The Coming Silver Shortage
Personally, I have been 100% invested in gold for over 10 years now. However, over the last month or so I have begun adding silver to my holdings for one very simple reason: Relative to gold, it is tremendously undervalued at these currently suppressed/manipulated prices! I base my opinion on the following information.

Before 1933, when our coinage was silver and gold, the price of gold was $20/ounce and silver was $1 an ounce, a 20 to 1 ratio. Twenty silver dollars was equal to one $20 gold peice. This was a historical standard that had been around for thousands of years as gold is about 20 times less abundant in the earth's surface than silver.

Today however, the ratio between the price of gold and the price of silver is about 45 to 1. Gold is trading for around $1800 an ounce, while silver is around $40 an ounce. Now, in a truly free market system, where prices are based on true supply and demand, and not central bank/gov't manipulation, that ratio would tell us that for every 45 ounces of silver that exist, there should be 1 ounce of gold.

However, according to the following chart, that is not the case. The truth is that there are only 8 ounces of investable silver for every one ounce of investable gold... an 8 to 1 ratio.

CLICK ON CHART TO ENLARGE

source: sharelynx.com

In other words there are only 8 ounces of investable silver out there for every one ounce of gold. That means that the price ratio should be 8 to 1, not 45 to 1. And since markets, no matter how manipulated in the short term, always eventually reach equilibrium, that means that with gold at $1800 an ounce, silver should be trading at around $225 per ounce. That disparity represents opportunity!

Of course, that $1800 gold price is a moving target. It is $1800 today, but tomorrow? Who knows? By the time it hits $2000, then silver should be at $250.

The bottom line is that because most of the silver that is mined today is used by industry, there's not as much "investable" silver out there as there was 100 years ago when silver was more of a monetary and less of an industrial type metal.

So what should that ratio be today? I think 8 to 1 is certainly a starting point, but if investors begin to purchase physical silver and draw down the supply, you could see that ratio fall even further because the supply of silver is miniscule. 800 million ounces of silver is only $32 billion. And $32 billion, in the big scheme of things is NOTHING. Of the thousands of mutual funds out there, the Fidelity Cash Reserves Fund alone has assets of over $118 billion!

When the public finally catches on to what is going on and the stampede into gold and silver starts, there simply won't be enough to go around!

I do know this.... based on the above, I think the 45 to 1 ratio will come way, way down, so even if the price of gold stays the same (which it won't), the price of silver needs to go up sixfold just to be where it should be. However, if/when the public finally catches on and stampedes into the precious metals market, you can throw those ratios out the window. Prices will go ballistic at that point.

Entering Stage Two!
Where are we now in the gold bull market, and how will we know when the gold bull market has run its course? The answer to that question lies in the understanding of the three stages of a bull market.

Stage 1
Bull markets begin in obscurity with only speculators and bargain hunters interested in the market. Often markets will double or triple in this first stage which will attract the attention of the professionals. This market will receive no press coverage and will be looked upon with ridicule by all.

Stage 2
Professional money managers will begin to notice the bull market and develop specialty products to take advantage of the trend. This is the longest stage, usually lasting for many years (5-10), and it is the most profitable. Prices may go up 10 to 20-fold during this stage. You will begin to see this market mentioned in the financial media on occasion, but the consensus is that this rise is just an aberration.

Stage 3
After years of exceptional returns in the bull market, the professionals finally admit that we are in a bull market and begin openly advocating the sector. The finanical media presents this market as the next "hot" thing, and talk about it incessantly. Individual investors finally take notice and pile in, not wanting to miss out on the easy money. This particular market is the talk of the office, Christmas parties and even the bartenders and barbers are giving buying tips. Of course, by this time, the easy money has already been made, and a bubble is immenent. After a massive selloff in a short period of time, the sheeple that bought in AFTER the hype lose the majority of their investment.

So, where are we now? I believe we are still in the beginning of Stage 2. Here's why.

In 2008, when the financial crisis hit, and investors ran for the "safe haven" investments, Treasuries went up as investors flocked to them for safety. At the same time, gold was relatively flat. There was no big rush into gold as it was not viewed by the financial elite as a safe haven alternative.

However, this past month has seen the markets react similarly in response to the debt deal crisis, with investors again fleeing to what are perceived as safe haven investments. Once again, Treasuries were purchased en masse, driving the prices of them up by about 15%. But, unlike 2008, gold was also purchased as a safe-haven investment, driving its price up by 25%.

My conclusion is that gold is now being looked at by the financial elite as an option for "safe haven" money. That is a classic "Stage 2" sign, which let's me know that we still have a long, long way to go in this gold bull market!

Musical Chairs
Unlike the public, all major governments are now aware of the fact that the next world currency system will have some sort of gold backing. As the following article points out, this will lead to nations who have allowed their gold reserves to be held by western governments, to ask that their gold be sent home. Only one problem: does that gold even exist? Many, including myself, suspect that it does not.

These are the things wars are made of. Suppose the US and Britain can't produce the gold it owes Venezuela, India and others? What happens then?

The bottom line is this: The gold market is like a game of musical chairs. There are at least 100 times more "claims" on gold than there is actual physical gold in existence. If/when everybody shows up at the same time demanding their gold, somebody gets left out. That's when the music stops and the shooting begins.

Of course, the western nations do have an alternative: Make up some "weapons of mass destruction" type story about those you owe money to, and then invade them in the name of freedom/democracy. Then, all of a sudden, there is no need to return the gold to those you owe money to, and then, no one discovers that the emperor actually has no clothes.

Of course, Chavez knows this, but he also knows that should the US attack, he has Russia and China in his corner who are more than willing to use Venezuela as a pawn to expose the achilles' heel of the west.

Can anybody say "World War 3?" And you thought gold wasn't important! Ha!

Gold, politics, and Venezuela
Gold Research Analysis - August 27, 2011
Markets were abuzz last week with Chavez’s recall of Venezuela’s gold reserves not currently held in Caracas. Bulls are excited by the thought that withdrawing some 150-200 tonnes from the Bank of England and the bullion banks will force a bear squeeze on the LBMA, where gearing between the physical and paper markets are assumed to be 100 to 1. This stretches the relationship between paper gold and physical gold even further. They are also excited by the possibility that others might follow Venezuela’s example.

These concerns are real and should not be dismissed lightly, and the announcement could not have come at a worse time for LBMA members, who also face being caught up in a European banking crisis. Fear dominates, but the real trigger for this market emotion, and therefore its outcome, is global politics. Chavez is not just recalling his country’s gold to protect its integrity, he is waging an idealist’s war against the capitalist system and the US in particular. This is why he has threatened to move gold and foreign reserves to the countries he says he trusts, principally Russia and China, and why he is proposing to nationalise Venezuela’s gold mines.

He has picked the capitalist system’s weakest point. He has been told by his central bank that the Fed, the BoE and the Bank for International Settlements hold gold for the whole central banking community in the main trading centres, and that much of this gold exists only as a ledger entry and is not backed by physical metal. Whether or not Venezuela’s gold is held in these fractionally-backed sight accounts, or in earmarked accounts where the gold is held separately, we do not actually know; but there is little doubt that this move is designed to encourage other central banks to demand that their gold is also repatriated.

Chavez has a point. It is a fair bet that the International Monetary Fund’s 2009 sales of 212 tonnes of gold to other central banks are held in sight accounts as a condition of sale. India, Mauritius and Sri Lanka, who bought this gold, must be very nervous. Interestingly, India and Sri Lanka are also associated with the Shanghai Cooperation Organisation, which was set up by China and Russia with the eventual goal of establishing an Asian supranational state.

This little-known connection is extremely important. The SCO even has a website. The central banks of its member states, observer states and dialogue partners are nearly all buying gold, overtly or covertly. This is more likely to be a co-ordinated economic attack on the West than just a purely random event.

Until Chavez’s intervention, China and Russia – who run the SCO – were gently turning the screws on the gold market: Russia by announcing regular purchases and China by encouraging its citizens to buy. They appear to have put the word about through the SCO that gold will have an important role in the SCO’s future, and those involved should have some. This is a world Chavez wants to be part of, and by removing his country’s gold from capitalist markets he is declaring his credentials.

Underlying this extreme socialist action is the Marxist belief that capitalism will destroy itself. Chavez believes it is his duty to give it a helping hand.

Still Trusting Your Retirement To Wall Street?
Check out this article entitled "Real People Say 'Screw You' To The Markets" over at Market-Ticker.org. It is written by a trader who is lamenting the fact that computer programs have taken over the markets, and in the process, driving out the human element. Now, I can't comment on all the technical jargon found in this short article, but I can appreciate the following:

"All that's left is the computers. The humans have gone home. True liquidity and participation has ended. The people have given up. This is not an isolated incident - as I write this I'm seeing it literally minute-by-minute, and it's been very common all month. A few minutes ago I saw seven contracts on the bid at the money. Seven - at 9:57 (ET) in the morning.

The fraud, the phony bids and offers and the high-frequency ripoffs have driven everyone away.

Go ahead politicians, tell us how important "Wall Street" is to the economy and to you. Let the thieves and liars continue to pollute the markets and screw everyone. Volatility is as high as it is precisely because people are tired of getting buttraped and after a few instances of it they simply say "screw this", take their money and go home.

They don't need the markets, the markets need them, and they're gone.

With no depth in the market huge moves become commonplace and are essentially impossible to trade.

I've never seen the market this illiquid during the day as it has been the last few weeks. It's ridiculously bad and getting worse. When you see two-digit bids and offers during the trading day in the stack you may as well be playing with a loaded six-shooter pointed at your own head - you can't possibly trade ahead of these jackasses and they can and will steal your money,******your stops and then reverse the market right out from under you before you can react. All you do is churn your account and waste your capital.

Don't even try to "invest" in this market folks, and if you decide to trade, realize that you're playing in a rigged casino and the entire force of the government is not only behind rigging the casino but explicitly endorses and permits the rigging to go on and continue, despite being fully-aware of it.

Remember, "Wall Street is Main Street" to them - and if that means your retirement and investments get destroyed that's just fine provided that big buildings in downtown Manhatten continue to be infested by the thieves guild that pumps tithes into campaign coffers."

This guy is as cynical, nasty and mad as I am. What a great guy! He has on no rose-colored glasses and sees the politicians and financial elite for what they are. How refreshing to hear someone so politically incorrect!

Only Crazies Believe It’s Over for Gold
by Rick Ackerman on August 25, 2011
It seems like a terrible waste of energy to haul gold down by nearly $200, as has occurred this week, only to run it back up to new all-time highs next week. Or will it be different this time? Show of hands: How many of you think the POG will never, ever reach $2000 an ounce? That’s what we thought. Still, you can’t blame bulls for grumbling when DaBoyz decide to let the bottom drop out for a couple of days. And that’s exactly what they did, presumably because they had grown wary of chasing gold who-knows-how-high. And make no mistake, it is bulls who caused this week’s carnage, including the $112 selloff that occurred so swiftly yesterday. It’s not as though a bunch of sellers panicked and dashed for the exit all at once, trampling the strong hands who have sponsored gold’s rise from $250 an ounce. No, it was a case of buyers simply going AWOL – for just a short while, we are pretty confident. There was no conspiratorial meeting in a smoke-filled room to arrange all of this, just a tacit consensus that gold was ready for a breather before it launches its inevitable assault on $2000.

Yesterday’s “breather” should have scared the pants off speculators and investors who had grown complacent about the trend. But that is what bull markets are supposed to do: punish bulls and bears alike. Otherwise, it would be too easy for all of us to get rich. Thus do we see bursts of virile strength punctuated by devastating swoons. Losses are often recouped so quickly that even hard-core bulls are left in the dust, too bewildered and dazed to climb back aboard. And yet, more than anyone else, they understand that the monetary forces that have been pushing bullion relentlessly higher for more than a decade have not abated, not one bit. The story is the same: the central banks of Europe and the U.S. are in a last-ditch campaign to hold deflation at bay. Sure, they sometimes talk about austerity, and the bailout packages that some of Europe’s basket cases have signed onto are written in blood. But we shouldn’t kid ourselves that any of it will ever be paid back in hard cash. Nor does anyone actually believe that the 660 billion digital euros pledged against the inevitable crises in Spain and Italy will suffice to cover the approximately 850 billion euros those two countries will need to borrow in a year.

Bet against a renewed burst to $2000 an oz. if you want. As far as we’re concerned, though, it’s only the lunatic fringe that thinks the bull market in bullion is over. Meanwhile, if you want to closely follow our analysis, which is updated round-the-clock, consider taking a free trial subscription to Rick’s Picks. It will give you access not only to timely analysis and detailed trading recommendations, but to a 24/7 chat room that draws savvy traders from around the world.

Chart of the Day
Today's chart provides some long-term perspective in regards to the gold market. As today's chart illustrates, gold has been in an extremely strong bull market since 2001. The pace of that upward trend has increased over time. There was a slight increase in slope both in 2001 and 2005. Following the financial crisis of late 2008, however, gold significantly increased the pace of its ascent. Recently, gold made new rally highs but has pulled back after approaching long-standing resistance (red line) of its current accelerated trend channel. Despite the pullback, gold currently trades for over six times what it did when the rally began back in 2001.

If voting could really change things, it would be illegal.
Revolution Books, New York, New York

It's Not An Accident!

I recently received this excellent email from one of my clients. He's a UVA grad who did his thesis on the velocity of money, so he's not exactly a dummy! Anyway, I am posting his email in its entirety, followed by my email response to him.

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Greetings All:

Time for another rant I guess. The core of the problem is that unregulated, trickle down capitalism is a system that does not work, and will be changed one way or the other.

One solution that I have commented on before is this: If you want to sell it here, you will by God, make it here. And we will do the same. There are a few items that we would have to exempt, but not many.

I can hear it now. All of the Exporters will be screaming that they will not be able to sell overseas, and America will be doomed. Well, have you seen the balance of trade figures of late? They may be doomed, but the rest of us will start to do better.

Have you seen pictures of Detroit, Michigan USA? The only scene that is more horrible is a bombed out city somewhere in the mid east, and we are probably the country that destroyed that city in the first place, but that's another story. This is what unregulated trickle down capitalism gets the average guy.

What can we do? Probably not too much, but I try not to buy anything from those damn Chinese.

The Midnight Writer

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Hey Big C,

Excellent insights. I agree totally, but I have a bigger question to ask: If you and I can figure this out, then don’t you think the powers-that-be can see this as well? I’d assume the answer to that question is “yes,” which leads me to ask a second question. “Why are those we have entrusted with protecting our nation and economy systematically dismantled it?”

I’d say the answer to that question IS NOT that they are stupid. I’d say it IS NOT that they are unaware of the consequences of their actions. I’d say that IT IS because that is what they are “hired” to do by the big money that gets them elected!

Let’s look at this thing from another angle and I think things get real clear.

If we were part of the international banking cartel with eyes on total global domination, what, or who, would be the greatest obstacle to the achievement of our goals? A strong America! A free America! (Never forget that the borrower is slave to the lender and the goals of the international banking cartel has always been to make every nation dependent upon them via debt. This is one reasons why wars are started as it forces governments to borrow to pay for them. See How And Why International Bankers Make War. ) Therefore, job number one for us would be to systematically dismantle the American economic system to the point where Americans would be willing to give up their freedoms and independence in exchange for food and security. And how would we do that? By saddling them with unbearable debt and destroying their manufacturing base.

How would we go about such a dismantling? I think we’d start by buying off the politicians, media and educational system. Their acquiescence to our objectives would eventually guarantee our success as the bulk of dumbed-down Americans are unwilling and unable to think for themselves and will just swallow hook, line and sinker anything the establishment tells them. So, if the guvamint tells Joe Sixpack that allowing WalMart to run American manufacturers out of business in favor of lower-cost Chinese producers is the American Way, then Joe Sixpack is more than happy to switch off his brain right there and just be happy that he got his widget cheaper than had he bought American.

The prostituted educational system is more than happy to continue to espouse Keynesian economics as long as they can continue to belly up to the guvamint trough and slop with the rest of the little piggies! They will run studies and do research and come up with whatever “proof” they are asked to produce as long as the federal funding keeps coming.

So, in conclusion, I think your observations are an excellent commentary on the process of the INTENTIONAL systematic dismantling of the Empire America. I do not think it is an accident, but it is the culmination of decades of careful planning. A part of me wants to say that the American sheeple deserve what they are getting. Let em crash and burn! Willful ignorance deserves to be punished. But the trouble is, you and I are on the same sinking ship with the rest of these buffoons along with a lot of other innocents who really don't deserve what they are about to have to endure. But at least we have a life raft waiting for us when the ship finally sinks……. Gold!

DT

Ron Paul On Conspiracies

I've always been the "crazy" one in my family. You know, the one that sees conspiracies, evil and demons behind every rock? Yeah, that's me. So I have gotten accustomed to being alone (Translated: "out front") on most issues and having to wait on everyone else to catch up. So it feels real good to have Presidential Candidate Ron Paul confirm what I've been saying for years, namely, that the folks that run this country are not stupid, but have a plan in place for its systematic dismantlement. Put plainly.... a conspiracy.

In the following interview, Congressman Paul was asked whether the purpose of the FEMA Camps, and specifically HR 645, The National Emergency Centers Establishment Act, were to incarcerate Americans in a time of civil unrest. In true Ron Paul fashion, his answer is direct and shocking.



The "trial run" for civil unrest is currently playing in London now. You can be sure that the globalists are fine tuning their strategies for the real game which will come to America soon.

And what might bring civil unrest to our shores? There are any number of black swans circling overhead that could be triggered to bring this about, but the obvious choice at this point would be economic hardship, a plight which I have espoused all along was a "planned" event. (Got gold?) Let the average, mild-mannerd, everyday citizen get hungry enough and he will take to the streets like a third-world peasant.

The people that run this world are not stupid. Obama is not stupid. Bush was not stupid. They are doing exactly what the plan calls for. They are systematically dismantling our nation and selling us down the globalist river. Nothing is by accident.

The game plan calls for civil unrest. They will create it, and you can be sure that they will be fully prepared for it when it arrives. The only question that remains is "will you be prepared?" And sadly, the answer to that question for 99% of Americans is "no." And when you get hungry enough you will eventually take to the streets and demand change. And it is change you will get, and HR 645 is waiting in the wings to give it to you.

Okay, I'm finished ranting, for now. Put your head back in the sand and have a nice day!

James Turk Interview




James Turk is founder of The GoldMoney Foundation. It is a not-for-profit educational organisation established in 2010 by GoldMoney Network Limited, a leading global provider of precious metals that safeguards over $2.0 billion of customer assets.

The aim of the Foundation is to promote and support educational initiatives that expound the principles of sound money. Its scope is global. The Foundation is an influential addition to the well-established tradition of leadership in sound money that has been an important building block of GoldMoney Network Limited.

Sell In May And Go Away?
"Sell in May and go away" is an old saying that we have heard in the gold business for years. It attests to the fact that the Summer is usually a quiet time for gold prices as most traders are vacationing far away from the trading floors. As a general rule, nothing much happens to gold prices in the Summer so traders will sell out their gold positions in May and lay low for the season.

Now, consider the following chart:


So much for old sayings! Which just goes to prove what I am always telling my clients: "trying to time an entry or exit in the gold market is like trying to catch a falling knife." And my second insight is similar to the first: "the best time to buy gold is always NOW!"

Trying to time the markets is a losing proposition and one that would have cost you 30% gains this Summer if you had sold in May and went away. Which brings me to my new "old saying," BUY TODAY AND GO AWAY!

Dropping Supply Will Lead To Higher Prices
by David Tanner
I have frequently written about how the increasing demand for gold is driving prices higher. However, until now, I have not addressed the supply side of the gold market since it is rather static and inelastic. The following excerpt will serve as an intro to this supply-side discussion.

News reports state that "economic genius" President Hugo Chavez has announced his intention to take over Venezuela's gold sector which produces around 400,000 ounces of gold per year. With gold beating nominal records, we expect the decree to come in short order and Venezuelan gold production to shift into decline not long after the developed multimillion-ounce deposits in hand are plundered. Source:Resourse Nationalism, Casey Research

Currently, the gold mining industry cannot produce enough gold to keep up with global demand AS IT IS. I said "as it is" because it appears that the current supply side of the equation is about to change. In short, it appears that governments around the world, looking for quick cash infusions to balance their budgets, are gearing up to go plundering their natural resource companies, which, as is always the case when the government enters the private sector, will result in inefficiencies and loss of productivity. This, in turn, will surely lead to a decreased supply.

How does government intervention result in a lower supply of gold?

In short, private investors sink billions of dollars into mine exploration and development years before the first gold is ever extracted. Imagine you are one such investor and just as the gold is finally being produced, the government steps in and takes a big chunk of the profits you were counting on reaping when you invested your hard earned dollars years earlier. What would your reaction be the next time someone asks you to invest in a gold mine? You'd likely decline the opportunity to get robbed as second time!

So, if governments do begin nationalizing their gold and silver mines, look for long-term investment in the mining industry to dry up. And when that happens, supply eventually dries up as well.

The bottom line is that nationalization will lead to much lower precious metals supply at precisely the time the world is clamoring for more supply. This is an explosive combination that should lead to some "explosive" prices in the not-too-distant future.

Hang on.

Eric Sprott - The Price of Silver Should be $110 to $120 Today
With the Dow down almost 500 and gold surging above $1,825, today King World News interviewed billionaire Eric Sprott, Chairman of the $10 billion strong Sprott Asset Management to get his take on the action and what he is doing with his own money. When asked about his charitable foundation selling gold and buying more physical silver Sprott stated, “We’ve put a notice in that we are going to sell two million shares of the Sprott Physical Trust, which would generate something like $32 million of proceeds, and it’s my intention to move that into (physical) silver. As you know I have opined very often that I think silver should trade at a 16/1 ratio to gold. That would imply a price today of something like $110 or $120, (and today) it’s $40.

...The availability in dollar terms of gold is 100 times that of silver, so you can’t keep buying at a one to one ratio without something giving here. As long as people keep buying it you know the price has to go up, there is very limited supply. I think Comex has something like 27 million ounces (available for purchase), which is all of one billion dollars. What is one billion dollars these days? I mean there’s probably 500 different organizations that could clean them out.”

Sprott expects another banking crisis. He commented, “People start to worry about a country whether it’s Spain or Portugal or Italy or maybe now France and anybody who’s semi-intelligent would say to themselves, ‘Well, if I can take my money out of a Spanish bank and put it in a German bank or a Swiss bank or a Canadian bank or something like that, why wouldn’t I do it?’

But you can certainly sense that this money is flying around the world. We had an example of that where a week ago I think it was Bank of New York Mellon said, ‘We’ve got so much money in here we want to start charging for people to put money in the bank.’ Now ultimately they didn’t go through with it, but it was symptomatic of what was happening, the money was just pouring out of Europe.

Of course as it pours out of the bank, the banks who are levered twenty to one, they have all of these paper assets whether it’s stocks or bonds, mortgages or whatever and the depositor wants his money and theoretically they have to sell something. But there’s no one to sell it to. Nobody wants to buy any of those assets, so the governments have to step in and support them....Essentially we have what I would call a bank run that’s been going on, it happened in Iceland, it happened in Ireland, it happened in England, Greece, now it’s gone to Spain, Portugal and Italy.”

When asked about the GATA conference in London and Jim Sinclair’s speech in particular Sprott responded, “Well it was very special for me to see James Sinclair and meet James Sinclair who I had never met, but I go to his website (jsmineset.com) very often. I mean I think it was one of the greatest calls of all-time which I commented on in my own speech there, that anybody who in 2000 that would have suggested gold would go to $1,650, to be able to triumphantly come to GATA and the price was $1,650 was absolutely incredible and I think it inspired everyone.

To add icing to the cake of course, Jim suggested that if gold went through $1,764, it would start entering a parabolic phase and would go to $12,000. But what an incredible call ($1,650), it was an honor to be there.”

When asked about gold Sprott stated, “I’ve always thought that the ultimate destiny for gold and the ultimate reason for owning it is that people don’t understand, you take a risk when you own any paper asset including a bank deposit and perhaps a bank deposit is the riskiest of all because that money has been levered in the system.

You can see us in a situation where people are losing confidence in paper currencies....

“You can almost sense that we are going to go back to a precious metals backed currency. Just think of the demand there would be if these two products (gold and silver) had to go into circulation and you need this physical commodity. So I have no doubt that these prices will continue to escalate.”

When asked where the gold is coming from to supply market demand Sprott replied, “Well, it’s a great question and I struggle with it immensely, I struggle with it more every day. Central banks bought approximately 200 tons of gold in the first half of this year. One can assume that they will probably buy 200 tons in the second half of the year which would be 400 tons (total). Last year the IMF sold 400 tons and they haven’t sold any this year. We have in gold a 4,000 ton per year market, which is 2,600 tons of produced mined gold and about 1,400 tons of recycled gold.

So that 800 ton change just at the central bank level would mean a 20% difference in supply/demand this year vs last year. But there is no extra supply. So it always begs the question, where is the gold coming from? As I just read today, the World Gold Council came out and said Chinese demand grew 38% in the second quarter and Indian demand grew 25%. I was reading today where the Dubai gold sellers say the business is up 100% and I keep wondering well, how can we keep having all of these big numbers, supply is flat, where is the gold coming from?

It probably takes me more today than any other time in my life to the GATA view that banks have all along both overtly and without transparency just been selling gold. And I think that they have to be selling gold now to keep things under control. So I don’t know where all of this gold is coming from that everyone is buying because every time I look at a data point in gold it’s plus 20%, plus 30%, plus 100% and you turn around and look at gold supply is (only) up 2% per year. So I have no idea where the gold is coming from, but somebody is supplying this market that is doing it surreptitiously.”

Doug Casey On The "Recovery"
An excerpt from We Are Exiting The Eye Of The Storm.
"I’m not sure that many people really ever believed there was a recovery under way. Wall Street acted like there was – but only somewhat, since banks never started lending again. But unemployment has remained high; it’d actually be about twice the official 9% level, if it was calculated the same way it was 30 years ago. And outside of the price collapse of certain asset classes – like real estate – the cost of living has increased greatly for most people; the calculation of the government’s CPI is as corrupt as its unemployment numbers. I think it’s a mistake to talk about a double dip in the economy; we entered the Greater depression in 2007 and are still in it. A “jobless recovery” is not a recovery. The only thing that’s recovered is the stock market, to some degree. Aside from government hocus-pocus, the mirage of corporate earnings, and foolish investors wanting to believe it was safe to get back in the water, things have not gotten better. And they are about to get much worse."

The economy isn’t going to stay in the eye of the storm for much longer. The stab of panic we saw last week gave lie to the emperor’s new recovery clothes. It’s not just the losses on the stock market, but gold hitting significant new all-time highs in nominal terms, and Bernanke saying that the Fed would hold interest rates close to zero for another two years. That’s huge – and a huge mistake. It tells me that Bernanke has truly panicked. The impact this will have on the dollar cannot be overstated; it’s a guaranteed disaster. It assures that people will do all sorts of things they would not do without that artificially easy money.

What needs to be done is to let the market raise interest rates, to encourage savings – the accumulation of the capital needed to start moving forward on a solid basis. Instead of encouraging people to work, spend less than they make, and save the difference, these low interest rates encourage profligacy. They encourage people to liquidate savings and live above their means. As usual, the government isn’t just doing the wrong thing, it’s doing the exact opposite of the right thing.

And – adding insult to injury – not only are they doing the opposite of the right thing, they are actively punishing people who did the right things, who worked hard and saved. Pensioners living on fixed incomes are being forced to reach for higher and higher yields, which means they are being forced to put their nest eggs into riskier and riskier investments. This guarantees that the pensioners and the savers will be wiped out. Unless they put their savings into gold.

But nobody but crazy goldbugs even thinks about that. And it gets worse: The current course guarantees the total destruction of the U.S. dollar. Again, I cannot emphasize enough how serious this is. People all around the world save in dollars. If the dollar is destroyed, it won’t just be Americans who’re hurt, it will be all the hard-working people around the world who’ve struggled to scrimp and save and put money away for future needs. All these people who were wise and frugal, they are going to be wiped out. They are going to be left with absolutely nothing. This is criminal – it’s the stuff revolutions are made of. And that’s exactly what I expect we’ll see plenty of, all around the globe.

Bill Buckler Quote
"Up until August 15, 1971, there has never in history been an era when no paper currency was linked to Gold. The history of money is replete with instances of coin clipping, printing, debt defaults, and the other attendant ills of currency debasement. In all other eras of history, people could always escape to other currencies, whose Gold backing remained intact. But since 1971, there is no escape because no paper currency has any link to Gold.

All of the economic, monetary, and financial upheaval of the past 40 years is a direct result of this fact.

The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of Gold." - Bill Buckler, The Privateer

Richard Russell - Expect Mass Entry Into Gold By Retail Public
With gold hitting new all-time highs and silver surging to $43, the Godfather of newsletter writers Richard Russell had this to say in his latest commentary,

“Gold -- I've been receiving many calls to the effect, ‘Should I sell my gold now?’ My answer is that I don't have the ultimate answer to that question. My thinking is that gold has been in a decade-long (bull) market. Most extended bull markets end with a third-phase period of torrid speculation and a mass entrance by the retail public. So far, we have seen neither.

My inclination is to ride the gold bull market until it provides a classic ending. That means sitting through many a coming correction and perhaps extended periods where gold does little or nothing. In other words, I may be doing something stupid but I'm sitting.”

Russell continues:

“GOLD -- Lord bless moving averages ‘that work.’ One MA that has worked beautifully for two years is the 150-day MA of gold. Note below that gold has ‘tested’ or touched the 150-day MA of gold on five separate occasions over the last two years, and each time gold has held -- and then rallied to new highs.

Gold's latest run has taken it rather far ABOVE its 150-day MA, and now gold has me a bit nervous. Has gold run up too far? Does gold need a rest? Will gold sit on its butt, until the 150-day MA rises to touch it (nah, that would take too long)? Or is gold rising on a new and steeper angle?”

To subscribe to Richard Russell’s Dow Theory Letters CLICK HERE.

Selected Articles For Your Pleasure

Nervous investors go for gold as panic grips stock markets

Silver About to Roar Through $50 All-Time High: John Embry

Is Gold the Only 'Safe-Haven' Investment Left? CNBC

Last Call Before Closing Time
Unlike paper money that can be printed out of thin air, real money, gold and silver, cannot be instantly created to meet demand needs. Occasionally, demand for metals exceeds supply and the physical metals market dries up. Such appears to be the approaching case based on the following commentary from Doug Steer over at Casey Research. I strongly urge you to not wait around too long or you will be left behind.

"The U.S. Mint had another sales report yesterday. The sold 3,500 ounces of gold eagles...2,000 one-ounce 24K gold buffaloes...along with another 150,000 silver eagles. Month-to-date the U.S. Mint has sold 83,000 ounces of gold eagles...17,500 one-ounce 24K gold buffaloes...and 2,134,500 silver eagles. As I keep reminding you, dear reader, I do hope you're getting your share, as it's my opinion that the clock is ticking.

There was huge activity over at the Comex-approved depositories on Tuesday, as they reported receiving 2,209,572 troy ounces of silver...and shipped 1,754,399 ounces of the stuff out the door. As Ted Butler keeps pointing out, this sort of frantic in/out activity suggests tightness in the physical market, as it appears that no one wants to sell the Comex-held silver they own...at least not at the current price level, so new supplies must be brought in to meet demand."

Venezuela moves cash, bullion out of Western states
While Americans continue to slumber, the rest of the world is gearing up for an economic world war by stocking up on economic ammo (gold!). In a story that can be found here, Venezuelan leader Chavez has nationalized his country's gold industry. In addition, in a related story that can be found here, as originally reported by the Wall Street Journal, "The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela."

Little does the average American realize that, while he sleeps, billions of dollars worth of US paper assets such as stocks, bonds and bank accounts are being liquidated by the world in an effort to extract themselves from the damage from the coming economic meltdown. Of course, for every stock or bond that is sold, someone is buying it. Who are the buyers of these worthless securities? YOU!

Joe Middleclass, with his 401ks, IRAs, mutual funds and stock purchase plans at work is continuing to drink the Kool-Aid being sold by the media and the mainstream financial industry. "Just buy and hold," he's told, "the market always comes back."

Of course, that's true, but who has twenty years to wait? In the meantime, you might want to consider following the rest of the world into the safe haven of gold while you still can. And while you wait, the returns ain't too bad either!


CLICK ON CHART TO ENLARGE

Ron Paul Revisited - The Fix Is In!
Last week I posted a short article about Presidential candidate Ron Paul and why he will never be elected. For those of you who think the media isn't shaping your vote, I would ask you to watch the following short clip about how the media ignores Ron Paul.




Likewise, this same media that has convinced you, the unthinking American public, that Ron Paul does not exist, has also convinced you that neither does gold exist as an investment choice. That's why you don't own any yet, because you are too lazy to do your own homework and think for yourselves. You take the prostitute media's word that gold is a poor investment. And in the end, when you are standing in the bread line with other doctors, lawyers, engineers and other "smart" people because your $500,000 401k plan has evaporated, you will only be able to point the finger of blame at yourselves because you listened to a media who were merely the mouthpeices of those who were systematically stealing from you while they pretended to be your friends.

Word of advice..... if you don't want to be standing with those "smart" people in the bread lines in the future, then don't stand with them now. Be different. Think for yourself and dare to stand alone. No one ever became great (or rich) following the crowd.

Why You Buy Gold
Here's a short exceprt from King World News' interview with Peter Schiff of Europacific Capital. He very quickly and clearly outlines why everyone will soon be buying gold.

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With gold consolidating recent gains, today King World News interviewed Peter Schiff, CEO of Europacific Capital, to get his take on where things stand. When asked about the run in gold Schiff responded, “Well it’s going to continue, gold is going to go higher because people want refuge. In fact the other safe havens in the currency world, like the Swiss Franc or the Yen, the central banks there are trying to undermine their currencies.

I mean the Swiss are actually thinking about pegging their currency to the euro. One of the reasons people were buying the Swiss Franc was to get out of the euro. Now they are threatening to turn the Swiss Franc into the euro. So what’s the one asset that central banks can’t print? That’s gold and so gold is the last man standing and everybody is going to be piling into it.”

When asked about the relentless rise in gold Schiff replied, “Look at what’s going on, governments have interest rates at zero, the Fed just said they are going to keep interest rates there for at least two years. That’s basically QE3 because they are going to have to buy a lot of bonds to keep interest rates that low. So what else is gold going to do?

If there is no yield on currencies, if they are printing them like they are going out of style, if governments are trying to keep economies inflated and they have all of this debt, how are they going to get rid of the debt? They are going to inflate it away. If they are not going to default and they are not going to cut government spending, what’s left? Inflation, print money.

So it’s becoming obvious to more and more people and when the government repudiates its debt through inflation, when you hear they (governments) are inflating their way out of debt, well, yes they are inflating their way out of debt, but they are also inflating their creditors out of their assets.

When the government gets rid of its debt through inflation, it wipes out people’s assets that are based in that currency, people’s savings. So if you don’t want to get your assets inflated away, you buy gold, that’s the refuge....

“Gold will be overbought for years, I mean it will have pullbacks, but most of the time it will just be going higher and you are going to have to buy it. That’s the wall of worry. I talk to people all of the time who say, ‘I can’t buy gold because it’s high.’ Who says it’s high? Maybe it’s lower than it was based on how many dollars and euros and RMB are out in circulation now.

Gold is a measurement of the value of money. So the higher the price of gold, all it’s telling you is that money as wealth has lost value. If money keeps losing value, then gold has to keep going higher. Gold only has one way to go and that is higher because the only way that you are going to stop the price of gold from rising would be to do what Paul Volker did in 1980. We need to get a huge increase in interest rates, where interest rates are way ahead of the real rate of inflation.

But the problem is you can’t do that without completely destroying the phony US economy, so you’ve got to be willing to do that. To break the run in gold, you have to be willing to collapse the economy, to bankrupt the US government, to crash the housing market, to bankrupt the banks. You have to be willing to take a recession or depression, one that’s much worse than the one in 2008/2009 time frame. I just don’t see any political will to do that. As I said, they are going to keep on printing so it’s just a one way trip for gold.”

Silver Set To Run
The following is another great tidbit from the most recent Delaire Report.

"When one considers the recent price action of gold, the moves in the price of silver are perhaps somewhat disappointing. However, let me assure you that as the price of this precious metal consolidates between $38 an ounce and $42 an ounce, it is only a matter of time before we see a fresh break to the upside that will take the price of silver through the $50 an ounce level.

As at August 04, physical COMEX inventories of silver were down to 27 million ounces. That's more than a 35% decrease since April — and down 48% in the last twelve months. With so little inventory, it's likely that nine out of ten COMEX traders do not have their silver contracts backed by stockpiles of the physical metal, something we have known about for years. Even though the chance of a of default (unable to deliver) is very slim, if there is a sudden rush for the physical, there will be a scramble to close these short positions leading to much higher prices. So, the potential for a short squeeze still exists in the silver market.

If this happens this would lead to explosion in silver prices straight through the previous all-time high of $50 an ounce into triple-digit territory —possibly past $120 an ounce. Ultimately, it may even test the $200/oz level."

Knowing What To Do Is Simple

Back in the 80's, when I was in the mutual fund business, I read a book by Peter Lynch, then, the most successful mutual fund manager in the world, that gave the secret of his success in stock-picking. He shared that one of his "tricks" was to take all the neighborhood kids to the grocery store every Saturday morning and tell them to buy anything that they wanted. He, then, would go back to the office on Mondays and check out the companies that produced the products that the kids purchased.

I think this story highlights the core of successful investing, and, anybody can do it. What was Lynch doing? He was simply guaging the demand for various products. And as we all learned in basic economics, rising demand leads to rising prices.

Armed with that knowledge, I ask you to consider the following comments made by Ed Steer of Casey Research in his Gold & Silver Daily column:

"I remember four or five years ago when a story on gold came out so seldom that you could count them on the fingers of one hand in a one month period. They are now arriving in my in-box at that rate per hour!

That's the excuse I'm using for the boat load of stories that I have for you again today. I have come to dread my Tuesday column, because there are three days worth of stories to post. In the 'old days'...a gold story on the weekend was unheard of. Now it's commonplace."

With the financial community slowly waking up to gold and beginning to write about it, it is only a matter of time before the public at large jumps on the gold bandwagon. Of course, with that increased demand will also come increased prices.

It's not too late to get ahead of the trend, but the window of opportunity is certainly narrowing. Right now, armed with this knowledge, knowing what to do is simple.

Wrong Again
This is a short excerpt from the most recent Delaire Report.

"And as soon as the price of gold drops, most analysts instruct their investors not to touch it as it is too high. They claim that they only buy when prices are low.

Yet, even when prices were low, they were not buying. A typical example of this is when one of the more prominent financial experts and well-known economist, Nouriel Roubini, professor of economics at the New York University’s Stern School of Business said gold was a bubble when the price was $1100 an ounce.

On Decemember 10, 2009 with gold at $1100 an ounce, Roubini said, “all the gold bugs who say gold is going to $1500, $2000, they’re speaking nonsense. Roubini went on to say, “I don’t believe in gold.”

Gold has now risen more than 60% since then. I wonder what Roubini has to say now. But believe me he is not alone in this type of thinking. In South Africa every single main stream commentator got it wrong. Yet, they have not changed their myopic views about gold and still refuse to recommend it to investors as a portfolio diversifier.

As I mentioned countless times, we live in times of tumultuous change. We do not know what is going to happen the next day. Paper assets can soar or sink as we have recently witnessed last week. Some shares dropped suddenly by more than 20%! That is like saying the price of gold has dropped overnight by $350 an ounce. Yet, as soon as the price of gold does drop, even if it is $50 an ounce, most analysts slam gold as a bad investment. This only goes to show that they have no knowledge of the global monetary system and why the price of gold continues to move higher. Through centuries of war and peace, feast and famine, gold has always been a consistent store of value and a trusted medium of exchange. Gold has an intrinsic value and has been used as money and as a store of value for more than 5000 years."

Now, the question you need to be asking yourself is how can these well-connected, well-educated financial spokespeople continue to be so wrong? The answer is simple. THEY DON"T BELEIVE WHAT THEY ARE SAYING! Every time they say "don't buy gold, it's too high," it's to keep the masses away from the precious metal, SO THAT THEY CAN CONTINUE TO BUY THEMSELVES AT THESE LOW PRICES!

I used to have a gold dealer in New York that would call and tell me everytime the Goldman Sachs boys would get their million dollar year end bonuses that they would come into his shop and take it all in gold and have it shipped out of the country. These are the same boys that are getting on CNBC and telling you that gold is a poor investment. LOL. Don't believe a word they say.

Russell - $2,000 Gold Shortly, Then $2,500, $5,000 & $10,000
Source: With tremendous volatility in gold, silver and stocks, the Godfather of newsletter writers Richard Russell had this to say in his commentary this week, “I think what I'm most interested in now is whether and to what effect the fading market has on the US economy. I honestly don't think most people are taking this market decline seriously. After all, we "have the marvelous Fed" and the Fed has always come through in an emergency. Besides, probably 90% of living Americans have never seen or lived through what I call really "hard times."

Richard Russell continues:

“But a collapsing market within a fading economy is a dangerous situation. This is exactly what happened after April 1930. Once the big upwards correction topped out, the market headed down in earnest, and it was the start of the Great Depression.

Therefore, I want to see whether the US economy starts to unravel, as it did during 1930. If it doesn't, then we're not seeing a repeat of 1930. And my comparisons with today and 1930 will have been misplaced (let's call it wrong).

The P&F chart of gold remains bullishly intact. But gold is becoming extended and overbought. The next nearby target is 2000 for gold. Central banks, which have been net sellers of gold, are now net buyers, particularly the Asian central banks. I expect gold to be erratic an unstable like the rest of the market, and it will takes guts to sit with gold over coming weeks.”

“When chaos reigns, people look for certainty. When all is lost, only one item stands supreme and has been supreme for thousands of years. That item is gold. You can see on the P&F chart that gold has been, and is, working its way higher. The anti-gold element is afraid of gold hitting the even number of 2000, thus we see gold, day after day, fluctuating in the 1500 to 1700 area, but never breaking out to 1900, or God forbid -- 2000.

At 2000, the next objective would be 2500, and from there 5000, and from 5000 -- 10000. As gold marches higher, it's playing the death knell for fiat money. And every central banker knows it. So far, the P&F chart does not show a three-box correction.

Just imagine, the dollar, the world's reserve currency, backed by a nation with a credit rating that is less than AAA. No wonder far-sighted investors are opting for gold instead of man-made (fiat) money.

This is no time to be a wise-ass. Sure the stock market has appeared hysterical, but in the end it always makes sense. Today (Thursday) we got the second 90% up-day from the NYSE, this after a long series of brutal and frightening sell-offs. This is what I've been waiting to see. Stocks have been battered down far enough so that the big money and the institutions believe they are values, and thus the big money was ready to pile in. And pile in they did, yesterday and today. With the appearance of two 90% up-days, I'm saying that the bottom of the correction is IN, and that the secondary trend of the market has finally turned bullish."

According to Richard Russell this move in gold is far from over. The mania in gold still lies somewhere ahead. Gyrations aside, remember to be right and sit tight with your positions.

Ohhh, It's About To Get Good!
For all of us that are "all in" regarding gold, here's an insight from Casey Research that just can't help but give you the warm fuzzies all over! Enjoy.

"...the Treasury market is now the largest bubble on the planet. How big a bubble can be understood by comparing the record-low rates just mentioned against the record size of the U.S. debt and its record deficits.

This is the part where it gets exciting - at least if you are paying attention.

Once the pin hits the bubble - and that pin is the inevitable price inflation that pushes today's negative real yields even deeper into the red - not only will the world's central bank be scrambling for a new home, but so will a tsunami of money coming out of bonds, the world's largest financial market by a wide margin.

As to where that money may go, you can rest assured it won't be the yen - which is in almost as much trouble as the euro or the renminbi - at least not as long as the communists are still in control.

Which leaves gold, the all-time indisputable champion of money.

Already we have seen a big swing in central bank reserves of gold, with the bankers collectively switching from being net sellers of millions of ounces of gold annually as recently as 2008, to being net buyers. They'll be buying more.

The Near Term
Since we're engaging in speculation about the future, I would add that in the near term, I expect the frenzy in gold to abate and prices to consolidate for some time. Any time a market moves as far and fast as gold has of late, it almost certainly has to take a pause.

It's worth remembering that just a month ago, on June 12, the price of gold was "just" $1,550. So even a fall of $200 per ounce (gasp!) would mean absolutely nothing in the overall scheme of things. That is not to say you should try to trade any pullback - there are too many black swans circling overhead - just don't worry if gold does correct.

Why You’ll Still Be Buying Gold at $2,000
By Jeff Clark, Casey Research

I was recently asked in an interview if I thought gold was going to $5,000 an ounce. “No,” I said bluntly. “I think it’s going higher.”

“You’re that optimistic?”

“No,” I replied. “I’m that pessimistic.”

Imagine the condition of our world if gold reached $5,000 an ounce – and kept soaring. We’ll likely be in a mania if that happens – but what kind of mania will it be? There’ll be some greed to be sure, but I think there’s a good chance a deeper reason will be at play. And it’s the same reason that will drive you to keep buying gold at $2,000 an ounce.

You’ll have to.

There are 101 reasons to own gold right now. You might buy because of the debt turmoil you see around the globe. You may think it wise, like the Chinese and others, to keep some of your savings in gold. Negative real interest rates may draw you to gold. You might buy because of the mere fact that demand is overwhelming supply. Or you fear inflation. Or deflation.

But most of these factors are missing one critical element: They’re not yet personal.

Most reading this have not had to flee their country, been the victim of hyperinflation, or watched helplessly as their currency went poof! Longtime investors have made money on their gold investments, to be sure, but most of us bought the yellow metal as an investment and not because of a do-or-die situation.

It’s doom and gloom to say this, but I think it’s possible and perhaps even probable that at some point we’ll all feel forced to buy gold, almost irrespective of price, due to a sudden and rapid depreciation of the U.S. dollar.

How do we get to that point? Simple: You go to buy something and realize you’ve just been priced out of the market, not because the item is too expensive, but because you suddenly realize the money in your hand no longer has purchasing power. Your reaction to that event is predictable: You feel cornered, maybe even scared, and the urgency to seek an alternative takes over.

This is obviously an inflation scenario, but it’s not exactly a stretch to get there from where we are today. Here’s why.

The following chart tracks the dollar and gold adjusted by the CPI from 2000 to present. It catches many people off guard, once they realize its implications. Look what’s happened to the greenback in the past 11+ years:

CLICK ON IMAGE TO ENLARGE



Since the Y2K scare, the dollar has lost an incredible 25% of its purchasing power. Even adding the measly interest one would earn in a traditional savings account doesn’t make up for this loss. This isn’t a picture of the dollar since the creation of the Fed or since Nixon took us off the gold standard. This is what’s happening right now – a gross devaluation of your dollar-based savings. Gold, on the other hand, has not only preserved but increased one’s purchasing power.

Now, imagine this scenario on fast forward. Instead of a 25% loss in 11 years, what if it occurs in, say, two years? That’s what can happen in a highly inflationary environment. At some point, given the baked-in consequences for our currency and the unwillingness of politicians to effectively deal with the problem, you one day instinctively realize, as you hand money to a cashier to buy milk and she asks for more, that it is a depreciating asset and no longer a stable form of exchange.

In other words, you won’t buy gold at $2,000 an ounce because you think it’s going to $6,000; you’ll buy gold because you fear the dollar will continue losing its ability to meet basic monetary requirements and you’ll need a substitute, something that will retain its value.

Regardless of whether the downward trend with the dollar continues at the same pace or speeds up, one thing is clear: It will continue. You must portion some of your savings in gold.

Sooner or later I think we all will have an epiphany about money that pushes us to buy gold, even if it’s at levels that would seem expensive today. When that time comes, you won’t be focused on the price of gold but on the absolute need to acquire a more lasting asset.

If I’m right, $1,700 is not a high price to pay.

Is Recent Gold Hedging Activity a Warning?
By Vedran Vuk, Casey Research

Many investors have been baffled by Treasuries in the past few days. They've been downgraded, yet investors continue to flee into them for safety. Has the world gone completely mad? No, not at all. Economists have observed this phenomenon for decades; it's known as "sunspots" or "focal points."

Sometimes market participants rally around a certain point regardless of the fundamentals. If everyone agrees on the focal point, they will end up in the same place. Over the years, Treasuries and the U.S. dollar have been the strongest focal points in times of crisis. As a result, it doesn't necessarily matter that Treasuries have been downgraded. Investors retreat to Treasuries because others will too.

Social scientists have done experiments on focal points outside of markets. For example, in one study, ten students were dropped off in different parts of New York City. They were instructed to find each other by the end of the day. Doing the numbers, this seems almost impossible. There are millions of people in New York City. How could they possibly find each other without some form of communication? From a purely mathematical perspective, the odds are slim.

However, the students did find each other. Guess where? Times Square. Though none of them had planned it ahead of time, Times Square was a New York City focal point in their minds. They each headed there and found the others.

The significance of focal points isn't only a phenomenon for Treasuries. What really has me excited is gold's reaction in the past few days. During the 2008 crash, gold initially climbed but then dipped with everything else. Some folks saw it as a flight to safety, while others did not. There wasn't a consensus to push gold higher.

This time around, gold is witnessing a fascinating transformation. As the market crashes, gold has risen, touching a peak of $1780 so far. And more importantly, this spike is obvious to every trader in the market. In my opinion, we're seeing the birth or perhaps rebirth of a new focal point: gold.

Prior to the recent market drops, I heard plenty of gold naysayers for times of crisis - even among gold supporters. They saw it as a decent investment in times of rising inflation. However, in a crash it might not do so well. Others noted, "Well, there might be some flight to safety, but those will be offset by the lower demand for jewelry." So far, they have been wrong again.

If gold stays afloat over the next few weeks, everyone in the world will take note. This could be one of the most important moments for gold in the past decade. The old flight to safety, Treasuries, shouldn't be worried about the downgrade. Rather, it should be worried about the rebirth of the competition, gold. There's a new flight to safety in town.

YTD Performances
Click on chart to enlarge.

Too Good Not To Pass On

I pass these on, not because I am an Obama basher, but because I am a big-government basher. Put the face of any politician you like in these pictures and it doesn't change the story or the outcome. Got gold?

Take Cover Now With Gold, Or Live To Regret It
This from the most recent Delaire Report.

The recent global sell-off in equities and commodities may help to illustrate a point that I have been writing about for years. And, that is, the worlds’ monetary system is faltering and that the two main currencies, the US dollar and the euro are both looking increasingly precarious. Some analysts are even suggesting that the US dollar will ultimately collapse. Some say that it will either be an outright default as the increasing interest on the debt becomes too large to pay the minimum or the more likely scenario, the US will pay its’ debts by debasing their money thus causing hyperinflation. If this should happen, every aspect of every person’s life will be dramatically effected as paper assets become less valuable. Wealth will be transferred from paper assets to tangible assets.

According to Chris Duane, “Understanding that the collapse is going to happen and that it will be the single largest event in human history leaves you with a choice; denial or prepare.”

While my take on the overall situation is not as dramatic, I do believe that things are going to get worse before they get better. It is therefore prudent to take appropriate action as we will see a paradigm shift from paper assets to tangible assets. As I have mentioned countless times, Keynesian economics consisting of paper wealth works in a peaceful, growing economy. But, when things slow down, ultimately we get to the point where everything starts falling apart and people fail to keep their promises. It seems that we are getting to this point. Politicians, bankers and financial officials lie as they can’t keep their promises. This can be all be covered up for a while by bailouts and money printing, but eventually that leads to the collapse of the currency as a store of value and that takes down all other paper assets.

Global Banks Poised to Cut 101,000 Jobs
(Bloomberg)

Banks around the world are starting to unload workers again. The article notes:

At that pace, they’ll cut more than 101,000 jobs this year – the most since 192,000 positions were targeted in 2008 amid loan losses, a global credit crunch and unprecedented government bailouts. HSBC’s aim to shed 30,000 workers, unveiled by the London- based firm on Aug. 1, was the single biggest job-cutting announcement since Bank of America said in December 2008 that it would eliminate as many as 35,000 positions, the data show.

Full article

Why Gold Will Reach $10,000 An Ounce
I have quite a few customers that I convinced to buy gold back when it was selling around $250 an ounce. Now that it is up 6 times that amount, they sometimes ask me if they should be selling now while the price is "high." My response is always the same: "Call me when gold hits $10,000 an ounce and then we can talk about selling." Of course, their response is always the same as well: "There's no way gold is going to hit $10,000 an ounce," at which point I have to re-educate them on why that event is a certainty. Here's the reasons why:

1. Gold is not immune to the economic laws of supply and demand. When more people want anything that has a fixed supply, the price rises. And gold certainly has a fixed supply. It cannot be created out of thin air as can paper money.

2. The price of gold has risen six-fold over the last 10 years, and still, nobody in the US owns gold. Possibly, one out of a hundred American investors have purchased gold.

3. The country is broke beyond repair. Even IF politicians could fix it, they wouldn't. Politicians don't go to Washington to fix the system, but to be enriched by it! They have ZERO interest in stopping the gravy train from the American public to the bankers, because it is the financial backing of the bankers that gives them the financial backing to get elected in the first place. Not only are they not interested in fixing the system, they will stand in the way of anyone, like a Ron Paul, who tries to fix it!

4. America's financial system is in a slow-motion, managed collapse, where the dollar will ultimately become so worthless that it will be replaced by some commodity-backed currency. Our trading partners (the rest of the world) will demand this. The Chinese, Arab, Indian and Russian appetites for paper dollars that are backed by nothing but a promise to repay, from a country that has no hope of every repaying, no longer exists! Of course, the average American still does not realize this because he gets his news from CNBC, NBC, CBS, ABC, CNN and FOX which are nothing more than propaganda mouth-peices for the banksters. Regarding this commodity-backed currency, gold is the only commodity that fits the bill, hence demand for gold will continue to rise as America is forced by the rest of the world to place some sort of gold-backing to our currency.

5. Eventually, the American public will figure out what is going on and stampede into gold. (Remember #1 above, when demand rises so do prices.) Of course, by then, gold will be much higher in price than it is currently, and it will be harder (if not impossible) to buy because of lack of supply, as gold cannot be simply created out of thin air, as can dollars.

The late arriving public will repeat their mistakes of the dot-com bust, day trading bust and the real estate bust. Their arrival will drive the price of gold through the roof. They will arrive at the party too late after all of the real opportunity has been missed. In the 90's we saw people quitting their jobs to become day traders. In the last decade we saw everyone quitting their jobs to flip houses. Where are they now? The public is always the last to know.

6. Gold has risen six-fold when only one or two out of a hundred people own gold. Do you think gold will only rise six-fold when those other 99 climb on the gold bandwagon? Let me ask this question another way: If the increased demand from only 1 out of 100 people buying gold has pushed the price up six-fold, how far do you think the price will be pushed up when the other 99 decide to climb aboard the gold bandwagon?

At its current price of $1750 an ounce, for gold to merely rise another six-fold puts the price at $10,500 an ounce. It's simple supply and demand..... Econ 101. It's not rocket science!

Of course, I have never believed gold will ONLY rise to $10,000 an ounce. A ten-fold rise in the price from here puts gold at $17,500 an ounce, and a twenty-fold rise from here puts it at $35,000 an ounce, which is where I personally believe the MINIMUM upside target for the gold price should be.

In the interim, remember this: Day to day, week to week and month to month, the markets are manipulated by the powers-that-be to hold down the price of gold because it is the enemy to their paper money system of legalized theft. But long term, supply and demand will win out, as it always does.

Investing isn't really that hard or complicated. One only needs to watch what the masses are doing and then do the opposite. Right now, everyone is SELLING their gold jewelery. Every other commercial on TV is about selling your gold. The masses are not BUYING gold, and the masses are ALWAYS wrong, because they are conditioned to be so.

That is about to change, and when it does, we will blow by $10,000 like it doesn't exist!

$2,000 Gold Soon A Reality?
This from Rick Ackerman's daily commentary yesterday:

Over the years, we have asserted here many times that, during the deflationary bust that lay ahead, even financial wizards would find it challenging to hold onto a small fraction of their peak net worth. Although we lacked the imagination to envision bullion and Treasury paper as the last assets left standing, we always suspected that even the very smartest of the smart money would somehow get trapped.

That is now clearly a possibility if you grant that the U.S. could default on its obligations. And yes, we know that, technically speaking, because Uncle Sam can gin up as much digital cash as it takes to pay the interest and principal on America’s debt, a true default cannot occur. But hyperinflation would have the same effect, wiping out those who now cling, via Treasury paper, to the branches of a tree sprouting from the sand of a small island that will soon be submerged. The rentiers (and pension funds, and hedgies, and many others) may be dry at the moment, but the tide of debt seems all but certain to inundate them.

Under the circumstances, although Gold is officially execrated rather than sanctioned, we see no reason to worry about the health of its long-term uptrend. That said, we have turned cautious on gold for the near term because the December Comex contract yesterday came within $4 of the $1728 Hidden Pivot rally target we’d been using as a minimum upside objective. If that resistance is easily brushed aside within the next day or two, however, it would be telegraphing the next big push – to $2000, and presumably beyond.

The Assasination of Rep. Ron Paul
Those ignorant of history, and that includes 99% of Americans, are not aware of the constant battle that has been fought since our nation's inception against the international banking cartel. It is a well-known fact that if you can control a nation's money supply then you can control that nation. That's why I don't get too caught up in who the President is. They all do the bidding of the financial elite that enables their election, Republicans and Democrats alike.

Abraham Lincoln, Andrew Jackson*, JFK and, most recently, Congressman Larry McDonald have all been "taken out" in their attempts to stand up to the banksters who control our money supply through our central bank (The Federal Reserve being the most recent incarnation). To learn more about this little known history of our nation, visit Behind the Fed and browse the articles there. The two that are most pertinent to this writing are The Assasination of Congressman Larry McDonald, Korean Airlines Flight 007 and How and Why International Bankers Make War.

With those events of history as a backdrop I read the following headline today with trepidation.

Rep. Paul introduces bill to cancel $1.6T in debt held by Federal Reserve

Our friend, Rep. Paul, has dared to strike the head of the snake in calling on Congress to, in effect, stiff the banksters out of $1.6 trillion of imaginary debt that YOU THE PEOPLE owe them. All others who have dared to strike the beast have paid the ultimate price.

In so doing, Rep. Paul is the only elected official that I am aware of that is actually doing what he was elected to do: protect the interests of the American people. He is standing up for YOU, so I ask, what will you do in return for him?

I will be praying for Rep. Paul's protection and I hope that all other God-fearing Americans will begin to do the same, and may this article be the only time we ever read a headline like the above.

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*The unsuccessful assasination attempt on President Andrew Jackson came after his refusal to recharter the Second Bank of the United States.

Five Days Warning
Here's how Ed Steer ended his Gold and Silver Daily column this morning:

Silver is 'acting poorly' for reasons that I stated above...and is actually declining in price as the gold price rises in London. This is, of course, the work of JPMorgan and friends...but without silver confirming gold, at least from a technical analysis perspective, that may be all the justification that's needed for gold's rally to end. We'll find out very quickly I would think.

But this will all be short-term price action. I'm a 'buy and hold' investor...and I've come too far to try and time this market now. As I've said many times over the years, the moment that the powers-that-be stop propping up everything that wants to crash and burn...and stop suppressing the price of everything that wants to blast off to the moon and the stars...the world's economic, financial and monetary system will be a smouldering ruin within five business days.

We've almost arrived at that point now, because if they don't do something drastic, it will be all over by Christmas...or sooner.

I'm still 'all in'.

DOW Down 10,000
This from Rick's Picks
If we sound pleased that the market appears, finally, to be having a massive heart attack, it’s because stocks for too long have been the captive of quasi-criminal forces that could charitably be described as pond scum. The good news is that when the Dow is trading 10,000 points lower in a few years, no longer doing the bidding of high-frequency traders, mountebanks, thimble-riggers, Murphy men and arse bandits, that will set the stage for a true bull market that will run for a generation. At that point, with “money” no longer available interest-free and in practically unlimited quantities for rampant speculation, stocks will rise once again on their individual merits, savings will have a purpose, and capital will seek out its most productive uses. We hope we’re around when all of this comes to pass, as it eventually will.

Meanwhile, the implosion of stocks that seems under way raises the question of whether deflation has finally overwhelmed the central banks’ prodigious but increasingly desperate efforts to resuscitate the economy. We think the answer is yes and that deflation will rule for the foreseeable future, asphyxiating not only the economy but nearly all investable assets. A related question is whether gold and silver have made their final top. Although this is certainly possible, we strongly doubt it, since billions of people in this world have yet to understand that the paper money in their wallets, as well as the digital money in their bank accounts, is fundamentally worthless. When this epiphany finally hits it will trigger a hyperinflation that could send bullion prices soaring to perhaps unimagined heights. In the meantime, hard cash, intrinsically worthless though it be, actually will be king in the absence of easy credit. Credit will be available in theory, but at usurious real rates and only with adequate collateral. Just what will pass muster as “adequate” collateral is a question still to be answered, but assets that qualify are certain to be far less valuable than real estate that’s already been hocked a dozen times over.

The Budget Debate Made Simple
Here is a short excerpt that really helps anyone understand the budget debate and vote that just occurred in Congress last week. It can be found at the Dollar Vigilante blog. It shows how helpless we are as a nation to control our borrowing and spending, and, of course, the end result will be a massive default rendering all investments other than gold and silver worthless.


Doctor: Uncle Sam, you've been drinking larger and larger amounts of alcohol every day since 1960. 1960 was the last year where you didn't drink. You are going to die if you keep this up.

Uncle Sam: I don't want to die, Doc. Tell me what I need to do.

Doctor: Well, from 1960-1975 you weren't too bad. You drank 3 or 4 beers per day but it was under control. You could have stopped if you wanted... you just didn't. However, throughout the 80s it increased to about 5 or 6 per day and then by the 90s you were up to drinking 10 beers a day.

Uncle Sam: Yes, Doc, but remember 1999 and 2000? I slowed to only 5 or 6 beers per day again.

Doctor: Yes, but that was just for 2 years. Since then you've gotten completely out of control. You've increased every year since and then, since 2008 to now you've gone from 30 to 40 beers per day.

Uncle Sam: Ok Doc. It's time to get serious. Here is what I'm going to do. I am now drinking 40 beers per day but in 2013 I will only drink 39.6. And in 2014 I will only drink 39.4 beers per day. By 2021 I will be down to 38 beers per day. Will that work?

Doctor: You're in denial. And, you'll be lucky to make it to 2013 much less 2021.