Palladium and Rhodium Are on Fire, Is Platinum Next?

Platinum was once the most precious of metals. For decades, it traded at a premium to gold. The other platinum group metals – palladium and rhodium – barely registered on investors’ radar screens.

Platinum lost its crown to gold in 2015. It was overtaken by the other Platinum Group metals (PGM) metals in recent weeks.

Given that platinum, palladium, and rhodium demand is largely driven by automobile manufacturing and the production of catalytic converters, one of these things is likely true; platinum is currently undervalued, or the other two have gotten ahead of themselves.

1 oz rhodium bars run about $1,455 each.

Which one is the correct assessment will depend on whether the current optimism for economic growth in both developed economies and emerging markets has been well placed. Either way, investors inclined to speculate on the PGM metals have some interesting market action upon which to trade.

Platinum does look remarkably underappreciated. It is hard to imagine it trading at a significant discount for too long.

Auto makers should bid for whichever metal offers the lowest cost as all three are somewhat interchangeable.

Platinum offers the largest and most liquid market of the group. It is widely available in a variety of coins and bars. For investors, platinum’s liquidity is a consideration.

However, momentum traders may want to take a look at rhodium. It is traded in relatively tiny quantities and has a history of making big moves. Rhodium saw a top near $4,000 in the early 1990s and it made a run north of $2,000 about 10 years later. It peaked at $10,000 per ounce in 2008.

Although rhodium has doubled in the past year, it currently trades just over $1,300.

The metal’s pattern of having a sharp spike roughly once every 10 years is interesting. It is possible we are in the middle of another of those massive moves now.

Rhodium is available primarily in 1 ounce bars. While the quantity of rhodium traded is by far the lowest among precious metals, market liquidity for that metal has seen a boost since 2008. There are now a couple of ETFs focused on the metal. Those ETFs may in fact be driving a good portion of the recent demand.

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

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Gold/Silver vs. Bitcoin Comparisons: A No-Brainer… or Brainless?

For most of the year, as Bitcoin soared, crashed, and soared again, cryptocurrency vs. physical gold-silver talking heads engaged each other in heated rhetoric about which of these venues is here to stay.

Some of the biggest names in finance, government, and the newsletter analyst space have made comments that – to be charitable – appear less-than-fully informed. Comments like “Even though bitcoin could rise to $100,000, it’s still going to zero!” don’t offer much insight. Some other questionable assumptions:

2017 percent price change comparisons: Relating this year’s gold and silver’s price range to that of bitcoin misses an important point. Yes, bitcoin (BTC) has risen by a much greater percent, but it’s also fallen more. I don’t recall gold dropping 40% this year, which bitcoin has… on a couple of occasions.

Please note: Bitcoin has no tangible, physical form.

Trash-talking gold and silver as “antiquated”: Bitcoin is now considered legal tender in Japan, but at this time, its primary function is for use in the purchase and sale of the 900+ “alt coins” currently available.

Most of these exchange entries in the crypto-space are not really “currencies” at all and will never trade as such.

Rather they are “coins” or “tokens” digitally created and circulated to raise seed money, via initial coin offerings (ICOs) in order to solve some business application in a blockchain-connected manner. Many have no trading volume – possibly because the market is skeptical of their business plan – and have become more or less “dead” coins.

At present, a relative few have an actively trading market. Investors have dropped literally millions of dollars into scores, if not hundreds of entrants which have appeared on the scene like dragon’s teeth, in many cases only to see volume dry up soon thereafter.

At present, digital apparitions can be created and marketed by just about anyone. The following example demonstrates how easy it is (for now), and how gullible some people really are.

Can I interest you in a “Useless Ethereum Token”?

Earlier this year, the “Useless Ethereum Token” (UET) was “announced” online. The “Issuer” wrote:

You are literally giving your money to someone on the Internet and getting completely useless tokens in return. There are no ‘whitepapers,’ no ‘products’, and no ‘experts’. It’s just you, me, your hard-earned Ether, and my shopping list.

You would think this blatantly-stated scam would elicit exactly zero response, yet reportedly, the UET ‘Project” was able to raise more than $60,000!

By the same token, it’s a safe bet that many Venezuelans wish they had traded some of their bolivares fuertes (“strong Bolivar”) notes, rendered worthless over the last few years, for a few ounces of silver – or a single ounce of gold – which could now purchase respectively, six months of food, or a house.

Becoming a victim of “default bias”: We all have a tendency to operate through a lens which uses the past as a default setting.

We keep doing what we know, avoid taking new risks, and resist changing the way we think.

Default bias can cause lost opportunities – whether it involves learning about the blockchain or being hesitant to buy precious metals when they’re in boring “wear you out or scare you out” sideways action (another David Morgan homily) … as they’ve been lately.

Dismissing Bitcoin as “just digital”: Kim Iskyan (Stansberry Churchouse Research) addresses the criticisms leveled at bitcoin and the blockchain. Responding to the charge that it’s “purely digital,” he notes that fully 90% of all the money – or as David Morgan refers to it, “paper promises” – that exist around the world today are not physical either!

Doug Casey is always one to see beyond the next investment valley (or country), and he pegs what most people miss when they argue that bitcoin is “bad” for the future of precious metals. As he said,

When people buy these cryptocurrencies, even if they know nothing about hard money, economics, or monetary theory, they inevitably ask themselves, “Hmm, Bitcoin or the dollar?” They’re both currencies. Then they start asking questions about the nature of the dollar…the nature of inflation… and whether the dollar has any real value, what’s going to happen to it, and why.

People start asking themselves these questions – which wouldn’t have occurred to them otherwise… and it’s going to make them very suspicious of the dollar. It’s going to get a lot of people thinking about money and economics in a way they never thought about it before. And this will inevitably lead them to gold

What I am doing: In addition to staying very active in metals and miners, I have placed “small money” into several coins and tokens having viable business models in hopes of making an asymmetric profit.

In spite of the current turmoil, I remain steadfast in the belief that the next few years will see gold and silver trading several times higher than their nominal 2011 prices of $1,900 and near $50 respectively. The blockchain is here to stay. As for bitcoin, only time will tell.

We may even see digital coins and tokens backed by precious metal. But these changes in the crypto space will not replace them. Indeed, gold and silver will almost certainly – to the surprise of many bitcoin bulls – markedly increase demand.

I plan to continue holding the majority of my investible funds in gold and silver. How about you?

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.

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Frank Holmes Exclusive: Bitcoin Needs Electricity, Gold CONDUCTS Electricity

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Mike Gleason: It is my privilege now to welcome in Frank Holmes, CEO and Chief Investment Officer at US Global Investors. Mr. Holmes has received various honors over the years, including being named America’s Best Fund Manager for 2016 by the Mining Journal. He is also the co-author of the book The Goldwatcher: Demystifying Gold Investing and is a regular guest on CNBC, Bloomberg, Fox Business as well as right here on the Money Metals podcast. Frank, welcome back and thanks for joining us again. How are you today?

Frank Holmes: Excellent. Thank you, my friend. Thank you.

Mike Gleason: Well, to start out here, Frank, I know you recently attended and spoke at the Denver Gold Show and I always like to talk to insiders like yourself following those sorts of events because you can always glean some good insights on the mood of the industry and how things are really going in the precious metals community. Now the mining industry has taken a pretty good beating over the last few years and it continues to struggle a bit even as we seem to be in a new bull cycle that began in late 2015. You’ve got your new gold fund now, GOAU, so you’ve got lots on insights into the mining industry and know lots of gold bugs. So, what did you glean from the conference Frank? What was the mood in general? Give us some highlights there if you would.

Frank Holmes: Well I think my presentation was well received when I explained how the quant world and data mining, and these other what they call alternative investment research companies, are providing new insight the way investing is taking place. Understanding the paradigm shift on that data collection and that analysts love their old reports on mid asset value, are irrelevant. They’re not relevant to picking stocks today. And you have to go with the forces of physics either as electromagnetic rebounding to the mean is a cheap stock and math says it will rebound or has strong momentum. And you can take a universe of 88 gold stocks and take it down to 28 and far outperform the GDX or GDXJ.

Using data that was foreign to a lot of these analysts and recognizing … the other thing I think worth commenting on was gold and this whole thing on Bitcoin, is it a competition for bullion? It is not. First of all, without electricity Bitcoin is not worth any money. It needs electricity. Gold is always gold. It conducts electricity and it will always have its materiality for currency in addition to being jewelry. But I think that’s really important is to recognize that it’s so much easier, this idea of crowdfunding, to go and open up an exchange and trade 24/7 all these different currencies all around the world than it is to open a brokerage account. And I think that this excessive regulations is basically seeing people migrate over to angel investing, crowdfunding such as into cryptocurrencies, et cetera. And I think that’s the bigger danger is to overall investing in trading in the capital markets. So, they’re the comments that I made and that seem to have come back with many written messages to me regarding the quants and how they’re changing the landscape.

But I think the other part that’s important for your listeners is that there were 1,100 people there. Now they don’t allow investment bankers in. Research analysts, traders, CEOs, gold analysts from the buy and sell side, they’re allowed to participate and there were 1,100. The week before there was a big event for the juniors (junior miners) but this event is the premiere event of the world. And I was impressed with it. The conversations looking for companies that are going to be taken over. What’s the probability? Because the seniors are desperate for future production and where is that growth going to come from because they’re just not finding the gold as fast as they’re mining. So, the Newmonts of the world have to go and strike deals like they did with Continental in Columbia to get a foothold into high grade big geographic footprints. So, I thought that was interesting. I think that in the next 12 months there’s going to be lots of M&A work. And the other part was the royalty companies seem to get a new sort of respect for how their positioned in the capital markets in that gold space.

Mike Gleason: Yeah definitely. Sounds like there is a wave of optimism there and some good things ahead. Now I wanted to get back to some of the cryptocurrency conversation here. Your firm, Frank, US Global Investors, recently made an investment in HIVE Blockchain Technologies and you have been appointed chairman of the board there. Given you are heavily involved in the cryptocurrency space now, we’d like to get your take on a topic of growing interest in the metals community. You alluded to this a moment ago but cryptocurrencies, Bitcoin in particular, have been seen by many as another form of honest money. You’ve obviously maybe shot a little bit of a hole in what it is that is needed in order to continue the cryptocurrency world, that being electricity. But since you’re a fan at least in part of both metals and blockchains. What are your thoughts on how metals might fit in with this emerging technology, Frank?

Frank Holmes: Well let’s just focus on this emerging technology. We go back to the internet and it was actually very boring when it first come out because it was very slow and it used to be a joke that it was just porn and dark things. And now it’s fast porn. No, I’m kidding. But the real catalysts for the internet exploding in usage were emails, AOL. And long before Yahoo came out to give you free email. And then people saw the incredible capacity for this channel of distribution of information. Well I think that the Bitcoin and Ethereum are doing that for blockchain technology and that there’s a huge scramble to be able to apply this so that you’ll be able to trade stocks 24/7.

And when I was doing my research and I went to the largest cryptocurrency event, that used to be where the gold show used to be held in New York at the Marriott. I was just shocked to see how many young people were there. Many more than ever when gold was peaking. And two is that they weren’t drinking scotch and whiskey at the bar and beer, they were drinking Pepsi and coffee. That really threw me off to just watch those young people and how they’re looking at it. And then to find out that the keynote speaker was a CEO of Fidelity. Fidelity is a massive multi-trillion dollar asset management company and they have all their employees on Bitcoin. They have a wallet and you can buy goods in the store. And seeing that she’s the keynote and that the New York Stock Exchange when it was launching GOAU they were commenting that they had put money into Coinbase along with USAA in San Antonio.

So, at Coinbase you can open an account so easily and they will now let your 10,000 or 50,000 or 100,000 of coins show up as an asset over all in your portfolio. USAA and all that should do that at Fidelity. So, I said well it’s something really that’s not mainstream and then in the summer it came out in the Wall Street Journal that Fidelity is doing it. But really it didn’t seem to captivate a lot of people’s interest. And I think that the big part with the New York Stock Exchange is just their worry of being Uberized the way taxi cabs were with having stock trading 24/7 and a lot cheaper.

So, I think that that’s the big trend and along I was trying to launch a cryptocurrency, ETF, or a product with that and I just kept bringing up cul-de-sacs. Had to back that car out, back that truck out. It didn’t matter if it was the U.S., the SEC, or Canada with the OSC. They’re just so consumed that AML (Anti Money Laundering) supersedes, even though you can track Bitcoin, supersedes anything else. So that’s why you’ve not seen anything come out directly where you can trade Bitcoin into an ETF.

So, I’ve been working on this and then all of the sudden I hear from my friend Frank Giustra saying, “Look, we have this deal. Do you know much about this space?” And I said “Oh, yes. I’ve been working on it. And I just keep running into cul-de-sacs.” And he said, “Well, why don’t you explore it” and explored it and I said, “You know what, I’ll be come your third biggest shareholder, and I will go on the board,” because I think that HIVE is so special and unique because it’s the mining business.

And the company behind HIVE is Genesis Mining and Genesis Mining is the largest cryptocurrency miner in the word. They have a million people give them 500 bucks a year and one of the things I learned was that if you want to do mining of cryptocurrency you need to have cheap energy like two cents a kilowatt hour. So, you find that a lot of these big dealer centers are in Iceland where it’s cool and you have cheap electricity. Google is there. Facebook is there and so is Genesis. And you need to have computer graphic cards because the processing power to validate a transaction. So, you found that NVIDIA stock has taken off because the cryptocurrency companies like Genesis have been massive buyers of their computer graphics cards.

And so, with that, I said, “You mean, we’re going to be investing in a company that’s mining and validating transactions all over the world, and we create new coins, fresh coins, mint coins, virgin coins” … however you want to characterize them. We are not trafficking on the silk road. We are not buying and selling a coin that could have been painted et cetera. No. We’re the creator because we validate transactions and you get paid every time you validate a blockchain transaction. So, I became extremely excited about this opportunity and so far, we’ve made for our shareholders more than 500% on their money.

Mike Gleason: That’s fantastic. Now I’d like to get your take on the U.S. dollar. The dollar had a miserable performance through the first eight months of the year and bottomed in early September at 91.5. The greenback then bounced and has enjoyed a very good rally since then. What is driving this rally in your view and are you expecting the dollar to keep moving higher in the months ahead, Frank?

Frank Holmes: Well, historically it does get a bit of a rally going into the year end. That’s one. Two is the 5-year government bond. The 5-year government bond is positive now, the yield. So, the CPI number is 1.9 and you just take whatever the government is trying to entice you to buy their 5-year government bond, subtract the CPI number… it recalibrates every month and it gives you a good idea for where fund falls are going for real rates return. And whenever the five year government bond and the two year government bond are negative, gold is positive. And so, we went from a 1.4 to 1.5 5-year government bond to a 1.93. Now it’s just slightly positive but that was enough to sort of have the dollar rally and gold come off in the past month.

But I think that unless you really get change, you get fiscal change, trying to get the tax code streamlined and trying to get other parts of the legislation body in its Beltway to streamline regulations. We need to have the TSA preferred, how you can fly much more quickly now, rather than those two hour waits to fly and to go and catch your flight. You know most people in San Antonio were driving to Houston rather than going to wait two hours for an hour flight. And so, you’re seeing now this TSA preferred. That’s just streamlining processes and this has to be done for the movement of money, for opening a trading accounts, for opening up investment accounts, et cetera. If we don’t get those things, we’re going to have to have negative real interest rates to keep the economy going. Or you’re going to have to a very weak dollar to drive exports.

And I think that Trump has been a master disrupter. He’s so disruptive to the Beltway Party, which is the regulatory regime that’s been their professional regulatory. I’ve listened to other people like Bernanke spoke about the difficulty for Jimmy Carter and Trump to take on the Beltway Party. But he’s different and so he’s trying to push for the streamline of regulations. If he can, rates can trade higher and I think that the dollar will just trade with the real interest rates relative to the rest of the world.

But I remain very positive on gold. It’s amazing to see how well gold has done this year. The gold stocks have had a great run until the GDXJ blew up. Basically, they captured 95% of all fund flows. Therefore, they had to be concentrated owning more than 20 companies 20% means they had to do a force takeover. They had to back out of that one and they blew out three billion dollars. They brought in five billion dollars over 12 months and then they did an exit in only a matter of weeks of three billion dollars. And that really damaged the bid side and bruised people. It’s like getting hit by Mike Tyson. You just don’t heal quickly when he hits you and it’s the same thing with the gold stocks. But I think there’s some just fabulous gold stocks out there that are ripe to be taken over, that have very strong positive cash flow. The weaker dollar in the U.S. and the higher gold prices, there’s very strong margins for companies like Klondex.

Mike Gleason: Yeah, certainly can be interesting as we go towards the latter part of the year here to see what might be sustained in this correction in gold or if it can rebound and get back to where it was maybe a month ago or so. We did have a good first half of the year in the metals but the markets obviously have hit some of those headwinds here recently, a rising dollar and so forth that you alluded to. If you would, give us your bull case for metals in near term and then also if you would maybe a bear case as well and then kind of expand more on which side you’re betting on, as we begin to wrap up here.

Frank Holmes: Well, there’s the two drivers for gold: love trade and fear trade. And the fear trade dominates the psychic of Americans and the same thing with Europeans in that’s predominantly negative real interest rates. So, whenever the government has to monetize most of their debt, and basically negative real interest rates are losing money and buying their government bonds, gold does well. I don’t think that they can raise rates significantly without a massive streamlining of regulations and the government is doing everything to try to stop Trump from doing that. So, I think we’re going to end up still living with negative interest rates.

Now, the other positive part, for the U.S., is that the dollar is down but the exports are up. So, we have our strong industrial base. And it’s showing up in PMI, that’s Purchasing Manufacturer’s Index, which is a forward looking index. It’s not like GDP, which is looking out the rear view mirror. This is like looking with headlights looking down six months. And the one month is above the three month, and that’s really positive for global growth. So, I remain positive and constructive towards it. What could derail it? North Korea could derail it. China’s policies could derail it. And I think that if rates were to surge dramatically in the U.S., that could derail it.

But I don’t think that’s going to happen. We’re in a very constructive mode and it’s a great opportunity for stock picking. I just spoke at a conference in Vancouver yesterday, and I commented on … By the way, I commented on HIVE. I was asked and I said, “You know, if you’re a value investor, HIVE is extremely overvalued.” But if you are a first mover advantage in the first public company where funds can go by and get exposure to crypto-mining. It is not. It’s like Tesla, it’s like Amazon. They will always trade at lofty valuations. And so, it’s extremely attractive that way when you look at it as being first mover advantage.

Mike Gleason: Well that’s great stuff as usual. Thanks as always for joining us. It’s a real honor to hear your thoughts and we appreciate your time as always. Now before we let you go, please tell our listeners a little bit more about your firm and your services and then also mention the Frank Talk Blog so people can learn more about that if they’re not already checking it out.

Frank Holmes: Well, we are USfunds.com, makes it so easy, just go to USfunds.com, sign up for investor alert. It’s right in the middle of the page. And we write every week and we do a game film analysis, three strengths or weaknesses for last week and opportunities and threats that can come out next week. Sort of forward looking like game film and looking back.

And the Frank Talk is my global travels and I try to be insightful and learn about how we’ve applied quant math. What’s called quantamentals to stock picking. And especially we launched our GOGO Canadian gold ETF and we’ve launched one here in the U.S., which we’re really proud of because the ten year index based on those smart factors, both performs of GDXJ say 94% of the time are rolling 12 month periods. So, we think that GOAU, we’ll write about it, we’ll tell you about the changes. And we also have unique products like JETS which is also an ETF listed on the New York Stock Exchange.

Mike Gleason: Yeah, it’s great stuff. Certainly, the Go Gold fund is looking very good from what I’ve been reading about. Obviously performing just as you were hoping it would and continued success there. We always appreciate it and good luck with the other endeavors that you have going on and keep up the good work on those market commentaries and we’ll certainly look forward to our next conversation. Take care, Frank.

Frank Holmes: Take care, my friend.

Mike Gleason: Well that will do it for this week. Thanks again to Frank Holmes, CEO of US Global Investors and manager of the recently launched GOAU Gold Fund. For more information, the site is USfunds.com. Be sure to check out the previously mentioned Frank Talk blog while you’re there for some of the best market commentary you will find anywhere on gold and other related topics. Again, you can find all that at USfunds.com, and you can also go to GOAUETF.com for more information on that new gold fund.

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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Europe’s Weight In Gold and Silver

Gold, and silver, have always been valuable. Through upturns in fiat currency, downturns in commodities, and everything in between, the precious metals have always been a useful indicator and base level for the worth of things internationally.

Far from being the hallmark of huge institutions, like the Federal Reserve, you can take advantage of the evergreen currency to secure your own ‘reserve’.

Why Use Gold?

There have been few occasions where government has been criticized for keeping hold of gold reserves. Quite apart from it, in fact, with the British government panned for selling back in 2002.

There has never been a better time in fact, with measures over the world being taken up that can threaten your ‘liquid’ cash flow. Over in Europe, there has been legislation introduced as the EU attempt to prevent bank runs that threatens your ability to withdraw your own cash in the event of adverse economic conditions.

How Can You Invest?

If you are already struggling to withdraw the entirety of your cash supplies from the bank under restrictive legislation, the economics show that it’s worth taking beneficial loans to obtain lump sums to invest in gold; see this Norwegian example as illustration.

You may also be tempted to look into cryptocurrency as a way of making small wagers that can increase in value and, ultimately raise capital. Many vendors now accept cryptocurrency.

The Benefits To You

The theory behind establishing a gold reserve is well-established. You can diversify your portfolio, ensure against future fluctuations and have a nest egg on which to build investment.

In Europe and the USA, however, the policies of the ECB are giving great hope for gold investors. The policy of asset procurement over in the EU is creating a great demand for gold and as a result prices are high and continue to rise.

Taking consideration also of the effects of 2016’s Brexit vote, NBC reported that silver and gold hit a two-year high after the vote as a result of speculation of the performance on the pound. With the EU facing challenges from France and the Netherlands, Trump in power and Brexit rumbling on, the level of uncertainty is proving a boon to the price of the age-old precious metal.

Gold is not the archaic measure of worth you might think it is! Despite decades of fiat currencies taking the lead, exemplified by 2002’s British selloff of gold, the worldwide political and economic shakeup we’re going through is bring it back to the fore.

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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.

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.

Several major oil refineries have been shut down by the storm. However, crude oil production is little affected. Oil inventories are expected to build even as gasoline prices rise (gasoline futures jumped 3% on Monday).

The disaster is bringing Americans from disparate backgrounds and worldviews together, united in a common purpose to help provide relief to those in need. Perhaps Congress will set aside some of its partisan acrimony when it goes back into session next week. Unfortunately for taxpayers, though, outbreaks of bipartisanship are usually associated with emergencies that cause both sides to agree on even more spending.

The political pressure to make sure federal agencies are equipped to handle Harvey relief efforts (which will be ongoing for months) figures to be overwhelming. Conservatives who had aimed to force concessions in an upcoming budget fight may conclude that they now have no leverage to do so.

President Donald Trump so far hasn’t backed off his vow to pursue border wall funding even if Congress refuses and a government shutdown occurs. But a government shutdown in the aftermath of a major natural disaster could be a political disaster for whoever gets blamed for it.

With so many risks hitting investors this week, it’s no surprise that the gold market is benefiting from safe-haven inflows.

Silver is benefiting as well. Although the silver market has not yet hit a new high for the year, prices advanced nearly 2.5% Monday to close above the 200-day moving average.

If silver can now start showing leadership, that would be bullish for the entire precious metals complex. The gold:silver ratio currently stands at about 75:1. Gold is still trading at a high price historically relative to silver.

The ratio can move rapidly to the downside when silver prices are surging. That was the case from late 2010 to early 2011, when the ratio dropped from the high 60s to the low 30s. An even bigger move could be in store for those who buy silver now, while the gold:silver ratio is still in the 70s.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

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China’s Get the Gold Plan: Part II

Money Metals readers may remember my November 2014 report in which I discussed how gold flowed into China in “tributary fashion” like small streams flowing into a giant one. In this case, the gold has been streaming into China’s increasingly massive thousands-of-tons gold hoard.

In January, 2015, I penned an essay titled “China’s Global Gold Supply “Game of Stones” outlining China’s long-range goal to dominate the world’s physical gold market.

Well, events have moved massively forward since then. I want to update you as to just how much things have changed – and how close we may be to experiencing a “defining moment” in the gold market.

I’m talking about a game-changing event that could, with little warning, propel the price of gold upward by hundreds – even thousands – of dollars per ounce in the space of a few weeks… conceivably overnight! (And since silver’s price movements are highly correlated with that of gold, we could expect an upside explosion in silver as well.)

China’s 4-pronged gold accumulation strategy:

First: Buy physical gold in world markets, re-fabricate it when necessary (into .9999 fine bars in Switzerland), and ship to the mainland.

Second: Hoard all domestically-produced gold… which is now being done, even when produced from operations with foreign-partners. This is also true with silver production, e.g. Silvercorp Metals – a Canadian silver/lead producer with operations on the Chinese mainland.

Third: Partner with (e.g. Pretivm Resources; Barrick Gold-Pascua Lama) or buy outright, gold explorer-producers located on foreign soil.

Fourth: Purchase for cash, gold production “off the books” from ‘informa’ miners in S.E. Asia, Africa, and South America. China’s intent is to supplant the U.S. as the largest holder of physical gold (claimed to be around 8,000 metric tons) on the planet. (Disclosure: I, David Smith, have held for several years, positions in Silvercorp and Pretivm, purchased in the open market.)

Right now, China is vastly understating what it actually holds as well as how much is being imported.

This deception is easier than ever because a significant amount is no longer routed (and thus reportable) through Hong Kong, but rather through other mainland entry ports. What the authorities admitted holding as of last summer was almost unbelievably small compared to what even the official figures streaming through Hong Kong alone, plus domestic production add to the total, and China is now the number one global gold producer.

As reported by Steve St. Angelo China has, during Q1, 2017, imported a record 57.4 metric tons of gold to the mainland, from Australia.

Notice the Australian/U.S. multi-year pattern of gold mine exports vs. production

In Addition: A parallel determinant is China’s effort to lessen its holdings of U.S. dollar reserves, by signing infrastructure agreements (denominated in yuan) with countries participating in its massive, long-term New Silk Road project. It’s been reported that China has even approached Saudi Arabia about yuan-based oil sales – a direct threat to the decades-long monopoly of the U.S. petrodollar.

And then there’s this:

The Perth Mint sold $11 billion worth of bullion to China last year alone, and demand continues to climb. Demand is so strong that Perth Mint brings in gold from mines in other countries like Papua New Guinea and New Zealand, and jewelry from South-East Asia that is refined down to the Mint’s signature 99.99 percent gold bullion. (ABC News)

and:

Steve St. Angelo reports that so far in 2017, scrap gold recovery is down sharply, even though the price of gold has risen – an unusual historic occurrence.

His projection for the year? “…as the price of gold has increased in 2017, global gold scrap supply will fall by almost a third, or 32% versus 2010… this major gold market indicator trend shift suggests that individuals are now holding onto their gold rather than sell it for a higher FIAT MONETARY PRICE.”

A Surprising Shock-Rise?

Precious metals prices have been in a cyclical decline since mid-2011 – not unlike the last secular bull market in the 1970’s – before gold’s eight-fold rise less than two years later.

It’s understandable that you might meet this latest suggestion of an unexpected, massive rise in the price of gold and silver with skepticism. A rise that could take place so quickly that those who hesitate could not react before prices had climbed far above prevailing levels. Before the supply cupboard had been swept clean. But the truth is – it’s not a pipe dream, not blowing smoke, not wishful thinking. This is not just possible, but increasingly probable.

Everything in life involves playing the odds. If something is “unlikely” but possible, and if that something taking place had the potential of being a “game-changer,” would you not seek to prepare for it in some measure?

A vertical up-move in gold would place you in a tidy profit position, even if you held a relatively small amount (e.g. the oft-touted 5% of your investable assets). So, it’s not necessary to mortgage the house or go into debt in order to “participate.”

I believe it’s almost “a given” that precious metals will resume their secular bull run, which could continue for the next three to five years. If you agree, does it not make sense to begin (or continue) a conservative metals’ acquisition plan? With little worry as to the price where you began?

It’s not that difficult. Either buy metals when you have some surplus investible funds, and/or do so on a regular, dollar-cost-average basis. If the “China card” never gets played, you’ll still do well as metals’ prices advance over the coming years. You’ll have been purchasing “paid-up insurance” for the rest of your holdings, hedging more as time goes on.

And one more thing. Don’t think of it as “spending money” on buying gold and silver. You’re simply exchanging continually-depreciating “paper promises” – the enduring term coined by David Morgan at TheMorganReport.com – for “honest money” which has stood the test for millennia and will likely continue for as far as the eye can see.

Remember, if you don’t hold it in your hand, you can’t be sure you really own it. John Hathaway, Tocqueville Asset Management covers this precisely, saying,

When the market reverses, the diminished physical anchor to paper claims, concerns over title and encumbrances on central bank bullion, and worries over the drift of public policy will drive liquid capital into gold. However, this time around, it seems to us that the major recipient of flows will be the physical metal itself. Holders of paper claims to gold will receive polite and apologetic letters from intermediaries offering to settle in cash at prices well below the physical market. To those who wish to hold their wealth exclusively in paper assets, implicitly trusting the policy elites to resurrect normally functioning capital markets and economic conditions, we say good luck. For those who harbor doubts on such an outcome, we say get physical.

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.

The post China’s Get the Gold Plan: Part II appeared first on Gold Silver Worlds.

from Gold Silver Worlds http://goldsilverworlds.com/physical-market/chinas-get-gold-plan-part-ii/

Sleeper Issues Poised to Rattle Markets

Investors have been well-trained in complacency. They have spent the past few years watching markets shrug off momentous geopolitical events – each more quickly than the last. Brexit’s impact faded within days. Trump’s election faded within hours.

Stocks traded at all-time highs this summer and volatility made all-time lows. That is the set-up as we head into the fall…

Almost nobody seems nervous. In this age of central planning and highly artificial markets, it is hard to tell when this period of strange market serenity will end. But vigilant investors should have a few ideas. The next few months are going to challenge the status quo.

President Trump Is Under Siege

It has been clear from the beginning of his term that President Donald Trump has very few supporters in Washington DC. Democrats and progressives naturally oppose him. Deep staters have been working hard to undermine the administration. And you don’t need enemies when you have “friends” like John McCain, Mitch McConnell and Paul Ryan in the Republican led Congress.

Turmoil in Trump’s administration escalated last week. The president disbanded two separate business councils following the defection of high profile CEOs who disagreed with Trump’s response to events in Charlottesville, Virginia.

On Friday, Americans learned Steve Bannon, Trump’s Chief Strategist, was kicked out of the White House. That will cost Trump some support from his core constituency, who favored Bannon.

The president is already taking flack from supporters such as Ann Coulter. Bannon’s ouster leaves the President with an inner circle which is completely dominated by Wall Street insiders (with a history of supporting Democrats – such as Gary Cohn, Steve Mnuchin, and Dina Powell) and Pentagon brass.

Should a good portion of Trump’s voters stop backing the president, he’ll be in real trouble. And markets will start pricing that in.

Conflict with North Korea Possible, Even Likely

North Korean dictator Kim Jong-un ramped up the rhetoric again late last week in response to planned military drills conducted by South Korea and the U.S. Should the North Koreans test fire another missile, the U.S. may well respond with force.

The generals advising the President appear to be succeeding in the effort to persuade him to get more aggressive. Steve Bannon’s departure signals that Trump has heard enough counsel for a less interventionist foreign policy.

The former Chief Strategist was one of few voices for restraint in the White House.

Bannon’s views with regards to North Korea in particular seem to be part of what put him at odds with the president. In an interview with the American Prospect, released just days before his ouster, Bannon said;

“There’s no military solution here; they got us. Until somebody solves the part of the equation that shows me that 10 million people in Seoul don’t die in the first 30 minutes from conventional weapons, I don’t know what you’re talking about.”

In recent days, fears over a confrontation with North Korea have seeped into the markets. If actual warfare breaks out, investors can expect a much bigger reaction.

Republican Leaders Angle for Debt Ceiling Increase

The Republican leadership in Washington DC wants to increase the borrowing limit, quietly and without fanfare. However, they may not be able to betray rank and file Republican voters and get away with it this time.

Conservatives in Congress look ready to revolt, leaving leadership in the awkward position of having to seek compromise with Democrats.

The problem is that Democrats are looking for any chance to thwart Trump and Republicans.

It’s unlikely we’ll see a fight over the debt ceiling which is big enough, and protracted enough, to have significant implications for markets. Past battles over the debt ceiling have been for show. In the end, Congress has never missed an opportunity to hike the borrowing limit – big government Republicans and big government Democrats always find common ground.

However, the polarization in Washington DC is unprecedented. It might even lead to a genuine stalemate this time around.

Wildcard: Russia Hacking Story May Implode on Democrats & Fake News Media

Democratic leadership and their friends in media bet the farm on convincing Americans that Trump colluded with Vladamir Putin to subvert last Fall’s presidential election. They have been telling the world that Putin stole damaging, confidential party emails and coordinated with the Trump campaign to release them at the most opportune time – just before the people voted in November.

Wikileaks founder Julian Assange says he can demonstrate unequivocally that the Russians are not the source of the leaked information. Last week, Republican Congressman Dana Rohrabacher met with Assange to discuss the matter and agreed to share the details with President Trump.

Investors should get ready for some significant developments to be announced soon.

It will be bad news for the Democrat Party and its legacy media allies if their Russia narrative falls apart. Particularly if it turns out whistleblowers from inside the Democratic National Committee were the source of the embarrassing leaks. Party leaders do not want Americans to turn their focus to scandals such as the DNC’s effort to undermine Bernie Sanders or CNN feeding debate questions to Hillary Clinton.

If, as some on the right have speculated, the murder of Seth Rich is related to the leaks it could turn the political left upside down. That would shake Wall Street as well as Washington DC.

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

 

The post Sleeper Issues Poised to Rattle Markets appeared first on Gold Silver Worlds.

from Gold Silver Worlds http://goldsilverworlds.com/economy/sleeper-issues-poised-rattle-markets/