Market Recap forMonday January 28, 2013
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Change
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GOLD
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$1654.60
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-$4.70
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GOLD - 1 year ago
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$1737.30
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-$82.70
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SILVER
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$30.84
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-$0.34
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SILVER - 1 year ago
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$33.99
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-$3.15
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PLATINUM
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$1659.00
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-$33.00
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PALLADIUM
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$736.00
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-$4.00
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RHODIUM
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$1200.00
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0.00
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HUI
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395.47
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-3.58
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XAU
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149.21
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-1.61
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USD
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79.80
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0.06
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EURO/USD
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1.3454
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-0.0002
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DOW
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13881.93
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-14.05
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GOLD to SILVER RATIO
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53.65 to 1
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0.43
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Table of Contents
Click on the Links Below to Scroll to the Articles
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Private Meetings and Events
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Quotes of the Day
I have been working constantly since Friday to answer your emails. Being indoors all this time, I had to go out and get some fresh air. To my astonishment upon my return there were more incoming emails than I have answered in the last three days. Clearly, I will not get these all answered, but that does not mean I am not going to try.
I understand the responsibility of giving you my opinion. To say I understand the serious nature of what I say is a world-class understatement. The people I am speaking to are not the leveraged paper traders in gold. I am speaking to those who have invested in gold without borrowed money as protection against the instability of the Western world's financial condition.
There is no question whatsoever in my mind that gold will trade at and above $3500. The volatility in gold is only going to become more extreme, so you crazies who are in gold on heavy margin are beyond my help.
If you are so concerned that you cannot think straight, what are you doing investing in anything? I willingly stake my over 50 years in this business to tell you gold will trade at $3500 and above. I have committed 100% of what I am and have to my gold related position. I have zero concern about my gold investment. Absolutely none whatsoever.
I told you when gold was forced back under $1000 that it would trade at $1650 and above. For that analysis, I was scorned by many who are the same personalities that today are the outspoken bears.
Gold will trade at and above $3500 and no manipulator, private or public, can stop it. Gold is not for the weak, but then the weak will not survive this crisis in Western finance trying to be hidden from view with every possible public relations weapon.
For all the bears communicating with me tonight, you are totally wasting your time.
-Jim Sinclair, A Message To All The Unleveraged Gold Investors, January 28 2013
The weight I feel of the responsibility of giving so many members of the unleveraged gold community correct direction is enormous. I might say few could possibly shoulder the incoming negative psychology on every reaction we have had in gold since $248. Both condemning me and pleading with me for comfort is like an emotional vampire.
I have worked in finance and metals for more than 50 years with a good deal of success. Before I am willing to say I wager my entire career on the prediction that gold will go to and through $3500, there are only two other people in the world who I believe absolutely know the gold market and to whom I would go. That is Kenny and Johanna who do not seek any publicity, and do not take clients.
Before I issued that missive to you last night I sent a draft to Johanna and Kenny telling my dear friends that at a certain time I intended to send it to Editor Dan for publication. Below is their response.
Sincerely,
Jim
Hey Jim,
Let me tell you something: You are dead f-ing right. That ain't no swan song. That is a statement of fact and in so doing - your service to the public in this matter, is the epitome of a very long term example of courage under fire and which has always been under constant public scrutiny.
Johanna and I stand with you on every count - and you can say so publicly, if it is of any help. You are however, much more tolerant of the limp-wristed whiners than we are. The only thing you can't give is the exact time of economic collapse, nor can I. But if it could be given, those of the weak-kneed, complaining sonofabitch population would want to know what you had done for 'em lately five minutes after they cashed in their profits.
You were the very first to enlighten and warn the public of the coming economic disasters from every aspect of brokerage, banking, and government collusion years ago even when you knew it would draw fire. You have our admiration. I can only hope that if we were confronted with the same difficult choices as you had, we would have had the balls to act as honorably as you did. Well done, old friend...
Remember that we have always set a plate for you at our table, and always will.
Our support and very best regards,
Kenny and Johanna
-Jim Sinclair, The Responsibility That Comes With Experience, January 28 2013
On January 9, 2010, Venezuela's strong man Hugo Chavez devalued his country's currency by 50%, overnight and without warning, causing immediate inflation, shortages of food and supplies, and general financial chaos throughout the nation.
While you might be shaking your head in pity over the plight of the citizens of North Korea and Venezuela, ask yourself this: could this not happen in the United States?
On April 5, 1933, President Franklin D. Roosevelt, an Obama hero, outlawed gold ownership overnight by signing Executive Order 6102, which gave the people three and one-half weeks to surrender all privately owned bullion to the government for a price of $20.67 per ounce. On January 30, 1934, nine months after collecting the people's gold, Roosevelt devalued the dollar 69% overnight, by raising the gold price from $20.67 to $35.00 per ounce.
Since its founding in 1913, the Federal Reserve has devalued the dollar by 98+% thanks to endless money printing and debt creation, a corrosive and impoverishing process that is now accelerating. In the past year, the Fed has engineered $20+ trillion in bailouts, subsidies and guarantees for well-connected and lucky scavengers and opportunists, an amount equal to roughly 40% of the total private wealth created in this country since its inception. All because a few elitist government man-gods with an almost perfect record of error and failure have deemed in their imperial wisdom that it shall be so. The citizens, whose hard-earned wealth is being systematically destroyed by this continual, government-decreed monetary debasement were never invited to the debate or given a say, which is par for the course for dictatorships. This massive de facto devaluation now hangs over the people's wealth like a great monetary sword of Damocles.
Conceptually, whether it is a 50% overnight devaluation in Venezuela, a 69% overnight devaluation in the United States, a 98% devaluation in America over time, or a 99% overnight devaluation in North Korea, what is the difference? The fact is: there is no difference; monetary debasements are all the same. In each and every case, the people's wealth is stolen via government edict, while the people stand by helplessly and in shock.
So one must ask: For whom does the bell toll? A foreign "them," or a domestic us? Who is to say that you will not be told tomorrow morning that, effective immediately, in accordance with some perversely named mandate such as the "American Monetary Security, Wealth Preservation and Terrorism Prevention Act," enacted by emergency for "the safety of the nation and the financial well being of the citizens," all existing currency and bank balances will be redenominated in "New Dollars," at a conversion rate of 1 new for every 100 old currency units? Would this not simply be another, almost predictable act of defiance toward the American people by the Master Class? And if that happened, do you honestly believe that the Master Class would not have been alerted in advance and allowed to make special preparations for itself ahead of the devaluation? Do you think they intend to go down in the same ship as the people they defy? If such a currency devaluation were announced, what could you do about it? March on Washington? But how would you get there if your money had been wiped out?
- Stewart Dougherty, America's Impending Master Class Dictatorship, January 22 2013
Back to Table of Contents |
From David's Desk
| David Schectman |
Backwoods Jack is Back - For the Last Time
This afternoon, my wife Susan received a phone call from Dublin Rarities. The salesman introduced himself to Susan and proceeded to try and sell her rare coins. Susan said, "Do you know who you are talking to? My husband owns Miles Franklin." The salesman replied, "They're crooks." Then he hung up. I tell you, there are so many scumbags in our un-regulated industry. If you want to see what these kind of companies are all about, check out their websites. You need to own gold and silver, but please be careful whom you deal with. This truly is a "buyer-beware" marketplace.
We always tell our clients to do their due diligence. Check out companies on the Better Business Bureau website. Miles Franklin has maintained it's A+ rating and has zero complaints registered with the BBB.
Living just north of Miami, maybe 15 miles or so, this video hits close to home. It also makes a mockery of some of the following comments from Backwoods Jack, who accuses me of bringing up the possibility of civil unrest, here in the US. Check out the video and continue reading about the latest Backwoods Jack saga.
In The News Today
January 28, 2013, at 8:04 pm by Jim Sinclair
Jim Sinclair's Commentary
A training exercise between the Miami Police, and attack military helicopter using live fire. Now exactly what enemy are they planning to kill in Miami, those damn conservative Snowbirds?
| Machine gun fire from military helicopters flying over downtown Miami Fl. |
Backwoods Jack is back - and more out of touch than ever. Out of the blue, after reading my Friday newsletter, featuring some wonderful advice by Jim Sinclair, Backwoods sent me the following email:
Had dinner last evening with a friend, Chairman of the Board of one of the largest banks in the U.S. He says the next 18 months will show steady growth in our economy and your doom and gloom forecasts are invalidated. The Dow Jones will continue to grow whereas, my son, Backwoods III, claims, as does everyone else in finance, that Richard Russell's 20-year prediction that the DJA and Gold will someday be1/1 is laughable. "Someday" is the annual "pushback," that your gold contemporaries feed upon. Why hasn't gold soared as predicted for years, with turmoil in the Mideast? The classic answer for years has been "manipulation," but no boards of inquiry have proven this to be true. I fear you are being led down the wrong path. Other forces will cause a rise in gold and silver without the "manipulation" factor." He followed it up with, "My son Backwoods III is not opposed to gold and silver at all. He's opposed to all the gloom and doom forecasting continually for the past ten years and yet strangely, collapse has not occurred. Thus, it seems to be a phony scare tactic to promote sales, which he and most others in his financial world regard as laughable. He has around 50 brokers in every major city in the US and is continually in contact with them. Of course there will be riots like east St. Louis, for example, and probably in other cities as well, when entitlements are cut back, but empty food shelves, no gas or water, or electricity falls under the category of "fear mongering" As your friend, I urge you not to believe all the "BS" that you read.
Why do I bother to reprint this line of thinking? Because Backwoods is the essence of the way most mainstream-informed American's think. I foolishly took it upon myself, as a friend, to "educate" him so he could understand what is occurring and where we are headed. I have sent him so much information, over a decade, populated with honest real-world facts from the Richard Russells, Jim Sinclairs and John Williams of the world - not to mention my newsletter, that it could fill up his office library. On a personal level, for two years I managed his portfolio and made him over $2.5 million! Then he sold it all and decided to take the advice of others. It didn't exactly work out too well.
Why do people like Backwoods delight in attacking the voices that are trying to help them? They gloat over the fact that the economy has not collapsed (yet) and shortages, riots and hyperinflation have been held at bay, and conclude that therefore we are terribly mis-guided. Now it would be one thing if Backwoods was stupid, which he is not, or if he wasn't exposed to our side of the story, but he has been for over 10-years. He made a great deal of money following my advice and has witnessed, first hand, how accurate my views have been. But he continues to "put words in my mouth," to attribute time-lines to doom that I have never made, and is certain that the views he solicits from main street bankers and his Ivy League educated and Wall Street nurtured son feed him are correct - and I have a screw loose. Being well past the point of "Political Correctness," I told him, "I don't give a good @#$%! what you son thinks!" Of course he disagrees with what WE believe. He sells dollar-denominated investments. He says we promote fear to make a sale. Fact is, he promotes pie in the sky and dollar stability to sell his products! Talk about the pot calling the kettle black!
I should just ignore it, and as Mr. T says, "Pity The Fool," but I can't help but take these comments very personally. He insults me, and those I revere and tries to soften it with, "As your friend I fear you are being mis-led." Funny, that's exactly how I feel about him. One day he calls me and admits "You've been right." He is correct. Yes I have! The next day I get more of the kind of crap he sent to me the other night. This was just one-time-too-many and I told him I'm done! I will no longer send you ANY financial information. In fact, I told my editor to take his name off of our mailing list. I'm wasting my time on someone who will never be open minded nor accept the facts! And that can be said for most of the people we know. We can preach to the choir but it just doesn't work when we try and educate newbies. Friends, family, and acquaintances - most of them think we have a screw lose, or as Backwoods often says, we are just "wingnuts." I bet that was said about The Boy Who Cried Wolf too. I understand - Backwoods came from an ultra-rich, conservative mainstream background. These people will never come around. Good luck Jack, you're absolutely gonna need it, and please don't come crying back to me saying, "You were right." From now on, you are on your own.
PS: If I'm wrong and go down with the ship, it will be with a big heavy bag full of gold and silver! But I won't be wrong, and as Jim Sinclair said:
Gold will trade at and above $3500 and no manipulator, private or public, can stop it. Gold is not for the weak, but then the weak will not survive this crisis in Western finance trying to be hidden from view with every possible public relations weapon.
For all the bears communicating with me tonight, you are totally wasting your time.
And that especially applies, in my case, to still-my-friend, Backwoods Jack, even though he makes a habit of insulting me!
Sincerely, David Schectman Miles Franklin Back to Table of Contents |
Gold Highlights
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Jim's Mailbox
January 27, 2013, at 1:50 pm by Jim Sinclair
Dear Iram,
I do not write for paper gold speculators. They are simply gambleholics, and not gold people. I write to those that are considering or have chosen to own a gold investment without debt, as insurance against the dislocation we are presently in concerning finance. The operative concept here is "no debt" on the gold position whatsoever.
Gold will trade at and above $3500. I do not care a bit what it does now as I know where it will go.
When markets in anything are down all observers are raving bears. When markets in anything are up all observers are raving bulls. It is no different in gold. Markets turn from bear to bull when absolutely no one will say a good word for them; when the commonly voiced outlook is dire.
I will say a good word for gold as I know it will trade at $3500 and above. I do not care at all for whatever anyone else thinks. This way I am responsible for what I believe, having not borrowed from anyone else.
Respectfully,
Jim
__________________________________________________
In The News Today
January 28, 2013, at 8:04 pm by Jim Sinclair
Jim Sinclair's Commentary
I believe this biblical story occurred just before God's wrath was visited upon certain perverts and thieves. It is possible that this illustration is in fact timely.
The financial sociopaths are proud of themselves. One I know well told me that where his family was concerned, it is better that they fear him than love him.
Jim's Mailbox
January 28, 2013, at 12:44 pm by Jim Sinclair
Dear Jim,
They are buying the dips.
Russian holdings climbed 2.1 percent to 957.8 metric tons in December, taking the increase over 2012 to 8.5 percent, according to data on the International Monetary Fund's website.
Regards,
CIGA Luis Ahlborn Sequeira
Russia, Kazakhstan Expand Gold Reserves as Central Banks Buy
By Chanyaporn Chanjaroen - Jan 28, 2013 8:27 AM ET
Russia and Kazakhstan expanded their gold holdings in December, seeking to diversify their reserves as the metal capped a 12th annual advance and investors raised holdings to an all-time high.
Russian holdings climbed 2.1 percent to 957.8 metric tons in December, taking the increase over 2012 to 8.5 percent, according to data on the International Monetary Fund's website. Kazakhstan's hoard expanded 1.7 percent to 115.3 tons last month, and surged 41 percent over the year, the data showed.
Bullion has rallied as investors sought a haven from weaker currencies and potential inflation, with governments from the U.S. to Europe and Japan ramping up stimulus to promote faster growth. Gold holdings in exchange-traded products reached a record last month. Prices will rally this year and into 2014 on central banks' stimulus measures, according to Morgan Stanley.
Central banks need to "diversify into gold as the euro zone is not yet out of the woods," said Lynette Tan, a senior investment analyst at Phillip Futures Pte. in Singapore. "This will provide long-term support for gold prices."
More...
***
Jim,
I thought you might enjoy this piece. He thinks highly of John Williams and his work also.
CIGA EOB
These deficits and debts are now so gargantuan that they have become surreal abstractions impossible even for sophisticated financiers to begin to comprehend. The common citizen has absolutely no idea what these numbers mean, or imply for his or her future. The people have been deluded into thinking that America's arrogant, egomaniacal, always-wrong-but-never-in-doubt fiscal witch doctors and charlatans, including Greenspan, Rubin, Summers, Geithner and Ponce de Bernanke, have discovered a Monetary Fountain of Youth that endlessly spits up free money from the center of earth, in a geyser of good will toward the United States. Unfortunately, this delusion is false: there is no Monetary Fountain of Youth, and contrary to the apparent beliefs of the self-deified man-gods in Washington, D.C., the debt and deficits are real, completely out of control, and 100% guaranteed to create catastrophic consequences for the nation and its people.
More...
_________________________________________
David's comment on the above: if you can find the time, read the entire article. Brilliant!
Back to Table of Contents |
Reliable Financial Advisors
In a world of heightened speculative and counterparty risks, finding someone you can trust may be the most important research you do. Miles Franklin does not sell stocks, but is frequently asked if we know of reputable, full-service brokers. WE DO NOT CONDEMN OR CONDONE EQUITY INVESTMENTS, but want investors with such interest to be honestly and competently handled.
In resource stocks, the folks at Sprott Global Resource Investments - managed by Eric Sprott and Rick Rule - are the best in the business. In various capacities, we have worked with Eric Angeli, Jeff Howard, Kenton Toews, Mishka vom Dorp, Jason Stevens, Anthony Marsh, and Andrew Jackson - all of whom are diligent, ethical, and knowledgeable. That style of business is indicative of the reputation Global has built over the past 25 years. You can feel comfortable with any of their brokers, reachable at 800-477-7853.
For all other stocks - including large cap gold, silver and other resource equities - Nick Shermeta, from Northland Securities here in Minneapolis, is as trustworthy and knowledgeable as they come. Nick is a Senior Vice President with more than 20 years experience, but will treat you as if you were his only client. You can reach Nick at 612-851-5908, or by email at nshermeta@northlandsecurities.com.
The common denominator is decades of Wall Street experience, which should give you comfort that well-seasoned and weathered hands are helping manage your portfolio. Notably, we do not receive compensation for these recommendations. We just want you to know that if they are good enough for us, they should be good enough for you too.
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The Untouchables
Wealth Daily's Weekend Edition
By Brittany Stepniak Sunday, January 27th, 2013
It's a sunny, 17-degree day in Baltimore, a day best spent with a hot cup of coffee and Frontline. After all, I owe it to myself and to my readers to try to make sense of this madness...
How could the White House, our elected officials, our government leaders - the very ones we voted for to uphold the truths and values necessary so that we may continue living our lives with the freedoms our forefathers worked so hard to attain - protect these criminals?
Why are innocent taxpayers and what's left of the disappearing private sector forced to pay up?
Why are their mistakes now our burden?
They are those who have committed the most shameful and globally debilitating acts of fraud, yet not a single one of them has been prosecuted.
They are Wall Street.
When I was in high school, my coworker stole a pair of jeans from the local mall and was arrested, banned from the store, publicly shamed, and fired from her retail job.
In a free society, punishment is the only way to maintain order. In a free society where money is king, punishment for financial criminals should be a bedrock for the system.
Evidently, the Obama administration isn't too concerned with maintaining a functioning and fair financial realm. Better to let ordinary Americans suffer than piss off the guys with the money.
Taxpayers Left to Pick Up the Pieces
No one should have the power to completely destroy the financial system of the United States, much less the entire world. "That doesn't happen if there isn't something bad going on," Senator Ted Kaufman said a few years ago.
Something bad IS going on...
It's called fraud.
In the thick of the financial disaster several years back, homeowners were either duped or duping mortgage loan lenders. One contract worker who was a due diligence underwriter responsible for assessing the risk of buying loan portfolios said "anything went."
The bankers didn't care what happened with those unsustainable loans. The head honchos received $36B in bonuses one year, only to demand billions in bailout money from taxpayers shortly thereafter.
Abominable.
Shooting Fish in Barrel
Apparently, it's easy to toss the word "fraud" around - but not so easy to prosecute it.
The FBI and Department of Justice were able to respond merely by "shooting fish in a barrel," according to Christopher Cruise, loan officer and trainer from 1990-2008.
Dozens of small mortgage brokers, loan appraisers, and even home buyers were arrested... but not a single banker or Wall Street exec was convicted of these crimes.
Wall Street won. The government won. Everybody lived happily ever after...
Except the rest of us.
History to Repeat Itself
Five years have passed, and we're finally beginning to feel the weight of the bankers' burdens.
The debt limit drama is a direct effect of the economic calamity initiated by the criminal bankers on Wall Street. And this is only the beginning...
Obama plans to raise the debt limit through another executive order, disregarding the obvious risk factors. The government will win again and Wall Street will stay afloat - all thanks to taxpayers like you and me.
Not to fear; the Fed will print more money to give us an illusion of wealth in these trying times.
But keep in mind the Fed was created by the very same banking criminals who got us in this unfortunate state of affairs.
Neither organization is looking out for you.
Fiat currency is not wealth.
It will not suddenly create more soybeans, iPads, or Honda Accords. As Ron Paul so acutely stated, it merely exists to "strengthen a fantasy balance sheet" as part of the grand illusion.
Unless you're a Wall Street executive, a member of Congress, or a part of Obama's administration, you're going to need to get your retirement savings out of their greedy reach.
Take back some control and exercise your right to the pursuit of happiness with REAL wealth.
We recommend buying precious metals, hiding them, and keeping them safe.
More ideas on how to secure and protect your wealth without giving a percentage to the schemers in this week's top investment stories, below...
Best wishes for a prosperous future,
Brittany Stepniak for Wealth Daily
Back to Table of Contents |
If China likes silver, maybe we should too
January 25, 2013|Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) - Silver's drawing more and more attention as an investment these days, especially from China.
That appetite has made silver bulls giddy and lifted prices closer to a record.
"Investment demand, not industrial demand, is what drives silver prices right now," said Mark Thomas, author of email-alert service provider SilverPriceAdvisor.com. "World investment demand is starting to really pick up."
Chinese citizens are "now buying silver because gold topped out in 2011 and silver is much more affordable," said Thomas, a silver bull who has recently tripled his exposure to the white metal.
And silver is starting to outshine gold. See Commodities Corner: Gold bulls come out of hiding.
As of Thursday's settlement on the Comex division of the New York Mercantile Exchange, silver SIH3 -1.44% has outperformed gold GCG3 -0.57% , with futures prices trading 5% higher this year, compared with a 0.4% loss in gold, and some analysts are touting the white metal's prospects to achieve a record high this year. Read more on daily gold and silver trading.
Silver is "facing just as good a year, if not better, than the yellow metal," said Jan Skoyles, head of research at The Real Asset Company, a precious-metals investment platform provider.
Read the full article at Marketwatch.com
Back to Table of Contents |
As the Global Financial Crisis Continues, Diversify Some of Your Assets into Gold
Tuesday January 22, 2013 10:29
Although the gold price has languished for past year or so, and even though it has remained relatively flat for the first three weeks of 2013, the global currency war has intensified and the financial crisis facing the Eurozone, US, UK and Japan has deteriorated, despite the rhetoric of financial leaders who want us to believe that things are improving remarkably well.
While many banks and financial institutions have been saved from bankruptcy thanks to the various bailout programs, economic growth is still very sluggish despite the easy monetary policies of the major central banks. The major central banks of the world are now determined to weaken the value of their respective currencies in order to maintain a trade advantage against other competing economies.
The policies of the US Federal Reserve as well as similar programs by the ECB, Bank of England (BoE), Bank of Japan (BoJ), Peoples Bank of China (PBoC) Swiss National Bank and the Bundesbank, have created an unprecedented era of unlimited credit creation, which will destroy the value of fiat currencies. As a consequence, we will see a loss of confidence in the purchasing power of many existing currencies, a rise in price of many essential commodities causing an inflationary scenario, which will create the ultimate financial bubble.
In such an economic environment, it is imperative to diversify part of one's assets into physical gold. The fundamental case for gold has not changed. Exploding government debt and deficit spending are unsustainable without solid economic growth. Today's policy makers are simply compounding the problem by pilling more and more debt on top of an existing mountain of debt.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved"
-Ludwig Von Mises.
Up until the end of December the price of gold was stuck in the low $1,660s, near four-month lows, but that abruptly changed when a US Congress vote on a Senate deal to avoid the fiscal cliff - $600 billion in tax cuts and spending increases that were set to kick in on January 1 was agreed upon. Under the agreement, Bush-era tax cuts will expire for single Americans who make more than $400,000 and couples earning over $450,000. Even though taxes are rising, the move is seen as a plus for businesses and consumers because it provided permanent tax brackets. However, the deal contains no spending cuts, which the Republicans feel are essential for dealing with the country's ballooning deficit.
After the agreement, the global gold market came alive and prices soared to $1,695/oz., its highest level since mid-December. The price of gold gained along with prices of most commodities as well as global equities. Brent crude jumped to a two-and-a-half-month high and the Dow gained around 300 points - it's best ever first day of annual trading.
Only a week later, gold prices reversed its upward trend, and dropped sharply when minutes from the latest Federal Open Market Committee (FOMC) meeting showed that several policy makers were in favor of stopping the asset purchases well before the end of 2013. They cited concerns about financial stability and the size of the balance sheet.
Then, prices rebounded in the wake of the latest non-farm payroll report and unemployment figure. Currently, some three weeks later, the price of gold is back above $1690 an ounce and looks set to test the $1700 an ounce level.
While the price of gold may remain particularly sensitive to any new development in monetary policy of the US Federal Reserve or the ECB, the underlying fundamentals driving the price have not changed as I have explained above. However, there are traders on Comex who base their decisions on any piece of economic news causing short-term volatility in the price. In the short-term we may see an attempt to hold the price of gold below the $1700 an ounce level, but this situation will not last very long and prices will resume their upward trend once again.
While there are analysts out there who are calling an end to the bull market in gold as it experiences its 12th consecutive year of price increases, they fail to see the deterioration in the global monetary system, which is set to worsen this year.
While the dollar gains in gold in 2012 were not as impressive as some of the gains we have witnessed in previous years one must bear in mind that the price of the yellow metal increased against practically every fiat currency. The price of gold rose 7% in US dollars and was 4.9% higher in euro terms and 2.2% higher in sterling terms. Some of the other gains seen in gold prices versus fiat currencies included the following:
Argentine Peso
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+21.6%
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Burundian Franc
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+27.3%
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Ghanaian Cedi
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+23.8%
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Indonesian Rupiah
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+14.9%
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Iranian Rial
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+17.5%
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Japanese Yen
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+19.4%
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Pakistani Rupee
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+15.0%
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South African Rand
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+11.7%
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Sudanese Pound
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+75.7%
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Syrian Pound
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+50.2%
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Ugandan Shilling
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+15.8%
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During 2012 the price of gold fell in seven months of the year and rose in five (January and June to Sept). Interestingly, gold's biggest monthly rise was in January when gold returned 11.1%.
Despite weak economic conditions, global shares rallied in 2012. However, the prices of these were artificially boosted due to central banks flooding the world with money. Another market aberration in financial markets can be seen in the global bond markets. An example of this is the situation regarding Italian government bonds. By the end of 2011 the Italian 10 year bonds had jumped to over the crucial 7%. However, by the end of December 2012, the yield had dropped back to 4.234%, yetthe country's public debt had risen to an all-time high of over two trillion euros.
More recently, according to a report issued by the central bank, Italy's public debt in October 2012 had expanded to 2.015 trillion euros (USD 2.64 trillion) from 1.995 trillion euros in September. The figure shows a 3.7% rise compared to January of 2012. And, despite a worsening scenario in Spain, bond yields have also dropped substantially.
Under normal economic conditions, the deteriorating situation in countries such as Italy and Spain would see yields rise not decline. But, as the ECB has been buying this government debt, yields have been kept artificially low while bond prices are being propped up.
Only last week the euro gained against the US dollar after another successful Spanish bond auction. Spain managed to sell its maximum target of EUR 4.5 billion worth of bonds yesterday at lower yields. EUR 1.6 billion in five-year bonds were sold with a yield of 3.77%, while EUR 2.4 billion in 2015 bonds were also sold with yield of 2.713%, and on the long end, EUR 0.512 billion in 2041 debt was sold with yield at 5.696%. Also data from Bank of Spain showed that net borrowing from ECB dropped for the fourth consecutive month to EUR 313.11 billion in December, down from November's EUR 340.84 billion. The data suggests that Spanish banks' dependence on ECB funding continues to decline. Yet, unemployment in Spain is currently around 26% meaning some 6 million people are unemployed.
According to the Bank of Spain, missed payments as a proportion of total loans at Spanish banks rose to a record 11.38% in November, 2012. And, in an interview with La Razon newspaper Luis de Guindos from the Economy Ministry said GDP declined between 1.3% and 1.4% last year and will be flat or positive in the second half this year. Yet, despite this dismal news, Spanish bonds are being snapped up. Frankly, I would feel a lot safer with my money in gold.
As we enter this year, I urge individual investors to diversify some of their assets into physical gold. For as long as this financial crisis has been going on for, there have not been any signs of improvement. And, while gold trades at around $1700 an ounce level, buy as much as you can. For I believe that this time next year, prices are going to be considerably higher.
Please note that physical gold refers to gold bullion bars and coins, not numismatic items or limited edition medallions.
TECHNICAL ANALYSIS
As gold prices recover from the lows seen at the beginning of this year, they still need to break above the $1700 an ounce level.
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Parallel Dimensions: An Update for the Precious Metals
by Joshua Enomoto, Founder of ContangoDown.com and FutureMoneyTrends.com contributor
Let's face the immediate facts: the precious metals market has turned yet another ugly corner in a ghetto full of ugly corners. While we have seen this sector pull away from the brink of disaster, is another miracle upon us? Ultimately, the long-term answer is optimistic for the entire commodities sector but we also need to acknowledge that within a secular bull market, there will be periods of short to intermediate term weakness.
Much of the meteoric rise of gold to $1,900 was based on pure monetary policy, otherwise known as letting the printing press operate at full blast. And why not? Federal Reserve Chairman Ben Bernanke is a notorious Keynesian economist and his dissertation regarding the Great Depression and fiscal illiquidity is referenced both in academia and pop culture. It would have been a contradiction of the highest order for him to squeeze the monetary base during the financial collapse of 2008, at a time when the entire nation was teetering off a very precarious ledge. Of course, Mr. Bernanke was all too happy to oblige, firing off inflationary programs euphemistically labeled "Quantitative Easing." The first two editions took both the equities sector and the precious metals soaring, which was the whole point of the matter. According to the Keynesian perspective, a financial disaster can be averted through the pumping of liquidity, which in turn would theoretically induce confidence in the markets. Higher gold prices just came with the deal.
While monetary discourse will always draw heated debates, it could be argued that QE1 and QE2 accomplished their objectives: banks confirmed excess reserves on their books and the national money supply, which was contracting for much of 2009 and 2010, went from moderate growth to rapid growth in the summer of 2011, as evidenced by gold's parabolic run. At that time, many saw no need for further easing programs, as the return on investment would exponentially decline and economic activity would not be substantially stimulated.
Yet here we are again, only a few months removed from an official QE3 and a de-facto QE4. Those that have argued in the past that further quantitative easing would have little effect were proven right from a short-term perspective:
The above is the 1-year daily chart for gold bullion, layered in with the US Dollar index. As you can see, for much of the past year, gold and the dollar shared an inverse relationship: as one went up, the other went down, as has been the case throughout much of the current commodities bull market. However, a strange occurrence developed in November, when gold and the greenback began to share a corollary relationship. This was evidenced most recently on Friday's (Jan 25) market session, when both assets tanked.
As expected, silver began to show the same odd correlation with the dollar:
Of course, noted gold bears and "Johnny-come-lately" have swung with full force, claiming that further issuances of QE are suffering from a declining rate of return and that this will be the end of the precious metals bull market. While I agree that QE3 and "QE4" have been a disappointment for gold and silver, talks of the bull market's demise have always been premature and will likely be premature again.
First, not all precious metals have been affected negatively:
Palladium is regarded as one of the more obscure precious metals and is heavily demanded by the automotive industry. Since late November, as the dollar weakened from "QE4," the other white metal began a steep challenge of the $700 level, eventually overcoming it and closing just south of the $740 mark. It too had a moment of direct correlation with the greenback, which lasted, for roughly a month and a half: this confirms that mere correlation with the dollar is not necessarily bearish and could lead to greater gains.
Second, we have to consider that other sectors, most notably the S&P500, benefitted dramatically from Bernanke's most recent monetary exploits from a nominal perspective, yet the market participation has been on a noticeable decline. This brings up the specter that current record highs in the equities are merely psychological speculation towards a monetarily supportive Fed; an assumption that may bring about unintended consequences.
For now, we have to acknowledge the facts: the metals have lost some near-term momentum and that usually brings the bears out of hibernation. Yet at some point, the precious metals will unhinge themselves from its current corollary relationship with the dollar and will eventually begin another challenge upwards.
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
We are approaching $200 million a year in precious metals sales. We are rated A+ by the BBB. We are recommended by many prominent newsletter writers including Doug Casey, David Morgan, Ron Hera and LeMetropole Caf�. Our reputation for service, education, quality product and pricing is outstanding. Back to Table of Contents |
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