Metals With McGuirk: Gold's Total Picture
gold should be significantly higher given the current state of global affairs
"And last, the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful."- William R. White, Economic Adviser and Head of Monetary and Economic Department for the Bank for International Settlements (BIS) in his speech " Past and Future of Central Bank Cooperation"- 2005.
Wow. This quote I reference is from G.A.T.A – The Gold Anti-Trust Action group in the USA. Yes, that "lunatic gold conspiracy mob." Todd once said: "The difference between manipulation and intervention is communication." Someone is and has been messing around with MY gold market for years. That is obvious to me and many others. The BIS appears to confirm a London Gold Pool-type "arrangement" between some Central Banks to control/affect the gold price, something that I have harped on for 6 years. Why and who? I couldn't care. We know how the London Gold Pool finished. Hmmm. Am I now a "lunatic" too? I guess so.
The other side of the coin.
Gold is behaving as expected with great support at $540 in the physical market as noted by the London Fixes. Dips below 540 are gonna be short and sweet and those with conviction and knowledge will be buying paper metals when it all looks bad -- just like last Friday at 534. There was a $17 roundtrip between the London AM fix on Friday and the AM fix on Monday. The paper market games are somewhat readable if one watches the physical market closely, IMO. The ranges are the ranges: 535-565 for gold. Silver is 9.72-10.42 (but should bust to 11 by month end)--opinion only, not advice and solely based on physical metal demand. India is a little perplexed at present with the rupee causing some concern and making gold imports somewhat more expensive-- marginal, but still good to go at 550.
Has anyone noticed the amount of headlines across the screens of increased physical metal demand across Asia and the Middle East even at these higher levels?? UAE, Dubai, Kuwait, Turkey (the gateway to the Middle East for physical metal) Vietnam, India, Thailand, China etc. etc. Even the Hong Kong Gold jewelry show was packed-out with buyers (and "rubbernecks" all having a gawk at this "gold stuff"). Yet, we "westerners" continue to have faith in a "Reserve currency," that is just a piece of paper, backed only by the US Government's ability to tax its own citizens. The dollar is at the precipice and the dollar decline versus gold hasn't even started yet, IMO. Let the games begin!
I contend that gold should be significantly higher given the current state of global affairs. 25-year highs reported incessantly for metals are disingenuous when inflation adjusted. We are nowhere near gold in 1987 when adjusted for inflation (that is understated by multiples, IMO). Gold is going to trade very, very much higher in the next handful of years. It's the inevitable, unavoidable conclusion to a fiat currency experiment that is imploding before our eyes and is destined to financially destroy a large percentage of the population. Central Bankers cannot control where this will end up – never could and never will. It's been tried before and every time it has ended in tears for the general populace. There are many examples throughout history. "But it's different this time" is the old chestnut trotted out by those who "know." Yeah right. They may be able to delay the day of reckoning but they cannot stop it without some very ugly and nasty medicine being prescribed.
Politics/social unrest/volatility/financial markets in Iran, Iraq, USA, Israel, India, Pakistan, Saudi Arabia, England, Palestine, Italy, Norway, Venezuela, Australia and a handful of other "democracies" that are having a close look at the way they are being governed/managed. Furthermore, factor in the ever increasing supply of dollars, the empire of debt, housing bubble, inflation (or lack thereof), the US deficit, overvalued equity markets, Asian central bank's stockpile of paper dollars looking for diversification, massive consumer debt, wages (or lack thereof), interest rates, gold leasing, the untested but inflationary Helicopter Bernanke, cessation of M3 reports by the Fed, liquidity, Oil, GSE's, the fiat currency system and on and on as we list the many reasons for economic uncertainty/precious metal bullishness.
We've spoken about sovereign risk before. Cop a peep at Zimbabwe with near to 700% inflation. What a nasty little mess. One that could have easily been averted/alleviated by locals who held physical precious metals. These blokes put some perspective on the disaster that was once a very prosperous nation. Can't happen in the "western world?" - just watch the next decade!
Silver is just being silver and is having a lot of fun at many trader's expenses. It's gonna get more and more messy, IMO. Do not be short paper silver, especially paper that one could be asked to deliver REAL metal. The Chinese don't fool around so this could be significant. Buy dips - don't sell rallies is the course of action I am adhering to.
Well, well, well - 3 holes in the ground. Coeur d'Alene Mines (CDE) has announced it is gonna dilute their shareholders to the tune of about 10% by issuing 22 million new shares to raise further capital for… blah blah blah. Which wall will this fresh capital be thrown up against? This mob is farcical, IMO. Did they even do a debt vs. equity cost analysis??? I do believe that I made my feelings clear last week about management. I just didn't expect them to screw investors so quickly. This management group has form, bad form. At $10 silver they should be "printing cash" for their shareholders. They are not a long term proposition that I would consider holding in my core portfolio. Sure, trade them around with the silver price, but be very vigilant. Compare and contrast Pan American Silver (PAAS) or Silver Standard Resources (SSRI) (who are smart enough to not mine/waste uneconomic assets). Hmmm--CDE--not even with your money!
I note that Apex Silver (SIL) copped it up the clacker on its hedge book this past year--to the tune of over $50 million. Not only is it not a real silver company, which we have discussed before, but it hedges, so it isn't gonna see my money.
Metal stocks are cheap. Physical metals are cheaper but you get no leverage to the metal price. Forget PEs, etc., they will all work themselves out as the dollar descends to oblivion. Precious metals are and have been money/store of wealth for thousands of years. The dollar has been "invented" twice – once in 1933 with the Internal DEFAULT of the dollar via the Gold Confiscation Act (making it illegal for ordinary US citizens to own gold). The second was the 1971 International DEFAULT of the dollar under Nixon (leading to ordinary US citizens being "allowed" to own gold again in 1974). Think about that.
Just remember that all the precious metals mining stocks in the world can be bought for roughly half the DEBT that General Motors (GM) is carrying. How's that for perspective?
Only down here could this happen!!!
Things are on the move down here for me professionally. It appears I have new office space ready to go, the lawyers and accountants are doing what they do to get this new venture going and the tech people are doing what they do. Time consuming and mundane but it has to be done. This working "Aussie time" is novel and today I realized just how much I missed wandering around the city at lunchtime. The views around the streets were impressive, even on a day where summer was somewhat missing.
Enjoy the day.
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