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“The
great Khan (Chinese ruler), causes the bark of trees, made into something
like paper, to pass for money all over his country.” …Marco POLO,
(1254 – 1324 Traveling explorer from Venice).
Featured
is the weekly gold chart. (These charts courtesy Stockcharts.com unless
indicated). The bull market that started in 2002 is beginning to take on a
greater urgency. In percentage terms the price rise is still in its
infancy (the 1980 bull market rose from 35.00 to 850.00 for a 24-fold
increase). The current bull market has just passed the 5-fold increase
level. However in chart form the shape of the bull market is beginning
to resemble the money supply chart. See next chart.
“Because
China needs gold, there will never by ‘Peak Gold.”
…. VRONSKY.
This
chart courtesy Mises.org shows the True Money Supply (USA) up to the
moment. Since the 2008 credit crunch, the US dollar money supply has
begun to move up exponentially. When you add on all of the Euros, Yen, Yuans, Francs and Pounds, it becomes obvious why gold is
beginning to rise exponentially as well.
“You have a choice between the natural
stability of gold and the honesty and intelligence of the members of
government. And with all due respect for those gentlemen, I advise you, as
long as the capitalist system lasts, vote for gold." …George Bernard
Shaw.
This
chart courtesy Greshams-law.com shows the ‘real’ Fed Funds Rate,
from data supplied by the Federal Reserve. It shows ‘real
rates’ to be negative (-3%), and heading lower. According to
Gibson’s Paradox whenever ‘real rates’ are negative, gold
is accumulated by those who are interested in wealth
preservation. It should be noted that the data supplied by
the Federal Reserve is ‘massaged’ for the best possible
outcome. If we were to use data supplied by John Williams at
Shadowstats.com the ‘real rate’ would be negative -8%. This
means that anyone with money in the bank at 2% is losing 6% while paying tax
on the 2%! Now that is not smart.
When
silver rose to nearly 50.00 in late April the ‘top pickers’ were
out in force. They began to recommend selling while silver was trading
at 37.00. Those of you who listened and sold out must be wondering what
to do now. Here are a few things to keep in mind while you contemplate
your next move:
- In order for
silver to reach $50.00 in 1980 dollars adjusted for inflation, the price
would have to rise to $136.47 (using the calculator at
www.bls.gov). John Williams at Shadowstats.com uses a formula that
was used by the government up to 1980 and his calculation shows silver
would need to be priced at nearly $400.00 to match the purchasing power
of $50.00 in 1980.
- According to the CPM
Group (Commodity Experts), in 1950 the above ground stockpiles of silver
totaled 10 billion ounces.
- By 1980 the
stockpiles had shrunk to 3.5 billion dollars.
- Today the amount of
silver in stockpiles around the globe has dwindled to about 300 million
ounces.
- 97% of all the
silver that was available in 1950 is gone! The majority of silver
applications are in amounts too small to make recycling economic.
- Barely 3% of that
1950 silver is all that is still available for use in the manufacturing
of computers, cell phones, iPads, TVs,
refrigerators, smart weaponry, satellites, medicinal applications, water
filter systems, RFID chips and solar panels (the solar panel
industry is a very big silver user – thousands of tonnes of silver).
- Since 1980 the
number of consumers for these products has increased by several BILLION
people! Please let this sink in! Most of these people were
born into the very countries that have an affinity for gold and silver
– China and India!
- The thriving
economies of China and India are producing thousands of millionaires,
even billionaires!
- The mismanagement of
economies by Keynesians (in 1971 President Nixon said:
“We’re all Keynesians now)”, guarantees that the
monetary inflation that is now above 10% per year will continue to
provide the liquidity for gold and silver prices to continue to rise.
- Historically, once
the leaders of a country decide to use the printing press to pay for the
daily expenses of running a country, instead of relying strictly on
taxes and user fees, the end has ALWAYS been the destruction of the
monetary unit. There are no exceptions.
- Silver in the ground
is becoming scarce. The easy silver has already been found.
- Gold and silver are
becoming more expensive to dig up. It takes fuel to turn the drill
bit, to build the mine and to run the mine. ‘Peak oil’
is here and cheap oil is history. Chris Martenson
(Chrismartenson.com), is on record as predicting oil at $200 a barrel
within the next few years. John Hoffmeister,
the former CEO of Shell Oil has predicted oil at $150 a barrel by the
end of 2012.
- A few years ago some
stupid people working for several large banks thought it might be a good
idea to ‘sell silver short’. They did this at the
commodity exchanges by selling contracts to deliver silver they did not
own. For a while the game worked out well for them.
Authorities at the Comex winked at the fact
that these banks would drive the silver price down by selling large
numbers of contracts at predetermined times and then buying the
contracts back from hedge funds and small speculators who sold to cover
margin calls. Although this practice is immoral at best and
illegal at worst, it continues to this day. For a blatant example,
think back to Sunday evening May 1st. The problem
these banks now face is that there is not nearly enough silver in the Comex approved warehouses to cover the several
hundred million ounces that have been sold short. Every time
someone buys a silver contract and takes delivery of the silver, it
reduces the amount of silver that is left for future delivery.
- During the
1970’s the Hunt Brothers came to the conclusion that many of you
have arrived at: ‘silver is underpriced.’ They
decided to use their resources to buy as much silver as possible.
They bought futures contracts at the commodity exchange and took
delivery of the silver. Some of the people who held short
positions at the COMEX also sat on the board that made the rules.
When the Hunts kept on buying silver, these people with their short
positions were beginning to ‘feel some pain’. In
January 1980 they changed the rules. Anyone who was short silver
(these rascals) could operate on margin, but anyone who was long silver
(like the Hunts), would have to come up with 100% margin. The
result was instant multi-million dollar margin calls for the Hunt
brothers. They had to sell some of their silver and the price
began to drop.
- I met Nelson Bunker
Hunt at a Jim Blanchard convention in New Orleans shortly afterward and
asked him where he thought the gold to silver ratio would end up.
His answer was: ‘10 to 1.’
- Today we look at a
totally opposite situation to the one faced by the Hunts. Whereas
in early 1980 the market was suddenly faced with a lot of silver coming
into the market, today we are faced with a shortage
of silver to cover the millions of ounces that some
devious bankers have sold short. This has never happened before
and may never happen again!
- Those of you who are
mining executives with cash in the bank, why not hold silver or gold in
storage instead of cash in the bank? Your shareholders will be
impressed and you will improve your bottom line as the silver and gold
you store, rises in value. Your bottom line will grow!
- Those of you who are
investing in silver and gold substitutes such as SLV and GLD might
instead consider buying and storing physical metal, or buying shares in a
‘trust’ where the metal is audited and you are sure that you
own a piece of the ‘real thing’.
- Those of you who
think your portfolio is too small to make a difference in the grand
scheme of things should remember that every time you buy an ounce of
silver, whether it is a bar or an Eagle or a Maple Leaf, and store it
away, you are making sure that the world has a future source of silver
and you are taking ounces away from the cabal that is trying to keep
your investment from rising to its rightful value.
- “Nothing
will unnerve the ‘paper shorts’ more quickly and do more to
undercut their confidence than to strip them of the real metal and force
them to come up with more hard bullion to make good on deliveries.
“Stand and Deliver or Go Home” should be the rallying cry of
the gold and silver longs to the ‘paper shorts.” …Trader
Dan Norcini.
“Freedom is a fragile thing, which is
never more than one generation away from extinction. Yet it is not ours
by heritage, but it must be fought for and defended constantly by each
generation, for it comes only once to a people. Those who have known
freedom, and then lost it, have never known it again.” President Ronald Reagan.
Featured
is the daily silver chart. The green arrow accentuates the rising
trend. The RSI and MACD are turning positive from oversold levels
(green lines). The blue arrow points to the area where my subscribers
and I took partial profits while leaving our core position intact. The
black arrow points to the spot where we finished loading up again.
Generally speaking, if you draw a line through the center of any rising stock
or commodity and buy below it and sell above it, you’ll come out
ahead. The important thing is to study the fundamentals, keep your
eye on your end goal, and avoid being influenced by the
‘top pickers’.
"Back in the 1970s when I liked silver
over gold, there was ten times as much silver above ground as there was gold.
Despite that, we made twice as much money on silver as we did on gold. Now
that ratio has changed. Industrial use has so depleted our silver inventory
that the US government now owns no silver at all! There is six times more
gold above ground than silver, which is by far the scarcer of the two metals.
So why is gold many times more expensive than silver? Because 99.9% of the
people in the world think gold is much rarer than silver. But they are wrong,
dead wrong. Sooner or later the supply/demand equation will favor silver and
narrow the pricing gap between the two metals." …Howard RUFF.
Summary:
The ‘negative thinkers’ will soon be telling you that the
investment climate for gold and silver during the summer all but guarantees
lower prices. While no one but God knows the future, we do
have the ability to analyze trends. The trend during the summer months
is for the jewelry trade to slow down their buying of silver and gold.
Another trend however is for the monetary authorities to continue to destroy
the purchasing power of the various monetary units, causing anxiety among
investors. The tug of war between these two trends will determine
whether prices rise, fall or move sideways between now and Labor Day, (the
usual starting point of the annual Christmas Rally).
On
my website www.pdegraaf.com is an article: “The Making of a Successful
Investor.” In that article I cover the success or failure of people who
apply ‘sell in May and go away’ to gold and silver. The
conclusion reached in that article is that most of the time it is better to
‘sit and hold’ than to ‘trade out’ and try to get
back in.
Happy Trading!
Peter Degraaf
Pdegaaf.com
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