Saturday, December 14, 2019

Falling Interest – Keith Weiner

0

by Keith Weiner, Sprott Money:

Last week , we discussed the marginal productivity of debt. This is how much each newly-borrowed dollar adds to GDP. And ever since the interest rate began its falling trend in 1981, marginal productivity of debt has tightly correlated with interest. The lower the interest rate, the less productive additional borrowing has in fact become.

Let’s look at a recent event: the Ikea acquisition of TaskRabbit. You might wonder, why does a home goods company need to own a freelance labor company? Superficially, it seems to makes sense. Ikea products notoriously come in flat packs, but consumers don’t want to fuss with all the little parts. They just want finished furniture. Ikea has been using TaskRabbit to hire people to assemble it in their homes.

Isn’t this like that caricature of the billionaire who buys, say, the Planters Peanut company because he likes to eat salted nuts? Ikea could be a customer of TaskRabbit, hiring its temporary workers as needed, without owning the company. In fact, it had been doing that for years.

The acquisition price was not disclosed, however, we can guess that it was high. TaskRabbit was a Silicon Valley darling with a bright future. Its value proposition is right for this economy. It had raised $50 million, presumably at rich valuation multiples.

How much would Ikea be willing to pay? We don’t know how many dollars TaskRabbit was earning, so we will have to pass on total price. However, we can ask how much Ikea would be willing to pay for each dollar of earnings. There are two metrics to help answer this question.

One, Ikea can compare to the price that its own investors are willing to pay for a dollar of Ikea earnings. If it can buy a dollar of earnings via TaskRabbit for less than the market pays for a dollar of Ikea earnings, then it’s a good deal. Ikea is not publicly traded (but we suspect management has an accurate internal estimate of enterprise value).

Two, Ikea can compare the return on its investment to the cost of borrowing. If it expects to earn 5{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} on its investment for example, but borrows at 3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, then it’s a good deal.

The price to earnings of a large company, and its cost of credit, are both related to the prevailing rate of interest. As interest falls, price to earnings rises and cost of credit falls. So a falling interest rate, all else being equal, creates the opportunity for such acquisitions.

This fuels a process of capital destruction that we have written about extensively (see Keith’s series onYield Purchasing Power ). With Ikea we don’t know the company’s debt or cost of borrowing. But typically, acquisitions are funded by borrowing. The debt of the acquirer replaces the equity of management and investors of the acquired. Total debt goes up, but production does not increase.

And the exquisite madness of this is that it makes sense! By every principle of rational business management, these deals should be done. If you can borrow at 3{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, then you can pay perhaps up to 20 or 25 times earnings to make acquisitions. If you can borrow at 1{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, then you may pay up to around 50 times earnings, or a bit more.

This process, of course, makes billionaires out of the founders of many a startup and makes the venture capital firms and their investors a lot, too. The source of their profits is the debt, borrowed by the acquirer. They may spend their profit and consume it.

The more the rate of interest falls, the more fuel is added to accelerate this consumption process.

We don’t want to drill any deeper into this here. Instead, let’s move on to address the question we left from last week: why is the marginal productivity of debt after 2010 at a higher level than before the crisis, despite interest rates that continued their inexorable collapse?

In Keith’s Theory of Interest and Prices Part I, he states:

“These processes and forces [that lead to the formation of the bid and ask prices of credit] are nonlinear. They are also not static, not scalar, not stateless, and not contiguous.”

The question last week was a bit unfair, in that these five ideas were embedded in how it was framed. We showed a graph showing falling interest and falling marginal productivity of debt. And asked why the discontinuity in the correlation post-2010?

We think the key idea that explains the post-2010 situation is: people are stateful. What does this mean? It means they have internal state. Their behavior is not a simple function of quantity of money or interest rates.

For example, they have balance sheets. A business with low debt to equity has plenty of capacity to borrow to buy more assets. However, we know that in 2010, asset values were way down compared to 2007, but of course the debt persists. Therefore, capacity to borrow was reduced.

Stateful also refers to the fact that people have memory. What could people possibly have been remembering in 2010? It’s a real head-scratcher…

Sarcasm aside, the major corporations in 2010 or 2012 had less appetite to borrow to buy the TaskRabbits of the day. No matter that the cost of credit was lower than it had been pre-crisis, their assessment of the risk was much higher.

Deals like the Ikea acquisition of TaskRabbit are a sign that the temptation to buy earnings with dirt cheap credit once again outweighs the fear of a liquidity crisis or a crash of asset prices. Besides, if your company is the only one not partaking in the Fed’s largesse, and all your competitors are, then you will certainly lose out.

Read More @ SprottMoney.com

Backing Out – Ted Butler

by Ted Butler, SilverSeek:

News reports this week indicated that the Bank of Nova Scotia (ScotiaBank), Canada’s third largest bank, had put its precious metals operation, ScotiaMocatta, up for sale. Various sources said the unit had been for sale for a year or so and it was thought or hoped that Chinese interests might buy the business. It was also reported that the Bank of Nova Scotia would shrink the unit if no buyer could be found. The impetus for the sale was said to be a scandal involving smuggled gold from South America to the US. Somewhat ironic, and interesting, was that the sale “listing” agent was none other than JPMorgan.

http://www.reuters.com/article/us-scotiabank-gold/scotiabank-mulls-sale-of-gold-trading-unit-sources-idUSKBN1CN2CN

I believe there is more to this story than meets the eye and it involves the ongoing gold and silver price manipulation. About the only thing I find suspect in the news accounts is the motive for the sale.  I was aware of the smuggling story, but ScotiaMocatta didn’t seem particularly exposed in this matter. I accept that the unit is up for sale, just not the motivation behind the sale. If my reasoning is correct, this could be a very significant development in the ongoing silver and gold price manipulation on the COMEX; on a par with JPMorgan taking over Bear Stearns in March 2008; which, in my opinion, was the most significant event in the silver market in decades.

Truth be told, I could never figure out why a leading Canadian bank would even want to buy and run a business not remotely in keeping with its core banking businesses – it was like trying to put a square peg in a round hole. The Bank of Nova Scotia has roughly 90,000 employees, whereas the ScotiaMocatta unit has less than 200 employees and accounts for a tiny fraction of the bank’s $2 billion quarterly profits.

I think the Bank of Nova Scotia’s real motivation for seeking to offload its ScotiaMocatta precious metals unit after 20 years of ownership is liability. It’s the fear of what is to become of a major short seller in silver (and gold) on the COMEX. By every count, ScotiaMocatta is one of the 7 potential dead men walking who hold large concentrated short positions. It’s not some alleged smuggling ring that is motivating the bank to dump the unit. The only wonder is what took the bank so long to come to this conclusion.

When it comes to the 8 largest concentrated shorts in COMEX silver and gold, JPMorgan, alone, is protected against financial ruin whenever silver prices explode due to its massive physical silver position. I see no evidence that any other entity has accumulated enough physical silver.  Because JPM was so far ahead of the pack in recognizing that silver will soar in the futureand began buying as much as it could starting six and a half years ago, it’s too late for the 7 others to jump onto the buy side now. That’s because such buying would set off a price spiral – about the very last thing a big short would want. JPMorgan has played this masterfully.

The best thing the Bank of Nova Scotia could hope to achieve now is to unload the problem on someone else, say an unsuspecting Chinese entity. The problem is that you can’t go from being, most likely, the 2nd largest silver short on the COMEX for years running, to suddenly closing out your shorts or getting long in a flash. You can’t just blink your eyes or click your ruby slippers and have the short position closed out – you must buy back the position or deliver physical metal, no easy task when you are talking perhaps upwards of 75 million ounces they hold short in COMEX silver futures (15,000 contracts). And just in case anyone is wondering – there is also no way that the Bank of Nova Scotia could ever admit to this and hope to unload the unit on anyone else. Hence, the BS smuggling cover story.

As to what has finally awoken ScotiaBank to the potential liability inherent in being a large short seller in silver and gold, there a number of explanations. Back in the summer of 2016, the open and unrealized losses to the 8 largest shorts in COMEX gold and silver combined amounted to $4 billion. By the end of last year, the 8 big shorts had succeeded in rigging gold and silver prices lower and with the price decline, the $4 billion open loss was extinguished. Still, at the gold and silver price highs of 2016, the $4 billion open loss had to be dealt with by the 8 big shorts. This meant that the unrealized loss had to be deposited with the clearing house by all shorts who were underwater, including the 8 big shorts (of which ScotiaMocatta was a card-carrying member).

Read More @ SilverSeek.com

GOLD AND SILVER REBOUND ON EITHER TRUMP’S CLOSE TO PICKING A FED NOMINEE OR MOST LIKELY REACTING TO IMMINENT THREAT COMING FROM NORTH KOREA

by Harvey Organ, Harvey Organ Blog:

TROUBLE IN SPAIN AS ARTICLE 155 IS INVOKED AND THE CATALANS RESPOND TO CREATE HAVOC/GENERAL ELECTRIC AGAIN CRASHES AS A SIGN OF POOR GLOBAL GROWTH/VENEZUELA MOST PROBABLY WILL DEFAULT IN THE NEXT FEW WEEKS AS INCOME IS FALTERING FROM ITS OIL OPERATIONS

GOLD: $1279.65 UP $0.30

Silver: $17.05 UP 2 cents

Closing access prices:

Gold $1282.20

silver: $17.08

SHANGHAI GOLD FIX:  FIRST FIX  10 15 PM EST  (2:15 SHANGHAI LOCAL TIME)

SECOND FIX:  2:15 AM EST  (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $1290.33 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1275.55

PREMIUM FIRST FIX:  $14.78(premiums getting larger)

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1290.33

NY GOLD PRICE AT THE EXACT SAME TIME: $1276.55

Premium of Shanghai 2nd fix/NY:$13.78 PREMIUMS GETTING LARGER)  

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1275.25

NY PRICING AT THE EXACT SAME TIME: $1275.85

LONDON SECOND GOLD FIX  10 AM: $1274.90

NY PRICING AT THE EXACT SAME TIME. 1274.75

For comex gold:

OCTOBER/

NOTICES FILINGS TODAY FOR OCT CONTRACT MONTH: 4 NOTICE(S) FOR  400OZ.

TOTAL NOTICES SO FAR: 2443 FOR 244,300 OZ  (7.599TONNES)

For silver:

OCTOBER

 

 5 NOTICES FILED TODAY FOR

 

25,000  OZ/

Total number of notices filed so far this month: 784 for 3,920,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Bitcoin:  $5659 bid /$5678 offer DOWN $278.00(MORNING)

BITCOIN CLOSING;$5904 BID:5924. OFFERDOWN $29.00

end

Let us have a look at the data for today

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL BY ONLY 722 contracts from  193 ,086 DOWN TO 192,364 WITH RESPECT TO FRIDAY’S TRADING (DOWN  22 CENTS).  THE CROOKS ARE STILL HAVING AN AWFUL TIME TRYING TO COVER THEIR MASSIVE SILVER SHORTS. 

RESULT: A SMALL SIZED FALL IN OI COMEXWITH THE  22 CENT PRICE FALL.  OUR BANKERS COULD NOT COVER MUCH OF THEIR HUGE SHORTFALL

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.966 BILLION TO BE EXACT or 138{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT OCT MONTH/ THEY FILED: 14 NOTICE(S) FOR 70,000OZ OF SILVER.

In gold, the open interest SURPRISINGLY FELL  BY ONLY722 CONTRACTS DESPITE THECONSIDERABLE FALL IN PRICE OF GOLD ($9.05) .  The new OI for the gold complex rests at 529,313. OUR BANKER FRIENDS  COULD NOT COVER ANY OF THEIR GOLD SHORTS AS THEIR RAID FAILED MISERABLY IN THE ATTEMPT TO COVER ON FRIDAY..SO THEY INITIATED ANOTHER RAID THIS MORNING AND THAT ENDED IN FAILURE.

 

Result: A SMALL SIZEDDECREASE IN OI WITH CONSIEREABLE FALL IN PRICE IN GOLD ($9.05). WE HAD MINIMAL BANKER GOLD SHORT COVERING AS THE BANKERS FAILED MISERABLY TO LOOSEN ANY GOLD LEAVES FROM THE GOLD TREE ON FRIDAY..SO THEY INITIATED ANOTHER RAID THIS MORNING WHICH ENDED IN FAILURE..

we had: 0 notice(s) filed upon for NIL  oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

With respect to our two criminal funds, the GLD and the SLV:

GLD:   

Tonight , NO CHANGESin gold inventory at the GLD/

Inventory rests tonight: 853.13 tonnes.

SLV

Today:   STRANGE!! WITH SILVER CLOSING HIGHER WE HAD A WITHDRAWAL OF 1,039,000 OZ FROM THE SLV

INVENTORY RESTS AT 320.288 MILLION OZ

 

end

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver SURPRISINGLY FELL  BY ONLY 722 contractsfrom 193,098  DOWN TO 192,364(AND now A LITTLE FURTHER FROM THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) .  OUR BANKERS WERE AGAIN UNSUCCESSFUL IN THEIR ATTEMPT TO COVER MUCH OF THEIR SILVER SHORTS.

RESULT:  A SMALL DECREASE IN SILVER OI  AT THE COMEX WITH THE  GOOD SIZED FALL IN PRICE OF 22 CENTS (WITH RESPECT TO FRIDAY’S TRADING). OUR BANKER FRIENDS WERE UNSUCCESSFUL IN THEIR ATTEMPT TO COVER MUCH OF OUR SILVER SHORTS

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late SUNDAY night/MONDAY morning: Shanghai closed UP 2.05 points or .06{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} /Hang Sang CLOSED DOWN 181.36 pts or 0.64{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} / The Nikkei closed UP 239.01 POINTS OR .04/Australia’s all ordinaires CLOSED UP 0.19{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}/Chinese yuan (ONSHORE) closed DOWNat 6.6403/Oil UP to 52.13 dollars per barrel for WTI and 57.77 for Brent. Stocks in Europe OPENED IN THE GREEN EXCEPT SPAIN.  ONSHORE YUAN CLOSED DOWN AGAINST THE DOLLAR AT 6.6403. OFFSHORE YUAN CLOSED STRONGER TO THE ONSHORE YUAN AT 6.6501 AND //ONSHORE YUANWEAKER AGAINST THE DOLLAR/OFF SHORE WEAKER TO THE DOLLAR/. THE DOLLAR (INDEX) IS STRONGER AGAINST ALL MAJOR CURRENCIES. CHINA IS NOT HAPPY TODAY.

Read More @ HarveyOrganBlog.com

Platinum, Rhodium and Gold

0

by Clint Siegner, via Deviant investor:

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

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

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

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

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

Platinum does look remarkably under-appreciated. It is hard to imagine it trading at a significant discount for long.

 

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

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

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

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

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

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

Read More @ DeviantInvestor.com

Russia Triples Gold Reserves In Preparation For Full-Scale Economic War With The United States

by Jay Syrmopoulos, Activist Post:

The Central Bank of Russia has more than doubled the pace of its gold purchases, and tripled its gold reserves—from around 600 tonnes to 1,800 tonnes—bringing its international gold reserves to the highest level since Putin became president 17 years ago, according to the World Gold Council.

The impetus for the massive increase in Russian gold reserves is their desire to break away from the hegemony of the U.S. petrodollar and dollar-based payment systems. Currently, over 60 percent of global reserves and 80 percent of global payments are denominated dollars, according to James Rickards, author of Currency Wars.

Additionally, the U.S. is the only country with veto power at the International Monetary Fund, known as the global lender of last resort. Thus, one of the most crucial weapons wielded by Russia, in its war to free itself from the hegemony of the petrodollar, is gold.

The reason gold is so critical is that it cannot be manipulated by U.S.-based economic warfare, as it cannot be frozen out as other forms of digital and paper fiat can be.

Gold can simply be loaded onto pallets and shipped to another state to make a payment, thus bypassing targeted economic sanctions that are often used by the United States as a means of attempting to force geopolitical compliance by Russia and other countries. The strategic significance of gold is so great, that even when oil prices and Russian financial reserves were collapsing in 2015, they continued to acquire gold.

In fact, during the second quarter of 2017, Russia accounted for 38 percent of all gold purchased by central banks. The massive increase in Russian gold reserves has taken place while simultaneously abstaining from purchasing foreign currency for more than two years.

Even as global demand for gold fell to a two-year low in the second quarter, Russia maintained its strong position due to gold being one of the most geopolitics-proof investments in the world. In a time of increased economic warfare, with the petrodollar being utilized as a weapon by the U.S., gold is a means of bypassing U.S. sanctions.

“Gold is an asset that is independent of any government and, in effect, given what is usually held in reserves, any Western government,” said Matthew Turner, metals analyst at Macquarie Group in London. “This might appeal given Russia has faced financial sanctions.”

In addition to being the largest international purchaser of gold, Russia is also one of the three biggest gold producers in the world, as the Central Bank of Russia purchases gold from domestic mines using commercial banks and not in the open market.

Russia’s accelerated pace of gold bullion purchases began in 2007, with Russian gold holdings now having quadrupled to 1,556 tonnes at the end of June. In terms of total reserves, Russian now comes in just behind China and has more gold reserves than India, Mexico and Turkey combined, with a total of nearly $427 billion in reserves.

Additionally, Russia is simultaneously pursuing other strategic dollar alternatives besides gold. Russia and China have built a non-dollar payment system for regional trading partners.

Read More @ ActivistPost.com

Leveraging Gold and Silver

0

by James Turk, via Goldseek:

Leverage is the use of credit or borrowed capital to increase the earning potential of your investment portfolio. But like everything else in finance, higher returns mean higher risk, so leverage is not for everyone.

Nevertheless, leverage can be a useful tool for those accepting the risk. If you choose to use it to maximise the return of your gold and silver, there are two key factors to getting it right.

First, use leverage when the trend is in your favour. So how do you identify the trend? Here are a couple of popular methods.

1) Moving Average – A moving average is constructed by calculating the daily closing price over a period of time. Different time periods can be used for different markets, but for gold and silver, the 21-day and 200-day moving averages are popular measures of short-term and long-term trends.

When using moving averages, the rule is to be in harmony with the trend. This is accomplished by owning gold and silver when their price is above the moving average and the moving average itself is rising. Conversely, if you are trading precious metals as opposed to accumulating it, be out of the market if either or both of these conditions are not met.

It sounds easy, but it’s not. To assist you in identifying the trend, trendlines can be particularly helpful when used in conjunction with a moving average, as illustrated in the following chart of silver’s daily closing price in London.

Note the clear uptrend in the silver price and the downtrends. Note also that a new uptrend in price is just beginning because the silver price is above its 21-day moving average, which itself is turning higher and rising. If history is any guide, now is the time to buy and possibly leverage your purchase with additional silver, if you believe the risk/return suits your investment criteria.

2) Higher Lows – Prices can also point out the trend. For example, the gold price declined from its record high of $1910 per ounce in August 2011 to December 2015 when it reached $1055. Then prices began to rise. Gold eventually retraced that rise, and in December 2016 fell back to $1125, 6.6{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} above the low price a year earlier.

This year there have been two further retracements occurring after the gold price rose. These advances and retracements are normal patterns, but the important point is that the low price in March was higher than the previous low in December 2016. Similarly, the July low price was higher yet again.

Read More @ Goldseek.com

Possibly the Most Important Thing About Gold You’ll Read All Year

0

by Marin Katusa, Katusa Research:

Dear Katusa Research reader,

A German newspaper just published one of the most important things on gold you’ll read all year.

It’s an interview with Pierre Lassonde, one of the smartest guys in mining. One of the smartest guys in the world. Pierre is the billionaire founder of top mining royalty firm Franco-Nevada.

In an industry with plenty of pretenders and shady salesmen, Pierre stands very tall. He’s a brilliant deal maker, he has an incredible long-term track record, and he’s an all-around good guy. When Pierre talks about making money in natural resources, I listen. I hope you do too. (You can read my story about having dinner with him right here)

Recently, the German newspaper Finanz and Wirtschaft (translated to Finance and Economy) interviewed Pierre to get his take on gold and gold mining. I thought it was an excellent interview. Below, you‘ll find what I believe are the biggest, most useful ideas he shared, along with some comments from yours truly. I hope you find this “one two” punch combination from Pierre and myself useful.

Q: So where do you think gold will go from here?

Pierre Lassonde: My view has been between $1250 to $1350 per ounce for this year and then slightly ramping up next year to around $1300 to $1400. But for gold to get into the next real bull market we need signs of inflation. So far we haven’t seen them. The Federal Reserve and other central banks have piled up huge reserves. But there is no inflation because the money is sitting within the banks and they are not lending it. Therefore, you don’t get a multiplier effect. But what happened recently in the US – the one-two punch with respect to the hurricanes »Irma» and »Harvey» – is going to require an enormous amount of reconstruction. This could finally move the needle on inflation. Also, Europe is doing much better. So at some point I suspect we are going to see inflation start to pick up a little bit.

Marin comment: I couldn’t agree more. I believe gold has great potential to rise from current levels, but it won’t budge until the extraordinary central bank stimulus of the past 10 years produces meaningful inflation.

Until inflation shows up across the economy, I believe gold doesn’t break $1,400. That could take several years. Gold bugs don’t like to hear that, but it really could take that long. One of my favorite ways to track inflation through

Q: What does this mean for the mining industry?

Pierre Lassonde: First of all, at a gold price of $1300 the industry by and large is doing well. I tell my peers: If you are not making money at $1300 you should not be in this business. So it’s a good price and you should be making good money. But the industry has had to shrink a lot. When the gold price dropped to $1000 at the end of 2015 everybody in the business was too fat. So the industry laid people off, consolidated, shrunk and many junior companies have been wiped out.

Marin Katusa comment: I agree again. If you own shares of a gold company that can’t make money at $1,300 gold, sell it. It has poor assets or poor management or both.  I actually prefer to see a company making money at $1,100 gold before considering it as an investment.

Q: What are the consequences of [the industry shrinking]?

Pierre Lassonde: Production is declining and this is going to put an enormous amount of pressure on prices down the road. If you look back to the 70s, 80s and 90s, in every of those decades the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless 5 to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits. So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know. We do not have those ore bodies in sight.

Q: Why aren’t there any large discoveries anymore?

Pierre Lassonde: What the industry has not done anywhere near enough is to put money back into exploration. They have not put anywhere near enough money into research and development, particularly for new technologies with respect to exploration and processing. The way our industry works is it takes around seven years for a new mine to ramp up and then come to production. So it doesn’t really matter what the gold price will do in the next few years: Production is coming off and that means the upward pressure on the gold price could be very intense.

Marin comment: This is a big, big idea all gold investors should be following. Back in July, I wrote an entire research piece on this topic (read it here). To summarize the piece, gold discoveries have plunged over the past 10 years…. the reserves at major gold mining companies have plunged to 2004 levels… and gold industry capex has plunged.

This means that even if the price of gold were to rise to $2,000 next week, the gold industry couldn’t quickly ramp up production to capitalize on the high price. It would take at least five years to get production going.

The supply constraints also mean large gold companies must replenish their reserves by buying small and mid-tier gold producers with proven low-cost ounces in the ground. Get to those companies before the majors do, and you could make a fortune during the coming takeout wave.

Q: How does that impact the funding of mining?

Pierre Lassonde: The thing with this industry is that you have to have an incredible amount of patience and you have to have money. And right now, it’s hard to get money. The risk appetite of investors has been gone for many, many years. If you are not one of the chosen few you can’t get money. You sit on the sideline and wait. In the past, more than half of the new discoveries have been made by junior companies. But they haven’t had any money now for like 10 years. So how are you going to find anything if you don’t fund the junior companies?

Read More @ KatusaResearch.com

GOLD AND SILVER RISE ON HUGE BOMBSHELL STORY OUT OF THE USA:FBI HID INVESTIGATION ON URANIUM SCANDAL

by Harvey Organ, Harvey Organ Blog:

MOSTLY LIKELY THERE WILL BE MANY CHARGES LAID

GOLD: $1288.40 UP $7.20

Silver: $17.25 UP 25 cents

Closing access prices:

Gold $1289.65

silver: $17.26

SHANGHAI GOLD FIX:  FIRST FIX  10 15 PM EST  (2:15 SHANGHAI LOCAL TIME)

SECOND FIX:  2:15 AM EST  (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: $1290.80 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  $1277.70

PREMIUM FIRST FIX:  $13.10(premiums getting larger)

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

SECOND SHANGHAI GOLD FIX: $1292;30

NY GOLD PRICE AT THE EXACT SAME TIME: $1279.20

Premium of Shanghai 2nd fix/NY:$13.10(PREMIUMS GETTING LARGER)  

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  $1283.40

NY PRICING AT THE EXACT SAME TIME: $1283.40

LONDON SECOND GOLD FIX  10 AM: $1286.40

NY PRICING AT THE EXACT SAME TIME. 1286.40

For comex gold:

OCTOBER/

NOTICES FILINGS TODAY FOR OCT CONTRACT MONTH: 3 NOTICE(S) FOR  300OZ.

TOTAL NOTICES SO FAR: 2439 FOR 243,900 OZ  (7.586TONNES)

For silver:

OCTOBER

 

 3 NOTICES FILED TODAY FOR

 

15,000  OZ/

Total number of notices filed so far this month: 779 for 3,895,000 oz

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Bitcoin:  $5569 bid /$5589 offer DOWN $16.00(MORNING)

BITCOIN CLOSING;$5681.00 BID/$5699.00 UP $95.00

end

Let us have a look at the data for today

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest SURPRISINGLY FELL BY ONLY 84 contracts from  191,928  DOWN TO 191,844 WITH RESPECT TO YESTERDAY’S TRADING (DOWN 2 CENTS).  THE CROOKS ARE STILL HAVING AN AWFUL TIME TRYING TO COVER THEIR MASSIVE SILVER SHORTS.  IT IS OBVIOUS THAT WE MUST HAVE HAD MINIMAL BANKER SHORT COVERING AND THUS THE REASON FOR ANOTHER ATTEMPTED RAID LAST NIGHT AND EARLY THIS MORNING AND THAT ENDED IN DISASTER FOR OUR BOYS!!.

RESULT: A TINY SIZED FALL IN OI COMEXWITH THE  2 CENT PRICE FALL.  OUR BANKERS COULD NOT COVER ANY OF THEIR HUGE SHORTFALL AND THUS ANOTHER CONTINUAL RAID WAS CALLED UPON WHICH ENDED IN FAILURE . 

 In ounces, the OI is still represented by just UNDER 1 BILLION oz i.e.  0.960 BILLION TO BE EXACT or 137{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT OCT MONTH/ THEY FILED: 3 NOTICE(S) FOR 15,000OZ OF SILVER.

In gold, the open interest FELL BY A CONSIDERABLE3856 CONTRACTS WITH THE  FALL IN PRICE OF GOLD ($3.75) .  The new OI for the gold complex rests at 524,944 .OUR BANKER FRIENDS  COULD ONLY COVER A SMALL AMOUNT OF THEIR GOLD SHORTS SO THEY CONTINUED WITH THEIR CONSTANT TORMENT LAST NIGHT AND EARLIER THIS MORNING W

 

Result: A FAIR SIZED DECREASE IN OI WITH THE FALL IN PRICE IN GOLD ($3.75). WE HAD SOME BANKER GOLD SHORT COVERING. THEY NEEDED MUCH MORE GOLD/SILVER LEAVES TO FALL SO THEY CONTINUED WITH THEIR TORMENT AND THAT ENDED IN COMPLETE FAILURE.

we had: 3 notice(s) filed upon for 300 oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

With respect to our two criminal funds, the GLD and the SLV:

GLD:   

Tonight , NO CHANGESin gold inventory at the GLD/

Inventory rests tonight: 853.13 tonnes.

SLV

Today:  A HUGE change in inventory: A MONSTROUS WITHDRAWAL OF 3.49 MILLIONOZ

INVENTORY RESTS AT 322.271 MILLION OZ

 

end

.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver FELL BY A TINY 84 contracts from 191,928  DOWN TO 191,844(AND now A LITTLE CLOSER TO THE NEW COMEX RECORD SET ON FRIDAY/APRIL 21/2017 AT 234,787) .  OUR BANKERS WERE AGAIN UNSUCCESSFUL IN COVERING THEIR SILVER SHORTS. THE DATA ALSO SUGGESTS THAT THE BANKERS COULD ONLY COVER A SMALL THEIR GOLD SHORTS  . HOWEVER IT IS CLEAR THATSILVERIS BECOMING IMPOSSIBLE FOR THE CROOKS TO COVER.

RESULT:  A TINY SIZED DECREASE IN SILVER OI  AT THE COMEX WITH THE  FALL IN PRICE OF 2 CENTS WITH RESPECT TO YESTERDAY’S TRADING. OUR BANKER FRIENDS WERE UNSUCCESSFUL IN THEIR ATTEMPT TO COVER ANY OF OUR SILVER SHORTS

(report Harvey)

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

)Late WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 11.62 points or .24{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} /Hang Sang CLOSED DOWN 552.67 pts or 1.92{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} / The Nikkei closed UP 85.47 POINTS OR .40/Australia’s all ordinaires CLOSED UP 0.08{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}/Chinese yuan (ONSHORE) closed UPat 6.6200/Oil UP to 51.40 dollars per barrel for WTI and 57.51 for Brent. Stocks in Europe OPENED IN THE RED  .  ONSHORE YUAN CLOSED UP AGAINST THE DOLLAR AT 6.6200. OFFSHORE YUAN CLOSED STRONGER TO THE ONSHORE YUAN AT 6.6190 AND //ONSHORE YUANSTRONGER AGAINST THE DOLLAR/OFF SHORE STRONGER TO THE DOLLLAR/. THE DOLLAR (INDEX) IS WEAKER AGAINST ALL MAJOR CURRENCIES. CHINA IS HAPPY TODAY

Read More @ HarveyOrganBlog.com

A WORLD OF LIES BUT GOLD WILL REVEAL THE TRUTH

0

by Egon von Greyerz, Gold Switzerland:

The dollar is dead but the world doesn’t know it.  It has been a slow death and the final stages will be very painful for the US and for the rest of the world. The US empire is finished financially and militarily.

NIXON WAS CONVICTED FOR THE WRONG CRIME

It all started with the establishment of the Fed in 1913 and escalated with Nixon. For anyone old enough to still remember him, they will think about the Watergate scandal. This was corruption and bribery at the highest level in the Nixon administration, including the president himself. In order to avoid impeachment which would have been a certainty, Nixon resigned. All this broke out 11 months after Nixon’s disastrous decision to take away the gold backing of the dollar on Aug 15, 1971. Nixon should not have been impeached for the Watergate scandal but for his decision to end the gold backing of the dollar. That disastrous decision is what will lead to a total collapse of the world economy and the financial system, starting sooner than anyone can imagine.

DE GAULLE UNDERSTOOD GOLD

By 1971, the US had already been running chronic budget deficits for 10 years consecutively. At the end of the 1960s, President Gaulle of France realised what would happen to the dollar and demanded payment in gold instead which was his right. This led to Nixon closing the gold window since this was the only way that the US could continue to live above its means. And this is exactly what the US has done for more than half a century now. Not only have they run a real budget deficit every year since 1961 but also a trade deficit every year since 1975.

THE UNHOLY TRINITY

Three things have allowed the US to do this: 1) The dollar being the reserve currency of the world, 2) The Petrodollar system. 3) Having a mighty military machine.

But the rest of the world now knows that the weakening US empire is losing out on all three fronts. The dollar has lost 50-70{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} against most major currencies in the last 46 years. And against gold, nature’s only permanent money, the dollar has lost 97{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} since Nixon’s fatal decision.

The US military superiority has been crumbling for many years. In spite of a military spending higher than the next 8 biggest countries together, the US has not been successful in any military action for decades from Vietnam, Afghanistan, Iraq, Libya and many, many more. This weakening of the US military power, will make it impossible in future to enforce the petrodollar. The US attacks on Iraq and Libya were as result of these countries intention of abandoning the petrodollar.

CHINA AND RUSSIA UNDERSTAND GOLD

China and Russia are now seeing what de Gaulle saw in the late 1960s. They know that it is only a matter of time before the dollar will lose its status as reserve currency. They also know that before this happens, the dollar will start crumbling and eventually disappear into a black hole resulting in an implosion of all the dollar assets and debts.

CHINA AND RUSSIA WILL ORCHESTRATE THE END OF THE DOLLAR

China and Russia are not waiting for this to happen They are actually going to orchestrate the fall of the dollar. Not by attacking the dollar itself but by killing the petrodollar. China will start to trade oil in yuan with Russia, with Saudi Arabia, Iran, Turkey etc. All these countries are now negotiating a number of agreements to facilitate the trading of oil and other commodities in yuan and rubles. These agreements cover a wide area such as new payment system and Forex trading between Russia and China as well as gold imports by China from Russia.

The intention of the Trump administration to repudiate the Iran nuclear agreement and to impose new sanctions will further strengthen the resolve of these countries to abandon the petrodollar. Sadly, it is also likely to lead to yet more terrorism in the West.

This is all happening at a much faster pace than the world is realising. And this time, the US cannot do anything about it. Because the US is unlikely to attack, China or Russia or Iran. A US attack with conventional weapons on any of these countries would be guaranteed to fail. The US wouldn’t stand a chance except in a nuclear war which would be the end of the world as we know it.

A BANKRUPT EUROPE

But it is not only the US empire which is crumbling. The decadent socialist system in Europe will not survive either. Socialism works until you run out of Other People’s Money. And this is happening fast in many European countries. Greece is totally bankrupt and should have defaulted on their debts many years ago and introduced a new devalued Drachma. This is the only way that Greece can ever progress and prosper. Instead, the EU insisted on them staying and imposed yet more loans that Greece will never repay leading to massive poverty and misery for the Greek people.

In addition, Brussels has forced them to process a massive number of migrants which Greece can ill afford. The same goes for Italy with their massive debt to GDP and crumbling economy. But it doesn’t stop there, Spain, Portugal, France, Ireland and the UK are all economies with massive debts. Since these debts can never be repaid, there are only two alternatives; either a default by the ECB and most European countries or money printing on a scale that the world has never seen. The likely outcome is that we will see both options. First money printing by the ECB in the €100s of trillions and then default, as the Euro becomes worthless.

The Eurocrats in Brussels including the European Commission are only interested in protecting their own position. Their main concern as unelected and unaccountable representatives of 500 million people is to hold their empire together at any cost. What they are doing is not for the good of the European people, but rather to serve these bureaucrats’ self-interest. The Brussels elite is more concerned about their own massive expense accounts and pensions than the Greek or the Irish people.

THE SABOTEURS IN BRUSSELS

The European Commission in Brussels, with Junker leading, is now doing all they can do sabotage the Brexit decision by the UK electorate. They just can’t stand that anyone breaks rank in this very unholy alliance. Interestingly, the word sabotage, derives from the industrial revolution in Belgium when the workers threw their “sabots” (clogs) into the new machines that were taking their jobs away. So the Brussels tradition of sabotage is not a new phenomenon.

THE EU – A FAILED EXPERIMENT

The EU is a failed experiment that will eventually collapse. So will the Euro which is an artificial currency that can never work for 19 Countries with different backgrounds such as growth and inflation rates, productivity, industrialisation and cultures.

The dollar is likely to fall before the Euro as they both compete in the race to the bottom. Just think about it, here we have the two richest regions in the World, North America and Europe, both on the verge of collapse, economically, financially, politically and morally. How can anyone ever believe that all the bubble assets can survive under those circumstances. Well they won’t. That is absolutely guaranteed. It is only a question of how soon it starts and how deep it will be. The sad thing is that no one is prepared for it and it will be a devastating shock the whole world.

READ MORE @ GoldSwitzerland.com