June Update

Historically the summer months have been quiet in the Precious Metals markets, but this is no ordinary summer, a loss of confidence, a 'black swan' event, could easily trump the expected seasonality of the metals, and send it off, time will tell.

I know that some bought near the recent high of $50, (most well below $30) if I had a crystal ball I would have suggested waiting, which is why I when I am asked about near term price action, I always point to the long term picture, as that is clear, the fundamentals of supply/demand are clear, the short term anything is possible, especially in a manipulated leveraged paper market. Some recently said to me 'I hope the market moves the way you want',  I do want and expect the price to go up, however honestly I am happy for an extended period below the nominal high of $50, as I hope to be able accumulate more, and help as many others to do the same.

Thus for me the plan, is still the same, continue to accumulate precious metals that will be revalued many multiples higher in the future.

Fundamentally nothing has changed, we are now only circling the proverbial toilet drain faster, with turmoil in the middle east, Europe's debt problems leading to riots and protests, debt ceiling limits reached in the U.S., and the end of the FED's money printing program QE2 (ending June 30th), it should make for a very hot summer.

Re: QE I have no doubt there will be QE3, it'll come, but it’s a matter of timing at this point, if/when the world markets tank then nearly everyone will clamor for more printing,

There are also many articles out there explaining how the present balance sheet of the FED is so huge (nearly 3 trillion USD) that just reinvesting the maturing debt back into the market will be another form of QE, AND they can re-arrange their portfolio, by changing the debt maturity levels at any time, for example if the 10 year note gets out of hand (rising interest rates) they can move specially into that one, at the expense of the 30 year, etc. http://investmentwatchblog.com/lets-recap-what-jim-rickards-has-said-about-the-qeiii-subject/

Anyway as the 'beauty' pageant for the ugliest fiat currency continues, the EURO has taken the lead, and many are pulling out of that fiat currency favoring a higher dollar, but the smart ones and going to Precious Metals; http://www.ft.com/intl/cms/s/0/c986823e-9bf8-11e0-bef9-00144feabdc0.html

Gold has made new Highs this last month priced in both the U.K. Sterling and the EURO;

(GBP Chart)

(Euro Chart)

I full expect a new EURO to be born out of this crisis, one based, at least partially, on tangibles; gold/silver/oil/grains etc. 
http://www.hardassetsinvestor.com/interviews/2791-dennis-gartman-long-gold-short-euros-with-eyes-on-irrational-corn.html


I also expect that Greece will default (after that maybe Portugal, Spain, and Ireland), and go the way of Iceland (just say no to repayment) and perhaps reinstate the drachma (which they can then devalue against other currencies and climb their way out).

There comes a point where if the ECB prints too many Euro's (to 'help' the PIIGS Portugal, Ireland, Italy, Greece & Spain) that the very integrity of the EURO is questioned,
http://www.fgmr.com/is-the-ecb-solvent.html

Unless they use the 'golden bullet' and re-price the gold they hold reserves at much higher multiples. --a step was made recently moving Gold from Tier 3 Capital (50% discount) to Tier 1 Capital see here for details, this would have a huge impact on Gold/Silver http://www.usfunds.com/investor-resources/frank-talk/?i=5935
But the Paper Precious Metal markets are full of counter party risk, and at the end of the day what a central bank has in it's vaults may not be the central banks.  A prime example ---The Belgian Bank admits 41% of reserves lent out
http://www.zerohedge.com/article/41-belgian-central-bank-gold-has-been-lent-out

S&P restates political threat to U.S. AAA Rating (dollar negative/PM (Precious metal positive). http://ca.news.yahoo.com/risk-u-credit-rating-downgrade-increased-p-095220913.html

There are many who say that when the silver price was rising earlier this year, that futures contracts where settled in cash, some at 30% premium over spot.
http://news.coinupdate.com/is-the-comex-manipulating-gold-margins-to-mask-silver-supply-deficits/

All the while silver inventory available at the COMEX continues to leave their depositories.

The commercial shorts added about 1500 contracts to their 'presold' ledger according to the June Bank Participation report (as of June 10th), however non-U.S. bank went from short 3,600 in May to long 66 in June, which is positive. The Bank Participation report when released gives the clearest view of the market positions as it is up-to-date when released, the weekly Commitment of traders report released every Friday, only gives a snap shot of Tuesday--Tuesday action. COT reports after the June 10th Bank participation report continued to show liquidation by the commercials, but as explained in previous posts they want to do this on falling prices, at all costs (literally!).


Here is the June Bank Participation Graph;

Here is the 'days to cover' chart;

Asians & other Creditor Nations continue to accumulate precious metals;



(Russian Central Bank)

China has to issue more gold/silver coins to meet continued strong demand;
http://news.xinhuanet.com/english2010/china/2011-06/20/c_13940014.htm


India imports of gold/silver soar 222%
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=129665&sn=Detail&pid=110649

Vietnam is worlds 2nd Largest gold hoarder;
http://english.vietnamnet.vn/en/business/9404/vietnam-is-world-s-2nd-largest-gold-hoarder.html?utm_source=Sprott+Money+Newsletter&utm_campaign=a20a76a84a-Sprott_Money_Newsletter_June_16_20116_16_2011&utm_medium=email


Frank Holmes Discussing Gold & Oil -the Fear and the Love trade
http://www.morningstar.com/cover/videocenter.aspx?id=384102&sr=wt0110

-Fear trade; Negative real interest rates, deficit spending, political policy fighting deflation

-The Love trade, Asians give gold as gifts and many of these nations were not around in the 1980's market, and the worlds population has doubled since then.

-Central Banks will continue to be buyers, and with Basel 3 capital requirements being implemented in the Fall, gold will no longer held on their balance sheets at a 50% discount to market value, making it more attractive to hold.


On the regulatory front; CFTC's Gary Gensler says 'public not protected'
http://video.ft.com/v/985595019001/Derivatives-regulator-faces-funding-challenges


Dive in Silver Price a 'set up' says Sprott
http://silverinvestingnews.com/7431/dive-in-silver-price-a-%E2%80%9Csetup%E2%80%9D-says-sprott.html

On this note, one must realize that fiat money has it's own 'market' characteristics as well, based on supply and demand, and events as seen in the May silver 'Crash' when the CME raised margin requirements over and over, or the FED ending QE2, they in essence created a demand for cash, and squeezed leveraged paper participants. Being able to take advantage of any drops in price would be ideal, the flip side to having 'attack capital' available, is that when the S***T hits the fan, you'll have some fiat money that will be late (maybe too late) for the inevitable take off of Precious Metals. -At this point I am conflicted as many probably are, I have to keep some in fiat for this and other business going, taking stock of your own plan and re-evaluating every now and then is probably the only way to go. Savings I feel differently about.


Why anyone would want to trust their savings, storing their purchasing power in the USD (or other fiat currencies), controlled by the FED (or other centrally planned/issued currency) is beyond me,

10:20 minutes into Ben Bernanke's most recent conference http://www.federalreserve.gov/mediacenter/media.htm

he said "We don't have a precise read on why this slower pace of growth is persisting."

he should know;

I tend to agree with Peter, he's trying to save the debtor's by debasing the currency in which their debt is denominated, he's said they want at least 2% inflation, do some compounding math on 2% per year, and you'll find it doesn't take too long take to take the value of something to 0!

http://www.youtube.com/watch?v=9QpD64GUoXw

What's a guy to do?

Well you can buy the EURO, just buy the right type, we have the Philharmonic which is the 2nd most purchased coin worldwide available right now.

How's that for a shameless plug?  ---But really, I don't care where you get it, just continue to get some when you can.

Have a good summer.

May update

Here is a quick update on the silver market, as always, there are many dynamics to any market, and so I'm sure that there are areas that I am not seeing, but I would like to share with you some of what I see in the silver market.

First of all the good news from the most recent Commitment of Traders report released last Friday (which shows a snap shot of Tuesday--Tuesday trading), the commercial shorts have their lowest position of shorts (pre-sold silver) since May 2009, when silver was trading at around the $17 range. The managed money (Hedge funds) that had been holding long positions (buyers) have sold a large percentage of their positions to the commercials, and now there is very little that they can liquidate to the commercials. In other words the internal structure of the COT report is most positive it has been since May 2009, when silver was at $17 per oz.

For a more complicated look at the situation see this graph below, it was updated only until April 2011, give it a couple of minutes and it'll grow on you;



Please also see the difference in the 2 graphs below the first one is based on the most recent commitment of traders report, showing the still present roughly 110 days of world silver production that the commercials (Banks) have pre-sold (and need to buy back), compared with 160 days from back in August 2010.

This is the most manipulated commodity market in the world, as can seen in the 'Days to cover' charts above. -where the banks have held huge manipulatively large levels, and as the price has increased, they were in the red for huge losses, the futures market is a zero sum game, someone's loss is someone's gain. All along the recent price rise to $49 the commericals were unloading their positions (buying them back), and if price broke above $50 at that time, the banks could have been in big trouble facing huge losses! These banks sit on the board for the CME (exchange), and are the exchanges largest customers so many believe that the CME pulled the rug out from underneath the hedge funds, speculators and investors to save their business partners, the CME contiually raised margin requirements for silver trading on the Comex, on this recent decline, and along with banks pulling thier bids, they got the ball rolling down. This smacking was done at the very beginning of Monday trading  (Sunday evening in the U.S.), when there was not one physical exchange open, just light globex electronic trading, and asia on extended holiday. To many people including myself, it seems manipulative in nature! --all of this has to do with the paper market in the U.S.

As I wrote on April 19th note to you our monthly purchase participants; "I have come to believe we could be in for quite a rough ride over the next 2-4 months."  I wrote that I thought we may have a correction, I thought this would be due to dollar strength based on a ending of QE2 in June, or maybe an even earlier ending, but rather than a large bounce in the dollar strengthening, what turned out to happen was a creation of weakness in the commodities that are priced in dollars. --same result by a different method. And very welcome by central banks around the world who looked helpless fighting the inflation they had created.
 
The rate of silver's ascent, without some kind of a geopolitical or other crisis was unsustainable. (Still we could have an known or as of yet unknown event take precious metals to the moon.)  Many traders booked profit, many over-leveraged traders got forced out by the numerous hikes in margin CME requirements, etc. Many people also speculate that this had a lot to do with getting metal out of SLV (the largest silver ETF).

This all has little, if anything to do with the physical market, the physical market is still tight, premiums are high, many products have long delays from the mints, even on the comex there is still backwardation (cheaper to buy it in the future) showing the constraints on the physical market. --and when the price declines it allows countries and citizens that run surplus to continue to divest themselves of more paper fiat money, into gold/silver at better prices, which only accelerates the physical shortages developing. (Mexico recently bought 93 tons of Gold, Thailand, bought Russia bought 400,000 oz of Gold, etc


India continues drive demand, but has now taken 2nd place to China;

Here is another great article about China's Precious Metals purchasing.

As Marc Faber said 'become your own central bank by buying gold & silver'. The paper market continues to determine the price, but it will be the physical market that will set it in the future!

Nothing has changed on the fundamentals for silver or gold, it is still the insurance that you can buy even when the financial house of the world built on paper debt is burning. Most investors of the world still are playing the paper game of fleeing from one currency/stock to the other, as each displays more weakness than the other, eventually the world will see through this paper game;

The fiscal monetary situation of the world could hardly be more precarious, the U.S. has a battle in the Congress on raising the debt ceiling

Central Banks of the World continue to increase the money supply, albeit at different rates;

Running higher and higher amounts of debt;

While taking in less and less income;

In conclusion, for those who have bought at higher prices, I suggest to hold tight, we will break out above $50, its just a matter of time. If you can add to your position, taking advantage of this drop in price, or any further price declines, it will average your total cost lower. --in the end, when the current financial system collapses under its own debt weight, or from some outside shock, it will be about how many oz that you have and not so much of the price that they were purchased at. -this is the period that I am holding for. Gold/Silver will be repriced at much higher multiples in the future either by choice, or by the force of the markets, world demographics, and the money supply creation.

Right now gold/silver represent a small portion of the total paper holdings of financial institutions and investors, when the gray portion moves into the gold portion, the price will explode, patience, patience my friends......

One for fun

Eric Sprott Update

Interview with Eric Sprott.

CME Margin Hike Is 4th AND 5th - Charting The Parabolic Rise In CME Silver Margin Hikes

Remember when earlier we said the CME had hiked silver margins for the 4th time in 8 days? We lied. In fact, what the CME did was to hike margins for the 4th (effective May 5) AND 5th times (effective May 9). That's right, dear reader, in one release, the CME has performed two concurrent margin hikes, which means today's action is the 5th margin hike in 8 days, a previously unheard of event! As of May 9th, the initial margin is $21,600, or 11% of the contract value, while the maintenance is $16,000. This is nothing short of sheer panic at the CME. At this point we can only wonder if the FDR-style precious metals confiscation executive order will come by way of the CME or the FBI. And for everyone asking, below is the chart of recent CME margin hikes in silver.

http://www.zerohedge.com/article/cme-margin-hike-4th-and-5th-charting-parabolic-rise-cme-silver-margin-hikes

Silver, Gold 'on Steroids'

Silver, Gold 'on Steroids'

Mon 09 May 11 | 01:45 AM ET

With about 1.2 billion ounces of available investment silver it doesn't take much to set prices higher or lower, Ben Davies, CEO of Hinde Capital, told CNBC. In the end, both gold and silver will, in the long term go up, he added.

http://video.cnbc.com/gallery/?video=1914958227

Forbes Predicts U.S. Gold Standard Within 5 Years

http://www.humanevents.com/article.php?id=43439

Ron Paul 2012!!