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Weldon's Money Monitor: Reflections and a Silver Lining


Monetary debasement of paper is intensifying to a new extreme.


ALL modesty and humility aside, regular readers of our Money Monitor KNOW that there has been NO ONE, simply NO ONE, that has been more dead-on CORRECT in assessing the macro-situation as applies to the bull market in bullion than we have been.

NO ONE has provided more unique insight and outright prescience when it comes to gold than the Money Monitor - case closed.

NO ONE 'called' for the type of macro-divergence that has developed leaving Gold rising against ALL paper currencies, including the U.S. dollar and most every foreign currency - except for the Money Monitor.

Moreover, our 'call' does not date back a week, a month, and not even a year. Our call dates all the way back to 1999, when COMEX Gold spreads and the Cash Gold Swap market began to tighten somewhat dramatically.

BEFORE, just before, the announcement of the Washington Accord, an event that can now be used to identify the ultimate 'low' in the long-running multi-year bear market in precious metals.

We were there and we called it.

Indeed, long-term readers recall the Money Monitor's sister publication and predecessor, The Morning Metal Monitor, which began publishing in 1998. In fact, our entire business plan in 1998, including a philosophical belief that Gold was nearing a MAJOR SECULAR LOW amid accelerated disinvestment and complete investor APATHY, and the continued reflation in technology.

For YEARS, we have defined the 'reflation' in technology during the nineties as being disinflationary at the bottom economic-line in terms of inhibiting inflation in wage-driven income. Our entire thesis was built upon the belief that global central banks would peer into the debt-deflationary abyss and CHOOSE monetary paper asset reflation over a consumer retrenchment and debt liquidation that would ROIL global markets and economies.

Our thesis has been DEAD RIGHT.

Our belief in Gold has been DEAD ON.

Our philosophical mantra as per the Central Bank mentality has been PROVEN correct, and it continues to be proven every day.

And, with each passing day, the same realizations hit more and more investors who are suddenly flocking to precious metals as a store of wealth that is MOST safe from BOTH ... hyper-reflation AND debt-deflation.

Gold is NOT an IOU, and thus, gold is distinguished from EVERY 'paper' vehicle used as a store of wealth.

Even real estate is an IOU, an IOU linked to the MOST debt-saddled borrower of ALL-TIME; the U.S. consumer.

The consumer has MORE debt than ever and NO savings.

The U.S. government and governments throughout Europe, are creating debt like MAD.

Yes, the Fed and a few other central banks, now including the ECB, have raised the cost of money. BUT, they simply have NOT raised it high enough, nor quickly enough, to SQUELCH demand for CREDIT, which remains EASILY available.

We evidenced our own recent Money Monitor data dissections as PROOF, examinations during which we carved up money supply and bank lending data to reveal NEW HIGHS in the nominal levels AND the short-term growth rates in numerous 'aggregate' measures of money supply and debt.

Our recent focal pieces have served to SPOTLIGHT this dynamic in Europe, Russia, China, England, and the U.S. Money supply, consumer credit, and fiscal deficits are ALL SCREAMING to the upside, in concert, in the face of alleged tightening by central banks.

Simply: Monetary debasement of paper is intensifying to a new extreme.

The rise in Gold against ALL paper exemplifies this.

The rise in Gold against ALL paper exemplifies EVERTHING we have been discussing for YEARS, since the inception of Weldon Financial Publishing. Hence, today we sit back to enjoy the MOMENT, to live in this moment where our beliefs, our tenacity, our determination and ALL of our own blood, sweat and tears can be 'reflected upon' and the moment savored.

Indeed, this past week I had the opportunity to 'play' outside during the first winter storm of the season, frolicking in the yard with my son and daughter, ages 15 and 11. We held a RACOUS snowball fight that ended up with all three of us rolling around on the ground, wrestling in the white fluffy snow. My children are at the age where there may not be too many more snowball fights with dear-old Dad, so as we lay there, fresh snow decorating the pines that surround my yard, with the sun glistening as it began its descent over the horizon, I stopped and allowed myself to appreciate that MOMENT, to 'live in the moment,' savoring it for its simple natural beauty.

Truly, this was Life as it is meant to be.

I share this experience so readers might understand that this is WHY I chose to write today's Monitor as it is, to savor this moment. In fact, this is a moment that defines a collective 'success,' that of the Money Monitor, and that of ALL of my readers, many of whom have held closely all of the same beliefs to which I have professed and upon which I have pontificated.

Hence, enough from the heart, let's get down to the SOUL and let's EXAMINE exactly what we are talking about when we state that Gold is now accelerating to a NEW 'plane' in terms of appreciating relative to ALL paper 'assets.'

We begin with the beginning, at the COMEX, where it all began for me, as is now defined in the daily candlestick chart below detailing Gold's most recent historic rally through 500 U.S. Dollars per ounce, capping a +20% run since the end of summer.

Leading the way, EXACTLY as we anticipated, Gold in Yen, up +32% since the end of summer. We sit back and SAVOR the FACT that Yen-Gold has rallied in twenty of the last twenty-three days.

Not far behind, Gold in Euro currency has rallied in twenty-three of the last twenty-eight days, and in the process has appreciated by more than +26% since the end of August.

More importantly, as we have spotlighted in previous Monitors, Gold has violated KEY overhead resistance in EUR, at 390 per, and has pushed above the psychologically sensitive EUR 400 level.

AND, note that the ECB rate hike did NOTHING to arrest the rally.

In line with evidence offered just yesterday in the form of an unchanged Bank of England Base Rate, and in line with our detailed dissection of the plight of UK central bankers in yesterday's Money Monitor, we offer the chart below, revealing the appreciation in Gold versus the British Pound.

YES, we have included paper in a form we have come to call 'equity-market-scrip,' as defined by stock indexes including the U.S. S+P 500, against which Gold has appreciated by +15% since the end of August during a solid BULL run in that same equity-market-scrip, a testament to the inherent underlying SECULAR strength in precious metals.

The FTSE is SOARING to new bull move highs, exploding through the last (61%) of the Fibonacci retracement levels relative to the decline from the 2000 peak, as detailed in yesterday's Money Monitor chart perspective. Yet, relative to Gold, the FTSE has DEPRECIATED, as seen below.

For sure, both the Fed and U.S. Treasury have been 'allowing,' if not facilitating, a FLOOD of paper in the form of Treasury debt to be unleashed into the global financial system offering a tidal wave of cheaply funded liquidity upon which more DEBT is created.

For sure, Gold is appreciating against this 'form' of paper noted in the chart below, revealing that on a price-basis, Gold is SOARING relative to UST.

Of course, using the yield on the long-bond, the STILL HISTORICALLY LOW yield on the US 30-Year T-Bond, we need only reproduce the chart below, extracted from one of last week's Money Monitors, worthy of an encore.

Indeed, NOW we hear it, people ARE saying it (in PUBLIC no less), something we have said in private, to clients, all along; gold, on its way to $1000.

Even relative to the once-high-flying, reflation-floated realty sector, Gold has taken over as defined in the chart below, plotting the price of Gold relative to the iShare for the Dow Jones US Real Estate Index Fund, or IYR.

Indeed, Gold is up +22.5% since July against PAPER real-estate.

And, Gold has appreciated against the 'CAUSE' of all the inflation-anxiety - energy - as defined in the chart below showing that Gold has rallied by a SPECTACULAR +42.5% against the price of Crude Oil since the end of August.

We have been saying all along that inflation in raw materials, specifically closely-held or short-supplied commodities, is DISINFLATIONARY at the margin, pressuring companies to increase productivity at the expense of wage-income-driven reflation.

This, while monetary debasement leading to a credit driven reflation in paper assets is at the core of the imbalances that officialdom pledges to reconcile, and yet allows to intensify on a historic scale.

In the end we offer NO answers. In fact, we have noted on many occasions that the 'time' for 'academic-solutions' are LONG gone, leaving only the pain of a debt-deflation-liquidation, OR, the pain-avoidance of perpetual paper-reflation. Again, as we have said SO many times, Central Banks WILL, and do, continue to choose the latter as evidenced by the appreciation in Gold versus the CRB.

However, there is a would-be chink in the armor as we observe the chart below which reveals that since the summer, Gold has DEPRECIATED against Japanese equity-scrip in the form of the Nikkei. Still, since 1999 Gold has appreciated dramatically against the Nikkei.

But, thanks to the fact that the Bank of Japan has NOT FLINCHED in terms of moving to raise the cost of money (which remains at ZERO), a policy that is only just now creating some fresh demand for - gasp - credit. Gold has paused, in its secular trend higher against Japan's equity-scrip.

BUT WAIT, there is a dark horse in the running, one we actually issued a short-term note of caution on not too long ago, amid weakness in spreads. A weakness that dissipated quickly enough to allow SILVER to appreciate against the Nikkei, something Gold has NOT done since the summer.

So does that mean that SILVER has finally picked up the torch of upside leadership against PAPER, as the everyman's gold, the cheaper version of gold, the poor man's gold? A move that would CEMENT our theme, in terms of a FLOOD of investment money rising the tide of paper depreciation, into precious metals

Evidence the chart below, and note that Silver HAS taken a leadership role.

Subsequently, our final chart of the day focuses again, as we have SO MANY times before (we have ZERO 'relationship' with this company, NONE, and thus NO vested interest other than our own personal purchases and sales of this stock) on our favorite core precious metals 'paper' holding. Pan American Silver (PAAS) has broken out to a new all-time high and moved above the $20 per share level in the process. You've come a long way baby, from the days of sub-$5 quotes when we first got 'involved' !!!

Bottom Line: We remain BULLISH on bullion, both Gold and Silver, and Precious Metals mining shares.

In concluding today's old-style Metal-Monitor-like Money Monitor, we ask our newer readers to forgive us for our syrupy, soupy syntax.

But understand, without sounding like a gold-bug, something long-time readers KNOW that we are NOT, we must say that like a child, nurtured and coddled over years of growth and maturation, the bull market in precious metals is dear to us.

And thus we admire 'its' blossoming process like a proud parent.

Indeed, long-time readers have read it, hundreds of times, LITERALLY HUNDREDS of times. We have printed the question, and readers have asked it of themselves in countless different languages, literally, 'Got Gold???'

AH, today we savor the moment, saying, simply, "Pass the Sugar!!!"

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