s election is in large part due to anticipation of stimulus spending that will drive demand and inflation. Gold took a hard hit this week due to the strength of the dollar. But inflation and massive spending are on the rise under President Trump. When inflation goes up, gold will act as a powerful hedge. Its recent price drop-off is a buying opportunity to protect against future inflation. Silver has pulled back as well on the same economic indicators as gold.

BILL GROSS ON TRUMP AND THE BOND SELL OFF

Bill Gross, the "King of Bonds" and Janus Capital Fund Manager
Bill Gross, Janus Capital Fund Manager

Janus Capital manager Bill Gross, is seeing ominous signs from the bond sell-off. The “Bond King” spoke out negatively this week about the economic growth potential during the Donald Trump era. He does not believe it will hit the 3-5% target that Trump has suggested.

The key feature of Trump’s economic plan is to increase spending on defense and infrastructure and cut taxes. Analysts estimate this will add to the national debt to a massive degree. Some see these tax cuts as a long-term economic boost that will drive corporate profit and in turn job and GDP growth.

Gross believes that lower tax revenue accompanied by higher government spending will push budget deficits higher and ultimately spur interest rates and prices. Although Gross is known as the Bond King, he is bearish on bonds given the massive sell-off. Since November 8th, there has been a $1 trillion loss in global bonds.

What this means for investors: Gross does not anticipate a new bull market in the wake of the election, despite the stellar rally in the stock market. He advised caution to investors. Lower taxes and higher inflation and interest rate have the potential to lower earnings and the price/earnings ratio. “Trumpflation” – a soaring deficit provoked by increased spending and tax cuts – will likely characterize the soaring inflation rate in the coming years.

FEDERAL RESERVE SPEAKS OUT ON RATE HIKES

Janet Yellen Rate Hikes

The Federal Reserve chair Janet Yellen spoke out this week on a December interest rate hike and the effects of the election. Yellen claimed that the election had not altered the Fed’s assessment that the case has bee strengthening for a December hike. She claimed that a hike would be appropriate “relatively soon” and that the outcome had no impact on their decision.

During the campaign, Donald Trump had at times some harsh words for Janet Yellen. He stated that she was too political and was purposely keeping rates low for longer than necessary to create a false economy that helped the democrats. He said he would replace her with a Republican in 2018 when her term as board chair expires. She insisted that this was not the case and vowed to finish her term.

What this means for investors: Fed funds futures showed a 91% chance of a rate rise in December. Last year, the Fed anticipated four rate hikes for 2016. If the December one happens, it will be the first due to economic data not being robust enough yet in the Fed’s estimate. In the short term, a rate hike will affect gold negatively. However in the long term, it will contribute to the inflationary trend that will drive gold prices up.

THE GLOBAL ECONOMY AFTER TRUMP ELECTION AND POSSIBILITY OF “TRUMPFLATION”

Trumpflation will mean higher interest ratesUnlike the  Federal Reserve, the European Central Bank will likely not raise rates and rather continue their quantitative easing program. Political uncertainty in the Eurozone – including, but not limited to issues around Brexit – are one concerning factor. Upcoming election and referenda in Germany, France, Italy, and the Netherlands are also an issue. The EU has been struggling to meet GDP growth goals through its monetary policy thus far. Mario Draghi of the ECB has been attempting to make borrowing cheaper with low rates and push banks to lend. However ultimately it has been undercutting banks’ earnings and they are instead focusing on building capital.

The bond market sell-off has presented difficulties for the Bank of Japan. The BOJ had set a goal to keep government bond yields hovering around zero by buying up the 10-year bonds. However as treasuries sold off, the Japanese sell-off drove yields into positive territory. Higher yields would have a tightening rather than growing effect on the Japanese economy.

What this means for investors: Sluggish global growth will be favorable for gold and silver. During economic uncertainty, the metals become more attractive as safe havens. The state of the global economy still makes a strong argument for owning gold and coming “Trumpflation” in the U.S. from a rising budget deficit and spending will spur inflation and lower purchasing power of the dollar.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Does the VIX Still Accurately Measure Fear?

Read Here

Bill Gross on Trump and the Bond Sell-Off

Read Here

Federal Reserve Speaks Out on Rates

Read Here

Global Economy after Trump Election and Possibility of “Trumpflation”

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Trumpflation and Gold

“Trumpflation” and What it Means for Gold

“TRUMPFLATION” AND WHAT IT WILL MEAN FOR GOLD IN THE TRUMP ERA

Trumpflation

What does a Trump presidency mean for inflation, the markets, and your financial future? From what history tells and the President Elect has promised in his policy outlines, it will be debt, inflation, market collapse, and a potential trade war. While Mr. Trump promises to build new roads and bridges that are “second to none”, he also promises to lower your taxes. Welcome to Trumpflation… where three things are poised to rise: the national debt, interest rates, and gold.

In the immediate aftermath of Donald Trump’s upset win, gold prices skyrocketed due to volatility. Shortly after they pulled back. Long-term, however, they will be buoyed by several different economic trends that are stirring the markets.

A TRUMP PRESIDENCY MEANS INFLATION AND DEBT

Trump will mean more debt

You think the Obama administration contributed to our national debt problem? You would be right. But wait until you see what levels the national debt will soar to under a Trump presidency. The self-proclaimed “King of Debt” is going to increase spending, and he has not been shy about saying so. He has pledged increased spending particularly in defense and infrastructure.

Donald Trump has also promised tax cuts. In theory these tax cuts will stimulate business and create more jobs. However this does not happen instantly and takes time for these effects to be felt. In the short term it means reduction in tax revenue. Greater spending with less revenue could mean adding up to 50% to the national debt in Trump’s first term alone. This equates to massive inflation.

The Federal Reserve has been eyeing raising interest rates all year. Each meeting they argue that the case is “strengthening” and that a hike before the year is over must happen. When rates do finally go up, this will drive inflation and push inflation rates higher than we have seen since the 1970s.

Gold is a hedge against rising inflation. Inflation means dollar devaluation. As the dollar goes down, gold will go up. Gold always preserves purchasing power, unlike the dollar, which is subject to inflationary and deflationary trends.

THE STOCK MARKET IS PERFORMING AT ALL-TIME HIGHS… BUT FOR HOW LONG?

The Stock Market is Up

The stock market has been hitting highs on a nearly daily basis the past couple weeks. How long will it continue after higher interest rates and “Trumpflation” hit?

The stock market is approaching a bubble burst. It is in an inflationary trend and higher interest rates could be the trigger for it bursting. Some analysts are warning that the stock market is already overpriced, and its current rally could come back to bite investors. Furthermore, the direction that the bond market is moving does not bode well for Wall Street.

Gold price has been suppressed the past couple weeks as the stock market hit record high after record high. When the bubble bursts, however, investors will flood back to safe haven metals.

WHY YOU SHOULD BE WATCHING THE BOND MARKET

Watch the Bond MarketThe yield on the 10-year government bond has experienced a sharp increase since November 8th shooting up 40 basis points. The yield is going up because prices are falling. In the week after the election, 10-year bond prices plunged 1.4%. They are being sold off rapidly in anticipation of Trump’s spending stimulus. Holders of U.S. treasuries are anticipating dollar devaluation and selling off their bonds now.

As the yield percentage increases, so do interest payments on the obligation of the bonds. Many U.S. mortgage rates are tied to 10-year bond yields, meaning higher borrowing costs for companies. 30-year fixed mortgage rates plummeted 9% in the election’s wake.

In the short term, the dollar is enjoying a 14-year high. In the long run, this will all increase the national debt subjecting the dollar to further devaluation. Rounds of quantitative easing will follow. All of this will bode well for the gold investor, and, more importantly, strengthens the argument for gold as a natural hedge against the markets. The last time the dollar was this strong, gold was $300 per ounce. Gold is now trading over $1,200 an ounce. Gold is an alternative to the dollar, particularly during inflation and devaluation.

TRADE POLICY AND DOLLAR DEVALUATION

Dollar Devaluation Ahead
Massive inflation would diminish the purchasing power of the dollar

Increased government spending on defense and infrastructure is intended to stimulate the economy through job creation. With national debt levels as high as they are, it is “artificial”, government-created dollars that are going to be spent.

Some analysts warn there will be stagflation instead though. The economic growth that this spending will drive could be halted by some of Trump’s proposed trade barriers. These could keep the proposed tax and regulation cuts from reaching the intended stimulating effect. This will mean rising prices, but little growth to go along with them. The global economy is already experiencing sluggish growth, and protectionist trade policy will slow it further.

The bottom line: The message has been the same all along: Gold is an alternative to the dollar. Gold is real money. When the dollar loses its value (and can buy less), gold will preserve your wealth (and maintain your purchasing power).

President-Elect Trump

Markets Rally, but Trump Win Will Mean Inflation and Debt Down the Road

Gold Market Discussion

Stock Market Rally in Aftermath of Stunning Trump Win

Trump means debt and rate hikesDonald Trump’s win Tuesday is seen as a victory over the political establishment and a return to conservatism. The news also triggered a triggered a massive stock market rally. In the long run though, the Trump win will likely mean inflation and debt down the road.

As the votes came in on Tuesday night, gold jumped and the stock market plunged. The shock and surprise as the GOP candidate took the lead sent ripples of uncertainty through the markets. They shook from volatility as Hilary Clinton had been significantly favored to win. However when the markets opened Wednesday, stocks soared. On Thursday, the stock market hit an all time high, and by Friday’s close they set another all time high. Gold, meanwhile, which generally moves in opposition, has made a significant pull back falling approximately $100 from its Tuesday night high to Friday morning.

What this means for investors: Short term, gold prices will likely remain subdued. Many analysts were predicting that gold prices would jump with a Trump win due to the volatility factor. However many of these same analysts were expecting a Clinton victory anyway.

Stocks are up because of Trump’s promises of economic growth, de-regulation, tax cuts, and job growth. With the Federal Reserve already making a case for an interest rate hike next month, don’t be surprised if we finally see the long anticipated hike. Stocks are on an inflationary trajectory, and a rate hike could send the inflated market crashing.

Inflation and Debt Levels are Going to Soar Long Term

Trump Building Wall Street
The Trump Building located at 40 Wall Street, NYC

Trump’s “outsider” and populist status undoubtedly is a thorn in the side of Wall Street and the political establishment. Voting stats have shown the economy, more so than his traditionally conservative social policy, was the impetus for his rise. His economic plan, however, is far from from being conservative in the traditional sense. With the massive spending plan he has promised, the skyrocketing national debt is going to balloon even further and we will see a spike in inflation.

Trump has pledged increased spending in defense and infrastructure. This will undoubtedly add to the debt. At the same time he has proposed tax cuts. In the long run these tax cuts will help stimulate business and hiring. However, short term it will mean loss of tax revenue to finance the spending increases.

What this means for investors: If Trump’s projected spending passes, it will be be the harbinger of inflation. Gold and silver protect against inflation. When the top finally blows on the stock market, gold is going to be the safest net for preserving wealth. Buying gold while prices are low will best protect against the future. Right now gold is down to its June levels. Gold will also benefit long term due to uncertainty around Trump’s proposed trade tariffs.

Watch the Bond Market – China Selling off Treasuries

10-year-government-bond-october-2016
10-Year Government Bond Chart January 2015-October 2016, with rates on the rise again.

The bond market tells a lot about what to expect from the economy. Since Tuesday, 10-year yield bonds made a 30% jump in yield to its highest yield all year.. A rise in yield means bonds are cheaper and being sold. Investors are selling them off at an alarming rate. China, on the heels of devaluing the yuan, has been selling trillions of dollars worth of treasuries.

What this means for investors: The strength that the dollar has been enjoying this year is going to pull back. Dollars are looking less attractive to investors and bond holders. Inflation will devalue the purchasing power of the dollar. When the dollar goes down, gold goes up.

How the World Reacted to Trump Win

The world reactsWorld leaders immediately started phoning and tweeting reactions to Trump’s wins. Some subtly voiced reservations, but the overall sentiment was congratulatory and optimistic.

A major concern of Trump opponents is that he would be unable to cooperate with other world leaders. On foreign policy, the President Elect has stressed the need to re-define an image of a tough America that its allies can rely on.

What this means for investors: Geopolitical events have a significant impact on gold and the markets. Having no political foreign policy experience and few policy specifics expressed thus far, it is still uncertain how Trump’s presidency will impact the world and foreign affairs at large. The reservation that some world leaders still have indicates there could yet be an increase of uncertainty in the markets that would drive gold prices.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Stock Market Rally in Aftermath of Stunning Trump Win

Read Here

Inflation and Debt Levels are Going to Soar

Read Here

Watch the Bond Market – China Selling off Treasuries

Read Here

How the World Reacted to Trump Win

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold and Silver Maple Leaf

Correction Over? Gold Breaks $1300 This Week and Silver Rallies

Gold Market Discussion

Is the Correction Over? Gold Breaks $1300 This Week

gold liberty 1866

Gold prices broke through to $1300 this week for the first time in nearly a month signaling that the correction of the last few weeks could be over. It closed the week at a four week high after starting the current rally the previous week.

The announcement following a Federal Reserve meeting was an important trigger for gold’s movement on Thursday, however, earlier in the week gold had already started its upward move. The Fed announced – unsurprisingly – that there would not be an immediate interest rate hike. No one expected them to hike rates immediately before the election. Yellen did, however, say that there is a stronger case for a rate hike now in December. Last year, the Fed promised four rate hikes this year. So far there have been zero. The fear now is that they missed their window of opportunity for hiking rates without dire repercussions.

What this means for investors: The Fed’s reluctance to move on raising rates speaks to the weak fundamentals of the current economic climate. The fear is that the stock market is too inflated and could not sustain raised rates. Precious metals are more desirable in a low interest rate environment because of a lower yield on interest bearing assets.

Why Are Investors Protecting Now with Gold?

hold physical goldThere are a number of other reasons investors are increasingly moving into gold. Election fears certainly are playing a significant role at the moment. Analysts predict that either candidate’s economic plan is going to create an environment where gold will thrive. Both have pledged increased spending when the U.S. is already running a budget deficit of over $400 billion. Gold jumped last week immediately following the announcement of the FBI re-opening the Clinton e-mail investigation.

On Friday the U.S. Labor Department released its monthly jobs data report. The data was neutral. It neither missed nor exceeded expectations, though expectations have fallen slightly recently. It impacted gold at first pushing down the price a small margin, but gold prices re-gained later in the day.

Another major source of the surge in gold demand is from foreign governments buying up greater reserves of physical gold. Russia aims to double its gold trade in the next three years. China has also increased buying this year and moved into the slot of number one buyer in the world.

What this means for investors: Gold demand will increase through the next year. Investors are increasing gold holdings now as protection for the future.

Silver – The “Common Man’s Gold” – Rallies with Gold This Week

Silver Rally November 2016

Silver rallied with gold this week as it often does. Its prices are moving from some prior resistance into support. The metal moves much more sporadically than gold despite being influenced by many of the same factors.

The fundamentals are in place to take silver higher. Central banking monetary policy, the prospects of the U.S. election, and slowing economic growth are all conditions which will drive safe haven demand and lift silver prices. Silver may experience some more resistance in the short term before breaking out further, but conditions are in place for gold and silver to experience massive rallies.

What this means for investors: Price corrections are the time to buy. Many investors wait until metals prices take off – buying high, and selling low – instead of taking advantage of price pull backs to protect against the future. Gold and silver have both had stellar rallies all year and moved into new bull markets. As this week showed, price pull backs can quickly shift into rallies. Regardless of when you buy however, gold and silver will always be valuable long term investments.

High Court Rules that Britain Cannot Start Leave Negotiations Yet

Prime Minister Theresa MayNews on the Brexit negotiations shook the markets on Thursday. Prime Minister Theresa May has promised that Britain will enact Article 50 of the Lisbon Treaty by March next year, thereby kicking off exit talks for the country to leave the European Union. However on Thursday, the UK High Court ruled that Britain could not trigger Article 50 without Parliamentary approval.

Those who voted to leave the EU reacted indignantly given that the referendum was approved by Parliament. Many “Leave” campaigners are speaking out against the usurpation of the peoples’ will by the courts. The fear is that not enough members of Parliament will be willing to vote to uphold the popular vote, and that the June referendum will be null.

What this means for investors: The post-Brexit fears of uncertainty caused the markets to plunge along with the Euro and pound sterling. The dollar’s recent strength was buoyed by some of this currency aftermath reaction. The Thursday announcement however gave the pound a modest boost after it has been sitting at 31 year lows.

The worry now for investors in regards to Brexit is that discussions will be dragged into a political quagmire extending uncertainty for some time. Theresa May acknowledges that the problems of what was to be a long, complicated process are now compounded by the High Court ruling. After the referendum, Britons and Europeans flocked to safe haven gold investing, and it seems likely the shift to gold will continue as Brexit talks extend.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


 Here are some articles from the web discussing the topics in this week’s post:

Is  the Correction Over? Gold Breaks $1300 This Week

Read Here

Why Are Investors Protecting Now with Gold?

Read Here

Silver – the “Common Man’s Gold” – Rallies with Gold This Week

Read Here

High Court Rules that Britain Cannot Start Leave Negotiations Yet

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold bars

Gold Set to Continue Gains in 2017 as U.S. Data Keeps Prices High

Gold Market Discussion

Gold Set to Continue Gains in 2017

Precious metals have made tremendous moves this year, and gold is set to continue its gains in 2017. Even if the Federal Reserve decides to hike rates in December, the conditions are set to be favorable to gold.

Gold prices have rallied over 19% this year. Global economic slowdown, low and negative rates around the world, Brexit fear, and future uncertainty are driving safe haven demand. Strategist and investor Mark Mobius predicts gold will climb over $1,370 in 2017 even with a Federal Reserve rate hike. Rate hikes tend to decrease demand for gold, but in the long run, in his assessment, it will weaken the dollar, which would make gold more attractive. The London Bullion Market Association had their annual meeting this week as well, and participants predicted gold to hit $1,347 next year.

Another condition that will drive the price of gold is the fact that there is currently a market surplus of physical gold. Global gold supply just experienced its largest quarterly surplus since the last quarter of 2005. A report by Reuters estimated that with such an oversupply of the metal, it is unlikely the price will fall below $1,240 and could go high enough to average $1400.

What this means for investors: An oversupply of anything will keep prices low for a time. When demand increases to match the supply, however, the price will eventually soar. It might not be an immediate move, but the market will adjust eventually. Investors should take advantage of price dips now.

Disappointing U.S. Domestic Data Keeps Gold High

The US Data ReportGold inched higher this week after a couple fairly quiet weeks. Prices remained positive this week despite little movement. U.S. durable goods order numbers for September were weaker than expected. Weakness in the manufacturing and transportation sector indicates a worrying slowdown in the economy.

The stock market and dollar are enjoying relative strength right now against the rest of the world’s major economies. It is a calm before the storm that is lacking in strong, economic fundamentals to underpin the strength we are seeing. The U.S. budget deficit is up 17% in the past year, $10 trillion in global government bonds are yielding negative returns, credit and stock market bubbles are expanding, and the U.S. is about to have an election between two of the most unpopular candidates in history.

What this means for investors: When these bubbles burst, gold and silver prices will soar. If the Federal Reserve decides to raise interest rates in December, this will likely give stocks and interest-bearing assets a boost for some time, but eventually markets will have to experience a massive correction. The warning signs are flashing now for many investors to start moving their money into safe haven gold and silver.

Gold Closes at 4 Week Highs Following FBI Probe on Clinton Emails

Clinton Email Scandal
The markets received an unexpected shockwave on Friday afternoon when the FBI announced it was re-opening its investigation into Hilary Clinton’s email server scandal. During an investigation on former New York Congressman Anthony Weiner’s (former husband of top Clinton aide Huma Abedin) illicit text messages, emails were found on his phone that gave FBI director Comey reason to re-open the Clinton email investigation.

Gold jumped to its highest price in 4 weeks after the news broke early Friday afternoon. The markets pulled back slightly.

What this means for investors: Volatility and uncertainty are what gave gold its boost. As the frontrunner in the race, Clinton’s lack of judgment and mishandling of classified information raised fears about the prospect of her potential presidency.

The Current Case for Silver

Silver Bars Silver has been making a strong case all year with a stronger performance than gold for much of 2016. Silver has pulled back slightly in recent weeks along with gold. However, there is still a strong case to be made for the metal. Last week Deutsche Bank made the news for attempting price fixing on silver to manipulate the price to be lower. Although it is difficult to say just how much this affected overall prices. Silver prices are also influenced to a greater extent by industrial demand than gold prices are, which can make it move more sporadically. Silver ended the week in the green having been boosted by the same market forces as gold.

What this means for investors: This case for silver is still strong. Silver protects wealth and is cheaper to buy than gold, making it an ideal investment for a wider range of investors than gold. If gold rallies through the next year as strategists are predicting, silver will certainly ride the rally with it.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Here are some articles from the web discussing the topics in this week’s post:

Gold Set to Continue Gains in 2017

Read Here

Disappointing U.S. Domestic Data Keeps Gold High

Read Here

Gold Closes at 4 Week High Following FBI Clinton Email Probe

Read Here

The Current Case for Silver

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Bull Room to Run 2016

Why the Gold Bull Market Has Room to Run and the Election’s Impact

Gold Market Discussion

Why the Gold Bull Market Has Room to Run Yet

gold bear marketThe gold bull market is not over yet. It still has some room to run. Gold price climbed slowly, but steadily this week after pulling back last week. Gold and silver both have been keeping rather quiet the past two weeks, but this week they edged higher.

Earlier this year, gold entered a bull market, according to many analysts. Some of the more gold-wary strategists are still skeptical whether it will continue. However the gold bull market is certainly far from over. The physical gold market is going to get a boost from greater demand in India, China, and Russia. It will also become more desirable as uncertainty increases and geopolitical tensions in South East Asia and the Middle East increase.

More apparent though is the structural weakness underpinning the U.S. and global economies. Stocks are caught up in a bubble and government bonds – once considered the safest investment – are trading at disturbing lows thanks to central banking monetary policy. U.S. debt tripled in the last fiscal year. Unemployment rates are not recovering as well as hoped, and GDP growth is sluggish. Even the IMF and OECD are warning about global downturn. It is only thanks to the utter weakness of foreign currencies that the U.S. dollar is still relatively strong.

What this means for investors: Gold and silver prices have both found support. It presents a prime buying opportunity. For investors looking for safe haven investing who cannot buy gold, silver is an attractive alternative. Silver has been rallying this year as well due in large part to safe haven demand.

How is the Presidential Election Going to Impact Gold?

Trump and Clinton Presidential electionThe prospect of either of the U.S. presidential candidates in the White House makes a strong case for buying gold. It is an election unlike any other with the two most polarizing candidates from the GOP and Democrat Party to ever run. Analysts speaking to Market Watch this week stated that a Trump presidency would likely see a sustained rise in gold price. A Clinton would cause an immediate rise, then some slowing, but a greater rise in the long run.

A Trump presidency comes with many unknowns given his lack of political experience to look to. Many of his promises will disrupt trade agreements, banks, and other established elements that will create some chaos for at least the short term as the economy adjusts. Gold will be attractive for its stability. There is also an anticipation of political volatility around his presidency that would spur some safe haven buying.

With tax increases and greater spending, a Clinton presidency would likely be inflationary. Gold prices rise with inflation, as gold is a hedge against it. Clinton’s hawkish foreign policy legacy could lead to more conflict and nation disruption in other parts of the globe causing investors to flock to safe haven gold as protection.

What this means for investors: There has rarely been such a climate of fear and uncertainty around a U.S. presidential election. Hedge fund managers, strategists, and top investors have been buying up gold all year, and buying is not slowing as November looms closer. Often investors buy gold when price is high and sell out of nervousness when it starts to fall. However, buying when the price pulls back is better protection against rising inflation and future uncertainty. There could be some more pull back in the near term as metals prices remained quiet and mostly stationary this week, but economic fundamentals point towards a resurgence in demand before the year’s end.

Europe Continues Negative Interest Rates and Easing

European negative interest ratesThis week the European Central Bank decided to keep interest rates at current low and negative levels causing the euro to hit four-month lows. The ECB will continue buying 80 billion euros in government bonds per month until at least March 2017. Many of these bonds are trading at negative yields. With this easing policy, the ECB policy makers are hoping to stimulate growth, and yet they have missed target inflation rates for three years straight.

The ECB is continuing on its policy path that has been proving for years to be ineffective. This shows they are out of options. There are too many structural and cyclical problems in national economies and the EU at large. The Eurozone is going to remain mired in this stagnant climate until something triggers the system collapse. A few weeks ago Deutsche Bank sent a rumbling through the system. Chinese and Gulf investors are now preparing to buy up 25% of the bank, which has lifted its stock price again for the time being.

What this means for investors: Immediately after Mario Draghi’s announcement, gold climbed higher. The dollar also gained against the weak Euro and Pound, however, which eased back gold prices slightly. Generally, gold does better in a low interest rate environment, so low interest rates are favorable to metals. When Europe finally emerges from this limbo it is stuck in though, gold will surge as the fundamental problems of today’s fiat currencies are realized.

Deutsche Bank to Pay $38 Million for Silver Price Fixing

Deutsche Bank
Deutsche Bank has been notorious in the news lately due to its stock plunge a couple weeks ago. This week it found itself in hot water again. The German bank was forced to pay $38 million to settle U.S. litigation over allegations that it had violated U.S. antitrust laws. It was found to be fixing silver price at the expense of investors. The bank was attempting to manipulate prices to keep them lower than they should be.

What this means for investors: The settlement is a small amount for a bank as massive as Deutsche Bank. This is an important step though in pulling back the curtain on the price and currency manipulations that goes on in these “too big to fail” banks. It also gives credence to those gold and silver investors that have been saying banking manipulation is glazing over structural problems in the system.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Why the Gold Bull Market Has Room to Run Yet

Read Here

How Is the Presidential Election Going to Impact Gold

Read Here

Europe Continues Negative Interest Rates and Easing

Watch Here

Deutsche Bank to Pay $38 Million for Silver Price Fixing

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Asian Economic Slowdown

Gold Demand in Asia and Russia Signals Now Is Time to Buy

Gold Market Discussion

Economic Slowdown in Asia Signals More Gold Buying

Economic slowdown in AsiaGold demand in the Asian markets is picking up after a slowdown last week when Chinese markets closed for a week of holidays. Markets are indicating that now may be the perfect time to buy gold. Demand for gold in Asia is on the rise, which will contribute to driving the price higher.

Asian – and particularly Chinese – demand for gold is on the rise because of general global and national economic slow down. The Chinese economy has been showing worrying signs of lagging for some time. Exports fell more steeply in September than expected.

Lack of exports from China means there is a lack of demand for products around the world. China’s slowing economy is a symptom of global uncertainty. Sales are down with consumers not buying as many things as they used to.

Russia has also been buying up significant quantities of gold. Central banks have boosted their holdings in gold by over 10% since the financial crisis, and Russia and China lead the pack in increasing their gold reserves.

What this means for investors: Gold price’s pull back is a prime opportunity to buy. Gold performs best as a long term investment. Even Bank of America is projecting a recession to come. Their data and analysis projects it to hit next year.

U.S. Jobs and Labor Force Participation – What It Says about the Economy

US Jobs and Labor Force The unemployment rate is reportedly at 5%, but realistically it is probably in fact higher. The unemployment rate rose in September with fewer than expected jobs added to the work force. The labor force participation rate is also falling. This is partly due to baby boomers retiring, but also due to workers feeling discouraged and not actively seeking work.

Many of the jobs added are also part time employment, and many of those workers would prefer full time jobs. There has also been an increase in temp positions, which skews the employment figures a little as well.

What this means for investors: The state of the labor force can tell a lot about a country’s economy and outlook. Even with baby boomers retiring, the opportunity for younger workers to fill jobs that they once held is simply not there. One analyst blamed demographics in part for the reason that the recovery from the Great Recession is not happening as hoped. In addition, a paper by a San Fransisco economist stated that we may find the Fed’s dovish monetary policy will be contractionary rather than stimulative in the long run. Quantitate easing has been a feature of central banks around the globe, so this effect will be felt worldwide. Shrinking economies will mean even less employment and lower wages. In this economic climate, gold and silver safe haven demand will increase.

The Fed Continues to Weigh Rate Hike

Fed Rate Hike Coming?Fed Chair Janet Yellen gave another speech lacking in clarity or direction this week about a possible interest rate hike. On Thursday the minutes from the last meeting were also released, which took a September rate hike off the table. Three member had voted for an immediate hike in September, but it was voted down. Initially the minutes release was positive for gold prices.

Yellen’s speech helped to bolster the U.S. dollar while bonds fell. She gave no absolute direction to when we can expect a hike, but most analysts are anticipating December. Central banks around the world have been pursuing negative interest rates for so long, that some worry the Fed is approaching a point where they will miss the window of opportunity for a hike to do any good.

What this means for investors: A rate hike too soon will be positive for gold, but it will create shock waves through the economy. The last hike was December of last year, and the economy was not able to handle it. The Fed is playing with smoke and mirrors with its current monetary policy with the dollar experiencing strength at the moment relative to other currencies, but lack of strong economic growth and employment data contradicts it.

The pound sterling’s weakness from last week continues to be at play in strengthening the dollar as well, which is weighing on gold prices.

A Short History of the London Gold Market

London Gold MarketLondon is the most influential of the gold trading markets. Other important trading centers are in New York, Hong Kong, Zurich, Shanghai, and Sydney, but London exerts the most pull. Gold prices changes constantly but twice a day, the price is fixed in London. These price fixes are determined by supply and demand as well as speculation around monetary policy, short selling, jewelry and industrial demand, safe have demand, war, and other geopolitical events.

The Shanghai price fix that was introduced earlier this year is now exerting a great deal of influence as well. China wants to have more control over gold prices, as it is the largest gold mining and buying country in the world.

An article from Bloomberg laid out a timeline of the key events in the London gold market stretching back to the 17th century. It shows the longevity of gold as a preserver of wealth.

What this means for investors: Governments and central banks still place significant value on gold today. Although it is not exchanged as every day currency anymore, it is real money, retains value, and has for hundreds of years.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Economic Slowdown in Asia Signals More Gold Buying

Read Here

U.S. Jobs and Labor Force Participation – What It Says about the Economy

Read Here

The Fed Continues to Weigh Rate Hike

Read Here

Short History of the London Gold Market

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

100 trillion Zimbabwean Dollars

No One Is Talking about the 1.4 Trillion Dollar Budget Deficit for 2016

Gold Market Discussion

$1.4 Trillion Dollar Deficit That No One Is Talking about

100 trillion Zimbabwean Dollars
It’s too bad we can’t pay down the debt with Zimbabwean currency.

In the 2016 fiscal year, the U.S. hit a 1.4 trillion dollar budget deficit, and no one is talking about it. October marked the start of a new fiscal year, and 2016 closed with a deficit three times larger than the previous year. It is the third largest increase budget deficit ever. The two times the budget deficit increase was greater was in 2007 and 2008 as the financial crisis and Great Recession hit. In comparison to those years with massive bank bail outs by the federal government, this year has been relatively normal for the federal government. So why has the deficit become so out of control?

Even the U.S. presidential candidates are not talking much about the budget deficit. Both are calling for increased spending initiatives. Although they differ on tax plans where the spending would increase, analysts mostly agree that both candidates would add further to the deficit.

What this means for investors: Budget deficits are dangerous. Some of the factors that contribute to budget deficits are slow economic growth, high unemployment, and high government spending. A deficit can be telling about the health of an economy. The budget deficit is at an unsustainable level now. It will be virtually impossible to pay back. Eventually, debt default might be the only option.

Brexit Talks and The British Pound’s Flash Crash

The Brexit aftermathPound sterling hit 31 year lows this week in a flash crash. On Friday it was lower than the Euro (which also fell). The weak EU currencies shored up the dollar to have a strong week, which contributed to some of gold’s pull back this week.

The pound’s fall was du to Prime Minister Theresa May’s announcement that the United Kingdom would trigger Article 50 of the Lisbon Treaty by March 2017. Article 50 is the protocol to begin the process of an EU member nation leaving the union. May hinted that the exit would be a “hard exit”, with the U.K. losing access to the single European market.

Other theories about the flash crash are that there were a “fat finger” error or a lack of liquidity. A “fat finger” error is when an investor accidentally trades more of a currency or stock than he or she intended. Lack of liquidity means that there is not enough cash being traded on the market.

What this means for investors: Regardless whether there was a “fat finger” error, the pound’s flash crash shows that Brexit politics will still weigh heavily on the currency. The Bank of England has been devaluing their currency since June by pumping cash into the system and cutting interest rates to record lows. When currencies devalue, gold becomes more desirable as a stable measure of wealth.

Gold Dips During Slow Week, Chinese Markets Closed

China Golden Week

Gold had a slow week and receded from some of its recent gains. One reason was that the Chinese markets, one of the biggest buyers of gold, were closed all week for the Golden Week holidays. The lack of trade in the Chinese markets weighed heavily on metals across the board.

Silver fell with gold, as it generally does. Next week when the Chinese markets open again, it is likely they will use the price dip as a prime opportunity to start buying it up again, as they generally do. In addition to China increasing gold holdings, Russia is also using this opportunity to shore up gold reserves.

What this means for investors: As the Chinese yuan and Russian ruble devalue, the governments are holding more gold to safeguard against crisis. Price dips in this uncertain economy are lucrative buying opportunities.

What Employment Numbers are Telling about the Economy

Employment Application

In the latest jobs report from the Department of Labor, data showed that unemployment crept slightly higher to 5%, and the U.S. had added 156,000 jobs. The labor force participation rate is just over 50%. The data was fell short of expectations, however. All in all, it was a mixed report. It was likely not negative enough to scare the Federal Reserve away from a December rate hike, but it was not solid enough to impart any real confidence to investors about the state of the economy.

What this means for investors: The labor market has recently been one of the few positive forces in the economy with some solid numbers in July and August following dismal figures in the spring. It is sending mixed messages, however, and has been all year. Precious metals are a key way to protect against such market uncertainty.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

$1.4 Trillion Dollar Deficit That No One Is Talking about

Read Here

Brexit Talks and The British Pound’s Flash Crash 

Read Here

Gold Dips During Slow Week with Chinese Markets Closed

Read Here

What Employment Numbers are Telling about the Economy

Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Deutsche Bank Failing

Deutsche Bank’s Instability Revives Fears of 2008

Gold Market Discussion

Deutsche Bank Strikes Fears of Lehman Brothers Repeat

Lehman Brothers Collapse

Deutsche Bank sent liquidity fears through the markets on Thursday reminiscent of the lead-up to the 2008 crash. The bank’s stock fell to all-time lows on Thursday on liquidity concerns as large funds began to withdraw excess cash and positions at Deutsche Bank. The bank, which is Germany’s biggest lender, was already suffering after the U.S. Department of Justice requested $14 billion a couple of weeks ago to settle an investigation into mortgage backed securities.

This is dangerous for the entire global financial network. Deutsche Bank is at the center of the European financial system and is heavily interconnected to banks across the world. Collapse would be systemic.

The bank has 42 trillion Euros in derivative exposure, which is more than double the entire EU GDP. Eventually the bank will have to do something. A “do nothing” scenario is no longer an option.

Initially, gold and silver rallied as fear and uncertainty set in among investors. On Friday, with talk of a possible DOJ deal and assurances (at the behest of Angela Merkel) from bank CEO John Cryan, stocks rallied again. Gold and silver held modest gains.

What this means for investors: A few weeks ago, Deutsche Bank made the news for another nefarious reason. The bank refused delivery of promised physical gold to investors.  Mainstream news sources flashed headlines about stocks closing the financial quarter on highs, despite the S&P and Dow having their worst month since January. Deutsche Bank is down 49% YTD, and a significant number of other banks in the U.S. and Europe have performed nearly as poorly.

Banks cannot guarantee your money is safe. When the algorithms fail, money disappears. Assets like gold and silver, however, do not disappear.

What Strategists are Saying about Deutsche Bank

Deutsche Bank CrisisMost investment strategists are in agreement about the danger of Deutsche Bank’s situation. Jeff Gundlach of DoubleLine Capital is advising investors to “stay away from Deutsche Bank.”Gundlach named “bizarre monetary policy” as the main reason for the dismal financial sector performance this year. He believes a government bail out could still be a possibility. By EU regulation, member states are not allowed to bail out banksAnother strategist ,Paul Gambles at MBMG International, predicted in 2013 that the bank was approaching collapse, and only government intervention will save it now.

A bail out of Deutsche Bank would be political suicide for Angela Merkel though. Bank bail-outs in the EU are forbidden at least in theory to protect the average, tax-paying citizen. Merkel would lose faith with the German people if a Deutsche Bank bail out happened on her watch. Her center-right party, the Christian Democrats, recently lost in Berlin elections, and Merkel cannot afford to lose more faith with her constituents.

Stefan Muller, the CEO of a Frankfurt-based research company, believes government intervention is necessary. In his estimate, “something serious needs to happen.” The bank’s CEO, John Cryan, seems at a loss of what to do, despite his assurances that the bank has some cushion and is not in trouble. The financial and monetary systems have become deadlocked, and at this point, the bankers are merely prolonging the inevitable.

What this means for investors: How long can such a broken system stay propped up by bankers’ assurances that things are alright? Gundlach said the system is beyond analyzing anymore because of unprecedented policy and regulation. Deutsche Bank is extremely interconnected and has a huge derivatives book. If it does collapse, the contagion spread would be systematic. Gold will soar as a safe haven when the system does collapse.

 Silver Holds Prices to Close out Quarter

silverbars

Silver closed out the quarter in the green. The metal spiked on the last couple trading days of the quarter. The Deutsche Bank concerns buoyed silver prices as well as gold. While gold pulled back slightly Friday though, silver stayed just under $20.

Silver did experience some choppiness as well during the week as investors adjusted ahead of the quarter end. High energy prices and volatility contributed to silver’s price support, however.

What this means for investors: Silver’s shining performance this year has not dimmed yet. Widespread economic uncertainty and volatility will continue to support the price. Silver is a cheaper alternative to gold for protecting wealth against banking crises, and is up more than 26% YTD.

OPEC Deal Could Help Gold

DOHA Oil

Oil prices settled higher on Friday after a tentative deal among OPEC partners to cut production. There has been much dispute particularly between Iran and Saudi Arabia about production numbers. With sanctions lifted, Iran has been producing more, and Saudi Arabia – in an effort to maintain market share – also increased output. Crude prices have been dwindling because of output and inability of the OPEC countries to reach an amiable deal, but prices were shored up by the possibility of an accord this week.

What this means for investors: HSBC analysts think that the deal could help gold. Gold and oil often move in correlation, though it has been less so this year as gold emerged into a bull market.. More rallies in oil could lead to rallies across other commodities, including gold and silver.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Deutsche Bank’s Instability Revives Fears of 2008

Read Here

What Strategists Are Saying about Deutsche Bank

Read Here

Silver Holds Price to Close Out Quarter

Read Here

OPEC Deal Could Help Gold

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Janet Yellen and Fed Do Not Raise Rates

Fed Fears Keep Rates Low, Gold and Silver Rally

Gold Market Discussion

Gold Has Shining Week After Fed Decision Not to Hike Rates

Federal Reserve BuildingGold and silver both ended the week on highs after the Fed announced its decision not to raise interest rates. The metals had their greatest weekly advance since July. Stocks and bonds initially rallied after the Thursday announcement as well, before they experienced pull back on Friday.

The announcement was remarkable in that the Fed’s language continues to be unremarkable. The past couple Fed announcements have been slightly more hawkish, but remain vague about rate hike timing. Janet Yellen, the Fed chair, claims to be data driven in her decisions, however she picks and chooses and will which data to follow. GDP growth is sluggish, but positive labor figures in August seem to be warranting more notice from Yellen.

There are those who believe the Federal Reserve is politically motivated in its decision. When asked at the press conference by a reporter, Yellen assured them that they were not motivated by politics, but there are still those who wonder. A rate hike could send the stock market into disarray, which would be difficult for the incumbent Democratic Party a month away from a Presidential election. Some analysts also associate a great deal of market risk with a Trump presidency.

The Fed governors are very divided over the rate hike. They fell just short of a majority vote for a hike. Boston Fed governor Eric Rosengren, worry that the low rates are creating market dislocations with investors pursuing riskier assets on the hunt for returns.

The Bank of Japan also had a monetary policy announcement this week. It announced more quantitative and qualitative easing with more “yield curve control.” Gold and silver also reacted with upward movement to the BOJ announcement.

What this means for investors: The Fed decision came as something of a surprise to many investors, who have been expecting a hike announcement for months. Many are now saying that the Fed probably missed its chance to hike months ago. Strategist Charles Dumas said that the Fed is putting market sentiment before the real economy, and it is provoking a stock bubble that will burst with dire consequences.

It is increasingly clear that people are losing confidence in central banks. If 2017 is the bear market that many fear, gold and silver will be among the safest assets for investors.

The Economy Is Approaching an Event Horizon

Global EconomyGlobal debt is approaching $230 trillion. How long can the global economy sustain such a burden? One strategist turned to astrophysics to explain what happens next. When a star’s life ends, its gases begin to expand into its core. The core becomes so heavy that the star cannot withstand its own gravity. The star becomes larger and denser, eventually turning into a supernova, exploding, and collapsing upon itself. After the star explodes, a black hole exists where the star once was.

Central banking policy of unprecedented quantitative easing and zero and negative interest rates led to this debt expansion. Interest rates have been falling for 35 years into negative rates. Bond investors want them to move lower in order to ensure a return. As sovereign debt increases though, the money supply is falling.

Even the stock market highs this summer have not merited the celebration they should in another economic climate. Stock buyers are buying for their dividend and lack of options in this low interest rate world. The stock market is giving a distorted view of the economic reality.

What this means for investors: This is why fiat currency is dangerous. The money supply is too easily manipulated by numbers and ineffective policies. Gold and silver are real, hard, physical assets. They have value when the money supply runs out. More and more investors are recognizing the gravity of the “event horizon” – or black hole’s edge – that QE and negative interest rates are pulling the economy towards.

Silver Prices Post-Fed Announcement

stacked silver bars

The cheaper metal experienced two-week highs after the BOJ’s and Fed’s announcements this week. It pulled back some on Friday, but still made a relatively large gain for the week at 7%, following a 4% pull back the previous week.

Other factors influencing the price gains for both silver and gold were a slowdown of European economic growth and stocks falling on Friday. The U.S. dollar also experienced some pressure on Friday.

What this means for investors: Investors who bought the previous week when there was some pull back on price were encouraged to see the metals bull market has not finished its course. Both silver and gold have been extraordinary performers in 2016, and with an ominous and uncertain economic outlook, they have not finished their run yet.

Trump Vs. the Federal Reserve

Trump vs the Federal Reserve

Republican presidential candidate Donald Trump and Janet Yellen have been trading jabs the past two weeks. First, Trump accused the Fed of political bias. Trump has even gone as far as to say Yellen should be ashamed of what she is doing. He essentially said that the Fed is not hiking rates because they want Obama’s legacy to end on an economic positive. At an address at the Economic Club of New York, he predicted the rate hike would come in January as the next President prepares to take office.

Following the FOMC meeting this week Yellen fired back that the Fed is absolutely not political, and politics are not discussed in the Fed meetings. One strategist believes Yellen is afraid of Donald Trump, however. As a political outsider, he has a level of unpredictability not seen in a U.S. election before.

What this means for investors: Politicians in the past have called for an audit of the Fed. Could a Trump presidency see one happen? The Fed has amassed far too much power over the U.S. (and global) economy, and political theorists and philosophers as far back as the late 18th century have warned of an all-powerful, central banking system.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Fed’s Decision Could Be Leading to 2017 Bear Market

Read Here

The Economy Is Approaching an Event Horizon

Read Here

Silver Prices Post-Fed Announcement

Read Here

Trump Vs. the Federal Reserve 

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Boris Johnson Brexit

Boris Johnson Says Britain Will Begin Brexit Talks Soon

Gold Market Discussion

Boris Johnson: Brexit Negotiations Could Begin Early 2017

Boris Johnson
Boris Johnson, British Secretary of State for Foreign and Commonwealth Affairs

Boris Johnson says Britain will begin Brexit talks soon. Johnson, the British Foreign Secretary and staunch “Leave” vote advocate told the Italian prime minister this week that Brexit talks could begin as soon as early 2017. Boris Johnson, the former mayor of London, campaigned heavily for Great Britain to leave the European Union, which was voted for by referendum in June this year.

The aftermath of the Brexit referendum saw a massive downturn in the global markets and most world currencies fell.  The U.S. dollar strengthened as did gold and silver as demand surged for safe haven, wealth-preserving assets. Within a few weeks, however, much of the investor fear had subsided, and the political will to move forward seemed to fizzle out as the British government changed hands after David Cameron’s resignation as Prime Minister.

Under the legality of the Lisbon Treaty, the next step to leave the EU is for Britain to initiate two years negotiations with the EU as to how the separation would happen. The Treaty’s Article 50 allows for a member nation to leave, though it has never been done before.

Johnson’s comments this week to his Italian counterpart Paolo Gentiloni are significant because new PM Theresa May is so far seeming to procrastinate on starting the process. President of the European Commission Jean-Claude Juncker, French president Francois Hollande, and UKIP leader Nigel Farage have all said that the process should begin as soon as possible.

What this means for investors: Demand for gold and silver surged after the initial referendum. Many investors in Britain and the Eurozone began to buy gold for the first time as they watched their currencies’ value plummet. When Britain does sever its EU membership, the pound and sterling will take another significant hit, which will drive precious metals prices.

The post-Brexit flight to gold illustrated how the value of gold is not denominated merely in spot price. It is a hard, valued asset that survives when currencies collapse.

 

Gold Pulls Back Waiting for Interest Rate Guidance

Gold and interest rates

Gold prices closed out the week on a pullback as markets wait for announcements next week from the Federal Reserve and Bank of Japan about where interest rates are going next. The Asian markets – including China, which is currently the world’s largest gold buyer, Taiwan, and South Korea – were closed Friday for a holiday, which also contributed to the Friday pull back.

In the case of the Bank of Japan, investors are waiting to see if the government will inject more stimulus. Some believe interest rates in Japan could be slashed even further. On the U.S. side, there is mixed expectation of whether the U.S. will raise rates.

What this means for investors: Central banks do not know what to do anymore. Former Fed Chair Alan Greenspan warned this week that ‘crazies are running the system.’ With central banks in Europe, the U.S., Japan, and Great Britain running out of options on monetary policy, gold will become a highly desired asset in the future. Gold has been moving in a bull market all year, and price pullbacks like this are a prime buying opportunity.

 

A Perfect Storm of a Correction is Coming

financial perfect storm

A sharp stock market pullback may be imminent, according to economist and strategist David Rosenberg. Last Friday the stock market took a resounding hit when a Fed official hinted at an interest rate hike to come. Prominent investors and strategists have been warning of an impending stock market bubble burst for some time.

Stocks fell the previous week after a Fed official hinted at raising rates. Rosenberg’s analysis was not merely based on Fed policy however. He also cited an overvalued stock market, investor complacency, and sluggish economic growth. Overall global economic growth is even slower than in the U.S.

What this means for investors:  Although an interest rate hike would initially shake gold prices, when the stock market undergoes such a sharp correction, investors will start shifting demand to gold as a safe haven asset. CNBC’s Delivering Alpha conference this week featured chief hedge fund managers, investors, and strategists whose analysis of the economic outlook was, for the most part, uncertainty and gloom. Nearly all have been moving more holdings into gold as protection against global uncertainty.

Have We Entered a Recession? 

post financial crisis monetary easing
Chart showing the Fed’s implemented monetary easing post financial crisis

A series of graphs in this article illustrate that the U.S. could be on the brink of another recession. The four policy drivers of the economy are monetary policy from central banks, fiscal policy from the government, and microeconomic policy from corporations.

On the monetary policy, as already discussed, central banks are unsure what direction to take anymore. Stimulus, negative interest rates, and helicopter money has not been fixing problems, merely providing a means to ignore them for a little longer. Fiscal policy from elected officials is wrought by partisanship and ineffectiveness. Corporations are guilty of misallocating capital. Ineffective – and dangerous – policies from these three frameworks would result in the ‘perfect storm’ of a market correction, which leads to recession.

What this means for investors: Gold protects wealth during recession. Silver can similarly protect your portfolio in a weak economy. Many first-time metals investors are finding silver is a good starting point towards diversifying their portfolio. It’s a cheaper option than gold, follows most of the same market trends, and is up more than 25% this year.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Boris Johnson Tells Italian Prime Minister Brexit Negotiations Could Begin Early 2017

Read Here

Gold Pulls Back Waiting for Interest Rate Guidance

Read Here

A Perfect Storm of a Correction is Coming

Read Here

Have We Entered a Recession? 

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Massive stock and bond selloff

Friday Fed Announcement Triggers Biggest Stock Loss in Months

Gold Market Discussion

Massive Stock and Bond Sell Off Shake Markets on Interest Rate Prospect

stockbrokers selloff

On Friday, the Dow and Nasdaq had their worst day since Brexit. The Dow was down nearly 400 points and had its third worst week overall year to date. An unexpected announcement from the Federal Reserve that hinted at an imminent interest rate hikes was the catalyst. Eric Rosengren – President of the Boston Fed – said Friday that “low interest rates are increasing the chance of overheating the U.S. economy.” He commented that there needs to be a tightening of monetary policy in order to maintain full employment.

In the past several weeks, the stock market has been hitting record highs, so it was a shock to many investors. Gold also took a hit after spot price had been moving up above $1,350 the previous day. European stocks also had a dismal day after the news with their worst day in over a month. The U.S. dollar and short-term government bond yields moved higher.

The European Central Bank announced this week that they would not deviate from their course of stimulus. Mario Draghi encouraged national governments to increase spending, but it is becoming increasingly clear from both the ECB and Federal Reserve that the central banks are out of options on monetary policy.

What this means for investors: Gold also fell Friday, which is not surprising. When interest rates are higher, demand shifts from non-interest yielding assets like gold. If this stock market bubble finally bursts though – which it is dangerously close to doing – investors will start moving back to safe haven assets like gold and silver.

 

Markets are Frozen by Uncertainty Fears

frozen markets

Central banking policies have been at the root of the markets’ gains, and they will be a catalyst for when it crashes. The Fed has been mostly hesitant and vague for the whole year in a climate where the slightest word from a spokesperson shakes the markets. The current state of affairs for the global economy can be summed up by uncertainty – so much so that it is becoming increasingly clear that central bankers are even uncertain what course to take. The features of this uncertainty are:

  • A Federal Reserve preparing to hike rates as global growth is slowing.
  • An ECB that is paralyzed with inability to move forward and tries to shift responsibility (and blame) to national governments.
  • The Bank of Japan continuing an aggressive negative rate policy.
  • $13 trillion of sovereign debt at negative yield.
  • Brexit uncertainties are still rampant, as Britain is preparing to face an economic recession.
  • A U.S. presidential election unlike any other.
  • Apple – which accounts for 7% of the S&P 500 – ordered by the European Commission to pay 3 billion euros in back taxes to the Irish government, which Apple and Ireland have both appealed against.
  • Geopolitical instability in the Middle East, South China Sea, and North Korea.

What this means for investors: Precious metals will be the asset that investors will flee to when the system breaks down. It has happened before, and it can happen again. The banks can only prop up a broken system for so long, and the warning signs are numerous that the world is approaching another brink of economic collapse.

Former Anti-Gold Wall Street Investor Changes Course, Recommends Buying Metals

buy gold bars

Richard Bernstein
Richard Bernstein

Richard Bernstein, a notoriously anti-gold investor, is buying gold for his clients’ portfolio for the first time over inflation concerns and market uncertainty. When Bernstein – a former investment strategist at Morgan Stanley – taught at New York University’s School of Business, he was notable for telling his students that there was no difference between gold and “wampum,” the glass beads that the Eastern Woodlands tribes of Native Americans used to exchange as currency.

In his opinion, gold was only an asset because of some “romantic value” assigned to it. Just as wampum was only valued because of an agreed upon value, gold only means something because society has decided so. It could easily become nothing more than glass beads one day.

What Bernstein’s analogy is missing however is that gold and silver have been valued as currency by most societies for thousands of years. The example of Native Americans exchanging wampum is representative of a small fraction of human history.

What this means for investors: If Richard Bernstein is seeing enough danger in the markets to buy gold, investors should take note. Another important factor to consider is inflation. Precious metals are an effective way to hedge a portfolio against inflation, which is one of Bernstein’s chief motivations. Gold is also real money. It has been valued for thousands of years, and it does not lose value, unlike paper trades, fiat currency, and “wampum.”

 

Buy Gold on Rebound Rally

Buy Gold on the rebound rally

The pull back on gold price Friday presented a prime buying opportunity. This graph illustrates the Comex gold weekly trends for the past couple years. This week gold met resistance at $1,360 and pulled back some.

On the silver side, in last week’s Gold Market Discussion, we looked at why the cheaper metal’s price would continue to run.

What this means for investors: The primary point to take away from this graph is that the current retreat is a lucrative buying opportunity before the uptrend continuation to $1,360 and beyond. Gold is in a new, strong bull market, so any price retreat is a prime opportunity to take advantage.

 

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Massive Stock and Bond Sell Off on Interest Rate Prospect

Read Here

Markets are Frozen by Uncertainty Fears

Read Here

Formerly Anti-Gold Wall Street Investor Changes Course, Recommends Buying Metals

Read Here

Buy Gold on Rebound Rally

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Deutsche Bank Backing out on Promised Delivery

Deutsche Bank Backing out on Promised Delivery of Gold

Gold Market Discussion

Why is the Deutsche Bank Backing out on Promised Delivery of Gold? Is Gold Approaching a Short Squeeze?

Deutsche Bank

This week German gold buyers discovered that they could not receive delivery of the metals they had paid for. The bank in question – Deutsche Bank – is the chief bank of Germany. Investors had bought through the gold exchange traded commodity Xetra-Gold. This is a gold investment service that is essentially more of a paper trade than actual physical gold, as many investors do not choose to exchange the warranty for physical delivery and instead treat it more as an ETF. However, the contract states that a buyer can redeem their contract for physical gold at the designated Deutsche Bank.

When an investor attempted to take the guaranteed delivery of their physical gold this week the bank was unable to produce it. Later – after being questioned – the bank issued a formulaic response stating only that the bank was in fact the designated supplier of physical gold despite its inability to deliver. The bank is the guarantor of the physical gold backing the warranty, thus it seems Deutsche Bank rather than Xetra-Gold is at fault here.

What this means for investors: The question to consider here is whether Deutsche Bank was unwilling or unable to deliver the gold. Each prospect is equally worrying. If the bank is unwilling to make good on the warranty, what is their impetus for wishing to keep possession of their gold? If the bank is unable, then where is the gold that is supposed to be backing these trades?

This is one of several signs that gold could be approaching a short squeeze. For every 542 ounces of gold traded on the Comex in ETFs, only one ounce of physical gold is sitting in a warehouse for physical delivery. This means that the price of gold can become exaggerated. If every holder of one of these paper gold certificates attempted to cash them in, there would not be enough physical metal to meet the requests. The price of gold would skyrocket, although many investors would be left high and dry. Eventually these imbalances will need to undergo some degree of correction.

This is a significant reason that owning physical gold is safer than gold ETFs. Physical gold investors can be confident that they have their investment safe in their own hands.

 

Gold and Silver Prices Ends Week with a Jump after August Jobs Report

fine-gold-close-up

On Thursday gold and silver saw dips in anticipation of the U.S. jobs data report for August. However both re-bounded Friday after some worse-than-expected data. Gold saw its biggest gain in a month when the data failed to hit estimates.

In July, the jobs report was better than expected which caused gold to take a hit, despite weak numbers in May and June. According to some analysts, far too much credibility is being placed in the jobs data, however, as GDP growth is still more sluggish than could be desired. The Federal Reserve keeps looking for positive economic indicators for a rate hike, and the July jobs report had significant bearing in a slightly more hawkish tone from Janet Yellen last week on a possible rate hike this month.

Silver saw a significant price jump as well. On CNBC’s Fast Money Friday, one analyst even said he preferred the white metal to gold in this market.
What this means for investors: The metals jumped due to demand for safe haven. The jobs data indicates a slowing economy and uncertainty, which both boost gold and silver demand. Precious metals also are desirable in the low interest rate world that we are currently living in.

Gartman on Gold vs. Bonds in Unorthodox Market

gartman gold vs bonds

Dennis Gartman, editor and publisher at The Gartman Letter, talked this week about some unusual trends in the past few months between the bonds and gold markets. Historically the two have always moved in opposition to each other. However as Gartman pointed out on CNBC, “…since June, as went gold, so went the bond market.” The absolute prices of both have rallied and fallen alongside each other in the past quarter, which is an anomaly.

Both investments are seen as safe havens during times of economic turbulence and uncertainty, which accounts for the rallies this year. They move in opposition as investors shift between the two deciding on the safest investment. Both saw significant gains following the post-Brexit volatility.

What this means for investors: There is huge demand or safe haven investments right now. The primary reason for this is uncertainty. With monetary policy experiments, contradictory U.S. economic data, negative ECB interest rates, the U.S. presidential election, and still some Brexit volatility, no one is certain of what is to come.

Silver Forecasted to Stay Strong [VIDEO]

What this means for investors: Silver rallied Friday after falling slightly over the past few weeks. Its rally shows it is still a strong performer – in fact performing better than gold this year – and set to gain even more in both short and long term. The current correction makes now an optimal buying time.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Deutsche Bank Refuses Delivery of Gold
Read Here

Gold Rallies after Jobs Data 
Read Here

Gartman on Bonds and Gold
Read Here

Silver Rallies Friday – Investors Predict Higher Gains
Watch Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Economic Indicators About Trump vs. Clinton

What Economic Indicators Are Saying About Trump vs. Clinton

Gold Market Discussion

The Markets’ Take on a Trump Presidency

What would Trump mean for Gold?

Presidential elections in the U.S. have significant impact on market movements. Even the anticipation of (before the candidate is even elected) what a candidate might do is impactful.

According to some hedge fund managers, there is a correlation right now happening between investors wanting to hedge against a market drop in the event of a Donald Trump presidency. The CBOE Volatility Index – or VIX – gauges volatility expectations and right now its projections are moving in line with Trump’s polling numbers according to CNBC analysis.

What this means for investors: The VIX can be indicative of what traders expect for the rest of the year. It is not an infallible predictor, however. Although some traders are expecting volatility, it does not necessarily mean a long-term negative for the markets

 


Economic Data Forecaster of Clinton’s Chances

What would Clinton mean for Gold?

The economic data around Hillary Clinton’s chances is also worth noting. Some forecaster models are frighteningly accurate at predicting the outcome of U.S. presidential elections by taking into account unemployment, GDP growth, and inflation.

An economist at Yale – Ray Fair – analyzed the current race with his model based on these factors. The model has correctly predicted all but two presidential elections in the past hundred years. His results were emphatically in favor of a Trump victory. According to the assessment, a Clinton victory is impossible without 4% GDP growth. Growth is currently trudging at 1.2%.

What this means for investors: Of course, modeling data is not perfect. It is difficult to account for every variable, and this election is particularly volatile. A rate increase could be detrimental to the Clinton campaign based on the Yale model, but that doesn’t mean it still won’t happen. Regardless of victory, demand for safe haven investments like gold and silver will likely go up in the wake of the election if the economic data and slow growth continues.


Gold Advances after Fed Announcement from Yellen on Friday

The Fed says they might raise rates...again

On Friday the much-anticipated Fed announcement on interest rates drove gold higher. Gold had retreated earlier in the week in anticipation of the Federal Reserve meeting in Jackson Hole, Wyoming. The previous announcement from Fed chair Janet Yellen had hinted at a rate increase happening soon, so many had thought that Friday’s announcement might finally give a concrete timeline for that hike to occur.

The analysis of Yellen’s speech, however, did not reveal anything new in Fed policy strategy. Yellen did reiterate that a rate hike soon would be appropriate, but did not give a certain date or further details. Rather, she said it would be “gradual” and “over time.” According to Fed Funds data, odds of a rate increase happening in September fell slightly to 28% from 32%. Given the Fed’s tone recently, a rate increase in September is certainly not off the table though. One analyst believes it would more likely happen in December rather than September.

The chief factors that the Fed took into consideration are unemployment rates, GDP growth and global economic uncertainty. While the data is not robust enough for the Fed to take a definitive move from its doveish stance, Yellen did state that the economy was nearing employment and growth goals.

It is also worth noting that on Monday, the Libor – London Interbank Offer Rate – hit a 7-year high even as interest rates have been falling. The last time time it experienced such a spike was prior to the 2008 crash. Most loans are linked to the Libor, and this could be a sign of system stress, as the Fed acknowledged in the most recent FOMC minutes. A rising Libor in these conditions could make the Fed more reluctant to raise rates.

What this means for investors: The markets had a mixed reaction. Generally gold goes up when interest rates are low because they are seen as a safe haven. The Fed board does not seem able to make up their minds at the moment and are continuing to stall on an interest rate hike. A hike too soon in a volatile economy could send the stock market crashing, which would eventually support gold. It is an unusual time in monetary policy and well worth following.


Markets Still Adjusting to Impact of Brexit on the U.S.

What will Brexit mean for the US?

Brexit uncertainty still looms large in the minds of investors, bankers, and policy makers. In the initial fall out from the UK vote to leave the EU, the pound, euro, and most other world currencies plunged along with the stock market while the dollar and gold gained strength.

The initial frenzy soon died out, however. Stocks recovered and were hitting record highs within a month of the post-Brexit fall. The dollar and gold both remained robust as well though. The UK looks to be poised on the brink of recession now with the prospect of a long, arduous road of negotiations ahead to decide the nature of the UK – EU relationship.

What this means for investors: Economic uncertainty is at the forefront of monetary policy decision makers’ minds right now. Although the markets are not experiencing dramatic movement from Brexit right now, investors are still cautious about implications to come concerning Brexit. The economic data has still to be realized and analyzed, and until that point – and likely for a while after – the economic uncertainty will support gold prices.

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

The Markets’ Take on a Trump Presidency
Read Here

Economic Data Forecaster of Clinton’s Chances
Read Here

Gold Advances after Fed Announcement from Yellen on Friday
Read Here

Markets Still Adjusting to Impact of Brexit on the U.S.
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Nixon Closes the Gold Standard

45-Year Anniversary of Fiat Currency Replacing Gold

Gold Market Discussion

Just Over 45 Years Ago the U.S. Left the Gold Standard – What Has Happened Since?

President Richard Nixon closed the Gold Standard 45 years ago in 1971
President Richard Nixon closed the Gold Standard 45 years ago in 1971

We just passed the 45-year anniversary of fiat currency replacing gold. 45 years ago – August 15, 1971 – President Nixon declared the end of the United States’s decades long, gold backed monetary system and replaced it with the current fiat system. The gold standard had ensured that something valued and physical – gold – was giving value to the dollar rather than paper, government promise, and digital manipulation. At the time gold was $35 an ounce. Today it is $1,350 an ounce.

Nixon’s strategy was originally designed to be a temporary measure. He claimed it was to combat nefarious “international money lenders” who were waging war against the U.S. dollar. In reality U.S. spending on the Vietnam War was creating a massive budget deficit and soaring inflation. Both foreign governments and private investors saw the potential for dollar devaluation and immediately began flocking to gold.

What this means for investors: Nixon’s promise that the dollar would not decline was proved false. The dollar plunged. Within nine years of leaving the Gold Standard, gold had climbed from $35 to $850. Since 1971, there have been market upheavals, economic crises, and currency collapses around the globe due to speculation and manipulation of fiat money. Gold has real value, and that value will always protect wealth during uncertainty and crisis when printed paper becomes worthless.


The Fed’s Announcement and How It Affects the Gold Bull Market

Janet Yellen illustration by DonkeyHotey on Flickr

This week the Federal Reserve’s minutes were released from their latest meeting. Many investors were hoping the Fed would at last turn hawkish and announce an interest rate hike. However, the announcement was much more timid than these investors would have liked. The announcement was rather that an increase might be appropriate soon with no indication of specific date. Gold initially fell after the Wednesday announcement, but rose again Thursday on the uncertain nature of the announcement. Peter Grandich, the self-styled “Wall Street whiz kid”, later wrote that gold is in the early stages of its biggest bull market ever.

Silver is also likely going to ride the same bull market run as gold. The ratio between gold and silver is narrowing. It’s up more than gold so far for the year and could still have a ways to run.

What this means for investors: Many strategists have been saying for months that gold and silver are entering new bull markets. The summer is historically a slower period for precious metals, and as we enter autumn, prices could start to see more movement. Gold and silver are both up over 26% for the year, and have a ways to climb still. Price dips after announcements like the one last week are an optimal time to diversify an investment portfolio with both gold and silver.


Lord Rothschild Is the Latest Elite Banker to Increase Gold Holdings

Lord Jacob Rothschild
Lord Jacob Rothschild

The Rothschild name has been synonymous with speculative banking and furtive, elitist power for well over a century. This week Lord Rothschild called the current monetary policy of central banks around the world the “greatest experiment in monetary policy in the history of the world” as they attempt to force stimulus into economies through low and negative interest rates.

In his half-yearly financial report for his fund, RIT Capital Partners, Rothschild outlined the impending global risks. These risks were primarily the UK vote to leave the EU, the sluggish economic growth in China, tensions in the South China Sea, conflicts in the Middle East, the U.S. presidential election, and recent terrorist attacks in Germany, France, Belgium, and the U.S.

Along with outlining geopolitical and economic risks, the banker stated that he was increasing his gold holdings due partly to the increase in declining yields. He reduced pound sterling holdings due to the pound’s post-Brexit crash, and was also somewhat reducing U.S. dollar holdings.

What this means for investors: Many hedge fund managers and bankers are increasing gold holdings in their portfolios and preparing for a future of uncertainty and crisis. Gold protects wealth when fiat currencies fail. It could be an ominous sign when the world’s most powerful and influential are turning to gold.


Is the Stock Market Approaching a Stall? Why One Expert Thinks So

Art Cashin
Art Cashin, Director of USB Floor Operations at the NYSE

Art Cashin, director of UBS floor operations at the New York stock exchange, warned this week that even as stocks are hitting new highs, the market could be about to stall. At first look it might seem contradictory. Cashin thinks that it is possible people have simply not realized the stall approaching yet because of the gradual nature it has arisen.

The markets are also still awaiting economic data from the UK to see how hard it was impacted by the Brexit vote in June. Currently the British 30-year bond is yielding less than the U.S. 10-year after the Bank of England cut interest rates last year.

What this means for investors: When the stock market bubble finally bursts, investors will start flocking to gold. The current trend the markets are in are unusual in that the stock market is hitting highs even as gold continues to make gains. Gold will be a safe haven for investors when the market finally stalls, as Cashin predicts it will soon.

 

Subscribe Now to Get the Gold Market Discussion Delivered Direct to Your Inbox


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

45 Years Ago This Week the U.S. Left the Gold Standard – What Has Happened Since?
Read Here

The Fed’s Announcement and How It Affects the Gold Bull Market
Read Here

Lord Rothschild Is the Latest Elite Banker to Increase Gold Holdings
Read Here

Is the Stock Market Approaching a Stall? Why One Expert Thinks So
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Ben Bernanke Predicts

Ben Bernanke’s Forecast for Interest Rates, and a Look at the Global Economy

Gold Market Discussion

Ben Bernanke Predicts Fed Won’t Raise Rates

 

Ben BernakeFor months now investors have been expecting the Federal Reserve to raise interest rates. Events such as the May jobs report data, the June Brexit vote, and a lack of economic growth in Q2 have forced the Fed to continue to delay hiking rates. There is much speculation that September could finally be the right moment for the Fed.

However Ben Bernanke, former chairman of the Federal Reserve from 2006 to 2014, said this week that his successor, Janet Yellen, would be reluctant to raise rates for a while yet. Partly this is due to the Fed making incorrect predictions over the past several years, and thus being overly cautious lest it blunder again. In addition there is conflicting economic data, which adds a strong air of uncertainty to any decision making that the central bank takes.

December 2015 marked the first rate hike in nine years, and at the time the Fed forecasted four more to happen in 2016. So far there has been zero, and it is not our of the realm of possibilities that none will come in 2016.

What this means for investors: If interest rates stay low, gold will continue to climb. However what is more noteworthy is the lack of hard data to support a strong economy. The Fed’s reluctance to raise rates indicates that the U.S. economy cannot support higher rates. With such weakness, demand for gold and silver will continue to rise with safe haven demand.


China and Germany’s Warning Signs

China and Germany, the world’s second and fourth largest economies respectively, are showing dangerous signs of weakness. Chinese economic growth rate fell to a twenty-five year low last year, and the hard data indicates that the slowdown will continue. For one, both Chinese imports and exports fell more than expected for the month of July. In addition, retail sales are not hitting expectations, and fixed asset investment is down. The International Monetary Fund projects Chinese economic growth to fall below 6% by 2020. According to a UBS assessment, China has also begun to bail out its banks.

Germany’s economy accounts for one fifth of the Eurozone’s GDP, and a flailing Germany economy could easily infect every other country in the 28 country trading bloc of the EU. European Central Bank interest rates are still at negative as they attempt to pump stimulus into the economy. German bonds are trading at negative yield. Germany industrial, energy, and construction sectors all shrank in quarter 2, and high inflation was a hit on real incomes. HSBC economist Rainer Sartoris said this data does not even account for the impact of Brexit. The impact of this data will be seen later in the year.

What this means for investors: Japan, the world’s third largest economy, is in even more dire straits than China and Germany. While U.S. stocks rally and some interpret this as economic robustness, with such international strains on the global economy coming from these economic powerhouses, the system has dark clouds looming ominously over it. The global system is too far integrated for everyone not to eventually buckle under the continued pressure of stagnant economies.


Britain’s Exit from the EU Could Mean 4% Shrink in GDP

Brett or Bregret

The Brexit vote by Britain to leave the European Union in June this year wreaked havoc on the markets before the initial fervor fizzled out a few weeks later. British politics underwent a re-structuring with Theresa May taking over as Prime Minister from David Cameron and forming a new cabinet. The opposition Labour Party debated changing leadership from far left populist Jeremy Corbyn – who fiercely opposed Brexit – but without effect. May, like Cameron, is opposed to the British exit, however maintains she will uphold the “Yes” vote and enact Article 50 of the Lisbon Treaty, which would begin the two year process of negotiations around the mechanics of how an EU member state would leave.

After the Brexit vote, the British pound fell to its lowest in over thirty years. The Bank of England has also recently lowered interest rates in an effort to stave off recession. A recent study is indicating that the British economy will further contract if it loses access to the European single market.

The EU was originally designed as an economic union where countries could engage in free trade and movement of goods and services. If Britain leaves, this would have a dire impact on many businesses that depend on this access to sell products and services to a wider customer base. Because of Great Britain’s significant financial sector, some even predict lack of EU market access could shrink the British economy by 7%.

What this means for investors: The Brexit vote spurred record demand in Britain for gold and safe haven investing. Gold prices spiked after the Brexit vote due to fear and uncertainty. The outlook for Britain continues to be uncertain. It’s yet to be seen whether the nation will actually leave the European Union, but if it does, there will be significant impact that will stifle economic growth in Great Britain and the Eurozone for some time.


Gold and Silver Close the Week with a Rally

Gold was up Friday snapping back from a losing streak earlier in the week, maintaining its 28% climb for the year and closing out the week just over $1,350. Earlier in the week stocks had enjoyed a solid run as gold pulled back. Gold closed in the green even as the Nasdaq still managed to close Friday at a record high. This was due in part to retail sales for July doing less than expected and wholesale prices plunged the most in the year.

These are worrying signs the economy is not as strong as the stock market and the labor data report from July seem to indicate. Economic growth is not as robust as many have anticipated.

Silver was also up on Friday at just over $20. The white metal continues to perform for the year and is up 30%.

What this means for investors: There has been an unexpected correlation in recent weeks where the U.S. dollar and gold are both gaining. Historically the two are inversely related. Many experts are saying that gold still has a ways to run in this bull market, and data like this would seem to support that projection.


Watch: Silver is on the Rise

Watch this latest video with Arizona Sports host and RME Endorser Ron Wolfley

Here are some articles from the web discussing the topics in this week’s post:

Ben Bernanke Predicts Fed Won’t Raise Rates
Read Here

China and Germany’s Warning Signs
Read Here

Britain’s Exit from the EU Could Mean 4% Shrink in GDP
Read Here

Gold and Silver Close the Week with a Rally
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Precious Metals Bull Market

More Global Financial Risk; What Is Silver Saying about the Precious Metals Bull Market?

Gold Market Discussion

What the Gold Market Is Saying about Global Risk, Bank of England Rate Cuts, Japanese Stimulus

Global Risk

Michael Preiss of Taurus Wealth Advisors believes the global economic outlook is recession and stagnation. In his analysis on CNBC he stated that the gold market can reveal much about the state of the economy. He points out that gold is the best performing asset class of 2016 and has outperformed the S&P by 19%. Much of the world’s sovereign debt is seeing low and negative yields.

watch this video from Yahoo Finance UKWatch the video here from Yahoo Finance UK.

What this means for investors: Financial stress is becoming more apparent in the global system. If the recession that Preiss believes to be inevitable does occur, gold and silver will see more gains.

 


Silver’s Performance for the Year Optimistic for Precious Metals Bull Market

Silver has been a top performer so far for 2016. Silver often outperforms gold in a bull market for precious metals, which most strategists are agreeing is where the market currently is. The white metal is up more than gold overall for the year with both over 26% in the green for 2016. Georgette Boole – commodities and currency analyst at ABN Amro Bank – believes that silver will continue to outperform gold into 2017. An ounce of gold right now is able to buy the least amount of silver since 2014. The ratio was at its lowest in three decades during the record prices that we saw in 2011. This is an indicator that the bull market has a way to go yet.

Both metals gained early and mid-week after the Federal Reserve announced no interest rate hike and the Bank of England cut interest rates.

What this means for investors: Both metals have a bright outlook through 2017. Silver is driven by many of the same economic factors as gold, but its price is also dictated by industrial demand. It can also move more sporadically than gold. With an increase in usage in things like solar panels, touch screens, and RFI chips, the metal is seeing increased demand, which has lifted the price. Silver is a lucrative way to diversify a precious metals – or any investment – portfolio, and many first time silver investors are taking advantage of the price now to buy.


The Bond King: “I Don’t like Stocks, BONDS or Equity…gold and land are favored asset classes.”

Gross on CNBC August 2016

This week in his August letter to investors, Bill Gross, portfolio manager at Janus Capital, issued a warning against investing in stocks and bonds and advised investors to move into gold, land and other real assets.

The reason for his dour prediction is central banks’ monetary policies of low and negative interest rates and other foreboding signs of a weakening financial system. Low interest rates raise asset prices, but impede savings and business investment. He also stated that capitalism cannot function properly with interest rates at zero and negatives, and that global monetary policies will not succeed without nominal growth, which we are not seeing.

Bill Gross manages the $1.5 billion Janus Global Unrestrained Bond fund, which is up 3.93% for the year. He has also written acclaimed books on investing. Gross is the latest to join the swelling ranks of fund managers and investors who have gone bullish on gold. Stanley Druckenmiller, Paul Singer, Jeff Gundlach, and George Soros are just some of the other prominent names that have recently recommended gold to investors and cautioned against stocks in the current economic climate.

We sent out a mid-week blog post about this on Thursday Aug 4th which you can check out here.

What this means for investors: In times of market turbulence and volatility, gold becomes a more attractive investment. Demand increases, as investors become more risk adverse. Economic growth around the globe is slowing due to central banking stimulus policy, and without growth, high yields on stocks and bonds will become more difficult to find. Gold both preserves wealth during economic downturn and offers a return. The metal is up 26% for the year with many strategists projecting it to climb as high as $1400 by the end of the year.


Gold and Silver React to July Jobs Report

July Jobs report gold reaction

After gaining all week, gold and silver both fell Friday following the release of the July jobs report. The data was better than expected – especially after the dismal May numbers – with 255,000 new jobs added last month. Unemployment held steady at 4.9% as well. Targets had been 4.8%. It was a positive for the U.S. economy after the weak GDP growth from the second quarter. Stocks responded by rallying and precious metals fell as the dollar strengthened. Earlier in the week the case had been the opposite with stocks falling and gold gaining following European volatility and the Fed’s low interest rate policy.

Despite the robust numbers however, some analysts are still worried about the labor force participation rate, which is lower than what some targets call for. Corporate earnings for the second quarter are lagging in some sectors, causing concern over how strong the business cycle actually is.

What this means for investors: The jobs data gave stocks a much-needed boost on Friday after being down all week, as investors became more risk adverse. Friday’s slump for metals could likely be a short-term event, however, as the economic data is more indicative of economic slowdown ahead. The Federal Reserve may read the labor data as a sign to finally raise interest rates if they believe the economy is strong enough.


Here are some articles from the web discussing the topics in this week’s post:

What the Gold Market Is Saying about Global Risk, Bank of England Rate Cuts, Japanese Stimulus
Watch Video Here

Silver’s Performance for the Year Optimistic for Current Bull Market
Read Here

“I Don’t like Stocks, Bonds or Equity…gold and land are favored asset classes.”
Read Here

Gold and Silver React to July Jobs Report
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Bonds

When Bond King Bill Gross “Doesn’t Like” Stocks or BONDS, Perhaps We Should Listen

Watch: Bill Gross Doesn’t Like Stocks or Bonds!


Trouble viewing video? Click here. Bond King Bill Gross “Doesn’t Like” Stocks or BONDS. Bonds! This is the former head of Pimco, where he managed the largest Bond fund to the tune of oh… $270 billion. After all, the man’s nickname literally is “The Bond King”. So what does he like?

 

Bill Gross: “I don’t like stocks, I don’t like bonds, I don’t like private equity…real assets such as land, gold…are favored asset categories.”

 

Yesterday in his August letter to investors, Bill Gross, portfolio manager at Janus Capital, issued a warning against investing in stocks and bonds and advised investors to move into gold, land and other real assets.

stocks and bonds warning from Bill Gross
Should investors be concerned about stocks and bonds?

The reason for his dour prediction is central banks’ monetary policies of low and negative interest rates and other foreboding signs of a weakening financial system. Low interest rates raise asset prices, but impede savings and business investment. He also stated that capitalism cannot function properly with interest rates at zero and negatives, and that global monetary policies will not succeed without nominal growth, which we are not seeing.

What this means for investors: In times of market turbulence and volatility, gold becomes a more attractive investment. Demand increases, as investors become more risk adverse. Economic growth around the globe is slowing due to central banking stimulus policy, and without growth, high yields on stocks and bonds will become more difficult to find. Gold both preserves wealth during economic downturn and offers a return. The metal is up 26% for the year with many strategists projecting it to climb as high as $1400 by the end of the year.


Bill Gross, Janus Capital Group
Bill Gross, Janus Capital Group

Who is Bill Gross?

William “Bill”  Gross is the founder and former Bond Manager of PIMCO, where he managed as much as $293 billion in assets. His understanding of the bond markets earned him the nickname “The Bond King”. In 2014, After 43 years, Gross left PIMCO to join Janus Capital Group, where he currently manages the $1.5 billion Janus Global Unrestrained Bond fund, which is up 3.93% for the year. He has also written acclaimed books on investing, “Everything You’ve Heard About Investing is Wrong” and “Bill Gross on Investing“. Gross is the latest to join the swelling ranks of fund managers and investors who have gone bullish on gold. Stanley Druckenmiller, Paul Singer, Jeff Gundlach, and George Soros are just some of the other prominent names that have recently recommended gold to investors and cautioned against stocks in the current economic climate.


The Gold Market Discussion with Jim Clark

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wall street

What’s Ahead for Gold and Silver after the Summer?

Gold Market Discussion

Gold Prices End the Week High on U.S. Economy Growth Concerns and European Bank Stress Test Results

The US Economic Growth?

Gold closed out July hitting two-week highs and seeing gains through Thursday and Friday to settle at $1350 by Friday close. The metal has entered a new bull market and is now up 26% for the year.

There were several factors influencing its run this week. The first was the Federal Reserve decision not to raise interest rates. The economic and labor market data is still not strong enough to predicate raising rates. Expectations of more Brexit induced stagnation and a continuation of central banks in Europe and Japan pursuing monetary easing are also significant factors. Crude oil is also plunging, and U.S. durable-goods orders fell ahead of the Fed meeting.

Growth in the U.S. economy for the second quarter was also lower than analysts predicted. This follows on a weaker than expected start to the beginning of the year. GDP for the second quarter rose 1.2% up slightly from 0.8%, but still short of the median expected growth among analysts of 2.5%.

On Friday the results of a stress test on Europe’s leading banks were released, and their weak results further gave gold prices a positive push. The oldest bank in the world, Italian Banca Monte dei Paschi di Siena, fared the worst out of the fifty-one banks tested, but most of the banks tested had worrying results. There is around 1 trillion euros of non-performing loans plaguing the European banking system. The stress test did not include a test for Brexit volatility and continued negative interest rates.

What this means for investors: The U.S. economy is not as stagnant as those in Europe and Asia, but it still not as strong as many peoples’ expectations and with the global economy becoming increasingly inter-dependent, this will put a strain on the world system at large. It is worth noting that the European bank stress test did not include the Brexit and negative interest rate factors, which are two of the direst indicators of the lagging economy. As economic uncertainty looms ahead for 2016, gold and silver could see significant further runs.


The November Election and Other Reasons Gold Could Still Run

Trump and Clinton

Major events, particularly political and geopolitical, impact gold and silver significantly. This year’s U.S. Presidential election is quickly becoming one of the most theatric and ugly elections and could its outcome – regardless of victor – could create a great deal of global volatility as elections often do. Some analysts have even gone as far as to cast a possible Donald Trump win as one of the biggest threat to global stability due to the unpredictability of what a Trump administration might look like. Regardless of whether this is a viable assessment or not, an unpredictable future tends to drive gold demand.

Gold demand is steadily rising in Great Britain and Japan on economic uncertainty fears. Although for most the Brexit economic fears were not fully realized, there is still a sense of fear as to what it will mean long-term if Britain leaves, and there has been a sharp upswing of British citizens buying gold (many for the first time). On the other side of the globe, there is a similar spike in gold buying as Japanese citizens see the BoJ’s monetary policy lagging, and government bonds fall below zero. Over $11 trillion of government debt around the world is currently at negative yield, and that kind of global strain can only hold for so long before there are dire repercussions.

Gold has been putting in a strong performance this year (up 26%), but it is currently playing second violin to a particularly strong equities market. Many investors agree, however, that gold is in a new bull market, and when the stock market enters an inevitable correction, gold prices will jump further.

What this means for investors: Many experts are predicting that gold will close the year at $1400. If that is the case, now is a prime buying opportunity. Safe haven buying around the world will also continue to drive gold prices. Silver has been moving in line with gold, making it an attractive investment as well.


The Federal Reserve Doesn’t Seem to Know What to Do

Federal Reserve Building

Gold prices lifted significantly mid-week after the Federal Reserve meeting where the Fed made the decision to postpone lifting interest rates yet again. Many have been expecting the rate increase to happen for the past couple months, but there is still no clear indication of when it might happen.

On Thursday the Fed announced that it would keep rates low and gold and silver prices responded accordingly by rising, which lasted through Friday. Danielle DiMartino Booth, a former advisor to the Dallas Fed, was on CNBC to give some analysis on the Fed’s current monetary policy. In Booth’s opinion, the central bank missed its opportunity for a rate hike some time ago. One of the methods of measurement of the robustness of the economy’s job market is the labor market conditions index, which has been negative now for six straight months. Other strategists also think they should have raised rates some time ago, and that this extended period of low rates will become a major problem long-term. Many are expecting a rate hike to finally happen in September, but it is still uncertain.

What this means for investors: If the Fed does eventually raise rates, gold will fall at first. However if these analysts are correct in their assessment that the Fed has missed its window of opportunity, rates could stay low for some time yet. There is still a palpable sense of fear as to just how strong the U.S. economy is and whether it can handle a rate hike right now.


Strategist Predicts Stock Market Rally Will End with the Summer


Last week U.S. stocks hit new all-time highs. However, investment experts are warning that the stock market’s current rally is approaching its end. One strategist compared it to a summer fling, calling it a “summer camp romance rally” and predicts that like a fling, it will fizzle out when summer turns into autumn. Another market expert also predicted that the stock market could see a significant correction before much longer.

One reason for the stock market’s attractive performance is that global government bond yield is at record lows. Instead, investors are moving towards stocks with more attractive relative valuations.

What this means for investors: The summer months are historically slower for gold, but gold has still made some gains through the summer months even as the stock market hit its highs. Post-Brexit fear sent gold and silver prices soaring, but price pullback through mid-July made this month a prime buying opportunity. Gold is ending July in the green, settling around $1350 by Friday afternoon.


Here are some articles from the web discussing the topics in this week’s post:

Gold Prices End the Week High on U.S. Economy Growth Concerns and European Bank Stress Test Results
Read Here

The November Election and Other Reasons Gold Could Still Run
Read Here

The Federal Reserve Doesn’t Seem to Know What to Do
Read Here

Strategist Predicts Stock Market Rally Will End with the Summer
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

dollar and gold correlation

The Dollar and Gold Currently in an Unorthodox Trend; Why the ECB could Boost Gold Further

Gold Market Discussion

The Dollar and Gold in a Complicated Relationship

dollar and gold unorthodox correlation

Traditionally gold and the dollar have an inverse relationship. When the dollar is strong, gold is weaker. Alternatively, gold rises on a weak dollar. However, we are currently seeing a dollar enjoying relative strength while gold prices are simultaneously over 25% into the green for the year. This trend defies history and is worth paying attention to.

Gold is priced in U.S. dollars, so one reason a strong dollar makes gold prices lower is because it becomes more expensive for foreign buyers. However central banking policy run wild around the world has many foreign investors seeking out safe haven investments like gold. Geopolitical turmoil and market volatility has increased the amount of economic uncertainty as well, raising gold demand. Non-government organizations like the IMF and OECD have recently issued warning reports of more global growth stagnation still to come.

Analysts at Citi believe that this dollar – gold correlation is a signal for more volatility ahead. Assets are becoming more interconnected as global financial markets become more intertwined, and the outcome is difficult for analysts to predict at this time.

What this means for gold investors: Gold’s slump from the last two years is over. Prices are at the highest they have been in two and a half years, and it is no anomaly. Silver is likewise performing strongly this year and has gained more than gold overall for the year.


More Stimulus from ECB and Bank of Japan and What It Could Mean for Gold

Bank of Japan main offices
Bank of Japan Head Office in Chuo-City, Tokyo, Japan

Gold prices lifted on Wednesday in anticipation of an announcement from the European Central Bank that they would increase stimulus funding in the floundering Eurozone. The monetary easing policies that the ECB has already been engaging in essentially weaken paper currencies, which makes gold stronger as it becomes more attractive than holding the devalued fiat money.

The Bank of Japan last week also announced it would pursue such a policy of “helicopter money” to attempt to stimulate economic stagnation. Central banks around the world have been embarking on these monetary experiments, which has sent some into the negative interest rate territory.

What this means for investors: Some of the world’s largest economies are in a slump that they cannot seem to get out of. The U.S. dollar and markets are relatively strong in comparison, but the integrated global financial system cannot withstand the strain forever of monetary easing policy. The central banks are attempting to prolong an inevitable major downturn. Investing in gold and silver is a way to hedge against this financial risk.


Britain’s Stagnant Post-Brexit Economy

England's currency

The pound, euro, and global stock markets all plummeted when Britain voted to leave the EU. Yet within a month they seemed to have regained at least some of the loss according to many media outlets that had backed the Brexit.

Yet the reality of the British economy is that it is shrinking and investors and policy makers are losing confidence. A couple months ago, the International Monetary Fund had reported that global economic growth overall was weak. After the Brexit vote, they cut projections even further.

The Bank of England could pursue monetary easing to attempt to stave off the slowdown. If Britain does leave the EU, they will possibly lose access to the single European market, which would hurt business across the board. One of Britain’s economic growth drivers – the service industry – was impacted particularly harshly by the Brexit vote.

What this means for investors: Demand for gold around the world is on the rise. More EU countries are now talking about having referenda to leave the EU. It is a foreboding sign that our current global financial structure could splinter. No one can predict the outcome, but it is certain that demand for gold will increase with the unknown.


Some Investment Analysts Predict Gold to $1500

Analysts predict $1500 gold

Many commodity and investment experts have agreed that gold has entered a new bull market. DBS Group Holdings Ltd., a Singapore-based bank, predicted the current rally well in advance and ahead of most. Low and negative interest rates are keeping demand strong, and with no rate hikes expected in the U.S. (and likely longer in other countries) until at least the end of the year, the rally is on track to continue.

Foreign exchange strategist Benjamin Wong stated this week that gold has had four major bull markets since 1970, and that this is another one. He also added that the markets have not dealt with the uncertainty of the U.S. presidential elections this year, and that could be a gold driver as well.

What this means for investors: DBS Holdings is advising investors to buy gold now. Their projections expect gold to climb to $1500 during this rally. Gold’s price dips this week made this week a prime buying opportunity.


Here are some articles from the web discussing the topics in this week’s post:

The Dollar and Gold in a Complicated Relationship
Read Here

More Stimulus from ECB and Bank of Japan and What It Could Mean for Gold
Read Here

Britain’s Stagnant Post-Brexit Economy
Read Here

Some Investment Analysts Predict Gold to $1500
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Why the Post-Brexit Stock Rebound Could Be in Trouble; Silver Continues to Build on its Gains for the Year

Gold Market Discussion

The Post-Brexit Stock Rebound: The Market Rally Has a Lurking Problem

watching the stock market

In the Brexit aftermath, the stock market plunged so low that it lost all of its 2016 gains. However within a few weeks it has been hitting some historic highs to the confusion of many.

There is a darker side to the stocks rally though. Only 16% of the S&P 500 stocks are hitting the 52-week highs while more than a quarter are down at least 20% from their highs. The Down Jones is over 18,000, but the NYSE Composite measures a majority of stocks to be below their highs of last year. According to Bank of America Merrill Lynch, only 18% of active investment managers are outperforming their benchmark, making it one of the worst years on record. Even as the stock market is making its historic gains, there is also a significant amount of trade happening in safe haven investments such as gold, U.S. treasury bonds, and utility stocks. This suggests that there is still much uncertainty about how long this rally will last.

What this means for investors: Many on Wall Street are ignoring alarming economic data, weakness in the oil market, increasing levels of negative yield government debt, and U.S. corporate earnings recession. Gold and silver prices have been rising for the year as well even as the stock market rallies. The U.S. stock market is the only one of the world’s developed economies that has not buckled under economic uncertainty and pressure yet. The levels of volatility and uncertainty will likely increase and continue to drive gold prices as these problems with the stock market gain more exposure.


Silver Out Performs Gold Again

silver rally continues

Silver’s significant performance this year continues to be an important theme. Gold prices saw some pull back earlier in the week, but prices went up again mid-week and closed slightly down for the week on Friday. Silver was trading in the green for most of the week. Over the weekend an attempted military coup in Turkey drove prices back up as geopolitical upheavals often do.

Silver is now up over 45% for the year. The white metal is being driven by safe haven demand (like gold) and industrial demand.

What this means for investors: Many analysts are saying that the precious metals market is in a new bull market. The price dip this week makes now a prime buying opportunity as the markets correct. Gold and silver have been gaining for six weeks straight and are up significantly for the year.


Negative Yield German Bonds Selling at Auction

German bonds go negative

This week Germany became the first country in the Eurozone to sell at auction 10-year government bonds at negative yield. Investors are guaranteed to lose money over the life of these bonds. Germany is by no means the only European country with negative yield bonds, however. Irish bonds hit record lows, and Dutch bonds have just gone negative among others. Even positive yield bonds are still at record lows. Yields on the 10-year German bonds, which have been negative since June, are the benchmark for the Eurozone.

The economic repercussions of Britain leaving the EU are still a significant driver for the negative yield on German bonds. Europe is only barely recovering from the last financial crisis, and a British exit would slow growth even more. Britain’s new prime minister Theresa May has promised on her appointment this week that she will start the Brexit process. The European Central Bank has been slashing interest rates to negative and printing money as a means of buying bonds and trying to ease slowing. This is putting pressure on bond rates around the globe, however. Government bonds are usually considered a safe haven investment, but currently $11.7 trillion of debt is trading at negative yield.

What this means for investors: The Eurozone is grinding to a halt as monetary policy runs amok. Government debt – usually a low risk, safe haven investment – is at dangerous lows. Investors will start looking to other safe haven investments as they continue to lose money. The global financial system was not designed to be run on negative interest rates for this long, so there is much uncertainty from policy makers and analysts about what this means for the future. As investors continue to lose money on bonds, they will move to other safe havens such as gold and silver.


Japan Buying Up Gold

Japan flag

Rising Japanese demand for gold as economic uncertainty around Japanese monetary policy increases is a notable positive factor for global gold prices. Earlier this year the Bank of Japan lowered interest rates to the negative territory sending investors flocking to gold as a safe haven. It is looking likely now that Prime Minister Shinzo Abe, being advised by former Federal Reserve chair Ben Bernanke, will opt for “helicopter money” policy and start printing money for a $100 billion stimulus. One of Japan’s largest bullion dealers has said that in the past several weeks, sales have doubled and are up 30% for the year.

What this means for investors: This is a prime example of how during economic upheaval, investors see gold as the best storage of wealth. The sale of safes in Japan for storage of gold and cash are also up significantly. Japan has been through numerous rounds recently of monetary easing and stimulus and failed to make the Yen competitive again or hit inflation marks.


Here are some articles from the web discussing the topics in this week’s post:

The Stock Market Rally Has a Lurking Problem
Read Here

Silver Out Performs Gold Again
Read Here

Negative Yield German Bonds Selling at Auction
Read Here

Japan Buying Up Gold
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold bars and coins stacked

Why Gold and Silver Will Be the Most Secure Currencies

Gold Market Discussion

Why Gold and Silver Will Be the Most Secure Currencies

silver overtakes gold

Many eminent investors consider gold and silver as currencies. Peter Boockvar considers precious metals an “anti-fiat money” currency. Because gold is a tangible, finite resource, its value cannot be as easily manipulated or created electronically through central banking monetary policy as fiat currencies can.

Central banking policies – particularly in Europe and Japan – of negative interest rates has resulted in nearly $11 trillion worth of negative yield government bonds. These polices are also hurting the return prospects of pension funds and savers, threatening the existence of insurance companies, and straining the banking systems. In Boockvar’s words, “We are living in a world of monetary mayhem where monetary policy has embarked on an experiment that is now going haywire.” As central banks lose their grip on the policies they’ve embarked upon, the global economy is slowly grinding to a barely creeping pace.

What this means for investors: The warning signs that the global economy is in trouble are increasing. Many of these dangerous macro trends are prompting investors to move into gold and silver now. Boockvar believes gold and silver will be the last currencies standing when the current monetary regime inevitably falls apart.


WATCH: Why Gold Investors Should Also Be Watching Silver


Silver hit two-year highs on Monday as it climbed to $21 an ounce. Part of the price climb is still driven by post-Brexit safe haven demand. Some analysts are saying an increase in demand for silver’s industrial uses – particularly in solar panels – is also spurring the price climb. Silver still has a long way to go to hit its 2011 highs of $49. This suggests that prices could continue to rise. The French bank Societe General raised its long and short-term price forecast this week for both gold and silver.

What this means for investors: Silver has two strong drivers right now. Because of its lower price relative to gold, it can be more erratic in movement, but generally rides on gold’s wake. The white metal is so far performing better overall than gold for the year, however. While part of that is due to industrial remind, when analyzed in conjunction with gold price movement, signs indicate that safe haven investing is the strongest factor as investors diversify against increasing risk in the market.


WATCH: More Leading Analysts Flocking to Gold in New Bull Market


Investment strategists have been saying for a couple months that gold has entered a new bull market. Prices bottomed out at the end of 2015 and gold is up nearly 29% this year. At the start of the week, the metal reached $1,377, which was its highest level since March 2014.

An increasing amount of financial risk is in great part the catalyst for gold’s climb. Central banks around the world are pursuing low and negative interest rates as the U.S. Federal Reserve struggles to raise them. The economic indicators, however, have not been strong enough thus far to justify a hike. Divergent and unconventional monetary policies across the board along with a stock market that could be topping out are making many investors uneasy about the future.

What this means for investors: Gold prices rallied for twelve years until they peaked in 2011 and fell. It appears, as predicted, that the price truly did bottom in 2015. This new bull market could last a long time with the amount of volatility and future uncertainty for the global economy.


Federal Reserve June Meeting Minutes a “Non-Event” for Gold

The Federal Reserve released the minutes of its June meeting on Wednesday. Even following the tumultuous Brexit week’s volatility, there was little new information about the markets and direction for the economy. For the gold market, it amounted to a non-event and did not seem to impact gold price movement. The minutes acknowledged however that weak employment and payroll data for May was of concern, and that a July interest rate hike is now off the table.

What this means for investors: The stock market saw some gains after the minutes were released, but gold was not impacted. Generally gold moves in opposition with the stock market, so the fact that it made little movement suggests there is much uncertainty about the positive outlook that the Fed continues to attempt to project for the U.S. economy. The lack of growth in the labor force is sending warning signs despite the stock market’s positive movement. Some strategists are doubting whether a rate hike – first planned and postponed for June, and now for July as well – will even happen this year.


 

Here are some articles from the web discussing the topics in this week’s post:

Why Gold Investors Should Also Be Watching Silver
Read Here

More Leading Analysts Flocking to Gold in New Bull Market
Read Here

Federal Reserve June Meeting Minutes a “Non-Event” for Gold
Read Here

Why Gold and Silver Will Be Most Secure Currencies
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold and Silver March

Silver Hits 2 Year Highs and Gold Poised for Further Rally; Why Brexit Volatility Will Continue

Gold Market Discussion

Silver Hits 21 Month High This Week As Gold Lifts

silver is on the rise

Silver prices soared along with gold through the week. By Thursday silver was at $18.76 hitting its highest mark in almost two years.

During the last half of the week, the stock market recovered some of its losses. Both global stocks and U.S. stock indexes were trading higher from Wednesday. On one hand this seems to indicate that investors overreacted initially to the Brexit referendum. However as Dennis Gartman pointed out on CNBC’s “Fast Money” on Wednesday, if not for the U.S. and Brazil markets performing, the global stock market as a whole would be down 20% for the year. More importantly, the German 10 year bund, which is the benchmark European government bond, is currently seeing negative yields. This seems to suggest that many Europeans are still seeing a threat to the survival of the EU in its current form. The Deutsche Bank – the euro’s power source – was the hardest hit by the Brexit “Leave” vote.

What this means for investors: Silver has outperformed gold this year. Silver typically rides gold’s coattails, but it is also influenced by industrial markets. Its strong performance this year suggests, however, that it is equally valuable as a safe haven against global uncertainty. If the stock market’s correction this week is temporary as many signs indicate, silver could be a lucrative, cheaper option for protecting one’s wealth.


UK & EU S&P Credit Ratings Downgraded to AA after Brexit
Standard and Poor's Building

Gold prices have firmly held above $1,300 after getting a significant lift following the “Leave” vote on the British referendum on EU membership last week. The pound has fallen to 31-year lows with the euro taking a hit as well. Meanwhile the dollar strengthened on the plunging world currencies.

Standard & Poor’s cut the United Kingdom’s credit rating from AAA to AA this week after last Friday’s market upheaval. On Thursday they downgraded the European Union’s to AA as well down from AA+. They warned that the UK could face another slashing, since the vote means that there is “a less predictable, stable, and effective policy framework in the UK.”

What this means for investors: Analysts don’t know what to expect for Britain’s economic and political future. Many in Britain are still fighting to remain in the EU. Meanwhile British Prime Minister David Cameron has announced his resignation sparking vigorous debate and conjecture for who will take over the Tory leadership. The Opposition Labour Party is also wrought with inner-party turmoil and disagreement. Even if the Brexit does not go ahead, this uncertainty on the domestic political scene will make it difficult for the pound to bounce back from the hit it took. Gold will increasingly be seen as a safe haven.


What’s Next for Gold Bull Market after Brexit

UK cuts from the EU after Brexit

The Brexit vote was the beginning of what could be a mass upheaval of political and economic systems. It was a vote against the largest trading bloc in the world and the governance system that has arisen from it. Experts are saying that this is just the beginning of gold’s move. Scotland and Northern Ireland are increasingly showing signs that if the United Kingdom severs its EU ties, they will seek to sever their own ties with the UK and re-integrate with the EU. Former Federal Reserve Chairman Alan Greenspan said that if this continues to play out this way, we could expect a major bull market for gold.

Banks have also raised their gold bullion forecasts. Morgan Stanley and Goldman Sachs Group Inc. have both raised their predictions for the metal echoing the flight to safe haven that many other investors have already taken.

What this means for investors: This could be the calm before the storm. There are still many major and historic decisions to be decided about the future of the European Union and the nations that comprise the United Kingdom. Global markets will continue to waver under the strain of the uncertain future. The Brexit vote was a collective message of anger at a multinational governance system and that anger extends to the national government. It is not unique to Britain either. As populaces continue to question their government political systems (for better or worse), volatility will increase.


More Reasons Gold and Silver Will Continue to Go Up


What other factors are influencing gold and the markets? The Brexit is the hot topic, but there are other macroeconomic trends worth paying attention to as well. The high levels of uncertainty about the future of the European economic union are being ignored at the moment before UK – EU negotiations kick off more aggressively and Great Britain decides on its political leadership.

There is a real recession fear among central banks. The Bank of England, Federal Reserve, and European Central Bank have promised to provide liquidity in the market when needed, which would mean lower interest rates for longer. The ECB is already in negative interest rate territory. The central banks have precious few options left though to provide this kind of liquidity they have promised. The devaluation of currencies is another major reason for precious metals prices to lift. Gold’s initial spike after the Brexit vote was to be expected after such a historic geopolitical event, but its sustained growth will be tied to the loss in value of the pound, euro, and other world currencies. The Shanghai Gold Exchange has indicated that Chinese demand for gold is rising again. China is one of the world’s largest gold consumers, and is currently facing a currency crisis of a devalued Yuan and lagging economic growth.

What this means for investors: Investors are seeing many indicators that gold prices will continue to rise post-Brexit. Central banks are scrambling to find solutions to stave off crisis and global economic slowdown and running out of ammunition. As many in leadership and the media attempt to assuage concern about the effects of the British exit or even the possibility of it even happening, it is imperative to remain aware of the other threats to the global financial system.


Here are some articles from the web discussing the topics in this week’s post:

Silver Hits 21 Month High This Week As Gold Lifts
Read Here

UK & EU S&P Credit Ratings Downgraded to AA after Brexit
Read Here

What’s Next for Gold Bull Market after Brexit
Read Here

More Reasons Gold and Silver Will Continue to Go Up
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The Brexit Aftermath

The Brexit Aftermath

Gold Market Discussion

What the Brexit Vote Means for Gold, Stocks, Currencies, and Banks

Vote is to leave the EU
On Thursday, Britain voted by 51.9% majority to leave the European Union. By Friday morning, the global markets – mostly poised for a “Remain” vote – were in chaos as the Brexit spurred a massive sell-off. This is a monumental event of which the significance cannot be stressed enough. It will be a catalyst for major global economic and political changes.

The Brexit aftermath: How the markets reacted:

  • Gold: Gold prices skyrocketed hitting 20-month highs. The gold price had its greatest one-day move in 7 years as investors flocked to the safe haven metal. After the official announcement, gold rose as much as $100. Gold was up 13% against the pound and more than 6% against the euro and Swiss franc.
  • The Dollar: The dollar strengthened as the pound and euro collapsed. Gold and the dollar generally move in opposition to one another: when one goes up, the other comes down. Yet both gained against the collapsing European currencies as many saw gold as a safer alternative.
  • Pound Sterling: The British Pound fell 8% as gold rose 8%. Pound sterling was at a 30 year low. Before polls had even closed, British citizens were lining up to exchange their pounds for gold, euro, or dollars. The pound was down 700 base points after Sky News called the results.
  • The Euro fell nearly 3%. The Norwegian krone, Swedish krona and Australian dollar fell even steeper.
  • Banks were the hardest hit sector. Many were down nearly 10% with Deutsche Bank experiencing the hardest losses. The Bank of England said it would pump billions into the financial system, and the European Central Bank said it will give banks all the funding they require.
  • Dow Jones and S&P 500: Both saw all of their 2016 gains wiped out. The Dow dropped 600 points and had one of its worst trading days ever.
  • The Nasdaq had its worst day since in five years.
  • Stoxx Europe 600 plummeted 7%, having the worst day since the height of the financial crisis.
  • Crude oil was down 5%.

What this means for investors:

Gold has not hit its peak yet. We are already seeing a massive flight to safety in gold, and as the global markets continue to reel, gold prices will continue to climb. These moves were a reaction to only one day after one vote. As the effects of these events continue to rock the markets, gold will move higher.

Experts like Dennis Gartman expect gold will keep rising. Those who bought in the past couple weeks when prices dropped back are now seeing great returns, but this is still a prime buying opportunity.


More Market Chaos and Volatility to Come; “Tip of the Iceberg” According to Alan Greenspan


The former Federal Reserve Chair said Friday on CNBC that this is the worst financial period he can recall – worse even than 1987’s Black Monday when the Dow dropped 23%. Greenspan also said that the euro currency is an “immediate problem,” and shows that the Eurozone and EU political integration has failed.

What this means for investors: Ultimately the Brexit vote was a political vote more than economic vote. It was a vote against European integration. Established systems in Europe are crumbling, and with such major disruption, the global economy is poised for an even worse crisis than the previous. The collapse of the euro is not just the collapse of one country’s currency; it is the collapse of nineteen countries’ currencies. Demand for gold will rise against such global uncertainty


The Domino Effect of the Future of the EU

EU Domino Effect
Several EU countries have already voiced a desire to hold their own referenda on leaving the EU as well. Leaders in the Netherlands, Italy, and France have called for national referenda. These are especially significant because these are three of the original six members of the EU’s precursory organization and all use the euro. In Austria – a country receiving a large influx of immigrants and with a strong right wing party – 40% want a referendum held. Polls have also indicated that the Czech Republic, Hungary, Denmark, and Sweden could likely vote to leave in a referendum.

What this means for investors: The EU’s future is dire. Alan Greenspan also said Friday on CNBC that despite its efforts to prop up banks, the European Central Bank is limited in what it can do, due to the economic stagnation in the Eurozone. The Southern Eurozone is funded by the ECB and Northern zone, which is a fundamental problem without a clear or easy solution. The “Brexit” is like the first major leak in a dam, and it will spread and set off others until the dam finally bursts. Gold’s post-referendum spike is just the first upward move that will inevitably accompany this crisis.


Here are some articles from the web discussing the topics in this week’s post:

What the Brexit Vote Means for Gold, Stocks, Currencies, and Banks
Read Here

More Market Chaos and Volatility to Come; “Tip of the Iceberg” According to Alan Greenspan
Read Here

The Domino Effect of the Future of the EU
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

What Today’s Brexit Vote Means to Investors

What the Brexit Vote Means for the European Union and the Future

Britain holds a historic vote this Thursday – June 23rd – to determine whether they will remain in or leave the European Union. The question will be determined by referendum – a yes or no question decided by popular vote. What does it mean for Great Britain, Europe, and the globe if Britain exits the EU? We will break down questions you may have about the EU, Britain’s role, the referendum, and its future implications. Let’s look into what tomorrow’s Brexit vote means to investors…

Why Does Britain Want to Leave?

The Brexit BattleCurrent British Prime Minister David Cameron campaigned on the promise that he would hold the referendum if elected in 2015. His promise was in large part due to mounting pressure from Conservative Members of Parliament and the UK Independence Party (UKIP).

The “Leave” campaign argues that the EU has become too powerful and over-bearing and started to erode nations’ sovereignty in favor of a federal Europe. They believe it has too much control in peoples’ daily lives while operating with too much secrecy. It’s processes and institutions are unlike any other organization making it both too empowered and too distant. Many are also opposed to the influx of immigrants from other EU states that are enabled by the visa free moment, living and working rights of people across borders. The proposed “resettlement quota” proposed by the EU for Syrian refugees in each EU nation further fueled many of these sentiments.

Those arguing for a “Remain” vote see improvements to their daily lives and opportunities from EU membership. Many also like the strong commitment the EU pledges to workers’ rights and education opportunities. They also see a “Leave” vote as causing innumerable economic and logistical burdens for:

  • British citizens living elsewhere in the EU who will now require visas and work permits or be forced to move back to the UK, and vice versa Europeans living in the UK
  • Small businesses who avail of the single market to expand business opportunities
  • Countries like Ireland whose largest trading partner is the UK

What is the Purpose of the EU?

The EU flags

The EU is a complex, bureaucratic organization that many people – including EU citizens – struggle to fully understand. Knowing how the EU arose and how it operates is useful in understanding both the “Leave” and “Remain” campaigns.

The European Union was founded as an economic union on the principles:

  • Free Movement of goods – free trade across borders to create a single European market as if it were basically one country
  • Free Movement of People – visa free travel, living, and work for all EU citizens in all EU member countries

It was based on the idea that if countries were economically dependent on one another and enjoyed this freedom of movement across borders, future conflict could be avoided. It has become an increasingly political organization as well with a foreign affairs branch and leadership having significant weight on the global diplomatic stage.

Timeline of the EU:

  • Post World War II: During the economic rebuilding of war torn Europe, the European Coal and Steel Community (ECSC) is founded in 1951 with a treaty designed to keep countries from mobilizing troops against each other due to integrated dependence on one another for coal and steel.
  • 1958: Creation of the European Economic Community (EEC) and European Atomic Energy Community (Euratom) by six countries – Belgium, Germany, France, Italy, Luxembourg, and the Netherlands. First step towards future EU.
  • 1967: Brussels Merger Treaty streamlines organization by combining EEC, ECSC, and Euratom into one and establishes Commission and Council – replaced by Treaty of Amsterdam in 1997
  • 1973: Denmark, Ireland, and United Kingdom join EU
  • 1981: Greece Joins
  • 1986: Spain and Portugal join
  • 1989 – 1990: Collapse of the Soviet Union
  • 1992: Maastricht Treaty – Establishes European Monetary Union in preparation for the euro, introduces elements of a political union (citizenship, common internal and foreign affairs policy)
  • 1995: Austria, Finland, and Sweden join
  • 2001: The Euro is introduced – is now used by 19 of 28 countries
  • 2004: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia join
  • 2007: Bulgaria and Romania join
  • 2013: Croatia (newest member country) joins bringing total member countries to 28

How the EU Works

The four chief institutions of the complicated structure are briefly explained in this video from BBC.


How the EU operates and legislates is far more complicated. It is the murkiness around the working process that alienates and disillusions many of its citizens.

EU Politcal System Explained
Click Chart Image to Enlarge

GO: What Happens if the Referendum Passes?

  • No one really knows for sure all of the implications of a “Leave” vote.
  • Treaties and trade agreements would have to be re-negotiated.
  • Twenty-seven countries must decide the legal procedure for numerous UK citizens settled within their borders.
  • Multi-national corporations and large banking institutions would have to re-structure and sift through countless red tape.
  • Both the pound sterling and euro would plunge as the single European market loses the ninth largest economy in the world from its bloc. The stock market would experience heavy losses and gold prices would lift as a safe haven investment.

STAY: Why Britain Could Vote “Remain”

  • It is likely that the fear of such an unknown future might be enough to scare enough voters into wanting to remain in the EU. For many a “Leave” vote carries personal risk to their daily lives and livelihood.
  • The immediate economic crisis that would occur would damage an already stagnant EU economy further in a zone where a large number of EU citizens have still not recovered from the 2008 global crisis.
  • Many of the UK citizens living abroad are retired or have families and will not want to uproot their lifestyles.
  • Younger voters tend to align ideologically with the EU for its political commitment to the advancement of human rights and open borders and opportunities for travel, higher education, and work opportunities in other countries.

What the Referendum Means for the Future of the EU

 Whether the referendum passes or not, it presents important questions for the future of the EU. “Euroskepticism” is on the rise in many more member countries. If Britain does leave, many predict there will be a domino effect of member countries holding referenda. If it doesn’t leave, Britain’s example could still prompt other nations to hold referenda and cause exits of other nations until the organization finally unravels.

Alternately however, a British “Remain” vote could be interpreted as a vote of confidence in the EU. Regardless, the aftermath of the June 23rd referendum will be worth following and will have significant historic and economic repercussions.

3 Reasons Why Gold Prices Have Bright Outlook

Gold Market Discussion

3 Reasons Why Gold Prices Have Bright Outlook

gold-bars-close-up

  1. The “Brexit”
  2. The Federal Reserve’s decision on interest rates
  3. German and Japanese negative interest rates

Right now, the potential Brexit and the Federal Reserve’s interest rate decision (see next section below) are two of the key drivers for gold’s rising price. A third, more long-term driver continues to be the negative yield on government bonds. A significant number of governments’ debt is selling at negative yield. The Japanese government bonds for with two year, five year, and ten year maturities all have negative yields. Two and five year German bonds are likewise yielding negative returns, and the German ten-year bond is close to a negative yield as well. This means that investors who hold these bonds to maturity are definitely going to lose money. Germany and Japan are two of the most significant economies experiencing this lack of growth given their size, but they are certainly not the only ones.

What this means for investors: As they continue to lose money, investors are going to start forgoing bonds in favor of assets like gold that store value. It’s also worthwhile to remember that the gold market is relatively small when contrasted to the bond or stock markets, so a relatively small amount of money diverting to precious metals investing could cause prices to soar.


Gold’s Mid-Week Price Jump Following Fed Announcement

gold set to resume rally
The biggest news of the week for the economy was Wednesday’s Federal Reserve announcement that the June interest rates hike proposed a few weeks ago would not go ahead after all. Recent jobs data from the Bureau of Labor showed alarming figures about lack employment growth and called into question whether the economy was strong enough for a rates hike. Gold and silver were both making gains earlier in the week and got an additional hefty boost following Fed chair Janet Yellen’s announcement with gold hitting 6 week highs and coming just short of $1,300. Stocks took a hit.

What this means for investors: This has two implications for investors. The first is that the economy is showing signs that it is not as strong as the optimistic projections of we have been hearing from the Fed. When the economy is suffering any kind of sluggishness, investors flock to gold as a safe haven against crisis. The second implication is that this is a prime buying opportunity for both silver and gold before prices surge higher.


Experts Say “Gold Will Soar” if Britain Votes Leave on EU Referendum

Is Britain in or out of the EU?
Should I stay or should I go?3

The possible “Brexit” – which will be voted on next week – was also an important discussion topic in the Fed meeting. The staunchest “Remain” contingent in Britain has said a “Leave” vote would be “economic suicide” for Britain. Whether this is an exaggeration or not remains to be seen, but it is certain that the euro and pound sterling would suffer a hard blow regardless and the global economy would suffer massive amounts of uncertainty and volatility. European investors have been heavily buying gold in the weeks leading to the vote.

HSBC Bank estimated gold would rally 10% to around $1400 if the leave vote wins out. In the past week, polls have tipped from “remain” to “leave” with some at as much as a 40/47 split.

What this means for investors: If the Brexit happens, investors here and in Europe who did not buy gold will be kicking themselves. All 28 countries in the EU bloc will find their economies reeling as they negotiate what the exit of one of their most influential partners means for trade deals. If there Brexit does not happen, there is still enough volatility in the Eurozone  and global economy at large that gold would likely not be adversely affected by the “Remain” vote. Although the Brexit has taken the spotlight for now, Greece’s recent financial collapse and debt default is also still weighing heavily on the Eurozone and will certainly continue to wreak havoc on the markets.


$10,000 Gold – Why One Commodities Expert Says It’s Possible

gold-bars
An impending global economic meltdown will drive gold’s price to historic highs, according to one of Wall Street’s most closely followed commodities traders, Jim Rickards. Rickards was on CNBC saying that gold is on the verge of a rally unlike it’s ever experienced before. The author of numerous New York Times bestsellers, he cautioned that the world is on the brink of another, ten-year cyclical financial collapse. He advised that gold is the ultimate safe haven in times of volatility such as will come in the next couple years.

What this means for investors: Rickards estimation tracks a cycle that’s been occurring for decades where every ten years the global economy experiences a massive disruption. He thinks 2018 is going to be the next such disruption and will likely be triggered by the U.S. government itself. Central banks will need a bail out as other banking institutions did in 2008, and the International Monetary Fund (IMF) is the only global source left with the funds necessary to do so. War and conflict in the Middle East or South China Sea would exacerbate this meltdown. As the money supply is disrupted, investors will flock to risk-off investment in gold and silver as the only safe protection of their wealth.


Here are some articles from the web discussing the topics in this week’s post:

3 Reasons Why Gold Prices Have a Bright Outlook
Read Here

Gold’s Mid-Week Price Jump Following Fed Announcement
Read Here

Experts Say “Gold Will Soar” if Britain Votes Leave on EU Referendum
Read Here

$10,000 Gold – Why One Commodities Expert Says It’s Possible
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Golden Bull Market fights the bear

Gold Prices Rise and Stocks Fall with Increased Concern Over Global Economy

Gold Market Discussion

Gold and Silver Prices Strong This Week, Stocks Vulnerable

gold provides security
Gold and silver prices continued rise this week following its strong close the previous Friday. Ominous signs about the stability of the U.S. economy started to become apparent after a much weaker than expected jobs data report last week. A few days prior, Janet Yellen, chair of the Federal Reserve, had called for raising interest rates saying the economy was strong enough to handle it. The jobs data though said otherwise, probably taking the rise off the table for now.

What this means for investors: The strength of the U.S. dollar appears to be ebbing. Increasing volatility in the stock market will be favorable to gold prices and drive investors toward safe haven investing. Both gold and silver continue to perform well this year with silver seeing a slightly greater percentage increase.


Influential Investors Saying Now Is the Time to Hoard Gold


Hedge fund managers and banking analysts are moving funds into gold in greater numbers. Just a couple of these recently have been George Soros, who has been buying up gold, and Stanley Druckenmiller, who told investors to get out of stocks altogether and into gold. Adding to the gold advocates this week were chief commodities analyst at HSBC Jim Steel, who believes there is sufficient geopolitical and economic instability to keep gold prices rising, and DoubleLine Capital CEO Jeff Gundlach who thinks gold could go to $1400.

Veteran industry trader Jim Bouroudijan believes the recent movements in the gold market are a red flag of an upcoming market adjustment that will favor gold.

What this means for investors: Some top investors and investment advisors are foreseeing much global economic instability, and protecting their wealth against it with gold. With a recent price dip a couple weeks ago, now is a prime buying opportunity. Gold is up almost 20% this year


Is the EU on the Brink of Collapse?

Brexit from the EU

The “Brexit” (British exit from the European Union) referendum coming up on the 23rd continues to play as a dark horse in the markets. Polls saw a rise in the past couple days in support of the “Leave” campaign. If Britain does choose to leave, the EU’s disintegration could ensue. If it doesn’t, the Union’s seams are under severe stress regardless. The biggest specters of doom hanging over the EU are the Greek debt crisis and the inability among member states to agree on a solution the refugee crisis. The past several years have seen a rapid rise in “Euro-skepticism” and dissatisfaction with what many see as a supranational organization that is chiseling away at member nations’ sovereignty.

What this means for investors: If the “Brexit” does happen, the pound and euro will plunge. If the EU collapses, this effect will be even more severe. Those who have not already safeguarded against currency collapses with safe haven investing like gold will certainly flock to it then as prices soar.


What Other Macroeconomic Forces Are Driving Gold?

china flag

The “Brexit” vote and the question of whether the Federal Reserve will raise interest rates are the influencers in the forefront right now for most investors. Another significant concern is the potential collapse of China’s economy. The second largest economy in the world, it has seen sluggish growth this year marked by a depletion of foreign currency reserves and flight of capital. In addition, Chinese political leadership is experiencing internal strife, which will make it more difficult to recover from their economic issues.

There has also been a growing lack of confidence in central banks around the world, which historically has been favorable for gold and is continuing to hold true. Government bond yields fell around the globe this week in Europe, Asia, Australia, and Europe.

What this means for investors: The falling bond yields are indicative of increasing levels of trepidation among investors and traders about central banks’ monetary policy and its ability to push their economies out of slow economic growth. Currently, the strongest macroeconomic and geopolitical trends favor a continuation of this year’s rise in gold prices.


Here are some articles from the web discussing the topics in this week’s post:

Gold and Silver Prices Strong This Week, Stocks Vulnerable
Read Here

Influential Investors Saying Now Is the Time to Hoard Gold
Read Here

Is the EU on the Brink of Collapse?
Read Here

What Other Macroeconomic Forces Are Driving Gold?
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

How to Store Gold Safely

How to Store Gold Safely

Where Should I Store My Gold Safely? 

Best place to store gold?

How to store gold safely is one of the most common questions we hear from clients who are purchasing gold for the first time.

As we researched the different methods adopted by investors, we wanted to share some of these options and list the pros and cons of each. Many factors need to be considered, but the first most investors consider is accessibility. How will you ensure your gold or silver is safe, secure, and accessible when you need it? After all, we own physical, private gold so that we can always keep our money within arms reach. With that said, let’s dive in…

The most common methods for storage are:

  • At home (in a safe, or at least well hidden)
  • In a bank’s safe deposit vault
  • In a private depository

There are pros and cons to each that should be considered, but generally home storage or a private depository box are the safest options.

Additionally, you should consider the size of the gold and silver you want to store, and if you expect to significantly increase your holdings. Bullion coins are small, and with only a few coins you can easily hold thousands of dollars worth of wealth. Graded and certified coins have plastic holders that make them slightly bulkier. Gold kilo bars and 100 oz. silver bars require even more space.


Storing Gold and Silver at Home: Things to Consider

It is difficult to estimate what percent of investors choose to keep their gold at home. This is primarily because most are wise enough to only let one or two trusted family members know.

In the event of crisis or catastrophe, you may need immediate access to your gold. For example, in 1975 during the Vietnam War, when Saigon fell, its citizens were given immediate notice that they must evacuate. Going to a bank to withdraw money was out of the question. Luckily, many had gold at home that they carried with them and used to set up new lives elsewhere.

  • PRO: You know the status of your gold and can access it virtually anytime.
  • PRO: Privacy of ownership is a big incentive for many investors, so it is logical to want to keep gold at home to maintain that privacy.
  • CON: Home thefts occur more frequently than bank or depository thefts. If it becomes widely known you have gold at home, your house may become a target.

Where you store your gold on your property also has considerable weight on the security factor. What security mechanisms (home alarm system, firearms, surveillance cameras, etc.) do you have in place on your property? These have an impact on the safety of home storage as well as the storage method.

In no particular order, here are the most common home storage options:

1. Burying Outside

bury your gold
It is highly unlikely a typical home burglar would know where to dig in your yard to discover buried gold. If you decide to bury it, you also want to be assured you or an appointed trustee can dig it back up. Would age, injury, or infirmary be an obstacle to retrieving it?

Although gold and silver are resilient metals, you would also want to make sure they are protected from the elements by purchasing an air and water-tight lock box (with a locking mechanism for extra security).

  • PRO: Out of sight. Burglars might know where to search the house for hiding spots, or see a safe (if you have one) and get it open. 
  • CON: Potential difficulty unburying. It can also be time consuming if you need them in a hurry.
  • CON: Susceptible to elements, natural disasters, etc.
  • PRO/CON: Consider the size. It is relatively easy to bury if it is a small amount, however, it is difficult if it is large amount or if you want to add to it later.

2. Upright Safes

upright safe for gold storage
Safes and floor safes are the preferred method for home storage. They come in numerous sizes and specifications with options for dial locks, keypad locks, key locks, and combinations of multiple locking mechanisms. Large, upright safes are heavy to move and can be utilized for storing other valuables. Smaller safes can be tucked away in nooks and crannies.

  • PRO: Large, upright safes are heavy and cumbersome for a burglar to move. They can also be utilized for storing other valuables.
  • PRO: They are equipped to withstand fire and water damage (to certain degrees).
  • CON: Large safes can be easily spotted.
  • CON: Small safes, if found, can be easily carried away.
  • CONSIDER: If you go for the safe option, buy a couple different safes and split your gold between them. Then if one is stolen, you have still got at least some of your stash left. One could also serve as a “dummy” safe and trick thieves into taking it, not knowing your most precious assets are hidden elsewhere.

For those shopping for safe purchases and installation in the Phoenix area, a popular choice is Arizona Lock and Safe.

2. Floor Safes

 

Floor safe
Floor safes are perhaps more secure than upright safes. They are much more easily concealed, and like upright safes, are equipped to withstand fire and water damage. They also have different options for locking mechanisms. In most cases you will need a lock and safe technician to install it.

  • PRO: The most easily concealed and secure safe.
  • PRO/CON: Immobile. Choose the placement carefully. This can be an advantage if it’s discovered. If you want to change the location, however, you will likely need a technician.
  • CON: Large safes can be easily spotted.
  • CONSIDER: Install two floor safes and split your assets between the two in the event that one is discovered.

2. Unsecured Hiding Place

strore gold in plain sight?
Examples of unsecured hiding places are under the mattress, in an old coffee can, or behind a loose floorboard. This storage method is not recommended. Some might think of it as “hiding in plain sight” and secure in that it is “too obvious”, but this is not the case. It is extremely risky and the surest way to lose your valuable coins.

  • CON: You or someone else could accidentally throw them out, forgetting they are there.
  • CON: Easily stolen.

Storing Gold and Silver Off-Site: Things to Consider

1. Bank Deposit Box

Bank Deposit Box

Chase Bank letterBank deposit boxes have an array of risks associated with it. For one, your access to your gold is limited to the bank’s opening hours. But more nefariously, you could be denied access all together. Banks like JP Morgan Chase have been known to send letters to their clients expressly forbidding storage of gold bullion (and cash) in their deposit boxes. A scan of the letter that Chase sent to deposit box owners is on this page, but you can click here to download the entire letter as a PDF.

  • CONSIDER: In 1933, gold was confiscated by executive order. Having gold in a bank deposit box made seizure easier.
  • PRO: It takes away the home risk of self-storage.
  • CON: There’s a chance you may have it confiscated. It happened once, it can happen again. The Chase example is further proof.
  • CON: Deposit boxes are not FDIC insured.
  • CON: Financial institutions could collapse.
  • CON: Storage cost.

2. Private Depository

store gold in a private depository

If you are (justly) wary of the banking system and don’t want the risk of home storage, a compromise might be a private depository. They are not subject to the institutional risks of banks and many provide 24/7 access.

  • PRO: Less personal risk than home storage.
  • PRO: Not subject to unsavory banking institutional regulations.
  • PRO/CON: You will pay a storage fee, but these are generally at a reasonable cost.
  • PRO: Your box is insured, and the location is well secured.
  • CON: Though you may have 24/7 access, it might be difficult to access immediately during a crisis depending on how far away it is or how much demand there is for access.

…And the Winner is?

Ultimately, it is up to the investor to decide which option is best suited to his or her lifestyle and needs. Most investors, however, shy away from the bank option because of the risk of confiscation and a mistrust of the current financial institutional system. Home storage can be the most secure if it is done wisely, but many find the private depository option affords the most peace of mind.

When choosing your storage option, it is a good idea to remember some primary reasons we own gold in the first place: privacy, liquidity, and tangibility. Considering those three values is important when deciding which means of storage is best for you.

Ask yourself:

  1. How important is it to you to have 24/7 access to your gold?
  2. How confident are you in securing your investment in your own hands?

If you said #1 is important to you and you are confident securing it yourself, we would always recommend self-storage of precious metals. Having your gold within arms reach is critical in times of crisis or disaster, but most importantly, you are in control of your own investment- with literally zero counter-party risk.

Again… privacyliquidity, and tangibility… isn’t that why we own gold in the first place?

Jobs Data is weak

Gold Rallies Friday on Bleak Economic Jobs Data While Dollar and Stocks Fall

Stronger Dollar-Eurozone Fears

Bleak Economic Jobs Data: U.S. Labor Force Adds Fewest Workers in Six Years

bleak economic jobs data
The jobs data was more negative than even the most pessimistic growth projections, according to Bloomberg analysts. Average estimates put the number of jobs added to the U.S. labor force for May at 150,000. The reality was shockingly short at only 38,000 jobs added. The weak job growth was across all industries, but was particularly felt in factory, manufacturing, and those vulnerable to weak overseas markets. The number of part-time employees who want full-time work rose nearly 500,000 from April. The unemployment rate is now at 4.9%.

Why this matters to precious metals investors:
Much of the slowly returning confidence in the economy is misplaced, as data like this indicates. A weak labor market is indicative of a struggling economy. Gold prices have seen some pull back the past couple weeks, but the rally this week shows it has potential to rise higher if the economy continues to slow. It is a prime buying opportunity before prices rise again.


Dollar Plunges Lowest Since December and Stocks Fall While Gold Soars – Will The Fed Change Policy?

dollar-plumets-chart
Gold closed $30 up on Friday while stocks and the dollar fell. The reason for this was primarily due to the weak job growth that the U.S. Bureau of Labor released on Friday with only 38,000 jobs added in May – the lowest since November 2010. This data shook the markets and made many question the strength of the economy and labor market. Confidence in the economy has been tentatively returning, but as this new data shows, much of that was likely based on false flags and hopeful thinking. One currency strategist has said that the dollar correction is over and that it has a weak future.

It also has many wondering if the U.S. economy is strong enough for the interest rates hike that the Fed chair Janet Yellen announced for June. Some analysts are advising to scale it back and warning that it would strain the economy too much.

European Central Bank officials met this week to discuss interest rates and Greece. A decision on diverting more funds to Greece was postponed, but they decided to maintain negative interest rates.

Why this matters to precious metals investors:
The indicators are pointing towards a slowing economy. Demand for safe haven gold will continue to go up, as it has been in 2016. Gold prices will rise in tandem against the plunging dollar. Silver prices were also up as silver continues its stellar performance this year.


G-7 Annual Summit Meeting Discuses Slow Global Economy and Refugee Crisis

G7 2016 Summit Leaders
The annual two-day summit took place in Japan this week, bringing together leaders from the United States, Japan, Canada, Italy, France, Germany, and the United Kingdom, as well as two of the heads of EU institutions. The main topics for discussion were concerns over the state of the world economy, the refugee crisis, and cyber and maritime security.

Japanese Prime Minister Shinzo Abe compared the current global economic conditions to those of the 2008 financial collapse. Emerging economies are struggling, and their sluggish growth may last some time yet, according to Japan’s cabinet chief. Economic slowdown in China is impacting many nations’ economies and oil prices and commodities have been falling. Abe called for fiscal stimulus and flexible monetary policy from world leaders, but has been meeting resistance from the U.K. and Germany.

Why this matters to precious metals investors:
The U.S. job data and weakening economy are not the only thing that are impacting gold’s rally this year. The malaise is impacting all of the world’s economies and grinding growth to a near halt. Countries like China that are seeing significant downturn are increasing their gold holdings to stave off potential crisis.


We Are in a No-Growth Global Economy, Says OECD Secretary-General

OECD Logo
The Organization for Economic Cooperation and Development is an inter-governmental, global institution that strives to “improve the economic and social-well being of people around the world” by advising governments on monetary and social policy. The OECD’s macroeconomic assessment this week revealed the economy’s recovery from the 2008 financial crisis to be disappointingly weak. The International Monetary Fund (IMF) published a similar report in its quarterly World Economic Outlook.

Why this matters to precious metals investors:
The OECD’s and IMF’s assessments are in opposition to what Federal Reserve chair Janet Yellen and ECB chair Mario Draghi have been saying about improving economies. However, Yellen and Draghi are the chiefs of central banks with control over interest rates and policy decisions. The statements put out by them have more impact on the economy than reports from independent agencies like the OECD, but because they have their own policy agendas, they must be taken with a grain of salt. The OECD assessment echoes the concerns from the G-7 Summit leaders and points towards an ominous future.


Here are some articles from the web discussing the topics in this week’s post:

Bleak Economic Jobs Data: U.S. Labor Force Adds Fewest Workers in Six Years
Read Here

Dollar Plunges Lowest Since December and Stocks Fall While Gold Soars – Will The Fed Change Policy?
Read Here

G-7 Annual Summit Meeting Discuses Slow Global Economy and Refugee Crisis
Read Here

We Are in a No-Growth Global Economy, Says OECD Secretary-General
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Memorial Day 2016

Gold is in the Beginning of a New Bull Market- What Analysts and Banks See Ahead for Gold

Stronger Dollar-Eurozone Fears

[VIDEO] Leading Wall Street Analyst: Gold Will Hit $1900; Get In Now


Market Analyst Peter Boockvar was interviewed on CNBC this week saying that gold is in the beginning of a new bull market. He believes many are reading the market wrong and that gold and silver still have a ways to climb. Boockvar said the 2011 highs of $1900 are reachable and possibly passable. Here is his interview discussing Fed rate hikes and the future move on gold.

Why this matters to precious metals investors:
Boockvar’s assessment is that the current dip in prices is a perfect time to get into the gold market. Gold has been down the past couple weeks, but is still up 17% overall this year.


What Are the Potential Fed Interest Rate Hikes Doing to Gold and Stocks?

Janet Yellen
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System

On Friday, Janet Yellen – chair of the Federal Reserve – announced that cautious rate hikes over the next few months are appropriate due to positive economic indicators. In anticipation of an announcement of a rate hike, gold has been down this week with a mixed performance in stocks.

However, this flies in the face of previous experience with rate hikes. The last time the Fed raised rates in December, the stock market practically collapsed. The positive economic indicators that the Fed is citing to justify the hikes are also likely exaggerated. Policy speculation alone has immediate repercussions in the market, so it could be that this speculation is accomplishing what the Fed wants to happen in the markets.

Why this matters to precious metals investors:
It is likely that the Fed is predicting a future downturn, and with rates currently so low, they would not be able to further lower them again without first having raised them. This indicates a lack of confidence in the economic recovery. The hike could have a negative equity impact like it did in December and gold would be the last asset-class standing.


Global Economic Trends Impacting Gold Right Now

Global Economic Trends Impacting Gold Right Now
Gold prices are caught in a tug of war of macroeconomic trends right now. Brexit fears are positive for price, while possible interest rate increases are holding it back. Demand is increasing in China on fear of economic uncertainty and the November presidential election will further market volatility. Central banks around the world are adopting negative interest rates, which implies economic weakness. Hedge funds are increasingly moving into increasing gold in their portfolios.

Why this matters to precious metals investors:
Despite its price dip this week, gold still has strong support. Indicators of a global economic slowdown are increasing and investors are protecting their funds with gold ahead of it.


Gold Setback Temporary? What Some Banks See Ahead for Gold

Gold is in the Beginning of a New Bull Market
In the past couple weeks, banks like JP Morgan Chase and Goldman Sachs have moved into a more bullish stance on gold, despite prospective interest rate hikes and recent price dip. Dutch bank ABN Amro is the latest to join the gold ranks. Their precious metals and FX strategy division reported that the current strength that the U.S. dollar is enjoying – contributing to the gold price pullback – is transient and a blip in the markets. Their projections are for increased inflation, and that there will be many other factors come into play on gold price other than the dollar.

Why this matters to precious metals investors:
Gold prices rise on a weak dollar, so if the current dollar strength is headed for a crash as many analysts are predicting, gold would see strong support. There is much global volatility, which will buoy up gold prices and hurt interest-bearing investments.


Here are some articles from the web discussing the topics in this week’s post:

Leading Wall Street Analyst: Gold Will Hit $1900; Get In Now
Read Here

What Are the Potential Fed Interest Rate Hikes Doing to Gold and Stocks?
Read Here

Global Economic Trends Impacting Gold Right Now
Read Here

Gold Setback Temporary? What Some Banks See Ahead for Gold
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The Brexit

Gold Lifts as “Brexit” Fears Shake the Markets

Stronger Dollar-Eurozone Fears

The “Brexit” Politics and Their Impact on the Markets

Will England Exit the EU?

A few weeks ago we touched on the possibility of Great Britain voting to leave the European Union and what the impact of this move would be on gold and the markets. The referendum for the British exit – known most commonly as the “Brexit” – is fast approaching; it is set to take place on June 23rd and will be decided by popular vote. Many investors are anticipating a move to gold ahead of the referendum.

The European Union is, at its core, an economic union founded on the principles of free movement of people, goods, and services across borders. As one of the economic powerhouses of the EU, if Britain severs these ties, the shock waves will be intense as markets and businesses struggle to stabilize.

Initially, the dollar would likely do well if the referendum passes, as the euro and pound struggle, but the future of the EU project would be called sharply into question as other EU countries debate following Britain’s lead. The central and eastern European bloc – particularly Czech Republic and Poland – are already debating hosting a similar referendum.

Why this matters to precious metals investors:
Expect gold prices to rise ahead of the referendum. If the referendum passes, gold will likely rise again on market uncertainty and euro volatility. Investors – especially in Europe – will start fleeing to the safe haven investment.


Why is China Buying a $90 Billion Gold Vault in London?

China Buying English Gold

China is once again upping its gold consumption. This time it is putting its holdings overseas. In a secret location in London, China just bought a vault that will hold around $90 billion in gold. The Chinese economy’s sluggish growth has numerous investors worried. China is now consuming forty percent of the gold that comes out of the earth every year, making it the world’s top consumer. As an impending economic collapse in China looks more likely, gold is becoming more desirable as a safe haven net.

China has also been selling off massive amounts of U.S. Treasury bonds in an effort to fight the economic slowdown. It is the fastest sell off of U.S. debt by central banks since 1978.

Why this matters to precious metals investors:
China has the second largest economy in the world. An economic meltdown would have dire repercussions for global markets at large. Turmoil and volatility in the market is positive for gold prices, which is why China is becoming increasingly desperate for a large gold reserve.


George Soros Betting for Gold, Against Stocks; Will Gold Keep Rising?

George Soros is now in gold
Billionaire investor and business magnate George Soros

Formerly a vocal enemy of gold, billionaire George Soros is now moving a massive amount of funds into gold in a move that demonstrates lack of faith in stocks. He has said he believes the collapse of China is imminent. Despite some pull back on gold this week following a Fed discussion on an interest rate rise earlier than initially expected, gold has still made tremendous gains since the start of the year. Gold seemed to perform well in the Asian markets on Friday.

Why this matters to precious metals investors:
Despite its price dip this week, gold still has strong support. Indicators of a global economic slowdown are increasing and investors are protecting their funds with gold ahead of it.


Is Now the Time to Buy Silver?

silver bars and coins

There has been a lot of buzz around silver given its extraordinary performance this year. In a rising gold market, silver may have just beaten gold as the top metal performer. Some analysts are projecting silver still has a ways to go in outperforming gold.

Silver was still up on Friday while gold was down following the Fed meeting minute’s release.

Why this matters to precious metals investors:
Both silver and gold are up 20% this year with silver up marginally more than gold. Both metals respond to many of the same market factors, but silver has a greater number of industrial uses that can move the price as well.


Here are some articles from the web discussing the topics in this week’s post:

The “Brexit” and Politics and Their Impact on the Markets
Read Here

Why is China Buying a $90 Billion Gold Vault in London?
Read Here

George Soros Betting for Gold, Against Stocks; Will Gold Keep Rising?
Read Here

Is Now the Time to Buy Silver?
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

What is 1 oz of Gold Worth?

What is 1 oz. of Gold Worth?

The Price vs. the Value of Gold… What is the Difference?

Price of gold vs the value of gold
When investing in gold, price and value are not created equal.

The value of gold is measured beyond the daily spot price. Right now, as you read this post, the live spot price of gold is 1461.74 -2.51 . You may have just calculated your gains or losses based on when you purchased your gold. While the price of gold is important to understanding gold investments, you will find that it is gold’s long-term intrinsic value that has stood the test of time. While you read this post try to think about the longevity of your financial future. Let’s not consider today’s price of gold, rather how it has retained its value over time.

Buying gold is considered a safe haven against economic downturns and market uncertainty. Gold has the ability to preserve its purchasing power in ways that other investments do not. Gold’s worth is in its security and high quality performance over time as a preserver of wealth.

While market forces, inflation and economic trends influence the daily price of gold, gold retains purchasing power regardless of price. In the 1920s, one ounce of gold was worth $20. A $20 gold piece could buy a man a fine suit and night out on the town while today a $20 bill could not cover a fraction of those costs. However, the cost of an ounce of gold today could still buy those same goods as it did in the 1920s.

You may recall a national news story from 2014  when a California couple discovered over 1,400 twenty-dollar gold pieces buried in their yard. The stash, now referred to as the “Saddle Ridge Hoard“, was determined to be loot from a 19th century bank robbery, was worth over $11 million. If someone were to find 1,400 twenty-dollar bills, they would be priced at their face value (worth $28,000) which is worth much less than the gold today.

Over time, both the content of the gold and the demand for the coin, now a rare, historical piece far exceeded the monetary equivalent of its $20 face value. This is how gold preserves your future purchasing power. Holding gold for the long term will hedge against inflation. When you are ready to “cash in” or liquidate to the currency in use- you will find that it will be convertible to a fair value… unlike the box of paper money in the floor safe.

Take a look at the chart below which displays the increase in major purchases, goods, and commodities since 1971- the year the United States came off of the gold standard. Other than gold far outperforming the other data points, the most eye-opening number should be the average income in the United States- which has grossly under-performed against the other data points. You know the old saying “the dollar doesn’t buy what it used to”? Simply put: The dollar has been losing it’s purchasing power.

How gold protects and preserves your purchasing power
While all the goods and major purchases increase around us, our income has not kept up with the pace.

Is Your Money Safe in the Bank?

You may not have the money you think you do in your bank account. New banking regulations are making it more difficult to withdraw large amounts of cash due to banks being unable to keep sufficient cash reserves on hand. Imagine you walked into your bank and asked for a $1,500 withdrawal – knowing you had $10,000 in your account – just to be told that they could not give it to you.

Countries that have used bail-in with private citizen fundsUnlike the money in your bank account, gold is a tangible asset and not just a number in a computer system. It is a private and secure way that you can hold your hard earned wealth outside the dangers of a fragile banking system. When you don’t have access to your “money”, having a private, tangible asset like gold makes its value, well, very valuable.

This scenario may seem like a far-fetched and extreme circumstance, but in fact this has recently been a reality in some recent European countries such as Greece, France, Poland, Hungary, and Cyprus. Citizens of these countries were denied access to their money with daily limits for withdrawals, and in some cases, were the victim of nationalized “bail-in” programs.

The bail-in is a policy much like the “bail-outs” we saw here following the 2008 financial crisis. The difference? The banks needed to be “bailed out” by the government. In the case of the “bail-in”, the government is the one in need of financial help. Where does the money come from? You guessed it- you the taxpayer. Whether the funds come from pensions, taxes, or in some cases- private retirement accounts- the government could have full power and authority to seize the private assets from it’s citizens. Private gold is the line of defense you will want on your side in an economic environment such as this.

Dangers of Fiat Currency

Dollar delving and losing purchasing power

Fiat currency – denoted in the paper bills we use today – is only worth as much as the government printing it can guarantee it for. Its worth is subject to many risks and uncertainties. Physical gold does not have the same ambiguity attached to it. It is a commodity with intrinsic value that has stood the test of time against currencies that have risen and fallen.
If today’s currencies collapsed under the strain of government spending and borrowing, war, and further economic meltdowns, gold would be a safe haven: universally valued, a trade-able commodity, and a benchmark of wealth.

The Dollar and the Gold Standard: A Timeline

Understanding the history of gold and money in the United States is important in understanding gold’s worth. From its beginning, the U.S. dollar was backed by or convertible into gold.

  • 1787: An early clause in the Constitution prohibited states from making anything but gold and silver as payment tender.
  • 1900: The Gold Standard was adopted that stated, “…gold…shall be the standard unit of value, and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard.” The Gold Standard guaranteed the dollar was worth 1.5 g of gold at that time.
  • World War I: the Gold Standard was suspended (but eventually restored) as foreign entities liquidated their debts in gold. The Federal Reserve System was introduced and the U.S. Treasury issued emergency currency to assure debts to creditors.
  • 1929: The Great Depression hit, Wall Street collapsed, and speculators began to demand gold in exchange for what was now almost worthless paper currency. Eventually nearly all of the world’s major currencies abandoned the gold standard in favor of fiat currency: essentially a piece of paper with a government promise of value attached to it.
  • 1933: President Roosevelt passed the Gold Reserve Act banning private ownership of gold except for foreign exchange and revoking gold as a universal legal tender for debts. Roosevelt also raised the official price of gold to $35 per ounce, making the dollar more attractive to foreign buyers and foreign currencies more expensive for dollar holders. This led to more conversion of gold into dollars and allowed the U.S. to effectively corner the gold market.
  • 1944: The Bretton Woods Conference takes place to set up a new, international monetary system.
  • 1971: Nixon axed the Gold Standard completely. Dollars were no longer guaranteed by gold and the American economy suffered a devastating blow.

How Much Longer Will the Dollar Remain as World Reserve Currency?

The U.S. dollar has been the world reserve currency for over seventy years since the Bretton Woods Conference. When the Bretton Woods system was introduced, the dollar was still backed by gold. The dollar had replaced the British pound sterling as the world reserve currency.

Now over twenty countries peg their currencies against the dollar and conduct trade in the dollar rather than their various currencies. Inflation and trade deficits have led to such devaluation of the dollar that the future of the dollar’s status as the world reserve currency is now murky.

The World Reserve Currency chart
Nothing lasts forever– Here is the limited reign of the last five world reserve currencies previous to the US dollar.

Gold Is a Safe Haven Investment

Protecting your money with gold is similar to owning a house. When you buy a house, it is more than just an investment. The house becomes your home. It has utility that extends beyond getting a return on your money. It provides shelter and stability. Unless you are a hedge fund or a billionaire, day trading gold is not advisable.what is 1 oz. of gold worth?

Think of gold as insurance for your retirement account. In fact, it is even possible to own physical gold directly within an IRA, to reap the rewards of both the hedge value and the tax benefits at the same time.  Historically, gold has always defied inflation, posted profits, and most importantly- been in global demand. For certain, the same cannot be said for Enron or Blockbuster shareholders who purchased stocks, giving control to outside institutions. Ask yourself this: if you plan to retire in 15 years- will your money be there for you? As investors, we own gold for the future, not for tomorrow or next month.

In summary, as you look toward your financial future, keep in mind that the price of gold today is not the sole determinant for investors looking to secure their long term finances. It is what the value will be when you need it most 5, 10, or even 20 years from now.  As Economist Oakley R. Bramble wrote “Gold bears the confidence of the world’s millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history.” By taking control over your physical assets you eliminate the chances of your investments being subject to unpredictable actions by the government and other institutions. With the national debt at an all-time high, and government finances in turmoil, the need to preserve and secure wealth is ever more present.

Gold Market May Bull

Gold Enters a Bull Market with 30-Year Record High Demand; Rally Likely to Continue, Say Experts

Stronger Dollar-Eurozone Fears

Gold Enters a Bull Market, According to JP Morgan

Gold Enters a New Bull Market

One of Wall Street’s largest institutions, JP Morgan Private Bank, is betting on the gold rally to continue. Solita Marcelli, the bank’s head of fixed incomes, commodities and currencies, holds the view that gold could hit at least $1400 per ounce by the end of the year. Gold’s retreat on prices this week is, in her assessment, a healthy market correction before its next climb. Gold ended Friday on a positive note, recovering some of the gains from the previous days. JP Morgan is one of many financial institutions recommending their clients position for a new and very long gold bull market.

Why this matters to precious metals investors:
These projections are positive for both gold and silver. Both precious metals are sensitive to the same market factors. Silver has already been out-performing gold this year, so it is safe to assume both metals have entered this bull market.


What Jobs Report Data and Fed Policy Means for Gold Market Rally

jobless claims definition
Gold climbed a substantial amount last Friday after the Bureau of Labor Services reported much fewer jobs created in April than had been anticipated. This is a sign that the economy is not doing as well as hoped. Banks like Merrill Lynch and Goldman Sachs (among others) are changing their projections for interest rate hikes happening because of the negative economic data. A policy of negative interest rates – which is what the Federal Reserve is currently pursuing – is favorable to gold. Many investors were hoping for a policy reversal and interest rate hikes by June, and are now finally adjusting to the reality that it isn’t likely to happen.

Why this matters to precious metals investors:
When the economy is weak, gold is strong. Unemployment rates are on the rise and the dollar is losing steam. Investors in all financial sectors are starting to realize this and adjust expectations accordingly. Investing in gold now is a safe way to stave off risk with the rise of these negative economic indicators.


Central Banks’ Policy Direction Points Leading Hedge Fund Managers to Gold

Paul Singer
Paul Singer of Elliott Management Corporation (ECM)

Investment experts continue to push gold as the safest investment in this environment. Gold just had its best quarter in thirty years and is on the rebound. Global investors are becoming increasingly uneasy about the unprecedented monetary easing policies from the world’s central banks and its ramifications for inflation. Several eminent hedge fund managers are making gold their largest currency allocation. Investor confidence in central banks is weakening by the day leading to a revitalized demand for gold. Even Goldman Sachs, whose outlook for gold bullion has been more conservative than others, bumped up its gold forecast this week. Billionaire hedge fund manager Paul Singer recently said in an April 28th letter to his clients:

“It makes a great deal of sense to own gold. Other investors may be finally starting to agree. Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”

Why this matters to precious metals investors:
Some of these hedge fund managers flocking to gold are among the most successful in their field. The stock and equity market volatility has become too dangerous for many investors. If inflation continues to rise, gold will become even more attractive as a safe haven against a weak dollar. Buying now will stave off these risks later.


Q1 of 2016 Sees Highest Demand for Gold in a First Quarter Ever

Q1 2016 Sees Highest Demand
Concern over China’s debt problem, volatility in the equity market, and the Federal Reserve’s negative interest rate policy drove gold into its best quarter in thirty years. Demand soared to the second highest level on record. The metal attracted private investors and some of the world’s largest hedge funds alike. Stanley Druckenmiller, founder of Duquesne Capital Management, believes the equity bull market is “exhausted” and gold is now the company’s largest currency allocation.

Why this matters to precious metals investors:
With this kind of data, the run on gold that we’ve been seeing the past couple weeks has some definite support. It is not just a short-term fluke in the market. Demand and price are directly correlated, and as demand continues to rise, so will price. Demand at levels like this is not likely to quickly reverse, so gold has nothing but bright prospects for this year.


Here are some articles from the web discussing the topics in this week’s post:

Gold Has Entered a Bull Market, According to JP Morgan
Read Here

What Jobs Report Data and Fed Policy Means for Gold Market Rally
Read Here

Central Banks’ Policy Direction Points Leading Hedge Fund Managers to Gold
Read Here

Q1 of 2016 Sees Highest Demand for Gold in a First Quarter Ever
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Market May

Gold Price Hits $1,300 – Could it be Moving Towards $1,500? Dollar Slump Continues to Drive Price While Stock Market Reels from Crushing Week

Stronger Dollar-Eurozone Fears

Gold Price Hits $1,300

gold bull market 2016
On Monday, gold spot price passed the $1300 mark for the first time in over a year. Gold is up now 22 percent for the year and is crushing stocks, bonds, and most other asset classes. Gold’s performance this year has been driven by a few different factors. The first was the stock market’s dismal performance at the start of the year. This drove investors to the safety of gold. As the stock market picked up, gold calmed down until recently, when the dollar began to take massive hits. The dollar’s strength of the last couple years is starting to fail, and a weak dollar means gains for gold

Why this matters to precious metals investors:
This interview from Bloomberg this week on the dollar dilemma succinctly describes the relationship between gold and the dollar and why now is an optimal time to buy gold. Some market experts are projecting that gold is on the path to $1500 before year’s end.


Leading Analysts Predict Gold to Keep Rising and Advise Buying Now

Stanley Druckenmiller says get into gold
Billionaire hedge fund manager Stanley Druckenmiller advises to get out of the stock market and get into gold

Renowned billionaire and hedge fund manager Stanley Druckenmiller advised investors this week to get out of the stock market, sell off equities, and head towards gold. He pointed towards Fed recklessness in borrowing from future consumption and slowing cash flow in U.S. corporations as foreboding signs for the dollar’s future.

Dennis Gartman, on CNBC’s “Fast Money” on Monday, predicted gold could end the year 10 or 15 percent above current levels. He argued that fundamental principles were in place that favored precious metals due to central banks’ policies. Many of the world’s central banks are favoring an easy monetary policy with low interest rates that is making their currencies less valuable. As currency weakens, precious metals become more attractive as a safe haven investment.

Why this matters to precious metals investors:
These market experts are seeing recklessness and uncertainty lying on the horizon for the U.S. dollar (and the global economy at large). These are indicators that gold is going to start becoming more attractive as a safe haven investment, which will drive the price. Gold has moved past the bear market it has been stuck in and its projections for this year are bright.


Stock Market Experiences Worst Week Since February

stock slip worst since February 2016
The stock market closed out April with its worst losses since February. This caused even more unease among investors because of the market’s weak performance at the start of the year. Power players like Apple, Google, Microsoft, and Chevron all suffered major losses. The effect of the Bank of Japan’s shock decision to keep negative interest rates also is impacting the stock market and hitting the dollar and yen.

Why this matters to precious metals investors:
The stock market’s volatility this year is making investors wary and risk-adverse. If this trend continues, demand for precious metals will soar even higher, pushing prices up. Monetary policies from the world’s central banks are also indicating future scenarios where safe haven precious metals will thrive.


Silver Eases Back This Week, But is Expected to Rise Again

silver is on the rise
Silver’s stellar performance over the last few weeks eased back slightly this week. The corrective move will likely be temporary, as U.S. economic data, monetary policy, and increased demand in China will continue spurring the metal’s gains. So far this year, silver is up more than 23 percent and has hit highs not seen in over a year. The dollar dilemma driving gold is also driving silver, and the Fed’s policy and weak stock performance will also drive silver price.

Why this matters to precious metals investors:
Unemployment in the U.S. is rising and economic growth is slowing, according to data coming out this week. These signs are pointing ominously towards a declining dollar. Despite some resistance this week, silver is still the strongest performing investment of 2016 so far. Take advantage of the pull back now to invest.


Here are some articles from the web discussing the topics in this week’s post:

Gold Price hits $1,300
Read Here

Leading Analysts Predict Gold to Keep Rising and Advise Buying Now
Read Here

Stock Market Expereinces Worst Week Since February
Read Here

Silver Eases Back This Week, But is Expected to Rise Again
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

gold and silver bars split

Gold & Silver Prices Hit 15-Month Highs and Continue Rally Against Weak Dollar and Sluggish GDP Growth

Stronger Dollar-Eurozone Fears

Gold and Silver Prices Hit Highs Vs. Weak Dollar

gold vs the weak dollar

Gold hit a 15-month high on Friday as the dollar got crushed. Gold opened with its fourth consecutive day of gains and climbed as high as $1,292 per ounce. The shiny yellow metal is now up 20% since the first trading session in January and silver is advancing with equal (if not greater) steam. A weak dollar and an economy that is barely growing are contributing to the precious metals’ impressive runs, and coin sales in the U.S. are on the rise. The Bank of Japan’s decision this week to keep interest rates low and the Federal Reserve’s continued policy on low rates also gave gold a boost this week.

Why this matters to precious metals investors:
A couple of months ago analysts were projecting gold to hit $1,300 by the end of this year. It is already fast approaching that mark. Some are now even saying it could hit $1,400 by next month. Unexpected and negative projections for the dollar’s future are accelerating gold’s move making now a ripe opportunity for buying.


Rocketing Silver Set for Best Month Since 2013 as Gold Climbs

Silver is the Star

Silver was at a one year high this week and up 15% this month thanks to the dollar’s slump and rise in industrial demand. A stabilizing Chinese economy with increasing demand for precious metals is also partially responsible. All precious metals were up this week because of worse-than-anticipated economic growth this quarter that lowered the prospects of higher interest rates. Low interest rates makes non-interest yielding assets like gold and silver more appealing.

Why this matters to precious metals investors:
Precious metals are on the move. After three years of falling prices, all signs are now pointing towards positive growth trends for both gold and silver through this year. This Bloomberg graph shows the sustained upward climb of gold and silver against a steady decline of the dollar. The dollar value and precious metals value move in opposition to one another, and with a bleak outlook for the dollar this year, gold and silver have every reason to continue their march.


Weak GDP Growth in Q1 Weakens Dollar

Dollars down the drain

Lackluster economic data coming out this week on U.S. GDP growth is expected to keep the dollar on its downward spiral. In the first quarter this year, real GDP grew only 0.5%. This was the third consecutive quarter of growth slowdown.

Why this matters to precious metals investors:
Gold and silver become increasingly attractive as a safe haven investment as the economy slows. During times of recession and a shrinking economy, gold has had some of its highest price runs. The warning signs of a potential economic downturn are increasing. Buying now will protect against these future uncertainties.


Gold Price Climbs After Fed and Bank of Japan Decisions to Stand Pat on Policy

Bank of Japan and Federal Reserve Logos

The Bank of Japan’s decision to maintain a tight monetary policy this week came as a surprise to many analysts, who were expecting a stimulus, and sent shockwaves into the markets this week. Similarly, investors looking for the Fed to change course from recent cautionary policy instead got more of the same following a Federal Reserve meeting that confirmed that it was in no rush to raise interest rates anytime soon. Both of these events helped to boost gold prices. The dollar fell sharply against the yen and a basket of currencies following the news. On the U.S. monetary front, expectation that a Federal Reserve rate hike would happen before September is dwindling and traders’ expectations for such a hike occurring fell over five percentage points this week.

Why this matters to precious metals investors:
The monetary policy course that the Federal Reserve has set out on will continue to boost the price of gold as well this year if it stays on course. Analysts are also now saying gold has finally found its price floor after the past few years, which can only be positive for gold’s future. The pieces are in motion to see gold make great gains this year.


Here are some articles from the web discussing the topics in this week’s post:

Gold and Silver Prices Hit Highs Vs. Weak Dollar
Read Here

Rocketing Silver Set for Best Month Since 2013 as Gold Climbs
Read Here

Weak GDP Growth in Q1 Weakens Dollar
Read Here

Gold Price Climbs after Fed and Bank of Japan Decisions to Stand Pat on Policy
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

DOHA Oil

Doha Oil Negotiations and Domestic Data Reports Boost Gold; Silver Continues Strong Performance

Stronger Dollar-Eurozone Fears

Gold Price Rises as Oil Price Falls after Doha Oil Negotiations Derail on Iranian-Saudi Tension

Doha Oil Rig

The oil market endured a tense week as OPEC countries met for negotiations in Doha that ultimately broke down, causing oil prices to plummet. Rising tensions between regional rivals Saudi Arabia and Iran over output levels led to the demise of the talks in Qatar’s capital city. Iran, who has been increasing output since lifted sanctions in January, refused to sign up for the output-freeze that was proposed for all OPEC countries. After the Iranian refusal to play along, Saudi Arabia, the world’s leading oil producer, stated that they would likely increase output in conjunction with the Iranians as the freeze would only be effective if everyone signed up to it. Investors had been betting on an oil deal being reached, so when the crude oil price fell nearly 5%, demand for safe haven gold went up, lifting gold prices.

Why this matters to precious metals investors:
Iran and Saudi Arabia’s rivalry extends far past oil. The two countries’ religious-political feud derives from a centuries-old ideological division that still influences diplomacy in the region. These recent negotiation breakdowns are one of many indicators of increased volatility in the Gulf States. This kind of instability can be a strong driver for gold prices. As oil prices fell on Tuesday, investors shifted their focus towards gold as the metal offers more security. Gold, unlike oil, has intrinsic value that makes it more desirable in the face of regional threats to global security.


 

Silver Hits 11 Month High; Up More Than Gold in 2016

Silver Hits 11 month High

Silver has been building on its gains from last week and shot up 4.5% on Tuesday. So far this year silver is up 22% while gold is up 18%. Some of the reasons for silver’s rally are the same monetary policies driving gold and a Chinese economy that is gaining back some of its strength and putting increased demand on the metal. Silver is sometimes called “the poor man’s gold” for its relatively cheap price, but performances like this prove it can stand apart as a sound, and sometimes more lucrative, investment. Some experts are calling the white metal the best investment so far of 2016.

Why this matters to precious metals investors:
Silver generally trades against gold at 60 ounces to 1. Before it went through this corrective rally, it had seen disparity as great as 80 to 1 and is now returning to its historic parity. Silver’s strong performance all year is proving its returned stability. Now is a prime time to diversify a precious metals portfolio with silver as it continues its upward climb.


Precious Metals Soar as Dollar Slumps After U.S. Data

Weaker Dollar after US Data

This week’s release of U.S. economic and employment data was less than positive, which helped drive price increases in gold and silver. The U.S. housing market was hit harder than expected and the dollar slumped against other basket currencies while silver hit a 10-month high, gold rose 2% and platinum reached a 6-month high Tuesday. With a cautions Fed policy on interest rates, analysts predict the precious metals market to hold onto its gains into the next quarter.

Why this matters to precious metals investors:
The U.S. economy is becoming sluggish and interest-bearing assets are suffering, which is lifting the price of gold. The dollar is performing at its lowest in over six months. Investors are flocking to safe haven metals rather than a risky stock market.


China Starts Gold Fixing in Bid to Expand Global Market Sway

China Starts Gold Fixing

China is continuing to send ripples through the gold market. The world’s second largest economy is showing a proclivity towards having a large holding in gold. China is now the world’s largest consumer of gold and purchase of coins and bars is on the rise. The Chinese central bank is increasing its bullion holdings as it moves to diversify its foreign-exchange reserves. On Tuesday China began a twice-daily price fixing in a bid to increase its sway in the global market and establish a regional benchmark that could potentially rival the benchmark set in London twice a day. Having more sway in the gold market would help a Chinese strategy to establish the yuan’s expanded international use. Experts are saying this is an important development to watch as it could mean the start of increased use of gold in the Chinese monetary system and China becoming a key player in the gold market.

Why this matters to precious metals investors:
Over the next decade as China’s economy expands, it will likely overtake the U.S. as the world’s largest economy. The ascendant power’s focus on gold shows the metal’s long-term value and desirability. The Asian superpower has decided to prioritize the bullion market as an international market to have significant sway over. Because gold safeguards wealth against economic turmoil and global instability, having such a stake would ensure Chinese economic power in the future.


Here are some articles from the web discussing the topics in this week’s post:

Gold Price Rises as Oil Price Falls after Doha Negotiations Derail on Iranian-Saudi Tension
Read Here

Precious Metals Soar as Dollar Slumps after U.S. Data
Read Here

Silver Hits 11 Month High; Up More than Gold in 2016
Read Here

China Starts Gold Fixing in Bid to Expand Global Market Sway
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Chinese Market and Gold

What the Chinese Market Could Mean for Gold Price; Silver Price Rallies, Outstrips Gold This Week on Performance for First Time in Four Years

Stronger Dollar-Eurozone Fears

Is China Becoming an Even Bigger Player in the World’s Gold Market?

China is buying gold...again.

Despite the price dip in gold this week, other market trends point towards future increases in demand that could drive prices up. China, with the world’s second largest economy, is already an important power player in the gold market, and is set to increase precious metals acquisition even further. China is the largest producer and consumer of gold in the world with its 1,000 tons annual production and 540 tons annual consumption. Chinese production accounts for around 30 percent of the world’s demand. With recent low gold prices, China has started buying up even more international gold assets, and its leading gold companies have said they will expand acquisition even further.

Why this matters to precious metals investors:
China holds a large portion the U.S. debt, but has recently been moving towards dumping it due to its unstable nature. Gold is a more attractive and value-assured holder of wealth than bonds. Global security risks including economic downturn, cyber espionage and terrorist threats are drivers for government demand for safe haven investment. If Chinese demand continues to increase, this could boost future gold price rallies.


 

Stronger Dollar and Profit Taking Hits Gold This Week; Silver Price Pushes Higher Still

Strong Dollar Tug of War

Gold prices saw some push back this week against a stronger dollar and stock market as U.S. monetary policy uncertainty increased volatility. Some market analysts think this is due in part to unwillingness from traders to accept that the Fed would not be raising interest rates, despite recent assurances from the Fed that they would not. Were the Fed to reverse this policy, strategists believe it would not be sooner than end of the year. Some of the pullback on gold was also due to investors’ profit taking on Wednesday and a surge in risk appetite in the market.

Despite gold’s price dip this week though, silver performed well and hit nearly a six-month high this week.

Why this matters to precious metals investors:
This could likely be a short term set back for gold. If the recent, cautionary Fed policy holds, trader expectations will eventually reset in line with the market realities. Silver prices are influenced by many of the same factors as gold, so its strong week shows positivity for the precious metals market.


 

Silver Overtakes Gold as Best Precious Metal on China Confidence

silver price overtakes gold

Silver’s performance this week has made it the slightly stronger performing metal this year over gold. This week’s silver rally has given it a 17 percent increase this year with gold at 16 percent for 2016 so far. This is the first time since 2012 that silver has seen a better performance than gold. Silver’s rally was in part due to positive economic data coming from China this week regarding industrial and trade output. In March, Chinese exports rose for the first time in nine months and imports were not as low as anticipated. Like gold, silver benefits from low interest rates and a weakened dollar. However, it also has a greater number of industrial applications that can drive demand, so the Chinese economic data this week has benefited the metal.

Why this matters to precious metals investors:
Like gold, silver is valued as a safe haven investment against turbulent times, which is part of the reason for its rise in performance this year. Silver’s wider range of uses in industry also factors into global supply and demand, so silver can see more movement at times than gold. The industrial market factors and Fed policy indicate positivity for the metal over the year, making now an optimal time to diversify with silver.


Gold’s Resurgence: Who’s Buying Gold and Why?

who is buying gold and why?

An article published this week in the British Telegraph succinctly outlined some of the various factors that are driving gold this year. A notable trend is that central banks have been increasing their purchasing of the metal since the financial crisis, and this purchasing accelerated during the latter part of 2015. A variety of economic and geopolitical factors are increasing global uncertainty this year, which makes safe haven investment in gold more desirable than riskier asset or stock options. Cautionary monetary policy is becoming the trend; while the Fed promises low interest rates in the U.S., banks in Europe and Japan also pursue caution and negative interest rates.

Why this matters to precious metals investors:
The Telegraph article also highlighted an increase in U.S. Mint production of gold bullion as demand surges and the rise in numbers of British investors seeking to diversify with physical gold. This shows the universality of gold’s appeal as a wealth preservation investment. As the world becomes more volatile and the future more precarious, governments, central banks, and average individuals alike are seeking out gold as economic protection.


Here are some articles from the web discussing the topics in this week’s post:

Is China Becoming an Even Bigger Player in the World’s Gold Market?
Read Here

Stronger Dollar and Profit Taking Hits Gold This Week; Silver Pushes Even Higher Still
Read Here

Silver Overtakes Gold as Best Precious Metal on China Confidence
Read Here

Gold’s Resurgence: Who’s Buying Gold and Why?
Read Here


 

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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The Brexit and What it Means

The “Brexit” and What it Could Mean for Gold and Silver

Stronger Dollar-Eurozone Fears
The Brexit, Concern Over EU Stability, and Trade Deals Increases Safe Haven Gold Investing

Brexit from the EU
Economic uncertainty in the European Union continues to drive safe haven gold investment in Europe after a failed referendum on EU-Ukraine trade relations. Concern over Great Britain’s upcoming referendum on EU membership (set to take place in June) is also straining the markets. If the Brexit were to occur, it would likely spell the eventual demise of the European Union as an institution and set a prerogative for further member state exits. The Fed announced that the implications of a Brexit would be discussed at length in its next meeting. You may have already heard about the Brexit, but if you have not, now you have. This should continue to build momentum in the news as we approach June 23rd. This date is significant because it is the day the referendum will be held to vote whether Great Britain stays or exits the EU, hence the portmanteau “Brexit”.

Why this matters to gold investors: The risks and uncertainty driving concerned Europeans towards gold are not exclusive to Europe and will have global repercussions. As a predominantly economic union, an EU where member states begin severing ties would have a plethora of dire ramifications. For thousands of years gold has been intrinsically valued as an indicator of wealth, and as this rush to safe haven gold shows, now is no different. Investing now is a guaranteed way of ensuring wealth preservation in a turbulent future. Britain leaving the EU would create quite a ripple effect, and the haven from that wave will be and always has been gold and silver hedges. I encourage clients and prospective investors to speak to our guys about this. There is so much brewing in the global economy that we all need to be aware of. This was covered at our latest seminar at KTAR studios, and really opened many eyes in the room. There is a great manipulation going on in the bond markets that will eventual lead us all running to obtain gold, but if the Brexit occurs, it would most certainly accelerate the tailspin of the EU’s stability. This event would propel both the demand and price of gold significantly. Take a few minutes to find out more by calling your broker here at 602.955.6500.


Gold Gains Most in a Week on Fed Caution

Gold Gains on Fed Caution

On Wednesday, gold saw the most gains this week following the release of the minutes from the Fed meeting in March to discuss lowering interest rates. The question of whether the Fed would pursue a cautionary monetary policy has been much discussed in previous weeks, so this release was significant in solidifying the Fed’s dovish outlook.  The cautionary policy discussed and decision to keep interest rates low was positive for gold’s competitiveness against interest-bearing assets. Global economic risks and uncertainty were the key factors that influenced Fed caution.

Why this matters to gold investors: Gold has climbed 17 percent this year as the dollar declined. In March gold went through a corrective phase, which it appears to have now broken through and will continue to do through the year. Gold historically performs well when interest rates fall, as the Fed as reported they will.


Gold Looks Poised to Resume Rally

After Thursday’s rally, gold dipped slightly on Friday as world stock markets were stronger and oil prices rose higher. However, indicators point to gold having broken through its recent short-term corrective trend to continue its upward trajectory. The dollar’s volatility will continue to influence gold’s direction, and the dollar has been showing growing instability. The dollar has also been falling against the Euro and will likely continue to do so under the European Central Bank’s monetary precautions.

Why this matters to gold investors: With such positive projections on the horizon for gold, now is an optimal time to take of advantage of the recent market correction and invest. The correction has lent stability to gold prices, which are likely to continue to rally through the year.


Here are some articles from the web discussing the topics in this week’s post:

Gold Rallies During the Week after More News from the Fed
Read Here

Concern over European Union Stability and Trade Deals Increases Safe Haven Gold Investing
Read Here

Gold Looks Poised to Resume Rally
Read Here

Investopedia “Brexit” Page
Read Here


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Gold in Q1

Q1-2016 Closes as Gold’s Best Gaining Period Since 1986

Stronger Dollar-Eurozone Fears

Gold’s Best Gaining Period Since 1986- Q1 Closes with Strong Gold Outlook

source: bloomberg.com

As the stock market and dollar retreated this week, gold prices edged higher, finishing the quarter with a 16 percent rise. Despite some slowing from market correcting through March, we witnessed gold’s best gaining period since 1986. On March 29, The Fed Chair, Janet Yellen, announced caution against raising U.S. interest rates, which, accompanied by a lagging in overall global economic growth, contributed to gold’s rallying.

Why this matters to gold investors: With Yellen announcing cautionary monetary policy, the dollar will weaken further against gold. Uncertainty in the financial markets is generally a buoy for gold prices, and worries over China and an expected rise in inflation will further contribute to a rise in gold prices. These are prime market conditions for investing in gold ahead of further expected gains.


Gold Mint at Europe’s Heart Says Sub-Zero Rates Buoy Sales

European Central Bank negative interest rates

Negative interest rates in Europe are driving gold prices as well. A spokesperson for the Austrian mint spoke this week about demand continuing to rise throughout 2016. With the Euro zone still recovering from recent financial turmoil, high unemployment in some EU countries, the negative interest rates and the psychological impact of the refugee crisis and recent terror attacks, gold is seen as a safe haven investment. The Austrian mint has seen a 45 percent rise in gold and silver coin sales since last year.

Why this matters to gold investors: A weakening euro, like the dollar, will lead to a strengthening of gold. The European Union’s very existence is under dire pressure as it grapples with imminent economic and security threats with the chances of amicable, effective resolutions among its member states becoming difficult to realize. If demand for gold as a precaution against future threats in Europe continues to rise, this will spur the price higher around the globe.


Besides the Fed, What is Driving Gold?

In this Bloomberg interview below, precious metals analyst Suki Cooper describes the rise of gold, Fed policy, market correction and the Chinese market:

Why this matters to gold investors: Cooper (along with other analysts) believes gold could hit $1,300 this year. The market has been correcting even as monetary policy and other economic factors have been driving the prices up this quarter, which is positive for sustained further growth. Without these market dips, the gold rise would have the potential of developing the “weak lungs” Cooper describes.  With such positive projections for gold this year, investors should take advantage of recent market corrections to invest in gold now.


Here are some articles from the web discussing the topics in this week’s post:

Gold’s Best Gaining Period Since 1986- Q1 Closes with Strong Gold Outlook
http://www.reuters.com/article/global-precious-idUSL3N17352H

Gold Mint at Europe’s Heart Says Sub-Zero Rates Buoy Sales
http://www.bloomberg.com/news/articles/2016-04-01/europeans-concerned-about-future-buy-gold-austrian-mint-says

Besides the Fed, What is Driving Gold?
http://www.bloomberg.com/news/videos/2016-03-29/besides-fed-policy-what-else-is-driving-gold


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The EU dominoes

Gold Up After Brussels Attacks, Pulls Back with Stronger Dollar-Eurozone Fears

Stronger Dollar-Eurozone Fears
Gold Up After Brussels Attacks, Pulls Back with Stronger Dollar and Eurozone Fears

Global markets were sluggish this week anticipating the three-day Easter holiday weekend. Gold saw a rally this week following the terrorist attacks in Brussels at Zavantem Airport and Maelbeek metro station in the city’s EU institutions district. It eased back when the dollar began gaining strength over fears of Eurozone and Euro security. Gold generally sees price surges following major disasters. With a looming spectre of fear of more such attacks being likely, gold prices could increase again as it becomes more desired as a safe haven. Gold prices are still up nearly 18% year-to-date despite some market slowing this month.

Earlier this week, Marko Kolanovik, a chief commodities forecaster at JP Morgan Chase- anticipated gold going higher this year against a weakened dollar and stock market. He also predicted a likelihood of pressure being placed on the dollar later in the year if tariffs are imposed on import of Chinese goods. Here is a clip of Mr. Kolanovik on CNBC:

The World According to Marko chart from cnbc
source: cnbc.com

Lower physical demand from India and China this month has also contributed to the short-term negativity. The long term prospects are seen more favorably with some analysts forecasting the gold market as currently going through an anticipated price correction before it embarks on a more meaningful rise later this year. Some strategists are still predicting gold to go to over $1,370 by the end of the year.


If you listen to the airwaves in the Phoenix area, you most likely hear our commericals for RME on the local stations like KTAR News, Arizona Sports, KFYI, and iHeart Radio. We thought it would be fun to utilize the talents of Ben Campbell from iHeart Radio. Ben has a distinct talent- he impersonates a particular presedential candidate in a comedic fashion. We had a lot of fun cutting this latest ad- if you havent heard it running on KFYI/iHeart Radio yet- you can have a listen here:


Limited Seats Still Available to Thursday Seminar at KTAR- Sign up Now!

Join Ron Wolfley at this free gold seminar
Register for the seminar and meet former pro football player Ron Wolfley!

As always, I encourage you to speak with your broker at RME for more market updates. I hope to meet some of you at our upcoming seminar at KTAR Studios on March 31st. You can register to attend or call to register at 602-955-6500.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Strong Week for Gold Amidst Lowered Interest Rates, Weak Euro

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How High Will the Price of Gold Go?

Gold saw competitive gains this week after the Federal Reserve eased back projections for how high interest rates would rise this year. Even with the dollar steadying after a five month low, gold saw an increase this week. On Wednesday the Fed announced a holding for the benchmark interest rate at 0.25 percent to 0.5 percent. It was also announced that odds of an interest-rate increase occurring in June plunged from 54 percent to 38 percent. Lower interest rates favorably increase gold’s competitiveness against interest-bearing assets. The Fed’s decision on lower interest rates implies weak economic growth and ineffective monetary policy, which creates an array of risks within the banking system that gold historically rises on. How high will the price of gold go? Some market strategists are conservatively projecting that gold will far exceed $1,300 this year.

Here is a look at the rise of gold year-to-date:

source: tradingeconomics.com

Markets around the globe are seeing similar patterns. Like the Fed, the European Central Bank and Bank of Japan are also adopting aggressive stimulus policies that are affecting the strength of the dollar and other currencies and bolstering gold’s gains. As the euro fell this week, the ECB warned that interest rates could likely be further slashed, which would lead to further weakening in the Eurozone.

Silver is also seeing gains this week being up 4 percent. It is at its highest since October of last year. With gold up 18 percent this year it is no surprise there is added interest shifting to silver as well.

Here is a look at silver’s move year-to-date:


source: tradingeconomics.com

As always, I encourage you to speak with your broker at RME for more market updates. For those in the Phoenix area, there are still seats available for our upcoming seminar at KTAR Studios on March 31st. You can register to attend or call to register at 602-955-6500.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Negative Interest Rates: Coming Soon to the Local Central Bank Near You?

Subscribe to The Gold Market Discussion
2/21/2016

Negative interest rates have become “the new agenda” at Central Banks recently in Europe and Japan which signals good news for gold.

falling interest ratesLast week, Sweden’s central bank, Rikbanken, slashed their rate from positive 0.35% to negative 0.50% following the Bank of Japan’s drop of its key interest rate to negative 0.1%. Canadian officials are also talking about negative interest rates, according to the Wall Street Journal. Janet Yellen, Federal Reserve Chairwoman, has not ruled out negative interest rates coming to the U.S. soon, according to her recent Congressional Hearing address.

The proliferation of negative rates around the world is good news for gold. Investors are piling into gold, seeking shelter amid concerns that a turn towards negative interest rates in some countries is threatening to destabilize the global financial system. Gold soared to $1260 last week, its highest level in 12 months. One of the biggest factors behind gold’s rise has been negative rates.
Negative rates are in effect a tax on savings. Let’s say you have $100,000 in savings. If your bank had a negative interest rate of 0.5%, your fee to the bank for holding your money for you would be $500. You can store your ca at home (which is not the safest option) or as the recent rise in gold suggests, buy more gold. It is no surprise that the sales of home safes have nearly doubled recently. When rates fall below zero, gold becomes an even more attractive safe haven.gold-price-rising

The lesson to learn from this is to not hold wealth in the form of paper currencies. There has been a strong surge of demand for physical gold and silver in the US thus far this year. Obviously, more people are taking steps to protect their wealth.

As the WSJ explained, “Gold typically struggles to compete with any yield-bearing investments when interest rates rise, but that disadvantage matters less when borrowing costs are negative, opening the path for more investors to hold the metal. Its rally is another sign of how fearful some gold investors have become that central banks are increasingly powerless to prevent a financial meltdown”.


 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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Gold is on the Rise. Here are Some Reasons Why…

2/9/2016

Back in December, RME CEO Jim Clark stated the bottom for gold was in. His exact quote at the time was “I am going on record today to say that the price of gold [$1049] has found the bottom. The bull market in gold has begun.”. Today, gold closed right around $1190, up approximately $140 per ounce in just the past 2 months. You can read that original blog post from December here. We are now seeing other industry experts and strategists agree. We believe this is just the beginning. There is a reason for the increase in gold. Read on…


We are in the midst of a market change. Some will take advantage, others will be left behind. For those looking to enter the market, now is the time. For those who already purchased at higher levels, it is most definitely a time to rebalance your portfolio.

As previously mentioned, this past December, a bottom was established in gold at under $1049 per ounce. Since that time, the dollar and stock markets have been falling.  This indicates a fundamental change in the direction of markets so far into 2016 and perhaps beyond.

Noted trader, economist, and respected newsletter writer, Dennis Gartman of The Gartman Letter has changed his opinion of gold lately. After seeing a surge in gold to the $1200 per ounce level, a 12% increase so far this year, Gartman is now officially in the bull camp for gold for the first time in a long time. “After seeing a bear market essentially since November of 2011, gold is firmly in an uptrend which should continue”, he told viewers on CNBC Tuesday. “It’s different this time. This has been a demonstrative move to the upside without the benefit of hedge funds and speculators which typically fuel the market. Negative interest rates by the Bank of Japan are also responsible”, he added.

Watch a video from Gartman on CNBC which aired today (Feb 9, 2016):

Fear of the unknown by investors globally has helped gold reach $1,200 an ounce on Monday, explains George Gero, Vice President of RBC Capital Markets. “As crude weakness and political uncertainty persists and banks in the Eurozone experience weakness… gold reached the $1,200 area,” Gero says in a note Monday afternoon. “There are enough compelling reasons for haven seekers to return to gold, especially in view of gold being liquid, portable, convertible to any currency and without political allegiance,” he writes.

Donald Trump, Republican Presidential hopeful made his views of what is taking place quite clear, “Stock Markets are in a Big, Fat, Juicy Bubble”, he explained.

Slowing global growth has been nagging at markets, but then so has the idea that the energy industry’s slump will create casualties among energy companies and the banks that lent to them. European banks are especially vulnerable to this idea, and they have already been suffering the most. Deutsche Bank was down 8 percent Monday. U.S. banks are also feeling the heat.

Let’s take a look at a gold chart over the past 2 months:

Spot Gold 2 Month Chart
Spot Gold 2 Month Chart (Click to Enlarge)

Here is another video from CNBC which aired yesterday featuring BoA/Merrill Lynch strategist Michael Widmer. Mr Widmer states that the bottom is in for gold, and how gold will target $125o in 2016:


The need to rebalance your portfolio to gold and silver while prices are still low in comparison to the surge in prices witnessed from 2008 – 2011 has never been more apparent. Precious metals in your portfolio offers not only diversification, but insurance, protection, and peace of mind against a falling dollar, inflation, and government mismanagement. Speak with one of the experienced representatives at Republic Monetary Exchange. Learn and engage with our experts. See how our service to you, our client, is beyond and above what you will find anywhere in the industry.

Contact an expert now at (602) 955-6500 for more info and current pricing.

The Gold Price Has Bottomed

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12/06/2015

I am going on record today to say that the price of gold has found the bottom. The bull market in gold has begun.

Gold traded down to $1,048 on an intraday basis to close just over $1,055 on Wednesday this past week. The recent decline in the gold price has been a discounting of the much anticipated rate hike of 0.25% on December 16 by the Federal Reserve Bank. FED Chairwoman Janet Yellen has said this week, in essence, that the FED must raise rates so that the FED has more maneuvering room. Most FED analysts have read these statements by the Chairwoman as saying essentially that the FED is raising rates so that they can lower them next year without moving into a negative interest rate policy as the European Central Bank (ECB) has done.  The credibility of the US Federal Reserve Bank is on the line here.

This ECB negative interest rate policy has caused the EURO to weaken significantly against the US Dollar. Support for the dollar is critical to maintaining the status of the USD as the world’s reserve currency and US debt as a safe asset for investment by foreign governments and central banks. On Thursday, the USD sold off 260 basis points in the largest one day decline in memory. Stocks and bonds sold off sharply as well. Yet gold did not rally and closed unchanged. Friday, to close out the week however, gold rose sharply to end up 2.6% on the week, at a close of $1084.10.


MIXED SIGNALS FROM THE PAPER MARKETS AKA THE FINANCIAL CRISIS

Friday saw gold rise $28.65 from the previous day’s close. Stock and bond markets also rallied sharply. In the face of stock and bond market sell offs, followed by sharp rallies, historically sky high volatility in stock, bond and currency markets with increasing rates and a weaker dollar, what is going on here?

I think most of you will agree that we are in uncharted financial waters. Traditionally, there are six primary reasons that investors own gold:

  1. As a hedge against inflation.
  2. As a hedge against a declining dollar.
  3. As a safe haven in times of geopolitical and financial market instability.
  4. As a commodity, based on gold’s supply and demand fundamentals.
  5. As a store of value.
  6. As a portfolio diversifier.

History has shown us that the most important function of gold holdings is protection against geopolitical instability or put another way- own gold as a hedge against the collapse of confidence in government. Ask yourself this simple question- Why is 90% of all the gold ever mined owned by central banks? 

Hint: All of the largest banks in existence today have survived two world wars and the collapse of innumerable governments worldwide.


BULLISH BOTTOM IN COMEX GOLD

To quote market analyst Russ Winter, “The latest Commitment of Traders [report] is a gold bull’s fantasy come true.” The CoT is the COMEX report disclosing the activity of gold traders who set the gold spot price. The key bullish developments are as follows:

  1. Outstanding open contracts on COMEX are at historic lows. When everyone is ignoring a market it is time to buy.
  2. Large funds and smaller speculators have increased short selling positions to unprecedented levels that have never been seen before. (See chart below).
    chart-1-1206
  3. Commercial hedgers (producers and consumers of physical gold) This is the “smart money”.  The smart money has the most bullish (long) position in ten years. Always follow the smart money. (See chart below).
    chart-2-1206
  4. COMEX warehouse stocks of physical gold are at the lowest levels in history. There are now over 300   paper claims per ounce of physical gold in COMEX inventory. This has never been seen before. (See chart below).  We have never seen the combination of such low COMEX warehouse stocks combined with such a large commercial bullish position. This is a developing supply shortage. Buy physical gold now.
    chart-3-1206

TRADE DOLLARS FOR GOLD

There are extreme bearish readings for gold and extreme bullish readings for the US Dollar. Since abandoning the gold standard, the USD has lost 83% of its purchasing power. The price of gold is determined by market confidence in government run fiat monetary systems. However difficult it may be to quantify in advance the market confidence in the FED ability to engineer a resolution to the current economic crisis and market instability, the chart below tells the story about the value of gold compared to the value of the US Dollar.

fred-1206

Confidence in government’s ability to manage our monetary system is clearly eroding. When this confidence is lost, it will happen suddenly. The markets are warning us now. Protect your assets with true wealth and contact Republic Monetary Exchange to learn more


 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Ron Paul: Lessons Yet to Be Learned

Jim Clark

11/15/2015

 

This past Wednesday, November 11, 2015 was Veterans Day. To all veterans of the US Armed Services: Thank You for your service to our country.


FROM RON PAUL – LESSONS YET TO BE LEARNED:

 

  1. Increasing money and credit by the Fed is not the same as increasing wealth. It in fact does the opposite.
  2. More government spending is not equivalent to increasing wealth.
  3. Liquidation of debt and correction in wages, salaries, and consumer prices is not the monster that many fear.
  4. Corrections, allowed to run their course, are beneficial and should not be prolonged by bailouts with massive monetary inflation.
  5. The people spending their own money is far superior to the government spending it for them.
  6. Propping up stock and bond prices, the current Fed goal, is not a road to economic recovery.
  7. Though bailouts help the insiders and the elite 1%, they hinder the economic recovery.
  8. Production and savings should be the source of capital needed for economic growth.
  9. Monetary expansion can never substitute for savings but guarantees mal–investment.
  10. Market rates of interest are required to provide for the economic calculation necessary for growth and reversing an economic downturn.
  11. Wars provide no solution to a recession/depression. Wars only make a country poorer while war profiteers benefit.
  12. Bits of paper with ink on them or computer entries are not money – gold is.
  13. Higher consumer prices per se have nothing to do with a healthy economy.
  14. Lower consumer prices should be expected in a healthy economy as we experienced with computers, TVs, and cell phones.

THE REALITY OF U.S. DEBT

 

According to David Walker, the former head of the Government Accountability Office (GAO) under Presidents Clinton and GW Bush, the national debt of the US Government is far greater than the $19.6 trillion or so of popular media reports. He says that when you consider all of the US unfunded liabilities including social security, Medicare, civilian and military pensions and other miscellaneous unfunded liabilities, our national debt is closer to $65 trillion. These unfunded liabilities grow automatically, unlike the highly publicized and utterly fictitious budgeted debt that grows when congress increases the illusory “debt ceiling” every year to stave off bankruptcy and default.

To paraphrase former US Senator Everett Dirkson, “A trillio here, a trillion there, pretty soon we’re talking real money.” In Dirkson’s day, he referred to billions of dollars. In government terms, billions of dollars is no longer a relevant measure of government spending (debt). Let’s bring this into perspective, one trillion dollars is one thousand (1,000) billion dollars. In Dirkson’s day, the last year that the US minted silver quarters was 1964. In 1964 a silver quarter would buy one gallon of gasoline. Today, a silver quarter will buy one and a half gallons of gas. Preserve your wealth and purchasing power with gold and silver.

 


DECEMBER RATE HIKE

 

Will the Fed raise rates in December? The markets have already discounted the much anticipated December rate hike. The real question is should the Fed raise rates? Writing in the Financial Times, here is what Larry Summers, former Treasury Secretary has to say:

“With credit becoming more expensive, the outlook for the Chinese economy clouded at best, emerging markets submerging, the U.S. stock market in a correction, widespread concerns about liquidity, and expected volatility having increased at a near-record rate, markets are themselves dampening any euphoria or overconfidence. The Fed does not have to do the job. At this moment of fragility, raising rates risks tipping some part of the financial system into crisis, with unpredictable and dangerous results.

With her recent comments to congress, Janet Yellen has provided cover for both an increase in the Fed Funds rate and a decrease to negative interest rates (addressed in last week’s blog). The Fed is driving at 100 mph while looking in the rear view mirror. We will not have long to wait. Anticipate sideways markets in all assets until this question is resolved.


 

GOLD IS A STORE OF VALUE

Although the gold price may fluctuate, over the long run gold has consistently reverted to its historic purchasing power parity against other commodities and intermediate products. Historically, gold has proved to be an effective preserver of wealth. It has also proved to be a safe haven in times of economic and social instability. In a period of a long bull run in equities, with low inflation and relative stability in foreign exchange markets, it is tempting for investors to expect continual high rates of return on investments. It sometimes takes a period of falling stock prices and market turmoil to focus the mind on the fact that it may be important to invest part of one’s portfolio in an asset that will hold its value.


Contact your broker at RME to discuss how you can take advantage of current gold prices. While the price is down, the value remains- it is still the same gold that does exactly the same thing as it did at $1900 per ounce: Diversify, protect, and secure your wealth.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

December Rate Hike… Or Not.

Jim Clark

11/8/2015

Wednesday last week, Fed Chair Janet Yellen said “At this point, I see the U.S. economy as performing well,” noting the strength in domestic spending and that it may be “appropriate” for a rate hike in December. The Chairman of the New York Fed, William Dudley said he “fully” agrees with the Chair. The yield on the two year Treasury then rose to 0.84%, the highest rate since spring 2011. We remember that gold then rose to nearly $1,900 within months.

Vice Chairman of the Fed, Stanley Fischer supported this early warning (head fake) with the comment that, “US inflation is not as low as you think,”. For those of us who do our own grocery shopping this is not news.

Then on Friday, Yellen said, “if the outlook worsened” the Fed would consider negative interest rates. It is obvious to any casual observer that the Fed is policy planning on a month to month basis reactively. This is not policy planning, it is panic. Negative interest rates will cause irreparable harm to the savings of retirees and anyone dependent on savings for income. How do we protect ourselves from this policy of wealth confiscation?


UPDATE ON GOLD AND SILVER SHORTAGES

We and James Rickards have been warning about looming shortages of physical gold and silver for over a year. Rickards has been warning for at least two years that availability, not price will be the biggest issue for precious metals investors.  At the retail and wholesale levels, this shortage has manifested most visibly in the silver markets since August of this year. The US Mint has put its authorized dealers on restricted allocation since running out of silver in July. The Canadian Mint is currently not shipping silver Maple Leafs. Wholesalers of silver have pushed out delivery times from five days earlier this year to eight weeks for bulk silver products.

I have written over the last several weeks about the developing shortage of gold in the COMEX warehouses. For us at ground level, this has been a “stealth” shortage. Well, this stealth shortage has reached near crisis levels for commercial investors who take delivery of physical gold against their futures contracts. In September of 2013, there were 73 paper contract demands on every ounce of gold held in the COMEX warehouses.  Since over 99% of these contracts settle in $USD, this ratio is not particularly alarming.  This shortfall of physical gold to contract demand has risen dramatically to never before seen levels.

As of this writing, there are now 293 ounces of COMEX paper gold claims against each ounce of registered physical gold held by the COMEX.  COMEX warehouse gold is at historical lows. This is, by far the highest paper to physical ratio in COMEX history. Why is this important? This means that the large institutional and individual investors are taking delivery of their gold. Investors are removing their gold from COMEX warehouses and storing it, rather than trust the increasingly risky paper system. As we have always maintained, do what the big boys do (not what they tell you to do).

In the last two delivery months, JP Morgan has saved the COMEX from defaulting on deliveries by transferring gold from their proprietary account the COMEX account to meet delivery demand. With serious competition from the Shanghai Gold Exchange, which settles in physical gold only, what happens if COMEX loses its status as the world’s gold pricing venue?

Although it seems unlikely at this time, what happens to the price of physical gold if COMEX defaults on delivery? We will be looking down on the previous high wishing we had bought more.

By withdrawing their gold, the large gold investors are telling us that a default risk is greater than at any time in history. Own physical gold.

openinterst-gold


If you are in the Phoenix area this Tuesday, you need to register now for our free seminar at KTAR Studios! Both new and seasoned investors will take away some new knowledge of the markets, while one lucky attendee will even take away an investment-grade coin in our drawing. There are only a few seats left, so register now. I hope to see you there.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The “Bail-In” is the New “Bail-Out”

Jim Clark

11/1/2015

After opening the week at $1,164, COMEX spot gold rallied strongly to a three month high of $1,188 gold retraced to $1,141 giving back 48% of the October gains to close the month up 2%. After a strong rally on high volume trading, a short term 48% retracement of gains is to be expected from short term speculative traders taking profits. This week’s silver spot price mirrors the price action in gold- a midweek spike high of $16.32, with a 48% retracement of the October price gains from Monday’s open of $15.83 to Friday’s close at $15.52 closing October up 2%.

From a broader long term perspective, both gold and silver spot prices have hit the 50% Fibonacci retracement to the 1999 low from the highs of 2011. This 50% retracement is a key technical indicator of a market that has found a bottom. This is not the only factor affecting metals prices and as always, we will keep you informed as events unfold.

From 2000 to date, gold has vastly outperformed other financial assets – in spite of having been in a bear market since 2011.

The Fibonacci Retracement Definition from Investopia

A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset’s original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendlinebetween two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.

To learn more, visit Investopia: Click Here


BE FOREWARNED- THE “BAIL-IN” IS THE NEW “BAIL-OUT”

 

We have all heard of “bail outs”. The financial crisis of 2008 brought this term into popular use as the US government had to bail out the “too big to fail” financial institutions like AIG, Citibank, Chase bank and even Goldman Sachs got their pound of flesh from the American taxpayer so that their executives were not forced to suffer a cancelled annual bonus.

The Dodd- Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd- Frank bill, effective in 2010 has forbidden the US government from further bail outs of insolvent (failed) financial institutions. Great news, right? The effect of this legislation has been merely to remove the federal government from the process of asset seizure and redistribution. Get ready for a shot of the new reality.

In 2013 the US implemented legislation that will allow insolvent financial institutions to seize your deposits directly. In December 2013 the Federal Reserve in conjunction with the Bank of England issued guidelines and procedures for seizing depositor assets in the event of insolvency. Your bank does not need your permission to implement this seizure. Similar legislation has been put in place by the UK, Canada, New Zealand, Cypress and Germany. This model was tested in Cypress during their financial crisis in 2013. In March, 2013 depositors with over €100,000 had 40% to 60% of their deposits seized and converted to bank capital. This happened overnight on a weekend. It does not matter that your deposits are “insured” by the FDIC. You will not receive a warning.

If you think that your money market funds are safe, think again. The SEC has implemented regulations that permit money market fund managers to halt withdrawals from money market funds at their discretion.

“Redemption Gates – Under the rules, if a money market fund’s level of weekly liquid assets falls below 30 percent, a money market fund’s board could in its discretion temporarily suspend redemptions (gate).  To impose a gate, the board of directors would find that imposing a gate is in the money market fund’s best interests.  A money market fund that imposes a gate would be required to lift that gate within 10 business days, although the board of directors could determine to lift the gate earlier.  Money market funds would not be able to impose a gate for more than 10 business days in any 90-day period…”

And this…

Government Money Market Funds – Government money market funds would not be subject to the new fees and gates provisions.  However, under the proposed rules, these funds could voluntarily opt into them, if previously disclosed to investors.

The largest money manager in the world, Fidelity has opted in. Be sure to check your prospectus.


MONETARY HYPERINFLATION

Short term market action is not relevant to long term trends. If you think we are not already in  hyperinflation, see the stunning chart below.

short-term-chart
Never, in the history of the United States of America has the dollar been debased so rapidly.

Buy gold and hold.

Prices of goods, commodities and interest rates can be suppressed in the short term but the current and ongoing intervention by the Fed- buying treasuries to print more dollars while the Chinese and others are selling US Treasuries by the hundreds of billions of dollars cannot continue indefinitely.  Gold and silver prices must adjust to reflect a lack of confidence in fiat money and therefore government. Look at the chart above again. How is your confidence?


Contact an expert at Republic Monetary Exchange to learn more about protecting your money from inflation and worse.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

Gold Stays Strong, Silver Up 9% for October

Jim Clark

10/25/2015

Gold and silver traded softer this week with gold losing some ground from $1,171 to close $1,164 up 5% for October to date and silver opened the week at $15.86 and is trading at $15.81 basically unchanged for the week and up 9% for the month so far. Analysts attribute this week’s price action to some profit taking, a stronger dollar in the face of a rate reduction in China and dovish comments from the European Central Bank’s Chairman, Mario Draghi that the ECB is considering more QE and negative interest rates. Gold soared in Euro on his comments.

Regardless of this week’s price action, the trend for gold and silver appears to have turned to near term bullish with excellent returns month to date and strong support for gold at $1,160 and $15.50 for silver. The shortages leading to delayed delivery for all silver investment products continues with increasing premiums among all dealers. This is very bullish for silver prices as we have seen constricted availability of physical silver lead to increasing premiums help drive a a 9% increase in the spot price in less than one month. History has taught us that this price and availability squeeze will manifest in the gold markets as well. Buy gold and silver now, or pay more later.


THE YUAN AS A GLOBAL RESERVE CURRENCY

 

Indications from the International Monetary Fund (IMF) and China are that the decision to include the Yuan as a reserve currency in the IMF Special Drawing Rights (SDR) will come as early as the November meeting this year.

From Bloomberg, “International Monetary Fund representatives have told China that yuan is likely to join the fund’s basket of reserve currencies soon, according to Chinese officials with knowledge of the matter.

 “The most probable outcome is the board will vote to include the renminbi in the SDR basket,” said Meg Lundsager, who served as the U.S. representative on the IMF’s executive board from 2007 to 2014… The U.S. took a step toward backing China’s SDR bid last month… The U.S. now says it will support inclusion of the yuan if it demonstrates it meets the IMF’s technical criteria.”

The inclusion of the Yuan in the SDR is long term bullish for gold as China strengthens its influence in international monetary affairs and gold pricing.


DECEMBER RATE HIKE?

Will we get a rate hike in December? The US manufacturing index for October showed the strongest increase since May, indicating better than expected expansion in the manufacturing sector of the economy. The numbers indicate an annualized GDP growth rate of 2.25%. This is good window dressing for the Fed to justify a rate hike in December after congress increases the US debt ceiling to $19.6 trillion in November, and the Fed prints another $ trillion or so. (The US government has enough cash on hand to operate until November 3rd only.) The Fed must print more money or the US will default. At the same time there is tremendous pressure on the Fed to “normalize” interest rates. A rate hike of 0.25%, while truly inconsequential in the current interest rate environment, will preserve the illusion that the Fed has options in engineering our economy. They do not.

This stealth inflation will be discounted in the markets at some point in the next two years.


ONE FROM THE BILLIONAIRE PLAYBOOK

 

If you desire to accumulate and preserve financial assets, doesn’t it make sense to follow the billionaires? Warren Buffett, famous for his bland dismissal of precious metals, has over the last ten years accumulated 130 million ounces of silver and an undisclosed number of ounces of gold. He is not alone among his billionaire peers. How did billionaires become billionaires? They bought low and sold high. Buying low almost always means going against the popular opinion of the investment crowd. Billionaires do not chase markets (and they are patient).

So, who is buying gold now?

Stanley Druckenmiller, famous for the Duquesne Capital Fund with average annual returns of 30% from its founding in 1986 to its close in 2010. The Duquesne fund never had a down year. Stanley’s personal net worth is $4.4 billion and he holds 20% of his portfolio in gold.

Ray Dalio founded the investment firm Bridgewater Associates and manages the largest hedge fund in the world. Time lists him as one of the 100 most influential people in the world. Ray’s personal net worth is north of $15 billion and he manages a $154 billion fund. He has allocated 7.5.% of his portfolio to gold.

We have been in a bear market for precious metals for four years and both gold and silver are showing strong support at these price levels. We are at or below the average cost of production for both metals and a shortage of silver has developed. If you bought gold at higher prices, now is the time reduce your cost basis by averaging down and holding.


 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

The Strong Rally of Gold and Silver

Jim Clark

10/18/2015

Gold and silver have surged this week to bring both metals into positive return territory for this year. With a strong follow through to last week’s rally, both metals continue to make higher highs and higher lows, a bullish indicator of a turn in the market as we addressed last week. Gold is trading over $1,180, well above its 50 day moving average of $1,132 and pushing above the 200 day moving average. Silver is well above its 50 day moving average of $15.08 at $16.07 at this writing. On an intraday basis this week, gold reached a 16 week high of $1,191 after the consumer price index reported that prices fell again in September. (Remember that deflation always precedes inflation.)



THE U.S DEBT CEILING

 

us_economy_drowningUS Treasury Secretary Jack Lew has indicated that the government debt limit will be reached by November 3rd.  The current cash balance of the government is estimated to be approximately $30 billion and as Lew said, “”[W]e do not foresee any reasonable scenario in which it would last for an extended period of time,” If congress does not raise the debt ceiling, the US faces default. Naturally congress will raise the debt ceiling. They have no choice. As US debt continues to grow like a cancer, look for the long term downtrend in the dollar to continue as the Fed prints more dollars, further devaluing the dollar, to service this unsustainable debt monster. Since gold is real money, weakness in the dollar is fundamentally bullish for gold prices and this has been reflected starkly in gold and silver prices in recent weeks. Gold is the best hedge against currency debasement and the erosion of your purchasing power.


INCREASE THE DEBT, DEBASE THE DOLLAR, AND WHAT HAPPENS?

China’s PBoC, and other central banks are selling US Debt at a record pace. According to the Wall Street Journal,Foreign official net sales of U.S. Treasury debt maturing in at least a year hit $123 billion in the 12 months ended in July, said Torsten Slok, chief international economist at Deutsche Bank Securities, citing Treasury Department data. It was the biggest decline since data started to be collected in 1978.” 


CHINA AND THE YUAN GOLD BENCHMARK

The Shanghai Gold Exchange (SGE) continues to make rapid progress toward establishing the SGE as a competitor to London and New York in establishing benchmark gold pricing. The decision by the International Monetary Fund (IMF) regarding whether or not to include the Yuan in the international currency of Special Drawing Rights (SDR) has been pushed from October of this year into the second half of 2016. This may be viewed as a delaying tactic on the part of the US to defend the dollar against the increasingly important Yuan. We may also speculate that this gives China more time to stabilize their economy and stock market, while they continue to be the largest buyer and producer of gold in the world. We have addressed the fact that the accumulation of gold is central to China’s strategy to strengthen the value of the Yuan as an international reserve currency in competition with the dollar. This has profound implications for our standard of living here in the USA as congress and the Fed continue to debase the dollar and China accumulates gold to support the Yuan.

Since China is the second largest economy in the world, it is almost certain, that at some point in the near future the Yuan will be included in the IMF SDR international currency. Your best defense against the loss of the status of the US Dollar is to own gold, period.


KEEP YOUR PERSPECTIVE

Keep your eyes on the prize. We do not own physical gold and silver as a trading vehicle.

There are six primary reasons why investors own gold:

  1. As a hedge against inflation.
  2. As a hedge against a declining dollar.
  3. As a safe haven in times of geopolitical and financial market instability.
  4. As a commodity, based on gold’s supply and demand fundamentals.
  5. As a store of value.
  6. As a portfolio diversifier.

Although the price of gold can be volatile in the short-term, gold has maintained its value over the long-term, serving as a hedge against the erosion of the purchasing power of paper money. Gold is an important part of a diversified investment portfolio because its price increases in response to events that erode the value of traditional paper investments like stocks and bonds.

Gold as an asset will always maintain an intrinsic value. Gold will not get lost in an accounting scandal or a market collapse. Gold’s value does not arise from its usefulness in industrial or consumable applications. It arises from its use and worldwide acceptance as a store of value. Gold is money.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

jim-sign

COMEX Prices vs. Reality

Jim Clark

10/9/2015

Both gold and silver had strong breakouts above near term resistance and the price momentum has shifted to the advantage of the bulls. Gold opened the week at $1137 and is currently trading at $1,159, up $22 or 2% for the week. Silver opened on Monday at $15.24 and is at $15.86, up 4%.

The chart below illustrates a technical pattern known as a “rising pennant” showing a series of higher highs and higher lows on significantly increased volume. It is said that “Volume is the weapon of the bull.” This technical pattern along with the increased volume is a very bullish indicator that market sentiment has shifted toward higher prices.

Comex-Gold-Chart
We have been writing about the disconnect between the “spot” futures contract paper prices of gold and silver and the real market demand for physical gold and silver for many weeks. As we have been saying, the paper price for the monetary metals has not reflected the unprecedented and record setting demand for physical gold and silver. We have said that this demand for real world physical metal must ultimately be represented in the COMEX futures market with higher “spot” prices. I believe we are seeing the early stages of that price convergence now with the turn to higher COMEX gold and silver prices. We will address some of the reasons for this disconnect between futures prices and the real world below.


SPOT GOLD IS DEFYING MARKET FUNDAMENTALS

Gold American Eagle Bullion

The spot price of gold and silver has not obeyed the economic laws of supply and demand for at least the last two years. The demand for physical gold and silver is much higher than the supply and as we know, demand greater than supply causes prices to rise. To illustrate this point, on July 24, 2015, sales of physical gold coins by the U.S. Mint were higher than at any point in the past two years, but the price of gold fell to its lowest level in more than five years.  Why are gold and sliver prices an exception to the law of supply and demand? Here is why:

Gold and Silver COMEX futures contracts determine the price for the physical metal. So the supply of paper contracts to sell or buy is what determines the “spot “ price of the underlying metal.  Futures contracts can be created at will so that the supply of this hypothetical gold and silver is limited only by the demand for futures contracts, not by the supply of the underlying metals.  Most of these contracts settle not with the delivery of the underlying physical metal but with US Dollars- 99%  of gold COMEX contracts settle in dollars. This is the inverse of how other futures contracts prices for physical commodities such as wheat, soybeans, cattle and hogs function. The spot price of these agricultural futures contracts is determined by actual physical market supply and demand.

This system creates the opportunity for large players like money center banks and large speculators to drive prices to their own advantage. This is exactly what we have been seeing in the precious metals market.  For example, at 9:30 p.m. on July 19, 2015, someone sold a massive $2.7 billion worth of gold on the futures market, driving the price down by $50/oz. with a single trade.  Large players like JP Morgan and other money center banks have been selling hypothetical gold in the futures market, driving prices down, while at the same time taking delivery of physical gold in unprecedented amounts.

At one point recently, JP Morgan held roughly 30% of the outstanding short contracts (contracts to sell gold) on the COMEX and they took delivery of 600,000 ounces of physical gold from COMEX stocks during the same time period. This is the largest single order for COMEX gold ever delivered to one customer in one year. Putting this in perspective, if you could walk into the Mercedes Benz dealer and drive the price of a $150,000 Mercedes down to $100,000 before taking delivery, you would do that, wouldn’t you?


REGULATORS ARE TAKING ACTION

We wrote last week about the investigation of UBS gold price fixing by Swiss regulators. As reported by Reuters, Swiss officials are investigating gold and silver price rigging among several money center banks including UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui. In addition to official regulatory probes a number of lawsuits have also been filed in U.S. courts alleging a conspiracy to manipulate precious metals prices.

We have to wonder, as we watch the developing bull market in gold and silver, are these regulatory investigations gaining traction in moving the precious metals market toward an accurate pricing of gold and silver that reflects the market fundamentals of supply and demand? The disconnect between the “spot” price and the  true market demand  for physical gold and silver is resolving, as we have predicted for many months, in favor of the bulls. This is why you must own physical metals and not paper metals. By owning physical, you control your assets directly and with privacy.


Contact one of our precious metals experts to take advantage of this developing bull market before prices begin to run. Call our Phoenix offices and speak to someone today at 602-955-6500.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Gold and Silver Coin Sales at Record Highs

Jim Clark

10/4/2015

Gold and silver posted gains for this week thanks to a strong Friday rally in both metals with gold opening the week at $1131 and closing Friday at $1138.50 and silver opening at $14.70 to close Friday at $15.26. Silver was up 5% on the day – the biggest daily jump since Dec 1st 2014 and gold was up over 2% – its best day since April. Most analysts attribute this strong rally to the release of weak jobs data, raising the expectations of QE4 and resulting weakness in the US Dollar. US factory orders in September dropped for the tenth month in a row, adding to the general uncertainty about the “recovery” that apparently exists only in the minds of political speech writers.


GOLD AND SILVER COIN SALES AT RECORD HIGHS

USMINT_LOGOThe US Mint shows a 181% surge in gold coin sales quarter over quarter for Q3 and silver coin sales are up 47% month over month at a twenty nine year high. US Mint data shows that gold coin sales have never been higher. The U.S. and Canadian Mints are rationing supply and restricting allocations to wholesale dealers with delayed delivery times. In fact, the US Mint has for the second week in a row, reduced its allocation to dealers since resuming shipments in August after running out of silver coins in July. Many wholesale dealers have sold out their allocations through December.

Much of this demand surge is due to retail demand in the US as investors see these low metals prices as an opportunity to preserve assets and buying power. As gold and silver prices sank to six year lows, this US demand is overwhelming North American dealers and mints causing investors and collectors to look for supplies for coins overseas.

Let’s put this silver coin shortage into perspective. The Sunshine Mint, which provides a large percentage of silver blanks to the US Mint has ramped up its production capacity from 25 million ounces in 2008 to 75-80 million ounces currently. The current silver shortage is taking place while the industry has tripled production capacity since 2008. Additionally, consider this- There has never before been a silver shortage at the wholesale level. 

We are seeing rising premiums and delivery delays because of this unprecedented demand and a declining supply of all forms of silver and silver coins. Premiums on silver have been rising since May as you can see in the chart below:

Premium over sport chart for silver

We have not seen premiums rise like this since the financial crisis of 2008 when premiums on silver coins rose over 70%. We are in a similar market environment today as in 2008 with high demand, low prices and rising premiums. Three years later in 2011, silver reached a high London Fix at $48.70 per ounce. Now is the time to buy silver as prices remain low and before the next financial crisis drives prices and premiums higher.


UBS REVEALS CRIMINAL GOLD PRICE FIXING

As reported by Reuters, Swiss officials are investigating gold and silver price rigging among several money center banks including UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui. In addition to official regulatory probes a number of lawsuits have also been filed in U.S. courts alleging a conspiracy to manipulate precious metals prices. This probe is likely to result in actual proof of wrongdoing as UBS is cooperating with authorities in this investigation. From ZeroHedge-“ ‘As Bloomberg reported earlier “UBS was granted conditional leniency in Swiss antitrust probe of possible manipulation of precious metal prices, a person with knowledge of the matter said… Why would UBS do this? The same reason UBS did so on at least on two prior occasions: the regulators have definitive proof it is involved, and gave it the option to turn evidence and to rat out its cartel peers, or face even more massive financial penalties.’ “

We appear to be on the road to true price discovery in a free market with this investigation into what is the largest gold and silver price rigging scandal in history. This can only be good for gold and silver investors as true supply and demand fundamentals dictated by the physical markets are allowed to determine price, rather than the collusion between the large (bank) players in the paper markets.


As always, we will follow these developments closely and keep you informed. To analyze your portfolio and see what gold can do to help secure it, call us at RME for a private consultation either in our Phoenix offices or by phone at 602-955-6500.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

“Gold is Money, Everything Else is Credit”

Jim Clark

9/27/2015

Gold opened the week at $1133 and closed Friday at $1145, up 1% for the week following last week’s 3% rally.  Silver lost a bit on profit taking in the paper market (COMEX) declining from $15.19 to close at $15.09, holding the $15 floor. We are cautiously optimistic that this follow through rally in gold is an indication that gold prices have begun to reflect economic reality and are turning up. Given the instability of the world economies, the (catastrophic) geopolitical situation in sister Europe and the Mid-East, the collapse of the major world stock and bond markets (more below) and the historic level of global demand for physical gold and silver,  we look to be in the early stage of a bull market in gold and silver.

“Gold is Money, everything else is credit”

This quote comes from JP Morgan, one of the most well known financiers in business history. JP knew back then what will always stand true… that gold is the only true form of real money. Having gold as a diversification protects your other investments by creating a form of insurance for your portfolio. This week’s article leads with this quote to remind us all how important it is to have a position in gold. There are currently signals in the economy that tell us gold will be a savior to investors again. There is much to cover this week, so let’s have a look at a some of those signs…


STOCK MARKETS ARE HURTING YOU NOW

If your financial advisor is telling you to hold, be patient, stay the course or any variation of same, consider this:

The stock markets of the ten largest economies in the world are collapsing, wiping out trillions of dollars in investor equity.  Let’s look at the numbers (with a nod to ZeroHedge).

#1 The United States – The Dow Jones Industrial Average is down more than 2000 points since the peak of the market.  

#2 China – The Shanghai Composite Index has plummeted nearly 4o% from its high this year.

#3 Japan – The Nikkei has been extremely volatile and is off 3000 points from the 2015 hig. 

#4 Germany Down nearly 25% this year and with the looming failure of Deutsche Bank this will get worse.

#5 The United Kingdom- Down 16%. The UK is in a shambles.

#6 France – French stocks have declined nearly 18 percent. This welfare state will soon follow Greece into the pit of economic despair.

#7 Brazil – The Bourse is down 12,000 points and the currency is collapsing. 

#8 Italy – Down 15%, soon to follow Greece and France in the months ahead.

 #9 India – Down 4000 points, this major exporting nation is severely impacted by the contraction in global trade. 

#10 Russia – Best of the bunch at a loss of 10%.

Worst Market Stock Performance since 2008


If you have not moved to a substantial cash position with a serious allocation in precious metals to protect your equity, think about it now…

The charts below indicate the investor flight to safety of gold and bonds.


Gold is a store of value with limited supply, does not depend on faith and credit of any government as with fiat currency and it cannot be debased. Ninety per cent of all the gold ever mined on Earth is owned by central banks. Think about it.


THE FED AND THE NIRP

Recent Federal Reserve statements have alluded to the acceptance of, if not inevitability of negative interest rate policy (NIRP). In her speech last week at MIT, Yellen said, “ …severe downturns such as the Great Recession may require pushing real interest rates far below zero for an extended period to restore full employment at a satisfactory pace.”

In other words, you will be paying your bank to store your liquid cash in your accounts.

The Fed cannot raise interest rates without precipitating a systemic economic and governmental failure here in the US.  Here is why. Currently, the US Government debt is 979 times its annual revenue or 979%. This is second only to the failed economy of Japan with a ratio of 2359% For the sake of round numbers, let’s call that a debt to income ratio of 1000:1. That means that if the USG stopped issuing debt today, assuming steady annual revenue, it would take ten years to pay off the existing debt at current interest rates if 100% of the government’s income went to pay the debt!

Let’s put that 1000:1 (1000%) ratio into perspective. If you want a mortgage your debt to income ratio cannot exceed 43%.

The only reason the US government has been able to sustain the current debt level is because of current historically low interest rates. The 100 year historical average interest rate on the 10 year Treasury bond is 5%. That rate is 2.18% as of Friday’s close. If the 10 year Treasury rises to the historical average of 5%, this will raise the annual budget deficit to $900 billion per year, or in personal terms, for every family earning over the poverty line in the US, that represents an increase of $700,000 per family. This cannot happen.
Would you rather pay a financially troubled bank to safeguard your cash or store your value in gold?


DEUTSCHE BANK IS FAILING (FAILED)

Germany’s largest bank and the fourth largest bank in the world is dead standing up. Forgive my extreme language, but it is true. Deutsche Bank has by far the largest exposure to interest rate derivatives in the world, sitting on $75 trillion in interest rate swaps. When this bank fails it will take all of Europe with it and this will dwarf the Lehman Brothers crisis of 2008. More on this next week.


Learn how to protect your assets from financial uncertainty and possible chaos and call us at RME for a private consultation.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Fed Rates Hold; Gold and Silver Demand Remains High

Jim Clark

9/18/2015

THE FED HOLDS AND GOLD AND SILVER RALLY

Gold and silver began a rally on Wednesday, prior to the Fed announcement of no rate hike on Thursday. Especially significant for both metals is the strength of the Friday follow through surge in prices after the announcement. At this writing gold is up $32 and silver up $0.82 since the start of the Wednesday rally, both on heavy volume. As we have said in the past, “volume is the weapon of the bull”.


COMEX PAPER GOLD AND REALITY

Because of the increasing demand for physical gold and silver, COMEX gold and silver stocks are at all time historic lows. Each ounce of physical gold held for delivery in the COMEX warehouse has 250+ futures contract claims against it. This is unprecedented in the history of the COMEX. For comparison, one year ago the number of contract claims against physical was 72. So, in one year, the demand for physical gold delivery against COMEX warehouse gold stocks has risen by 250%. Currently, there are just 163,334 ounces of registered gold income warehouses: the lowest in COMEX history.

The charts below speak to the incredibly rapid increase in demand for physical gold.

cover-ratio

registered-gold

jpmorgan-gold

 


WORLDWIDE SHORTAGE OF PHYSICAL GOLD

In an interview with Bloomberg Television, Peter Hambro, Chairman and co- founder of Petropavlovsk said, “My baseline is they [the Chinese] have been buying and the Indian have been buying in enormous quantities. It’s virtually impossible to get physical gold in London to ship to those countries. We get permanent requests from Russia, would we please sell our physical gold to India and China. Because there is no physical, only endless promises. And I really worry that the market, the paper market, could be stamped on and people will say “sorry we’ll have a financial close out”, and it’s all over.”

From the Financial Times:

The cost of borrowing physical gold in London has risen sharply in recent weeks. That has been driven by dealers needing gold to deliver to refineries in Switzerland before it is melted down and sent to places such as India, according to market participants.”

“[The rise] does indicate there is physical tightness in the market for gold for immediate delivery,” said Jon Butler, analyst at Mitsubishi.”


A LOOK AT SILVER

The story for silver is much the same, except that the even greater demand for physical silver has created general and widespread shortages for silver bullion and coins. Wait times for delivery of some silver investment products is two months. Even the US Mint ran out of silver in July this year.  Currently, the average monthly withdrawals of physical silver is more than double the rate of delivery  demand during the silver price spike of 2011. This is happening despite the reduced industrial demand for silver.

 


 

We have been banging the drum for many months that these price levels represent an historic buying opportunity for gold and silver. Considering the institutional and individual investor demand reflected in the physical markets, we are not alone in this assessment. We may never see precious metals prices this low again in our lifetimes.

Contact a precious metals expert at Republic Monetary Exchange to learn more about the opportunities in gold and silver investing.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

The Discount Rate and Why it Matters to Gold Investors

Jim Clark

9/11/2015

THE DISCOUNT RATE, DOLLAR STRENGTH, & GOLD

The Federal reserve is poised to increase the discount rate. This is the interest rate that the Fed charges banks to borrow funds from the Federal Reserve Bank. This discount rate increase will weaken the dollar as the cost of borrowing dollars increases and thereby reduces demand for the dollar.

The dollar has risen in value nearly 20% in the last year and a move of this magnitude is unsustainable. It is both desirable for the economies of the world and a matter of history that currencies tend to remain in a trading range equilibrium. In other words, the dollar must regress to the mean against other currencies after such a dramatic move. As the value of the dollar sinks, gold and silver in dollar terms will rise in price. The chart below shows that every time the discount rate has increased, the dollar has fallen by 10-12% over the next two years.

dollar-vs-discount-ratechangeingold-chart
This is good news for gold investors. The chart below shows what happens to the price of gold in every two year period following a rapid increase in dollar strength like the one we have seen in the last twelve months. As you can see, gold prices rose strongly after significant up moves in the dollar like we have just seen. At this point, with gold and silver trading at or below the cost of production currently, would you rather be a buyer or a seller?

 

 


INDIA GOLD BONDS OR STEALTH CONFISCATION?

 

Private households in India own about 20,000 tons of gold. This is more than double the official gold reserves of the US government. Demand for gold imports for investment by Indians runs about 300 tons per year. In what the Indian government is claiming to be an effort to reduce the government’s foreign exchange current-account deficit, they will be issuing gold deposit backed bonds that will pay interest on the gold deposited in banks by Indian citizens. The Indian government is speculating that interest payments on private gold holdings will provide incentive for citizens to deposit their gold with the banks. Banks will then be free to sell or hypothecate this gold and thereby increase the supply of gold in the country, while reducing the demand for importation of gold to reduce the current-account forex deficit.

 

This is reminiscent of the US Executive order 6012, that FDR signed in 1933 which confiscated gold bullion and criminalized the possession of gold bullion by private citizens. EO 6012 provided for a $10,000 fine and up to ten years in prison for violations of the order.

The US then raised the official price of gold from $20.67 to $35 per ounce, devaluing the gold backed dollar by 41%. Put another way, the government increased the value of their gold bullion holdings by 40% after confiscating it from citizens.

What India is trying to accomplish by monetizing gold in this manner is to entice the population to hand over their gold in exchange for the promise of interest payments without paying out for the current value of their gold, while assuming full ownership rights to that gold. That’s even slicker than the deal FDR cut. Most importantly, with governments all over the world scrambling to cure their account deficits, will we see a similar de facto confiscation event here in the US again?

It is worth repeating the words of Martin Armstrong, founder of Princeton Economics from a previous newsletter.

In case you have never heard of Martin Armstrong, he is the founder of Princeton Economics and an internationally famous financial analyst and a consultant to banks and governments worldwide, including the Peoples Bank of China. He does not sell gold or any other product other than his economic research. Here is what Martin said about gold last month:

“I have warned that if you are going to buy gold, make sure it is common date $20, $10, or a $5 gold coin since bullion is going to become a dirty word. As of April 1, 2015, Chase Bank in the U.S. is advising its clients who rent safe deposit boxes that they may not use a safe deposit box to store cash or gold. According to their new policy- “Contents of box: You agree not to store any cash or coins other than those found to have a collectible value.”

In other words, simply storing gold bullion or cash is now considered to be money laundering as you are hiding assets from the government. They will assume it is illegal gains, even if you can prove it is cash or gold you bought after paying taxes. Welcome to the new totalitarian world of government; you are merely a custodian of the government’s total wealth and are seen as their property. You should have gold coins that are collector’s items with common dates rather than modern produced bullion coins.”

Call an expert at Republic Monetary Exchange to learn more about protecting your assets with gold and silver.


“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

ObamaCare for Your IRA

Jim Clark

9/6/2015

THE CONTINUED MOVEMENT TOWARDS GOVERNMENT INTERVENTION IN YOUR IRA

 

Obamacare for your IRA? The US Department of Labor is proposing a new “fiduciary rule” that will limit and ultimately eliminate your ability to decide how to invest your IRA and 401(K). This is the latest effort by the federal government to limit choice and place restrictions on your ability to choose what is an appropriate investment for your retirement account. It is another example of the federal camel’s nose inside the tent regulation to consolidate federal control over individual retirement accounts.

On the surface of it, the rule is being presented as a way to restrict fees that money managers may charge for managing retirement assets. Sounds good, right? The reality of this rule is that it will ultimately limit your choice of investments by limiting the advisor you may choose based on the advisor’s fee structure. This is part of the multi- pronged attack on individual retirement accounts that includes congressional proposals to require a minimum per cent of individual retirement assets be invested in “non-marketable” US Treasuries, a 2013 IMF recommendation that the US must impose a “one time” tax of 50% to 70% on IRA and 401(K) accounts and several versions of government guaranteed retirement accounts (GRA) pending before congress.


DEVELOPING SHORTAGES IN GOLD AND SILVER

 

Low gold and silver prices are starting to impact mine production in the US. The most recent data released by the US Geological Survey indicates that gold production declined by 14% in May.  . Since the US is the fourth largest producer of gold in the world, this is significant. Overall, for the first five months of the year, Jan-May US gold production is down 10%. If this trend continues, US gold production will fall below 200 metric tonnes for 2015. This has not happened since gold was priced at an average of $446/oz in 1987! The US is a net exporter of gold and with the Chinese and Indians consuming nearly 100% of the world’s annual production, how long will it be before a significant shortage of gold develops in the west?

The fundamentals for Gold are setting up for a major long term bull market in gold prices as mines shut down. This is the beginning of a supply driven price move that will last for many years as shutting down and reopening a mining operation is an expensive and time consuming process. Astute investors are positioning themselves to take advantage of the developing bull market in metals. As we wrote last week, Goldman Sachs and HSBC (the largest bullion bank in the world) have taken delivery of over 10 metric tonnes of physical gold in the last three weeks for their house accounts.

Add to this names like George Soros and Warren Buffet, who despite their public pronouncements have been accumulating massive amounts of physical gold and silver. (Buffet has taken delivery of one hundred thirty million 130,000,000 ounces of silver since 1998.) If people like this are accumulating gold and silver shouldn’t we?

Here at RME, we also are seeing delays in delivery of some forms of silver as a result of increased demand both locally and internationally.


Gold IRA with Republic Monetary ExchangePROTECTING YOUR ASSETS

It is too easy and mostly unwise to allow your investment judgement to be ruled by emotion. The volatility that we have seen in the major stock indexes over the last few weeks fuels emotion and is in the short term, a distraction from a long term investment strategy. Since none of us can know the future with certainty, we must allocate our money to include exposure to various different investments to achieve future returns regardless of what may come.  A well diversified portfolio holds investments that we want to perform well in changing times and to anticipate the unforeseen. This investment approach requires that we make adjustments to our portfolio based on changing market conditions.

August was the worst month for stocks in the last three years. The rout in stocks happened in all international markets with $5.7 trillion in investor value wiped out. The DJIA lost 6.6%, the S&P down 6.3% and the NASDAQ stocks ended the month 6.9% lower.

Conversely, gold rose 3.5% with silver 1% lower, acting as an effective hedge against falling markets worldwide. If you hold gold and silver in your portfolio, you had protection against stock losses. The question for investors now is, “Does my portfolio need re-balanced with more exposure to precious metals?” No other investment serves to protect your assets against uncertain economic times as well as gold and silver.

Contact RME today to find out more about how to best protect your portfolio and retirement accounts today. If you will be in the Phoenix area on September 15th, I encourage you to attend our gold seminar held at KFYI Studios. You must register in advance to attend, but can do that right now by clicking here or calling (602) 955-6500 during business hours.


“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Welcome to the Wall Street Casino

Jim Clark

8/28/2015

THIS IS NOT YOUR FATHER’S STOCK MARKET

On Monday- we saw a one thousand point swing in the DOW IN ONE DAY! As we wrote last week, we are seeing unprecedented volatility in the Dow Jones Industrial Average and in the broader markets, the S&P and The NASDAQ.  The chart below shows the market action in the DJIA for Monday, August 24. What we are looking at is a total cumulative stock price swing of 4500 DOW points! IN ONE DAY!  Further, this past week the DJIA has swung a total of over 10,000 DOW points. That is 60% of the value of the entire Dow Jones Average stocks. This has never happened in the history of the DJIA.  This is not merely volatility. These price swings are an indication of systemic failure.

Here is what Deutsche Bank, the third largest bank in the world has to say about this“The fragility of this artificially manipulated financial system was exposed over the last couple of days…”


MOUNTING LOSSES

 

So far this year, Americans have lost $1.8 trillion in the stock market with most of this loss in the last week. The Volatility Index (VIX) surged 120% last week, another record move, the like of which has not been seen since 2011 when gold soared to its high near $1,900 an ounce.

We must ask, is a this correction in a bull market or is it the beginning of a meltdown?  Since the financial crisis of 2008, after QE 1, 2 and 3, zero interest rate policy, TARP bail outs and non-stop central bank intervention in stock, bond and currency markets, are the world’s financial problems fixed or are they worse than they were in 2008?

Remember, the DJIA consists of the thirty largest companies in America, the most conservative, low risk investment in stocks that you can be in. Does this price action look conservative and low risk to you? This is a warning of a serious market dislocation with worse to come. Physical gold and silver offer investors a safe haven to preserve assets in chaotic times.


EROSION OF THE DOLLAR AS CHINA DUMPS U.S TREASURIES

 

In March of this year, the US Dollar Index (DXY) was at a twelve year high of 103. Shortly thereafter, China began selling significant numbers of US Treasury (UST) bonds in April this year. The dollar began to sell off. China has stepped up the pace of UST sales and in the last two weeks alone, China has sold $106 billion in US Treasury bonds (UST) to support the Yuan after its official devaluation this month. On the news of this sale, the USD plunged to 92.

This is critical. The Chinese strategy is to weaken the dollar by selling treasuries and this is what we saw happen in April and over the last week. Previously we have written of the interdependence of world economies and the profound ability that China has to affect our economy here in the US.  China has sold a total of $213 billion in UST this year which has capped the strength of the dollar in international markets.

According to Bloomberg, China controls $1.48 trillion in US Treasuries, so China has plenty of ammunition to execute a currency war against the US dollar. David Woo, head of global rates and currencies research at Bank of America Corp., said on Bloomberg Television on Wednesday, “China has a direct impact on global markets through U.S. rates.”.  In other words, China is in a position to manipulate the value of the dollar at their discretion. If China were to dump treasuries en masse, it would drive the value of the dollar down to unrecoverable levels.  Ron Paul has warned that our standard of living would decline by 25% if such an event occurs.

China has moved aggressively to become a major player in the international gold pricing mechanism through the Peoples’ Bank of China membership in the London Bullion Market Association (LBMA) and the Shanghai Gold Exchange (SGE).  As the largest buyer and producer of gold in the world, China has both the ability and the motivation to drive gold prices higher to their advantage when it suits their purpose. It makes sense to be on the same side of the China dollar/gold trade by owning gold.


 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Dow Index Down 531 Points Friday as Dollar Collapses

Jim Clark

8/23/2015

DOW SLAMMED FRIDAY TO CLOSE DOWN 531 POINTS

The weakness in stocks since May became a rout on Friday with the DJIA plunging 531 points amid a broad based sell off including the S&P and the NASDAQ. International markets reflected the same flight from equities as well. The decline in the DJIA this week is the largest decline since September 2011. The year that gold and silver made all-time highs. This collapse in stock prices is a decline of more than ten per cent from the DOW high in May this year. Across the board, all the major US stock indexes were down over 3% in one day!

We wrote last week about the increasing volatility in stock and bond markets and Friday, the VIX hit an all-time high. For those not familiar with this index, here is the Chicago Board Options Exchange definition of the VIX:

The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world’s premier barometer of investor sentiment and market volatility.”

In other words, volatility, the most widely accepted measure of investment risk has never been higher for stocks. Add to this financial maelstrom the collapse of the dollar this week and we are near a tipping point that could change the financial world as we know it.


DOLLAR COLLAPSE

The dollar plunged 220 basis points since its weekly high on Wednesday.  This is the third largest decline in the history of this index and the largest decline since June 2007. We are in a de facto “currency war”. China is not the only country to devalue their currency against the dollar. This is happening with virtually every major currency in the world and all of the emerging economy currencies. A strong dollar reduces US competitiveness in world markets as other countries with weaker currencies cannot afford our goods and as we are seeing, our economy falters. To prevent a depression, the FED must act to weaken the dollar. This is a race to the bottom for currency valuations and these cycles do not end well. This will drive gold prices up.

We are entering a season of great financial uncertainty. The stock market returns based on easy money from the FED to the Wall Street crowd are over as the big money is fleeing to quality, driving stocks down, Treasury Note yields down and gold up!

 


JP MORGAN CHASE WARNS OF BOND CRISIS

 

Jamie Dimon, Chairman of JPM, in a letter to shareholders earlier this year warned of a developing liquidity crisis in government and corporate capital markets. To quote Jamie:

Recent activity in the Treasury markets and the currency markets is a warning shot across the bow”…make it more likely that a crisis will cause more volatile market movements with a rapid decline in valuations even in what are very liquid markets”

When the selloff comes, bondholders will see the value of their bonds go down very rapidly. Be prepared ahead of time.


GOLD UP SHARPLY

Gold opened the week at $1,114 and has rallied strongly to $1,159 up 4%. So far in August, Goldman Sachs and HSBC have bought and taken physical delivery of 9.23 tons of gold bullion in their house accounts. That is $2.57 billion in gold at $1,159 an ounce. I cannot find a larger purchase of gold in one week by two private sector (non-government) entities in history. When you can buy an appreciating asset at or below the cost of production, as gold and silver are now priced, you buy.

Without exception, those of our clients who have bought gold and silver over the years in down markets and up markets have profited and more importantly, preserved their wealth and safeguarded their future against what we all know and agree is rapidly increasing financial uncertainty.

Going forward, the systemic risk of major market corrections and bank failures puts your money at greater risk than at any time since the great depression. The debt fueled economic contagion in Greece, Spain, Italy, France, and China is not isolated. As we have written before, we are in an interdependent “One World Economy”. The economy of China is the second largest economy in the world and the Chinese economy is collapsing along with their stock market. Do you think that the second largest economy in the world can collapse without drastically affecting our economy in the USA?

If you own stocks and bonds, where are they? They are only data entries on someone else’s computer.  To have possession of gold and silver means:

  • Privacy
  • Direct control of your liquid assets
  • Long term profit potential
  • Protection against financial uncertainty

 

Call one of the precious metals experts at RME today to learn how you can protect your money from further market corrections. It sure is a scary time to have your investments exposed, and as always, gold is here to diversify and protect your portfolio. The call and the consultation is always free at RME, so I encourage you to give us a call to see what you can be proactively doing to secure your wealth.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Volatility: Welcome to the New Normal

Jim Clark

8/14/2015

After trading sideways for most of the week with a bias to the upside, silver prices break out above $15 on Friday, closing at $15.26.  Gold remains in a trading range between 1082 and 1116 to close the week at $1115.

VOLATILITY: WELCOME TO THE NEW NORMAL
This has been an exciting and eventful week for all financial markets. Exciting in the same way as the feeling you get in your gut when a roller coaster goes into free fall and you instinctively pray that the gondola won’t derail at the bottom. Arguably, the most important event of this week is the devaluation of the YUAN by the Peoples Bank of China (PBoC). As of this writing, the aggregate of the three official YUAN devaluations this week amounts to a 6.5% drop against the dollar. After the Tuesday overnight devaluation, the DJIA plunged 277 points on Wednesday only to recover that loss to close unchanged- a 544 point round trip! Are you comfortable with this kind of volatility?

Conversely, Gold rallied $25 on the devaluation t from 1,110/oz to a high Wednesday of $1125.

Most of the mainstream financial press views this as an effort by the PBoC to maintain a steady parity range with the USD to stimulate the Chinese export economy in the face of seriously declining economic growth and the bursting of the Chinese speculative stock market bubble. This is the party line given by the PBoC in its official statements regarding the devaluation.

However, this may only be a first crack in the dike, an indication of coming events. If Chinese monetary policy can affect the US stock market so dramatically, I am compelled to ask, what lies ahead?
Most importantly- Is Chinese monetary policy now a weapon in economic warfare against the US? Do you trust the Chinese?


THE DEATH CROSS

The Dow Jones Industrial Average (DJIA) 50 day moving average has crossed below the 200 day moving average. Among traders and professional investors this is known as the “Death Cross”.  The charts below tell the story:

deathcross-1
This is what happened the last time a DJIA “Death Cross” occurred…

deathcross-2


 

THE ELEPHANT IN THE ROOM

The US is in a recession, period. Industrial orders have declined for the eighth month in a row. That by economic definition is a recession. This is the elephant in the room that nobody wants to talk about. We are in a cycle of worldwide deflation and deflation always precedes inflation.

For Q2 S&P 500 companies have posted a 4% drop in revenues. Hit hardest are the commodity and energy companies. Revenue growth has been confined to a few large key companies and healthcare shows the largest gains, thanks to Obamacare.

This marks the second quarter of Year Over Year declines in revenues: something that has not occurred since the last recession in 2009.

SP Growth

From ZeroHedge:
“Moreover, even earnings (which CAN be massaged to overstate growth) are showing signs of weakness.

Profit growth for the S&P 500 companies is at its weakest point since 2009. That’s because, in fact, there isn’t any profit growth.

S&P 500 earnings for the first half of the year are expected to show a 0.7% contraction compared to a year ago… The last time the S&P 500 saw a year-over-year decline for the first half of a year was 2009, when earnings positively cratered at the depths of the global recession, down 30.9%.”


 

GOLD AND SILVER PERFORMANCE DURING RECESSIONS
Commodity prices are hit early and hard in a recession. Since the market discounts the future, gold and silver prices have led this sector and are down substantially from their 2011 highs. During the last four recessions, gold increased in price, three times out of four and it barely dipped into the red during the recession of 2001. During the last four recessions the price of silver was up in price two times out of four.

The chart below shows the price performance of gold and silver during the last four recessions:

 

The table below shows the important details:

table-chart

Putting it simply, based on the performance of gold in the last four recessions, your downside risk for gold from current price levels could be as little as 3.6%. In the most recent recession- Dec 2007 to Jun 2009 gold was up 17.7%.

As for silver, which is more volatile than gold, Silver investors risked at worst 16.8% in 1990- 1991 with a best return of 52.2 % in the recession from July 1981 to Nov 1982.

Given the current risk inherent in paper assets- stocks, bonds and US Dollars the current risk/return ratio of holding assets in physical gold and silver is very attractive.


A FINAL WORD FROM MARTIN ARMSTRONG
In case you have never heard of Martin Armstrong, he is the founder of Princeton Economics and an internationally famous financial analyst and a consultant to banks and governments worldwide, including the Peoples Bank of China. He does not sell gold or any other product other than his economic research. Here is what Martin said about gold last week: “I have warned that if you are going to buy gold, make sure it is common date $20, $10, or a $5 gold coin since bullion is going to become a dirty word. As of April 1, 2015, Chase Bank in the U.S. is advising its clients who rent safe deposit boxes that they may not use a safe deposit box to store cash or gold. According to their new policy- “Contents of box: You agree not to store any cash or coins other than those found to have a collectible value.”
In other words, simply storing gold bullion or cash is now considered to be money laundering as you are hiding assets from the government. They will assume it is illegal gains, even if you can prove it is cash or gold you bought after paying taxes. Welcome to the new totalitarian world of government; you are merely a custodian of the government’s total wealth and are seen as their property. You should have gold coins that are collector’s items with common dates rather than modern produced bullion coins.”

 


 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Physical Delivery of Comex Gold Doubles

Jim Clark

8/9/2015

After trading sideways for most of the week with a bias to the upside, silver prices break out above $15 on Friday, closing at $14.82.  Gold remains in a trading range between 1082 and 1098 to close the week at $1095.

FIRST, A WORD FROM JIM GRANT
Jim Grant, publisher of Grant’s Interest Rate Observer (www.grantspub.com) is a 2013 inductee into the Fixed Income Analysts Society Hall of Fame. He is a member of the Council on Foreign Relations and a trustee of the New-York Historical Society. Jim has this to say about gold:
[quote_2 animation=””]

Gold is an investment in monetary and financial disorder – not a hedge…we are in one of the most radical periods of monetary experimentation in the annals of money…The important thing to recall is why those of us who own it, bought it. What is it about gold that ought to make it appealing – when it seems to be absolutely the thing you don’t want to have.”
[/quote_2]
He added that gold thrives in the face of monetary turmoil, disorder and uncertainty, noting:
[quote_2 animation=””]

“I think we have all three of these things.”…gold, to me, is now the conjunction of price, value and sentiment, and I am very bullish indeed.”
[/quote_2]


LOUISIANA AND BEYOND
In 2011, with House Bill 195, Louisiana outlawed the use of cash for all second hand purchases. HB 195 reads in part, “A secondhand dealer shall not enter into any cash transactions in payment for the purchase of junk or used or secondhand property. Payment shall be made in the form of check, electronic transfers, or money order issued to the seller of the junk or used or secondhand property and made payable to the name and address of the seller.” The Internet recycled this story in April of this year. However, recently, this law was amended to outlaw all cash purchases of gold.
With state and local government debt rising, how long will it be until this contagion to capture and tax all transactions spreads to your state and ultimately to the federal level?


ORDERS FOR PHYSICAL DELIVERY OF COMEX GOLD DOUBLE
To understand gold pricing you must understand the COMEX futures market. This is where the so called “spot” price of gold is determined. There are 124 claims of futures contract (paper) gold against each ounce of physical gold held in COMEX warehouses. Since 99% of these contracts settle in dollars, rather than actual delivery of gold, this 124:1 ratio has not been a problem, until now.
As of Tuesday, demands for delivery of COMEX physical gold stood at a total of 921,500 troy ounces of real physical gold. This is an unprecedented 28.7 tons and again, as in July registered gold for delivery in COMEX warehouses is about 10 tons- less than half of what is demanded. Notable is that the largest deliveries are going to the house accounts of Goldman Sachs and HSBC. (HSBC is the largest bullion bank in the world.) The “barbarous relic” is in greater demand from the wealthiest banks and investment houses and citizens than at any time in history.

JP Morgan has stepped in to bail out COMEX just as they did in July, filling the demand shortfall from their house account. Normally, a company does not take this kind of financial risk to bail out their competitors. Hmm, is JP Morgan acting as a proxy for some larger entity like say the US Federal Reserve to save the COMEX once again? The August demand for delivery of physical gold from COMEX is double what it was in July and has never been higher while COMEX inventory has never been lower!

comex-chart


WORLD GOLD SUPPLY
Annual gold production is declining even as demand is reaching historic levels. Total supplies of gold from all sources in 2015 project to be 4,155 tons, 695 tons less than in 2013. Supplies for 2016 are anticipated to be 3,585 tons or 260 tons less than 2015. This year, given demand so far, the shortfall of available supplies conservatively projects to be about 1,350 tons to satisfy market demand. Demand for physical gold at these price levels is likely to continue and most likely increase if prices fall further. The physical gold market is red hot. How long can paper prices keep dropping in the face of shortfalls and unprecedented demand?
Call one of our experts for more information….

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

The Chinese Stock Market Crash; Gold Demand Continues

Jim Clark

8/2/15

The Chinese Stock Market Crash
Since peaking in June, Chinese stock market indexes are down roughly 30%. As reported on CNBC today, Chinese farmer/investor has lost his and his family’s life savings and then some. Because of margin calls, Yang Cheng owes his brokerage firm $1 million, the amount of his original investment.  Yang said, “I don’t know what to do… I trusted the government too much.”

If you think that the financial fall out from China’s stock market crash is isolated to China, think again. Ignoring for the moment that China is the largest supplier of goods to us here in the USA, the parallels of the catastrophically overvalued Chinese stock market to the overvalued US markets are stark and ominous.

As we know, the US Federal Reserve has been providing liquidity to support US Markets through its near zero interest rate policy for the Wall Street banks, aka money printing. Margin debt in the US is at historical highs not seen since the crash of 1929. See the chart below:

 

Note the timing of previous peaks: 1. Just before the dot com crash in 2001 and 2. Just before the 2008 failure of Lehman Bros. and the financial crisis of 2008 from which we have not yet recovered.  Economic conditions in the US are far worse than they were in 2008. Even if you are not trading on margin, the flood of selling to meet margin calls will affect your stock valuations sharply.


 

Low Priced Gold Drives Gold Sales
The latest gold sales numbers from the US Mint show that so far in July, the mint has sold 285,500 ounces of gold coins, by far the greatest monthly sales this year. Compare this to June, the second highest total for 2015 at 163,000 total ounces sold.  Clearly, despite what you may hear or read in the mainstream press, the safe haven demand for physical gold is up significantly, worldwide and here in the US as well. The Shanghai Gold Exchange has delivered the second highest tonnage of gold in its history so far in July.

If you bought gold at higher prices, now is the time to dollar cost average and reduce your cost basis for your gold holdings. A lower average cost means greater appreciation in your assets. At today’s spot (paper) price, you can literally buy physical gold for less than most mines can get it out of the ground.  Miners are cutting back marginal production and there are early signs in the market of a developing shortage of physical gold. Ultimately, this must drive prices higher.

The Advantages of owning physical gold:

  • No counter party risk- The market cannot be shut down, nor selling prevented by the stock exchange.
  • No margin calls- You own gold outright and control your possession directly.
  • Gold is money.

 

Gold Price Volatility
We begin this writing with a simple question, “If you went into a car dealer to buy a car, would you talk the price up or would you talk the price down?”  The mainstream press including the Wall Street Journal, the Washington Post and Bloomberg have recently pronounced the death of gold. For generations of professional investors and traders, this kind of negative press has been used a contrarian indicator- a buy signal.

At the same time, demand for physical gold is surging toward historic highs. From UBS, “There are indications of physical demand for gold starting to develop and support the market… Meanwhile, U.S. Mint gold-coin sales are the highest in more than two years, even though July is a historically a slow month, UBS points out. “As it currently stands, U.S. Mint gold coin sales in July are nearly four times as much as the historical average,” UBS says.”

So, who is forcing prices of paper gold down, while demand for physical gold and silver is up significantly? Put another way, Who is talking down the price of paper gold and silver, buyers or sellers of physical metals? Remember, 90% of all the gold ever mined is held by central banks.


Gold and Interest Rates
There is much talk about the Fed move toward an interest rate hike in September this year. Some analysts conjecture that the rate hike will not come until 2016 but an increase is coming. Any rate hike will have a negative effect on equity and bond markets worldwide, causing a flight to safe haven investments.  Current increasing demand for physical gold may be a harbinger of the future as the mainstream press continues to misdirect the true picture of demand for physical gold. With an eye toward the systemic risk of cash in bank deposits as we have written about recently, let’s look at what happened to the price of gold the last time we were in a zero interest rate environment with subsequent rate hikes:

 


Dollar Cost Averaging (DCA)
During this period of gold and silver market price volatility, the dollar cost averaging investment strategy is particularly effective in improving returns for long term investors. Dollar cost averaging is a wealth building strategy that works to reduce the average cost of an investment so as to improve the long term return on investment. Utilizing this strategy frees an investor from feeling the need to pick market tops and bottoms, the tyranny of trying to time the market and the fear of “buying too high”. This discipline will prevent you from “chasing” overvalued markets.

For maximum success, the DCA strategy requires some investor discipline to ensure that investment buying is executed on a regular basis with a consistent amount of capital, regardless of market direction. Most investors are familiar with this strategy through their regular systematic contributions to 401k and IRA plans. These investments are made systematically, over time, without regard to market conditions and the results are without exception, superior.

When prices are up, dollars will purchase fewer ounces. When the cost per ounce for gold and silver is down, as now with both metals’ spot price below average cost of production; investors can purchase more ounces per dollar. You have greater buying leverage. The DCA strategy takes advantage of price fluctuations over time to give you a lower average cost per ounce of your metals holdings. The graph below illustrates the point:

 

If you dollar cost average, you need never be right about the short term market direction- only reliable to yourself.


London Metals Exchange Now Accepts the YUAN as Collateral
China continues to expand its penetration and influence in world financial markets. In conjunction with the acceptance of the Peoples Bank of China as a member in the London Bullion Market Association (LBMA), the London Metals Exchange (LME) will now accept the YUAN as a collateral currency for trading metals. The LME is the world’s largest venue for trading metals, over $15 trillion in metals traded last year on the LME. This is another major inroad for China’s influence in world financial markets. The YUAN is now the fifth most used currency for international payments.

From Zero Hedge, “A Bank of England survey on Monday showed that trading in yuan rose 25% in London in the six months to April this year, even as trading volumes in other currencies fell by 8% on average over the same period.

This acceptance represents a further erosion in the USD status as the world’s reserve currency and foreshadows the day when the US Fed will no longer have the luxury of printing dollars without the pressure of significant inflationary consequences. What happens to our equity markets when the Fed supplied liquidity dries up?

China as we know is both the largest buyer and producer of gold in the world. What will happen to the price of gold when it suits China’s purpose for prices to rise in support of the value of the YUAN as an international reserve currency?


 

Final Note on Silver
The US Mint is once again shipping Silver American Eagles. For now. After reopening sales of the SAE, 2.55 million coins were shipped in two days! This represents roughly 60% of global production for the two days. Silver is becoming increasingly scarce.


Contact your Account Executive at RME to learn more. Demand has been very high and investors have taken advantage of the current prices in both gold and silver.  If you currently own metals that you purchased higher than today’s prices, dollar cost averaging can allow you to own more metals at a lower overall average cost. If you are an investor that missed the boat in 201o, your opportunity to invest is here right now.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

 

 

Lower Gold Price Creating Demand Surge

Jim Clark

7/23/2015


[heading animation=”” type=2 border=”no” weight=”bold”]Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it. -Alan Greenspan[/heading]


 

 

This past week and the month of July for that matter has seen some major developments in the gold and silver markets. As has been the case for the last two years, these developments are apparently contradictory and have been a source of some investor confusion. There have been some major short selling events of enormous volume in the gold futures market timed to coincide with slow market conditions. One may be excused for thinking that there is a near term coordinated effort to drive down gold prices. Who benefits? Well, who is buying?

The most recent example of this coordinated selling is a $2.7 billion futures sell order (the equivalent of 57 metric tonnes of gold) entered on a Sunday night in Asia, at the slowest and lowest volume time period for the COMEX. This caused a drop in the spot price of $50 within minutes and gold closed down over $35 on the day. The fact is however, that demand for physical gold is up significantly despite the selloff of paper gold contracts. Let’s review:

As of this writing, the US Mint July sales of Gold Eagles are the highest in two years. According to Reuters, so far in July the US Mint has sold 118,000 one ounce Gold Eagles. Compare this to June sales of 76,000 ounces and May sales of Gold Eagles at 21,000 ounces. Remember also that the US Mint ran out of Silver Eagles earlier this month The Wall Street Journal reports that bullion dealers in China, India, Australia and Europe are experiencing demand spikes and that premiums paid for physical gold have doubled. History has shown that this disconnect between futures prices and physical metals cannot last.

In normal, rational market conditions, demand for any product of limited or finite supply will drive prices up, yet spot gold prices continue to languish as demand for the physical metal continues to rise. There is, however; a segment of the gold market with finite supply that has shown significant price appreciation this year, even as spot gold has declined. Call us for more information on this appreciating market segment.


 

Mainstream Media Is Bashing Gold

Last Saturday, Jason Zweig of the Wall Street Journal wrote of gold under the headline, “Let’s get real about gold: it’s a pet rock.” He wrote that owning gold is an “act of faith”. Ask yourself which of these options is an act of faith, 1. Owning a fiat currency or, 2. Owning gold. Or, ask a Greek who cannot access his bank account or his safe deposit box. What do we here in the USA have in common with the Greek financial mess? Both governments are burdened with a level of debt that cannot ever be repaid. What form of currency do you want to hold as insurance against a loss of faith?

In 1999, The New York Times ran a piece entitled “Who Needs Gold When We Have Greenspan?” His thesis was that the dollar had replaced gold as the world’s store of value. Bear in mind, in 1999 US government debt was $5.7 Trillion. Today US debt is $19 Trillion.  Let’s look at what happened the last time the mainstream media attacked the wisdom of owning gold as insurance against declining fiat money. (Gold ran up 650%.)
If gold is indeed a “pet rock” or a “barbarous relic”, why then to the world’s central banks own 90% of the gold ever mined?  

I wrote above, as demand for physical gold is increasing, there is a market segment in gold that has appreciated significantly this year, despite a lower spot gold price. Call one of our experts for more information….

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Greece: Coming to a Bank Near You?

Jim Clark

7/17/2015

ADR Pricing for the National Bank of Greece:

 

Greek banks are scheduled to open on Monday but despite positive headlines and happy talk about the Greek crisis being solved, the EU central bankers and the Greek government have done what they have always done- they kicked the can further down the road. Today from The Washington Post, “Greek debt crisis eases as banks prepare to reopen Monday”.  This is of course, nonsense. The Greek debt crisis is only worsened by a third bail out proposal.

Ignoring for the moment that,

  1. the Greek government has agreed to austerity measures that Greek voters rejected last week,
  2. the difficulty the Greek government will face in imposing these austerity measures, and
  3. nevermind the impossibility of raising taxes and at the same time growing the Greek economy-

Here is the reality of the immediate hurdles this bailout proposal faces:

From Zerohedge.com:

The next steps are:

 1)   Germany’s parliament must issue a mandate giving Chancellor Angela Merkel the right to negotiate a new bailout deal with Greece.

 2)   Finland’s, the Netherland’s, Slovenia’s, Estonia’s, and Austria’s Parliaments also must agree to let their Finance Ministers negotiate a new deal with Greece.

 3)   EU Finance Ministers must negotiate a new bailout deal with Greece.

 4)   Germany’s parliament must sign off on the new deal.

 5)   Greece must accept the deal

Most notably, the IMF and the European Central Bank (ECB) have considered debt forgiveness for Greece. As we wrote here last week, any debt forgiveness for Greece would most likely lead to popular movements in Spain, Italy and France to press for debt forgiveness. This would be an impossible situation for the European Monetary Union (EMU) and would lead to the collapse of the Euro.

In a nutshell, this is why. There are tens of trillions of Euro denominated derivatives based on the government debt of Greece, Spain, Italy and France. In aggregate, EU banks are leveraged at 26 to 1. A 4% drop in asset prices would wipe out all EU bank capital and cause a systemic failure in Europe. Any forgiveness of Greek, Spanish, Italian and French debt would amount to much more than 4%.

The Greek crisis is now about protecting European banks against their debt derivatives exposure.  Seen in this light, any lasting solution to the Greek financial and banking crisis will most likely not include debt forgiveness and will include what is essentially an ECB confiscation of Greek national assets against a debt that can never be repaid. The other alternative is a Greek exit from the EMU. The impact of a “Grexit” will lead to near term weakness in the Euro and longer term will erode the viability of the EMU as a monetary system as other member countries will move toward repatriating their currency and reclaiming national monetary and political sovereignty.

The only lasting solution for the EMU is to confiscate the assets of the Greek people to ensure the ongoing reign of the Euro and the EMU. We must ask ourselves, How long will it be before this debt derivatives contagion reaches the USA?

How will we Americans protect our assets against possible confiscation by insolvent banks?


The FDIC and Your Bank Account

In December 2012, The FDIC and the Bank of England released a document outlining the protocol for bank bail ins here in the US as part of the implementation of the Dodd- Frank bill of “reforms” passed in the wake of the Lehman Bros. failure and subsequent market crash in 2008.

Under Dodd- Frank, any bank deposits in excess of $250,000 are considered by law to be unsecured debt and in the event of the bank becoming insolvent, those deposits are to be converted to equity in the bank. Let me put this succinctly, bank deposits in excess of $250,000 will be confiscated by the bank and the depositor will receive stock in the insolvent bank. Your cash will be wiped out at the bank’s and FDIC discretion.

So, if the FDIC takes over a bank and determines that the bank is too big for them to save, depositor funds will be used to recapitalize the bank. You as a depositor do not get a vote in this and your deposited wealth will no longer be cash US dollars but stock in a failed bank.

For more information on strategies to preserve and protect your wealth, call one of our experts…

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Your Money and the Banking System

Jim Clark

7/12/2015

Your Money and the Banking System
Draconian measures intended to save Greek banks and the Euro monetary system have been imposed on the people of Greece. Greeks are no longer allowed to transfer money to accounts outside of Greece. In addition to limiting cash withdrawals to $65 a day, Deputy Finance Minister Nadia Valavani announced last week that Greek citizens will no longer be allowed access to their safe deposit boxes and that any cash held in those boxes will be taken and credited to the owner’s checking account.

The Greek government is now confiscating cash from its people. The cash will then be dispensed from ATMs in an attempt to postpone the day of reckoning for Greek banks when the banks are depleted of cash.

Does this sound familiar? No? Well it should.  At minimum, because of the interdependence of the national economies of China, the Eurozone and the US, we Americans are facing the same severe restrictions on taking possession of money that belongs to us.

Here are some key points we must consider:

  • Here in the US, last year, JP Morgan Chase and other major US banks restricted international cash transfers from the US.
  • JP Morgan Chase has prohibited holding cash and bullion (and bullion coins) in safe deposit boxes.
  • China has outlawed “major shareholders” from selling stocks and suspended short selling in a failed attempt to stop the freefall of Chinese stocks, which are down over 30% in the last three weeks.
  • France has outlawed cash transactions in excess of €1,000
  • On Wendesday , the NYSE was shut down for several hours after falling over 200 points, all outstanding orders were cancelled and investors could not exit any positions nor access any cash.

Capital Controls in the USA
Most of us feel that another financial crisis is on the horizon for the US. When this crisis unfolds, it will be increasingly difficult to access your cash

Another example of these creeping restrictions on your ability to access your money- The SEC, last year added a regulation allowing the restriction of withdrawals from money market funds. The regulation is called Rules to Provide Structural and Operational Reform to Address Run Risks in Money. Market Funds. 

Under this regulation- “Redemption Gates – Under the rules, if a money market fund’s level of weekly liquid assets falls below 30 percent, a money market fund’s board could in its discretion temporarily suspend redemptions…” Money market funds may lock in your capital at their discretion.

If you think that your money market funds are the same as cash, think again. Your money is a data entry on someone else’s computer. During the financial crisis of 2008, in the span of four weeks, Americans withdrew some $500 billion from money market funds. This represents nearly 24% of the cash in the entire system and revealed to our central bankers the instability of their “house of cards”.

The questions we need to ask ourselves are,

“Have the issues which led to the collapse of the US financial system in 2008 been fixed?”

“Has adding $10 Trillion in national debt through the QE program stabilized the system (or has it made us more like Greece)?”

“If our financial system were healthy, would regulators be imposing these kinds of restrictions on capital access?”

As we have said before on these pages, if issuing debt ie. printing money worked to stimulate the economy, Zimbabwe would be the most prosperous nation on Earth.


 

Spotlight On Physical Demand
The US Mint has run out of 2015 Silver Eagles and projects no new shipments until mid August. “The significant increase in demand for American Eagle Silver Bullion Coins depleted our current inventories,” the mint said. Demand for Silver Eagles has caused an increase in primary dealer premiums for the Silver Eagle by an average of $1.00. This is the second time in nine months that the US Mint has run out of Silver Eagles. As metals prices decline in the paper markets, smart buyers are taking physical supply off of the market at record rates, ahead of future demand.

The pressure on paper precious metals prices comes from two sources: The expectation of The Fed raising interest rates and the strength of the Dollar. The crisis in the Euro has caused safe haven buying of the USD. This is at best a temporary measure for when the market absorbs any Fed rate increase and the European Monetary Union and Greece resolve the bankruptcy of the Greek financial system, we are left with an inflated dollar bubble, a declining US economy and a massive US debt near $19 Trillion or 108% of US GDP. Let’s look at who is taking advantage of low metals prices.

If gold and silver are “barbarous relics why are central banks hoarding gold at a rate seen only twice in 50 years.

The reality is that the flight to quality and safe haven buying is happening in the physical metals market.

 

What can you do to safeguard your assets and ensure your future buying power? Contact one of our precious metals experts today for an answer.

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

With the 4th Behind Us, Let’s Look Back at Independence Day 1964…

Jim Clark

7/5/2015

The BBQs and fireworks are now behind us, and I hope everyone had a great time yesterday celebrating the birth of our great nation. Later in this post we will time travel to July 4th, 1964… (the good ol’ days). But for now, we need to stay focused on 2015 and all of the important gold market news. Let’s start with a recent regular to the Gold Market Discussion… Greece…

Greece Defaults, Ho Hum…

On Tuesday, we wrote a special mid- week blog in response to the Greek national debt default, the closure of Greek banks and the capital restrictions that have been imposed on Greek citizens. Greeks may withdraw only $68 per day and pension withdrawals are restricted to $120 per week. We have sounded the alarm for bankruptcy and default here in the USA by pointing out to you that Chicago, Detroit and Puerto Rico (and many other municipalities in the US) are bankrupt and cannot meet their debt obligations and pension payments.

These local governments, like Greece has done, are borrowing more money to meet debt and pension obligations. In other words, here in the US, bankrupt governments are following the Greek plan to financial ruin. Shout it from the rooftops– You cannot borrow your way out of debt.

How long will it be before severe capital controls are imposed on US citizens and your pension, 401k or IRA is restricted or “federalized” in the name of preserving a bankrupt debt system?

The DJTA is Sending a Message

On Monday, the DJIA dropped 350 points. This is the worst one day loss in two years and a warning of things to come. The DOW is now in negative return territory for 2015. More importantly, for those who look to prepare for the future, the Dow Jones Transportation Average has been declining for months. The DJTA is a reliable leading indicator for the direction of the economy and the broader markets in stocks. This downtrend indicator has been confirmed by the recent sell off in the DJ Industrial Average.  The Dow indicators are announcing in no uncertain terms: SELL.

charts-7-5

Demand for Physical Gold

Demand for physical gold delivered from the Shanghai Gold Exchange (SGE) spiked to an all-time record high last week as the Chinese stock market crash continued. As of June 19, the SGE June deliveries totaled 54 tonnes of gold compared to roughly 30 tonnes for the same period last year. Unlike COMEX gold contracts, which are settled primarily in $USD, the SGE delivers only physical gold to settle contract demand.

Physical Gold demand in the west is surging as well. As reported in Bloomberg on June 29, “Most of our common gold coins are sold out,” Daniel Marburger, a director of Frankfurt-based CoinInvest, said by phone. “When people learned that the Greek banks will be closed, they started to think that it may not be such a bad idea to have some money in gold.” Significantly, Greece has ceased its sovereign gold coin sales and Spanish banks are no longer selling retail gold to the public.

US Mint Reports June Gold and Silver Sales Up Over 100%

The U.S. Mint sold 76,000 ounces of the gold 2015 American Eagle bullion coins were in June alone, compared to 21,500 ounces sold in May. This represents an increase in sales for the mint of over 253%.  June demand for 2015 US Mint Silver American Eagles was near five million ounces. This is about 8% of annual world production. 

 

A Look Back in Independence Day… In 1964.

On July 4th in 1964, the last year the US minted silver quarters, you could buy one gallon of gas with a silver quarter. On The Fourth of July just yesterday, you could still buy a gallon of gas with that exact same silver quarter. Try that with the “sandwich” copper quarters minted since 1965. You would find that you would need about 12 of those!

quarter-gallon-small

For your financial independence, call us today and speak with a precious metals expert to determine how best to preserve your hard earned money and safeguard your retirement assets.

 

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

What if You Could Only Have $68 per Day from Your Bank Account?

Imagine this for a moment:  You would like to pay for something with $100 cash, so you go to the bank to withdraw your money. You have $18,000 in your checking account, which of course is plenty to cover the $100 you would like in cash. However, while it may be midday on Tuesday, the bank isn’t open. The line to the ATM is longer than the machine can supply, and you are at the end of it. Even if you can find an ATM machine, you are limited to only withdraw $68 per day, regardless of your account balance.

WELCOME TO GREECE

With the current dollar/euro exchange rate,  $68 dollars equates to the €60 currently allowed for withdrawal in Greek bank accounts.

While Greece may be a small country on the other side of the pond, we are seeing similar situations here in the United States.

What do Chicago, Detroit, San Bernardino and Puerto Rico have in common with Greece?

They are bankrupt and cannot meet bond payments and pension payments.

Will pension payments bankrupt more US Cities?

As the chart below shows, for every $1 state and city pension funds owe to their members, they have only 74 cents to cover payments!

  • On June 24, Chicago borrowed $1 billion to make a pension fund payment.
  • Detroit reduced pension payments by 18%.
  • A Federal Bankruptcy judge has ruled that pension funds are not protected in a bankruptcy.

Greece May Have an Easier Road to Recovery than Puerto Rico

Citizens of Puerto Rico teeter on edge of massive default after Governor states that the island’s debts are “not payable”.


Bill Gross on “Market Meltdown”

Bill Gross, former PIMCO bond guru and current Janus Group Fund Manager recently laid out the six ingredients of market meltdown:

1) A central bank mistake leading to lower bond prices and a stronger dollar.

2) Greece, and if so, the inevitable aftermath of default/restructuring leading to additional concerns for euro zone peripherals.

3) China— “a riddle wrapped in a mystery, inside an enigma.” It is the “mystery meat” of economic sandwiches—you never know what’s in there. Credit has expanded more rapidly in recent years than any major economy in history, a sure warning sign.

4) Emerging market crisis—dollar denominated debt/overinvestment/commodity orientation—take your pick of potential culprits.

5) Geopolitical risks—too numerous to mention and too sensitive to print.

6) A butterfly’s wing—chaos theory suggests that a small change in “non-linear systems” could result in large changes elsewhere. Call this kooky, but in a levered financial system, small changes can upset the status quo. Keep that butterfly net handy.

Previous RME Articles Covering Greece Financial Crisis

Are your retirement accounts safe from raids and restrictions? Will your money be there when you need it?

INVESTMENT-GRADE GOLD IS CURRENTLY IN SHORT SUPPLY, YET STILL TRADING AT LOW PREMIUMS .

The current strength of the dollar is suppressing gold prices stateside, which provides a massive buying opportunity in gold and silver. How long will this last? Many analysts and market makers agree with us that it will not be for much longer. Call us today to find out how you can take advantage of these favorable market conditions. 

SPEAK TO A PRECIOUS METALS SPECIALIST TODAY: CALL (877) 354-4040 or (602) 955-6500

Run on Comex Gold Continues While Fidelity Says “Buy Precious Metals”.

Jim Clark

6/28/2015

THE RUN ON COMEX PHYSICAL GOLD CONTINUES

As our regular readers know, we’ve been monitoring the flow of gold out of COMEX member warehouses.  What we are seeing is a steady outflow of physical gold from JP Morgan and other member warehouses.  Another prominent recent example is Scotia Bank. Two weeks ago according to the COMEX Metal Depository Statistics report, some 282,000 troy ounces were withdrawn in that one week alone. This is roughly nine metric tonnes. Since March of this year, the outflow from Scotia’s gold vault totals staggering 1,160,000 troy ounces, or 37 metric tonnes- almost 43% of Scotia’s eligible COMEX gold in less than three months!

Among the possible explanations for this unusual activity, we think the most prominent are that Scotia is either exiting the COMEX gold business or more likely, Scotia’s customers are taking possession of the gold they had stored in the Scotia COMEX vault.  Last week we wrote about Texas intending to take possession of the gold they have stored in the vault of the New York Federal Reserve Bank.

This is happening all over the world at the national level as well. Government central banks are repatriating their gold, most famously Germany, which in 2012 requested delivery of 674 metric tonnes stored here in the USA and were told by the US government that it would take eight years. According to Bloomberg, as of January 2015, a mere 85 tonnes had been delivered from New York to Germany. Physical availability of gold continues to be stretched.

 

THE CHINA WILD CARD, THE YUAN AND GOLD PRICES

In one of the most significant developments of modern finance, The Bank of China Ltd. is the first Chinese bank to join the London Bullion Market Association (LBMA) whose members include Goldman Sachs Group Inc., Societe Generale SA, Bank of Nova Scotia, HSBC Holdings Plc and Barclays Plc. LBMA is responsible for the well-known, twice daily, “London fix” of gold prices for the London over the counter gold market.

china-slotChina is stepping up efforts to impact the gold and currency markets. As we have written before, China is both the world’s largest producer and buyer of gold. As China maneuvers to position the Yuan as a world reserve currency in competition with the US Dollar and to have the Yuan added to the International Monetary Fund’s basket of reserve currencies, the Peoples Bank of China has since 2009 tripled their publicly reported gold reserves to 3,510 metric tonnes, second only to the US reported reserves of 8,331 metric tonnes. Most industry analysts consider the publicly declared China gold reserves to be significantly below the actual reserves.

We are of the opinion that current gold prices are being held artificially low in the paper market “spot” price and do not reflect a free and open supply and demand market for the physical metal. China stands to reap a huge benefit from buying gold at these low price levels and has aggressively become a more active and influential player in the paper gold market in recent years. With international currency reserves in excess of $4 trillion, we may reasonably speculate China is manipulating gold prices to their advantage while diversifying their reserves and supporting their bid for reserve currency status with the IMF.  The Chinese accumulation of gold is clearly the major force in the redistribution of physical gold reserves internationally and China benefits greatly from artificially low gold prices.

At some point in the near future, as China parlays the Yuan into an international reserve currency, it will be to China’s great advantage for gold prices to rise rapidly to significantly higher levels. The IMF has said they will announce their decision in August or October of this year. Investing in physical gold ahead of this event just makes sense.

 

FINALLY, A WORD FROM FIDELITY…

Well, three words actually- “Buy precious metals.”

Liquidity in the bond markets has been drying up for several months. We have seen “flash crashes” in German Bunds and US Treasuries this quarter with central bank intervention to prop up the bid in these events. US Treasury Bonds and German Bunds are the highest rated debt in the world, so a weak bid for these bonds is the ultimate flashing red warning light for bond investors. The liquidity for the secondary market in high grade corporate and high yield corporate bonds is far worse.

In what is an surely an early warning signal to bond investors, Ian Spreadbury, a bond fund manager at Fidelity Investments has recommended that investors leave the theatre before the anyone shouts  “fire” – “The message is diversification. Think about holding other assets. That could mean precious metals, it could mean physical currencies.”

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
jim-sign

Gold Back To $1,200 as Turmoil in Greece Continues

Jim Clark

6/19/2015

Gold Surges

The Gold futures spot price is consolidating at $1,200/oz after a very strong rally this week with a major move on Wednesday to close at $1,202, up over $25 on heavy volume to close the week at $1999.97. As we commented last week, gold prices have been making a series of higher highs and higher lows. This reflects some seasonal strength as June and July are typically strong months for gold and silver prices.

Strength in gold and silver in prices also triggered short covering, with fresh speculator buying and safe haven demand. Given the geopolitical situation with Russia and the financial crisis in Greece (more about this below) the argument for safe haven demand has merit. Dovish remarks on interest rates from the Fed Chair Janet Yellen after the Fed meeting this week may have been the spark that ignited this solid rally in gold prices.

 

Unusual Action in the Silver Market

In the second week of June, some 15% of the world’s annual production of silver was sold short on the COMEX. This is tremendously bullish in the near term for silver. This market action propelled open interest in COMEX silver to record levels of over 190,000 contracts, representing 960 million ounces of silver. This contract exposure is ten per cent greater than the annual global production of silver. With silver prices below the average cost of mining, declining above ground inventories and significantly increased industrial demand from the solar power industry, this near term artificial price suppression points to a major move up for silver. The fundamental reasons for owning silver have never been better.

 

Greek Bank Runs and Pending Default

Depositors in Greek banks are withdrawing funds at an unprecedented rate. Through Thursday this week, over €3 billion has been bled from the Greek banking system. To cover this liquidity crisis, the Greek Central Bank requested an emergency cash injection from the European Central Bank (ECB) to prevent inevitable insolvency of the banking system. The ECB granted €1.1 billion in emergency credit expansion, adding more debt fuel to the already hopeless Greek economic meltdown. Then on Friday, according to Reuters, Greek depositors withdrew €1.2 billion in cash, consuming the emergency liquidity assistance entirely, in one day!

Greece is being isolated by the international financial community in anticipation of the government debt default and bank failures that will follow. For example: Trading in the Greek 5 year bond has halted entirely. Not one Greek 5 year bond has traded since April 24th and no Greek government bonds have traded since May 20th. The major US banks and brokerage firms have informed customers that they will no longer guarantee settlement of trades in Greek equities, customers must make their own arrangements for cash settlement.

At this writing, the Greek bank run continues with long lines at ATMs in Athens.

 

Why a Greek Debt Default Matters to You
Friday, the prime minister of Greece is meeting with Vladimir Putin to discuss the terms of a Russian Federation loan to Greece. Greece as you know is a key member of NATO. It is very much in Putin’s interest to fund a needy NATO country with a strategic warm water port. At a time when the US and Europe have imposed severe economic and political sanctions on Russia and Belgium has frozen Russian assets- would such a loan compromise the strategic interests of an important NATO country? Will this further destabilize an already fractured NATO alliance in the face of a determined Russia?

Geopolitical instability has traditionally fueled safe haven buying of gold and we have already seen significant increases in gold purchases in all of the countries of the EU this year. German banks have enormous exposure to Greek debt and the German people have led the EU in safe haven buying of gold.

If Greece defaults with finality and again repudiates (“but this time we really mean it”) their debt to the IMF, as they have done already in an official public statement from The Ministry of Finance; most analysts are predicting the exit of Greece from the Euro and the European Central Bank system. This exit, it is understood will collapse the Euro as a viable currency since both France and Spain will likely follow with popular political support to quit the Euro as an alternative to paying their national debt to the ECB and IMF.

However, even if the ECB and the IMF absorb losses of 50% of the Greek debt as Greece is demanding, this will destroy the multi trillion Euro interest rate swaps (derivatives) market and create a Lehman Brothers type failure at Deutsche Bank- the fourth largest bank in the world with derivatives exposure in excess of $54 Trillion. Yes, that’s Trillion with a “T”.

Should this happen, we will see rampant inflation overnight in the EU. In the event that the ECB and IMF reach an agreement with Greece to refinance and or forgive some portion of their debt, we will see inflation occur over a matter of weeks and months. Either outcome will drive gold demand and prices higher.

Owning gold at this point in time is “Heads I win, tails I win.” regardless of the outcome in Europe.


Texas is Taking Their Gold and Going Home

 

Texas Governor Greg Abbott signed a bill into law on Friday, June 12, that will allow Texas to build a gold and silver bullion depository. Texas will withdraw its gold from the New York Federal Reserve Bank and store it in the new bullion vault when completed. The bill also contains a provision to prevent federal confiscation of gold bullion owned by private parties via the Gold Confiscation Act of 1933. Section A2116.023 of the Texas bill states: “A purported confiscation, requisition, seizure, or other attempt to control the ownership … is void ab initio and of no force or effect.” 

Find out why this bullion anti- confiscation provision is considered crucial for the citizens and State of Texas and for you and I. Call one of our precious metals experts today.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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Comex Gold and Never Never Land

Jim Clark

6/12/2015

Watch the Chart- The Market is ALWAYS Right

The most important near term technical development for gold prices this week has seemingly gone unnoticed or at least uncommented by gold market analysts. COMEX gold prices have made a series of higher lows and higher highs.

After touching a low at $1,167.90 on June 4, COMEX gold at this writing is trading at $1181, up $14 since then. More importantly for a longer term indicator of the direction of gold prices, this pattern has emerged after gold closed at its 2014 low at $1,142 on November 5. This price has not been seen since April 2010. After that, gold prices moved steadily to the September 2011 high of $1,895.

For those of you who are not interested in the details, gold has made a five year low at $1,142 last November and is currently trading at $1,181, up $39 with solid support at $1,168.

The JP Morgan Bail Out of COMEX

Last week I wrote about the developing shortage of physical gold and the unprecedented shortfall of the COMEX physical gold inventory versus buyer demand for delivery:

“The COMEX does not have enough gold to meet its June delivery obligations. There are 375,000 registered ounces in COMEX warehouses against 550,000 ounces of required delivery claims. These delivery claims must be met with physical gold, not dollars or gold contracts. This is a shortfall of 175,000 ounces. There is not enough COMEX gold to meet the demand for physical delivery. A shortfall of this magnitude has never happened before in COMEX history.”

In the first week of June, JP Morgan deposited 177,000 ounces of gold in the COMEX to cover the 175,000 ounce shortfall. This leaves COMEX with 2,000 ounces of registered gold to cover incidental demand as always happens in delivery months. If you do the math (we do) this effectively, leaves the COMEX with no unclaimed gold in its warehouse. In other words, COMEX apparently now has no gold to back the gold futures contract market. Is anybody paying attention?

The bailout’s effect is to ensure that COMEX will continue to function as the primary price-setting venue in the world gold market. For now, at least the COMEX  is a “too big to fail” institution.

In gross numbers, the shortfall of world physical gold supply for 2015 projects to be about 606 tons. Given the current status of the COMEX gold stockpile and the projected deficit of world gold supply to meet physical demand, future failures of COMEX to meet demand for delivery are very likely.

Consider Also the Following:

The current price of gold is at or below the average cost of mine production. Mines are taking drastic action to stay in operation.

  • The largest gold mine in Nevada- Allied Nevada has filed for bankruptcy
  • Newmont Mining has laid off 20% of its workforce since November 2014 and ceased exploration
  • Freeport- McMoRan cut its dividend from $1.25 to $0.25

The shortfall of physical gold to meet world demand is likely to grow larger in 2016 as a result of the benchmark paper “spot” price held at these artificially low prices.

If the COMEX is to retain its status as the benchmark pricing exchange for world gold prices, the gold futures contract “spot” price must be allowed to rise to meet the real world actual demand or risk a ruinous default for failure to deliver.

If you own physical gold, sleep well knowing that you have secured assets in the only medium of exchange that has held value throughout human history. If you are considering diversifying into physical gold, call one of our precious metals experts today for the information you need to make an informed investment decision.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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Long Gold for the Long Term

Jim Clark

6/5/2015

Dollar Strength, the Euro and Gold

All eyes are on the US Dollar in recent weeks. The strong USD has put pressure on gold and silver prices late this week. The strength of the dollar reflects the uncertainty in the negotiations of the repayment of Greek debt to the International Monetary Fund (IMF). The potential of a Greek default has significantly weakened the Euro against the dollar for the past two weeks until Monday when positive reports on negotiations coming from the ECB and the Finance Minister of Greece supported a rally in the Euro.

Greece did not meet the repayment deadline of Friday last week, but in the world of government finance however, this is not a default. How is that?

Stand Back- This is how they do it downtown

As reported in The Economist this past week, “Despite a delayed payment to the IMF, a deal between Greece and its creditors remains in sight. In an abrupt change of plan, Greece will no longer make a €300m ($340m) payment due to the International Monetary Fund (IMF) on Friday. However, this does not constitute a default.”

“The Greek coalition government…will avail itself of a rarely used concession whereby all the payments of principal in any one month can be bundled together into one payment at the end of the month. The plan is to combine the money due on June 5th and three other payments due by June 19th into one overall payment of €1.6 billion, to be made by the end of June.”

Let’s make sure we understand this. In the logic of government finance, quadrupling a defaulted payment increases the chances that the payment will be made.  So, instead of defaulting on one payment, Greece now has the opportunity to default on four payments. How much farther down the road can they kick the can?

In anticipation of a pending disaster for the Euro, as reported in last week’s blog, demand for physical gold in Europe has increased significantly among all members of the EU. In Germany, the strongest economy in Europe, perhaps the world, gold buying has increased by 20% in the first quarter alone. In other words, those who can afford gold are buying for the safe haven of the yellow metal.

 The Developing Shortage of Physical Gold

The COMEX does not have enough gold to meet its June delivery obligations. There are 375,000 registered ounces in COMEX warehouses against 550,000 ounces of required delivery claims. These delivery claims must be met with physical gold, not dollars or gold contracts. This is a shortfall of 175,000 ounces. There is not enough COMEX gold to meet the demand for physical delivery. A shortfall of this magnitude has never happened before in COMEX history.

This means the clearing members of the COMEX must source the gold elsewhere in international markets to make delivery to the owners of COMEX contracts to buy gold. (A “clearing member” is the financial company that guarantees the contract performance of the traders.)  Industry analysts have long suspected that gold futures (paper gold) prices are artificially suppressed in delivery months to reduce the cost to clearing members of sourcing physical gold in international markets to make “good delivery” of physical gold.

Paper Prices and Physical Gold

The COMEX is the world’s standard setting exchange for gold prices. Any widespread default by clearing members would cause the COMEX to lose its status as the international standard for gold pricing. Any default would send gold prices soaring and put at risk hundreds of billions of dollars in off- exchange traded gold derivatives contracts.

Despite the price of paper gold drifting lower, the supplies of physical gold are increasingly tight and the owners of physical gold are holding on to it. That is why the stock of gold in COMEX warehouses is at historic lows. This is a serious liquidity problem.

UBS (formerly Union Bank of Switzerland) published a report last week in which they said, ““The reality is that gold holdings have increased over the past decade or so and, even taking into account the cleanout in 2013, the market is still longer than it was in the previous decade,” A decade in which the price of gold increased by almost 300%.

The key takeaway from this unprecedented shortfall of physical gold at the COMEX is that a situation of significantly tightening physical supplies and lower paper prices cannot continue. The paper price of gold must rise to reflect real world demand for physical gold. Otherwise, there will be more and larger shortfalls and default risk for COMEX gold.

With gold trading below the average cost of mine production and the international supply of gold rapidly shrinking, we have never seen a better opportunity to buy gold.

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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Back to the Trading Range

Jim Clark

5/29/2015

Gold opened the week at $1204 to close the week on Friday, down slightly at $1191. The action in gold and silver prices this week was dominated by the strength of the dollar. With US interest rates relatively higher than those in the Eurozone, US Dollar denominated assets are attractive and Euro Quantitative Easing (money printing) adds fuel to the fire of the dollar rally.

HSBC the largest bullion bank told investors this week that they expect the $1180 support level to hold. Physical gold Demand in China has flattened with the rally in the Chinese stock market as money in China pours into the Chinese Stock Index (CSI 300). The CSI 300 is up 40% thus far in 2015. Analysts predict that this surge will not continue into the second half of the year and Chinese demand for gold will resume in the coming months. More importantly:

Sovereign Debt and the Banking Crisis in Europe

The Geek debt crisis remains unresolved and without a loan of 7 billion Euro, Greece will certainly default on next week’s payment deadline to the International Monetary Fund. Greece has been unable to negotiate a repayment deal with its creditors. Christine LaGarde, Chair of the IMF warned Friday that a default is a possibility and will almost certainly lead to a Greek exit of the European Union and the Euro. “Economic meltdown” for the Eurozone is the phrase dominating the headlines of the European financial press should Greece default. A Greek exit from the EU will send economic shockwaves throughout the economies of Europe.

The Greek finance minister, Yanis Varoufakis has said, “Our government cannot accept – and will not accept – a cure that, over a five-year period, has proved worse than the disease.” Subsequent to his comments, on Thursday, Greeks withdrew $300 million Euro in one day from their bank accounts. This is 300% of normal withdrawals.

In Spain, Banco Madrid has had its funds frozen while the government decides whether or not to bail out the bank. What does this mean for investors?

Demand for Gold

As reported in CNN Money on Thursday, demand for gold bars and coins in Germany is up 20% in the first quarter this year vs Q1 2014. With the European Central Bank embarking on the Euro QE experiment to purchase $1.3 trillion in government bonds, the Germans, despite having the strongest economy in Europe, perhaps the world, remember the hyperinflation of years past. Add to this uncertainty, the increasing tensions over the significant buildup of Russian military hardware and personnel on the border of Ukraine this week, largely unreported in the US.

The Germans are not alone in this move to the safe haven of gold. The French, Swiss and Austrians have increased their purchases of gold in the same period by double digits as well. In fact, the World Gold Council reports that demand for gold in Europe is the highest it has been since 2011 when gold prices reached $1900.

Finally:

Sovereign Debt Insanity

We all know that government deficit spending has past the point of no return world-wide and this pace of spending is accelerating. This debt will never be repaid. That is a mathematical certainty. If money printing worked to stimulate the economy, Zimbabwe would be the most prosperous nation on Earth.

I leave you with these questions to ask yourself, excerpted from Zerohedge:

  • What happens to our financial system and the price of gold when western central banks are no longer willing or able to ship gold to Asia in exchange for fiat currencies held by Russia and China?
  • What would happen if commercial banks announced they will charge you for depositing your currency in their bank?(Oops, that has already happened.)
  • What if bail-ins occur, and the banks take your deposited funds to pay off creditors, such as other banks who bought or sold derivative contracts?(If the bail-in is announced late on a Friday and the banks are closed the next week for “restructuring” you will have no opportunity to remove your currency from the bank.  In Cyprus the insiders and politically connected escaped with their funds while many other individuals and businesses discovered their accounts had been “bailed-in.”)
  • What happens if governments eventually announce that most retirement accounts and pension plans will be required to purchase continually devaluing government issued bonds?
  • What happens if trust and confidence in the financial system are lost, banks no longer trust banks, businesses no longer trust they will be paid, and individuals no longer trust their governments or the pieces of paper we call money?
  • The Fed has reduced interest rates so investors are chasing yield in all the wrong places, such as junk bonds. What happens when many of those junk bonds, which may have been stuffed into your bond mutual funds and pension plans, are priced at their true value – much less than face value?

What are the consequences? “

Prepare Now.

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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Is the Bottom in for Gold and Silver?

Jim Clark

5/22/15

 

Solid Support for Gold at $1200

Gold established solid support above $1200 this week to close the week on Friday at $1203, substantially higher than the previous support level at $1180. For the last several weeks, the $1200 level has been an attractor. Each time gold has dipped below this key level, buyers have bid the price up and each time gold has surged above resistance at $1220 gold has settled back to support above $1200. This price action is a healthy consolidation for a move to higher prices.

Switzerland produces no gold internally so imports and exports of Swiss gold should roughly balance out as the Swiss import gold to fill orders for export buyers. Swiss gold exports for the first quarter of 2015 total 485 tonnes which annualizes to just under 2000 tonnes. This would be the second highest year of Swiss gold exports when compared to the all time record of 2083 tonnes exported in 2013.

This shows that the demand for physical gold is strong and is providing significant price support for gold prices despite pressure from the paper traders. At some point, there will be a disconnect in price between paper god and physical gold as the demand for physical gold overwhelms the paper price. As Jim Rickards, author of The Death of Money: The Coming Collapse of the International Monetary System has said in the recent past- “it will not be a matter of what the gold price is, but of availability.”. We will continue to track the flow of physical gold in world markets for you and as always, keep you informed.

Silver Follows Suit

After bottoming at $15.34 in March of this year, silver has steadily climbed to close Friday at $17.08 on heavy volume. Price rallies in both silver and gold have been driven by exceptionally high volume since the beginning of April.

Is a Whale Accumulating Silver?

Silver imports to the US have increased dramatically by 44% YTD this year as indicated by the chart below:

 

US Geological Survey numbers show that the US imported a total of 4,960 metric tonnes of silver in 2014. If the current 2015 rate of silver imports continues, the US will import over 6,200 metric tonnes of silver in 2015. Fundamental market indicators including industrial demand, US Silver Eagle sales and Comex inventories are flat or declining. What is the source of this surging demand for silver? Is a large player or players attempting a corner on the market? This is very doable since the estimated stock of above ground commercial investment grade silver is roughly 2 billion ounces. This is “only” about $34 billion.

At this point is impossible to say, but we will monitor this market activity and as always, keep you informed.

The Collapse in the Velocity of Money

The velocity of money peaked in 1998. The repeal of the Glass- Steagall Act in 1999 has created a banking system that is oriented to the structuring of products for transactions based on short term trading profit. (The  Glass–Steagall Act  refers to the U.S. Banking Act of 1933 that limited commercial bank securities activities and affiliations within commercial banks and securities firms. This prevented banks from engaging securities transactions and owning securities firms.)

Our banks have abandoned the traditional banking model of relationship banking and capital formation for business. This has had the effect of depleting the cash flow of money out of the general economy and is a cause of the rising unemployment we have seen since this time. This national catastrophe is clearly illustrated in the chart below:
The mild economic recovery in the US has been shallow at best. The Federal Reserve has been unable to raise interest rates to demonstrate any meaningful recovery. The stimulation of Quantitative Easing (QE) has failed.  This leads to a lose-lose proposition for risk assets, ie. stocks and bonds).

In other words, either the economy improves and the Fed hikes rates, which will cause market volatility, or the economy does not recover and earnings per share drop, dragging stock prices down.

With US stock prices at record highs, US equity funds are experiencing net outflows of investment capital in 2015, on the order of $100 billion. You must ask yourself, “Why?”

Bank of America Warns Investors and Recommends Gold

Perhaps, as they say, “The worm has turned.”. On Tuesday morning, Bank of America Merrill Lynch issued a warning to investors:

“Investors remain trapped in “The Twilight Zone”, the transition period between the end of QE and the first rate hike by the Fed, the start of policy normalization…until (a) the US economy is unambiguously robust enough to allow the Fed to hike and (b) the Fed’s exit from zero rates is seen not to cause either a market or macro shock (as it infamously did in 1936-7), the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes… extremities of liquidity, profits, technological disruption, regulation, income inequality…potential for a cleansing drop in asset prices cannot be dismissed.”

“For this reason we continue to advocate higher than normal levels of cash, adding gold …”

 

Find out how to defend your assets against rapidly changing and uncertain financial times by calling one of our precious metal experts.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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Gold and Silver Break Their 200 Day Moving Averages

Jim Clark

5/15/15

This week has seen very positive developments for gold bulls. Gold broke strongly through resistance at $1217 to begin consolidation over $1220 to close Friday at $1220.50. On Tuesday, gold was up roughly $23 on heavy trading volume (Remember the old saying, “Volume is the weapon of the Bull!”). Gold surged through its 200 day moving average at $1209 decisively. Silver has followed suit with a move up from $16.30 on Monday to close Friday at $17.25, up over $1. A weaker US dollar, weak macro-economic data and demand from China are cited by analysts as factors contributing to the rally.

 

Central banks continue to be strong buyers of physical gold with purchases of 119 tonnes so far this quarter. Central banks have bought gold for seventeen consecutive quarters. Central banks around the world continue to diversify assets away from the US dollar.

Demand for Swiss Physical Gold Exports is at Historic Highs

Switzerland produces no gold internally so imports and exports of Swiss gold should roughly balance out as the Swiss import gold to fill orders for export buyers. Swiss gold exports for the first quarter of 2015 total 485 tonnes which annualizes to just under 2000 tonnes. This would be the second highest year of Swiss gold exports when compared to the all time record of 2083 tonnes exported in 2013.

This shows that the demand for physical gold is strong and is providing significant price support for gold prices despite pressure from the paper traders. At some point, there will be a disconnect in price between paper god and physical gold as the demand for physical gold overwhelms the paper price. As Jim Rickards, author of The Death of Money: The Coming Collapse of the International Monetary System has said in the recent past- “it will not be a matter of what the gold price is, but of availability.”. We will continue to track the flow of physical gold in world markets for you and as always, keep you informed.

 

China Moves Ahead to Take Over Pricing of Physical Gold

China is by far the largest buyer of physical gold in the world and has amassed thousands of tonnes of gold reserves to rival the holdings in the US. China is lobbying the International Monetary Fund (IMF) to include the Yuan as a world reserve currency. Gold reserves have a large part to play in that effort.

China also has the largest private market for gold in the world and by 2013 had eclipsed South Africa as the largest producer of gold in the world. According to Simon Mikhailovich, managing director at Tocquville Bullion Reserve:

“It is the Chinese view that all great currencies have gained prominence in some measure because of the hard asset reserves the government standing behind the currency. Gold reserves both from the government and reserves held by the population are a key factor for economic security for them,”

The Shanghai Gold Exchange will establish a new standard gold price for physical gold based on delivery of 1 kilogram bars in competition with the London Bullion Market Association price “FIX” which mirrors the paper price of gold futures. Western banks are heavily involved with China in this process.

Said Mikhailovich, “I think what the Chinese are trying to do is creating a real market that reflects supply and demand for physical gold.”.  Higher gold prices will support the Yuan and therefore the Chinese effort to attain their goal of inclusion by the IMF as a world reserve currency. The decision from the IMF is due later this year, to take effect in 2016.

Buy Ahead of the Rush

Jeff Gundlach, founder of DoubleLine Capital and formerly the manager of the $9.3 billion Trust Company of the West Total Return Bond Fund dubbed by Barrons as “The King of Bonds” and included in “The 50 Most Influential” list of Bloomberg Markets magazine was recently asked for his best investment idea for the next six to twelve months.

His answer- gold. A top mainstream bond fund manager recommending gold as his top investment idea is a major wake up call.

 

Find out how to defend your assets against rapidly changing and uncertain financial times by calling one of our precious metal experts.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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Chaos in the Government Bond Markets This Week; China Challenges the London Gold Fix

Both gold and silver were up for the week. Gold moved up strongly from the April 30 closing low of $1,174 to a high for the week of $1,193 to close the week at $1188.40. Silver followed the same trading pattern, closing last week at $16.11, trading up to $16.56 mid-week closing Friday at $16.47.

The big action this past week was in the bond markets. A huge panic sell off in US, UK and German government bonds this week has left traders and investors alike shocked and concerned. From Bloomberg:

“In the past 15 years, a rise in yields of this size has only happened twice – in mid-1999 and again in late-2011, as the ECB began to shore up bank funding issues in the midst of the eurozone crisis. Given that roughly less than 5% of participants in our last … Survey expected bund yields above 50bp by the end of June (we are at 54bp today; nearly one third of the survey expected bund yields below zero), it is likely this … [ed.] has caused a great deal of dislocation for fixed income investors.”

Here is what happened Thursday:

  • 10Y TREASURY YIELD CLIMBS 6BPS TO 2.31%, HIGHEST SINCE DEC. 8
  • BOND SELLOFF DEEPENS; GERMAN 10-YR YIELD JUMPS 17 BPS TO 0.76% 
  • U.K. 10-YR BOND YIELD CLIMBS 8 BPS TO 2.06%; MOST SINCE NOV. 24

Beyond the obvious concern over loss of portfolio value for bond holders, why is this important to US investors?

Keeping interest rates low is the cornerstone of US Federal Reserve central bank policy. Low interest rates and the efforts to drive rates lower still, allow central banks to continue to issue more debt, increasing the total debt load of the government, while the cost of interest payments on that rising debt load remain stable or even decline.

In normal economic times, increasing debt is associated with increasing interest rates because an increased debt load raises the risk of default. By printing more dollars and inflating the currency, central bankers have chosen to ignore this economic fact so that they can “kick the can further down the road” to the next administration.

We have been told that so called “Quantitative Easing” (QE) is a short term temporary measure to stimulate the economy out of recession. The theory behind this strategy is that short term growth will “kick start” the economy for the long term and that the resulting longer term growth will allow a future administration to pay down the debt. This has never happened in the history of the world.

If the money printing strategy worked, then Zimbabwe would be the most prosperous country on Earth. You remember Zimbabwe, the guys with the $ One Trillion Dollar Note.

Today, the relative size of federal debt as a percentage of GDP is the highest since World War II.

China Challenges the London Gold (Price) Fix 

Reuters reported in February that China is planning to establish a Yuan based 1kg gold contract on the Shanghai Gold Exchange (SGE) later this year. Contracts on the SGE settle with the delivery of physical gold as contrasted with the COMEX gold contract which settles primarily (95%+) in US dollars. This will more closely tie the contract price of gold to the actual open market price for the delivery of physical gold, in Yuan, of course.

Currently, the London Bullion Market Association (LBMA) is the world’s standard benchmark pricing authority for the inter-bank trading of gold bullion. Gold prices are published twice daily by this association through polling the members’ bank customers as to what price they are willing to pay for physical gold, rather than by an open market trading system like the Commodities Exchange (COMEX)  in the US or the SGE in China.

The “London Fix” process has been abused by its membership and members have been fined for price manipulation numerous times recently. For example,” last year, the FCA fined Barclays (Bank-ed.) £26 million ($40.2 million) for lax controls after one of its traders allegedly manipulated the gold fix at the expense of a client…” and this,More than 25 lawsuits have been filed against Barclays, Deutsche Bank, HSBC, Bank of Nova Scotia and Société Générale over their alleged role in setting the gold fix. “ (ZeroHedge)

This challenge to the existing gold pricing regime will likely have the effect of allowing a more realistic, free floating price for physical gold outside of the price manipulation of western central banks and will further strengthen the effort by China to establish the Yuan as a viable international reserve currency and present an increasing threat to the US Dollar as the world’s reserve currency. As Rand Paul has said, if we loose the status of the US Dollar as the world’s reserve currency, our standard of living will drop dramatically.

Find out how to defend your assets against rapidly changing and uncertain financial times by calling one of our precious metal experts.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion: 5/3/15: Bullion in a Safety Deposit Box? Not at Chase!

by Jim Clark

Both gold and silver experienced a rapid run up and equally rapid drawdowns this week. Gold has been locked in a trading range between $1150+/oz and $1215/oz and silver between $15.50 and $16/oz since February 2015. There is solid support at the $1175 area for spot gold and $15.50 for spot silver. These bids have held several times since the November 2014 lows when gold briefly dipped to $1145.

A long anticipated sale of $1 billion of gold bullion by Venezuela to Citibank has been overhanging the market, accounting for gold’s price weakness in recent weeks. This sale was closed early in the week and gold quickly rallied from $1175 up to $1214, only to retrace this rally back to the $1175 support price level.

Said Warren Buffet in a 1998 address at Harvard:
“(It) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Well, we are not on Mars and had Warren bought gold in 1998 at its high, he would have paid $304.85. Based on $1175 gold, this is a 285% increase in seven years. Interestingly, Buffet, through his Berkshire Hathaway investment vehicle bought 130 million ounces of silver in 2014.

Noriel Roubini, economist and professor at the NYU Stern School of Business, recently called gold, “a barbarous relic”. For some reason, the large money center banks Citicorp and JP Morgan, Chase & Company seem not to agree. Citicorp just bought 1 million ounces of gold this past week and JP Morgan/Chase has accumulated 55 million ounces of silver since 2012.

Speaking of JP Morgan/Chase, in April, Chase sent a letter to safe deposit box holders announcing an updated safe deposit box lease agreement in which Chase limits items that may be held in the box.

From the Chase letter:
“Contents of the Box: You agree not to store any cash or coins other than those found to have a collectable value.”

Further in the letter, under “Right of Access”, Chase explains that the bank “can restrict access to your box for any reason, including but not limited to… our inability to obtain information that satisfies our ‘Know Your Customer’ requirements, and any unexpected circumstances (natural or manmade).”

In other words, you must disclose on demand, the nature of the contents of your safe deposit box to the bank.

Think about that for moment. The purpose of owning a safe deposit box is to secure your important documents and valuable personal property. It seems as though Chase is telling customers that the bank does not consider your cash and coins to be personal property. Coins, in case you are unaware, include gold and silver American Eagle bullion coins.

JP Morgan/Chase is a leader in the implementation of banking policy in the United States of America. Other banks, including Wells Fargo have this policy in place as well. I believe the other big banks will follow suit.

The value of bank deposit guarantees and the FDIC
Austria, in the wake of the October 2014 failure of its second largest bank-  Hypo Alpe AdriaIt, and the recent subsequent failure of the Heta Asset Resolution GmbH, the government constructed bank charged with managing the assets of the failed bank, is planning to eliminate the government guarantee of deposits, their equivalent of the FDIC insurance in the US.

This is how it starts. Bail in legislation is in place in every major country in Europe and in the US. You do not own the cash in your bank account, the bank does. Perhaps this is why the FDIC is allowed to have less than 50% of the Designated Reserve Ratio (DRR), required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This act requires the FDIC to retain 2% of its potential liabilities on hand. Currently the FDIC has approximately 0.84% DRR. Would you feel more comfortable at 2%?

I quote an internal FDIC Memorandum:

MEMORANDUM TO: The Board of Directors

FROM: Diane Ellis Director Division of Insurance and Research Division of Insurance and Research

October 2, 2014

SUBJECT: Update of Projected Deposit Insurance Fund Losses, Income, and Reserve Ratios for the Restoration Plan

Regarding the Deposit Insurance Fund (DIF) balance, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 provides the following:
…Each year, the FDIC sets and publishes the DRR for the following year. The DRR for 2015 is 2.0%
“The DIF balance has risen for the past four and one-half years and stood at $51.1 billion on June 30, 2014, resulting in a reserve ratio of 0.84 percent.”

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Is Venezuela The Reason For The Recent Weakness In Gold Prices?

  • Citigroup and Venezuela have been negotiating a gold swap deal for over a month.
  • Last Friday we finally saw closure on a deal between the two parties where at least $1 billion of gold will be swapped.
  • A lower gold price favors Citigroup and now that the deal is done we may see some relief for gold.
  • In terms of this deal, Citigroup would now benefit from a higher gold price as Venezuela would be forced to buy back its gold at a higher price.
 Over the past few weeks gold has been fairly week despite geopolitical issues that would ordinarily provide strong support for the metal. This weakness culminated last Friday as gold hit a multi-week low right before London close (around 10 AM EST).

This puzzled many analysts as gold failed to rally following consistent weaker-than-expected U.S. economic data. We may just have found out the reason for gold’s recent unexpected weakness.

The Venezuelan Gold Swap

For a few months Venezuela had been discussing a gold swap with a number of US banks, which last Friday the country closed with Citibank for at least $1 billion US Dollars. Bill Baruch, chief market strategist for iiTrader, said looking back last week’s price action now makes sense as forces were trying to keep gold prices low while the two sides successfully negotiated the gold swap. He found it strange that gold had no “mojo”, but “Last week, there was a large amount of selling that kept prices low and now we know why,” he said.

We completely agree with Mr. Baruch and think that a significant, motivated seller is now out of the market. Why is that?

Our understanding of the gold swap (and details are still a bit scarce) is that based on the initial reports, the central bank would provide 1.4 million troy ounces in exchange for cash. After four years, it would have right of first refusal to buy the gold back. Of course, during this whole time the Venezuelan central bank would be paying interest to Citibank on the borrowed money.

So it would be in Citigroup’s benefit to have the lowest possible gold price going into the deal (remember most of these deals are closed based on the London Gold Fix), which we did see very clearly last Friday as gold plummeted into the London close. Investors should remember that the lower the gold price, the more ounces of gold Citigroup gets for its $1 billion (or more) that is loaned to Venezuela. Once the swap deal is done, it would offer no more benefit to Citigroup to see a lower gold price, and in fact, it might be of greater benefit to see a higher price as they now have the Venezuelan gold.

In addition, this deal may reflect Citigroup’s view of the future as it suggests the bank is bullish on gold as they would greatly benefit to see gold rise as they now have $1 billion of physical gold that Venezuela may have to buy back in a few years. If that gold price was much higher than Citigroup would be earning interest income from the loan plus the price appreciation on their gold holdings. A pretty sweet deal if you believe in higher future gold prices.

Continue reading this story from the original source, Seeking Alpha,  here.

The Gold Market Discussion: 4/26/15: What if the Yuan Was Backed by Gold?

by Jim Clark

April 24, 2015

Can 1.4 billion Chinese be wrong? Between 2008 and 2009 China doubled their reserve of gold bullion stock. In April of 2009, the Chinese Central Bank (The People’s Bank of China) reported gold holdings of 1,054 metric tonnes. Recently, Bloomberg Intelligence estimated China’s gold holdings at 3,510 metric tonnes, second only the United Sates’ reserves of 8,134 metric tonnes.

China has tripled their gold reserves in only six years! China is both the largest producer of gold in the world and is also the largest buyer of gold from the world’s exchanges. Why is China’s appetite for gold so voracious?

When China launched the Shanghai International Gold Exchange on September 19, 2014, Zhou Xiaochuan, the governor of the Peoples’ Bank of China (PBOC), stated, “[The] gold market,” he said, “is an important and integral part of China’s financial market. We are now the largest gold producer, as well as the biggest gold importer and consumer in the world. . . The People’s Bank of China will continue to support the sustainable growth and sound development of China’s gold market.”

The speculation among most metals analysts for the reason behind China’s massive purchases of gold is that the Peoples Bank is maneuvering to support the value of the Yuan as a both a world reserve currency and an IMF (International Monetary Fund) reserve currency, backed by its gold holdings.

The IMF has created an artificial international currency to dispense money known as SDR (Special Drawing Rights) SDRs include the dollar, euro, yen, and British pound. China wants to be included in this exclusive club. The IMF has said they will decide on this issue in either their May or October meeting.

The strategic importance of gold was acknowledged by the Chinese government:

The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries towards reserving more goldLarge gold reserves are also beneficial in promoting the internationalization of the RMB.  -[Wikileaks]

At this point, you may fairly ask the question, “What does this have to do with my money?”

Let’s take it by the numbers:

  • China has nearly $4 Trillion in total foreign exchange reserves. This is the largest currency reserve of any country. Compare this to US foreign exchange holdings of $133 Billion.
  • The total value of the world’s gold reserves is estimated at $1.25 Trillion (with gold at $1,220/troy Oz).
  • China holds $1.28 Trillion in US Treasury Bonds.
  • The US holds $320 Billion in gold reserves.
  • These reserves give China tremendous power in the international monetary markets. How powerful is this?
  • With $4 Trillion in foreign currency reserves, this means that China could purchase the entire US gold holdings with only 8% of its foreign exchange reserves. [Read this again.]
  • China could purchase the entire gold reserves of the world with only 32% of its foreign currency holdings. If China paid twice the current price for gold, they would still have $1.5 Trillion in reserves.
  • With China accumulating gold to strengthen and support the Yuan (RMB) as an international reserve currency, what will happen to the value and purchasing power of your dollars if China decides to flood the world market with their US Treasuries?

China is buying gold, not for a profitable trade, but in preparation for a new world monetary order that holds serious consequences for our way of life here in the USA. The Chinese view gold in its proper historical perspective, not as a vehicle for making money, but as a store of value.

Now to address my original question, “What does this have to do with my money?”

Compare the value of a dollar, not backed by gold to the value of the yuan backed by gold. To defend the dollar and the value of US Treasury bonds against a major liquidation of US dollars by China, the US would need the value of the US gold reserves to match China’s holdings of $1.28 Trillion in US Treasuries. Gold will need to be priced at $4900 per troy oz. This is 4x the current price of gold.

What will your dollars be worth in a world with a gold Yuan?

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion: 4/12/15: What Recovery?

Jim Clark

After starting a little soft last week, gold finished strong on Friday, closing at $1,208. Silver also started off weak and finished at $16.58.Let’s look at some economic news both here in the U.S. and abroad and its affect on the yellow metal.

According to Bloomberg, analysts are predicting the the Standard & Poor’s 500 Index profits are about to decrease for three straight quarters. History has shown that once earnings drop for that long, they almost always keep falling, and usually take the market with them. This has happened 82 percent of the time in the past eight decades. Also according to a Bloomberg analysts, investors may face the longest stretch of profit declines since the 2008-2009 financial crisis. Oil companies are expected to post the worst first-quarter results among the S & P 500 industries, with profits dropping 63 percent. This is a result of faltering demand and booming supplies from North American shale fields. Income from four other groups, including producers of household goods, are also forecast to fall. The dollar, still near a twelve year high, has actually  hurt sales for firms like Proctor & Gamble Co. One example of lowering dividends is the company Freeport-McMoRan, which explores for copper, gold and other materials. They stunned investors by slashing dividends 84 percent! This resulted in lost dividends of $1.1 billion. Dividend reductions are extremely rare in the materials sector. When earnings estimates deteriorate, companies like Home Depot Inc. and Comcast Corp. start stock buybacks resulting in higher stocks but not real profits. It’s a strange economic picture we have, with still near-record low interest rates and stagnant pay, which has enabled CEOs to increase profits an average 15 percent a year since 2000, or three times faster than sales!. However, this is poised to change as the Federal Reserve prepares to raise interest rates amid a (reportedly) improving labor market. By the way, what would rising interest rates do to gold? In the late 1970’s, during rising rates when bond yields surged into the double digits, gold and silver experienced one of their greatest runs. When interest rates are running below inflation rates, that is favorable for precious metals. So even even if interest rates go up, with inflation inevitable due to monetary policy, gold and silver will too.

We still hear in the news that the economy is improving, but most don’t see it. A March 6-12 poll by Bank of American Corp. showed a net 35 percent of respondents in the survey picked the U.S. as the worst place to invest in the next 12 months. The dollar’s rise has many nations worried about a debt crisis in the making. The recent example of Greece has been a lesson that is still being felt globally. Ann Pettifor of Prime Economics, who foreshadowed the credit crunch in her 2003 book The Coming First World Debt Crisis, says that, “We’re going to have another financial crisis. Brazil’s already in great trouble with the strength of the dollar; I dread to think what’s happening in South Africa; then there’s Malaysia. We’re back to where we were, and that for me is really frightening.” (source). You see, the developing countries have been taking advantage of the rock-bottom interest rates and cheap money created by quantitative easing to stack up billions in new debt. Countries like Turkey, Malaysia and Chile have large dollar-denominated debts and sliding currencies, and a string of African countries face sharp rises in debt repayments. These countries are turning to the International Monetary Fund (IMF) for relief. They are asking for financial help from the IMF and bankruptcy processes akin to the Chapter 11 procedure for companies to be applied to governments. In other words, it looks like, as Ms. Pettifor said, the lesson of 2008-2009 has never been learned.

That is why it is so important to have a portion of your money in precious metals. Gold and silver will protect your wealth during another economic crisis. Gold is always real money with real value. It can’t be printed and devalued. In Cyprus in 2013 the government took a portion of all deposits (which is called a bail-in) from banks in order to remain solvent. This concept is being introduced here and could be implemented sooner rather than later. Diversification in physical holdings of precious metals makes more sense now than ever.

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The Gold Market Discussion with Jim Clark, 3-29-15

Jim Clark

3/27/15

War often drives the price of precious metals, and the drums of war certainly drove the price last week. Volatility in the Middle East has pushed gold back up to $1,200 after seeing a drop to $1,145 last week, and silver is back up above $17 dollars. The dollar strengthened Friday after a selling during much of the week, down almost 4%.

The initial phase of a military campaign against Yemen has been taking place with airborne assaults. The AP reported that the turmoil in Yemen grew into a regional conflict with Saudi Arabia and a coalition bombing Shiite rebels allied with Iran. Now that movement is escalating with the Saudi deployment of 150,000 troops on the border with Yemen. Egyptian military and security officials told the AP that military intervention will go further with a ground assault into Yemen by Egyptian, Saudi, and other forces once airstrikes have sufficiently diminished the Houthis and Saleh’s forces. They said the assault will be by ground from Saudi Arabia and by landings on Yemen’s Red and Arabian Sea coasts.

And this could just be the beginning. Egyptian officials said the force is planned to include some 40,000 men backed by jet fighter, warships and light armor. Iran denounced the Saudi-led air campaign, saying it “considers this action a dangerous step,” and oil prices jumped in New York and London after the offensive.

The locals in Yemen are not all happy about the prospect of foreign troops entering the country uncontested. Anger against the airstrikes, which flattened a dozen homes and killed at least 18 civilians, lead to thousands gathering in protest and chanting against Saudi Arabia and the United States.

It looks like the US will intervene at a point in the near future, with its own military assets. A US amphibious assault ship carrying 2,000 marines is currently located just off the coast of Yemen.

The escalating conflict sent gold and silver higher as heavy buying came in on safe haven demand.

http://m.apnews.com/ap/db_289563/contentdetail.htm?contentguid=0RhbSV8h

http://www.zerohedge.com/news/2015-03-26/yemen-ground-invasion-saudi-arabia-troops-imminent

Meanwhile in Asia, Chinese appetite for gold looks insatiable. Here is a chart of physical gold withdrawals from Shanghai. As you can see, as gold prices have been falling since 2012, physical withdrawals are only increasing.

 

Another war, the war on cash, is intensifying as authorities both here and abroad attempt to crack down on cash withdrawals from banks. Cash withdrawal is increasingly being looked at as a suspicious event. New measures in France have been introduced to restrict French citizens from making cash payments over 1,000 Euros. This regulation, introduced in the name of fighting terrorism, will also see cash deposits of over 10,000 Euros during a single month reported to anti-fraud authorities. In the UK customers are being restricted from cash withdrawals of 5,000 Pounds or more.

Back here in America, banks are also making it harder for customers to withdraw and deposit cash. Chase Bank is imposing capital controls that mandate identification for cash deposits and ban cash being deposited into another person’s account. Chase also instituted policies which banned international wire transfers while restricting cash activity for business customers. Banks are required to file ‘suspicious activity reports’ on their customers, with threats of fines and jail time for directors if financial institutions don’t meet quotas. As investor and financial blogger Simon Black points out, according the handbook for the Federal Financial Institution Examination Council, such suspicious activity includes, “Transactions conducted or attempted by, at, or through the bank and aggregating $5,000 or more….” Last week, assistant attorney general Leslie Caldwell gave a speech in which he urged banks to “alert law enforcement authorities about the problem” so that police can “seize the funds” or at least “initiate an investigation”.

More and more, banking regulations are making it difficult to have access to and control your own money.  Gold is still trading at 5% below mining costs and silver at 10% below cost, making both still an attractive acquisition.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion with Jim Clark, 3-22-15

Jim Clark

3/20/2015

Gold and Silver prices spiked this week as gold traded above $1,185 and silver in the $16.85 range. The spike in gold and silver prices can be, in part, attributable to Janet Yellen’s comments at this week’s Fed meeting.

Chairperson Yellen indicated ultra-loose monetary policy for the foreseeable future with no rate rise in June. This pushes the .25% rate interest increase to September at the earliest. So, as we discussed last week, raising interest rates while headed into a recession looks like a non-starter. The decision by the Fed to delay any rate increase caused a massive sell off in the dollar and strength for all the precious metals. One look at the following chart shows how well gold has done against all the major currencies.

What we are witnessing today is a full blown currency war. Global central banks are lowering interest rates and monetizing debt. European Central Banks are pushing interest rates into negative territory trying to revive inflation. This means continued strength in gold against all major currencies in the long term.

Investors are buying bonds yielding less than zero.  Global bond sales won’t mature for more than 30 years! Yet, global sales of these bonds have soared. Some of the currencies into which the bonds are denominated could be worthless by the time they mature. Bond investors are making riskier and riskier investments. European bonds are being issued at rates so low that they make U.S. debt instruments look good by comparison. However, the U.S. has a higher debt-to-GDP ratio than any nation on earth, with unfunded liabilities in excess of $100 trillion. Yes, the dollar looks strong now based on other unbacked currencies, but the dollar’s purchasing power has not recovered to 2003 levels. In fact, the purchasing power of the dollar declined 87% during the period of 1964-2014. It now takes $1 to buy what cost 13 cents in 1965. In 2003, an ounce of gold was $345 and an ounce of silver was $4.75 an ounce. Though the purchasing power of the dollar has weakened substantially since 2003, gold still purchases the same amount it purchased then, in spite of a downdraft over the past few years.

The dollar’s status as world reserve currency has allowed the U.S. to become financially overextended. Over the last several years, countries around the world, including Russia, China, and others, have insisted on a dollar alternative.  The following article from the New York Times just this week shows how this effort continues unabated

BRUSSELS — Ignoring direct pleas from the Obama administration, Europe’s biggest economies have declared their desire to become founding members of a new Chinese-led Asian investment bank that the United States views as a rival to the World Bank and other institutions set up at the height of American power after World War II.

The announcement on Tuesday by Germany, France and Italy that they would follow Britain and join the Chinese-led venture delivered a stinging rebuke to Washington from some of its closest allies. It also called into question whether the World Bank and the International Monetary Fund, which grew out of a multination conference in Bretton Woods, N.H., in 1944 and established an economic pecking order that lasted 70 years, will find their influence diminished.

As American influence wanes and other countries move on without the dollar, it is inevitable that turmoil will hit the U.S. dollar. Although a rising Dollar Index makes it tough for metals to rise, the dollar cannot maintain its current rate of increase.  Over time, like all fiat currencies, the dollar will depreciate. Trading dollars for precious metals will protect your wealth in the face of ongoing currency wars and crisis.  Now is the time, as gold is selling at 5% below production cost and silver at least 10% under.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion with Jim Clark, 3-15-15

Jim Clark

3/15/15

This week has seen more weakness in gold prices. Gold prices are currently at the $1150 range with silver at $15.50. The weakness can be directly attributed to the strength of the dollar, which has recently reached highs not seen since 2003, and has done so in a remarkably short period of time. With the volatility in the currency markets, things are starting to get interesting In banking. Large swings in currency markets have historicaly lead to severe disruptions in the global economy.

Take the recent example of Heta Asset Resolution AG, the third largest bank in Austria. This bank is worthless after an unprecedented move in the Swiss franc and a huge sell off in the euro vs. dollars after the implementation of EU QE. Wha surprises are just around the corner for the US banking industry after the huge run up in the value of the dollar? The feeling is pervasive that something “big” is just on the horizon.

The graphic below shows the size of the currency market according to The Bank of International Settlements (BIS). These are daily volume numbers. Currency markets drive the liquidity for the financial world. We are starting to see extreme volatility in currency markets brought on by direct intervention of central banks to devalue their currency. For people investing in gold and silver, now is a unique and ideal opportunity to “sell” dollars at twelve year highs and purchase gold/silver at five year lows.

 

 

The next couple of months should be interesting. The Federal Reserve has indicated they wil raise rates as soon as this summer. But, with the US economy headed back into recession, we’ll see if that holds true; I have my doubts. However, I do believe it will not be long before the Federal Reserve will announce more QE.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion with Jim Clark, 3-8-15

March 8, 2015

This week gold prices traded in narrow range around the $1165 to $1210 area, currently gold prices are $1168 per ounce silver at $15.88. Gold is now trading below most miners’ ability to bring gold to market. This represents a tremendous opportunity to acquire physical gold at seriously depressed prices.

These are some of this week’s important economic events.

  1. Austria’s Heta bank has 7.5 billion Euro short fall, insolvent.
  2. Dollar hits 12 year high
  3. Global Central Bank Rate Cuts Continue
  4. EU QE begins in March to the tune of 60 billion euros per month

Did Austria just experience their Lehman moment?

(Reuters) – Austria’s Financial Market Authority stepped in on Sunday (March 1st) to wind down “bad bank” Heta Asset Resolution and imposed a moratorium on debt repayments by the vehicle set up last year from the remnants of defunct lender Hypo Alpe Adria.The step, allowed by new legislation that gives banking supervisors more power to intervene, followed an outside audit of Heta’s balance sheet that exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the FMA said.

This means no more bailouts for Austria’s 3rd largest bank. They have been cut off, and now because of legislation passed a just a month before creditors will be forced to “bail in”

“The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta – or “bailed in” – under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden.”

There you have it… “Bail ins” are what will happen moving forward. Bankrupt governments around the world will no longer be putting taxpayer money to bail out banks that have taken inordinate amounts risk.

Speaking of risk, the following chart has lots of investors concerned. Margin debt has now hit a new all-time high.  Market at high along with margin debt, and the dollar also at a 12 year high.

 

Dollar Index

With the dollar hitting a fresh 12 year high a US recession is likely on the way.

 

Global Rate Cuts Continue as EU starts QE

Central banks representing roughly 60% of the global economy are cutting rates, or using other tools to pump more cash into the system. This currency war is made worse by the ever increasing strength of the dollar.

European Central Bank (ECB) President Mario Draghi announced the launch of an open-ended, expanded monthly 60 billion euro ($70 billion) private and public bond-buying program on Thursday. More of the same from central banks as they continue to create money to buy “assets”, and with no end in sight take a look at how gold is trading to the EURO

 

It appears that gold is ready for another leg up relative to ever cheaper Euros. Lets look at Yen…

 

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion with Jim Clark, 2-27-15: A Look at the Bond Bubble

by Jim Clark

2/27/2015

Gold rose 1% percent this week closing at $1,213.00 an ounce, with silver closing at $16.65 an ounce. As I mentioned last week, Central Banks are some of the largest buyers of gold today. They have been adding to their gold reserves for five years, which is a reversal from being net sellers since the late 1980’s. The Central Banks are set to be net buyers again in 2015. Governments have purchased 477.2 tons of gold in 2014, and it is estimated by the World Gold Council that they will purchase 400 tons this year. And why are they doing this? ……What do they know that we don’t? Smart investors will follow the lead of Central Banks and accumulate gold. Let’s look at some of the issues that make purchasing gold at these prices a valuable buy for you.

Alan Greenspan, the former chairman of the Federal Reserve, had a much different take on the economy from the present chairwoman, Janet Yellen. In an interview on CNBC, Alan Greenspan said that, “US economic growth is not strong,” and, “The stock market is up but the economy is not.” He points out that entitlements are “crowding out capital investment and savings which is key to productivity.” And he made an amazing statement coming from a central banker that, “Effective demand is extraordinarily weak-tantamount o the late stages of the great depression.” He explained that the Fed was, in fact, the main driver of the P/E multiple expansion in stocks. When asked if this ends badly again, he concluded, “…When real interest rates start to move up, that’s when the crisis could hit.” The chart below comparing the S&P to the US Macro shows the Mr. Greenspan is right.

 

The 2008 Financial Crisis was not THE Crisis. The real crisis will hit when the bond bubble collapses. What does this mean? Let’s talk about some rather technical but important numbers that will affect your future economic picture. The current global monetary system is based on debt. For many years, Western countries have been completely bankrupt due to excessive spending, and all of this spending has been fueled by bonds. Government s issue bonds to a select group of large banks and financial institutions (e.g. Primary Dealers in the US). These financial institutions list the bonds on their balance sheets as “assets”. In fact, these bonds are the senior-most asset they own. That is why Central Banks do everything they can to stop defaults from occurring in the sovereign bonds space including: cutting interest rates to make these gargantuan debts more serviceable and targeting inflation because it also makes the debts more serviceable and puts off inevitable debt restructuring. The banks then issue their own debt-based money via inter-bank loans, mortgages, credit cards, auto loans, and the like into the system. Thus, “money” enters the economy through loans or debt. In this sense, money is not actually capital but legal debt contracts. Ever since the early 80’s, an entire generation of investors and money managers have been investing in an era in which risk has generally gotten cheaper and cheaper. In turn, this has driven the rise in leverage (which means borrowed money) in the financial system. As the risk-free rate fell, so did all other rates of return. Thus investors have turned to more and more leverage, in other words using borrowed money, to try to gain greater rates of return. Today the US bond market is well over $38 trillion. If you include derivatives based on these bonds, it is more than $191 trillion in the US alone.  Globally, the bond bubble is now more than $100 trillion in bonds. And this $100 trillion has been used as collateral for a derivative market that is more than $555 trillion. Now, to put this in a little more perspective, the Credit Default Swap (CDS) market that nearly took down the financial system in 2008 was only a tenth of this ($50-$60 trillion). (http://www.zerogedge.com/news/2015-02-23-real-issue-isnt-stocks%E2%80%A6-its-bonds). Those numbers are staggering to even contemplate! But the long story is when the bond bubble bursts, it will make 2008 look like the good old days. Those who bought gold in 2007 were protected during the 2008 crisis. When the results of so many years of unsound government and monetary policies eventually lead to a day of reckoning, as it always does, gold will help protect your wealth.

Let’s look at some other economic news that has investors concerned.

  • Even though the unemployment figures are down, Gallup reports a staggeringly low rate of 44% of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% to replenish American’s middle class. The government figures don’t reflect the 30 million Americans either out of work still or severely underemployed. And it doesn’t consider those working part time but wanting full-time work.
  • Continued unrest in the Middle East and elsewhere in the world.
  • Global growth expectations are expected to decline in 2015.

 

The Fed has printed so much money that inflation is inevitable. Though it is difficult to predict when, we are at risk of having very high rates of inflation.The markets crashed in 2000 and 2008. Gold will protect your wealth when they crash again and during inflation. Safeguard a portion of your hard earned wealth by moving it outside the banking and financial institutions. It is insurance that makes sense.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”
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The Gold Market Discussion with Jim Clark, 2-20-15

by Jim Clark
2/20/15

Gold and silver prices dipped earlier in the week only to recover and end strong, closing at $1,208 and $16.32 respectively. There was some heavy physical buying that came in when gold briefly fell below $1,200 an ounce.

Have you ever heard the old Chinese saying, “May you live in interesting times”? People have debated whether this saying is a blessing or a curse. But, regardless of how you believe, we do indeed live in very interesting times. Just reviewing the headlines this week reminds us of how volatile things are becoming globally. On the financial front things couldn’t look worse.

  • Market Left stunned by Germany rejecting Greek extension proposal.
  • The Fighting still Rages After Ukraine “Ceasefire” Deal
  • Russia Recently Sold Record Amount of US Debt.
  • China Resumes Selling of US Debt
  • Possible US Supply Chain Interruption (Ports)

Things continue to look bad for Greece and Germany to get any deal done and Grexit becomes a more likely scenario. Greece leaving the Eurozone would be devastating for Europe and the common currency. Some estimate the Euro would drop to .90 on the US dollar. With the volatility we are seeing in the currency markets already, this will only add to the uncertainty. Of course, with any Greece exit of the Euro, pressure would mount in Italy, Spain, Ireland, and Portugal to follow because of the crippling austerity in those countries. Here we are again talking about the PIIGS countries. The only difference this time is gold is $1,210 not $1,800, once again a reminder of the buying opportunity right now.

Russia continues to add to the uncertainty by selling the most US debt on record. Russia sold 20% of its holdings of US debt or $22 billion. China also decreased their overall holdings of US debt in the most recent reports.

Another recent development that is gaining a little more traction in the media is the disruption of inventory flows in our West Coast Ports. If these disruptions were to continue, you could see some real impact to already declining US GDP. There are already talks of looming shortages as supplies bottleneck. This supply disruption could lead to a drop in US GDP which will delay the Fed’s ability to raise rates and give the Fed no ammunition as we head into another recession.  This development could force the Fed into more QE as the liquidity crunch continues.

Our national debt has increased upward at more than 9% per year. At that rate the official US national debt will exceed $30 trillion before January 2021, unless our financial system crashes first. Each year the US and many other governments take in revenue, spend it, and then add more debt. The US owes compounding interest on the larger debt. The government pays interest on the loans from previous years, and debt increases rapidly-too rapidly to be repaid without massive inflation. Central banks purchase the debt in order to support the global financial system and prevent the deflationary depression that every banker and politician fears.  So more and more money is printed and infused into the system causing it to become more fragile, more dangerous, and more unstable each year. The consequence of that printing over time is inflation.  You can be sure that governments will continue to spend more money they can collect, and deficit spending will expand with wars and turmoil in the Middle-East and elsewhere. Senator Rand Paul recently stated that, “Once upon a time, your dollar was as good as gold. Then, for many decades, they said your dollar was backed by the full faith and credit of government. Do you know what it’s backed by now? Used car loans, bad home loans, distressed assets and derivatives.” He went on to say that, “The Fed’s book-keeping and monetary policies could lead to serious economic trouble.”  Today the central bank is leveraged three times greater than Lehman Brothers was when Lehman Brother went belly up.

The extraordinary loose monetary policy in the US was introduced in late 2008 when the global economy was in free fall and the US economy and domestic product was plunging.  Today, the US economy has been growing for several quarters, yet the proposal of taking even modest steps toward a normal monetary policy, such as raising the interest rates from zero to 0.25%, has been met with alarm by the Fed. Charles Evans, president of the Chicago Fed and a voting member of the board that determines rate p