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September 26 2018

moneymetals

Gold/Silver Ratio Back at Extremes

gold-silver-ratio-at-extremes-social.jpg

The gold/silver ratio, calculated by simply dividing the gold price by the silver price, may be signaling the end of the bear market in metals is drawing near. That could be good news for gold investors and great news for those who hold silver.

First, let's take a look at a long-term chart of the ratio:

Gold/Silver ratio (1975-2018)

The 1980 low in the ratio coincided with the blow off top in the silver price at $50/oz. Both metals fell sharply after that peak, and silver underperformed gold for the majority of the next 11 years.

The gold/silver ratio peaked in 1991 when it spiked to almost 100. Gold was priced near $400/oz and silver near $4. Since that peak, the ratio has spent the majority of its time bouncing between about 40 on the low end and 70 on the upper end of the range.

Read more: 

https://www.moneymetals.com/news/2018/09/24/gold-silver-ratios-at-extremes-001623

June 13 2018

moneymetals

WHY HARRY DENT’S $400 FORECAST FOR GOLD IS WRONG…. Price Is Heading Up Much Higher

Harry Dent has been making the rounds suggesting that for gold to get back to its pre-bubble price, it would need to fall to $400 or $450. If we were to believe Mr. Dent, then it would be bad news for gold investors. However, Harry Dent’s gold price forecast is quite faulty because he fails to consider the most critical factor.

Harry Dent has become well-known on the internet for his $750 gold price forecast. He bases a low gold price upon what he calls “The end of the Commodity Super-Cycle.” Dent sees nothing but massive deflation ahead. Thus this will cause the gold price to fall along with all commodities.

Unfortunately for Dent, his gold price forecast is incorrect because he fails to incorporate the Falling EROI (Energy Returned On Investment) and energy into his analysis. Dent, like many in the financial industry, believes in the “Energy Tooth Fairy” (a term coined by Louis Arnoux). What I mean by the Energy Tooth Fairy is the notion that economy will continue to grow forever because plenty of cheap energy will always be available. Thus, economic and business cycles, forecasted by Dent, will also continue forever.

Before I explain in detail why Dent is totally wrong on his $400 gold price forecast, here he is in a recent interview on Kitco:

(https://www.youtube.com/watch?v=62jrl_irLzs)


Dent makes several forecasts in the interview, but his price target for gold is the most startling for precious metals investors. He says gold is heading for $650-$750, but that is just the first target. Dent then says, “Ultimately for gold to erase its bubble and get back to its bubble origin, it would be $400-$450. Once gold hits $400 or $450, then Dent would be a buyer.

I gather Dent is suggesting that gold became a bubble in 2004 when it went above $400 an ounce:

Gold price 20 year chart june 11 2018

As we can see in the chart above, the gold price never fell below $1,050 since the 2008 Financial Meltdown. Is Harry Dent suggesting that the gold price will drop another $600 from its low of $1,050 in 2015??




June 11 2018

moneymetals

Why are Gold/Silver Premiums SO Darn Low Right Now?

The bullion markets have undergone a shift in recent months. Prices may be range-bound, but there has been a transition from a seller’s market to a buyer’s market. Our goal, as always, is to keep our readers and clients apprised of developments and answer your questions.

Question: Why don’t spot prices for gold and silver respond to bullish news events or fundamentals in the physical market?

Answer: Physical supply and demand don’t necessarily impact the “spot” prices for gold and silver set in the futures markets on a day-to-day basis.

Take a hypothetical situation where some geopolitical event has investors running for safety. Lots of people decide to buy gold. Unfortunately, many of these investors will foolishly turn to gold futures.

As demand spikes in the futures markets, the bullion banks stand ready to meet the new demand with freshly printed digital contracts. This new supply of gold derivatives is scooped up by eager buyers even though not a single physical bar is added to any inventory. Their digital receipt which purports to represent gold is, in fact, almost completely unbacked.

The geopolitical event may drive plenty of demand, but the impact on price will be muted, and perhaps eliminated entirely.

Question: I noticed that premiums have fallen significantly compared to two years ago. Why has this occurred?

Extremely low prices

Answer: When demand for coins, rounds, and bars outstrips the physical inventory held by dealers, premiums will start rising as dealers bid aggressively for inventory.

This dynamic drove premiums sharply higher a number of times between 2008 and 2016. This part is telling; the futures markets can, and often do, signal the exact opposite of what is happening in the bullion markets where supply and demand are actually balanced through price. Between 2011 and 2015, spot prices were in decline, but that was a period of unprecedented demand for physical coins, rounds, and bars.

Today, this dynamic is working in reverse. Retail bullion investors in the U.S. (but not worldwide) have been more inclined to sell.

They seem optimistic that President Donald Trump and his policies will solve many problems. Some are frustrated by the returns in the metals markets and seek better performance elsewhere. Dealers are buying lots more inventory from the retail public than they did a couple years back, and this glut in supply has caused premiums to fall as a result.

We view this period of relatively low spot prices AND extraordinarily low premiums on physical gold and silver items as the best sort of environment to buy, not sell. But for those wishing to sell, Money Metals also offers the best prices.

Article Source: 
(https://www.moneymetals.com/news/2018/06/11/why-are-gold-silver-premiums-so-low-001549)

May 01 2018

moneymetals

Marc Faber: Countries Unwise to Let Antagonistic U.S. Hold Their Gold

Well now, for a closer look at America’s politics internationally and what it all might mean for gold and silver, let’s get right to this week’s exclusive interview.

Marc faber

Mike Gleason: It is my privilege now to be joined by a man who needs little introduction, Marc Faber, editor of The Gloom, Boom and Doom Report. Dr. Faber has been a long-time guest on financial shows throughout the world, and is a well-known Austrian economist and investment advisor, and it's a tremendous honor to have him on with us today.

Dr. Faber, thanks so much for joining us again, and how are you?

Marc Faber: Well, it's my pleasure to be on your show. Thank you.

Mike Gleason: Let's start out here with the equities Marc. Now the U.S. stock markets peaked in late January and made their lows for the year in early February. Stocks have been trading in a range since, but are currently pushing back towards those lows as volatility has certainly picked up. If you had to guess about which way the markets are likely to break from here, what would it be, and do you think we've seen the top for 2018 or can speculators keep pushing the markets higher for a bit longer?

Marc Faber: That's a good question and I think everybody's interested in the answers and everybody has a different view, but I have maintained that the January 26th high for the S&P up 2,872 was like a mirror image of the low on March 6th, 2009 when the S&P was at 666. At that time, everybody was bearish and leading strategy and I don't want to name who, but they were predicting for the S&P to fall to 400. And what happened is that, because sentiment was so negative, and the market was so oversold, the market turned around and actually on very poor earnings, started to go up. And now, we have, in January, a high, when everybody felt that the market would go higher and what then happened is that on good earnings, stocks didn't move up, but started to go down.

So, I think we are in a situation where it is likely, it's not yet a hundred percent sure, in order to get a clearer picture, if a major bear market has started, we would have to make a low below the February low, but that hasn't happened yet. But looking at the market and the market action and the momentum and the number of stock that are actually making new lows, I'd say there is a fair probability that the market will disappoint point very badly.

Mike Gleason: Dr. Faber, it seems to us that the fate of precious metals markets is tied pretty closely to stock prices, at least in the near term. We lack either fear or greed to drive any trend change. Here in the U.S. there's very little demand for safe-haven assets. If you look at sentiment in the metals markets you'll find that the greed factor is also missing. Now that could all change if gold and silver can catch investors' attention by significantly outperforming stocks for a while longer or if we get the long overdue correction stocks.

Now Marc, you wrote recently about two items you feel would signal a major top in the equity markets. The first had to do with the public going all-in, coupled with an excessive amount of speculation. The second would be the revelation of a major fraud. Those items will be familiar to anyone who had taken a good look at the 2008 financial crisis. Are you expecting history to repeat itself here?

​Read/Listen to the full podcast (source) ​

April 24 2018

moneymetals

China Takes the Long View on Gold-Silver... and So Should You

A cursory look at Chinese history can convince you that China should not be underestimated when it sets its sights on a particular goal.

Even before Mao Zedong took over the reins in 1949, and the first Five Year Plan began in 1953, centuries of history demonstrated that long-term planning, while not always meeting expectations, is a core behavioral trait of the Chinese psyche.

And more often than not, it has enabled them to hit the mark.

Expect eventual success for the One Belt, One Road Initiative – the world's largest construction project, estimated to cost $80 trillion dollars – linking the Asian mainland, (including Central Asia) with Europe via high speed rail, communications links and vibrant financial trading platforms.

And expect this project to be a major factor in bringing about what Doug Casey and others believe could become the greatest commodities bull-run that most of us now living are going to see.

The petro-yuan. A game-changer?

And oh, by the way, China recently officially launched a petro-yuan contract at the Shanghai International Energy Exchange. It marks the first time overseas investors have been able to access a Chinese commodity market – an oil futures contract – that can be settled, not only with U.S. dollars, but also Chinese Yuan, eventually a basket of currencies... and gold.


Continue Reading (source)

January 29 2018

moneymetals

Precious Metals Markets Outlook 2018

The first trading days of 2018 are confirming signs of renewed investor interest in the precious metals sector after a long period of malaise.

Gold bull

Gold and silver markets entered the year with some stealth momentum after quietly posting gains late in 2017. Gold finished the year above $1,300/oz. – its best yearly close since 2012.

Over the past five years, the yellow metal has been basing out in a range between $1,050 and $1,400. A push above $1,400 later this year would therefore be significant.

It would get momentum traders and mainstream financial reporters to take notice.

The alternative investing world was enthralled by Bitcoin in 2017. While we don’t expect a Bitcoin-like mania to take hold in precious metals in 2018, we do expect gold and silver markets to make some noise.

Stimulus to Push Up Commodity Prices Again

Even as the Federal Reserve vows to continue raising its benchmark interest rate and “normalizing” its balance sheet, a flood of new fiat stimulus is set to hit the economy. The recently passed tax cuts will cause hundreds of billions – perhaps eventually trillions – of dollars to be repatriated back to the United States.

Continue reading (source)

January 25 2018

moneymetals

The Market Underestimates The Tremendous Energy Consumption By The Gold Mining Industry

While the gold mining industry reports energy as only 15-20% of its total production costs, the total amount consumed by the industry is much higher. The market underestimates the amount of energy consumed by the gold mining industry because of the way it is listed in their financial statements. Thus, it takes a great deal more energy to produce gold than the market realizes.

Due to the complex supply chain system that we depend upon, most of the energy that is consumed in the production of goods, services, materials, metals, and commodities is hidden from plain sight.For example, a gold mining company will list “Tire Costs” in their Financial and Sustainability Reports. However, even though a tire cost is listed as a material cost, the majority of a tire’s production cost comes from burning energy… in all forms and in all stages.

For example, Barrick Gold consumed nearly 25,000 tons of tires in 2013 on its mining operations. According to the Rubber Manufacturing Association, it takes roughly 7 gallons of oil to produce a standard car tire. And from the article, This Is What A $42,500 Tire Looks Like, stated the following:

Caterpillar 797 tire

One of the many unique aspects of the Cat 797 are its tires: More than 13-feet-tall, weighing 11,860 pounds, each Michelin or Bridgestone 59/80R63 XDR tire costs $42,500 and that’s when you buy the full set of six required by each $5.5 million truck.

Contains nearly 2,000 pounds of steel, enough to build two small cars and enough rubber to make 600 tires to put on them.

If the Rubber Manufacturing Association says it takes 7 gallons of oil to make one standard tire, and this article claims that the 13-feet-tall tire used by the Caterpillar 797 haul truck contains enough rubber to make 600 tires, then it takes 4,200 gallons of oil to make one of these giant tires. If we take a more conservative estimation of a smaller mining truck tire, it would likely consume at least 2,000 gallons or oil, or nearly 50 barrels of oil.

​Continue reading.. (source

November 21 2017

moneymetals

Will the Tax Reform Debate Impact Precious Metals?

November 20, 2017 -- Precious metals got a boost last week as investors were reminded that stock prices move in two directions -- up and down. The S&P 500 and the Dow both finished the worst two weeks they have seen since August.

The selling certainly wasn’t dramatic (both indexes remain within about 1% of their all time highs), but it does represent the recent negative correlation between stocks and metals. Absent the return of an inflation trade, any sustained rally in metals will likely have to be fueled by investors fleeing the stock markets. We’ll see how the equity indexes fare this week. 

Taxes

Wall Street is focused on the debate over tax reform. Whether Congressional Republicans will muster the majority needed to pass a tax bill remains too close to call. We remain skeptical given the combined animosity of the Republican leadership and Democrats towards the president.

At least metals investors who would like some tax relief may get higher gold and silver prices as a bit of a silver lining. Should tax reform fail, it will likely hurt the stock markets and prompt some flight to safety. Trading figures to be lighter this week given the Thanksgiving holiday, but there is some significant economic data due out. We’ll see reports on existing home sales, durable goods, and the FOMC minutes from the Nov. 1st committee meeting. 

Source

August 29 2017

moneymetals

"Alert: Gold Breaks Out to New 2017 High"

Gold’s naysayers and doubters came out in full force earlier this summer as sentiment reached its nadir. The mid-year pullback in prices did, too.

There can be no doubt about it now – gold has broken out of its summer doldrums. On Monday, the yellow metal finally broke through the longstanding $1,300/oz resistance zone to make a new high for the year at $1,316.

Gold - continuous contract (august 28, 2017)

Assuming the breakout holds, the next upside target is $1,375/oz, the high point for 2016.

There are plenty of bullish factors behind gold’s recent upside momentum to continue pushing prices higher in the days and weeks ahead. The gold mining stocks are starting to show relative strength again. And the U.S. Dollar Index appears to have begun another new down leg this week, falling Monday to a two-and-a-half-year low.

Another bullish factor is geopolitics. Gold gained a few more dollars in early trading Tuesday morning in Asia after North Korea launched a missile over Japan. Japanese Prime Minister Shinzo Abe said, "Their outrageous act of firing a missile over our country is an unprecedented, serious and grave threat and greatly damages regional peace and security."

On any ordinary news day, this dangerous provocation from North Korea would be the top story on all the cable news channels. Hawks would be calling on the U.S. to retaliate, and doves would be warning of the potential for millions of deaths in the event war breaks out in the densely populated region.

For now, though, the unprecedented flooding caused by Hurricane Harvey is the Trump administration’s top priority. Early estimates are that the storm has caused $40 billion in damage. Water levels are still rising in Houston, and surrounding areas extending to Louisiana, so the scale of the catastrophic losses stemming from 11 trillion gallons of water will continue to grow in the days ahead.


Continue reading... Article Source

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