The Miles Franklin Newsletter
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From The Desk Of David Schectman
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David's Commentary (In Blue):
I have an out of town guest coming to visit on Wednesday. This is probably my only posting for this week.
For the last 6 months, we have urged our readers to sell gold and buy silver. We stated that at 86 to 1 the silver – gold ratio was way out of balance and silver was a buy. For a while the ratio moved down toward 80 to 1 but then it started moving back up and now it is 91.32 to 1. Did we make a big mistake here? Yes, if you are looking at this short-term, but no if you take a step back and see where it is headed.
As it now stands, silver is the most undervalued relative to gold as it has been at any time in the last 25 years. This is not a result of investors dumping silver in favor of gold. How can this ratio exist? The total value of all the gold in the world is $8 trillion and the total value of all the silver in the world is just $3 billion. This is all about futures positioning on the COMEX. The last time gold traded where it closed yesterday, back in 2013, silver was trading over $30. It has a long ways to go, but silver will catch up to gold.
In 2011 gold topped out at $1,900 and silver was $48.48. The ratio was 39.19 to 1. Compare that ratio to today’s ratio and you get an idea just how underpriced silver is today. And that is what we expect the ratio to look like when the precious metals take off again. Actually, there is a very good chance that the fuse may be lit right now and this is the beginning of the bull market we have been waiting patiently for since 2012. Even if the ratio only reverts back to 50 to 1 or 60 to 1, our advice is sound. Be patient. JPMorgan is responsible for this, but they also have the largest hoard of physical silver in the world and when they decide to let silver run, they stand to make billions. It’s coming.
This is not a normal market. Gold and silver want to move up but there are forces that are doing everything in their power to stop them in their tracks. The following quote from Ed Steer gives you an idea of what is taking place now.
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“The firepower that the powers-that-be have unleashed in the precious metal market this past week is like nothing I've seen before. The volume numbers have been staggering...the highest I've ever seen in the twenty years I've been watching this market.”
“Although gold was up almost 60 dollars on the week -- and silver by 45 cents...it's a given that if JPMorgan et al hadn't been ever vigilant as short sellers of first and last resort, gold could have easily been up $600 -- and silver by $45.”
“Let me ask you the obvious, dear reader. How much money would have flowed out of the U.S. equity markets and into the precious metals complex if these rallies in gold and silver had been allowed to run away to the upside? Enough to blow it sky high -- and it still might...as that thin edge of the wedge that I've been referring to for the last week or so, just got a whole lot thicker this week.”
“The war is being fought in the two monetary metals. Nothing else matters.”
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Here are the most recent charts on gold and silver. As you can see, gold is very oversold and that usually means it is ripe for a correction. But there is enough new interest in “risk assets” that the correction may not come for quite a while. Markets can stay oversold for long periods of time.
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When you look at the 10-year chart for gold, it has broken above the key resistance at $1,360. That is the level that has been defended for the last three years. This current move is very impressive!
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Here's the
year-to-date
chart. This is not about supply and demand of physical gold and silver. It is all a result of JPMorgan's near death grip on the silver price on the COMEX.
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Ed Steer accurately sums it up as follows:
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The precious metal complex is certainly in play now -- and the four-letter gold word is far more frequent in the mainstream financial press these past few weeks. But the powers-that-be are fighting these rallies with everything they've got. One has to wonder if it will be enough this time.
Once again, here's that Peter Warburton quote from
his April 2001 essay
that I used earlier this week to show you what central bankers are really up against..."What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar, but of all fiat currencies. Equally, their actions seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets."
The moment that battle is lost...and it's inevitable that will be lost at some point...the financial and fiat monetary systems that came into being in 1971 when Nixon "temporarily" denied convertibility in U.S. dollars for physical gold, will be relegated to the dustbin of history.
That's what's at stake here -- and with central bankers being the sociopathic creatures that they are, they will fight this to very last COMEX contract. The chance that they'll ever sacrifice one good delivery bar in support of this fight, is remote at best. Even though it began almost sixty years ago, they haven't forgotten the hard lessons learned by the failure of the
London Gold Pool
back in the 1960s. And with some of the world's central banks on a gold-buying spree currently, there would be no stomach for it now.
And as I've pointed out on numerous occasions over the years, I'm still not sure whether this "final crack" will come by circumstance, or design.
It may have started this week -- and when the final denouement does arrive, the Golden Rule will come into play, as it has through all of history..."He who has the gold...[and silver]...makes the rules."
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Ed Steer
As happy as I was to see higher price in both gold and silver on Thursday, the fact of the matter is that JPMorgan
et al
were at battle stations as short sellers of both first and last resort during the entire trading session yesterday. If it hadn't have been for them, gold would have been several hundred dollars per ounce higher -- and silver would have risen $25 rather than 25 cents.
The paper volumes that 'da boyz' through at the precious metal prices was absolute immense -- and that is continuing without a break in Far East trading on their Friday. The sole purpose of this is to cap these rallies as quickly as they can before the trickle of money into this sector become a flood that totally over runs them.
There's no doubt that JPMorgan
et al
are out to kill these rallies in silver and gold stone-cold dead...at least temporarily -- and we may have seen the top of this current price rally for the moment.
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There was an article on Zero Hedge that caught my attention. I emailed it to a friend who is very wealthy and open minded (a rarity these days). He owns no gold. He emailed me back the following: “
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The question I will know ask is without conflict on my part. It is not meant to be a gotcha question. I respect you and your intellect. So please do not mistrust my question. There is no hidden agenda on my part.
When if at all will this collapse begin?
Another way of putting my question would be on a scale of 1 to 10 what number would you attach to this collapse taking place. Obviously, 1 being the lowest 10 being the highest.
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Rather than put a “number” on this outcome, perhaps we should simply acknowledge that the likelihood of a war between Iran and the U.S. is real. There are factions in our government that are pushing hard for it.
I often wonder why, when it comes to gold (and silver), so many people are content to sit on the sidelines waiting for proof that they need it? I have always believed that you must be early, not late to the party. You see, when gold takes off, in a scenario where the dollar is about to lose its reserve currency status, two things are happening. Not only is gold rapidly rising, the dollar will be rapidly falling too. That makes it doubly important to be ahead of “The Event.”
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Zero Hedge
Provoking Iran Could Start A War And Crash The Entire World
Tensions in the Persian Gulf are reaching a
point of no return
.
In recent weeks,
six oil tankers
have been subjected to
Israeli sabotage
disguised to look like Iranian attacks to induce the United States to take military action against the Islamic Republic. Some days ago Iran rightfully shot out of the sky a US Drone. In Yemen, the Houthis have finally started
responding
with cruise and ballistic missiles to the Saudis’ indiscriminate attacks, causing damage to the Saudi international airport of Abha, as well as blocking, through
explosive drones
, Saudi oil transportation from east to west through one of the largest pipelines in the world.
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Here is another Zero Hedge article that touches on the same theme: war with Iran and what it will mean for the price of oil, gold and the US dollar
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"
As markets and the Fed itself rapidly adjust to the new reality of a slowdown in economic growth
, those risks have subsided, bolstering our conviction that
the next gold cycle is about to unfold
..."
The Fed and the defense of the dollar
The US dollar-based economy has a
huge debt problem
caused by post-2008 economic policies. All central banks have lowered interest rates to zero or even negative, thus continuing to feed otherwise dying economies.
The central bank of central banks, the Bank for International Settlements, an entity hardly known to most people, has
stated
in writing that “the outstanding notional amount of derivative contracts is 542 trillion dollars.” The total combined GDP of all the countries of the world is around 75 trillion dollars.
With the dimensions of the problem thus understood, it is important to look at how Deutsche Bank (DB), one of the largest financial institutions in the world, is dealing with this. The German bank alone has assets worth about 40 trillion dollars in derivatives, or more than half of annual global GDP.
Their solution, not at all innovative or effective, has been to create yet another bad bank into which to pour at least 50 billion dollars of long-term assets, which are clearly toxic.
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Is the COMEX Running Out of Silver? – with Harvey Organ
Anyone who studies the silver market for any period of time quickly realizes that things are far from normal.
For years silver investors have been stunned by the amount of paper silver contracts that are dumped on the market and keep the price low. While at the same time, other counter-parties are taking as much physical metal out of the market as they can. Which as you can well imagine has created quite a supply and demand imbalance.
So how does it all play out? And are we nearing the point where someone shows up for their silver and there’s a failure to deliver?
Fortunately Harvey Organ joined me on the show to explain what he’s seeing on the COMEX, and what investors should know before it’s too late to respond.
To find out more, click to listen to the interview now!
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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 rated A+ by the BBB with zero complaints on our record. We are recommended by many prominent newsletter writers including Doug Casey, Jim Sinclair, David Morgan, Future Money Trends and the SGT Report.
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