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Start thinking about silver before it becomes popular again

Start thinking about silver before it becomes popular again

In 663 BC, King Ashurbanipal of the Assyrian Empire invaded Egypt and sacked the city of Waset (located in modern day Luxor on the Nile River).

Ashurbanipal vanquished the city, purportedly seizing more than 75 metric tons of silver for his personal collection.

At the time in the ancient world, the prevailing ratio between gold and silver was 1:2. In other words, 75 metric tons (= 75,000 kilograms) of silver was worth 37,500 kilograms of gold, equal to $1.76 billion in today’s money.

That 1:2 gold/silver ratio had held for thousands of years across Persia, Mesopotamia, and Ancient Egypt, possibly since as early as 3,000 BC.

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But over time it has changed periodically.

By the time of Alexander the Great in the 300s BC, the Gold/Silver ratio had shifted to 1:13. Mining techniques had advanced at that point, so the ancients were able to produce higher volumes of silver than ever before.

Under Julius Caesar in Ancient Rome, one ounce of gold was worth 12 ounces of silver. In the time of Mohammed and the early days of the Islamic Caliphate in the 600s, the ratio was 1:16.

Even in the early history of the United States, the Mint and Coinage Act of 1792 established a gold/silver ratio 1:15.

(According to the law, one US dollar is defined as 1.604 grams of pure gold, or 24.1 grams of pure silver. So those pieces of paper in your wallet are not technically US dollars, but ‘Federal Reserve Notes’.)

In our modern times, the ratio average is around 55 ounces of silver per ounce of gold.

 …click on the above link to read the rest of the article…

Central Bank Issues Stunning Warning: “If The Entire System Collapses, Gold Will Be Needed To Start Over”

Central Bank Issues Stunning Warning: “If The Entire System Collapses, Gold Will Be Needed To Start Over”

It’s not just “tinfoil blogs” who (for the past 11 years) have been warning that a monetary reset is inevitable and the only viable fallback option once trust and faith in fiat is lost, is a gold standard (something which even Mark Carney hinted at recently): central banks are joining the doom parade now too.

An article published by the De Nederlandsche Bank (DNB), or Dutch Central Bank, has shocked many with its claim that “if the entire system collapses, the gold stock provides a collateral to start over.”


Wow

Dutch National Bank goes ‘Big Reset’:

‘Aandelen, obligaties en ander waardepapier: aan alles zit een risico [..] Als het hele systeem instort, biedt de goudvoorraad een onderpand om opnieuw te beginnen. Goud geeft vertrouwen in de kracht van de balans van de centrale bank’.

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While gloomy predictions of a monetary reset are hardly new, they have traditionally been relegated to the fringe of mainstream financial thought – after all, as Mario Draghi stated on several occasions in recent years, the mere contemplation of a “doomsday scenario” is enough to create the self-fulfilling prophecy which materializes it. As such, it is stunning to see a mainstream financial institution open up about the superior value of limited supply, non-fiat, sound money assets. It is also hypocritical given the diametrically opposed Keynesian practices regularly engaged in by central banks and official institutions worldwide: after all, just a few months back, the IMF published a paper bashing Germany’s adoption of the gold standard in the 1870s as the catalyst for instability in the global monetary system.

Fast forward to today, when the Dutch Central Bank is admitting not only did gold not destabilize the monetary system, but it will be its only savior when everything crashes.

 …click on the above link to read the rest of the article…

Silver & Gold as Portfolio Core…But What Else? Mike Maloney and Chris Martenson (Part 2 of 3)

Silver & Gold as Portfolio Core…But What Else? Mike Maloney and Chris Martenson (Part 2 of 3)

In the second of this three video series, Mike Maloney and Chris Martenson reveal that there is one asset apart from gold and silver that they are both looking to accumulate. What could it be? At what valuation will they trade gold or silver for this most important and often overlooked asset?

Gold’s long-term gains have even outperformed Warren Buffett…

Gold’s long-term gains have even outperformed Warren Buffett…

Warren Buffett, despite his extraordinary investment success, has a rather famous and long-standing love/hate relationship with precious metals.

Maybe it started with his dad– Congressman Howard Buffett of Nebraska– who, as a staunch advocate for the gold standard, argued to his colleagues on Capitol Hill that “paper money systems have always wound up with collapse and economic chaos.”

Warren himself acquired a record-setting 128 million ounces of silver back in the late 1990s… which he later sold at a profit in the early 2000s.

But to listen to him talk about precious metals these days, he’s always negative.

Buffett often quips that if you took the world’s entire supply of gold and melted it together, it would form a cube of about 68 feet (~21 meters) per side and be worth around $9 trillion.

With that same $9 trillion, you could buy every share of Apple, Disney, Google, Microsoft, JP Morgan, Exxon Mobil, all the farmland in the United States, all the developable land in Manhattan, and still have more than a trillion dollars left over.

This is Buffett’s central argument: gold doesn’t produce anything. So it’s much better to invest in a productive asset like a business, farmland, etc.

Sure, I’d rather own a profitable, productive asset than a pile of metal.

But Buffett is completely wrong to compare gold to productive assets… they’re apples and oranges.

Gold isn’t an ‘investment’. It’s an insurance policy against paper currencies will lose value over time. So a MUCH better comparison for gold is CASH.

Using Buffett’s same thought experiment, would an investor with $9 trillion rather have all that money sitting in a bank earning 0%? Or buy all the productive assets I mentioned above?

Clearly it’s more attractive to own productive assets than cash sitting in a bank.

 …click on the above link to read the rest of the article…

China De-Dollarization Pushes Into Hyperdrive, Adds 100 Tons Of Gold Amid Trade War Chaos

China De-Dollarization Pushes Into Hyperdrive, Adds 100 Tons Of Gold Amid Trade War Chaos

As the trade war continues to escalate, China’s rapid move towards de-dollarization continues. China added more than 100 tons of gold to its reserves since December 2018 and has also been divesting US Treasuries. 

Bloomberg reported the People’s Bank of China acquired 188,800 ounces, or about 5.9 tons of gold in Sept., raising total holdings to 62.64 million ounces in September from 62.45 million in August. Over the last nine months, China added a whopping 100 tons of gold to its reserves as a hedge to a deepening trade war. 

Gold jumped to a six-year high in September as economic turmoil across the world is pointing to a global trade recession in 2020. Central banks have been leading buyers of the precious metal, especially ones based in emerging markets. Gold purchases by China and central banks will continue through 2020, Bloomberg notes, as protectionist policies spurred by the Trump administration have blown up global supply chains and will continue to produce volatility in global equity markets for the foreseeable future. 

“Given strained relations with the US, China needs a hedge against its large holdings of the dollar, and gold serves that function,” said Howie Lee, an economist at Singapore-based Oversea-Chinese Banking Corp. 

“As China becomes a superpower in its own right, I expect more gold-buying.”

Last month’s purchases boosted the People’s Bank of China’s gold reserves to 62.64 million ounces. As shown below, Comex Gold futures tend to rise when China is adding. 

The Chinese continue to add gold to their reserves to reduce their exposure to the dollar. As one analyst told Bloomberg in August, “It is important for the country to diversify away from the US dollar. Over the long run, even relatively small-scale gold purchases add up and help to meet this objective.”

 …click on the above link to read the rest of the article…

U.S. Constitutional Crisis? Not According to Gold Bullion

U.S. Constitutional Crisis? Not According to Gold Bullion

U.S. Constitutional Crisis? Not According to Gold Bullion - Nathan McDonald (26/09/2019)

The system is collapsing, the markets are crashing, and gold and silver bullion are soaring higher, attempting to protect their investors from the impending doom about to befall us.

Or not.

The Mainstream Media is at it again, beating the war drum and attempting to rile up the people of the United States, the markets, and anyone else that will listen. After all, you’ve got to get those clicks.

The hubbub that I am referring to regards the ongoing “constitutional crisis” taking place in the United States even as I write this article.

A “whistleblower” in the Intelligence Community has stepped forward with damning information that he / she heard from a guy who knows a guy who knows for a fact that President Trump is attempting to circumvent the election process, big league.

Straying from tradition and in record-breaking fashion, the Trump administration released the transcripts of the supposed incident, which took place via phone call with the President of Ukraine. The “whistleblower” believes the President attempted to garner foreign interference in the upcoming 2020 elections by having Ukraine investigate Joe Biden and his son Hunter Biden.

This, of course, would be very concerning if true, even if there was undoubtedly some funny business that took place regarding Hunter’s “incident” while Vice-President Biden was in office.

To read more about the background surrounding this past event, I suggest Karl Rove’s recent Op-Ed that appeared in the WSJ this morning.

If all of these allegations were true, then you would expect that President Trump and his administration would go into immediate “lock down” mode, making it as difficult as possible for the opposition to investigate his “wrongdoings”. Which is what I believe both the Democratic Party and the MSM thought would happen.

 …click on the above link to read the rest of the article…

The Silver Series: The Start of A New Gold-Silver Cycle (Part 1 of 3)

The Silver Series: The Start of A New Gold-Silver Cycle (Part 1 of 3)

The world has experienced a decade of growth fueled by record-low interest rates, a burgeoning money supply, and historic debt levels – but the good times only last so long. 

As the global economy slows and eventually begins to retract, can precious metals offer a useful store of value to investors?

Part 1: The Start of a New Cycle

Today’s infographic comes to us from Endeavour Silver, and it outlines some key indicators that precede a coming gold-silver cycle in which exposure to hard assets may help to protect wealth. 

The Start of a New Gold-Silver Cycle

Bankers Blowing Bubbles

Since 2008, central bankers around the world launched a historic market intervention by printing money and bailing out major banks. With cheap and abundant money, this strategy worked so well that it created a bull market in every sector — except for precious metals. 

Stock markets, consumer lending, and property values surged. Meanwhile, the U.S. Federal Reserve’s assets ballooned, and so did corporate, government, and household debt. By 2018, total debt reached almost $250 trillion worldwide. 

Currency vs. Precious Metals

The world awash in unprecedented amounts of currency, and these dollars chase a limited supply of goods. Historically speaking, it’s only a matter of time before the price of goods increases or inflates – eroding the purchasing power of every dollar. 

Gold and silver are some of the only assets unaffected by inflation, retaining their value.

Gold and silver are money… everything else is credit.

– J.P. Morgan

The Perfect Story for a Gold-Silver Cycle?

Investors can use several indicators to gauge the beginning of the gold-silver cycle:

  1. Gold/Silver Futures

    Most traders do not trade physical gold and silver, but paper contracts with the promise to buy at a future price. Every week, U.S. commodity exchanges publish the Commitment of Traders “COT” report. This report summarizes the positions (long/short) of traders for a particular commodity. 

 …click on the above link to read the rest of the article…

Gold Prices Will Keep Rising Because Crash Conditions Are Becoming Obvious

Gold Prices Will Keep Rising Because Crash Conditions Are Becoming Obvious

The price movements of precious metals are difficult for some people to understand. In the world of equities, investors are mesmerized by tickers day in and day out, and market movements occur minute by minute. This realm of investment teaches people to shorten their memories, their attention spans and their patience. In the world of gold and silver, however, investors buy and sell according to cycles that last years – oftentimes decades. It is the complete antithesis to stocks.

This is why gold catches a lot of ignorant criticism at times. The “barbaric relic” does not behave the way day traders want it to behave. It sleeps, they ignore it or laugh at it, and then it explodes. It is not surprising that your average stock market player is usually caught completely off guard when an economic crisis hits Main Street, while the average gold investor already saw the event coming many months in advance. The gold mentality lends itself to caution, observation and historical relevance. The stock market mentality lends itself to carelessness and the denial of history.

I would acknowledge here that there is plenty of evidence of paper market manipulation of gold and silver to the downside by major banks like JP Morgan. Any investor in metals should take this into account. However, it is also important to realize that in moments of economic uncertainty, the physical market can and does overtake paper manipulation, and prices rise anyway. This is exactly what happened in the lead up to the 2008 crash, and it’s happening again today.

 …click on the above link to read the rest of the article…

Currency Which Expires – That’s the Solution – Or Just Cancel it all?

Currency Which Expires – That’s the Solution – Or Just Cancel it all? 

Back during the Great Depression, there were people who theorized that gold hoarding was preventing economic recovery. There is always this same theory that people who save hoarding their money and are not spending it results in the lack of a recovery suppressing demand. This theory has been around for a very long time. It assumes a recovery is always blocked by people hoarding their money and saving for a rainy day.

Back during the American Civil War, the federal government issued paper currency for the first time after the Revolution. Much of this currency paid interest. Some were in the form of virtually circulating bonds with coupons for the interest payments. Some were backed by gold. Others offered a table on the reverse providing a schedule. The interest baring notes remained valid currency, but the interest expired within a specific time period. Hence, one would redeem the note since it would no longer pay interest beyond a specific date.

The rumbling behind the curtain I am hearing is a growing idea of making the currency in Europe simply expire. I have explained before that in Europe currency routinely expires – even in Britain. The United States has never canceled its currency so a note from the Civil War is still legal tender. But that is not the case in Europe.

Europeans are accustomed to having their money simply expire. This is not limited to paper currency. They also cancel the coins. The proposal being whispered in the dark halls of Europe is that perhaps the way to impose negative rates to force people to spend is to just cancel all the currency and authorize only small notes for pocket change. They want everyone to be forced to use bank cards and this is the new theory to revitalize the economy.

 …click on the above link to read the rest of the article…

Negative interest rates and gold

Negative interest rates and gold 

The reason for persistent strength in the price of gold can be found in the changing relationship between time preference for monetary gold, and a new round of interest rate suppression for the dollar. Evidence mounts that the forthcoming recession is likely to be significant, even turning into a deep slump. Bullion bank traders are waking up to the possibility that dollar interest rates are going to zero and that pressure is likely to be put on the Fed to introduce negative rates. The laws of time preference tell us bullion banks must urgently cover their short bullion positions in anticipation of a dollar rate-induced permanent backwardation for gold, silver and across all commodities.

This article dissects the moving parts in this fascinating story.

Introduction

For some time now, I have maintained the wheels are likely to fall off the global economic wagon by the year-end. Furthermore, for many of my interlocutors, the recent rise in the gold price is just evidence of an impending cyclical crisis, anticipating and discounting the certain inflationary response by central banks. But in this, we are describing only surface evidence, not the underlying market reality.

In the combination of trade protectionism and an emerging credit crisis we face a problem upon which almost no formal research has been done, so it is not something that even far-thinking analysts have considered. To my knowledge, no mainstream economist has pointed out the lethal mix these two dynamics together present. Very few even recognise the existence of a credit cycle, traditionally called a trade or business cycle. Not even the great von Mises called it a cycle of credit, having identified and described it with great accuracy in his The Theory of Money and Credit, first published in 1912. But a spade must be called a spade: it is in its fundament a credit cycle.

 …click on the above link to read the rest of the article…

Why Silver Is Better Than Gold

Why Silver Is Better Than Gold

While the surging gold price has received most of the spotlight in the market, silver will outperform the king monetary metal over the longer term.  Key fundamental factors make silver the more attractive asset and investment to own versus gold when we look closely at the data.  However, that doesn’t mean precious metals investors shouldn’t own gold.  Investors need to own both precious metals, but I believe silver will provide better returns than gold in the future.

Now, there is this notion put forth by many precious metals analysts that central banks will be forced, at some point, to back their currencies by gold.  Thus, the idea is that gold will reset at a much higher price.  While that is a possibility, backing debt-based currencies with gold will not solve our coming energy crisis.  And, let me tell you, it’s an energy predicament that we have no real solution.

You see, it doesn’t really matter if we back fiat money with gold.  The REAL ISSUE has always been ENERGY. The massive increase in debt and derivatives are a symptom of the Falling EROI (Energy Returned On Investment) of oil.  Basically, while gold may solve certain issues in regards to “Confidence” in money, it doesn’t fix our energy problems.

I touched on this briefly in my newest video, Why Silver Is Better Than Gold.  However, most of the video explains new charts that show fundamental factors on why silver is a better investment than gold as well as some key price levels for the short term.

One of the more important charts in the video shows the amount of “Identifiable” physical gold and silver investment stocks.  Interestingly, according to the data from the World Gold Council and the World Silver Surveys, there is just about the same amount of physical gold investment as there is silver.

 …click on the above link to read the rest of the article…

The Corroboration and Costs of Fear Gold

The Corroboration and Costs of Fear Gold

Gold is the ultimate hedge, but it is far from perfect. Unlike, say, sovereign bonds there should be no expectation for a negatively correlated price. You can buy a UST or German bund even at negative yields and at least expect the price to rise when things are at their worst. Flight to safety or flight to liquidity.

You can’t with gold. One big reason is its seemingly opposing uses. I got a chance to sit down once again with Erik Townsend of MacroVoices to talk about gold, negative rates, and the lies (of omission) of Janet Yellen, but to further that discussion, particularly the gold parts of it, I’ll add more here.

While a UST will rise in value during a liquidity event partly or even mostly because of its status in repo, the opposite happens in the gold market. Though gold is a collateral of last resort, too, it isn’t as flexible and so it gets dumped whenever deployed that way. Very negative for its price.

So, it ends up in a tug-of-war between what I’ve called collateral gold (negative price) and fear gold (positive price). What ultimately might determine which one wins out is hard to predict, and it’s not a precise and straightforward mix at least inferring ahead of time.

As I wrote last December during the landmine:

Gold may be collateral of last resort but many still treat it as a hedge against everything going wrong – including central banks and their numerous big errors (forecasts). Therefore, even with renewed deflation and market liquidations tied right into collateral problems gold has been moving in that other direction – UP…

In other words, if there wasn’t this fear bid, gold would probably be down huge likely more than it was after April 18. That it’s not and is in fact at multi-month highs is a testament to the level of anxiety permeating global markets right now.

In 2008, for example, collateral gold was unleashed in the immediate aftermath of Bear Stearns – which makes sense given what Bear taught the marketplace about illiquid securities and the need for repo reserves. Gold was down sharply as collateral became very hard to source.

 …click on the above link to read the rest of the article…

“Pet Rock” Indeed: Bank of America Says Buy Gold As Central Banks Lose Control

“Pet Rock” Indeed: Bank of America Says Buy Gold As Central Banks Lose Control

What a difference a few years makes. Back in the summer of 2015, a WSJ op-ed writer,  who somehow was unaware of the past 6,000 years of human history, infamously and embarrassingly said “Let’s Be Honest About Gold: It’s a Pet Rock.” Fast forward to today, when with every central bank once again rushing to debase its currency in what increasingly appears to be the final race to the debasement bottom, when even BOE head Mark Carney recommends that it is time to retire the dollar as the world’s reserve currencypet rock gold has emerged as the second best performing asset of the year… and at the rate it is going –4th in 2017, 3rd in 2018, 2nd in 2019 – gold will be the standout asset class of 2020.

Which naturally has sparked comparisons for gold’s performance in 2019 with 2008+, when gold exploded higher as the financial system nearly collapsed and central banks started injecting trillions in liquidity into the system to keep it afloat.

Are such comparisons appropriate?

Deutsche Bank Mulled Investment Banking Alliance With UBS: Dow Jones

As Bank of America writes in “anatomy of two gold bull markets”, in comparing the gold bull markets in 2008 and 2018, real rates remain key price drivers, while a critical difference in market dynamics – this time around  – is that central banks have been unable to reflate global economies and even as metrics like the value and proportion of negative yielding assets has been increasing, further easing is on the cards. Linked to that, Bank of America makes a stunning admissions: “the risk of quantitative failure, which was not a concern in 2008, makes gold an attractive asset.”

 …click on the above link to read the rest of the article…

Krugman and the Goldbugs

Krugman and the Goldbugs

The announcement that President Trump would nominate Judy Shelton, a long-time advocate of the gold standard, for a seat on the Federal Reserve’s Board of Governors got Paul Krugman thinking: why do some economic commentators become goldbugs?

Krugman offers a rather cynical view. It is difficult “to build a successful career as a mainstream economist,” he writes.

Parroting orthodox views definitely won’t do it; you have to be technically proficient, and to have a really good career you must be seen as making important new contributions — innovative ways to think about economic issues and/or innovative ways to bring data to bear on those issues. And the truth is that not many people can pull this off: it requires a combination of deep knowledge of previous research and the ability to think differently. 

So what’s an aspiring if not so smart or creative economist to do?

“Heterodoxy,” Krugman writes, “can itself be a careerist move.”

Everyone loves the idea of brave, independent thinkers whose brilliant insights are rejected by a hidebound establishment, only to be vindicated in the end. And such people do exist, in economics as in other fields.… But the sad truth is that the great majority of people who reject mainstream economics do so because they don’t understand it; and a fair number of these people don’t understand it because their salary depends on their not understanding it.

In other words, Krugman suggests most gold standard advocates are either ignorant or disingenuous — and, in some cases, both.

According to Krugman, “events of the past dozen years have only reinforced that consensus” view that “a return to the gold standard would be a bad idea.” 

 …click on the above link to read the rest of the article…

Weekly Commentary: “Hot Money” Watch

Weekly Commentary: “Hot Money” Watch

In the People’s Bank of China’s (PBOC) Monday daily currency value “fixing,” the yuan/renminbi was set 0.33% weaker (vs. dollar) at 6.9225. Market reaction was immediate and intense. The Chinese currency quickly traded to 7.03 and then ended Monday’s disorderly session at an 11-year low 7.0602 (largest daily decline since August ’15). While still within the PBOC’s 2% trading band, it was a 1.56% decline for the day (offshore renminbi down 1.73%). A weaker-than-expected fix coupled with the lack of PBOC intervention (as the renminbi blew through the key 7.0 level) rattled already skittish global markets.  

Safe haven assets were bought aggressively. Gold surged $23, or 1.6%, Monday to $1,441, the high going back to 2013 (trading to all-time highs in Indian rupees, British pounds, Australian dollars and Canadian dollar). The Swiss franc gained 0.9%, and the Japanese yen increased 0.6%. Treasury yields sank a notable 14 bps to 1.71%, the low going back to October 2016. Intraday Monday, 10-year yields traded as much as 32 bps below three-month T-bills, “the most extreme yield-curve inversion” since 2007 (from Bloomberg). German bund yields declined another two bps to a then record low negative 0.52% (ending the week at negative 0.58%). Swiss 10-year yields fell two bps to negative 0.88% (ending the week at negative 0.98%). Australian yields dropped below 1.0% for the first time.  

It’s worth noting the Japanese yen traded Monday at the strongest level versus the dollar since the January 3rd market dislocation (that set the stage for the Powell’s January 4th “U-turn). “Risk off” saw EM currencies under liquidation – with the more vulnerable under notable selling pressure. The Brazilian real dropped 2.2%, the Colombian peso 2.1%, the Argentine peso 1.8%, the Indian rupee 1.6% and the South Korean won 1.4%. Crude fell 1.7% in Monday trading. Hong Kong’s China Financials Index dropped 2.5%, with the index down 4.4% for the week to the lowest level since January. European bank stocks dropped 4.1%, trading to the low since July 2016.

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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