Buy Gold, While It's On Sale

Dollar Commentary:

Smart investing is about taking advantage of situations when they arise, and there are plenty of opportunities right now. On the above chart you can see that the dollar has gained 19% against gold in the last month, after falling horribly for many years. This dollar rally is effectively an invitation to increase your gold holdings, and it is what I have done this week. Gold is quickly becoming my personal currency.


Debts have to be paid, whether in one form or another. Dollar debt can be paid traditionally or by dilution. The US debt is so large that I don’t believe it can be paid traditionally, so the dollar has to be diluted. This dilution will cost all citizens in one form or another, mostly in the form of a lower standard of living.

If a currency is diluted it loses purchasing power, both here and abroad. The buyer gets less and pays more. In the next few months the dollar appears headed down to the $65.00 area on the $USD index. This technical price action represents the fundamental of debt payment by dilution.

While the time of this actual quotation is uncertain, Jim Rogers has commented on the magnitude of the US debt with this statement over the years,“Europe’s got some bad problems but the entity as a whole is not nearly as deep in debt as the U.S. They don't have a huge balance of trade deficit, like we do.”

Our debt could turn into a crisis, and it could be a lot worse than what Europe is experiencing. Will Illinois, California, and New York be viewed by the rest of America like Germany views Greece now? Where does this all end? It feels like there is no end, and much more pain to come for many years.

The dollar rally already now appears to be starting a topping out process. This process that is topping the dollar is also creating substantial bottoming action in gold and commodities. I expect this process to take another two weeks. I want to own more gold while the “sale” is on.

Gold Super Highway Chart

Gold Analysis

Two important items:

You can make the argument that chart damage has been done here. The small symmetrical triangle I highlighted last week failed, but it was a small technical formation; the big technical picture continues to strengthen. Gold has begun the journey to becoming the worldwide asset of choice in this crisis.

Massive Asian physical buying has come to the metals as a result of the three day correction that saw gold prices fall over 10%, and the Indian wedding season preparations are picking up steam.

A report was posted on Bloomberg several days ago stating that gold could go to $10,000 per ounce based upon the amount of money printed on a historical basis. That is prior to any additional QE programs. More printing allows for an even higher gold price. Many believe the US government will default on obligations. There really is no final target price for gold. Over time, governments will just keep printing paper currency to dilute their debts, as they have for thousands of years. It began with diluting gold coins with other metals. The space age has brought the electronic printing press. Gold is volatile, but the largest trend of the gold price over the longest time has always been higher, against government promise-backed currency.

I believe physical gold owners are the smartest of all investors.

To be in a market and to stay in a market, you must believe in what you own and know why you own it. Don’t buy something simply because the chart looks nice. Buy it because of great fundamentals. Use my technical buy signals to increase your core positions.

Read The Rest Here

Commodities on the rise - still. And then Some.

Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers expects the US to lose its AAA credit rating after Standard & Poor's revised its outlook on US sovereign debt to "negative" from "stable".
S&P said last week the United States had until 2013 to come up with a credible plan for addressing its financial problems.
Speaking to Investment Week, Rogers said: “Eventually it will happen. Not this month, or this quarter, but it is certainly going to happen”.
“The US is the largest indebted nation in the history of the world and the debt is going higher and higher," Rogers added.
A new report from Deutsche Bank ranks the US government as the world's fourth riskiest sovereign borrower, behind Greece, Ireland and Portugal, and just ahead of Italy.
"Because the US has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a statement.
"More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures," said S&P credit analyst Nikola G. Swann.
“The government is printing money to solve this problem and I cannot imagine lending money to the US government for 30 years in US dollars at 3%, 4%, 5% or 6% interest, as the government will never be able to pay off those debts, ” Rogers told Investment Week.
Speaking to India's Economic Times (ET), the renowned investor reiterated he was poised to sell short US treasury bonds.
"I have no position in US treasury bonds. I am waiting to sell them short," Rogers said.
"I plan to sell short US government bonds sometime in the next few weeks, months. Interest rates all over the world are going to go higher. We have inflation, staggering debt problems and currency problems facing us. So interest rates are going to go higher," he added.
Asked about the US dollar, the renowned investor said: "It is a conscious policy of the US, as far as I can see, to debase the currency".
"In fact, what they might say, they want the book value of the US dollar to go down. They think that makes the US more competitive. It has never worked in many countries. In fact, this policy of debasing the currency has never worked throughout history and it would not work this time, not in the long term or the medium term, maybe in the short term," he said.
Asked by ET Now if he thought the Fed would stop buying bonds after June 30, Rogers said "they will stop buying bonds at least for a while because they have said so many times that they are going to".
"I would suspect that after a while, they will be back. Who knows what they will call it? They will make up a new name, but they will be back, they will be printing money again next time things go bad," Rogers predicted.
Rogers, who predicted the start of the global commodities rally in 1999, again reiterated his belief in agriculture commodities. "They are all going to go higher. I mainly buy the Rogers Agricultural Index which has 21 agricultural products. So I own them all," he told ET Now.
Which commodities does he prefer?
"I prefer to look at the things that are still depressed. Natural gas is depressed compared to oil, silver is depressed compared to gold. I would rather look at the things within those sectors to see what are the things that are still depressed and see if maybe that is where we should be putting money".
Clarifying his stance on silver and crude oil, he said: "Silver has certainly gone up a lot in the last 9-10 months. There is no question about that, but remember, silver is still 10% below where it was 31 years ago. I bet you do not know many things that are 10% below where they were 31 years ago".
"Silver has been going up but on a historic basis, it is still very depressed. Oil is up a lot in the last year or two, but remember the known reserves of oil are on a decline. People can moan all they want about," Rogers told ET Now.
"The fact is that the price of oil is up, but where is the oil"

Sliver is about to take off like a rocket

As a result of active "demonetization" efforts by the IMF and its member central banks, gold and silver have experienced the type of volatility that has given conservative investors reasons not to perceive the metals as dependable cash alternatives. Instead gold and silver have become known as the asset class to hold as a hedge against inflation.

However, during the 1990's, when inflation was in general much higher than it has been since the turn of the millennium, gold and silver prices drifted lower and stagnated. However, since 2000, gold and silver have risen by over 400 and 700 percent respectively. Remarkably, this has occurred over a time frame during which, by most accounts, low inflation has prevailed. How can this be explained?

In 1944 when the U.S. dollar was considered 'as good as gold,' it was made the international reserve currency. This unique status is the reason that Fed Chairman Ben Bernanke was recently able to say that, "The U.S. Government has a technology, called the printing press that allows it to produce as many dollars at it wishes at essentially no cost."


Today, with the Federal Reserve treating the greenback as a never ending lottery ticket for deficit spending politicians, many investors feel the U.S. dollar is good for nothing. As a result there is an increasing international pressure to remove the U.S. dollar's reserve status. Given that there is no widely accepted alternative to the dollar (the euro has many problems of its own), this is creating fears of an international currency crisis, which has fueled interest in precious metals. So metal prices have risen even with low inflation expectations.

In order to paper over the effects of the financial collapse, central banks around the world are printing as fast as their presses can manage. But unlike prior periods of monetary inflation (like the 1970's), some major powers (China) are withdrawing liquidity. In addition, emerging market manufacturers are holding down prices even as currencies lose value. This may explain the strong performance of metals despite seemingly manageable inflation. But if higher prices emerge into the light of day (as they already have in commodities), currency uncertainty combined with high inflation should intensify the market for precious metals. The question then becomes how to play the market.


Gold has always been the reserve asset of choice for central banks and major private investors. But now, as smaller investors become aware that paper dollars are under threat, many are looking towards silver. Taken in aggregate, these smaller investors have enormous buying power. Through ETF's and mining stocks they are not bound by government restrictions on holding precious metals in retirement funds. In contrast to gold, central banks do not hold much silver. They are therefore less able to push down the price of silver by dumping inventory when rising metal prices undermine currency confidence.

Indeed, so far this year, silver is up nearly 50% while gold is up only about 6%. Given these figures, investors may be forgiven if they feel that the big move in silver may be over. Technical analysis may provide comfort.

According to the U.S. geological survey silver is about 17.5 times more abundant than gold in the earth's crust. This ratio has long been appreciated by civilizations throughout history. Thus, in 1792 the newly formed U.S. Congress passed the First Coinage Act, which legally set the valuation ratio of gold/silver at 15 (it was raised to 16 in 1834). In the early 1990's, with silver out of favor with investors, the ratio approached 100. At the beginning of this century gold stood at some $250 an ounce and silver at $4, putting the ratio at about 62. Today, with gold at around $1,500 an ounce and silver at $45, the ratio has closed to around 33. But this is still far higher than the ratio seen in the late 1980's (silver's last mega spike), and if far higher than the natural proportions of gold and silver would suggest.

The demand for physical silver also remains strong, which supports the market for spot silver. Smaller investors may find gold too expensive at $1,461 an ounce, but may be nevertheless prepared to buy several ounces of silver for much less. Potentially, this 'poor man's gold' market may help drive silver prices far faster than gold.


April 22, 2011

John Browne is senior market strategist for Euro Pacific Capital.

The Destruction of Wealth

Think Precious Metals Prices Are A Bubble? Think Again.

Each time the two monetary metals reach new highs, calls for the end of the bull market in gold and silver come quickly and frequently. At $500, $850, and ever since gold first cracked $1,000 per Troy ounce in March 2008, the gold price remained the focus of those paid to report a popular view among those firmly entrenched in a fiat paper system that’s rewarded them handsomely for two generations. Those unencumbered by a financial system—a system that pays its employees “more than four times the average salary in the rest of the economy,” economist Paul Krugman wrote in 2008—make a living by developing a reputation for accurately appraising the current state of the vilified gold and silver market. Otherwise, these unleashed analysts and money managers will no longer retain their flocks and fortunes. One such tell-it-like-it-is investment manager is the publisher and editor of the Gloom Boom Doom Report, Marc Faber—who, as a side matter, says that the choice for the name of his report, Gloom Boom Doom, came about from his observations of changing investor sentiment during complete market cycles. So, is it Gloom, Boom or Doom for the precious metals? Faber rejects the notion of a precious metals market soon entering a “Doom” stage. “If it [gold] were a bubble a lot of people would have gold. The whole world would be trading gold 24 hours a day,” he told CNBC’s Joe Kernen. “But I don’t think it’s really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252.” The rise in the gold price (but more spectacularly, in the silver price) has been primarily driven by the Fed’s unprecedented easy-money policies, first, following the popping of the NASDAQ bubble in 2000, then again, much higher in price following the collapse of the financial system, starting in March 2008, with the fall of Wall Street broker-deal/investment banking firm Bear Stearns. Not unlike most global pricing, the world’s traditional monetary metals are denominated in U.S. dollars, so a decline in the dollar’s relative value to world supply of precious metals lifts the price of gold and silver in dollar terms. The future of the gold price is bright as long as Fed chairman Ben Bernanke continues a policy of negative real interest rates—when compared, that is, with the rising rate in living costs, Faber has repeatedly stated. Even if the Fed followed last week’s European Central Bank’s (ECB) quarter-point interest rate hike, the competition for dollars between paper assets and tangible assets won’t tip the tide among investors in favor of paper assets, according to Faber. “One day they [the Fed] will increase it [federal funds] by a quarter percent. But what does it mean when commodity prices are going through the roof, energy prices are going up, health care costs are going up, insurance premiums are going up?” he said. Therefore, Faber posits that cash and debt will lose value relative to “commodities, real estate, art, collectibles and so forth, anything that essentially cannot be multiplied at the same rate as paper money, that is subject to the printing presses of Mr. Bernanke.”

The Dollar is Collapsing, just look at commodies!

This was sent to me by an aquaintence that has over 50,000 ounces of silver. He started buying at $12/oz. The market closed at $43.05 yesterday. It's my belief that until Congress can reign in it's deficit spending and pay off our national debt, the Federal Reserve Bank will continue to print money for them to pay their bills with, effectively destroying the dollar. Since the inception of the Federal Reserve Banking system in the USA, the purchasing power of the dollar has declined by 97%. Remember penny candy? It's not gone because it got expensive, it's gone because the Fed has flooded the market place with dollars. This is the true cause of inflation. And in the case of savings, it's theft. If the Fed increases the money supply by 5% and your bank pays 1% on your savings, they have effectively stolen 4% of your purchasing power.

Hamilton, Central Banks And The Death Of The Dollar

"'As on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so on the other, it is equally evident that to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.' --Alexander Hamilton, Report on Public Credit, 1790"

Hamilton was the father of central banking in these USA. He and Jefferson had very bitter debates on the subject. While borrowing in particular emergencies cannot be doubted, it was never intended as a means to operate the government on a daily basis.

Thomas Jefferson wrote:

"The [privately-owned] Central Bank is an institution of the most deadly hostility existing against the principles and form of our Constitution...if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

Even Abraham Lincoln shared Jefferson's view of the private bankers.In order to finance the Civil War, he approached the NewYork bankers to see about getting a loan for the North. The interest rates they proposed were in the order of 30%. Lincoln's response was akin to; "stuff it."He then had Congress live up to its Constitutional responsibility for issuing and valuing currency and issued his famous greenbacks.

Incredibly, like so many of us, even to the heights of power, Lincoln didn't know at first that he had the OPTION, let alone the probably-intended OBLIGATION to create money for the nation. With the civil war ending, he had come to the conclusion that his government issued currency should become the basis of there-United States monetary system. Within a matter of weeks he was shot in the Ford theatre with his monetary system dying with him.
In 1832, President Jackson vetoed the move to renew the charter of the 'Bank of theUnited States' (a central bank controlled by the international bankers). In 1836 thebank went out of business.

The Bank of the United States (1816-36), an early attempt at an American central bank,was abolished by President Andrew Jackson, who believed that it threatened the nation.

He wrote:

"The bold effort the present bank had made to control the government, the distress it had want only produced...are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it."
Andrew Jackson had at least two attempts made on his life. So proud and intent on warning the future generations was he that his tombstone is inscribed with the phrase"I killed the bank!"

It came back.

The Federal Reserve Act was passed in December 1913; ostensibly to stabilize the economy and prevent further panics, but as Congressman Charles Lindberg Sr. warned Congress:

"This act establishes the most gigantic trust on earth...the invisible government by the money power, proven to exist by the Money Trust investigation, will be legalized."

Even as early as 1916 President Woodrow Wilson was saying:

"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world--no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small amount of dominant men."

No more stinging condemnation of a concept can be given than by the man who, convinced it was for the good, championed it in the first place!

"We have met the enemy, and he is us."

The lovely Miss Puddy accompanied me to the movies a few weeks ago for a viewing of “Unstoppable” with Denzel Washington. In the movie Washington, a 30-year veteran locomotive engineer saves the day by not listening to the bureaucracy and trusting his instinct honed by years on the job. It is the story of a simple journeyman veteran who knows his trade well from 30 years on the job who saves the day. Washington represents the typical workingman who is fast disappearing in this country.

He plays a blue-collar professional who has dedicated his entire working life to his career. I read the other day that the average young person entering the workforce today will have three different careers throughout his working life – not 3 different jobs but 3 different vocations. How can anyone obtain proficiency in 3 different careers in one lifetime? I feel that if this country’s manufacturing/mining/farming economy is to be saved it will be by people like Washington’s character. Even the ordinary newspaper delivery guy can take pride in his job.
G o o g l e David Bond’s short article, “The Dog Biscuit Miracle” and see how any job can be done with dignity and pride.

Unfortunately everyone seems to be looking for Uncle Sam to be the hero and to rush in and save the day. Our old uncle is in poor shape and is hardly able to help anyone these days.

“The nation is badly insolvent and lacks legitimate income sources, something economists fail to grasp.” Jim Willie

“The US has lost 42,400 factories since 2001. The US has lost 32% of its manufacturing jobs since 2000.” Peter Grandich

We have allowed multi-national corporations to move our factories offshore and left our markets wide open. We were sold the idea that “we” could “think” and “they” could “work”. The idea that factories and mines were dirty and should be moved offshore while we could operate clean financial services, distribution and other service industry jobs was sold to us. We were taught that our economy was based on consumption. The federal reserve drove down interest rates and encouraged everyone to mine the equity out of their homes and to spend our accumulated wealth on new cars, vacations and other mindless consumer goods.

And don’t just blame the democrats.

Phil Gramm’s wife worked hard to repeal the Glass-Steagall act that allowed banks to operate in other financial markets. You would have thought we learned something from the 1930’s. All through the last 30 years our local banks have been gutted and monster national and international banks have taken over the local bank branch in your neighborhood. There was a reason that the very special business of banking with all its special privileges was only allowed to operate locally on a county basis just a few decades ago. A banker from 1980 looking at today’s mess would be astounded at what has happened. The gradual changes in banking over the past decades have been a travesty.

The Federal Reserve is now printing money with QE I (just creating money out of thin air; counterfeiting), QE II and QE to infinity.

There will be no end to monetizing the debt.

Stock outflows by investors have been high over the past year. Now bond outflows are alarming. The fed is quickly becoming the buyer of last resort for US bonds.

David Stockman says that our $800 billion defense and homeland security establishment will be forced to de-mobilize by the world bond market.

Bond vigilantes will force the US to finally balance their budget. The US cannot afford higher interest rates. The only other option is default. The fed cannot monetize the debt forever without the dollar falling apart (a default on the dollar itself).

“Any bartender could explain the situation. Bernanke is watering down the whiskey.” Bill Bonner

We are now facing a deadline with the debt ceiling. Tim Geithner says if the debt ceiling is not raised soon the US will begin to default on its obligations. Of course they have to raise the debt ceiling. Otherwise they have to cut spending by 1/3rd and balance the budget immediately. Congress doesn’t have the will to cut that deeply – YET. I predict there will be much posturing and many fine speeches but in the end they will raise the debt ceiling.

Many government agencies (BLS in particular) claim that the economy is recovering and things will be better soon. I am afraid they are deluded (probably just lying but I will give them the benefit of the doubt and politely say they are crazy). Inflation is coming in things we must import, which is a long list these days. We used to feed the world and now we must import some of our own food. Inflation in food, energy and commodities are here now and will get worse. The BLS (bureau of labor statistics, Dept of Labor) claims inflation is in the low single digits but ask anyone who is writing checks to support a family.

They will tell you their cost of living is up over 10% a year. Retail sales appear to be better but a deeper look at the market numbers show high end goods purchased by the rich are doing well while Wal-Mart sales languish.

The middle class is getting squeezed.

Howard Davidowitz says there is 21 SF of retail space for every man, woman and child in the US. This is twice the usual amount.

Internet sales will make the usual amount too high.

Those retail malls that are marginal now will not make it far into the future. Avoid REITs (real estate investment trusts) for retail commercial real estate.

This is not just a depression like the 1930’s it is a debt collapse AND a currency collapse (our currency is now a monetized debt unit). Think more 1781 and 1865 when the continental dollar collapsed in the 13 colonies and when the CSA notes collapsed in the South at the end of the War Between the States. Until the debt is washed out, written down or forgiven the economy will remain anemic and will not recover.

Transferring the debt from the banks to the government will not fix the problem. The debt is still too great. We must either cast off the debt or be slaves to it for the next several generations.

So what should the average citizen of these great United States do at this point?

Avoid municipal bonds like the plague. They will default first. Avoid long term US bonds as well. Short term US notes (6 months or less) are probably OK for now but keep your finger on the sell trigger. Cut back on all expenses and raise cash.
Live BELOW your means. Save cash and hedge that cash with precious metals. Keep your cash in local credit unions or locally owned banks.
Check their ratings and make sure you are saving in the safest institutions in your area. Cut up those credit cards and quit using them. Pay cash for your purchases. Keep 2 months of cash on hand in an emergency fund. Invest your precious metals 50% in gold and 50% in silver. Invest in physical precious metals when possible. For small investors a good investment is to simply purchase 6 months of non-perishable supplies that they normally use every day. They will probably cost 5 to 10% more in 6 months (not a bad return). Plant a garden or support a local farmer (or both).

“We live in an awkward time, too late to change course but too early to line up and shoot those responsible.” Doug Casey

I will close with another movie. “The Voyage of the Dawn Treader” by C.S. Lewis is billed as a children’s story but it is much more than that. In the movie the magician tells the characters, “You’re going to be tempted, and you’ve got to defeat the darkness within before you are able to defeat the darkness without.” Bob Beltz of Walden Media says, “Lewis tells us in his story that God exists and evil exists and there’s great conflict between the forces of good and evil, and ultimately God wins.”

Greed has caused most of our financial problems we now face. We must overcome our own internal demons first. We must prepare for a great conflict. Like C.S. Lewis, I have no doubt of the eventual outcome.


“We have met the enemy and he is us.” Walt Kelly

Larry LaBorde

Silver Trading Company

Dollar Collapse Is Coming, and Soon

I have written and reported on the coming collapse of the dollar for quite some time, but here is a one hour video that puts everything I have reported into one comprehensive, clear, concise statement about what's coming. Spend an hour, pay attention and learn a little something about what's coming. The information during them first hour is pretty much spot on, when the sales pitch starts for "The Stock Market Quitter's Secret" starts, I cannot attest to it's validity, and frankly would go ahead and disconnect. Semper Peratus.

Dammit. The Printing The Money

It will make sense when you watch this:

Commodities on the rise

World oil prices hit fresh six-month peaks on Thursday as the dollar slumped on the back of the US Federal Reserve's new huge stimulus package aimed at boosting the American economy.
Brent North Sea crude for delivery in December delivery rallied as high as 87.59 dollars, reaching a level last seen on May 4. It later stood at 87.46, up 1.08 dollars from Wednesday's close.
New York's main contract, light sweet crude for December, surged to a similar high point at 86.05 dollars, before pulling back to 85.88, up 1.19 dollars.
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The dollar tumbled on Thursday after the Fed announced that it would launch a new asset-buying plan, or quantitative easing (QE), worth 600 billion dollars, to bolster the nation's sluggish economic recovery.
In reaction, the European single currency soared to 1.4264 dollars, reaching the highest level since January 20, as traders fretted that the Fed policy could water down the value of the US unit.
"The Fed announced yesterday evening that it would be buying up more US treasuries. The much weaker US dollar as a result is now giving impetus to commodity prices," said Commerzbank analyst Carsten Fritsch.
A weak greenback makes dollar-priced crude cheaper for buyings using stronger currencies. In turn, that tends to stimulate oil demand and prices.
Crude futures had already surged in New York on Wednesday after the Fed unveiled the plans that have been dubbed QE2 by traders.
"The additional liquidity could also flow into commodity markets and lead to excessive oil prices on a more permanent basis," Fritsch added.
The US government's Department of Energy meanwhile published a weekly snapshot of crude oil inventories, detailing its stockpiles for the week ending October 29.
The DoE said on Wednesday that US crude stockpiles rose by two million barrels to 368.2 million last week. Analysts had forecast a smaller gain of 800,000 barrels.
"The lower implied demand for oil does suggest ... that the fundamental situation on the oil market is still weak," added Fritsch.
"But this is only likely to dampen the rise in prices at the moment and not halt it entirely."