Gold Prices: Grant Williams Points to the Web

Financial news bombards us daily.  Far too often it takes the form of a talking head explaining the
recent (as past 2, 5, or 12 hours) movement up (or down) in stocks, bonds, commodities, etc.  And despite the gravity given to their explanations, it's most often meaningless in the long term.  I suppose that's the cost of a 24/7 news cycle.  Someone has to say something--constantly.

Where's the Gold?
Source: Bloomberg

That's one reason I refuse to follow the news in real time.  I certainly don't read articles predicting what Ben Bernanke will say, did say, didn't say, or explaining what any of that might mean.  Life is too short.

One collection of news items I do look forward to is collected, edited, and emailed out weekly by Grant Williams of Maudlin Economics.  It's his "Things That Make You Go Hmmm..."

It's a collection of stories that he finds interesting.  Frankly, in a typical issue, a few are over my head or not in my area of interest, but I always find a few I'm really glad to have seen.

Often the most interesting part is the introduction by Grant Williams.  This was never more true for me than with his July 15th issue, titled, "What If?"  In it, he stitches together a number of recent events related to the gold market.  In capsule form, they are as follows (It's a picture, so please imagine quotes):

If you have any interest in the gold market, I STRONGLY suggest you check out the full story on the Maudlin Economics web site.  Mr. Williams ties together a broad array of recent events, which often seem contradictory, and makes sense of them.  Better still, he just a good storyteller.

Gold Crashing: What Does it Mean?

Want to dump your gold and silver this morning?  Before you do, check out this video from one of my favorite YouTube channels. After all, with demand for physical in liftoff and prices crashing, we're experiencing a market (or market illusion) unlike any that the econ textbooks predict.  What does it mean?



In the end, I guess it means something different for each of us.  A highly leveraged trader is in trouble, or perhaps kicked out of his trade already.  A long-term accumulator may be in a very different situation.  "Look!  It's on sale!"  

The real question is, what does it mean to you?

Gold in Motion: What Does it Mean?

It's been some time since Venezuela shipped its gold home.  Much more recently (and surprisingly) Germany set in motion plans to do the same--and was told it would take seven years!  More incredibly, the state of Texas wants their gold on Texas soil.

Now it appears that countries and states are perhaps not the only ones who want their gold "closer to home"  Check out this from Bull Market Thinking.

"A stunning piece of information was brought to my attention yesterday. Amid all the mainstream talk of the end of the gold bull market (and the end of the gold mining industry), something has been discretely happening behind the scenes.

Over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record during a single quarter since eligible record keeping began in 2001 (roughly the beginning of the bull market). See chart below."

"Bottom line: While mainstream voices question whether or not gold is still in a bull market, smart money appears to be questioning something else. They appear to be asking themselves, “Do we want to continue storing our physical metal within the Comex system? How can we best whisk it away from fraud, theft, or bankruptcy (including our own)?”

I can't tell you what this means, but it does raise a question.  Is that gold you own, and store elsewhere, or that gold or silver ETF, ETN etc., really as safe as you want it to be?

To paraphrase the Dos Equis man, "Stay careful my friends."

Gold: No New Reasons to Buy?

Here's some good advice from Bloomberg. In consideration of gold's current slump we are told at 20 seconds in that ". . . there are no new reasons to buy."



You could have fooled me.  I thought the Fed was providing 85 billion reasons a month, the Japanese were on the same track, and Europe was burning!

I have got to learn to look at the bright side of things.

When Does Gold Matter?

You could ask that question to a hundred different people and get as many answers.  Quite likely most would have no answer at at.  Still, this video suggests that it can come to matter very quickly in the right circumstances.  Can you think of any reason that someone a) might want to own gold, and b) might want to slip it from Italy to Switzerland?  (Hint: Cyprus just might be part of it!)


This reminds me of some famous quotes from the last few years.  Most apropo might be Charlie Munger's "Gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 . . ."  Or, apparently, an Italian family in 2013.  We can all learn from Charlie in the video below.

Cyprus Confiscates Gold!

Mark Grant, writing for ZeroHedge, reports on a move that precious metals holders everywhere have long feared.

"Please note that until yesterday all depositors in Cypriot banks were insured up to the value of €100,000 with any one bank. Today that solemn governmental promise has been shown for what it is; a lie. Worse and actually far worse and quite scary in fact is that the European Union and the European Central Bank and the IMF has not just allowed violation of the deposit insurance but demanded it. One thing is certain here; if they can void deposit insurance in Cyprus then they can void it in any country in Europe. Further; if they can void deposit insurance then they can void bond covenants with the scratch of a pen on paper. Nothing now; Nothing is safe!"

What's that   You missed the part about gold confiscation?  So did I, and that's the point.  Cash in a bank is a remarkably easy target for politicians and bureaucrats eager for a fix.  To be clear, so are ETFs purporting to hold gold, and even mining shares.

When things get bad, really bad, the safest counter-party is no counter-party at all.  Parents, it's 10:00.  Do you know where your gold is?

Jim Willie: Careful With Those Gold Stocks!

In this great post on SilverDoctors.com, Jim Willie covers a broad range of topics, including the imminent demise of Morgan Stanley, and the possible rehypothecation of hundreds of thousands of accounts.  As if that's not scary enough, he also sees a number of large risks for mining shares.

"The hostile positions of miners versus the corporate firms is becoming stark and clear. The unfortunate outcome is that gold and silver mine output will surely go into worse decline. The Jackass forecast is that from the global mine output factor alone, the physical precious metal prices will rise, while the mining stock share prices will fall. Output risk joins jurisdiction risk and dilution risk for the mining companies. For every mining stock winner, expect 20 to 30 losers."

I'm counting on broad diversification to protect me from jurisdiction risk, but I have to admit that when it comes to dilution risk, I may be swimming naked.  Are you?

Bill Fleckenstein on Gold and Gold Stocks

Bill Fleckenstein seems to have a lot of faith in central bankers--to do exactly the wrong thing,  So much, in fact, that when asked about gold and gold mining shares, he commented:

"I don't see any alternative." 

Hear the entire interview (about 12 minutes) courtesy of King World News.

Revisiting a Hard Lesson on Counter-party Risk

For those precious metals investors who learned nothing from MF Global, check out this post from Zerohedge.com:

"On Monday, the company, Amber Gold, Sp. z o.o., which sold a gold-indexed investment of its own design and offered higher interest rates than banks, said it was halting operations. It pledged eventually to repay about $24 million it said it owed to roughly 50,000 clients in Poland.
Amber Gold's 28-year-old founder, Marcin Plichta, who has publicly acknowledged past convictions for misappropriating funds, couldn't be reached to comment."

Sure, this was Poland, and the guy had a questionable past.  If we get right down to it, how different is that from the U.S. and Jon Corzine?

Bottom line?  One of the greatest strengths of gold is that there is zero counter-party risk--IF YOU HOLD IT YOURSELF!  Sure, "paper gold" is convenient, but is it worth it?

Jim Grant Channels Conway Twitty: It's Only Make Believe

Jim Grant says we are living in a central bank created fantasy world.

"Gold stocks are astoundingly...  and disconcertingly... ...and dismayingly cheap... ...cheap as businesses and as hedges."

And for the music lovers in the crowd. . .

Eric Sprott on the "Recovery" and Gold!

In a few paragraphs, Eric Sprott fillets the notion of a recovery.  U.S. housing?  No.  U.S. employment?  No.  European solvency?  Not even close.

Then he goes on to detail the incredible rising demand for physical gold (Am I the only one that feels silly needing to say 'physical' in connection to gold?) in the rest of the world.  Odd then, that gold prices seem to be an "immovable object" lately.  As I read Sprott, we may soon see an "irresistible force."

"We have written at length about the disconnect between the paper gold price and the physical gold market. If the demand changes stated above applied to any other market, the investing public would lose their minds. "

And when they lose their minds, gold can be expected to go parabolic.  THAT is when we reach bubble territory, and when it's time to consider liquidating your precious metals and converting them to. . .

Gold: Russia and Mexico are Buying

On the one hand, we've got hedge funds and some nervous investors afraid that gold and silver have had their time in the sun--and selling.  On the other hand, central banks continue to buy.  GoldCore.com reports that Russia and Mexico are buying in a big way.

"While gold demand from the western investors and store of wealth buyers has fallen in recent months, central bank demand continues to be very robust and this is providing strong support to gold above the $1,600/oz level.  IMF data released overnight shows that Mexico added 16.8 metric tons of gold valued at about $906.4 million to its reserves in March."  Russia continued to diversify its foreign exchange reserves and increased its gold reserves by about 16.5 tons according to a statement by its central bank on April 20."

Who's right?  Who knows?  Maybe both are.  If so, my guess is that the sellers are right in the short term.  If Europe implodes, who knows what kind of rush to liquidity that might cause?  In the long term though, that almost certainly means vastly more QE (give it a different name if you care to), and we know what THAT does to prices of everything.

Finally, if this next QE is the one where our monetary masters lose control, it's hard to imagine a price too high for gold--or too low for fiat currency.

Reducing Counter-Party Risk in Your IRA

Terry Coxon recently did a great article on owning gold in your IRA for Casey Research.  I highly recommend that you read the article in its entirety.  He covers a variety of issues related to having gold in your IRA extremely well.

The one that I found most interesting, though, is a technique for eliminating counter-party risk while holding gold in your IRA.  Now it's not particularly difficult to hold gold in your IRA.  And for those who only require "gold like" performance, there are, of course, the gold ETF's.

Here's the thing.  Many of us hold gold as a form of crisis insurance.  I can't speak for you, but in a crisis, I don't want to count on anyone to hold my most precious assets.  And Terry Coxon just may have the answer.

"There is a third alternative, which I've dubbed the Open Opportunity IRA, that starts with a simple idea but opens many doors for you. It's an IRA that directly holds just one thing – a limited liability company that you manage. The IRA custodian is the legal owner of the LLC, but you deal with the custodian only during the setup process. During that process, assets are rolled over from your old IRA to the new custodian and then into the LLC. After that, you as Manager of the LLC have your hands on the steering wheel and can invest and reinvest in just about anything with any broker, dealer or other party, and you can do so without waiting for the custodian to approve anything and without paying the custodian for storage or for handling transactions."

I have to say that after the last few years I am more than intrigued at the thought of securing my retirement assets far from Wall Street.  It seems very clear to me that while Wall Street manages to treat Wall Street.  Well, it treats the rest of us poorly on a fairly regular basis.  Wouldn't it be nice to put at least a portion of your retirement savings out of reach of Wall Street?

"In the case of gold and silver, since the metal will be owned by the LLC and not by the IRA custodian, you will be limited to American Eagles and Buffaloes. But you are free to buy them from any source that is not related to you, and you can store them in whatever way you think is best – in a safe deposit box, under the floorboards at home, or in the back of your refrigerator. And they don't need to stay or even be purchased in the US."

I have to say this seems almost too good to be true.  So as always, please be sure to investigate this idea to your own satisfaction.

Take Possession of Your Gold and Silver

The following is from another fascinating post on Zero Hedge:

"While Gerald Celente is crying about his lost six-figure account, Bill Fleckenstein also has personal money tied up with MF Global. He is hopeful that he will get it back but is critical of the authority figures involved. Celente does not expect to get all of his money back. Ann Barnhardt of Barnhardt Capital Management has shuttered its operations after six-years in the business. She did not feel like her clients’ funds were safe in the futures and options market any more. Lawrence Lepard, who posted on Zero Hedge, wonders if the MF Global failure was a hit job done by the Fed. My point is not about who is right or wrong . . .

The author, in addition to coining the phrase "fractal in a frying pan," makes the point that a global banking meltdown we are all at great risk of losing assets we believed to be safe.

I have no idea who first said that gold has no counterparty risk.  It's quite likely that I first saw the idea expressed by Bill Bonner in his Daily Reckoning.  In any case, it's probably worth considering that idea at least one more time.

Insurance contracts, stocks, mutual funds, ETF's, CDs, annuities, bonds, dollars, and a host of other investments all share one potentially fatal flaw.  Each is only as reliable as some party on the other side of the equation.

A gold or silver coin in your hand is an entirely different matter.  While it's true that you may need another party to trade it to, thousands of years of history suggests that your gold or silver coin will remain a safe store of value.

And please note that I did say "in your hand."  Iin good times or even fair times I have a reasonable amount of faith in GLD, SLV, Perth Mint Certificates and the like.  It seems fairly likely, though, that we have bad times ahead.  Plan accordingly.

Richard Maybury: The Easiest Investment Call in the World

Richard Maybury just did another great interview with The Gold Report.  I am sure you want to read the whole thing, but I couldn't pass on this one quote.

"TGR: If war and hyperinflation are the inevitable future, how can investors survive or maybe even thrive during a time like this . . .
RM: Well, I wouldn't put $100 under the mattress, at least not for very long, because it will soon become worthless. But commodities, stocks of raw materials firms, gold and silver and platinum coins have value. Generally, I try to see the world in terms of two kinds of investments: dollars and non-dollars. You definitely want non-dollars, things that do not have their value tied to the value of the dollar. An example of a dollar asset is something like a bond or bank CD. Their values are tied directly to the value of the dollar. If the dollar falls, then their values fall.
Gold is a non-dollar asset. When the dollar falls, usually gold rises. The same is true with silver and oil. All of these things have values that are not tied to the dollar. My advice is to invest in non-dollar assets. Gold would be at the top of the list, silver and platinum and then oil."

I spent a fair amount of time thinking about gold silver. When push comes to shove though I'm not really a goldbug. Honestly, I think it's much easier to save and transact in dollars.

But Richard hit the nail on the head here. Now is not the time (if there ever was one) to store value in dollars. So many actions that our government (and governments around the world) are taking seem to indicate with crystal clarity:

• They can never repay their debts.
• They don't intend to pay their debts (at least not in good money).
• They will bail out their bankers at any cost.
• They will continue to fund the unfundable at the cost of destroying our currency.

So to me it seems clear. Have some dollars to buy your groceries (might want some extra groceries on hand as well), pay your mortgage, and even next year's college tuition for the kids. But for the value you're saving for years from now, you'll probably want some protection from the tender mercies of our Federal Reserve.

Porter Stansberry: Bullion over ETF's

The following quote is by Porter Stansberry from Stansberry's Investment Advisory.   It's a paid subscription, so please don't expect to see the full text via that link unless you're willing to subscribe.

"I believe it is critical to hold physical bullion, not an exchange-traded fund (ETF) that invests in gold. The volume of contracts that trade on the futures markets (where ETFs control a lot of metal) dwarfs the amount of actual physical gold in the entire world. This indicates two things to me... 

First, the price of gold is likely depressed by selling in the futures markets. Whether that's a conspiracy or simply good trading, I can't say. .  .   But whether the price of gold and silver is manipulated doesn't really matter to me because, like it or not, the price is eventually going higher.

The second thing the volume of futures trading relative to the supply of gold tells me is... sooner or later... there will be a run into physical gold. When that happens, the futures markets will collapse because there won't be enough metal to meet demands for physical delivery."

I don't often use a quote unless I can link to the original material. I made an exception here for a couple of reasons. First, I think Stansberry has a lot on the ball. You might even want to subscribe.

The reason I couldn't resist this quote though, is that it makes two really vital points. The first is that investing in precious metals ETF's is very different from investing in precious metals bullion. The results may be similar--last year, this year, next year, and beyond. But someday, they made the diverge dramatically, and perhaps even catastrophically, for those who have relied on ETF's.

The other key point, which is implied if not stated, is that we may not recognize the difference between ETF and bullion until a run on bullion (and crashing ETF prices) occurs. At that point, of course, it will be too late to adjust your holdings without suffering significant financial loss.

What Happened to the Gold in Fort Knox?

Is there gold in Fort Knox?  You decide.




This video is a bit long, but raises some very interesting points.

1. No civilian has seen the gold in Fort Knox since 1974.
2. The US has a huge advantage gained through the worldwide acceptance of our currency as the reserve currency.
3. If the price of gold can be/is manipulated down, the dollar benefits.

There is a lot more to see. Enjoy!

Sell Your Gold!

That's right--sell it all! Because, as this astute analyst notes, gold isn't backed by any government.

She is probably a very nice woman, but she might do more good, and far less harm, in another profession. (No, I'm not suggesting any profession in particular.)

Gold Ipsa Loquitor

One Ounce Of Religious Non-Money Tradition = $1700

via One Ounce Of Religious Non-Money Tradition = $1700 | ZeroHedge.

Jim Rogers: Heads I Win; Tails I Win

In this video, Jim Rogers tells us again that commodities are positioned to outperform regardless of which way the economy goes.  He is high on many commodities, including gold, sugar, rice, etc.

Why?  That's simple.  Agriculture has been a lousy investment for 30 years.  The resulting underinvestment is certain to lead to higher prices.  Kind of like a pig in a python.

Rogers predicts that gold will hit $2,000 within 10 years.  But as he points out, that's really not a very outlandish position given our current circumstances.



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