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March 29 2019

moneymetals

So Why Should You Own Gold?

Maybe you have some gold (and silver) but not enough. Maybe you haven't added to your stash for quite awhile, and you kinda' forgot why you bought it in the first place.

Or perhaps you don't own any precious metals at all!

If one of these circumstances fits you, then it's time to refresh your memory on the multiple reasons why you should own gold, assess your risk profile and unique financial circumstances... then act!

The oft-stated Gresham's Law tells us that when a government dictates the exchange rate between different types of money, the "good," or undervalued method of exchange gets chased out by the "bad," or overvalued version.

Thus the "bad" money stays in circulation and, as debasement (inflation) picks up, is quickly spent.

Unbeknownst to most – for now – U.S. inflation (greatly understated by "official" statistics) is increasing across the board. It doesn't need to hit double digits in order to move the dial on gold and silver prices. Invariably, the "smart money" sniffs out the potential well beforehand – which is what it's been doing for the last 9 months!

The "good" money in the U.S. is in reference to gold after FDR's infamous 1933 edict banning circulation… and later, the removal of silver from our coinage starting in 1965.

Today, a pre-1965 quarter at $16/ounce silver is worth about $2.75. Why would anyone exchange it for an 8% copper/92% nickel slug? As for a gold coin, don't even bother doing the math!

In Venezuela, according to the IMF, inflation will rocket along this year at 10 million percent! How long do you think the ironically-named Bolivar Fuerte ("strong bolivar") stays in someone's pocket, bank account, backpack... or large cardboard box?

You probably recall the reasons for owning gold. Here’s a timely review...

It's durable. Spanish gold bars and coins have been recovered from shipwrecks submerged for centuries... no worse for the wear!

It's portable. A 25 (troy) ounce tube weighs less than two (avoirdupois) pounds and is worth around $33,000 today.

It's divisible into small portions. 1/10th of an ounce is the size of a thin dime, but you can buy/store it by the gram - or in blocks of grams.

It's difficult to counterfeit. Just about any quality coin shop can spot a "weight problem" in relation to the expected size of a bullion coin or bar that a crook – or a naive buyer – might bring in for fiat trade.

It stores easily. Significant dollar amounts can be squirreled away just about anywhere.

Gold available for purchase is in finite supply. At a fairly consistent production rate of around 2%/year (and falling), gold is unlikely to experience a "production spike" like a base metal might.

It can serve as collateral for loan agreements, and as financial insurance.

Annual gold production (2003-2024)

Gold (and silver) make great gifts. My daughter still has the 1 troy ounce Krugerrand she received as a high school graduation present. The cost: $275. Her brother has a tube of 25 American Silver Eagles purchased for $7.50 apiece.

It's costly to mine. The industry gauging standard of All-In-Sustaining-Costs (AISC) for even the most efficient miners is still about 80-90% per ounce of what they're paid from the sale of production. What's more, miners have a wasting asset that – unless the deposit can be replaced with additional ore – diminishes the value of their project with every ounce they sell.

Read the full article here: https://goo.gl/B9eKau

March 27 2019

moneymetals

The Staggering Amount Of Gold & Silver Investment Since The 2008 Financial Crisis

silver-gold-investment-since-2008-social.jpg

While the demand for precious metals is certainly off its highs from prior years, investors would be quite surprised by the astonishing amount of physical gold and silver investment since the 2008 financial crisis. Only by comparing the gold and silver investment demand to the prior decade, can we truly understand how the precious metals market has changed, and probably forever.

Now, before I get into the information, I wanted to say a few things about precious metals sentiment and the disillusionment, and at times, the outright disgust, by a percentage of former gold and silver investors. I am not going to name any names, but rather focus on the inability of these individuals to CONNECT THE DOTS in regards to the disintegrating Global Financial Ponzi Scheme.

And… for those few who still believe in the “Crypto Miracle,” to overtake 2,000+ years of gold and silver as money, you have my sympathies. I am not going to get into any details, but just to say… don’t count on High-Tech to solve our problems in the future. High-tech only creates more problems. So, if you believe high-tech is going to solve problems, then you don’t understand the historical record on the “Collapse of Complex Societies.”

Regardless, I believe part of the reason the “once” precious metals bugs, have now become quite frustrated, is that they have been taken in by the Mainstream Financial Koolaide. And why shouldn’t they? Stocks and real estate prices have been going up and up, until recently, for the past seven years while the metals peaked, declined, and have been virtually flat.

Yes, it’s frustrating to see the value of precious metals underperform the market while everything else seems to be heading toward the moon. But, that in itself should give anyone with a decent amount of intellectual know-how the ability to sniff out that… SOMETHING JUST AIN’T RIGHT. For some odd reason, all the negative aspects of the economy, the massive debt, derivatives, and leverage are all but forgotten when all we do is focus on the highly inflated stock, bond, and real estate asset values.

Unfortunately, the inability to see how the debt, derivatives, and leverage have created the biggest Global Ponzi Scheme in history will create the largest financial collapse ever witnessed, causing most investors to go bankrupt. It’s only a matter of time, and time is running out.

So, when I write about gold and silver, I am not doing so because I want to see a 1,000+% gains in the metals (that wouldn’t bother me either), but because there really isn’t much else worth owning as “Liquid Investments” when the Phat Financial Lady finally sings. Thus, I don’t focus on price targets or timelines, because that’s a fool’s game (one I was guilty of doing several years ago… no longer).

Frustration occurs when something doesn’t happen when or how we expect. Which means, it’s best to focus on the critical information, make one’s investment decisions, and let the system unfold in its due time.

The 2008 Financial Crisis Was A Game-Changer For Gold & Silver Investment

Because we focus on day-to-day news, we tend to overlook longer-term trends. While short-term information is important, it doesn’t override longer-term fundamental trends. Well, yes… maybe in some cases, but if we take the collapse of the Ancient Roman as an example, it cannot be attributed to just the events that occurred over the last few years of the empire, but instead, the centuries it took for its Falling EROI – Energy Returned On Investment, to destroy it from within.

Today, we are in the same predicament as the Ancient Roman Empire. However, the overwhelming majority of people don’t see it because they are only focused on short-term results and information. Thus, to truly understand the future, we have to look back in the past. And, if we do this with gold and silver investment, we will see a very interesting trend.

According to some of the best industry sources, the World Gold Council and World Silver Surveys, investors purchased 16,200 metric tons (mt) of gold and 57,800 mt of silver from 2009-2018:

Total physical gold & silver investment (2009-2018)

That turns out to be 520 million oz of gold and a nearly 2 billion oz of silver. Now, these figures only represent the physical bar and coin demand, including central bank net purchases. I did not include ETF’s or similar products. First, there is no way of knowing if the gold or silver is over-subscribed in these precious metals ETF’s or secondly, if all the metal that is listed, is contained in the vaults. So, the figures are likely much higher, especially for silver.

Continue reading: https://goo.gl/mpmhTe

March 25 2019

moneymetals

What Do Airline Crashes and the Precious Metals Markets Have in Common?

Boeing and the Federal Aviation Administration worked closely together to hustle a new passenger jet through the safety certification process. The combined efforts to save time and cost, coupled with little sense of accountability, resulted in a tragic safety flaw.

Boeing airplanes

Now hundreds of passengers are dead, albeit in other countries. The public is finding the enormous trust placed in the manufacturer and the agency tasked with monitoring safety was badly misplaced.

The regulator tasked with safety appeared more interested in protecting Boeing’s monopoly and bottom line.

Here is an excerpt from an article last week in the Seattle Times:

Federal Aviation Administration managers pushed its engineers to delegate wide responsibility for assessing the safety of the 737 MAX to Boeing itself. But safety engineers familiar with the documents shared details that show the analysis included crucial flaws.

The FBI announced it will join a criminal investigation into the process for certifying the 737 MAX.

Precious metals investors will find many elements of the Boeing story familiar.

Gold and silver bugs have already learned just how dangerous it is to trust corrupt and captured federal regulators. Now that lesson is being taught to Americans at large.

By the time all the details of this sordid tale have been published, more Americans will wonder who federal regulators really work for.

Gold and silver investors who have been similarly betrayed by the regulators. Regulatory malfeasance and corruption is a theme the precious metals markets and airline industry have in common.

Concerns over regulatory capture and a track record of failure were largely ignored. Editors at Bloomberg outlined some of the history of the FAA in a March 21st editorial. Suffice it to say the recent crashes aren’t the only examples of the agency putting the needs of airlines and plane manufacturers ahead of public safety.

Continue reading: https://goo.gl/8LMy2W

March 22 2019

moneymetals

What Soaring Palladium Prices Mean for Silver

A once-rare property crime is now trending higher around the world. Thieves are stealing precious metals from automobiles.

These opportunistic criminals don’t bother rummaging through glove compartments in the hope of finding stashed jewelry or gold coins. Instead, they go for the certain score of exposed catalytic converters.

A car’s catalytic converter is attached to its exhaust system and converts toxic emissions into less harmful byproducts. It contains corrosion-resistant noble metals – typically platinum, palladium, and/ or rhodium – in relatively small quantities.

Those relatively small quantities are valuable, especially in the case of palladium. “Soaring palladium prices are inspiring an unusual band of criminals: catalytic converter thieves,” reported the Wall Street Journal.

In March, palladium prices spiked to a record $1,600/oz. They appear poised to set more records this spring.

Fears of a chronic supply deficit are prompting not only thefts, but also panic buying of palladium by industrial users and abnormalities in futures and leasing markets, including backwardation and double digit lease rates.

Since early 2016, the palladium spot price has more than tripled – from just under $500/oz. to over $1,500/oz. Despite the huge move, demand for palladium continues to outstrip supply. The move may be far from finished.

However, long-term investors who are focused on finding value – who aim to buy low when markets are depressed and out of favor – likely won’t find palladium attractive at these lofty levels.

But they may find palladium’s recent tripling encouraging for the prospects of other metals that have been beaten down and overlooked by most investors.


Continue reading: https://goo.gl/VKMn4C


March 21 2019

moneymetals

As The Markets Sell-off The Precious Metals Rebound


To the surprise of many investors, the precious metals have rallied while the broader markets continue to sell-off. Currently, both gold and silver are solidly in the green while the major indexes were all the red following a huge sell-off yesterday. The Dow Jones Index has lost nearly 1,000 points in the past two days while the gold price is up nearly $25.

However, even though we could see a late-day rally in the markets, and even higher stock indexes over the next few months, the bear market for stocks is still coming. The Dow Jones Index has now suffered two large sell-offs in the past ten months:

Dow jones - oct. 10, 2018

In January, the Dow Jones Index fell by more 3,000 points, and the current correction is only one-half of that amount. So, I expect to see a continued correction over the next month. Because October is the worst month for market Crashes, this could be one hell of a blow for not only the economy but also, for investor confidence.

For example, according to the Zerohedge article, Used-Car Prices Plunge Most In 15 Years:

CPI - used cars & trucks mom

Looking deeper at the core inflation print, it reflected a 3% monthly drop in prices for used cars and trucks following increases in each of the last 3 months, and the biggest drop in 15 years…




Continue reading: ​https://goo.gl/r8VZYJ

March 11 2019

moneymetals

Palladium Blowup Could Expose Scam of Gold & Silver Futures

Craig hemkeCraig weighs in again and offers a concise and clear explanation on what’s been happening in the broken and rigged silver futures markets. And also tells us why he sees 2019 being a similar setup to what we saw in gold and silver back in 2010 and 2011 when the metals went on an historic run. Don’t miss a fantastic interview with Craig Hemke, coming up after this week’s market update.

Markets got roiled this week on some downbeat economic reports and a surge in the U.S. dollar.

The Dollar Index broke out to a 21-month high on Thursday after the European Central Bank came out swinging with more stimulus measures. The ECB indicated it intends to leave ultra-low interest rates in place at least through early 2020. That coupled with bleak new forecasts for European economic growth helped drag down the euro and give life to the dollar on foreign exchange markets.

Dollar strength is usually negative for precious metals, and this week was no exception, at least until today. With a bit of a bump here on Friday gold now shows a slight weekly gain of 0.3% to bring spot prices to $1,298 per ounce. Similar story in silver, which seems to have found a temporary bottom perhaps and is now moving off of it. The white metal currently comes in at $15.40 an ounce, up 0.8% now on the week. Platinum is lower since last Friday by 5.2% to trade at $818. And white-hot palladium is succumbing to selling pressure – down 2.2% this week to trade at $1,515 per ounce as of this Friday morning recording.

For the near term, metals markets appear vulnerable to further selling if the dollar breakout holds. So the question is: How high can the Dollar Index go?

The dollar closed Thursday at 97.63 on the Index. If it continues to rally, then the key level to watch would be 100. The dollar rally of 2015 stalled twice right at 100.

Check out the full podcast here: https://goo.gl/uBmjM2

March 05 2019

moneymetals

Warren Buffett’s Confusion & Disorientation about Gold

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Warren Buffett’s famed annual letter to Berkshire Hathaway shareholders landed in the mail last week. Buffett has built a vast fortune investing in the shares of publicly traded companies. He has long been critical of gold. His most recent letter takes another swipe at the precious metal and implores readers to buy stocks instead.

Before his fans start dumping gold and calling their stock brokers, we thought it would be worth examining Buffett’s argument.

Buffett got started investing in 1942. He bought $114.75 worth of shares and says had that amount been invested in a no-fee S&P 500 Index Fund, the current value would be $606,811.

He compares that to making a different choice and buying gold:

To “protect” yourself, you might have eschewed stocks and opted instead to buy 3 1⁄4 ounces of gold with your $114.75.

And what would that supposed protection have delivered? You would now have an asset worth about $4,200, less than 1% of what would have been realized from a simple unmanaged investment in American business.

It sure looks like a no-brainer. Only suckers would buy gold when they can buy stocks instead, right?

Hold on a second...

The comparison leaves out some critical facts. For starters, there was no such thing as an S&P 500 index fund in 1942. The notion of investors buying a “no-fee” variety of an asset type that didn’t exist is even more unfair.

The S&P 500 index as we know it began in 1957 and the first index fund representing a basket of those shares launched in 1976. Prior to that, investors would have been forced to pick stocks and take even more risk.

Gold price has crushed the market so far this century

Most would not have had the fortitude and discipline to manage a portfolio of stocks and get the sort of returns Buffett is implying. Of the 500 companies initially included in the 1957 index, only 60 remain. Plenty of those firms failed, and their share prices went to $0.

Shares of any stock can become worthless while physical gold cannot. Buffett neatly sidesteps the concept of risk with his comparison.

Buffett also fails to mention the gold price was tightly controlled for the first 30 years of his comparison period. While shares of public companies were free to appreciate as America clawed its way out of Depression and war in what was perhaps the greatest economic boom of all time, gold was officially suppressed. The U.S. government fixed the price at $35/oz and then $42/oz from 1934 to 1971.

In truth, Buffet could not have bought gold in 1942 had he wanted to do so. Franklin Roosevelt had long since outlawed private ownership of gold via Executive Order 6102.


Continue reading: https://goo.gl/SiF9F6

February 26 2019

moneymetals

Supply Problems Worsen in Minted Silver


supply-problems-minted-silver-social.jpg

Sales of the Silver American Eagles are off to stronger start this year, and the U.S. Mint has once again been caught flat-footed. Dealers received the following statement from the Mint last Thursday:

This is to inform you that we have temporarily sold out of our inventories of 2019-dated American Eagle Silver Bullion Coins. In addition, all remaining 2018-dated inventories have been sold too.

The West Point Mint is busy producing additional 2019-dated American Eagle Silver Bullion Coins. We hope to be able to re-launch the 2019-dated coins in a few weeks.

Premiums for the coins moved higher immediately following the announcement, and they could move higher still if demand remains strong.

Scarce us mint silver supply

Total 2018 sales of silver Eagles slowed to the lowest level since 2007. The Mint wound up with some excess of 2018 dated coins and actually required dealers to take a chunk of ‘18s with each new order placed for 2019 coins.

More than six million 2019 coins have been sold so far, two million more than in the same period last year. This is in addition to excess 2018 coins having been cleaned out since January 1st.

The demand was not fully anticipated, and sales are now suspended for a few weeks while the poorly managed U.S. Mint plays catch up. When sales resume, dealers are expected to be on “allocation” – or limited as to the quantity of coins they may purchase.

This leaves the silver bullion market a bit vulnerable to a supply shock right now. The U.S. Mint suspension is not the only bottleneck currently.

Check out the full article here: https://goo.gl/2NxrYp

February 07 2019

moneymetals

If Financial Markets Make You Nervous, It’s Time to Own Physical Gold in Your IRA Instead

physical-gold-in-your-ira-social.jpg

If the sharp selloff in stocks late last year has you looking for other places to invest your retirement money, self-directed IRAs are worth a look. These accounts allow you to switch some of your Wall Street assets for tangible assets such as gold, silver, and real estate.

Retirement

Nervous investors are making the switch in increasing numbers. In addition to the diversification away from paper assets, it is easy to transfer funds from an existing IRA.

And the cost of maintaining the account is often well below what Wall Street charges to “manage” the funds.

Banks and brokerages successfully cultivated the idea that IRAs should contain only conventional securities – stocks, bonds, and mutual funds. The vast majority of retirement funds are invested in those assets, and financial institutions get a rake on every nickel invested. It is no accident that paper is the ONLY option in most accounts.

Annual maintenance and storage fees for $100,000 in IRA funds invested in physical gold, including the storage at Money Metals Depository, are roughly 35 basis points (.0035) for the first year and 20 basis points (.002) ongoing. The maintenance and management fees built into many ETFs and mutual funds are triple that amount.

Word is getting out about the “Self-Directed IRA” alternative. In return for assuming personal control over investments, people can buy a wider range of assets – including many options their stock brokers and financial planners either don’t mention at all or speak of dismissively.

Today, there are a number of good IRA companies offering self-directed plans, so it is worth covering how an investor might go about choosing one.

Find out more: https://goo.gl/ZBq5z5

January 31 2019

moneymetals

Peak Gold and the Coming Supply Crunch

peak-gold-supply-crunch-social.jpg

During the lackluster and otherwise unremarkable trading of 2018, a hugely important development took place in the precious metals markets. Gold production, in the estimation of some top industry insiders, peaked.

Peak gold represents the point at which the total number of ounces being pulled out of the ground by miners reaches a maximum.

It doesn’t necessarily mean gold production will suffer a precipitous fall. But it does mean the mining industry lacks the capacity to ramp up production in order to meet rising global demand and even higher prices would not make it happen.

One of the leading proponents of the peak gold thesis is Ian Telfer, chairman of Goldcorp (which was recently acquired by Newmont Mining to become the world’s biggest gold company).

Telfer remarked in 2018, “In my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down… We’re right at peak gold here.”

We’ll soon find out whether his call for gold production to fall in 2019 pans out. If it does, the implications for precious metals investors are enormous.

The concept of peak gold is controversial, to be sure.

Skeptics point to the thwarting of peak oil over the past decade. Just as technological breakthroughs in fracking and horizontal drilling caused an unexpected surge in crude oil supplies, could not advances in gold mining techniques also lead to an unforeseen supply surge?

When human ingenuity combines with the right market incentives, nothing can be ruled out. But unlike crude oil which is a byproduct of decayed living organisms and exists in various grades all over the world, gold is a basic element that came to us from exploding stars billions of years ago.

Top 5 gold miners production 2017 vs 2018

The amount of gold in earth’s crust is fixed. By contrast, oil and other hydrocarbons can be produced synthetically from renewable biomass.

Perhaps one day we’ll mine for gold in space or generate it in nuclear reactors or particle accelerators. Theoretically, it’s possible. Practically, there’s no prospect of these unconventional methods of boosting earth’s gold reserves becoming economically viable in our lifetimes. It would take a true “moon shot” in the gold price and/or a technological breakthrough that might be decades away from coming to fruition.

In the meantime, the gold mining industry is experiencing a major wave of consolidation.

Last year Barrick Gold and Randgold merged. This year Newmont Mining acquired Goldcorp. Many lesser known junior mining and exploration companies have been or may soon be gobbled up by senior producers looking for an economical way to grow their reserves.

Developing new mines is expensive, time consuming, and risky.

Continue reading: https://goo.gl/siinuz

November 05 2018

moneymetals

A Tale of Two Metals: One WAY More Valuable Than Gold, The Other Historically Undervalued

Gold is the metal of kings, the ultimate money, an eternal store of value, an un-tarnishable embodiment of beauty. Gold is all those things. But it is not the most valuable metal you can own on a cost-per-ounce basis.

Often, platinum commands a higher price than gold. Lately, platinum has traded at an abnormally large discount to the yellow metal.

Metals investors who want to hold the most concentrated wealth in a single ounce bullion product should opt not for gold or platinum…but for a different platinum group metal called rhodium.

Rhodium is scarce and thinly traded. Frankly, it’s a little-known metal even among metals investors.

Like platinum and palladium, the primary application for rhodium is catalytic converters for cars and trucks. It is alloyed with platinum and palladium to enhance resistance to corrosion. Rhodium is also used in some types of jewelry.

Rhodium has quietly been in a raging bull market over the past couple years. Prices bottomed out in 2016 at around $600/oz. This September, they surged to over $2,400/oz and have remained there.

As impressive as that quadrupling is, rhodium still trades far below its all-time high from 10 years ago. From 2004 to 2008, rhodium launched from $500 to as high as $10,000/oz. At its current value of $2,425/oz, the niche metal still has lots of room to run.

Of course, the trade off associated with rhodium’s explosive price potential is that it also carries significant downside risk. This metal isn’t for the faint of heart.

Folks just getting started in precious metals investing should first build up core holdings in gold and silver. But more seasoned hard assets investors who want to add a high-risk/high-reward speculative component to their precious metals portfolio might consider rhodium.

The high-flying metal is currently available to investors in the form of one-ounce bullion bars. They come sealed and authenticated by either of the reputable mints Baird & Company or PAMP Suisse.

More options are available for the more popular catalytic metals, platinum and palladium. Bars, privately minted rounds, and even some sovereign coins are available to investors.

Continue reading: https://goo.gl/wSqPno


October 31 2018

moneymetals

WAITING FOR THE BUY SIGNAL: What’s Going On With Silver Investment

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The Silver Market is setting up for one heck of a move higher as investors are waiting for the signal to start buying. While the silver price has shot up due recently, it still isn’t clear if this is the beginning of a longer-term uptrend. The reason for the quick spike in silver was likely due to a small short-covering rally by the Large Speculators trading on the Comex.

For the first time in a quite a while, the Large Speculators (Specs) were net short silver. For example, the Large Specs were net long by more than 100,000 contracts last year when the silver price was $18.50. However, the last COT Report showed that the Large Specs were net short silver by 17,000 contracts:

Net commercial short positions silver fell from 7,400 - 2,600

The Large Specs are shown in the Light Blue bars. Typically, the Large Specs are long, not short silver. You can see the Large Specs going short three weeks ago as their light blue bars turned down. On the other hand, the Commercials (in Red) are usually net short. However, the Commercials had the lowest net short position in years. So, to see the price of silver shoot by nearly $1.00 in a few days isn’t surprising when I have seen this setup for a few weeks.

However, it’s difficult to know if this is the start of a long uptrend in the silver price. It’s coming, but I just don’t know if this is it yet. We will know when the Silver price is making a big move when it finally gets above $20 as the broader markets crash. Now, many silver investors might be a bit frustrated because silver sentiment and investment demand dropped to a low last year.

Continue here to read the article: 
https://www.moneymetals.com/news/2018/04/23/is-it-wise-to-invest-in-silver-001460

October 29 2018

moneymetals

Greg Weldon Forecast: Dollar to Get Whacked, Catalyzing Gold & Silver Rally

Well now, without further delay, let’s get right to this week’s exclusive interview.

Greg weldon

Mike Gleason: It is my privilege now to welcome in Greg Weldon, CEO and president of Weldon Financial. Greg has over three decades of market research and trading experience, specializing in the metals and commodity markets, and his close connection with the metals led him to author a book back in 2006, titled Gold Trading Boot Camp, where he accurately predicted the implosion of the U.S. credit market and urged people to buy gold when it was only $550 an ounce.

He is a regular presenter at financial conferences throughout the country and is a highly sought-after guest on many popular financial shows, and it's always great to have him on the Money Metals Podcast. Greg, good to talk to you again and welcome back.

Greg Weldon: Thanks, Mike. My pleasure.

Mike Gleason: Well, Greg, let's start by getting your update on what impact trade policy and tariffs may be having on the U.S. economy. We last spoke in July. Tariffs were just beginning to actually take hold. Since then, the President has imposed additional tariffs. Anecdotally, we have seen some effect. We've recently ordered some steel storage lockers for our client storage vaults and the price was increased 10% based on the higher cost of imported steel. There are also wholesale price increases coming on one line of the preparedness products we offer on our SurvivalGoods.com website. We can assume lots of businesses are experiencing the same sort of thing. Do you think tariffs are now having a significant effect? Is any of the recent weakness in the equities markets attributable to trade policy, do you think?

Greg Weldon: Yes, no, and yes. First of all, in the sense of is tariffs having an effect, absolutely. But maybe not in the way you think and not in the way you couched the question. What I find really interesting is the Fed just published a really comprehensive survey last week in which they asked businesses, manufacturing firms, I should quantify, but this is where we're talking about in terms of trade ... Manufacturing firms in terms of the impact of tax cuts versus the impact of tariffs. And the results were fascinating, because the impact of tax cuts was dramatically positive, as you might suspect. But what you might not have suspected was the impact of tariffs, which were there a degree of percentage of firms which had negative impact from tariffs? Yes. I don't remember the exact numbers, but it was somewhere less than 20%.

At the same time, there was roughly something like 13% of firms that said that tariffs actually helped their businesses in terms of generating high revenue and to whatever degree there would be benefits to certain businesses, so offsetting and mitigating the negatives of the 20%, the 13%. So the net-net negative was not as big as you might think and was overwhelmed by the positives still from the tax cuts. We know that to be true as it relates to labor, stock buybacks, and even wages.

I think from the U.S. economic slowdown perspective not a big deal, and that's what Trump's counting on. But the bigger picture, absolutely an impact, because it's affected China so much, and China was already slowing. So the GDP numbers that came out, and you know that we look at most things from a mathematical perspective, and one of the knocks on China is the slowdown in retail sales, the slowdown in money growth, the slowdown in GDP growth, the slowdown in industrial production and FDI.

But the nominal numbers are so high in trillions of renminbi that of course you're going to have a percentage slowdown, because you came from such a low base. So something like retail sales, you've gone from a 15% year-over-year rate to 9, and everyone's up in arms because the consumer in China's slowing. No, it's a record number every month. It's just a lower percentage gain because the nominal numbers are so huge now.

But right here, the third quarter numbers, were different. There was real weakness, and it's kind of even ahead of tariffs, which are going to cause more problems for China. We already see inflation on the rise. We see commodity prices in renminbi breaking out here, big thing that nobody's really talking about too much. And the renminbi's about to take out 7, probably going to 7-1/4. So yes, major impact, but it's on China.

Then you see the flow through to how this affects the U.S. and how this affects other global markets, and this coming at a time when you have a lot of other things going on: The Fed, what's happening with emerging markets, how emerging markets, specifically Turkey, might flow into Spain, and how Europe is vulnerable. So, there's a lot more than just tariffs going on. Yes, there's a major impact, but it's not on the U.S. economy. It's in the market vis-a-vis what's happening in China as a result.

Full podcast: https://goo.gl/rKxkuN

October 01 2018

moneymetals

Italy Borrows Too Much, The US Borrows More

Last week’s rally in the U.S. dollar was driven largely by weakness in the euro.

Italy was back in the headlines. The Italian government committed to borrowing even more money and, to the surprise of nobody with sense, the odds of default on Italian debt leapt higher.

Italian bonds are getting clobbered, and renewed concerns over the potential for a default now weigh heavily on the euro. Populists rose to power in recent Italian elections, promising to reduce austerity and increase government spending to stimulate the moribund economy.

Last week they delivered, passing a budget with large increases in a number of programs. The deficit there is expected to rise from 0.8% of gross domestic product to 2.4%, triple what was planned before.

The Italian government has already borrowed well in excess of the nation’s gross domestic product. The debt to GDP ratio is currently 132%. Those who own Italian bonds are right to be nervous.

When will the holders of U.S. Treasury debt begin wising up? Investors seem to think default is only possible elsewhere. European nations such as Italy, Greece, and Spain have been cycling in and out of financial turmoil for years now. So far, none of this has troubled the U.S. bond market.

The people who are worried about a jump in deficit spending in Italy ought to have a look at U.S. deficits when compared to federal spending...

Recent federal deficits as pct spending us from fy 2007 to fy 2017

The 2018 deficit is forecast to be 20% of overall spending. Currently one in five dollars spent in Washington has been borrowed. There has not been a year below 10% since before the 2008 financial crisis. And deficits are back on the rise, since bottoming in 2015.

The U.S. debt to GDP ratio currently rests at 104% and it is growing quickly. The trillion dollar deficit projected for next year will push that ratio to near 109%. When we get a major recession like the one plaguing Italy, GDP will be falling and our politicians will be pouring on the stimulus spending. The ratio will explode higher.

Check it out here: https://goo.gl/1YYQqX

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

September 24 2018

moneymetals

The Least Known (and Best Performing) Precious Metal

palladium-good-investment-social.jpgGold and silver have risen substantially off the price bottom put in just 2-½ years ago, but the gains have yet to attract much notice. Gold has gained roughly 28% and silver is up 20%.

Meanwhile, another metal has more than doubled since bottoming. This performance should have been more than enough to catch the attention of metals investors, if only they were watching. The metal is palladium and, for those who haven’t paid much attention, it is time for a brief update.

Palladium is one of the platinum group metals (PGMs) and it has a lot in common with its higher profile brother.

Like platinum, palladium is a lustrous, silver-white metal. It has many of the same applications. The largest application is in automobile catalytic converters, but there are also uses in jewelry, dentistry, surgical instruments, and electronics.

Palladium also shares platinum’s troubled supply chain.

The top producers are Russia and South Africa. The latter nation has fallen deeper into turmoil in recent months.

Mines there have dealt with unreliable electricity and labor strife for years. Operators are now at great risk of the having mine properties seized by government officials.

PGMs represent a good way for bullion investors to diversify and gain exposure to different market fundamentals.

Diversification can reduce the volatility in any investment and can produce better results – particularly in weaker markets. Just consider the relative outperformance of palladium versus gold and silver over the past 30 months.

Continue reading: https://goo.gl/rUXEFt


September 19 2018

moneymetals

Which Precious Metals Are Likely To Be Better Investments During The Next Market Crash?

The question on the minds of many investors, is which of the precious metals will be better investments during the next market crash? I should know because I receive this question in my email box quite often. So, I decided to test the price action of several metals and how each traded during a large market correction.

This article will focus on the top four precious metals, gold, silver, platinum, and palladium. Even though Rhodium and other metals are considered precious, the ones listed above take the lion’s share of the investment market. Furthermore, while platinum and palladium are purchased as investments, they have a much larger industrial component than gold or silver.

As I have mentioned many times, gold and silver disconnected from the broader markets when the Dow Jones Index fell 2,000 points in the first six weeks of 2016.

The two reasons I believe gold and silver jumped considerably as the markets sold off at the beginning of 2016 were:

  1. Gold and Silver were extremely oversold, and the Commercial hedgers’ short positions were at a low, thus very bullish
  2. Investors were extremely worried that the Dow Jones and markets were beginning a massive correction, so they moved into both gold and silver

To explain why investors were spooked in 2016, we need to look at the following chart:

Dow jones (september 14, 2018)

Typically during a major correction, the market makes several attempts at a top. In 2007, there were three tops made before the market finally came down in 2008. Then in 2015, we had three more tops and two large corrections. The reason investors’ worry turned into fear at the beginning of 2016 was that the last top did not reach the previous 18,000 level.

Full Article: https://goo.gl/asrgNh

September 17 2018

moneymetals

A Reader Asks: Should I Sell Gold and Buy Bitcoin?

Although the fervor has diminished substantially since the crypto price smash earlier this year, we do still see a degree interest in bitcoin among precious metals investors.

Question and answer

Bitcoin and metals arguably share some appeal as an “honest” alternative and as a hedge against the fiat dollar and the insolvent U.S. government which backs it.

In light of the bitcoin price falling dramatically this year, one reader asked, “Is now a good time to swap gold for bitcoin?” Below is our response.

It may be bad form to answer a question with another question, but it seems like a good way to approach this subject. So we ask; are you in the mood to gamble? If you are, it might make sense to swap some metal for bitcoin.

Cryptocurrency can potentially generate bigger returns... in exchange for bigger risk. Since there is no tangible backing to bitcoin, it could conceivably go to zero – much like shares in a defunct “dot com” company.

The two assets are far from interchangeable and will serve different purposes in your portfolio. Bitcoin has often been called “digital gold,” but that comparison is dangerously wrong. Gold is a reliable store of value with a track record thousands of years long. Bitcoin’s price has collapsed from its all-time high of nearly $20,000 to $6,000.

This is a vital difference between gold and bitcoin: gold will always retain some intrinsic value, while the price of a digital token might go all the way to zero. That is not our prediction for bitcoin. It is, however, a possibility.

A technology, which is one way to think of bitcoin, must hold its value amongst a growing number of alternatives. If it cannot, it will be replaced. That happens, even to leaders. Remember Napster and CompuServe?

Continue Reading: https://goo.gl/EHsJYV


August 01 2018

moneymetals

Top Gold Miners Production Declined 15% While Costs Escalate

Even though the gold price increased in 2018, the top gold miners production declined while costs continue to escalate. Output at three of the top gold miners in the world fell in the first half of 2018 compared to the same period last year. With rising costs due to higher energy prices, on top of decreasing production, the top gold miners free cash flow declined precipitously in 2018.

While many analysts focus on the company’s profits or net income, I like to pay attention to its free cash flow. Free cash flow is nothing more than subtracting capital expenditures from the company’s cash from operations. Because the gold mining industry is very capital intensive, the company’s free cash flow is a better indicator of financial health rather than the net income.

As mentioned, all of the top three gold miners suffered production declines in the first half (1H) of 2018 versus the same period last year. The biggest loser was Barrick, whose production declined over 20% by falling to 2.1 million oz in 1H 2018 compared to 2.7 Moz in the previous year. Goldcorp’s production fell 10%, while Newmont’s output dropped by nearly 9%:

Top miners gold production 1h 2017 vs 1h 2018

Altogether, the top three gold mining companies’ production fell 15% or approximately 1 Moz in the first six months of 2018 versus last year. Even though Goldcorp isn’t the third largest gold miner in the world, the company has already posted its second-quarter results. AngloGold is the third largest gold miner, but it won’t publish its financial statements until August 20th. Also, Kinross is likely ranked number four ahead of Goldcorp, but the company posts its production figures in “gold equivalent ounces.” If a company has to publish its gold or silver production in “equivalent ounces,” then the analysis is a bit flawed in my opinion.

Regardless, these top three gold miners all experienced declines in production which impacted their financial balance sheets. To get a better idea of the true cost of production and the health of the gold mining industry, I have come up with an “Adjusted Earnings Breakeven” price as well as a “Free Cash Flow” breakeven price.

July 31 2018

moneymetals

GOP Congressman Investigates Undisclosed Gold Market Intervention by China and the Exchange Stabilization Fund


Rep. Alex Mooney (R-WV) Calls Out Fed & Treasury for Dodging Questions on Gold Activities

Washington, DC (July 31, 2018) – A member of the U.S. House Financial Services Committee is calling out the Federal Reserve and the U.S. Treasury for dodging questions about their activities involving America’s gold reserves.

In a letter dated July 27, Representative Alex Mooney (R-WV) wrote to Jerome Powell, Chairman of the Federal Reserve, and Steven Mnuchin, Secretary of the U.S. Treasury, after receiving perfunctory responses to his April 24th letter, noting “a few questions were either not addressed at all or not fully addressed.”

In particular, the Fed and Treasury would not articulate any U.S. policy toward gold and refused to comment on historical U.S. State Department documents pointing to a U.S. policy of “driving gold out of the world financial system in favor of the Federal Reserve Note or Special Drawing Rights issued by the International Monetary Fund.”

In his follow-up letter, Rep. Mooney provided evidence of involvement by the Exchange Stabilization Fund in the gold market and called attention to “the recent correlation of the gold price with the price of the Chinese yuan and the valuation of the IMF’s Special Drawing Rights.”

Check out the full press release


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