1. In January of 2011, I swapped a fair amount of physical silver bullion for physical gold bullion. A couple of weeks ago, I reversed the swap.
2. When I first did the swap in 2011, silver was trading above $30. I wasn’t trying to call any tops or bottoms. Gold simply offered more relative value to me at that period of time than silver did.
3. Likewise, I’m not really interested in predicting that silver has “bottomed” against gold, at this point in time. Silver simply appears to offer more relative value to me now, than gold.
4. While silver is a mighty metal, it’s not for all investors, especially when bought with size. It’s much more volatile than gold. It can trade as wildly as sugar or natural gas. 
5. Most amateur investors should invest in gold first, and buy silver after they have built a “foundation of comfort” with gold.
6. Please  click here now. That’s the daily silver chart. A rally just up to overhead HSR (horizontal support and resistance) at about $18.70, is quite a sizable move. I’ll be booking some profits in that target area, if it is acquired.
7. Note the position of my price stoker (14,7,7 Stochastics), at the bottom of the chart. Rallies tend to begin from a point below 20, which is where the lead line is now. A post-jobs report rally of size is quite likely.
8. Gold itself continues to face modest headwinds from the crashing Japanese yen. I’ve predicted that a global fiat crisis is coming, and that it would begin in Japan. By 2016, I expect it to begin enveloping most of the Western world. 
9. Relatively speaking, Japanese QE is much bigger than American QE ever was, and it’s taking a toll on the yen. Please  click here now. That’s the daily chart of the US dollar versus the yen. The price stoker suggests that the dollar’s rally may be peaking, at least for now.
10. While the dollar has mauled the yen, gold has only moved marginally lower. That’s because Chinese jewellery buying has increased again. I trade the leading Chinese jewellery stocks on my junior stocks site at www.gracelandjuniors.com. They have been displaying sideways to bullish price movement. Diwali in India is also in play. Demand there has returned to seasonal norms.
11. Because the US dollar is the reserve currency of the world, it can take the most amount of “money printing damage”, before it crumbles against gold. The US dollar can be viewed as the lead aircraft carrier, in a fiat carrier strike force. The smaller battleships, like Japan and Europe, are now experiencing significant damage.
12. Unfortunately for the fiat carrier strike force, their opponent can be viewed as a gold jewellery bull era starship, with India’s gold-obsessed citizens at the helm. The formation of the gold jewellery era is not an overnight event.  
13. The ice age of paper currency has begun, but the movement of the ice is not visible, to the naked fiat eye.  
14. In the meantime, please  click here now. That’s the daily gold chart. It’s clear that despite the massacre of European and Japanese fiat, the dollar has barely moved gold lower at all. It’s only marginally below the $1180 area lows. That’s the power of gold jewellery demand growth, a power that is in its infancy.
15. Please  click here now. That’s the daily oil chart. Profits for Canadian oil producers in the tar sands are shrivelling now, and US “frackers” are entering the pain zone. Canada is America’s largest trading partner.
16. A meltdown in the Canadian economy could kill the US economic rally. Please  click here now. That’s the daily chart of the US dollar versus the Canadian dollar. With oil prices falling hard, the Canadian dollar is weakening dramatically.
17. Worse, I expect the Fed to stun global stock markets in 2015, perhaps as early as January, with rate hikes. All roads lead to gold jewellery and the Western mining stocks that source the gold, but does anyone really understand? I’ll be in my favourite Chinese gold jewellery store tomorrow, celebrating the new era with some quality purchases of 24 carat items. In Canada, gold jewellery can be insured and stored in regular safe deposit boxes, without violating any of the terms of storage. It’s best to check with your bank before proceeding with a transaction.
18. Please  click here now. That’s the daily natural gas chart. It looks spectacular. To understand why that is, please  click here now. That’s a chart from the United States Energy Information Administration. America is entering the winter season with abnormally low natural gas supplies. 
19. I bought oil into the 2008 lows. When I swapped that oil for natural gas a few years ago, most observers thought I was a lunatic. To make big money in a market, the investor needs to have a lot of patience, a stomach for enormous drawdowns, and have the intestinal fortitude to accumulate positions into the depths of their “personal surprize zone”.
20. The natural gas asset is potentially poised to move 100% higher, or more, given the supply issues and the long term weather forecasts for another bitterly cold winter on the East coast of the United States. Higher heating costs could also chop GDP, like they did last year.
21. I can’t even imagine being heavily invested in global stock markets in a situation where heating costs are soaring, GDP is tumbling, and the Fed is hiking interest rates, but “to each his own”.
22. Please  click here now. That’s the GDXJ daily chart. I’m looking for a sizable rally to begin very quickly. Yesterday’s price action was particularly encouraging, with gold trading about five dollars lower, while junior gold stocks marched nicely higher!
23. Note the position of the price stoker. Not every signal produces a big rally, but if the Swiss vote “yes” in the upcoming referendum, the GDXJ rally that follows could be record size.
24. For 2015, I’m ready for a cold winter, a Fed that electrocutes global stock markets, and the next leg in the gold bull era, featuring higher prices for gold stocks!

Nov 4, 2014
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com 
email to request the free reports: freereports@gracelandupdates.com

Tuesday Nov 4, 2014
Special Offer for Money Talks readers: Send an email to freereports@gracelandupdates.comand I’ll send you my free “Surf The Golden E Wave!” report. My lead Elliot Wave man, who has been shorting gold for more than a year, is in the process of covering his short positions and going long now, with a price objective that is vastly higher. I’ll show you what he thinks about key gold stocks, and the ones he’s buying right now!

So here we are, finally reaching the long awaited phase III. Robert Rhea developed the 3 psychological phases of bull and bear markets in the 1930’s.”

“Phase III is best described as The Horror, which I penned on April 6th 2014, it was not meant as hyperbole it was intended as a warning… it is now the reality.”

We ended our last essay, entitled “Phase III , Apocalypse Now” with the question has your market guru been advising you to buy all the way down from the highs of 2011? If so, don’t you think its time to reexamine your premise. Well, if you have maybe you are ready to adopt a different strategy so as to survive the final phase III of this precious metals bear market. This final part 3 essay lays out a suggested game plan to both survive the bear and to transition to the next bull market in the PMs. 

The official entry of phase III occurred last week with the violation of the December 2013 lows in the PM shares…..

….read this lucid and powerful essay with charts HERE

I traveled last week to the New Orleans Investment Conference, previously known as the ‘Gold Show.’ Jim Blanchard, a man known for promoting the right to own gold during the Nixon era, started the conference in 1974.

Early on, the conference was a gathering place for investors in precious metals. Speakers such as Rick Rule broke out into the investment scene through conferences like this one.

I’ll report later on the many speakers who attended the conference – and try to boil down some of the salient points from the highly valuable conference (attendees took nearly a week away from their regular lives to attend).

For now, I’ll confine myself to the headline speaker of the show – former Fed Chairman Alan Greenspan – and what his comments could mean for gold investors.

Greenspan ran the Fed from 1987 to 2006. He ran it right through the great technology bubble in the late 90’s and up to the housing bubble. He is widely accused of voluntarily inflating these asset bubbles through excessive money printing and ‘easy money.’

He’s also viewed as a big-government sell-out because he began his career as an adherent to the economic philosophy of Ayn Rand, with minimal government interference, and, relevant to his role as director of the Fed, sound money.

So what happened to the young ideologue that Greenspan had been? Did power corrupt him? Did he fold under pressure to run the printing presses, debasing the currency and propping up the government?

And why come to this conference? Why submit to being trotted out and publicly accused of his crimes for all to see?

At least that’s what we imagined would happen during his main panel alongside Marc Faber, and Porter Stansberry (of Stansberry & Associates).

Well, it wasn’t quite the public flogging we’d expected. As Rick Rule joked later on, ‘the man’s been through congressional hearings; I think he can handle us.’

We did, though, learn a few important things about the Fed.

First off, Greenspan claims he has always remained true to Austrian economics and the principle of sound money. He fell into his role as Fed Chairman purely by accident, he claimed, and what he did there, he did it because he had to.

He explained that the capital needs of the Federal government were so massive that the only way to prevent disaster for the rest of the economy was to keep feeding the beast with cheap money. If the Fed hadn’t created and circulated new money, the Treasury’s insatiable demand for capital would certainly have ‘crowded out’ the rest of the economy, wrecking the entire private credit system.

Political realities, he explained, in the form of entitlement spending and off-balance sheet obligations of the US government, trump the need for sound money every time. It wasn’t his fault – that’s just how the system works. It’s set up to redistribute income from savers, who lose income because of low interest rates, to spenders.

In other words, Greenspan was a man who was forced by circumstance to go against his beliefs. Coming to the show, I had expected to disagree with Greenspan, but what I found was that the Fed Chairman was saying exactly what we have believed all along. Sound, stable currency is incompatible with the welfare state. Greenspan may have slipped away from the path, but he’s a great spokesperson for our message.

The Fed is unlike any other business in the world. It’s the only one that we know of that literally creates ‘something from nothing.’

The Fed wills new currency into existence, which it can then ‘sell’ by charging interest. Every dollar comes into existence as a debt due to the Fed; the more dollars are out there, the more money the Fed makes. The interest it receives is ‘pure profit.’ So it’s no surprise that as the government’s demand for capital has increased, the Fed has ‘accommodated’ that demand. Even if the Fed has to lend the government the money to pay its interest, that new money costs nothing to create, and it adds to the bottom line.

We did get one striking admission out of Greenspan. The Fed is not independent of the government, he said, calling suggestions to the contrary ‘naïve.’

Greenspan didn’t speak much to role of the Fed. He didn’t talk about inflation targets, or comment on how the Fed could help grow the economy, as he would have if it had been a New York Times interview I’m sure.

Hidden in his answers, however, was a big prediction for how the Fed will likely act in the future.

It’s not about juicing the economy or keeping the currency stable, although those are certainly justifications that are used.

The truth is, the Fed is merely adjusting supply to meet demand. That’s what he meant when he said that the Fed had to increase the supply of debt to avoid the private sector being ‘crowded out’ of the market.

Its mission isn’t to keep the currency stable, it’s to help fund the spending of the US government, and to defend the banking system.

This suggests that as long the US government resort to high levels of debt, the Fed isn’t likely to decrease the supply of money.

Greenspan might have an inkling of something he’s not telling.

Here’s what the former Fed Chairman had to say about the direction of gold and interest rates:

“Gold – measurably higher. Interest rates – measurably higher.”

The Fed isn’t just dangerous because it serves the banking system; it also has another fatal flaw – hubris.

In late 2013, Greenspan wrote in Foreign Affairs that he hadn’t seen the financial crisis coming because the economy hadn’t conformed to the Fed’s models:

The conventional method of predicting macroeconomic developments — econometric modeling, the roots of which lie in the work of John Maynard Keynes — had failed when it was needed most, much to the chagrin of economists. In the run-up to the crisis, the Federal Reserve Board’s sophisticated forecasting system did not foresee the major risks to the global economy. Nor did the model developed by the International Monetary Fund, which concluded as late as the spring of 2007 that “global economic risks [had] declined” since September 2006 and that “the overall U.S. economy is holding up well . . . [and] the signs elsewhere are very encouraging.” 

The problem with this kind of thinking – that a mathematical model should be capable of predicting human behaviors in the markets – is exactly what went wrong with Long-Term Capital Management (LTCM) in the 1990’s. LTCM was a hedge fund management firm which deduced that there was only an infinitesimal chance of a serious crash in the stock market. It also claimed that the odds of correction were knowable, and could be hedged against. A few years later, in 1998, the market experienced an unforeseen crash, and LTCM went bankrupt.

Now the Fed has a new set of number crunchers, and a new, activist, leader. The Fed’s going full throttle, pushing ahead with low interest rates and easy money. It also has a brand new set of mathematical models. Are they now more humble about their ability to predict the future? Are they looking for the market to tell them what’s working, or are they favoring the theory?

In the years since the stimulus has been launched, spending has been muted while housing, stocks, and bonds have increased in value. Average incomes are stagnant or lower. Nearly all economic gains have been accrued to ‘rich people’ in the form of asset inflation.

Yet in a recent interview with Time magazine,¹ Yellen’s view – that stimulus doesn’t just help rich people, but that it lifts the whole economy remained unchanged:

You know, a lot of people say this (asset buying) is just helping rich people. But it’s not true. Our policy is aimed at holding down long-term interest rates, which supports the recovery by encouraging spending.

In other words, the way the Fed models the economy has been wrong before; it will likely be wrong again.

P.S.: Not yet a Sprott’s Thoughts subscriber? Sign up here and get your free electronic copy of the Sprott Gold Book.

This information is for information purposes only and is not intended to be an offer or solicitation for the sale of any financial product or service or a recommendation or determination by Sprott Global Resource Investments Ltd. that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on the objectives of the investor, financial situation, investment horizon, and their particular needs. This information is not intended to provide financial, tax, legal, accounting or other professional advice since such advice always requires consideration of individual circumstances. The products discussed herein are not insured by the FDIC or any other governmental agency, are subject to risks, including a possible loss of the principal amount invested.

Generally, natural resources investments are more volatile on a daily basis and have higher headline risk than other sectors as they tend to be more sensitive to economic data, political and regulatory events as well as underlying commodity prices. Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and nowadays also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment.  Because of significant volatility,  large dealer spreads and very limited market liquidity, typically you will  not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. Investing in foreign markets may entail greater risks than those normally  associated with  domestic markets, such as political,  currency, economic and market risks. You should carefully consider whether trading in low priced and international securities is suitable for you in light of your circumstances and financial resources. Past performance is no guarantee of future returns. Sprott Global, entities that it controls, family, friends, employees, associates, and others may hold positions in the securities it recommends to clients, and may sell the same at any time.

Last week we argued that the underperformance of the gold miners during Gold’s rebound was a bad sign. Since then the miners have plunged to new lows while Gold appears to be at the doorstep of a major breakdown below $1180. It shouldn’t be a surprise as it would simply be following the miners and Silver. The current bear market is getting very long in the tooth but it is not yet over. We see more losses ahead before a potential lifetime buying opportunity.

The HUI Gold Bugs Index is obviously very oversold but its not yet at strong support. It closed Thursday at 164 but should fall another 9% to support at 150. Currently the HUI is 26% below its 200-day exponential moving average and 19% below its 50-day moving average. The chart argues that those figures need to reach 40% and 27% before we deem the oversold condition extreme. If the HUI trades below 150 then it would mark an 11-year low. That is extreme!

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Nick Laird of ShareLynx provided me data from the Barron’s Gold Mining Index (BGMI) which I uploaded to stockcharts.com. This index dates back to 1938 and allows for greater historical perspective. Data is updated weekly so I had to estimate the current price. The HUI, XAU and GDX are all down 10% or 11% on the week so I calculated a 10.5% loss on the week which is a price of 567. Lateral support, which dates back to the early 1990s as well as trendline support that dates back 50 years provide a strong confluence of support in the mid 400s. That is roughly 20% downside.

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Another reason to expect more downside is Gold hasn’t even broken $1180 yet, though it may have by the time you read this. The price action has been textbook bearish. Gold failed to rally up to trendline resistance in the summer and then it declined in nine of twelve weeks. It rebounded for two weeks but quickly reversed at the 10-week moving average which is sloping down sharply. Also, the net speculative position in Gold as of a week ago was 25% of open interest. There are a fair amount of longs left to capitulate. Gold’s downside support targets are $1080, $1040 and $1000.

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We’ve been warning for several weeks of the near-term downside potential in precious metals. It is being realized but that does not mean its over. The miners plunged to new lows in recent days yet they are likely to move lower before a major turn. Our work above suggests a minimum of 9% downside potential and as much as 20%. Meanwhile, Gold could fall another 15% to strong support at $1000. Opportunities are coming but they are not here yet. We want to see Gold and gold stocks decline further so that they become extremely oversold as they reach major support levels. That is the combination that could produce a lifetime buying opportunity in the weeks or months ahead. Consider learning more about our premium service including a report on our top 5 stocks to buy at the coming bottom.  

Good Luck!

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com