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Gold & Silver “Trapped” in Tight Range, Volatility Near Half-Decade Lows, as PGMs Grab Attention

The GOLD PRICE eased $5 per ounce from a 2-day high in London trade Thursday morning, holding above $1676 as Asian stock markets closed lower but Europe held flat.

The Euro currency held onto a half-cent rise as the European Central Bank kept its key lending rate at a record low of 0.75% for the 15th month in a row.

Crude oil rose with other commodities, but silver bullion remained unchanged for the week so far at $31.80 per ounce.

Daily swings in the silver price haven’t been as small as this week since spring 2007. Volatility in the US Dollar gold price has only been lower than yesterday on 15 days since mid-2005.

“The story in the precious metals market,” says Commerzbank’s commodities team, “continues to be the explosion in the price of platinum” – now 13% higher since the start of the year.

Palladium, which is also used primarily in the auto industry, is similarly “in a very bullish trend,” they add, while “Gold and silver remain range-bound.”

Technical analyst Russell Browne at bullion bank Scotia Mocatta calls the gold price “trapped” for the last month.

While the market may be “building a base” from which to rise higher, “We do not expect any speculative buying until the market can break 1695,” he adds, “a level which has held since mid-December.”

Commodity analysts at the World Bank forecast a 4% drop in the gold price by end-December, with a further 3% fall to $1550 over 2014.

“Most risks are on the downside,” says the World Bank’s latest Commodity Market Outlook, “as the pace of global recovery improves, including further easing of financial tensions in Europe.”

The recent “high gold prices have [also] attracted considerable investment in the gold mining industry,” the report adds, “not only to replace aging existing mines but also to develop new mines.”

China’s gold mining output rose in 2012 for the 6th year, Shanghai Securities News said today, confirming its world #1 position with a record 403 tonnes.

Together with China’s gold imports through Hong Kong of 524 tonnes (net of exports), that figure takes China’s domestic demand for last year to at least 926 tonnes.

Imports to India – the world’s #1 consumer nation until 2012, but with no domestic mine output – fell one-third by value over the first 9 months of last year, perhaps taking full-year shipments below 650 tonnes.

“[The gold] market is slow these days,” Reuters quotes a Mumbai bank dealer, “as overall sentiments are not so good because of [central bank] comments.”

After gold import duties were hiked to 6% last month, the Reserve Bank of India on Wednesday proposed strict controls on import quantities, perhaps forcing wholesalers to re-export certain quantities and use recycled domestic metal instead, to try and cut the country’s large trade deficit.

“If they come up with quota system,” says the dealer quoted by Reuters, “then market will become very ugly.”

The Rupee slipped back Thursday against the Dollar, but remained 5% above last month’s multi-decade lows.

Sterling meantime whipped violently as first Mark Carney – who takes over as governor at the Bank of England this summer – spoke before lawmakers in London, and then the central bank held UK interest rates at 0.5% for the 48th month in succession.

“[Economic] risks are weighted to the downside..[but] inflation is likely to rise and may remain above the 2% target for the next two years,” the Bank said as it also maintained its quantitative easing at £375 billion ($590bn).

It will now start recycling the cash from maturing government bonds, it said, into new purchases of public debt.

“Returns to QE have declined, particularly in the US, as the scale of programme has increased,” said Mark Carney, currently head at the Bank of Canada, to the Treasury Select Committee this morning.

But “unquestionably” the UK economy’s “considerable slack…will be a situation that merits considerable monetary policy stimulus,” when he takes over from Sir Mervyn King in June.

The gold price for UK savers today touched a 10-week high above £1073 per ounce.

It has risen more than 5-fold since King moved from deputy to governor in June 2003. Consumer price inflation has averaged 2.7% per year, against the Bank’s official target of 2.0%.

Adrian Ash
BullionVault

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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

To once again quote the man I respected more than any other market professional I have come in contact with, [a late friend], we will list “just the facts” in order to define a complicated, yet very interesting period in time.

• Stock sentiment was at an extreme over-bearish level by what Sentimtrader.com’s data label “dumb money” last summer and as expected, a continuation rally of the bull market out of 2009 sprung from that sentiment backdrop.

• The rally’s character is currently of one-way momentum compared to its jagged, up and down nerve-racking beginnings.

• The sentiment profile is now opposite to its over-bearish state (by dumb money) at the rally’s beginning.

• The bull remains in full force with a string of 4 sets of major higher highs and higher lows intact out of 2009.

• Major events over the last year included a resolution by the ECB to bailout insolvent union members, the election in the US of a president committed to entitlements and credit expansion, the commitment by the US Fed to use increasingly inflationary policy to manage an economy it deems below capacity, a Kabuki Dance in service to the pretense that the Fiscal Cliff ™ debate was anything more than for show, a kicking of the US debt ceiling can a bit further down the road, Chinese stimulus operations and the election of a leader in Japan who called out the BOJ and has committed to stimulating inflation in his country. Have we missed anything?  Yes, there was much more.

• Signs of economic expansion are cropping up in the economy, from the anecdotal evidence of semiconductor equipment orders we noted last week to a 53.1 reading on the ISM report to tepid jobs growth.

And all of it, but all of it is dependent upon credit expansion!  The stock market rally, the economy’s creeping expansion and the very continuation of the current system are all dependent upon policy makers’ willingness and ability to continue to expand credit.

So let’s not be fooled into getting too wrapped up in casino mentality.  Yes, the writer who criticizes “casino patrons” and speculative mentality is using derivatives to hedge volatility, bull the Yen, etc.  But I am also not able to short stocks directly because I requested that margin “privilege” be removed from my accounts to manage counterparty risk in the brokerage world.  I keep healthy cash levels and have long-since been an investor in gold and a keeper of the idea that having debt in an expanding credit construct is fine until one day, it is not fine at all.

So with an understanding that everything bullish casino patrons are celebrating today is the product of inflationary policy that came in response to everything they were afraid of last spring and summer, let’s move on.

Credit Must Expand

There simply is no other choice.  Ever since Alan Greenspan met the end of the last great stock bull market and subsequent economic deceleration early last decade with bold new policy (now child’s play compared to what today’s Fed is doing), we have been locked into an ever-expanding credit continuum, which was severely interrupted in 2008.

This new bubble in credit launched house prices to new and unsustainable heights but worse than that, drilled down into the mortgage derivatives market by slicing and dicing new Ponzi-products that could be sold into this credit-expansion-lifts-all-boats atmosphere.  Whatever it is, sell it!  The Fed is compelling you to do so.  They sold it all right, and a lot of people bought it.

As the mortgage bubble continues to deflate, credit risk has been offloaded from the institutions that abused and profited from the system to the Federal Reserve itself.  But really, this burden falls on the American people in the form of their collective debt via the US Treasury.

So there is a great cyclical stock bull happening.  The economy may turn up a bit.  Investment managers and the public alike are turning more bullish after having been oh so bearish last year.  I am once again writing like a ‘bear writer’ and this stuff may sound stupid for a while.  Last summer I sounded (and sometimes felt) stupid for calling the market a bullish risk vs. reward situation.

How to Play It?

I am not going to try to tell readers whether or how to speculate.  That is casino patron stuff.  Bears are in agony now as the market feeds on pure momentum as all those investment managers come streaming back into the play.  My extended family member who is a financial adviser is now constructive on the US economy and thinks the stock market has legs for 2013 and possibly beyond.  You will recall he advised that his best and brightest fund managers were mostly cash in November and expecting a Fiscal Cliff related crash in December.  Ha ha ha…

As of now, the market is bullish.  They are printing money after all in the age of ‘Inflation onDemand’, inflate-or-die or whatever you want to call it.  But this is now becoming a global phenomenon and as long as the system holds together various currencies are going play Whack-a-Mole and alternately appear strong or weak.  As long as FOREX measures these basket cases against each other and as long as the vast majority maintains a casino mentality (i.e. as long as people are able to suspend disbelief that the system is unsustainable) the game goes on.

So it is not just the bears that are having a tough time right now.  It is the believers in sound money, which to this point through history has been represented by gold.  This is supposed to be THEIR time I tell you!  Well no it is not, because it is not.  We can read all kinds of reasoning into the situation, from the Fed and its henchmen in the ‘Bankster’ cabal operating ruthless manipulation schemes to a simple idea that too many people bought gold in too much of a panic during the acute phase of the Euro crisis.

Whatever it is, it is.  If you are a strong believer in your principles and if you are able to manage without being overtaken by casino mentality, you are good.  Go forth and speculate, but don’t swallow anybody else’s playbook (including or in some cases especially, the goldbugs’) whole.  You are a real believer in sound money and sound systems?  Then you are not leveraged to the system because you have managed personal debt and outright own things of value, including possibly, the monetary metal.

Biiwii.com, Twitter, eLetter, NFTRH

Friend of gold Jim Sinclair, and executive to a mining firm with interests in Tanzania, put it so well. He captures the theme of this article when he said, “It is the constant drop in the dollar’s usage as a contract mechanism internationally. No one sees this but it is the Hammer of Thor on the head of the dollar.” The rejection of the USDollar in global trade will mean the end of the abused privilege in a currency turned toxic. Its rejection is the marquee event in the financial world for 2013, following isolation. It is unstoppable and all-encompassing, certain to have geopolitical consequences, as it alters the economic and financial landscape in harsh ways much like a band of violent marauders brandishing machetes alter the neckline of their victims. See the Tonton Macoute in Haiti. The greenback is cornered; it is done!

 

The central bankers and sovereign wealth fund managers are running scared. The Official Monetary & Financial Institutions Forum (OMFIF) is a forum of central banks, sovereign funds, financial policy makers, and market participants. It recently issued a report on the global monetary system, emphasizing the possibility of a major breakdown in international monetary relations as a result of the currency wars, which hinder productivity. It accepts that the present system is collapsing. It argues a formal role for gold is required to play in international finance. But they turn to the despised corrupt savage callous Intl Monetary Fund, and its broken currency vehicle, the discredited discarded SDR basket. They will be swept aside despite eyes partly open.

 

The opponents to financial hegemony have spent the last four years in planning a new order that can viably sustain the global trade system without a USDollar at its central role. On one side, foreign nations must avoid the toxic effect of the asset bubble USTreasury Bond as the core to their banking systems. On the other side, foreign nations must react to the accelerating threat to their national economies from both a uniform cost inflation effect and a rising currency effect that punishes strength, success, and prudence. The Competing Currency War has reached a new elevated fever pitch, with the major central banks delivering powerful damage to each other while defending themselves. The unintended consequences have been a predictable unfolding of events to the sound money gold crowd, with years of warning and even a label given to the conflict. It comes as an unwelcome surprise to the mainstream sheeple crowd, still entangled in the paper wealth corner. The process continues, the pathogenesis relentless as paper securities erode in value. The world is slowly coming to the realization that only a Gold Standard can cure the world of its financial cancer from metastasized paper insecurities. The contact of Silver will cleanse the hand that has held paper since 1971, when the era of modern chronic unsolvable financial crisis was born. That is, unsolvable without a primary role for Gold itself, the despised stable metal. Gold is the ultimate currency.

 

SHOCK YEAR 2013

So the Jackass call is that 2013 will see the USDollar finally isolated and put in a position for rejection. It might not suffer a sudden death, but it will be corralled after being identified as the toxic agent flowing within the global financial arteries. However, the quarantine will be conducted in an extraordinarily clever fashion. Since the United States and United Kingdom, with its loyal court of followers in Western Europe, control the global banking system, the sovereign bond system, and the FOREX currency system, even the commodity markets including Gold & Silver, the solution had to be loaded with innovation if not guile. The alternative to the USDollar as a solution had to be formulated and planned as a counter-attack, but done so outside the oversized pockets of strength where the Anglo bankers ply their trade and controls. As many trade partners have been public about their objectives, when two parties come together to conduct trade, no rational reason can dictate that the USDollar should be used as a vehicle to settle trade, when both parties are located halfway across the globe. The New York and London bankster crowd cannot dictate Gold’s new role, when their vaulted gold supplies are being vacated to points in Asia, when their vault contents are demanded in official accounts for return, when their past gold shipments have been contaminated with tungsten. These banksters are being outed as criminals.

 

The end to US & UK hegemony is coming. It will arrive like a grand lasso cast around the set of trade partners seeking a fair system. Their proffered solutions will be ignored, like the QE lunacy in the United States and the ESM lunacy in Europe, both discredited totally. The IMF will not play a role in the next chapter. The irony is thick and inescapable. If the Anglo bankers insist on NOT considering, using, and relying upon Gold as a currency of utmost validity, robustness, and strength, then the rest of the world will devise a system for trade settlement that will evolve toward gold itself. The settlement of trade will not therefore pass through either the banking system or the currency marts. The solution will come in global trade that no longer requires the USDollar, but rather a simpler system where value is perceived more clearly, where the two participants will transact as peers, where payments will not rely upon the big banks, where the ignored super currency Gold is the basis. The deceptions of paper-based IOUs will be averted. The corruption in the banker shell games will be cast aside. The USDollar will be isolated, ignored, shunned, then put to death by the Americans themselves during its uncontrollable fever.

 

THE KEY: NON-USDOLLAR TRADE

The grand hint to the end-around solution in search for a USDollar alternative has been in front of the nose for several years, dating back to the China-Brazil bilateral swap deal in 2005. Little attention has been given a long sequence of similar bilateral swap deals that have centered upon the Chinese Yuan for initiating and settling trade. Nation after nation have lined up with the Beijing leaders to conduct trade in something akin to a credit card account based in Yuan currency, which converges toward zero over time on balance. Trade is initiated by one side delivering goods. The swap facility is tapped. Trade goes in the other direction, and the swap facility is credited toward zero. Numerous nations have signed up with China on such bilateral swap facility deals that enable brisk trade, in essentially a barter framework. The word barter is never used, since it might upset the powerful banker groups that shuffle bonds and currencies like so much stained wampum and contaminated salt at the corrupted trading posts. With Russia, South Korea, Japan, Iran, India, and Australia onboard with Chinese Yuan swap deals, one must suspect that a critical mass of perhaps half of global trade is conducted outside the USDollar shadow. This is a growing critical mass that acts much like scattered pylons on which to place a new trading platform. The key is that the collection of bilateral trade conducted by China is no longer done in USDollars. The objections are openly stated, that nations do not find it obligatory to settle trade in a third-party currency like the USDollar, especially when the US central bank is flooding the system with USDollars of highly suspicious origin but with very certain negative ramifications on the value of nationally managed reserve systems. The other big more recent hint is that Turkey is serving as a test site for trade settlement in Gold. Ankara bazaars are providing Gold in giant quantities, used in satisfying trade payments. So far the sleep Anglo bankers consider it minor, and operating in the Iranian shadows. They are wrong.

 

An important dynamic must be made clear. In the past decades as nations engaged in trade, in particular with crude oil, the trade was settled in USDollars. Therefore nation after nation accumulated USTBonds in their surplus reserves account as part of banking systems. They followed the lead set forth by the Saudis as they managed the Petro-Dollar functions. The Saudis recycled their surplus funds into USTBonds, so as to keep the balance of FOREX currencies intact even as massive imbalances built up quickly over time. As a result, the entire world of major nations, the global producers and traders accumulated USTBonds within their banking systems. The norm became USTreasurys with which to build national banking systems. So the Saudi-led Petro-Dollar established global trade done in USDollar terms, even outside the energy market. In a sense, their reserves management as agreed upon between the USGovt and Saudi royals (King Fahd), induced the global trade participants to follow suit and create banking systems built upon USTBonds also. All that is changing, since the Chinese Yuan swap facilities have taken on critical mass globally. However, the final blow to the USDollar will come from standard non-energy trade being settled outside any US$-based terms. The practice is accelerating, initiated in Asia, but spreading westward fast, urged along with a giant push in response to the Iran trade sanctions. Every action brings about an equal and opposite reaction.

 

The crux of the non-US$ trade vehicle devised as a USDollar alternative will be the Gold Trade Note. It will enable peer-to-peer payments to be completed from direct account transfers independent of currency, and most importantly, not done through the narrow pipes and channels controlled by the bankers with their omnipresent SWIFT code system among the world of banks. The Gold Trade Note will act much like a Letter of Credit, serve as a short-term bill, and maybe even push aside the near 0% short-term USTreasury Bills that litter the banking landscape. Any bond or bill earning almost no interest is veritable clutter. The zero bound USTreasurys open the door in a big way for replacement by a better vehicle. The new trade notes will involve posted gold as collateral, whose entire system for trade usage will bear a massive gold core that also will include silver and platinum, maybe other precious metals. The idea is to avoid the FOREX systems, to avoid the USDollar, and to avoid the banks as much as possible in a peer-to-peer system that can be executed between parties holding Blackberry devices or simple PC to complete the payments on transactions. If Gold is ignored by the corrupt bankers, then Gold will be the center of the new trade system and the solution in providing a globally accepted USDollar alternative.

 

Do not be surprised to see the Chinese Yuan later as interchangeable with the Gold Trade Note. But first the Yuan must be convertible into the many major currencies actively traded in the world. Numerous reports have come in recent weeks that the Yuan currency will soon have a gold backing, yet unconfirmed. My expectation is for the Chinese Yuan eventually to be interchangeable with the Trade Note. That will signal its implicit gold backing. While many events and steps are not known, and many surprises will be thrust on stage, the guiding pathways are slowly coming to light.

 

CURRENCY WAR AMONG CENTRAL BANKS

The Competing Currency War has grown in intensity. The competitive devaluations of currencies is causing severe damage among the major players. National reserves are suffering loss, while growing in size to dangerous levels. Protection of export trade has become of paramount importance. Nations are speaking openly through their central banks about the distress and urgency of the worsening situation. Russia has directly identified the currency battles as war. Nations are acting in their best self-interest, and in the process defying other nations, rendering them harm. With Switzerland and Japan enduring the brunt of the currency wars, look for them to each arrive at the conclusion that a Gold Standard would eliminate many problems. They are important pivotal nations. Successful nations and safe haven nations are put at great risk, even punished by having their floating currency rise. Great distortions are occurring as the Euro is propped, the beneficiary of colossal USDollar swap facility influx in the $trillions. The nearly constant US DX currency index is a lie, a false soothing signal that all is well. In fact, the USDollar is seeing instability with several currencies within the index.

The list of nations undergoing active currency intervention is growing markedly. Currency manipulation actions are routine, each action inviting a reaction by other nations. It is not just Japan and the United States, the usual suspects. It is Luxembourg, Switzerland, South Korea, Sweden, Norway, and Brazil. Heck, even the venerable England has taken steps to create a Chinese Yuan swap facility. They do not wish to be left out when the Yuan becomes a more global currency, with full convertibility. London is aiding the path to a convertible Yuan. Who’d a thunk it? London wishes to remain a major trading center. Look for someday soon a Chinese Govt Bond auction denominated in Yuan, the offering managed by London banks. Such a development is not welcome news for New York, which must be seething with anger and flush with disgust. This is the more than a currency war, but rather a global currency tumult and transformation, with grand tectonic shifts, on the disruptive path to a return of the Gold Standard.

 

Some important events within the financial wars over control of money and determination of value is underway. Many details are analyzed in the January issue of the Gold & Currency Report for the Hat Trick Letter. Big disruptions are coming very soon to both the FOREX currency market and the Gold market. Gold price breakouts will occur in various currencies, but not in US$ terms, the defended bunker. The new dangerous phase of the competing currency war has the propped Euro keeping the US DX index up, since the Euro has an absurd overweight in the queer index (artifact of past era). The Gold price rise will come like a sudden burst of wind. The speculators who trade Gold based solely on the DXY index will not understand the processes going on behind the scenes. They will be greatly surprised and taken off guard by the poweful upward move in Gold when it arrives. Watch for the Swiss and Japan to knock on the door for entrance in the Eastern Alliance, which will produce the USDollar alternative. It requires a critical mass for success. The stress felt in these two nations will motivate their pursuit of the USDollar alternative solution. They are being seriously wounded by the fiat paper currency system with floating rates.

 

Russia spoke out viscerally on the growing global awareness of an open currency war. Events are not of a fresh war, but rather a climax. Russia’s central bank head Alexei Ulyukayev seems only recently aware of the battles among central bankers that have raged for a few years. The climax could result in a Gold Standard implemented in place, with the Anglo-Americans deposed. The practice of competitive devaluation has turned routine. All actions taken by individual nations invite quick reactions by affected partners. Conversely, the successful nations do not tolerate punishment with a higher exchange rate. A return to gold in a central role would provide reward instead of punishment. This is the currency war entering the final phase, where the Gold Standard could potentially emerge as the global solution. The returned imposition of the standard would enable successful nations to garner more gold as reward (see Norway, Switzerland), and punish sluggish wayward parasitic sclerotic socialist nations which run chronic trade deficits by sending them to the Third World. Recall the shattered objective made in 2009 by central bankers. Their vacant call was reiterating just three months ago, to refrain from competitive devaluation of currencies. No nation refrained, as it is total empty rhetoric. When pressured and under attack, individual nations will act in their own domestic best interests, to defend their industries, to fight to survive.

 

The world has NEVER seen so much direct currency intervention and protective action taken by central banks. History is being made. The currency tremors augur some truly historical events, with the return of the Gold Standard coming, although by indirect means via trade settlement. By consequence the FOREX currencies and their crumbling bond foundation will be indirectly declared ruined, toxic, and unworthy of widespread global usage as a monetary platform. Some important events highlight the Competing Currency War clashes:

 

• Brazilian Finance Minister Guido Mantega first dubbed a currency war in 2010 in open terms, engaging the richer nation. He must be credited with the initial challenges and confrontations of the major central bank powers.

• Luxembourg Prime Minister Jean-Claude Juncker complained of a dangerously high Euro. Its 7% gain against the USDollar in the past six months poses a fresh threat to the EuroZone economy. The European Central Bank states that it is not prepared to favor a weaker currency.

• Switzerland has been blocking the Franc appreciation against the Euro since September 2011. Their central bank balance sheet has gone over 70% of GDP, but will fail to achieve any success. Great losses await in the blowback.

• The central bank of Norway (Norges Bank) has received pressures from the finance ministry, in reaction to a strong Krone currency. The ministry urges more accommodation, and not to continue conducting a tight fiscal policy. The Krone has been rising due to a responsible government, and long successful North Sea oil project with about $1.6 trillion held in sovereign wealth funds.

• The central bank of Sweden wishes to execute a rate cut in order to avert a stronger Krona currency. The Riksbank head has argued for deeper rate cut than the 0.25 basis point enacted. They prefer the basic self mutilation method.

• Japan has reignited new major battles, as newly elected Prime Minister Shinzo Abe urged a more aggressive central bank, turning it into more of a political arm. The result has been an 11% Yen decline since December against the USDollar. Their 22-year interventions are a total disaster, and example to observe. Expect Japan to join forces with the Chinese in common goals.

• The Bank of Korea has formally stated an urgent response is needed to defend against the falling Japanese Yen. Concern is over the harmful impact to exports and investor confidence. Their finance ministry wishes to put forward an agenda item at the G-20 talks in Moscow, on adverse effects of monetary easing in the United States, Europe, and Japan. Expect South Korea to join forces with the Chinese, as they diversify out of USTBonds.

 

SWITZERLAND POISED FOR GRAND LOSSES

The official program launched by the Bank of Japan delivered some powerful blows to the Swiss bankers and their lunatic peg against the Euro currency. Defense of Japanese industry has translated into outsized losses for the Swiss central bank portfolio, simply put. Extreme risk continues to rise toward a break point in Switzerland. Their Euro-Franc peg cannot be held firm. As the Euro continues to crumble (regardless of exchange rate), investors are flocking to the Swiss hills. The Swiss National Bank cannot hold the 120 declared peg. Their short Franc position and long Euro position, with other major currency long positions from some diversification (like into the Japanese Yen), will assuredly break as each major nation manages according to their own national priorities. The urgent Euro defense has prompted other nations to take defensive action. The war is on. A new phase has begun, with damage done to other nations rising. The Swiss Natl Bank has converted itself to an ill-fated hedge fund in danger of massive losses. Its losses are mounting. Its reserves from Franc defense are in the 75% range of their national GDP, the size of their economy. The Euro-Franc peg is doomed to fail, with gigantic losses to come in the cascade of ruin. Note that the Japanese Yen has moved down hard in four months time, and continues down.

A look at a 50-year chart (shown in the January Hat Trick Letter paid reports) should cause alarm, since the trend over two generations appears to be in the early phase of an important reversal. The JapYen is falling rapidly by designed pressure from their central bank, which has been politicized radically in recent weeks. Massive losses are coming from the Swiss bets on the Yen, along with catastrophic losses from an explosive upward move in their own SwFranc currency. The focus of the Competing Currency War right here right now should be squarely on the Swiss and Japanese. They are at war with each other, blowing up the Swiss reserves. The Swiss thought they were acting prudently by diversifying out of the Euro and into the British Pound and Japanese Yen. The BPound is down from 163 on January 1st to 156 today, almost a 5% decline in merely five weeks. The JapYen is down strong, from 129 in late September to 107 today, falling with powerful momentum. The Asian currency is down a monstrous 17% in the last four months. Japan is trying to push down their currency in order to make cheaper their exports. On the other hand, England is just falling apart, in a nasty recession.

The Swiss National Bank went all in three times and counting in the last several months, with heavy commitments to defend against a fast rising Swiss Franc currency. The Swiss have a truly massive and deadly commitment, seen by the size of their central bank balance sheet. It is like a giant boil on the Swiss face. Details of the interventions are full of intrigue, if not highlights of the futility. Huge losses await the small nation dominated by its banks. The bankers have gone coo-coo, like their clocks. Compare. The USFed has a big balance sheet, equal in size to over 20% of the USEconomy size, as measured by GDP. The Euro Central Bank goes further, with a balance sheet of 30% of GDP for the EuroZone. The Swiss take it to a new level, two to three times larger. The balance sheet of the Swiss National Bank contain assets amounting to about 75% of the Swiss GDP. They have literally bet the bank on three separate occasions recently. The nation is small, but the carried risk is staggering, enough to collapse their financial system. It is already badly damaged from a) the loss of secret private accounts, b) the loss from underwriting mortgages in Eastern Europe, and c) the loss from US$-based toxic bonds. Next comes potentially catastrophic losses from currency regime defense, compounded by legal challenges on Allocated Gold Accounts with accompanying multi-$billion lawsuits kept quiet.

The big irony in the Jackass viewpoint is that the Swiss will become a key force as an important swing vote. The potential is there for a hidden role. They might join the global gold-backed currency movement that replaces the USDollar in trade settlement. This is the currency war entering the final phase, where the Gold Standard could potentially emerge as the global solution. Imagine Switzerland with its impressive flow of funds into the Swiss hills, seeking safe haven from the collapse of Europe. A Gold Standard would mean that gold bullion would follow the flow of funds, the exact opposite impact as the current situation for the historical land of banks. So Switzerland could serve as a big swing state in the financial sector, like Turkey could serve as a big swing state in the trade settlement sector.

 

G-20 FLASH POINT

Rumor is circulating in London that neither the United States nor the United Kingdom will attend the G-20 Meeting in Moscow. Refusal to attend by the Anglos would open a giant gate to coordinate plans by the leading Eastern nations (trade participants) on the new trade settlement system with attendant platforms. Rather than creating a new and better currency, they are more likely to establish a gold-backed trade settlement process that will render the USDollar obsolete. Failure to attend by the US-UK tagteam of financial fascists would ignite the Eastern-led consortium on motivation toward the launch of the new system in a more open public vocal manner with press conferences. The Third World awaits the nations that refuse to become part of a growing critical mass in global trade, which desires a more fair and equitable system of trade settlement. It is coming, but awaits a climax of collapse.

 

TAINTED GOLD CHART

The Jackass finds little value in the Gold chart, the object of criminal control. Honestly, rarely is the so-called official gold price checked for months. By happenstance, it flashes across the television screen when the bumblers on the financial news networks are silenced by my mute button. Their gold price is controlled within a boring false range of meaningless that does not attract my attention or interest. The actual Gold price is 10% higher than the posted COMEX corrupted price, in many parts of the world where it is actively traded in volume, with authentication and verified bars bearing certification. Much of the New York and London gold is either stolen or confiscated, their stated inventory as full of fiction as the economic reports. Moreover much of the exported Anglo gold has tungsten centers. Their gold bars are as imaginary and contaminated as their sovereign bonds and mortgage bonds. So the Jackass sticks with the gold and currency wars, the developments by the stubborn resistant East, and trends toward the sunset of the USDollar after it is cornered like a rat. Ignored are the marquee billboards with false prices from leveraged fraud, naked shorting (see the Big Four US Banks), theft of client accounts awaiting delivery (see MFGlobal), surrogate wars to confiscate foreign gold accounts (see Libya), and raids of the Gold ETFund often called the bullion central bank kitty. The Jackass refuses to permit syndicate whores and harlots to define virginity or purity, or to set the price of taking a lady out to dinner, a show, and whatever follows. The entire pack of Western bankers can go to hell, whose doorkeeper prince of darkness is their object of worship in rituals.

 

REQUIEM FOR THE NATION

A sweeping captivating question will dominate in 2013: What happened to the United States? The answer cannot be made simple. As preface, the key to comprehension must bring focus to extreme banker thefts in the multiple $trillions, which began in a virtual theft of the bulk of the national home equity in the mortgage bond fraud. The problem is far more pervasive, if any degree of depth is to be grasped. It was the refusal to liquidate the broken sacred banks steeped in criminal activity, the extreme corrosion to the economy from adopted sanctioned urgently requested hyper monetary inflation, the burdensome war costs hidden within the mammoth unfixable federal budget deficits, the compromised Congress whose constituents are lobbyists, the cancerous growth of the state which is realized in higher taxes, onerous regulations, an expansive welfare network, and a forced tiresome war on terrorism that conceals a broad confiscation of gold hoards during a global capture of the narcotics trade, upon which the New York banks are hopelessly dependent. A military element has been prevalent in the breakdown, an extension of the Fascist Business Model into the business sector. It saw impunity of big banks from prosecution, devotion to war, permission of narcotics by the security agencies, the obfuscation of liberty as it vanished, the perversion of patriotism (including honor guards at sporting events), the subjugation of the press, the salute to an aggressive national socialism (often dubbed nazi by the enlightened). Enter systemic failure from a military standpoint.

 

The short answer on what went wrong would cite the departure from the Gold Standard, the advent of war beginning with Vietnam War and continuing through the Cold Soviet War and transitioning into a deceptive War on Islamic terrorism. The overly strong and active US labor unions caused a reaction to seek Asian outsources. The overly dominant financial sector led to dependence upon a series of aberrant asset bubbles, each and every one blessed by the wayward heretic US central bank, which owns a giant responsibility in the systemic failure in progress. The devotion to war has resulted in an added $3 trillion in the USGovt deficit just since 2003, and half the overall $17 trillion in total. A deadly decision was made in late 1999 that assured the demise of the nation, questioned by few, never having sat well with those in possession of an active economic brain stem. The discharge of the bulk of US factories to Asia, mostly to China, sent the legitimate income producing capability away, only to be replaced to a deeper dependence upon asset inflation. The resulting deficits for the USGovt cannot even remotely be repaid, nor even financed. Creditors have fled. The forced endless 0% rate is kept in place to enable debt service itself. Enter systemic failure from an political and fiscal standpoint.

 

When the Hat Trick Letter began in May 2004, the Jackass was very clear that the US housing market and mortgage finance sector would eventually enter a bust period. Due to the extreme dependence by the USEconomy on home equity extraction and bond security trades, the nation would enter a period of deadly insolvency followed by systemic failure since no monetary policy could pull the nation out of the toxic quicksand. It had no traction in industry from which to derive stimulus of low interest rates. Imagine a car spinning its engine with a Weimar stamp on the block, whose RPMs rise multiples past the red line of danger, whose transmission spins the bank-made tires endlessly, creating a din of noise and a thick mist of burning oil, but whose wheels have no connection to the roadway. No critical mass of industry means no locomotion for the USEconomy, as simple as that. Besides, the United States cannot compete on a wage basis with Asia, nor a union basis, nor on a government regulatory basis, and increasingly on a quality basis. Enter systemic failure from an industry standpoint.

 

In the last couple years, the systemic failure has extended from the USFed hyper monetary inflation, which kills capital itself in a manner that not 5% of economists comprehend. Central bank monetary policy to print nearly unlimited amounts of money, including funds destined for Europe, and to keep the official lending rate at the zero bound has resulted in a rising cost structure with no discernible increase in wages or income. Worse, the accumulated funds in savings and pensions earn nothing, therefore go negative when price effects are factored. The corrosive cost effect and the wet blanket savings effect on the USEconomy perpetuate the recession that has been firmly in place since 2008. No recovery has occurred in five years, despite the chatter and deception and lunatic pronouncements from the policy makers, compromised bankers, and poor excuses for economists (banker harlots & promoters). The USGovt deficits are covered over 80% in volume by the printing press with a Weimar nameplate. Foreign USTBond investors have vacated the auction pits and other financial premises. The reliance upon interest rate derivatives has been exposed, starting last spring and summer 2012 in JPMorgan admissions, in order to keep the absurdly ultra-low official interest rates in place. Enter systemic failure from a financial standpoint.

 

The cast of leaders has converted treason into a facade of patriotism, as they defecate and urinate on the tree of liberty, preparing their drones and black aircraft for assaults on cities. The battles politically remind a history student of a localized conflict between Nazism and Stalinism, with a surefire blend in targeting the population with a parade of assaults typical of each camp. Anyone who has overlooked that Neo-Con means Neo-Nazi, and the march to Socialism in the other party has a striking tone of Soviet Collectivism, simply misses the big trend in American politics. The FEMA Camp influx for indoctrination, along with psychotropic drug treatment for those who fail to salute, should convince the masses a bit more. Events in the sky over Miami and Houston in the past week should do more than awaken, even frighten, as they spread to other cities. The collection programs for guns will be eclipsed by collection of private pension funds and perhaps gold itself. The exit strategy for the US Federal Reserve might be extremely simple, enabled by the heavy Big Brother hand. Over $19 trillion in private pension funds in IRAs, 401ks, and Keoughs might be forced out of their current positions and dragged into a new special USGovt Bond that is backed by unwanted USTBonds racked by QE storms and worthless USAgency Mortgage Bonds racked by lost collateral that the big US banks eagerly dumped on the USFed. The $3 trillion central bank toxic balance sheet could be passed onto the gullible helpless and victimized American public. Their only real choice is to flee, like the USTBond creditors.

 

Self-protection will be deemed unlawful, either for personal safety or financial security. Speaking out in opposition will be deemed unpatriotic, if not subversive. Orwell, Huxley, and Thoreau are watching the obscene steps taken by the state. For some reason, fond memories of Richie Havens strumming his guitar and belting his tunes about freedom have been running in my mind for weeks, an icon from the 1970 decade, which produced the best music ever created in rock & roll.

 

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

From subscribers and readers:

At least 30 recently on correct forecasts regarding the bailout parade, numerous nationalization deals such as for Fannie Mae and the grand Mortgage Rescue.

 

“I have been a Hat Trick subscriber since 2005. I consider your publication beyond excellent. It is indispensable to understanding the mega-trends of the past such as the housing bust, bank insolvency, monstrous US Government $trillion debt, the Fed’s QE to infinity with no feasible exit strategy, and more. Essentially, your analysis exposes and documents the massive corruption ruining the future of young and old alike in America. A simple thank you is really not sufficient to express my deep appreciation of the time and effort you put into the Hat Trick Letters.”

  (ElaineW in California)

“A Paradigm change is occurring for sure. Your reports and analysis are historic documents, allowing future generations to have an accurate account of what and why things went wrong so badly. There is no other written account that strings things along on the timeline, as your writings do. I share them with a handful of incredibly influential people whose decisions are greatly impacted by having the information in the Jackass format. The system is coming apart on such a mega scale that it is difficult to wrap one’s head around where all this will end. But then, the universe strives for equilibrium and all will eventually balance out.”

  (The Voice, a European gold trader source)

“It has been my hope that the financial collapse would occur within a slower time frame, like a year from now. I have followed your articles on various sites for a while, and have to say that you are very perceptive and accurate as well as analytical. You have been more accurate, detailed and thorough than others, and your Big Picture analysis is usually spot on. I have noticed that it often becomes public news 3 to 6 months later. It is not easy connecting all the dots and understanding the implications one event has on everything else, then interweaving all the threads to grasp that big picture. I don’t usually spend the money for a subscription,

but I feel your information is vital to know.”

  (KathyN from Arizona)

by Jim Willie CB February 7, 2013

home:  Golden Jackass website
subscribe:  Hat Trick Letter
Jim Willie CB, editor of the “HAT TRICK LETTER”

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

 

 

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at  www.GoldenJackass.com. For personal questions about subscriptions, contact him at  JimWillieCB@aol.com

Stock Market Strength “Taking the Shine Off Gold”, But Futures Positioning “Could Create Conditions for Gold to Rally”

WHOLESALE PRICES for gold bullion hovered above $1670 per ounce Wednesday morning, broadly in line with where it started the week, while stocks and commodities were also little changed and the Euro eased against the Dollar ahead of tomorrow’s European Central Bank interest rate decision.

Gold has failed to break through the $1700 an ounce barrier since falling through the level in December. Over the same period, most stock markets have rallied. The S&P 500 had its best January since 1997, touching a new five-year high, while the FTSE 100 had its best start to a year since 1989.

“The stronger performance of more conventional assets, certainly equity markets, has taken the shine off gold,” reckons Daniel Brebner, head of metals research at Deutsche Bank.

“Safe-haven assets have performed fairly poorly as expectations of growth have improved…in that kind of environment, there is no significant motivation for gold prices to rise.

“Bullion’s correlation to the broader equity market has weakened significantly in the past month,” agree analysts at VTB Capital.

The so-called speculative net long position of gold futures traders, a closely-watched measure of futures market sentiment, fell to levels not reported since August during the week ended last Tuesday, suggesting traders have become less bullish about gold.

BullionVault‘s Gold Investor Index meantime, a measure of western investor sentiment towards gold, fell in January following five months of gains.

“There is probably some [downside] room to go if a negative catalyst were to emerge in the coming weeks,” says a note from UBS.

“But the scope is becoming more limited. Back in May 2012, short-selling weighed heavily on gold for most of the month. As a result of the extreme reduction in net spec length, though, it became easier for gold to bounce back in June and, after a period of consolidation, the market found itself in good shape positioning-wise for the rally in August and September. Gold could find itself in a similar scenario – if it manages to extend the resilience displayed thus far.”

Silver meantime climbed above £31.70 an ounce, though like gold was trading broadly in line with where it started the week by lunchtime in London.

The European Central Bank is unlikely to cut its main policy interest rate from its record low of 0.75% when it makes its latest policy decision tomorrow, and is not expected to change rates until July 2014 at the earliest, according to a survey of economists by newswire Reuters.

From its 2012 low in July last year, the Euro has gained more than 10% against the Dollar, prompting fears that a stronger Euro could harm Eurozone exports and thus the prospects for economic recovery.

“In terms of the pain threshold for the Eurozone as a whole, we’re right on it,” says Deutsche Bank economist Gilles Moec.

“A much stronger Euro could challenge the positive market vis-a-vis the [Eurozone] periphery, and structural improvements in competitiveness seen there” adds Elga Bartsch, economist at Morgan Stanley in London.

Since hitting an all-time high last September, Euro gold prices have fallen 11%.

Over in India, traditionally the world’s biggest gold buying nation, the central bank said Wednesday it would consider limiting the amount of gold banks can import in “extreme circumstances”.

“Large gold imports are adversely impacting the current account deficit,” said a draft report from the Reserve Bank of India last month, which proposed various policies for reducing bullion imports into India.

Recommendations in the full report published today include setting up a bank to monetize “idle gold” and promoting gold-linked financial instruments as an alternative to actually owning gold bullion.

The report also considers revisiting “fiscal measures” to reduce gold imports. Last month, India’s government increased import duty on gold from 4% to 6%.

India’s “anti-gold” policy could lead to a rise in gold smuggling, Philip Klapwijk, global head of metal analytics at metals consultancy Thomson Reuters GFMS said this week.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Every now and then we receive questions about JP Morgan and the allegations that the company suppresses the price of silver. In our Q&A section we answered some of those concerns by replying to a question about JP Morgan and silver manipulation. In that answer we wrote the following:

 

Despite a (…) lawsuit accusing JPMorgan and HBSC of jointly controlling “ over 85 percent of commercial net short positions ”, a position inherited mainly from the liquidated Bear Stearns business, the CFTC seems inclined to  drop any case it has against JPMorgan , making this the third case in a row that has not found proof of wrongdoing.

 

This actually happened last year and the CFTC didn’t find any substantial evidence of foul play on the part of JP Morgan after leaving out HSBC from the case.

 

Additionally, a group of 44 plaintiffs submitted to the U.S. District Court for the Southern District of New York a class-action complaint accusing JP Morgan of the manipulation of the silver market. This lawsuit was turned down by Judge Robert P. Patterson Jr. on December 21, 2012.

 

The complaint itself claimed JP Morgan had “combined, conspired and agreed to restrain trade in, fix and manipulate prices of silver futures and options contracts” and that it had “intentionally acted to manipulate prices of COMEX silver futures and options contracts.” (http://www.scribd.com/doc/65207178/11-09-12-FINAL-Consolidated-Class-Action-Complaint) This would have been done primarily through an enormous short position inherited from Bear Sterns. Supposedly, “JP Morgan frequently held 24-32% of the open interest in all COMEX silver futures short contracts (…) trading.”

 

The plaintiffs mentioned numerous cases when, in their opinion, JP Morgan had intentionally influenced the price of silver, particularly had caused substantial sell offs. The supposed manipulation would have caused significant losses on the part of the plaintiffs, particularly because of the depreciation in silver and because of margin calls which forced investors to close off their long positions.

 

The overall period during which the alleged manipulation would have taken place was on “June 26, 2007 and between March 17, 2008 and October 27, 2010.” The suit mentions dates of sudden price drops, such as June 19, 2008, June 24-25, 2008, May 17-18, 2009, June 9-10, 2009 and many more.

 

In spite of the level of detail presented in the listing of supposed manipulative actions, the case was rejected by Judge Patterson as one providing only “conclusory allegations.” This basically means that the plaintiffs presented possible situations of manipulation in the silver market but did not provide substantial evidence that the manipulation in fact had taken place.

 

As there is no precise definition for price manipulation within the U.S. legal system, the courts usually refer to a 4-step test in order to determine whether any manipulation has in fact taken place. In these 4 steps the court checks if:

 

• The Defendant has the ability to influence prices.

• They display intent to do so.

• There is an “artificial” price other than the price that would have been set without manipulation.

• The Defendant is the cause or one of the causes of that “artificial” price.

 

In our specific case, for Judge Patterson to consider JP Morgan a manipulator in the silver market, it would take several undisputable facts. The first point about the ability to drive prices one way or another is a relatively easy one to prove. With the abovementioned 24-32% of the silver futures short contracts under their control, it seems like there is a good possibility that JP Morgan is able to put pressure on silver prices whenever it wants to. Actually, this point was not disputed by the representatives of the bank – they didn’t contend the fact that JP Morgan has a position large enough to shake the market.

 

What they did contend, however, was the intent to suppress prices. And the plaintiffs’ complaint didn’t provide any facts which would prove otherwise. The intent part can be actually quite hard to prove. The lawsuit cited JP Morgan traders bragging about their possibility to control the market and success in doing so. The main problem here is that the suit was formulated in a general way and didn’t supply any concrete situations in which it could be established that person X from JP Morgan phoned person Y from JP Morgan and said “Hi, X, I just rigged the market.” This is exaggerated a little bit, but without such a “smoking gun”, or at least a loaded one, the claims that the traders were boasting about their ability to suppress the market boil down to one magic word. Hearsay. Which is not admissible in court.

 

Now, let us break it down for you into two pictures: the one seen by the plaintiffs and the one examined by court. The plaintiffs identified situations in which silver prices behaved “strangely,” mostly situations in which silver dropped significantly without any apparent reason. Then they looked at the market players and found out that JP Morgan is the biggest on the short side of the market. Up to that moment, the analysis is correct but the next point is flawed from the legal point of view. Namely, the plaintiffs came to the conclusion that JP Morgan had to be involved in those “strange” depreciations, mainly based on rumors circulating among precious metals investors.

 

The court saw the “strange” price patterns, but they didn’t provide any proof of market manipulation – markets can both appreciate and depreciate strongly without manipulative activities. Judge Patterson acknowledged that JP Morgan had the ability to influence the market but the most important part, the intent, was clearly unsubstantiated.

 

So, it would take an important witness to change the outcome of such a case. Someone who actually saw the manipulation taking place (if any manipulation was taking place), not just a person who overheard some bits and pieces from a different department within the bank.

 

Then, if any manipulation is taking place in the silver market, it would probably take an insider from one of the institutions involved in such alleged manipulative activities to speak. What is very important here is the fact that accounts of people connected to the silver market but not directly able to witness any supposed wrongdoing wouldn’t count. So, complaints of whistleblowers who, based on their market knowledge and experience, believe that the market is manipulated, just as Andrew Maguire did, don’t amount to much in court.

 

Since both the CFTC and the court have dropped their cases against JP Morgan, the company has been legally freed of any accusations. There is no conclusive proof linking any actions of JP Morgan to price behavior in the market, no matter how regular price patterns resulting in silver depreciation might seem.

 

Is silver price manipulated? It might be, but given that it would be so difficult to prove it, that is not the right question to ask in our view. The correction question would be if anything can be done to make sure that you make money on your silver investments whether silver is manipulated or not. The answer to this important question is yes, it can be achieved thanks to diversification of strategies (you will find details in our gold portfolio report) and keeping at least part of one’s silver holdings in the physical form.

In such a situation when there are lots of rumors circling around but no conclusive evidence, it might be best to analyze the data for yourself. We actually did that during the development phase of one of our soon-to-be-released investment tools, True Seasonals. Our results suggest that there are depreciation patterns around the expiration dates of derivatives. Because of that, regardless of the fact if any manipulation is taking place in the market or not, it’s best to remain particularly cautious about your trading activities on the expiration of gold and silver futures and options.

 

Liked this commentary? You’ll be able to find more essays on both gold’s fundamentals and the current technical situation in our gold articles. If you’re wondering why we consider both fundamental and technical factors, our report on gold portfolio might be of interest to you.

Thank you for reading.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold Investment & Trading Website – SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Vancouver, B.C……..Corvus Gold Inc. (“Corvus” or the “Company”) – (TSX: KOR, OTCQX: CORVF) announces the final results of a series of column leach tests on large diameter core sample composites from the Savage Valley area (Figure 1) of the North Area Deposit at the North Bullfrog Project, Nevada.  The final results averaged 82% gold recovery at a crush size of nominally 80% passing 19mm (-3/4 inch), which is 4% greater than the 78% gold recovery assumed in the December 6, 2012 Preliminary Economic Assessment.  The final recovery data (Table 1) shows the high gold leachability of the Savage Valley oxide material even at grades as low as 0.11 g/t.

These new results, along with recent column leach results from the Mayflower Deposit (NR13-02, January 17, 2013) which indicated an average gold recovery of 88%, suggest potential for improved overall recovery at both the Company’s Mayflower and North Area Deposit which could positively impact project economics.

Carl Brechtel, COO of Corvus, stated: “The ongoing North Bullfrog Project gold recovery results continue to be very encouraging and offer significant upside for this attractive new Nevada mining project.  These results will be integrated with further column tests at larger crush size to help optimize cost versus recovery.”

Table 1
Savage Valley PQ Core Composite Samples, Phase I Drilling, North Bullfrog Project Final Gold Recovery in Column Leach Tests at 63-136 days of Leach Time Nominal Particle Size 80% -19 mm (-3/4 inch)

SV PQ 1 SV PQ 2  SV PQ 3 SV PQ 4 SV PQ 5 SV  PQ 6 % Gold Recovery* 86.9% 87.4% 92.0% 69.9% 81.6% 72.3%

*-based on Au calculated head grade

Figure 1: North Bullfrog Project areas showing the location of the different resource areas and the PQ core holes used for metallurgical sampling.

About the North Bullfrog Project, Nevada

Corvus controls 100% of its North Bullfrog Project, which covers approximately 68 square kilometres in southern Nevada just north of the historic Bullfrog gold mine formerly operated by Barrick Gold Corp.  The property package is made up of a number of private mineral leases of patented federal mining claims and 758 federal unpatented mining claims.  The project has excellent infrastructure, being adjacent to a major highway and power corridor.

The project currently includes numerous prospective gold targets, with four (Mayflower, Sierra Blanca, Jolly Jane and Connection) containing an estimated Oxidized Indicated Resource of 27 Mt at an average grade of 0.28 g/t gold for 246,810 ounces of gold and an Oxidized Inferred Resource of 234.5 Mt at 0.18 g/t gold for 1,387,870 ounces of gold (both at a 0.1 g/t gold cutoff), with appreciable silver credits.  Unoxidized Inferred mineral resources are 221.6 Mt at 0.19 g/t for 1,361,000 ounces of gold (at a 0.1 g/t gold cutoff).

Mineralization occurs in two primary forms: (1) broad stratabound bulk-tonnage gold zones such as the Sierra Blanca and Jolly Jane systems; and (2) moderately thick zones of high-grade gold and silver mineralization hosted by structural zones with breccias and quartz-sulphide vein stockworks such as the Mayflower and Yellowjacket targets.  The Company is actively pursuing both types of mineralization.

A video of the North Bullfrog project showing location, infrastructure access, and 2010 winter drilling is available on the Company’s website athttp://www.corvusgold.com/investors/video/.

 

Qualified Person and Quality Control/Quality Assurance

Jeffrey A. Pontius (CPG 11044), a qualified person as defined by National Instrument 43-101, has supervised the preparation of the scientific and technical information (other than the resource estimate) that form the basis for this news release and has approved the disclosure herein.  Mr. Pontius is not independent of Corvus, as he is the CEO and holds common shares and incentive stock options.

Carl E. Brechtel, PE, a qualified person as defined by National Instrument 43-101, is responsible for planning and execution of the technical and engineering studies at North Bullfrog.  He has approved the disclosure in this news release.  He has over 30 years of experience in the mining industry, is a registered professional engineer in the States of Colorado and Nevada, and is a Registered Member of SME.  Mr. Brechtel is not independent of Corvus, as he is the COO and holds common shares and incentive stock options.

Mr. William J. Pennstrom, Jr., a consulting process engineer and President of Pennstrom Consulting, Inc., has acted at the Qualified Person, as defined by NI 43-101, for evaluation of the metallurgical testing data.  He has over 30 years of experience in mineral process design and operation, and has been an independent process and metallurgical consultant for the mining industry for the last 10 years.  He is a Registered Member of the Society of Mining, Metallurgy and Exploration (SME Member No. 2503900). Mr. Pennstrom and Pennstrom Consulting Inc. are both independent of the Company under NI 43-101.

Mr. Gary Giroux, M.Sc., P. Eng (B.C.), a consulting geological engineer employed by Giroux Consultants Ltd., has acted as the Qualified Person, as defined in NI 43-101, for the Giroux Consultants Ltd. mineral resource estimate.  He has over 30 years of experience in all stages of mineral exploration, development and production.  Mr. Giroux specializes in computer applications in ore reserve estimation, and has consulted both nationally and internationally in this field.  He has authored many papers on geostatistics and ore reserve estimation and has practiced as a Geological Engineer since 1970 and provided geostatistical services to the industry since 1976.  Both Mr. Giroux and Giroux Consultants Ltd. are independent of the Company under NI 43-101.

The work program at North Bullfrog was designed and supervised by Russell Myers (CPG 11433), President of Corvus, a Qualified Person defined by NI 43-101, and by Mark Reischman, Corvus Nevada Exploration Manager, who are responsible for all aspects of the work, including the quality control/quality assurance program.  On-site personnel at the project log and track all samples prior to sealing and shipping.  Quality control is monitored by the insertion of blind certified standard reference materials and blanks into each sample shipment.  All resource sample shipments are sealed and shipped to ALS Chemex in Reno, Nevada, for preparation and then on to ALS Chemex in Reno, Nevada, or Vancouver, B.C., for assaying.  ALS Chemex’s quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025:1999.  Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples.  Finally, representative blind duplicate samples are forwarded to ALS Chemex and an ISO compliant third party laboratory for additional quality control.  McClelland Laboratories Inc. prepared composites from duplicated RC sample splits collected during drilling.  Bulk samples were sealed on site and delivered to McClelland Laboratories Inc. by ALS Chemex or Corvus personnel.  All metallurgical testing reported here was conducted or managed by McClelland Laboratories Inc.

About Corvus Gold Inc.

Corvus Gold Inc. is a resource exploration company, focused in Alaska and Nevada, which controls a number of exploration projects representing a spectrum of early-stage to advanced gold projects.  Corvus is committed to building shareholder value through new discoveries and leveraging those discoveries via partner funded exploration work into carried and or royalty interests that provide shareholders with exposure to gold production.

On behalf of
Corvus Gold Inc.

(signed) Jeffrey A. Pontius
Jeffrey A. Pontius,
Chief Executive Officer

Contact Information:
Ryan Ko
Investor Relations
Email: info@corvusgold.com
Phone: 1-888-770-7488 (toll free) or (604) 638-3246 / Fax: (604) 408-7499

Cautionary Note Regarding Forward-Looking Statements

 

I’ve been discussing the equity markets quite a lot in the last several weeks, but in my opinion the real action is eventually going to occur in the commodity markets, especially in the Precious Metals sector. Over the last several quarters, this sector in particular has under-performed against equities as well as bonds. But that might change very soon. Chart 1: Precious Metals at technical decision points Source: Short Side of Long It has come to my attention, from a technical price action perspective, that Precious Metals are now at some type of an important crossroad. Consider the chart above, which shows Gold and Silver technical triangles, as well as major support and resistance lines. The major support levels for the metals are $1,550 and $27, while major resistance levels are $1,800 and $35 respectively. Interestingly, the triangle battle between bulls and bears is currently right in the middle of those trading ranges and an eventual decision point is coming very shortly. Furthermore, the current price action for both metals is coiled between the 50 day MA on the upside and the 200 day MA on the downside. A breakout or a breakdown will most likely set a trend for the next few months. Chart 2: Post election seasonality supports a bullish breakout Source: Seasonal Charts   We have just went through an interesting seasonal period for financial markets – the US election. While the US stock markets almost always tends to rally into an election period, Precious Metals tend to decline. More importantly, the post election period tends to be one of seasonal strength for the Precious Metals sector, as seen in the chart above. Usually, some type of an intermediate low occurs at the beginning of February and the current technical triangle could be a perfect catalyst for a price rally.

Chart 3: Unlike equities, sentiment in Gold is one of disinterest Source: Short Side of Long Sentiment also supports a possibility of an upside breakout too. In the previous PMs update written on the 11th of January 2013 (link: Entering Into 2013 – Part 3) while discussing the sentiment picture, I wrote:

“…sentiment itself is once again starting to turn pessimistic. The recent Daily Sentiment Index readings on Gold and Silver reached single digits. Last Friday, we witnessed only 6% bulls, which is one of the lowest readings since May 2012, when Gold bottomed at $1530. Furthermore, as we can see in the charts above, Silver’s public opinion is entering levels usually associated with extreme pessimism while the Hulbert newsletter advisors are recommending one of the highest short exposures to Gold in years. While all of this does not have to indicate higher prices automatically, it tells us that we are much closer to the intermediate bottom.”

Since then, we’ve seen sentiment in other indicators also deteriorate further. Consider the charts above, which show that physical Gold holdings within the GLD ETF continue to bleed out, while hedge funds have reduced net long positions to the lowest level since August 2012, when Gold bottomed at $1,530. While neither of these indicators signal that we will definitely rally, the probability of a bullish case scenario continues to increase. One thing is for sure, bullish expectations seen in October 2012, when the majority of strategists, analysts and newsletter writers expected Gold at $1,900 has subsided.

Gold Miners also remain oversold and out of favour for weeks now. Traders and investors everywhere have been throwing in the towel, which usually indicates that a bottom is near. Furthermore, Rydex PMs Fund Flows indicate extreme pessimism only witnessed during the panic of 2008 as well as a major sell off into May of 2012.

Chart 4: Gold Miners are oversold on relative basis Source: SentimenTrader Furthermore, looking at the recent breadth numbers within the whole sector, we note that only 15% of all miners are trading above the 50 MA and 23% above the 200 MA. Also, breadth indicators like McClellan’s Oscillator and Summation Index both signal an intermediate bottom is at hand. Comparing these oversold readings against the general stock market, which is currently in euphoria, shows a large contrast. Financial stocks have more than 90% of components above both the 50 MA and 200 MA. Just about every other major equity sector is also overbought. Therefore, a correction in equities could send some money back into Gold Miners, as we experience somewhat of a mean reversion.

Chart 5: Long term demand will remain robust as global currencies are devalued Source: Frank Holmes

Observing the recent financial reports in my mailbox throughout January, has me convinced that the majority of investment banks have now given up on the Gold bull market. Bloomberg analyst expectations show prices of Gold to be below $1,600 over the next few years. While the correction could go on for awhile longer, I obviously disagree strongly with Wall Street on this one. In his recent newsletter, Frank Holmes showed that just about every major central bank has plans to increase their balance sheets well beyond 2013. In other words, important currencies around the world are being devalued and the only way one can protect themselves in the long run is to own assets which will adjust to this currency devaluation. While some prefer equities and others prefer real estate, history shows that the best way to protect yourself during times like these is to own very rare and mostly precious assets.

Chart 6: Gold is not in a bubble… Source: Macro Trends I do admit that Gold has risen very sharply over the last 12 annual years and since middle of 2011, I have been calling for a prolonged consolation period and even a major cyclical bear market. It is only normal for assets to correct 30% to 40% every few years, especially great performers such as Gold  over the last decade.

However, the talk of a Gold bull market end is very premature and the talk of Gold being in a bubble is ludicrous. The Macro Trends chart above shows that overlapping Gold with previous major bubbles in the Nasdaq, Crude Oil and even Gold throughout the 1970s, shows the current price at very un-elevated and inexpensive levels.

Chart 7: … and could surprise on the upside!

Source: Simone Alberizzi

Simone Alberizzi shows in his chart that for Gold to mimic the Nasdaq euphoric of the late 1990s, it would have to reach over $10,000 per ounce. Considering this historical data, we can see that during the secular stock bull market of 1982-2000, Nasdaq managed to achieve a return of 26 times its value. Also consider that during the 1970s and into January of 1980, Gold also managed to return more than 23 times its value. When one compares those astronomical moves to the current bull market, hopefully we all come to a conclusion that we still have a long way to go.

Chart 8: Silver has under performed in the last two years…   Source: Objective Trader / Simone Alberizzi / Short Side of Long

 

While realising Precious Metal fundamental conditions continue to improve and assets like Gold are likely not anywhere close to the bubble stage, I once again turn my attention back to the shorter term time frame. In particular I favour playing the Silver triangle right here and will consider entering long if and when the price breaks from its current formation. While already stated many times on this blog, as a long term investor, I still see a lot of value in Silver. Consider the fact that the price peaked on 25th of April 2011 at almost $50. The correction has been ongoing for more than 1 year & 9 months, and with the price still trading 37% below its all time high, purchasing at current levels definitely falls under the investors rule book of “buying low” and hopefully in some years from now “selling high”. Chart 9: … and still remains inexpensive when adjusted for CPI Source: Macro Trends

 

Just to return to its nominal value of $50 per ounce, last seen in January 1980 and April 2011, Silver would have to rally almost 60% from the current levels. That in itself would be an amazing return, but the true value of this speculative metal lays with its possibility to re-test its inflation adjusted highs of January 1980. For that to occur, Silver will have to enter a mania and most likely clock a triple digit handle.

The ever-changing yardstick

The following is excerpted from a commentary originally posted at www.speculative-investor.com on 3rd February 2013.

To illustrate the difficulty of measuring performance in terms of the US dollar, today we are presenting three inflation-adjusted (IA) gold charts. Our method of inflation adjustment was outlined in the December-2010 article posted HERE.

First, we present the long-term monthly chart that we normally use to show gold’s ‘real’ performance. This chart puts historical prices into current (in this case, December-2012) dollar terms, which means that prices from past times are adjusted upward to reflect the estimated decline in the dollar’s purchasing power from the past time to the present. For example, we calculate that the January-1980 gold price of $722 is the equivalent of around $3100 in current dollar terms. This means that by our calculations it takes more than four dollars today to buy what one dollar would have bought in January-1980, or, to put it another way, the US$ has lost more than 75% of its purchasing power since January of 1980.

Note that our chart uses monthly closing prices for gold. For example, the 1980 high of around $3100/oz shown on the chart is the current-dollar equivalent of $722, the monthly close in January of that year. Had we used intra-day prices then our chart would show a 1980 high of around $3600, since $3600 is roughly the current-dollar equivalent of the January-1980 intra-day high of $850.

Next, here’s the long-term monthly gold chart in terms of January-1980 dollars. In January-1980 dollars, today’s gold price is around $400/oz.

Last, here’s the long-term monthly gold chart in terms of 1959 dollars. In terms of a 1959 dollar, today’s gold price would be around $250/oz. That the gold price in current dollar terms is about $1650/oz means that it now takes about $6.60 to buy what $1 would have bought in 1959.

The above charts look identical. The only difference is the scale on the Y-axis. This illustrates the problem of measuring performance in terms of a ‘yardstick’ that is constantly changing (shrinking).

A related point worth explaining is that if there hadn’t been any depreciation of the US$ from 1959 through to today, that is, if the dollar had the same purchasing power today as it had in 1959, then the gold price would not now be $250/oz (our calculation of the current gold price in 1959 dollar terms). It would probably still be around $35/oz. The increase from the $35/oz price of 1959 to today’s price in 1959 dollar terms of $250/oz constitutes a large real gain. This real gain stems mainly from the long-term economy-weakening costs of currency depreciation.

As we’ve argued many times in the past, if all that happened due to monetary inflation was a reduction in the purchasing power of the currency then monetary inflation wouldn’t be a big deal. Who cares if all prices rise uniformly across the economy? Everyone will have to spend more money, but they will also have more money to spend.

The problem isn’t so much that prices rise in response to monetary inflation. The problem is that due to the way money makes its way into the economy, prices rise non-uniformly and interest rates are distorted. This causes some people, businesses and economic sectors to benefit at the expense of others. It also leads to investment booms. Each large-scale investment boom, in turn, leads to a vast wastage of resources and eventually an economy-wide bust. In short, monetary inflation causes the boom-bust cycle.

As the economy oscillates between boom and bust, a long-term effect is that capital gets allocated less efficiently and the rate of economic progress slows. In addition, the more aggressive the efforts of the central planners to alleviate the pain caused by the bursting of an inflation-fueled boom by creating even more inflation, the greater the economic oscillations and the slower the long-term rate of real economic progress are apt to become. There is no doubt that the central monetary planners became far more aggressive in their efforts to manipulate the economy after the monetary system was ‘cut loose’ from its golden anchor in 1971, the result being booms and busts of greater magnitude and a pronounced slowdown in the rate of real economic progress.

The long-term decline in the rate of economic progress stemming from the more aggressive and more regular use of the monetary inflation policy-tool has had important side effects. One of these side effects is an increasing propensity to save in terms of something with money-like attributes that can’t be debased by the policy-makers. That’s why gold is in a very long-term upward trend in REAL terms. It’s also why analysts who try to calculate a fair value for gold by only considering changes in the supply of money and the supply of gold tend to be too pessimistic about gold’s prospects.

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WHOLESALE MARKET gold prices hovered just below $1665 per ounce Monday morning in London, having failed to hold onto gains in earlier Asian trading, as stocks and commodities also ticked lower along with the Euro, which retreated from recent highs following news of a political scandal in Spain.

Silver erased most of Friday’s gains this morning, dropping below $31.60 an ounce.

The gold price in Euros meantime regained some ground this morning as the Euro fell against the Dollar. Last Friday, gold in Euros dropped to its lowest level since May last year as Euro-Dollar touched a 14-month high.

In New York, the so-called speculative net long position of Comex gold futures and options traders fell to its lowest reported level since last August during the week ended Tuesday 29 January, weekly data published Friday by the Commodity Futures Trading Commission show.

The spec net long is calculated at the difference between ‘bullish’ long and ‘bearish’ short contracts held by traders such as hedge funds which are classified as ‘noncommerical’, and is regarded as an indicator of short-term sentiment in the derivatives markets.

“The ‘weak hands’ are further retreating from the gold market, which is a good thing in terms of the long-term price prospects,” says today’s commodities note from Commerzbank.

Spanish prime minister Mariano Rajoy, who travels to Berlin today for talks with German chancellor Angela Merkel, denied allegations in the Spanish press over the weekend that he received illegal payments from a slush fund run by his Popular party (PP).

Support for the PP has fallen six percentage points to 24% since the allegations were made, according to a poll published by Spanish newspaper El Pais, while 77% of those surveyed said they do not approve of Rajoy.

The number of unemployed in Spain meantime rose to 4.98 million last month, official figures published Monday show. Last month brought news that the unemployment rate rose to record levels above 26% towards the end of 2012.

In Italy, prime minister Mario Monti today criticized his predecessor Silvio Berlusconi’s proposal to reimburse taxes paid on primary residences that were levied by Monti.

“Berlusconi wants to buy the votes of Italians with the money that Italians had to turn over to cover up the shortfall left in the public accounts by Berlusconi,” Monti said.

A poll published last week showed Berlusconi had cut the lead of front runner Luigi Bersani to five percentage points ahead of elections in three weeks.

Bersani’s Democratic Party (PD) has faced criticism for allegedly receiving funding from Siena-based Monte dei Paschi (MPS), the world’s oldest bank dating back to 1472, which  is currently being investigated for covering up losses on derivatives trades and overpaying for its 2007 acquisition of Banca AntonVeneta.

MPS lost an estimated €2 billion-plus in 2012, following a €4.6 billion loss in 2011.

In Germany meantime, politicians have expressed skepticism over whether to accede to Cyprus’s request for a bailout from the European Union and International Monetary Fund.

“Without the introduction of effective controls on money-laundering and urgently needed structural reforms, we need not even discuss financial aid,” Rainer Bruederle, a member of the Free Democratic party which shares power with Merkel’s party, said over the weekend.

“Cyprus is based on a business model that damages us all,” added Johannes Kahrs of the opposition Social Democrats.

“Yet it is now supposed to be saved by the EU. The SPD will not support that.”

“There’s general unease…about the fact that Cyprus takes in a good deal of cash from Russians,” explains a note from Standard Bank.

Over in India meantime, traditionally the world’s biggest gold buying nation, Rupee gold prices fell to five-month lows Monday as the Rupee touched its highest level against the Dollar since October.

At the start of the year Indian gold dealers imported increased quantities of gold ahead of a rumored import duty hike, with the authorities duly raising the duty from 4% to 6% last month.

“Not many deals are happening [at the moment],” one dealer at a state-run bullion importing bank told newswire Reuters this morning.

“[The] market has to clear the old stocks, which could finish this week.”

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

We at Sunshine Profits suggest holding three precious metals (in a physical form) as long-term investments in a “default” precious metals portfolio – gold, silver and platinum. There are, of course, other viable options, such as palladium, depending on one’s preferences and needs, but these three mentioned above will suit virtually any precious metals investor.

Gold is and has always been the most popular and usually attracts the most attention both from investors and the general public and could be viewed as the safest bet. What is more, recent bottoms visible in the long-term charts suggest that a huge rally in the gold market is likely some time this year. However, the other two are tempting as well, as many factors suggest that they may outperform the yellow metal in the coming months and years.

As far as silver is concerned, we would like to mention two important arguments. Firstly, when silver reached its all-time high in April, 2011, it merely reached the level of 1980 high (only in nominal terms, as in real terms this high was much, much lower) whereas gold’s all-time high from 2011 was more than double the one form 1980 (again, in nominal terms) – this itself shows a great potential relative to gold. The second argument is more technical in nature, but very much in tune with the above one and consists of various price projections for the white metal that we featured two weeks ago.

A detailed explanation why platinum is likely to outperform gold can be found in one of our recent essays, but the most important factors here seem to be the fact that platinum has historically been the more expensive metal, with last year being an exception and that just recently platinum’s price has exceeded gold’s. And when we add to that the supply problems, which are the result of strikes in South Africa (which produces 75% of world platinum supply) the outlook for platinum does indeed seem encouraging.

To see how the above arguments fit into technical picture, let us jump straight into the world of charts. We will begin with silver’s long-term one (charts courtesy by http://stockcharts.com.)

Today we begin with the long-term chart in order to emphasize the importance of looking at the big picture which should always take precedence over short-term charts. In silver’s long-term chart, we see that prices tried to break down below the long-term support line but failed. They are now back above this line, and, after rallying, touched the resistance-support line once again. We clearly have a bullish situation with bullish implications for the long term.

Now, let us move on to the platinum market. Here, we will use platinum to gold ratio, as this chart seems to exert the most influence on the price of platinum currently.

In this chart, we see the ratio is now above 1.0, and the breakout is being verified (successfully so far). Platinum is now more expensive than gold. The ratio broke above 1.0, moved back to it and has moved slightly higher again. We could see more consolidation here, but the long-term implications remain unchanged. Platinum is expected to outperform gold in the months ahead, and the ratio is therefore expected to move higher as well.

A major bottom was seen at the end of 2011 (close to the powerful long-term turning point) and in early 2012. A breakout has now been seen above the long-term declining resistance line in this ratio, and it seems that a big comeback for platinum to much higher prices is likely. This will pay off big time for those invested in platinum for the long run.

Summing up, the technical implications are bullish for both white metals and so do the fundamental ones. Both of them are positively correlated with the general stock market in the long run because of their industrial uses and with stocks moving higher, it is this part of the precious metals sector that may move the most in the coming months. While we continue to believe that diversification is the way to go, it seems that platinum and silver will outperform gold in the medium term.

Use the following link to sign up for a free, no-obligation trial of our Premium Service and read the complete version of this study that is over 10 times bigger. You’ll also receive Market Alerts when things „get hot“ on the precious metals market and when the trial expires, you’ll start receiving our free newsletter. Additionally, you will also receive 12 gold best practice emails.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com

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Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Perhaps you have heard that the Fed is printing money to get out of the crisis and that such actions cannot possibly end other than in even more money being printed and in the dollar losing its ability to buy you tangible assets. In our essay on gold and the dollar collapse we pointed out that since 1970 the debt numbers have gone up more than 40-fold (!). In 2002, future Fed chairman Ben Bernanke noted that “the U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.” In keeping with these words, Bernanke has played an important role in the introduction of three rounds of what is known today as quantitative easing (QE) – programs expanding the money supply beyond the usual. The bill for QEs is $2.25 trillion and counting. As of January 17, 2013, U.S. debt totaled $16.4 trillion. These extraordinary numbers call for a deeper analysis and today we focus on what QE actually is.

 

The beginning of the economic crisis is usually linked with the date of September 15, 2008 when the U.S.-based investment bank Lehman Brother filled in for bankruptcy. Lehman Brothers went down with a bang, sending shockwaves through the financial markets and effectively beginning the global banking crisis. Lehman went bankrupt because of its bets on U.S. mortgages which had gone bad. When it became apparent that Lehman would not meet its obligations, everybody in the markets began to fear that everybody else could have excessive exposure to the housing market by holding assets linked to the performance of that market on their balance sheets. The market “dried up” – the lending between financial institutions effectively came to a halt and there was no liquidity in the market. In such an environment the financial markets ceased to channel funds to businesses and the credit market froze. Without credit, companies were not able to operate in a regular way. Such a disruption added to the problems stemming from the declining house prices. So, the lack of liquidity in the financial markets translated into a recession.

 

Facing the possibility of the further havoc, the U.S. government set the Troubled Asset Relief Program (TARP) into motion under which the U.S. Treasury was buying assets linked to the mortgage market in order to pump money and, therefore, liquidity into the banking system. TARP was a prelude to QE.

 

Under usual conditions, when the economy is struggling and there is not enough credit available, the central bank can lower the interest rate in order to make credit cheaper and more accessible. A lower central bank interest rate translates into lower interest paid by companies to commercial banks. It has also an adverse effect on savings – it becomes less profitable to keep your money in the bank since the interest you get is also lower. So, central banks tend to lower interest rates in hope of making credit cheaper, stimulating consumers to spend more and companies to invest more. Following the events of September 2008, the Fed brought its federal funds rate close to 0%. However, even combined with TARP, this did not bring the expected liquidity to the market.

 

Even though bailouts may have prevented the economy from slipping into chaos, the economic environment appeared to be deflationary. This means that with inflation close to 0%, the Fed feared a scenario in which the economy would actually experience deflation. Deflation results in falling prices. At first sight it may be hard to recognize why this would be harmful for the economy. To understand that, we need to consider that falling prices put off people from spending their money. After all, if goods are getting cheaper and cheaper, why buy a car now and not in several months when it costs less than today? Such thinking limits spending and the economy starts to wobble since the producers cannot find enough buyers for their goods. This limits output which, in turn, limits growth. Such an extremely simplified picture shows you why deflation is an unfavorable scenario. Generally, in the long run the market would be expected to fix itself – when prices get low enough, somebody would finally buy and prices would start to rise thus fueling growth of prices and economic activity. However, this is not in tune with what the Powers That Be are concerned with – they don’t want to have to tell voters that they have to wait a bit before things get better – they want to show that they can make things better right away.

 

If you consider that the interest rate can go only as low as 0%, you will come to the conclusion that in late 2008 the Fed practically lost its ability to stimulate the credit market and avoid deflation by lowering interest rates. At that time the Fed wanted to achieve a number of goals, including delivering liquidity and increasing spending to boost up the economy. Since the interest rates were already close to 0%, it adopted an unconventional policy. Namely, it started buying mortgage backed securities (MBS, assets linked to the performance of the real estate market) and Treasury securities. The gist of this approach was that the purchases were covered with newly created money.

 

Technically, the Fed did not print any new dollars. It took in MBSs and bonds from commercial institutions (e.g. banks) in return for acknowledging a claim against it. The commercial banks and other institutions could use that claim to lend out additional amounts of money. Fed’s idea was that buying assets would drive their prices up and simultaneously drive bond yields down (bond yields fall when bond prices rise and vice versa). Lower bond yields would be accompanied by lower interest rates and would make it easier for companies to find access to credit. Low bond yields would also make bond investments unprofitable for those willing to gain stream of income from them and force investors to switch to other assets, mainly to the stock market. This would, in turn, help to channel funds to U.S. companies and give the economy an impulse to grow. All of this would result in higher prices (inflation) and in increased economic activity.

 

The plan seemed quite simple – more lending, more money, more spending, more growth. There are, however, painful parts to this story. First of all, even though no additional notes were printed, the overall action increased the amount of money in the economy. No more goods were produced immediately but there were considerable amounts of freshly created electronic money hoarded in the accounts of commercial banks. This is potentially dangerous since it is obvious that creating more money, be it paper or electronic, will highly likely lead to inflation.

 

The chart below presents the expansion of the money supply in the U.S. as measured by the M2 aggregate (one of the definitions of money).

As you can see, the money supply in the U.S. is ever increasing just as it is in all the other developed economies all over the world. Since January 2008, it has increased by 40.4%. Conventional economic theories have it that the money supply ought to be increased roughly at the same pace as the growth of the economy. During the same period, the economy grew by 2.9% which is also displayed on our next chart.

This chart suggests that the U.S. economy may be getting back on the growth trajectory. Such a conclusion is not necessarily supported by other economic data, like unemployment numbers. However, it seems that in terms of real GDP the U.S. economy is slowly moving forward. Does this actually mean that the QEs are doing the trick? The best answer we can get to that question has been given quite bluntly by the BBC economics editor Stephanie Flanders: “Quantitative easing may well have saved the economy from a credit-led depression. We will never know.” But we definitely know what’s left over from the QEs. Take a look at the chart below which comes from our essay on gold and the dollar collapse.

In the abovementioned essay, we wrote the following:

 

It belongs to common sense that you can’t borrow money forever. Economics has a lot of intricacies and can be quite complicated at times but the basic rules are very simple. You borrow, you have to pay back.

 

Right now, the Fed’s balance sheet is becoming inflated to a point at which it may start to worry even its members. A point of view that it may be appropriate to end QE under several conditions was expressed by James Bullard, president of the St. Louis Fed, who said:

 

If the economy performs well in 2013, the Committee will be in a position to think about going on pause. If it doesn’t do very well then the balance sheet policy will probably continue into 2014.

 

It turns out, however, that the markets do not necessarily believe in QE ending as soon as this year. A recent survey by CNBC shows that market analysts are of the opinion that Fed will continue to buy assets aggressively and are divided as to when the purchases may end. A similar stance was presented by former Fed vice chair Alan Blinder who argued:

 

It’s never too soon to start thinking about it [but] I’d be very surprised if Fed even starts on its exit starting in 2013. I wouldn’t even bet on 2014. (Yahoo!) So, it seems that we might not see QE ending this year or even next year.

 

So, it seems that there is a lot of uncertainty linked to the growing debt pile but an economic recovery might as well be happening right in front of our eyes. What does it all mean for precious metals investors? The next chart might help clear that up.

This chart shows you the U.S. debt to GDP ratio along with the official rate of inflation. As of 2012, with a debt to GDP ratio of 102.5%, the U.S. is still quite far from where the ratio stood at in 1946, namely from 121.3%. We see that following the peak of 1946, the ratio sank considerably quickly (the red box in the chart). One of the key factors that made it possible was inflation. The annual inflation numbers for 1946, 1947 and 1948 read 8.3%, 14.4% and 8.1%.

 

It is worth noting that inflation started off for good after the debt to GDP ratio peaked. So, the inflation does not have to be obvious until the end of the debt expansion process. Translating that into the current economic situation: the mere fact that there has been no QE-related inflation so far does not mean that there automatically will be no inflation in the future, after the QE has ended. And the inflationary scenario seems all the more plausible since the government has only a number of ways to decrese the debt pile: economic growth, taxes and inflation (to simplify a bit). Growth is hard to achieve only through policy decisions, the taxpayers strongly oppose any new taxes, so it seems that the easiest way is to inflate the debt away, since a rise in inflation is not easily recognized by the markets (at leas at the very beginning). Naturally, 1946-48 was very different from today but a hike in inflation after the end of QE is still possible. Now, imagine official inflation numbers reading 8% or even 15% just as they did in 1946-48. Such a scenario would be extremely bullish for gold.

 

To sum up, even if the economy gets back on track, there is still a high probability of a hike in inflation which would bring the real debt burden down but could be very bullish for precious metals. If the economy doesn’t improve decisively, there is still a risk of further increases in the money supply, which could fuel uncertainty and translate into higher gold prices. So, no matter if QE saved the economy or just burdened it, it may significantly contribute to the gold bull market. It seems that it already has.

 

If you have enjoyed this essay, please check our free gold newsletter which covers both gold fundamentals, market timing and other precious metals related topics. If you’re an active investor or just begin your adventure with gold and silver, you may want to see our essay on how to build your gold and silver portfolio.

Use the following link to sign up for a free, no-obligation trial of our Premium Service and read the complete version of this study that is over 10 times bigger. You’ll also receive Market Alerts when things „get hot“ on the precious metals market and when the trial expires, you’ll start receiving our free newsletter. Additionally, you will also receive 12 gold best practice emails.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com

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About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

The PRICE of GOLD held onto most of yesterday’s $15 jump at $1676 per ounce Thursday morning in London, ticking back as Asian and European stock markets fell after Wednesday’s surprise drop in US economic output figures.

Silver also eased back, but held at 1-week highs above $32 per ounce after rising yesterday in gold’s “slipstream” as one bullion-bank analyst put it.

“This Friday’s [non-farm US payroll] report remains crucial,” says a note from Swiss bank UBS – currently encouraging its institutional clients to buy gold outright rather than as a credit-risk deposit.

“Some adjustments to [gold] positioning are likely to emerge” after Wednesday’s ‘no change’ decision from the US Federal Reserve on zero interest rates and quantitative easing.

“But overall, the gold market should resume subdued trading,” says UBS, “as is typical ahead of a key event” such as the monthly jobs report.

Russia’s foreign ministry meantime condemned a reported Israeli air-strike on a military research unit inside Syria, saying Thursday that – if confirmed – this “unprovoked attack [would] blatantly violate the UN Charter.”

Shares in Italy’s struggling Banca Monte dei Paschi di Siena – founded in 1472 – steadied as the Italian central bank weighed MPS’s second bail-out request in four years after it hid losses of €500 million on a 2008 derivatives deal.

German banking giant Deutsche Bank lost €2.2bn ($3.0bn) for the last 3 months of 2012, it said today.

“A year ago, the mood in Europe was horrible and nobody could see how on earth stocks could go up,” says Gloom, Boom & Doom author and money-manager Marc Faber, who urged CNBC anchor Maria Bartiromo to buy gold earlier this week.

“Now since May 2012, less than a year ago, Portugal, Spain, Italy, France, are up between 30 and 40% and Greece has doubled…!”

Factory-gate prices across France and Italy fell in December from November, new data showed today.

House prices in the year to October fell 2.5% across the 17-nation Eurozone, with Spain’s home-price drop accelerating to 15.2%.

“For the first time in four years,” Faber continued Wednesday, pointing to the US stock market, “since the lows in March 2009, I love this market. Because the higher it goes the more likely we will have a nice crash, a big time crash.

“You are in great danger if you don’t own any gold,” Faber had earlier told Bartiromo.

Near-term, reckons Deutsche Bank analyst Xiao Fu – and despite Wednesday’s $15 rise on poor US growth data and the Federal Reserve’s no-change decision on zero rates and QE – “Gold lacks a convincing catalyst near term to take it convincingly higher and instead remains susceptible to opportunistic selling.”

But “Any thought given to reining in some of the Fed’s buying power will now be shelved,” counters Ed Meir in his daily note for INTL FCStone.

“[Wednesday's] GDP number clearly shows that the US economy is still far from capable to muster its own momentum without key fiscal and monetary stimulus.

“In the least, this should provide an element of support to the precious metals group, at least over the short term.”

After creating and spending first $1.4 trillion on mortgage and Treasury bonds in 2008, and then a further $600 of T-bonds starting in 2010, the US Fed will likely acquire a further $1.1 trillion of US government debt with its current program of quantitative easing, according to a Bloomberg survey of analysts.

“Given the sluggish [US] economy,” says precious metals strategist Eugen Weinberg at Commerzbank, “it would be premature to discuss [the Fed] abandoning the quantitative easing programme.

“Despite the noticeably higher risk appetite displayed by market players of late, gold demand is thus unlikely to ebb away completely. On the contrary, high sales of US gold coins in January, and renewed inflows into the gold ETFs recently, point to relatively robust demand for gold.”

Over in India – most likely the world’s #2 gold consumer market in 2012 behind China – the economic affairs secretary contradicted the finance minister yesterday over plans to raise gold import duties again, in a bid to curb household appetite to buy gold, widely blamed for India’s yawning trade deficit.

Two days after Palaniappan Chidambaram told the Financial Times that New Delhi is considering “some other steps to moderate the import of gold” further, Arvind Mayaram told Reuters that “I don’t think there is any plan as of now.”

Adrian Ash
BullionVault

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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Based on the February 1st, 2013 Premium Update. Visit our archives for more gold & silver articles.

Gold moved sideways for the last six weeks, with each rally and correction sparking either new hopes or new fears about the yellow metal. But focusing on such short-term volatility can rarely bring any good when it comes to long-term investments. That’s one of the things that we often stress – one should always analyze the market form different perspectives and keep in mind their order of importance. This week we will focus on the long term.

Another thing, that we have already mentioned, is that such universal commodities, traded on many exchanges and in many currencies, like gold ought to be assessed taking other currencies into consideration. Hence, to get a clearer, distilled from the short-term noise picture of the situation in gold, today we will focus mostly on long- and medium-term charts, as well as on the yellow metal priced in currencies other than the U.S. dollar.

To see what awaits the gold price in February 2013 let’s turn to this week’s technical part. We will start with the yellow metal’s long-term chart (charts courtesy by http://stockcharts.com.)

Little change has been seen in this chart this week, but it is important for a reason which will be touched on when we summarize this essay.  The bottom was very likely formed here a few weeks ago when gold prices dipped below the 300-day moving average, which is a very important long-term technical development. Prices now appear to be simply consolidating a bit, which is also in tune with the historical patterns – the rally didn’t always start in a volatile way after the final bottom was reached below the 300-day MA – but it happened eventually many times and on each occasion the rally was worth waiting for.

Let us now move on to the yellow metal’s medium-term chart – we will use GLD ETF as a proxy.

Here, we see that prices moved lower this week but are still above the declining short-term resistance line. While significant volatility has been seen on a short-term basis, the average price has moved very little over the last month and a half.

The situation is very similar to mid-2012, where back and forth price movement was eventually followed by a huge rally. Those whom were not prepared, say last August, would have missed a large part of the upside move.

The price action seen on Thursday was quite similar to January 11, where gold corrected after a short-term powerful upswing and managed to move higher before the end of the session. The outlook was bullish then and we think it’s bullish right now as well.

The rally will likely really pick up after gold moves above the declining medium-term resistance line (black ellipse on the above chart). However, does the move higher have to happen immediately?

Let us have a look at two charts featuring gold from the non-USD perspective – we’ll start with gold priced in euro.

In this chart we saw a breakdown below the rising resistance line and the next support line is at the 2012 low. Since this level has not been reached yet, it seems we could see some weakness on a short-term basis.

Does gold have to decline based on that – from the USD perspective? Not necessarily. Quite simply, gold could not rally immediately if the dollar declined. Gold priced in euro could move slightly lower and if gold then catches up or rallies more significantly then the dollar declines, the price of gold in euro would rally. This chart does have some clearly bearish implications, however.

Let us proceed to the second chart that shows a completely different picture – gold from the perspective of the Japanese yen.

Here, the outlook is bullish as a breakout above the 2011 high has been seen. More importantly, the breakout was verified as prices stayed there for more than 3 consecutive trading days.

Summing up, quite a few strong signals are seen in the gold charts this week. Gold price in euro is a bit bearish, and price volatility can be expected in the coming weeks. With so much going on, and so many factors in place, we feel we must emphasize keeping what’s most important right in front of you. This is crucial and is why we keep featuring gold from the very long-term perspective, even though quite often, there are little changes from week to week.

The main point is that gold moved below the 300-day moving average (after already a lengthy consolidation) and then back above it. This accompanied major bottoms in the past, and we think that another is once again behind us. The ongoing debate now is whether consolidation will end immediately or if we will witness more sideways trading before the rally proceeds. The fundamentals are in place and gold will seemingly have to eventually rally. Taking all volatility signals along with the long-term gold picture into account, it seems that the next move will be to the upside, not down as the gold in euro picture might suggest. As far as long-term investments are concerned, we believe that staying in the market with your gold and silver holdings continues to be a good idea.

Use the following link to sign up for a free, no-obligation trial of our Premium Service and read the complete version of this study that is over 10 times bigger. You’ll also receive Market Alerts when things „get hot“ on the precious metals market and when the trial expires, you’ll start receiving our free newsletter. Additionally, you will also receive 12 gold best practice emails.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com

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About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

“End of an Era” for Gold as S&P 500 Records Best January Since 1997

THE U.S. DOLLAR gold price recovered some of its losses from the previous day Friday, edging higher to $1666 an ounce by the end of the morning in London, while most stock markets also edged higher ahead of US nonfarm payrolls data due out 08.30 Washington, DC time.

A day earlier, gold dropped 1% during Thursday’s US session, in what one analyst describes as “a remarkable display of schizophrenic volatility”.

A few hours later there was “little buying on the physical side” in Friday’s Asian session according to one Hong Kong dealer quoted by newswire Reuters.

“There’s some buying from mainland China…but I think gold is a bit tired after it failed to break $1700 an ounce.”

European stock markets edged higher this morning, with exceptions in Italy and Spain. Spain’s IBEX 35 index extended recent losses and was down 1.4% on the day by lunchtime today, the first day of trading after a ban on short selling dating from last July came to an end yesterday. Spanish stocks have now erased their gains from January.

The S&P 500 by contrast has seen its best start to a year since 1997, rising 5.2% last month.

“Earnings are strong, the economies around the world are bottoming and valuations are attractive,” reckons Paul Zemsky, head of asset allocation at ING Investment Management in New York.

BNP Paribas today became the fifth big bank to follow Goldman Sachs and cut its 2013 gold price forecast by up to $100 per ounce.

The French bank’s analysts now believe gold will average $1790 per ounce this year.

Credit Suisse meantime published a note today entitled ‘Gold: The Beginning of the End of an Era’, arguing that the 2011 gold price peak could prove to have been the high “in this cycle” as the financial crisis grows less acute.

Like gold, silver also edged higher this morning, ticking above $31.40 an ounce, while other commodities were broadly flat.

China’s manufacturing sector meantime continued to expand in January, though at a slower rate than the month before, according to official purchasing managers’ index data published by Beijing Friday.

China’s official manufacturing PMI fell to 50.4 last month, down from 50.6 in December, with a figure above 50 indicating sector expansion.

HSBC’s manufacturing PMI by contrast rose to 52.3, up from 51.9 a month earlier, implying an accelerated growth rate. The HSBC PMI is more heavily weighted towards small and medium enterprises than the official PMI, which places greater emphasis on the views of purchasing managers at larger state-owned enterprises.

“Overall, I will put more weight on today’s official PMI, largely because the current recovery is still rather narrowly based,” says Li-Gang Liu, chief China economist at ANZ.

“We believe the state sector tends to benefit from this round recovery much more than the SME sector, a sector that tends to dominate the HSBC sample. The HSBC PMI also has a pattern of pro-cyclicality. When the markets are optimistic, the HSBC often becomes more so, and vice versa.”

Over in Europe, Germany’s manufacturing PMI rose from 46.0 in December to 49.8 last month, while for the Eurozone as a whole the manufacturing PMI rose from 46.1 to 47.9.

“Providing there are no further setbacks to the region’s debt crisis, these data add to the expectation that the Eurozone is on course to return to growth by mid-2013,” says Chris Williamson, chief economist at Markit, which produces the European PMI data.

In the UK meantime, manufacturing PMI fell last month to 50.8, down from 51.2 a month earlier. Similar PMI data for the US are released later today.

The US Senate Thursday approved legislation to extend the federal debt ceiling until May 19. The legislation now needs to be signed into law by President Obama.

The US Mint meantime reported a record monthly volume of silver American Eagle bullion coin sales for January. Just under 7.5 million ounces of the silver coins – which are produced specifically for investment purposes – were sold last month. Sales of gold American Eagle coins were their highest since July 2010 at 150,000 ounces.

Ben Traynor
BullionVault

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

 

Amid continuing inflationary policy, the US Dollar is at a critical juncture by both daily and weekly charts.  Euro targets 142+ and the Yen approaches our target.  Currency war kicks off; gold just sits there biding time.

From last week’s eLetter:

“A Goldilocks atmosphere was expertly created in large part due to the fact that Operation Twist (yes, we are still dealing with its effects) by its very definition held long-term interest rates down (buying long-term T bonds) while sopping up any money supply implications and inflationary signals by sanitizing the process with the sales of equal amounts of short-term bonds.”

Policy makers have not found a new way to indefinitely manage the economy.  Traditional laws of economics have not been repealed.  The Federal Reserve used the equivalent of a macro parlor trick to dampen inflation signals and help produce today’s Goldilocks atmosphere, which features stocks rising now that the public and its mainstream money managers feel the worst is over with respect to the Fiscal Cliff non-event and the Debt Ceiling noise.

But in economics and macro finance, there is is always a price to be paid for unnatural (read: man-made) distortions.  The Fed ran out of short-term bonds to sell and now something has to give, as its ongoing inflationary operation is now unsanitized.

A bearish Head & Shoulders pattern has formed on the currency for which the Fed is  supposedly a steward.  If the neckline breaks, the measured target is 76.50.

The weekly chart of USD targets 74 off of an even more significant H&S, with the baby H&S of the first chart merely representing the right shoulder of the big daddy H&S.

A breakdown in the US dollar would confirm that the recent tick higher in Adjusted Monetary Base is the beginning of a new trend up in inflationary policy.

Unsurprisingly, USD’s chief rival, the Euro is in an inverted and bullish H&S.  We have been targeting 142 in NFTRH since the break above the neckline.  The Euro appears to be attracting a ‘long Euro/short Yen and gold’ momentum (read: hedge funds) crowd playing the opposite game to that from mid 2011 when Yen and Gold rose strongly in reaction to the Euro crisis.

Yen has been played to the hilt by the hedgies.  We have had 106 as the downside target since the neckline to the massive H&S broke down.  Yen could be a heck of a contrarian play for a counter trend rally, as the short-covering should be massive.

Meanwhile, the currency that resides outside the system bides its time.  Gold is unofficial money and with all the hype about currency war people who are not patient may have expected a rocket launch in the precious metals.

Here we bring it back to the Euro and realize that too many unhealthy would-be gold bugs came aboard during the acute phase of the Euro crisis in 2011.  That is being worked off now in gold’s ongoing consolidation.

Bottom Line

US dollar looks bearish.  Euro looks to complete its rally to 142+ where it will by the way, encounter a bigger picture DOWN trend line.  Yen is bearish but due for a whale of a short-covering bounce soon.

In the near-term some currencies are bullish and some are bearish.  But the US Fed, Europe’s ECB and the BOJ are not going to engineer their way out of their respective ‘inflate-or-die’ predicaments.  Gold may have a few more months of correction/consolidation but that is a drop in the bucket when viewing its entire history as a monetary anchor to value.

Biiwii.com, Twitter, free eLetter, NFTRH

In my articles you’ve heard me talk about accumulating on weakness, buying support, being patient and waiting for better opportunities. Folks, this next week is one of those opportunities. The mining stocks have been a disaster if you’ve invested in the average fund, GDX or GDXJ. If you’ve invested in the wrong stocks, they’ve been a total disaster and you now hate the sector forever. We’ve certainly been surprised by this protracted struggle. However, the gold shares are set to test a major bottom and could be on the cusp of a major reversal which could begin as soon as next week.

The gold stocks are setting up similarly to the bottom in 2005. Let me explain. The gold stocks made a major double bottom in 2004 and 2005. The first bottom occurred in 2004 and the second in 2005. Interestingly, the 2004 bottom was its own double bottom. Following that the gold stocks rallied significantly for several months before eventually giving it all back. Note the circles on the chart as they compare to the current situation. Below is a chart of the HUI in 2004-2005 with the HUI/Gold ratio plotted at the bottom.

In 2012 the HUI formed a small double bottom and then rallied strongly for a few months (like in 2004). Similar to 2005, the market has given all of that back and in the process the HUI/Gold ratio broke to a new low. The question now is will the HUI form a major rebound similar to the one in May 2005 and cement a long-term double bottom? Correlation is not causation but we should be aware of the potential for a strong rebound.

Aside from the 2012 double bottom support, there is major trendline support around the 350 area. In the short-term, a move below the May 2012 low would constitute a major breakdown. However, it could be a test of the bull trendline and induce a bear trap and major reversal. On a very long-term chart, the difference between 375 and 350 is barely noticeable. The chart below shows the trendline connecting the 2000 and 2008 lows.

One should buy when the sector becomes extremely oversold on a very short-term basis. Look for a bad day followed by a gap down the next day which produces big losses intraday. This is the type of action that precedes bottoms in the mining stocks. Traders can buy GDXJ or NUGT for leverage. For stock pickers, look for stocks with strong fundamentals which have held up well in recent days and weeks. Those stocks will produce good rebounds. If you’d be interested in professional guidance in uncovering the producers and explorers poised for big gains then we invite you to learn more about our service.   

Good Luck!

Jordan Roy-Byrne, CMT
Jordan@TheDailyGold.com

Balmoral Resources Ltd. (“Balmoral” or the “Company”) (TSX VENTURE:BAR)(OTCQX:BALMF) today reported additional high-grade gold results from drill testing of multiple shallow zones situated along the Bug Lake Fault System on its wholly owned Martiniere Property in Quebec. Drilling continued to expand and delineate the Hanging Wall, Footwall and Bug Lake Zones, with most holes successfully intersecting multiple zones of gold mineralization.

Results from the final 11 holes of the fall 2012 drill program indicate the presence of a fault repeat of the Footwall Zone, potential for expanding the Footwall Zone to depth and provide further evidence for the local development of a fourth, near surface high-grade zone located between the Bug Lake and Hanging Wall Zones. Drilling continues on the Martiniere Property with 2 rigs currently on site.

“Today’s results continue to demonstrate the continuity and growth potential of the multiple zones in the Bug Lake area of the Martiniere Property and they set the stage for an exciting 2013 drill campaign,” said Darin Wagner, President and CEO of Balmoral Resources.

Gold Results

Hole From To Interval* Gold Zone Number (Metres) (Metres) (Metres) (g/t) MDE-12-73 41.85 44.04 2.19 8.63 Hanging Wall including 41.85 42.39 0.54 32.20 “ 102.23 126.09 23.86 0.69 Bug Lake including 103.00 106.56 3.56 3.78 “ which includes 105.75 106.56 0.81 11.00 “ MDE-12-74 61.58 68.63 7.05 7.66 Hanging Wall including 61.58 62.77 1.19 42.25 “ and 68.18 68.63 0.45 7.05 “ 108.10 139.36 31.26 1.98 Bug Lake including 111.87 120.91 9.04 3.15 “ and 128.75 135.37 6.62 3.10 “ which includes 132.86 135.37 2.51 6.97 “ 212.00 213.66 1.66 8.07 Footwall MDE-12-75 150.45 215.00** 64.55 0.49 Bug Lake including 150.45 170.63 20.18 0.80 “ which includes 150.45 152.53 2.08 2.70 “ and including 194.00 194.76 0.76 10.90 “ MDE-12-76 27.60*** 100.71 73.11 0.54 Bug Lake+FW including 27.60 45.90 18.30 0.49 Bug Lake including 45.90 55.51 9.61 1.10 Footwall MDE-12-77 27.02 65.52 38.50 0.45 Bug Lake 65.52 73.37 7.85 7.64 Footwall including 65.94 66.95 1.01 47.06 “ 73.37 82.99 9.62 0.90 MDE-12-78 31.42 106.04 74.62 0.75 Bug Lake+FW including 31.42 79.15 47.73 0.80 Bug Lake which includes 70.13 74.46 4.33 3.20 “ which includes 73.50 74.46 0.96 11.15 “ and including 79.15 93.45 14.30 1.09 Footwall MDE-12-79 39.19 49.02 9.83 1.07 Bug Lake including 46.93 49.02 2.09 4.09 “ 64.55 65.08 0.53 22.00 Footwall MDE-12-80 44.43 54.86 10.43 2.27 Bug Lake including 48.72 50.53 1.81 9.56 “ 64.46 66.78 2.32 9.66 Footwall including 66.25 66.78 0.53 38.70 “ MDE-12-81 135.46 175.10 39.64 0.53 Bug Lake including 140.78 155.02 14.24 1.09 “ MDE-12-82 48.88 90.11 41.23 0.87 Bug Lake + FW including 48.88 71.57 22.69 0.36 Bug Lake and 71.57 84.94 13.37 1.90 Footwall which includes 73.61 75.00 1.39 4.14 “ MDE-12-83 18.09*** 26.99 8.90 11.74 Upper Porphyry including 18.84 21.14 2.30 41.06 “ which includes 18.84 20.00 1.16 58.80 “ 59.86 98.04 38.18 0.53 Bug Lake + FW including 59.86 87.93 28.07 0.37 Bug Lake and 87.93 89.35 1.42 5.36 Footwall * Reported drill intercepts are not true widths. At this time there is insufficient data with respect to the shape of the mineralization to calculate true orientations in space. ** Terminated in mineralized zone *** Collared into mineralized zone

Geological Interpretation

The Footwall Zone has now been traced down-plunge for 150 metres from the bedrock surface. Increased drill density indicates the presence of a fault repeat of the Footwall Zone. Re-interpretation of the Zone places the fault repeated section between the main Footwall Zone and the Bug Lake Zone in the vicinity of previously reported hole MDE-12-72, which returned 23.82 g/t gold over 6.73 metres from what is now regarded to be a Footwall Zone intercept. This fault offset section can be traced for approximately 75 metres down plunge. In addition, an intercept of 8.07 g/t gold over 1.66 metres in hole MDE-12-74 may represent the depth extension of the Footwall Zone at roughly 180 metres vertical depth, below which the footwall area remains untested. A revised long section for the Footwall Zone is available on the Company’s website at www.balmoralresources.com.

A deeper intercept of 16.53 g/t gold over 6.21 metres from hole MDE-12-72, along with three other intercepts, may indicate the presence of another high-grade occurrence to the west of the Footwall Zone in an area of limited testing.

The Bug Lake Zone continues to demonstrate broad zones of anomalous gold mineralization with higher grade sub-zones. Locally, the anomalous gold mineralization associated with the Bug Lake Zone merges with the zone of anomalous gold mineralization which typically surrounds the high-grade core of the Footwall Zone. Where there is no discernible break in the anomalous (>100 ppb Au) gold zone, the two zones have been reported together and the individual zones have also been reported separately in keeping with previous releases.

On-going testing has also indicated the localized presence of high-grade gold mineralization located at the upper (eastern) contact of a porphyry dyke which runs parallel to the Bug Lake Fault between the Bug Lake and Hanging Wall Zones. The western contact of this same dyke often forms the up-dip margin of the Bug Lake Zone. Several high-grade intercepts are present along the Upper Porphyry contact and it may represent another target for potential future resource definition.

Quality Control

Mr. Darin Wagner (P.Geo.), President and CEO of the Company, is the non-independent qualified person for the technical disclosure contained in this news release. Mr. Wagner has supervised the work programs on the Martiniere Property, visited the property on multiple occasions, examined the drill core and/or photographs from the holes summarized in this release, discussed and reviewed the results with senior on-site geological staff and reviewed the available analytical and quality control results.

Balmoral has implemented a quality control program for all of its drill programs, to ensure best practice in the sampling and analysis of the drill core, which includes the insertion of blind blanks, duplicates and certified standards into sample stream. NQ sized drill core is saw cut with half of the drill core sampled at intervals based on geological criteria including lithology, visual mineralization and alteration. The remaining half of the core is stored on-site at the Company’s Martiniere field camp in Central Quebec. Drill core samples are transported in sealed bags to ALS Minerals Val d’Or, Quebec analytical facilities. Gold analyses are obtained via industry standard fire assay with atomic absorption finish using 30 g aliquots. For samples returning greater than 5.00 g/t gold follow-up fire assay analysis with a gravimetric finish is completed. The Company has also requested that any samples returning greater than 10.00 g/t gold undergo screen metallic fire assay. Following receipt of assays visual analysis of mineralized intercepts is conducted and additional analysis may be requested. ALS Minerals is ISO 9001:2008 certified and the Val d’Or facilities are ISO 17025 certified for gold analysis.

About Balmoral Resources Ltd. – www.balmoralresources.com

Balmoral is a Vancouver-based precious metal exploration and development company focused on high-grade gold discoveries along the Detour Gold Trend in Quebec, Canada. With a philosophy of creating value through the drill bit and with a focus on proven productive precious metal belts, Balmoral is following an established formula with a goal of maximizing shareholder value through discovery and definition of high-grade, Canadian gold assets.

On behalf of the board of directors of Balmoral Resources Ltd.

Darin Wagner, President and CEO

This press release contains forward-looking statements and forward-looking information (collectively, “forward looking statements”) within the meaning of applicable Canadian and United States securities laws. All statements, other than statements of historical fact, included herein, including statements regarding the anticipated content, commencement, duration and cost of exploration programs, anticipated exploration program results, the discovery and delineation of mineral deposits/resources/reserves, the timing of the receipt of assay results, and business and financing plans and trends, are forward-looking statements. Forward-looking statements are typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions or are those which, by their nature, refer to future events. Although the Company believes that such statements are reasonable, there can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. The Company cautions investors that any forward-looking statements by the Company are not guarantees of future performance, and that actual results may differ materially from those in forward-looking statements. Important factors that could cause actual events and results to differ materially from the Company’s expectations include those related to weather, equipment and staff availability; performance of third parties; risks related to the exploration stage of the Company’s projects; market fluctuations in prices for securities of exploration stage companies and in commodity prices; and uncertainties about the availability of additional financing; risks related to the Company’s ability to identify one or more economic deposits on the properties, and variations in the nature, quality and quantity of any mineral deposits that may be located on the properties; risks related to the Company’s ability to obtain any necessary permits, consents or authorizations required for its activities on the properties; and risks related to the Company’s ability to produce minerals from the properties successfully or profitably. Trading in the securities of the Company should be considered highly speculative. All of the Company’s public disclosure filings may be accessed via www.sedar.com and readers are urged to review these materials, including the latest technical reports filed with respect to the Company’s mineral properties.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

Balmoral Resources Ltd.
John Toporowski
Manager, Corporate Development
(604) 638-5815 / Toll Free: (877) 838-3664
604-648-8809 (FAX)
jtoporowski@balmoralresources.com
www.balmoralresources.com