Gold’s 47-Year Bull Market

The following monthly chart shows that relative to a broad basket of commodities*, gold commenced a very long-term bull market (47 years and counting) in the early-1970s. It’s not a fluke that this bull market began at the same time as the final official US$-gold link was severed and the era of irredeemable free-floating fiat currency kicked off.
Anyone attempting to apply a traditional commodity-type analysis to the gold market would have trouble explaining the above chart. This is because throughout the ultra-long-term upward trend in the gold/commodity ratio the total supply of gold was orders of magnitude greater, relative to commercial demand, than the supply of any other commodity. Based on the sort of supply-demand analysis that routinely gets applied to other commodities, gold should have been the worst-performing commodity market.
The reason that a multi-generational upward trend in the gold/commodity ratio began in the early-1970s and is destined to continue is not that gold is money. The reality is that gold no longer satisfies a practical definition of money. The reason is the combination of the greater amount of mal-investment enabled by the post-1970 monetary system and the efforts by central bankers to dissuade people from saving in terms of the official money.

This post was published at GoldSeek on Friday, 24 November 2017.

Market Report: Firm undertone

Gold and silver prices on balance drifted with an upwards bias over the week, with a firm undertone. Interest was impacted by the US Thanksgiving Holiday. Given the near-certainty of a rise in the fed funds rate next month, plus the upcoming expiry of active contracts on Comex, this is something of a result. Monday saw a $2bn notional sale of gold futures (15,000 contracts, or 47 tonnes of gold), deliberately timed, it seems, to drive the price lower, which it did by $17. Gold on the week is down only $3, having recovered from Monday’s hit, to trade at $1290 in early European trade this morning, and silver is down 18 cents at $17.10. However, there could be significant volatility in the next few trading sessions, because the last trade date for November gold and silver futures is next Tuesday – 28th November. As of last night, there were 165,772 November gold contracts outstanding, either to be rolled into February, or closed. The slightest excuse for the shorts to bang the gold price will undoubtedly be taken. In silver, there’s 59,236 contracts to roll, so the situation there is equally fragile.

This post was published at GoldMoney on November 24, 2017.

Deflation must be embraced

There are two problems with understanding deflation: it is ill defined, and it has a bad name. This article puts deflation into its proper context. This is an important topic for advocates of gold as money, who will be aware that sound money, in theory, leads to lower prices over time and is often criticised as an objective, because it is not an inflationary stimulation. The simplest definition for deflation is that it is when the quantity of money contracts. This can come about in one or more of three ways. The central bank may reduce the quantity of base money, commercial banks may reduce the amount of bank credit, or foreigners, in possession of your currency from an imbalance of trade, sell it to the central bank.
The link with prices is far from mechanical, because the most important determinant of the general price level is the relative appetite for holding money, and not changes of the quantity in issue, as the monetarists would have it. All else being equal, a deflation of the money quantity can be offset by a decline in the public’s desire for cash and deposits in hand, so that the general level of prices is unaffected.

This post was published at GoldMoney on November 23, 2017.

Is This Gold Rally The Start Of Something Big?

First published on Sunday Nov 19 for members: While I would love to believe that the rally we saw on Friday is the start of the next larger degree break out in the metals complex for which many have been eagerly awaiting, there are many signs that suggest it is only part of a corrective rally.
As I noted in my update last weekend:
‘But, please, do not assume we have struck a bottom and expect that we are now ready to break out simply because we see another rally begin in the coming weeks. The market still has a lot to prove to us, especially since the primary set up we now have on our charts suggest we can see prices that are lower than where we closed on Friday. But, again, I will certainly maintain an open mind depending upon how the next REAL rally takes shape.’
Now, the question that I still maintain in my mind is if this is even the ‘real rally’ that I have been looking for over the last few weeks. And, yes, I am still questioning it.
While my primary expectation has been looking for a larger b-wave rally to take shape in gold and silver, many of the stocks I track in the mining complex do not look ripe for the major break out to begin.
First, I want to focus on the metals. The attached 144-minute silver chart is quite representative of the ‘mess’ we have been experiencing in the metals of late. My primary expectation is that we should see a rally in the metals, but I am still not quite certain if we will see one more spike down before the larger b-wave rally I am expecting takes shape in earnest. Unfortunately, due to the messy structure of late in the charts, I have no high probability perspective that suggests we have begun that rally with the move on Friday. In fact, we still have potential for one more spike down before we are able to strike our targets overhead.

This post was published at GoldSeek on Friday, 24 November 2017.

Buy Gold As Fed Shows Uncertainty And Concern Over Financial ‘Imbalances’

– FOMC minutes show uncertainty and concern about markets are affecting officials’ decision-making
– Officials were cautious when evaluating market conditions and the ‘damaging effects on the economy’
– Worry about ‘potential buildup of financial imbalances’ and a sharp reversal in asset prices’
– Members seem oblivious to impact of inflation on households and savings
– Physical gold and silver remain the only assets for real diversification and safety
After nearly a decade of pumping up the US and global markets, Janet Yellen and team are now starting to show some concern for financial market prices. The FOMC is concerned that they are getting out of hand and are a danger to the US economy.

This post was published at Gold Core on November 24, 2017.

The Digital Revolution Has Empowered Central Banks

We won’t know till the end of this cycle how much mal-investment has occurred under the great monetary inflation which started in 2010. We may already suspect, though, that much of this will be in ‘big tech’ and related fields. Any final reckoning should also include wider political and socio-economic damage not included in a narrow economic calculus.
Scott Galloway describes skilfully and colourfully the power of the big tech narrative in his just published and highly readable book ‘The Four: the hidden DNA of Amazon, Apple, Facebook and Google’. The general critic would take issue with his repeated use of a four-letter expletive. The monetary critic can point to a bigger problem with the book – a lack of any analysis linking the amazing spread of the big tech narrative to the prevailing monetary disorder.
If central banks had not created a famine of interest income, the big four would surely not have enthralled investor audiences to anything like the actual extent. Hunger for yield means that investors become willing to take on bad bets (actuarial value highly negative but some possibility of a big pay-off) rather than suffer certain loss on monetary assets. This is an example of ‘loss aversion’ as diagnosed in the pioneering work on mental flaws of investors by Daniel Kahneman and now prominent in behavioural finance theory.

This post was published at Ludwig von Mises Institute on Nov 23, 2017.


What is absolutely certain is that global wealth will be totally decimated in the next 4-8 years. It doesn’t matter if you are very rich or ‘just own a house’ with some equity left. Most of it will come down in value by 75-95% in the next few years as the debt and asset bubbles implode.
But what very few people realise or plan for, is the confiscation of wealth that will take place in coming years. There will be confiscation on many levels.
With times deteriorating, governments will be thrown out as ordinary people become dissatisfied with their rapidly declining ability to survive. Many people will lose their jobs and governments’ ability to help the poor and hungry will decline rapidly due to falling tax revenues. During that process, opposition parties will promise the earth. Thus we will see a society in upheaval due to political turbulence, social unrest, dire economic circumstances as well as anarchy.
Many countries in the West have turned socialist in latter years, and this trend will continue as the climate deteriorates. With the ruling party desperately fighting for its own survival, their task becomes increasingly impossible as there is no money left in the coffer and printed money no longer has any value.
Opposition parties will promise solutions to all the problems and will have no difficulty becoming elected. But as they get into power they will also fail desperately. In most Western countries there will be left wing parties ruling but we might also see far right leaders emerging due to the anarchic situation.

This post was published at GoldSwitzerland on November 23, 2017.

28 Reasons to Buy Physical Gold

Throughout human history, gold has constantly emerged as an unparalleled form of savings, investment and wealth preservation. Due to its unique characteristics and features, gold has inherent value and cannot be debased. When holding physical gold, there is no counterparty risk or default risk. Wealth in the form of gold can also be held and stored anonymously.
From its ability to retain its purchasing power over time, to its safe haven status in times of financial turmoil and uncertainty, to gold’s ability to diversify investment risk, there are many and varied reasons to own physical gold in the form of investment grade gold bars and gold coins.
1. Tangible with Inherent Value Physical gold is real and tangible. It is indestructible, impossible to create artificially, and difficult to counterfeit. Mining physical gold is arduous and costly. Physical gold therefore has inherent value and worth. In contrast, paper money doesn’t have any inherent value.
2. No Counterparty Risk Physical gold has no counterparty risk. When you hold and own gold bars and gold coins outright, there is no counterparty. In contrast, paper gold (gold futures, gold certificates, gold-backed ETFs) all involve counterparty risk.

This post was published at Bullion Star on 23 Nov 2017.

Rate hikes and what it means for gold

For the first time since the onset of the credit crisis, we believe the market is beginning to price in a higher probability that the Fed is finally in the position to raise rates both continually and more frequently. The prevailing view is that central bank rate hikes are the natural enemy for gold prices. Analyzing rate cycles and the gold price from 1971, we find that gold tends to do better in hiking-cycles than cutting-cycles. We find that the positive performance during hiking-cycles can be explained with the three drivers identified in our gold price framework. Given the outlook for these three drivers, gold will likely do well over the coming quarters even as the Fed keeps raising rates.
View the Entire Research Piece as a PDF here.
In recent years, the Fed has persistently indicated that it was going to hike rates several times per year over the next few years until rates are ‘normalized’. So far, the Fed has fallen short on delivery, having hiked only once in 2015, once in 2016 and so far twice in 2017. While that doesn’t sound like a lot, compared to its peers, the Fed is a hawk.

This post was published at GoldMoney on November 21, 2017.

Does The CoT Structure Prohibit A Rally?

Can the Comex metals rally from here given that the CoT structure is not yet fully “washed out”? Of course they can! While it’s sometimes easy and obvious to assume that rallies are imminent by the CoT structure, history shows us that a fully-washed CoT isn’t imperative for a bottom and rally.
Let’s start with an example of a full wash, rinse and spin in Comex gold. Note the all-time lows of December 2015. That’s as clean and washed as you’re likely ever going to see.
DATE PRICE COMMERCIAL NET SHORT 12/1/15 $1060 2,911 (ALLTIME LOW) 5/3/16 $1290 294,901 5/31/16 $1210 214,038 7/5/16 $1375 340,207 (ALLTIME HIGH) So, in this example, if you were waiting for a full CoT washout in May of 2016, you missed a $165 move in June.

This post was published at GoldSeek on Wednesday, 22 November 2017.