November 20, 2014
For 12½ years, I've fought on the front lines of the "gold wars." Nearly every day has in some way, shape or form been difficult; as aside from unrelenting Cartel attacks, I've endured the mental strain of propaganda, lies and ignorance from everyone from the baddest "bad guys" to the "best and smartest" of the lot. From my experience, so-called "good guys" can be as treacherous, or more so, than the bad - such as pied piper newsletter writers; bullion dealers promoting overpriced numismatics; or in the case of one particular dealer with an extremely popular website, consistently highlighting anti-PM propaganda as if they were JP Morgan or the Federal Reserve themselves. Heck, for seven years they employed a Marketing Director of sorts - in many ways, my peer - who was famous for his PM negativity. During his employ, I might add, gold rise from $600/oz. to $1,650/oz.
To that end, this morning's topic relates to the powerful, overwhelming skepticism such surrealism has produced in the PM community; which in the scheme of time, will ultimately be a faded memory for those wise enough to have "bought and held" physical gold and silver today. Why did I focus specifically on that particular website, you might add? Because this morning, their "top headline" takes the cake.
For those not aware, GFMS is the former "Gold Fields Mineral Services" - a leading precious metals industry consultant. Over the years, I have found their work woefully inadequate; in many ways, paralleling that of fellow industry consultant CPM Group, run by none other than the infamous Jeffrey Christian. In other words, GFMS and CPM - and similarly, industry trade groups like the "World Gold Council" and "Silver Institute" - completely ignore the giant pink elephants in the room of price manipulation and the surreptitious leasing, swapping and dishoarding activities of Western central banks.
As for the aforementioned headline, it is pure madness that such data could be published, when essentially all empirical data confirms record demand across the board. Sure, Chinese silver demand data is not readily available; but given their monstrous gold imports and policy of NEVER exporting silver, it's fair to say Chinese silver demand has not declined. As for India, the world's largest silver importer, data has been more difficult to obtain than in the past due to the massive black market that has developed since last year's ill-advised PM import tariffs were enacted. That said, officially reported first half Indian silver imports were down just 3% from last year's record pace, and no doubt increased since prices were since smashed. Heck, even the leading MSM cheerleader, the Wall Street Journal, said so last week - highlighted by the following quote from the director of a leading Indian bullion dealer..."there is a tsunami in silver. Investors are pouring in."
As for Western demand, U.S. and Canadian sentiment may be at historic lows, but demand is on pace to exceed last year's record levels. At the Royal Canadian Mint (where sales data is released quarterly with a two month lag), first half silver Maple Leaf demand was 10% above last year's record pace; while at the U.S. Mint, despite this month's 12-day shutdown, 2014 is on a pace to exceed 2013's record Silver Eagle sales by 8%. In fact, it just released updated November sales data yesterday afternoon, following the aforementioned 12-day sales suspension; and lo and behold, November Silver Eagle sales have been a whopping 2.57 million ounces in just the five days they were available, putting the month on a pace of nearly 4.3 million ounces, which would make it the eighth largest month ever! Throw in the fact that the severe PM backwardation - which hit new 14-year lows this morning - suggests massive physical tightness; let alone, the otherworldly open interest in the COMEX December silver contract that expires Monday, and you can see why one would be incredulous that a "leading authority" on silver demand could claim demand will be lower in 2014 than 2013. Then again, if it turned out to be just "6.7%" lower than last year's record level, how on Earth can the price be down 17% - atop last year's 36% decline, when demand was higher than at any prior time in history?
Yes, the lies are thick, the thieves thicker and the naked shorting unrelenting; even more so in mining shares, where the large caps breached 2008's crisis lows last week, and juniors have continuously plunged since mid-2007. Thus, it's not difficult to see why many have lost heart, even those who appropriately bought gold and silver as savings and/or insurance, as opposed toinvestments like stocks and bonds. Of course, nothing in life is easy, and "getting to the other side" of history's largest wealth transfer, opposed by the powerful entities intent on preventing you from doing so, is as difficult an undertaking as is imaginable. Which is why adherence to the wisdom of the handful of "good, smart people" in our sector is so important - which in my view, the authors of the Miles Franklin Blog should be deemed.
Before I get to the "punchline" of today's article, I thought I'd barrage you with TPTB's cumulative foolishness, to empower you with the knowledge of just how far off the track reality has been pushed - and thus, how close we are to "Economic Mother Nature" re-asserting herself and then some. To that end, let's start with the blatantly compromised Standard & Poor's "warning" of how the ECB has just "one last arrow in its quiver of quantitative easing of €1 trillion." Even I am floored by such lunacy, as the world's leading credit agency is claiming Europe's only hope for salvation is massive, unprecedented money printing. And this is after six years of the most maniacal, global money printing ever has produced a veritable debt explosion, and the worst European economy since World War II.
Speaking of the shear incompetence and foolishness of Central banks and rating agencies, how about the Bank of Japan "warning" Shinzo Abe about fiscal irresponsibility, just days after enacting the most hyperinflationary monetary policy in history? Which, by the way, has the Yen in utter FREEFALL this morning, and yen-priced gold within 10% of its all-time high. To that end, recall a year ago, when S&P warned it would downgrade Japan's AA- rating if it didn't demonstrate greater fiscal responsibility? In fact, they specifically cited planned sales tax increases as a potential fiscal savior - but "strangely," they haven't downgraded Japan now that the sales tax was cancelled. Mark our words, Japan will be the first "first-world" nation to experience hyper-inflation; and when it does, I wonder if S&P will have anything to say about it. Then again, recall what happened to S&P when they downgraded the U.S. in 2011 - i.e., they were sued by the U.S. government. For the record, they threatened further downgrades if the U.S. didn't get its fiscal house in order. However, today, barely three years later, the U.S. national debt is $3.8 trillion higher and the "debt ceiling," for all intents and purposes, abolished. Yet, not only did they maintain America's credit rating but upgraded its fiscal outlook!
Then we have China, which claims to be growing by "7.5%" per annum, despite crashing investment, home prices, commodities and credit quality. This week, both iron ore and steelprices plunged to their 2008 lows, whilst bad loans surged at their most rapid pace in a decade, and home prices had their largest year-over-year price decline in years - ominously, in an economy where three-quarters of all household assets are represented by real estate holdings. And yet, we're told Chinese "housing starts" rose by - this is not a typo - 39% from a year ago, in a nation that has already become the universe's largest "ghost city."
Oh, shoot! I just don't have enough space to write of the irony of Greek bonds plunging in the face of imminent default, whilst the MSM says Greece is not only "fixed," but the "fastest growing economy" in Europe - as following a six-year, 23% plunge, Greek GDP supposedly increased 0.7% last quarter. Or the propaganda machine that is the "North American Home Builders Association" claiming homebuilding "sentiment" has quadrupled in the past three years, despite the fact actual home sales have barely budged; mortgage purchase applications are at 19-year lows (despite record low interest rates and a "recovering" economy); home prices are declining; construction activity contracting; and the equally biased industry cheerleader, Zillow, claims housing will be weak for at least three years. Or the "common knowledge" that the Ukraine has "de-escalated," when both sides are speaking of imminent war. Or that plunging oil and industrial commodity prices are a "good thing," when producers (particularly shaleproducers) and sovereign nations alike are amidst massive political and economic upheaval - which will only worsen as the historic plunge in commodity currencies like the Ruble, Real, Rupee and Rand accelerates. Or my favorite lie, that the world is awash with "deflation," when not a single country is reporting a declining cost of living - with key "need versus want" staples like milk and beef hitting all-time highs.
Within this context, and this week's painfully blatant Cartel defense of $1,200/oz. gold, we fully understand your frustrations. However, said "Economic Mother Nature" has decidedly not gone away, so we can only warn PM holders to relax; particularly as the mining industry teeters on all-out collapse, GOFO rates contract further and demand rapidly escalates globally.
To that end, for the first time in years, even my skepticism is starting to abate. To wit, just weeks ago, we were told the Catalonian "no's" would win the day; yet, an astounding 81% voted for secession whilst just 4% voted against. Meanwhile in Switzerland, even a Goebbels-esque propaganda campaign - led by "Lady Macbeth" Thomas Jordan, the Swiss National Bank's Chairman - appears to be floundering as the "yes" contingent, which could alter monetary history remains in the lead. To that end, Alan Greenspan himself is publicly supporting gold's virtues; as is Yves Marche, the ECB board member that stated that the ECB is considering gold purchases. Not that I believe they actually would or could buy gold, but the fact they are evenmentioning it speaks volumes of the evolving global mindset. Meanwhile, in the Eastern Hemisphere, precious metal demand has never been higher; and quite vocally, the emerging Sino-Russian economic bloc is promoting its intention to utilize gold as its primary monetary asset.
Amazingly, skepticism amongst the PM community has become so pervasive, even some of its wisest strongest leaders are fearful TPTB will be able to suppress gold and silver prices in the event of a Swiss "yes" vote. Claims that "swaps" will be substituted for the real thing are a specific "goldbug fear" I have read of, and the SNB dragging their feet on mandated gold purchases another; as clearly, many of us have been lulled into a fear that somehow the Cartel will always "find a way to win." However, "Economic Mother Nature" assures us prices cannot stay this low for long, and the reality of a global monetary awakening is clearly occurring as we speak. Remember, it's always "darkest before the dawn"; and right now, the "darkness" been more pervasive. Have faith in your insurance and don't put yourself in a position to lose it. As unlike health, fire and flood insurance - which may one day be needed; fiat currency insurancewill be required - likely sooner rather than later.