GOLD & SILVER PRICE UPDATE: And What Most Precious Metals Analysts Are Missing

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by Steve St. Angelo, SRSRocco Report:

The gold and silver prices continue to consolidate since reaching new five-year highs in the summer.  Gold is nearly $100 lower from its high of $1,566 on September 4th, while silver is down more than $3 from its $19.75 peak on the very same day.  Thus, gold is down 6% while silver is off by more than 15% from the peak summer prices.

However, some precious metals analysts continue to harp on the “Price Hammering” or “Manipulated” knock-down of the metals when they didn’t complain when both gold and silver increased 23% and 38% respectively from their lows in just three months.  I bring this up again because the time spent fixated on the “supposed” precious metals manipulation will only amount to increased “FRUSTRATION.”  Rather, I believe it’s better to focus on understanding the underlying “ROOT” fundamentals of the market and the impact on the future value of gold and silver.

For example, I no longer spend much time at all, looking at the Political Circus in Washington, DC.  It’s a complete waste of time.  Americans are either brainwashed by propaganda from the LEFT or the RIGHT into believing their “ASSHOLE” leader is better than the other.  So, trying to debate Americans who are proud proponents of the LEFT or RIGHT is similar to wasting time on precious metals manipulation.

With all the articles claiming Gold and Silver Manipulation, why hasn’t anyone brought up the fact that gold and silver are now trading above their total primary cost of production (+$200 for gold & +$1-2 for silver)?? It would be one thing if gold were trading at $750 and silver at $10.  Then, the “Manipulation” mantra would carry more weight and make sense.  However, these two precious metals are still trading above their average cost of production, even after consolidating lower over the past three months.

So, the frustration experienced by many individuals in the precious metals community is that they believe the gold and silver prices should be up much higher than they are currently.  While I agree that it would be nice for the precious metals prices to be higher, especially considering the tremendous Fed and central bank market intervention, the underlying bullish fundamentals haven’t kicked in yet.

SRSrocco Report Analysis of the Precious Metals Has Changed Over The Past Several Years

My analysis of the precious metals changed over the past several years, mainly due to my focus on energy and how the markets trade.  Regrettably, back in the 2009-2016 period, I was stuck in the “superficial” GOLD BUG MANTRA.  By that, I failed to understand the many factors that were the key drivers of the gold and silver prices.

Also, at the time, I held an extreme contempt for bankers and the banking industry.  So, when the gold and silver prices were hit hard, I would blame the so-called “Bullion Bank Manipulators.”  I look back at it all now and can’t believe how silly and naive my past views on the markets.

Unfortunately, I see a lot of my fellow brethren in the precious metals community still stuck in that narrow-minded thinking that only leads to frustration. You see, the bankers aren’t the real problem.  Oh no.  Without the bankers, the entire Facade of a Bubble Economy that we currently have would collapse.  And let me tell you, I would much rather have the current gold and silver prices in a semi-functioning bubble economy rather than super-high precious metals values in a Global Depression that never ends.

And, this is where I disagree with Peter Schiff.  Schiff continues to believe that if we allowed the fiat banking system to collapse, while there would be a terrible economic depression, we would eventually recover to a much more productive market if the monetary system was backed by gold.  Schiff makes the “CARDINAL SIN” that plaques many of the top-notch precious metals analysts.

They fail to incorporate ENERGY and the FALLING EROI in their forecasts and analysis.

Recently, I had a Twitter exchange with Jan Neiuwenhuijs (formerly known as Koos Jansen) regarding energy’s impact on precious metals and the economy.  While we had several Twitter replies, the following two summarize the “typical lack of energy knowledge ” held by most of most precious metals analysts.

Jan replied to my Tweet where I stated that Energy Comes First, then Value Second, with his response, “The energy put into the production process has value too.”  Thus, Jan is implying that energy has “VALUE TOO” means that energy isn’t the key, just that it also has value. I differ in that energy must be burned first or human labor expended before any value can be created.  Without the SUN, humans on planet Earth would be totally screwed.  Thus, energy from the sun is the critical factor allowing life on earth.

This is also true for the value of most goods and services.  Hunter-gathers enjoyed an average 10/1 Energy Returned On Investment (EROI) of food gathering versus the modern high-tech agricultural growing, production, and distribution system being a net energy loser EROI of 1/10.  While Hunter-gathers invested one calorie of energy in obtaining 10 calories of food, we burn 10 calories of energy just to put only one calorie of food on our dinner plate.  Without oil, our modern agricultural system would disintegrate.

Thus, SUPPLY & DEMAND have nothing to do with the EROI of food gathering or production.  It is just a scientific ratio. 

The Austrian School of Economics, where most of the “upper-level” precious metals analysts acquired their education on money, fails to incorporate the EROI or Thermodynamics of Resource Depletion in their analysis of the economy and markets.  So, the overwhelming majority of precious metals spokespeople continue to provide analysis that is faulty and incomplete.

Jan’s second twitter reply shows a perfect example:

I have to commend Jan for actually looking over the Thermodynamic Oil Depletion chart. Still, his response typifies the ignorance held by most of the precious metals analysts in regards to the Falling EROI of oil.  While there are “other energy sources,” as Jan claims, their production would be significantly reduced without the oil supply.

This sort of lackadaisical response that “there are also other energy sources” demonstrates the utter lack of knowledge by the precious metals community on the KEY FACTOR that drives the economy. The Mainstream and Alternative Media are clearly guilty of believing in the ENERGY TOOTH FAIRY.

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