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Monday January 5, 2015
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davidFrom David's Desk
David Schectman

January 5, 2015  

Will a negative sight deposit ratio of -0.25% be sufficient to scare off investors looking for a safe haven? Maybe. But let's assume it does work, and investors are looking for different safe havens than the Swiss Franc.

The first currency coming to mind is obviously the US Dollar. The economy is booming again (despite some dubious numbers and the current crash of the energy-related sectors), and the Federal Reserve will very likely increase the benchmark interest rate in 2015. This should make the currency quite appealing to investors and could strengthen the US Dollar even further. However, gold could also enjoy a boost as it's definitely still is a safe haven for capital. Despite the recent slump in the gold price, it still is one of the (if not the) preferred assets to hold in case one wants to safeguard its capital.

This is also the position of major bank HSBC which tends to agree with out thesis as one of their analysts also indicated that putting the brake on the CHF might benefit the demand for gold. We think this is definitely the case for the capital flight of rich Russian citizens. Their country has continuously been buying gold through its central bank and this is obviously something, which they keep in mind when deciding what to convert their worthless Rubles in.

The next few weeks and months will be interesting, as people and companies which are withdrawing their money from Russia really don't have that many choices to choose from, and we expect that gold could start shining again. - Sproutmoney

"Remember what we're looking at. Gold is a currency. It is still, by all evidence, a premier currency, that no fiat currency, including the dollar, can match." - Alan Greenspan, October 2014

The central banks are toast.  Trillions of fiat globally and commodities are collapsing while the real economy shrinks for the 4th consecutive year.  Deflation is gathering speed but gold will be bought as anyone with a brain realizes the paper money system is nearing the end.  Forget the CBs and the respective oligarchs and watch the citizens accumulate gold and silver as the only real way to transact commerce.  At the same time bubbles are bursting (last night Kaisa Holdings in China admitted they will likely default on $800M loan issued in '13) so the $8-10 trillion carry trade is about to be front and center.  Everyone is long and complacent thanks to central bank heroin.

 

Central banks will not raise rates!!! - Bill Laggner

Many global stock markets are ignoring this and in the U.S. we are very close to all-time highs.  So we have two worlds, where the small minority can benefit from printed money, and the majority who are being burdened with ever-greater debt.  And since this is the end of at least a 100-year era, stock markets could have an explosion to higher levels.

But the risks are now enormous

Talking about gold, Deutsche Bank is now closing vaults in Singapore with 200 tons capacity, and in London with 1,500 tons capacity.  They have ceased gold trading and there is no need for big vaults, particularly in London because all the gold has already gone from LBMA banks to China and other countries in the East.

But anyone who doesn't own gold and who wants to preserve their wealth should buy now because we will most likely see the previous all-time high of $1,920 assaulted in 2015.  We are continuing to see short-term volatility that is totally irrelevant in a manipulated market.  By the end of 2015 we will see a very different gold price because the manipulators will have lost control.- Egon von Greyerz

 

The gold and silver year-end scorecard 

2014 was a better year for gold than 2013. In 2013, the spot price of gold fell more than 27%. Last week Comex February gold futures settled the last session of the year at $1,184.10, down almost 2% on the year. Silver prices closed the year down more than 19% on the year.

Just like I said it would be on 12-29, the Cartel refused to let gold and silver finish off the year on an up note. Here is what I wrote...

 

Here's my two cents worth. Knowing how the PTB love to paint the charts, I would expect that they will keep the pressure on gold and hold it both below last year's close and below $1,200. But then, early in January, gold and silver will show signs of life. The "cost" in physical metal (sales) is too great to hold the prices at this level and they will relax the manipulation.

 

$16 seems to be the "line in the sand" for silver. I have just three words to say about that... "What a buy!" A 50% gain in 2015 sounds about right to me. Far more potential here than for gold.

 

So it was no surprise to me that gold and silver finished below my targets.

 




 

So what's in store for gold, silver, the dollar and the economy for 2015? Truthfully, it beats me!

There are no "experts," no foolproof crystal balls. There are just people with opinions. I was watching a video by Stansberry today. His premise and data made perfect sense. The only problem is that in his view, the dollar would lose its "reserve currency" status and collapse. It may, but not yet. He was early. For most of 2014 the dollar moved in the opposite direction - up. It's convenient to say, and we often do, that the results are different from what we expect because of manipulation.
But when will reality overtake the manipulation?

 

I do feel comfortable stating that we understand the "end game," but it's the timing that's difficult to pin down. Fortunately, the fat lady hasn't sung.

I have no regrets for accumulating gold and silver for more than a decade. I will continue to do it because the dollar must eventually lose its reserve currency status. The size of the debt guarantees it. Even after several years of a rising stock market and falling gold and silver I still keep most of my wealth in precious metals.

Some of my friends love to remind me that I missed a double in the stock market. I don't feel bad. I made hundreds of percent from 2001 through 2011. I can afford to give some back and sit on the sideline while the stock market rises on the coat tails of bad data and manipulation. It will come to an end and whatever gains I left on the table will quickly swing my way and then some.

If Miles Franklin's writers have harped on one theme it is that gold is not an investment, it is an insurance policy. That is the only way to look at it. Wishing for gold to rapidly rise is cheering for stability, safety and normality to be a thing of the past. Gold will not rise in a vacuum. It will take a falling dollar or a collapse in the stock market or a sinking economy. Or - a return to Fed-sponsored QE. Could it happen? Here is what Rob Kirby had to say about it...

On the economy getting better and the upward revision to GDP of 5%, Kirby says, "The official data is inconsistent with what you can imperially observe going on in the economy.  The economy isn't doing well, and in addition to the economy not doing well, the U.S. government, for all intent and purposes, is insolvent.  Why bonds would be rallying against a backdrop of an issuer that is insolvent is beyond anybody's fundamental understanding, but fundamentals don't count anymore in our markets. . . . We don't have markets anymore; we just have interventions. . . . This financial engineering is all a hallmark of communism or central planning.  Central planning has a track record of failing."

On central banks, Kirby says you need to look beyond the Federal Reserve.  Kirby says, "When you are looking at the extension of the U.S. dollar as the world's reserve currency . . . you need to look at the Fed, the Bank of Japan and the European Central Bank.  One or the other has been printing since 2008.  The Fed can say we are not printing for 6 or 8 months, but really, what they have done is pass the baton to the Bank of Japan who has been printing like hounds.  They are printing fiendishly.  All they have done is picked up where the Fed left off. . . . As sure as God made little green apples, we are going to see in the very near future a made-in-America financial crisis regarding this shale oil junk debt.  They are going to use that as an excuse for yet more money printing from the Fed.  This is the path we are on, and it will continue to be the path we are on until the whole bloody mess collapses."

I just hope things unravel in an orderly fashion, but that may be a stretch.

If you prepare for inflation and deflation and you still may not win, but at least you won't lose. Jim Rickards recently released a report titled, "Why You Should Be Prepared for Both Inflation and Deflation." I agree. It makes sense. Which one will exert itself first remains to be seen. Hedge your bets.

I expect gold to serve its usual role as the premiere crisis hedge, regardless of which way it goes. I would rather be on the sidelines with cash and metals and leave the stock market for the "optimists." When you take a close look at what is really happening, there isn't a whole lot to be optimistic about. I believe we have made that case in these pages and it is up to you to decide if we are right and will prove to be correct. We certainly represent the minority these days. That could change very quickly.

Before signing off, here is an interesting Q & A with Jim Sinclair...

I keep expanding my position. Some bottoms are deeper and last longer than others, but I have been here before. I keep wondering how long interest rates will hold at low levels, and the dollar keeps strengthening.

CIGA Bob

Bob,

This is an exercise in "monetary magic" because to hold down rates the Fed must buy bonds through whatever name they give the program.

As you buy bonds at the Fed you create new money. This is called "debt monetization." The more dollars you create to hold rates down, the greater the supply of dollars. The greater the supply of dollars, the lower the dollar should go. You know that old belief in supply and demand thing.

This is why other currencies are being pounded. Maybe this is why Euro sanctions on Russia exist to strengthen the dollar at the cost of the Euro.

Check out the "MAGICAL" strong dollar.

Jim  

January 4th, 2015  

Keep the faith - prepare for the worst and hope for the best.

David

 

Featured Articles

Lawrie Williams (In Prospect: A strong 2015 For Gold And Silver?)

Ed Steer (It's clear that China and India alone are consuming all, or almost all, of the newly mined gold in the world at the moment.  This is a state of affairs that can't---and won't---last.) (Critical Reads)

Greg Hunter (Interviews Rob Kirby)

 

 

Zero Hedge (Martin Armstrong's perspective on this...)("Peak Gold Production" Hits In 2015 



holterThe Holter Report
bill holter
Bill Holter

THE MANHATTAN PROJECT

January 5, 2015 

 

Hopefully everyone is refreshed and ready to start the new year after spending the holidays with friends and family!  During the holidays, I had a chance to shut down a bit and just observe what's going on.  For me, this is a good thing because normally I view things from a big picture perspective rather than up close.  Most people see the trees and miss the big picture of the forest, my flaw is missing the trees sometimes.

   

Before getting to my main topic "The Manhattan Project", it would be good to tell you about my New Year's Eve "informal poll".  It has been many years since Kathy and I have gone out on New Year's Eve because the restaurant food is always the worst meal of the year due to the pressure on cooks to crank out more meals than any other evening.  It is also a dangerous night to be out and about because every amateur and their brother are out on the roads guiding 2 ton missiles with beer goggles on.  We decided to go to a neighborhood party just walking distance away.

   

I'm not trying to bore you, rather, I am trying to make a point.  I went to this party with a purpose.  A purpose my wife Kathy just cringed at.  My purpose was to see people's reaction to the truth as I see it.  To give you a setting, we live in a community of 300 or so homes, well away from any city or town.  In my opinion, we will in the future have a "community meeting" similar to this New Year's Eve party, only that meeting will be under similar circumstances to the "Jack and Jill" scenario I wrote of last week.

 

OK, the first person I saw when walking in the door was the "General".  He is a retired military officer who teaches concealed handgun classes (for free) to people in our community because he believes a well armed community is a safe community.  We have spoken several times about "what" we believe will happen, he had already thought the defense strategy through before we had ever spoken.  He "gets it".  The "people" unfortunately don't.

   

While mingling through and meeting people, each time I would mention "we will probably see each other at the next meeting".  Each time I said this, it was followed with "what do you mean?".  It truly was funny, the looks I got each time.  I then would explain "you do know the banks are going down this year, right"?  Though this was not a broad sampling, 100% of whom I spoke to said things like "that will never happen" or "this is America, it can't happen here".  There was also another "100%" agreement when my response was "do you agree the government is broke?".  Each and every person I spoke to agreed, "the government is broke".  Almost no one even knew what a derivative is, every single person knew "something" is not right and every single person agreed "the government is broke" ... BUT ...it can nor will ever happen here because "this is America"! 

   

I wanted to relay this to you because it confirmed everything we had thought, the public is beyond clueless.  Not only clueless but in absolute denial.  I am sure there were some conversations afterwards about the "crazy drunk cowboy" who thinks the banking system "can" come down.  I am not sure what other than denial can explain the mental fog which covers our land, but covered it is! 

   

As for the "Manhattan Project", if you remember, this was a very large and far reaching plan to create nuclear weapons.  Thousands of people were employed, huge resources were used and yet, less than two dozen people knew what was really going on in the big picture.  There were hundreds of puzzle pieces but people only knew what their particular puzzle piece was.  They may have known a little about one or two connecting pieces but that is as far as it went.  The point is this, there was a grand scheme which many worked on but almost no one knew about. 

   

It struck me over the holidays, this is most probably the same concept in the financial markets.  There are traders which constantly buy and sell futures on "orders" from above.  Do they know why?  Probably not, but, their personal bonuses depend on it.  We have seen scandal after scandal such as LIBOR rigging.  Did the traders know "why" they were rigging these rates?  Some did, others probably not, other than the immediate effect which translated into their year end bonus.  Don't get me wrong, I do understand there are still those out there trading "for profit", however, the financial world is increasingly controlled by algorithms.  Do the creators of these algos understand "why" they are programming what they are or are they "following orders" so to speak?  Please don't write me and tell me I've fallen off my rocker into a conspiracy pit, we know now for a fact that central banks are trading S+P futures.  I ask you this, ...to what end?  And how many participants really know what "the end game" is?

 

 The recent crash in oil prices is an interesting case in point.  Many financial writers speculated as to how or why the operation was undertaken.  I personally wrote, and still believe it was "our plan but not THE plan".  Meaning the U.S. believed they were crashing Russia's revenue ability while the reality is China filling her strategic energy reserves and the SinoRussian partnership was actually crashing our financial system.  In other words, they are letting us shoot our own feet off!

   

This past week, we received a little news from president Obama which strengthens this thought process in my eyes.  Mr. Obama came right out in a speech and said it was a U.S. "rationale" to crash oil prices to tip Russia financially and economically.  Before going any further, if this is true and it was our "rationale", this equals an act of or a declaration of war.  I have no doubt we did collude with Saudi Arabia to glut the market, I never dreamed Mr. Obama would be so brazen, so foolish as to say this publicly.  He has probably already "said enough", maybe he will expand on these thoughts, who knows?  When I say he has already "said enough", I am speaking to "liability" and further "proof". 

   

Starting with "proof", did he not come right out and say they have manipulated the oil market?  If you were an oil exporting nation, haven't you now been screwed financially because the U.S. unilaterally decided on a lower oil price to punish Russia?  It is one thing to manipulate markets and set prices under the cover of "market forces" ...it is an entirely different animal to admit or even gloat that you in fact "did the dirty work"! 

   

As for "liability", what if Venezuela or some other oil producing nation decided to sue the U.S. in international court for lost revenues?  What if some big oil company whose market cap has shed billions of dollars decides to sue the U.S. for collusion and market rigging?  What about domestic drillers and producers?  Can they try to sue the U.S. for destroying their business?  Can they go after the SEC or CFTC for not doing their job of maintaining "free markets"?  Maybe not but the door has now been opened because of a narcissist who wants to take the credit for collapsing the price of oil!

   

Taking this thought process just one step further, what does this say to the rest of the world?  Our markets are not really "free and fair"?  Heck, just in the last month we have found out that central banks not only "trade" in stock markets but are encouraged via exchange rebates and sweeteners to do so!  Congress is now contemplating an "audit the Fed" bill which I plan to write about further this week.  What in the world would foreigners think if it turns out the Fed has in fact bought S+P futures to rally the markets?  What if it turns out it is the Fed who has been behind all of the paper dumping of precious metals?  What if the Fed has "splashed around" in the oil market?  So much for their so called "independence".  The obvious answer is investors will "take on the Fed" as they will understand values are out of whack.  Investors will take on the bank and trade against them with the full knowledge, sooner or later the bank will lose by trading against Mother Nature's tide.

 
My whole point in writing this piece was to get you to think bigger picture.  In my opinion, the entire global financial, economic and geopolitical systems are all one big "Manhattan Project" aimed at some sort of goal (NWO?).  The "goal" is of course unattainable because markets are being pushed against Mother Nature.  More and bigger lies along with more and bigger interventions are constantly needed to keep this thing on the track.  I believe 2015 will be the year where "control" is lost because there are now too many moving parts to keep track of and too many broken parts to sweep under the rug. 
We will see ... 

Regards,  Bill Holter

hoffmanAndy Hoffman's Daily Thoughts

THE DIREST PREDICTION OF ALL

January 5, 2015 

 

I'm writing this New Year's Eve day, from the "Play Factory" in Phoenix - where my soon-to-be three-year old is frolicking, on one of Arizona's few rainy days. Oh well, the ominous, overcast weather is a fitting end to one of the most frustrating years of my life - which, I might add, will be replaced by weeks of sunshine starting tomorrow.

 

Watching the global economy freefall at a pace matched only by 2008 - albeit, with dramatically higher debt, social unrest, and geopolitical tension, I can only imagine what will occur when things really get ugly. And frankly, I have ZERO doubt that a year from now, today's economic horror show will be considered the "good old days." Today's PM attacks are just "par for the course" for TPTB's "last stand"; as honestly, how much more obvious can the Cartel have been in its defense of $1,200/oz gold; let alone, the $1,205/oz level it closed 2013 at?

 



Every day this week, oil, commodities, currencies, interest rates, and economic data have plunged; and while PMs surged higher Friday and Tuesday (albeit, muted by prototypical capping algorithms), the Cartel viciously fought back Monday and today. Moreover, PPT/Fed support of the stock market, whilst "not allowing" the 10-year Treasury yield to fall too far below 2.2%, round out the height of manipulative hubris. The problem, of course, is that with each passing day, the "chasm of destruction" between economic reality and manipulated markets - fostering historic investor lethargy - grows wider; and in the case of Precious Metals, the timing of their inevitable, perhaps permanent shortage has been dramatically accelerated.

 

To wit, today's economic data included the largest U.S. monthly home price decline in a year; followed by yet another downward "revision" of existing home sales; a multi-year low in the number of households expecting to purchase a home; an "unexpected plunge" in the Chicago PMI, and surging jobless claims. Meanwhile, in China, its manufacturing PMI again printed below 50 (signaling recession), whilst its main economic "leading indicator" plunged to its lowest level since the heart of the global crisis in early 2009.

 

Worse yet, dissension within the soon-to-implode ECB has never been worse, with Mario Draghi stating monetary union "must" be completed - as if it isn't, the "threat" of nations exiting the Euro (read Greece) could have dire consequences for all members. Simultaneously, one of Angela Merkel's top Bundestag allies claimed the Euro zone should no longer support Greece if it does not kowtow to "troika" austerity demands. In other words, even German support for the ill-fated monetary union is cracking, rendering Draghi's "whatever it takes" rhetoric and actions futile. Remember, Greece has €400 billion of debt that may - and likely, will - be defaulted if Syriza does, as expected, take control of Greece following next month's snap elections. And thus, it shouldn't surprise anyone that as I write, in these last hours of 2014, the Euro finally plunged below the July 2012 "whatever it takes" low of 1.2124 - on the verge of collapsing below ten-year support, to nearly the Euro's launch at the turn of the century. I mean seriously, this is one terrifying chart; and please note, how the 2010 bounce - corresponding to the initial Greek bailout; and the 2012 bounce, when Draghi said he'd do "whatever it takes" to save the Euro; simply bought ephemeral bounces that were destined to be swamped by the "unstoppable tsunami of reality"; which, quite clearly, is hitting Europe NOW.

 

Yes, the Euro is closing 2014 on its low tick; as will countless global currencies, serially crashing as fear of global economic and financial collapse goes parabolic. Not to mention, the interest rates in nearly all its member nations, as investors front-run the overt "QE to Infinity" that will become universally understood in the coming months. To wit, the "dollar index" has broken not only above its ten-year trading range, but the 2008 financial crisis high; clearly, illustrating the tragic ramifications of a collapsing fiat Ponzi scheme. The Ruble's 80% plunge against the dollar is grabbing all the headlines, but nearly all currencies are significantly lower against the dollar this year - as well as gold, as we recently emphasized. And not just "commodity currencies" like the Ruble, Rand, Australian Dollar, Indonesian Rupiah, and Nigerian Naira; but "mainstream" currencies like the UK pound; "cancer-stricken" currencies like the Pound; "pegged" currencies like the Swiss Franc and Yuan; and of course, suicidal currencies like the Yen.

 

To that end, how ironic is it that the year's best performing asset class is Chinese stocks? Just four months ago, they were down for the year, but ended 52% higher when the PBOC hyper-accelerated its already world-beating printing presses, by "unexpectedly" initiating easing measures from rate cuts, to relaxed bank reserve requirements, to eased mortgage financing standards - which, by the way, are just getting started. And what has actually occurred since then, aside from the opening of millions of margin trading accounts, just as in 2007, before the Shanghai stock exchange crashed? Per the aforementioned leading indicators and PMI data, every aspect of the Chinese economy has gone into freefall - from home prices; to manufacturing activity; debt delinquencies; and, of course, commodity demand. In other words, the aforementioned "chasm of destruction" between Chinese economic activity and financial markets is as wide as anywhere on the planet, getting wider each day.

 

Which brings me to today's all-important, year-opening topic, the "direst prediction of all" - referring to what we view as the most economically catastrophic of the 2015 predictions espoused in last week's audioblog. Which is, the horrifying collapse in commodities of all types; as depicted by the CRB Index, too, closing not only at its low tick of the year, but just 15% above its 2008 crisis low. Its largest component, WTI crude oil, just hit its low tick of the year as well, at $52.50/bbl - and at this point, it's difficult to believe anyone doesn't yet realize the global carnage this will cause.

 

Nearly four months - and 1,000 "Dow Jones Propaganda Average" points ago, we warned of the dire ramifications of the unfolding global commodity collapse. We also noted that based on their principal usage as monetary assets - per 5,000 years of financial history - gold and silver are decidedly not "commodities"; and today, more than ever, our confidence in their ability to protect assets from what's coming has never been higher. However, that's a story for another day, as what we're about to speak of is eminently important - and ominous.

 

Today's topic takes the issue of commodity crash one step further, care of the fantastic work of one of the world's greatest financial analysts, David Stockman. In his landmark book, the Great Deformation (which I haven't read), he writes of the big picture ramifications of four-plus decades of monetary lunacy; as not only did the resultant "liquidity" contribute to overvalued financial markets, but created an historical bubble in global manufacturing capacity. Said "deformation" was dramatically enhanced because bankers were allowed to run rampant with "weapons of mass financial destruction"; which, following the 1999 repeal of Glass-Steagal, have created a "new normal" of exponentially leveraged, unequivocally rigged financial markets.

 

In this must read article - and I do mean MUST READ; he discusses how the Fed and other Central banks' relentless monetary bubbles created such massive overcapacity in commodity production, it could take years - or decades - to be worked through. In other words, for all intents and purposes, the current plunge in commodity prices will be permanent. Nearly certainly in real terms, and possibly nominal terms as well - unless/until the Central banks inevitably resort to hyperinflation to "repay" their debts; which sadly, has been the route taken in every fiat regime throughout history. Thus, particularly given my ten years of experience as a Wall Street energy analyst, I am incredulous when I hear people speak of the "temporary" nature of the oil/commodity price decline; such as, for instance, Janet Yellen, who earlier this month described it as "transitory" - although clearly, she was lying through her teeth.

 

No, the multi-million barrel/day difference between supply and demand will decidedly NOT "correct" itself; particularly as demand continues to plunge, and supply to surge. You see, unlike in 2008, Central banks cannot inflate the money supply without causing hyperinflation, and manufacturing capacity is dramatically larger, financed predominantly with high-yield debt from an insolvent banking system. Worse yet, most such capacity is high-cost - such as the imploding U.S. shale complex; and thus, its heavily indebted purveyors will be forced to sell every last barrel to avoid instantaneous bankruptcy. Heck, Saudi Arabia itself just announced a record trade deficit; and given that it, and most OPEC producers, are socialized nations relying on $100 oil to fund spending programs, there is essentially no chance they will cut production; as not only do they desperately need the revenues, but are low-cost producers; and thus, know they can destroy high-cost producers, such as the U.S. shale industry. And sadly, this argument is not limited strictly to oil, but countless other resource-exploiting industries.

 

Except, of course, gold and silver - which are not only the polar opposite of "commodities" (given their maximum utility during times of financial crisis), but have been "treated to" the polar opposite supply effect of other commodities. In other words, just as the Central banks funneled endless amounts of printed money into the production of industrial commodities, their unrelenting suppression of gold, silver, and mining shares has created an essentially guaranteed production collapse; again, which could take decades to resolve, with the double whammy of occurring amidst historic demand.

 

At the Miles Franklin Blog, we have written of this all year; and given my five years' experience in the mining industry, I can tell you unequivocally that this outcome was set in stone as far back as 2011, when the industry was already devastated by capital strangulation, surging production costs, and surging geopolitical risks. In October's "Miles Franklin Silver All-Star Panel Webinar," we concluded that a 50% silver production decline in the coming years is not unrealistic; and as for gold, it too will unquestionably experience dramatic production declines in the coming years, as essentially no material capacity is expected to offset unrelenting depletion, particularly in today's suppressed price environment. Of course, when prices do inevitably explode, it will no doubt be due to the Cartel finally losing control over financial markets. This, in turn, will cause an historic "gold rush," not just by investors but governments themselves - such as, for example, "repatriators" like Germany, Holland, and Austria. Not to mention the "pink elephant" in the room - CHINA.

 

And thus, as 2014 comes to a close, we can only warn you of the likelihood that 2015 may be the ugliest economically of our lifetimes; during which, the few assets one can PROTECT themselves with likely trade at huge premiums to today's levels; that is, if you can find them at all. And as for the rest, my guess is "oversupply" will turn out to be the understatement of the century!

 

featuredFeatured Articles
Lawrence (Lawrie) Williams

In Prospect: A strong 2015 For Gold And Silver?

Lawrence (Lawrie) Williams - January 2, 2015

 

 

 

Well there's nothing like being optimistic at the start of a New Year and there are certainly many factors to be optimistic about if you are a gold bull. Gold demand remains strong - notably in China and India with those countries alone probably accounting for 100% or more of new mined gold at the moment. At the end of this article we will make some not very scientific predictions on the final levels for the gold and silver prices at year end 2015 - perhaps to have these totally shot down in flames when the year- end comes. It is always easy to be wise after the event.

China (in the form of the Shanghai Gold Exchange) is looking to perhaps see full year demand fall around the 2,100 tonne plus mark, only a fraction below last year's record of 2,181 tonnes. So much for the almost incessant mainstream media reports throughout 2014 of a collapse in the Chinese gold market!

India too has seen a remarkable pick-up in demand in the second half of 2014 despite the maintained imposition of 10% import duty on gold and silver - so much so that some commentators have reported that it may have become the world's No. 1 gold consumer again, retaking this position from China. It hasn't! But even so, if one takes smuggled gold into account to avoid the import restrictions, it could well have imported close to 1,000 tonnes in 2014 - maybe more - and with world newly mined gold output estimated as likely to be at perhaps just over 3,000 tonnes in 2014 then it definitely looks as though the two Asian giants will indeed have accounted for virtually all of this.

But of course China and India are not the only consumers of gold. Virtually every Asian and Middle Eastern nation has a propensity to accumulate gold, while there are also signs that the jewellery sector - the main non-investment gold consumption market - has also been picking up healthily in the U.S. in particular as the populace is fed a seemingly unending positive spin on a return to economic growth.

Geopolitical events are also impacting positively on safe haven demand for gold. The crisis in Ukraine and Crimea is still playing out and is likely to cause ever more strife moving forwards. Russia's President Putin in his New Year address made it quite clear that Crimea is now again wholly part of Mother Russia, while Ukraine's economic plight is dire and one finds it hard to see how it can continue without defaulting on its financial commitments. This could have a major adverse impact on creditor banks and nations, which in turn could have a knock-on effect on financial institutions globally. One can foresee runs on banks and domino bank and fund collapses as a result with the global financial system being so closely interlinked.

But Russia too has seen economic sanctions and low oil prices bite severely and it is also in somewhat of a financial imbroglio. But still it has been buying gold for its reserves, which it sees as a stabilizing influence. Russian banks are in financial trouble too as access to Western funds is cut off. What should worry the West is that Russia has the capability of itself imposing substantial financial damage on western economies by restricting oil and gas supplies, and possibly by cutting off wheat exports as well as restricting imports from countries imposing sanctions, among others. True this would further damage the Russian economy but the nation's rulers may feel that is a worthwhile sacrifice - and no-one should doubt the Russian peoples' capacity for absorbing economic pain, particularly if the internal political spin puts the problems all down to the wicked Americans and their European allies which it is doing very successfully at the moment.

And this all has the propensity for escalation from the current uneasy stand-off, to a resumption of the Cold War and even escalation into a limited Hot War should NATO move into Ukraine - a move President Putin sees as totally unacceptable. But increasingly hostile rhetoric and action on both sides could well lead to this taking place. That is indeed a scary scenario for Europe in general and former Soviet Union satellites in particular. Continued escalation on this front could well lead to an 'insurance' move back into gold and if financial institutions start to falter, or collapse altogether as a result of Western bank difficulties, the flow could become a flood.

Meanwhile there is no resolution in sight in Syria and Iraq with fundamentalist Islamic forces still firmly in place despite total Western air superiority. How long before the West has to put troops on the ground to hold back, or defeat, the fundamentalist forces? When religion is involved, defeat is perhaps not an apt word - attempted control may be better. Look at Muslim Afghanistan as an example. The Taliban has supposedly been defeated but still is capable of some horrendous day to day impacts, while the spillover into Pakistan and the rise of similar fundamentalist groups in parts of North Africa has to be deeply worrying. ISIS (or whatever it calls itself now) is unlikely to be able to build its Caliphate covering much of the Middle East, North Africa and even parts of southern Europe to emulate the Moorish empire of the past. However its fanatical support, now with access to oil revenues to provide finance to buy ever more sophisticated weaponry, may provide a military headache for the Western/Christian/Moderate Muslim alliances for many years to come.

New mined gold supply is peaking as pipeline projects come on stream and build up (but leaving very little new in the pipeline now to replace depleting and uneconomic resources). The industry's unprecedented cost cutting exercises will have put back new mine developments by many years and pushed back possible expansion plans.

The other major source of gold for the markets comes from scrap, but the lower prices have put something of a dent in supplies from this source. And much will have also been drawn out in 2009/10/11 when the gold price appeared to be rising inexorably and calls for individuals to sell unwanted gold jewellery were at their peak. Probably much less such metal is available to the markets nowadays.

On the negative side for gold, the metal price has shown weakness for three years now despite many of the above factors already being in play. Chinese demand hit a record in 2013, yet the gold price plunged. Sales out of the big gold ETFs will have been a factor that year. In 2014 too there were some significant sales out of ETFs as well but at perhaps only around 15% of those in 2013 and while there could be more to come from this source the amounts will likely diminish further. Nonetheless there are forces working against the gold price - and these may be even more prevalent in the much smaller silver market. The markets for both precious metals appear to being driven by the paper futures markets with relatively little physical metal changing hands.

There is a theory out there - not one believed by all - that the big money bullion banks are manipulating the gold price for their own ends - either to buy and make enormous profits when the market turns again, or at the behest of the U.S. Fed and other central banks. These may feel that a strong gold price would be seen as yet a further indicator of substantial weakness in the global fiat currency system and would act as a destabilizing factor in efforts to portray national economies as being stronger than they actually are. With major bank analysts mostly still bearish on gold - some more so than others - one does not know if this represents collusion with those seeing lower prices as in their best interests, or strongly held beliefs - but regardless of which these do tend to take the form of self-fulfilling prophecies as the big bank analysts will have very strong followings amongst the financial institutions in particular.

So there are strong pressures out there both for and against gold and it is difficult at this stage to predict which will win out in 2015, although one has a strong feeling that the long term future for the gold price is very positive - but then long term is a somewhat indefinite time period. So where will the gold price be 12 months from now. Here I'll take a leaf out of Martin Murennbeeld's book and come out with three price scenarios, and apply a weighting to each to come up with a final median prediction.

1. The high price scenario (probability weighting perhaps 15%) - Gold at $2,500, silver at $55.

2. Low price scenario (probability weighting 20%) - Gold at $1,000, silver at $12.50

3. Middle price scenario (probability weighting 65%) - Gold at $1325, silver at $24.

If we average these out we get a final median figure of: Gold $1396.50, Silver $26.35. Well it's probably as good a guess as any at this time of the year.

Lawrence (Lawrie) Williams has been involved with both the technical and the financial end of the mining sector for over 40 years, formerly CEO of top mining industry business publisher, Mining Journal Limited, he was Mineweb's General Manager and Editorial Director up until October 2012 and is now Consultant Editor. He has worked as a mining engineer on gold, platinum, uranium and copper mining operations.

Ed Steer

It's clear that China and India alone are consuming all, or almost all, of the newly mined gold in the world at the moment.  This is a state of affairs that can't---and won't---last.  But when will it end, you ask?  It beats the hell out of me, but it's a given that it will happen without warning.

 

With American power now being nakedly projected world-wide, especially with the Ukraine/Russia/China imbroglio, it's not hard to image that a war of some sort could show up in COMEX futures market.  Jim Rickards' "Currency Wars" are in full bloom---and a showdown in the precious metal market is not out of the question.  As I've said on several occasions, the Russians and Chinese are fully aware of the price management scheme in the precious metals in particular---and the commodity markets in general---and it may be to their advantage to pull the trigger in that arena at some point.

Right now, all we can do is sit here and watch the "da boyz" do their thing---and wonder when, and under what circumstance, it will all come to an end.

Get Your Gold Now Before It's Too Late - Jim Rickards

December 31, 2014 

Kitco News is kicking off its Outlook 2015 coverage with an interview with bestselling author Jim Rickards to see what he thinks will happen to the U.S. economy in the coming year and how it may affect gold. "We're absolutely in a currency war," he tells Daniela Cambone.

Looking at gold, Rickards says the current price is a great entry point because once it takes off, he thinks it will be hard for investors to find any gold.

This 6:32 minute video interview was posted on the kitco.com Internet site on December 31---and it's courtesy of Harold Jacobsen.

Read more...  

 

Koos Jansen: More silver traded in Shanghai than on Comex in 2014

January 2, 2015 by Koos Jansen 

In 2014 silver futures traded on the Shanghai Futures Exchange (SHFE) accounted for 2,908,168 tonnes. On the COMEX 2,123,387 tonnes were traded, 37% less than in Shanghai. 

First let's have a look at the latest SGE trade report of week 52 (December 22 -26). Total SGE gold withdrawals was a staggering 58 tonnes in week 52, year to date (until December 26) SGE withdrawals have reached 2,073 tonnes. With three trading days left (December 29 - 31) total withdrawals are 124 tonnes shy of the 2013 record (2,197 tonnes). The possibility 2014 withdrawals will transcend 2013 is small, though 2014 has once again been an incredible strong year for Chinese gold demand.

Regular readers of this blog are used to the tonnage being withdrawn from the SGE vaults every week, often more than 40 tonnes (in one week). The fact the mainstream media, or the World Gold Council, CPM Group or Thomson Reuters GFMS, still don't report these numbers is getting weirder by the day.

This must read commentary by Koos was posted on the Singapore Internet site bullionstar.com on their Friday---and I found it on the gata.org Internet site.

Read more... 

 

Jim Rickards: Why You Should Be Prepared for Both Inflation and Deflation

 

James Rickards.

Posted December 31, 2014

Today's investment climate is the most challenging one you have ever faced. At least since the late 1970s, perhaps since the 1930s. This is because inflation and deflation are both possibilities in the near term. Most investors can prepare for one or the other, but preparing for both at the same time is far more difficult. The reason for this challenging environment is not difficult to discern.

Analysts and talking heads have been wondering for five years why the recovery is not stronger. They keep predicting that stronger growth is right around the corner. Their forecasts have failed year after year and their confusion grows. Perhaps even you, who have seen scores of normal business and credit cycles come and go for decades, are confused.

If this "cycle" seems strange to you there's a good reason. The current economic slump is not cyclical; it's structural. This is a new depression that will last indefinitely until structural changes are made to the economy. Examples of structural changes are reduction or elimination of capital gains taxes, corporate income taxes and the most onerous forms of regulation. Building the Keystone Pipeline, reforming entitlement spending and repealing Obamacare are other examples. These are other structural policies have nothing to do with money printing by the Fed. This is why money printing has not fixed the economy. Since structural changes are not on the horizon, expect the depression to continue.

This commentary by Jim was posted on the dailyreckoning.com Internet site on December 31---and I thank reader Dan Lazicki for sharing it with us.

Read more...  

 

Gold "Terrifies" the International Monetary System

Wolf Richter 
December 22, 2014

 

In an interview with financial blogger Wolf Richter, Goldbroker.com founder Fabrice Drouin Ristori discusses attempts by central banks to repatriate their gold from the United States and explains that gold is a restraint on government power that governments can't abide. "Everything is done to bash gold so that no link can be established between the loss of purchasing power of paper currencies and the performance of gold," Ristori says. 

This short interview was posted on the wolfstreet.com Internet site back on December 22---and it's another item I found on the gata.org Internet site.  It's worth reading as well.

Read more... 

 

  

China's net gold imports from Hong Kong hit 9-month high in November

December 29, 2014

China's gold imports from Hong Kong in November rose to their highest level since February, indicating strong demand in the world's top bullion consumer ahead of the Lunar New Year.

The strong imports could also be for stocking-up of inventories ahead of the Chinese New Year in early 2015, when gold is bought for good fortune and to be given as gifts.

Net gold imports from Hong Kong to the mainland rose to 99.111 tonnes in November from 77.628 tonnes in October, according to data emailed to Reuters by the Hong Kong Census and Statistics Department.

China does not provide trade data on gold and the Hong Kong figures serve as a proxy for gold flows to the mainland.

The Hong Kong data, however, might not provide a full picture of Chinese purchases as direct imports through Shanghai and Beijing - for which no data is available - have gathered pace this year.

These numbers, as usual, have been leaked early---and the official report won't be out until mid-to-late next week---and at that time, Nick Laird will update his charts---and I'll post them then.  But, having said that, this import number is truly amazing, as it appears that China is going to end the year with an import 'bang'.  This Reuters story appeared on their website at 5:11 a.m. EST on Monday morning---and is another one I found in a GATA release yesterday.

Read more...  

 

 

Koos Jansen: New York Fed's gold vault outflow hit 47 tonnes in November

December 29, 2014 by Koos Jansen 

Forty-seven tonnes of gold left the vault of the Federal Reserve Bank of New York in November, apparently in connection with the gold repatriations of foreign governments, Bullion Star market analyst and GATA consultant Koos Jansen reported yesterday.

This is another gold-related article that I found posted on the gata.org Internet site.

Read more... 

 

  

Ted Butler: The Perfect Crime

December 29, 2014

 

A couple of weeks ago, a long-time subscriber correctly pointed out that I seemed to be speculating more than usual in my conclusion that JPMorgan was the big buyer of Silver Eagles and had accumulated as many as 300 million oz of silver, including Eagles and bullion. The subscriber noted that I usually relied on hard-core facts that could be documented and not on speculation. As it turns out, I believe there are sufficient number of hard facts behind my speculation, but I had failed to point them out. So let me present the facts, as I see them, that point to JPMorgan having amassed the largest physical silver position in history.

First, let me set out what I am suggesting concerning JPMorgan and silver. I'm not suggesting I knew all the facts as they were developing, but I came to see them only afterward with the benefit of hindsight. The facts show that JPMorgan took over Bear Stearns and its concentrated short position in COMEX silver (and gold) in March 2008 when silver was close to $21, the highest level to that point in 28 years. The price of silver fell from that level in an irregular pattern until late 2010, while JPMorgan both decreased (bought back) much of its concentrated short position on sharp price declines and increased its short COMEX silver short position on rallies, as I publicly chronicled all along. At times, JPMorgan's COMEX net short position exceeded 40,000 contracts or the equivalent of 200 million oz. Such a large concentrated position necessarily controlled the price of silver and was, in fact, manipulative on its face.

Because it controlled the price of silver, JPMorgan profited handsomely on its COMEX manipulation thru 2010 and not even an ongoing five-year CFTC investigation interfered with JPM's control on silver prices. However, in late 2010, investor demand for physical silver caused silver prices to break above the highs of early 2008 and JPMorgan could no longer control the price of silver through excessive paper short selling on the COMEX. Physical silver conditions tightened so much by the end of April 2011 that the price reached nearly $50 and, quite literally, JPMorgan (along with other collusive CME traders) were staring into a financial catastrophe, the same as undid Bear Stearns three years earlier.

It nearly goes without saying that this falls into the absolute must read category.  I urged Ted to post this in the public domain when it first appeared in as a commentary to his paying subscribers---and he has seen fit to do so now.  I've been using bits and pieces of it as quotes in my column for the last week or so, so some of it sounds familiar, you'll know why.

Read more...  

 

 

Greg Hunter's 

USAWatchdog.com

 Greg Hunter On January 4, 2015

Gold and derivatives expert Rob Kirby thinks crashing oil prices are going to lead to a 2008 style financial meltdown.  This is not a maybe-a market explosion is going to happen in 2015.  Kirby contends, "Oh yes, without a doubt, it will.  It must because the income crude oil sales generate are used to pay the interest on the debt. . . . If you have a mortgage payment of $5,000 at the end of the month and you only have $2,500, you have defaulted.  That is the position they are in right now.  We just need to wait for some coupon dates to come and go because these guys won't have the money.  They don't have the income."

Kirby also thinks what is happening with oil prices being cut in half in a matter of months is no accident.  Kirby explains, "I look at what is transpiring in the crude oil market as yet another engineered or financial trickery on the part of the financial elites. . . . What this breakdown in the crude oil price is going to spawn another financial crisis.  It will be tied to the junk debt that has been issued to finance the shale oil plays in North America.  It is reported to be in the area of half a trillion dollars worth of junk debt that is held largely on the books of large financial institutions in the western world.  When these bonds start to fail, they will jeopardize the future of these financial institutions.  I do believe that will be the signal for the Fed to come riding to the rescue with QE4.  I also think QE4 is likely going to be accompanied by bank bail-ins because we all know all western world countries have adopted bail-in legislation in their most recent budgets.  The financial elites are engineering the excuse for their next round of money printing . . .  and they will be confiscating money out of savings accounts and pension accounts.  That's what I think is coming in the very near future."

On the economy getting better and the upward revision to GDP of 5%, Kirby says, "The official data is inconsistent with what you can imperially observe going on in the economy.  The economy isn't doing well, and in addition to the economy not doing well, the U.S. government, for all intent and purposes, is insolvent.  Why bonds would be rallying against a backdrop of an issuer that is insolvent is beyond anybody's fundamental understanding, but fundamentals don't count anymore in our markets. . . . We don't have markets anymore; we just have interventions. . . . This financial engineering is all a hallmark of communism or central planning.  Central planning has a track record of failing."

More...  

 

 

Zero Hedge

 

Martin Armstrong's perspective on this...

January 1, 2015 by Martin Armstrong 

Turkmenistan, the former Soviet republic, devalued its currency against the US dollar by 18% for the new year. Turkmenistan is energy-rich and this is the latest sign of seriousness of the collapse in oil.

 

This will contribute to now force the dollar higher as commodities decline, the energy producing nations will be compelled to devalue their currencies in an effort to try to make ends-meet.

 

Devaluations will result in an attempt to create inflation to offset the deflation.

 

We are in a major economic collapse on a global scale.

 

Most people do not understand that this is the real threat we face.

 

We know, we know, "too small to matter"... "contained"... etc etc etc... nothing matters until it all matters remember... and the number of straws on this camel's back are starting to get very heavy.

  

"Peak Gold Production" Hits In 2015

Submitted by Tyler Durden  

 

It is becoming increasingly clear that just as the crude oil market is set for some violent times ahead as producers lock into the defection phase of the Prisoner's Dilemma and flood the market with supply in an attempt to crush the weakest competition, so the gold market is set for many upheavals, the first of which, however, may be what Goldcorp defined in a recent presentation slideshow as Peak Gold.

 

 

 

 

Submitted by Tyler Durden December 30, 2014 

Wealth inequality isn't just a political issue - it's a survival issue. When a society hits a certain level of economic disparity, it is set on a path towards destruction. It happened to the Roman Empire, and it will happen to the United States.

 

 

 

recapMarket Recap
Tuesday December 30, 2014


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