Gold & Precious Metals

Gold-Silver Ratio: Debunking The Myth

Posted by Kelsey Williams - Kelsey's Gold Facts

on Friday, 16 June 2017 13:19

A 16-to-1 gold to silver ratio has been the Holy Grail of some silver investors since the mid-sixties.

Unfortunately, fifty years later, it is a quest that continues unabated without success.

In fact, there is evidence that contradicts and widens the chasm that separates wishful thinking from reality.

In the Mint Act of 1792, the U.S. government arbitrarily chose a 16 to 1 ratio of gold prices to silver prices. The actual prices were set at $20.67 per ounce for gold; and $1.29 per ounce for silver.

Prior to 1792 the U.S. did not strike its own coinage. That changed with the establishment of the Philadelphia Mint, which was also authorized by the Mint Act of 1792.

The official price of silver and the market value of silver remained relatively close until the late 1800s.

In 1859, prospectors discovered the Comstock Lode in Virginia City, Nevada. It was the largest silver vein in the world.

Combined with silver already in circulation, this additional supply “flooded the market” and forced the value of silver well below its official price of $1.29 per ounce. This is another classic, historical example of inflation in a pure sense – a devaluation of the money supply. The silver in a silver dollar was now worth much less than the official price of $1.29 per ounce. (Also see: Mansa Musa, Gold, And Inflation)

Congress responded promptly by passing the Coinage Act of 1873, ceasing all production of silver coinage in the U.S. Five years later it reversed itself by passing the Bland-Allison Act which restored silver as legal tender and required the U.S. Treasury to buy large quantities of it. Silver producers were awash with the metal and it was hoped that this new agreement would create more jobs within the mining industry.

A series of other legislative efforts either repealed earlier bills, and/or furthered the requirements of the U.S. Treasury to purchase silver to support the market or to use in the production of silver coinage.

For the next seventy years, the U.S. government ramped up its efforts to control the price of silver. It offered to buy silver at artificially high prices which in turn over-stimulated production of the white metal. This was pleasing to voters in silver mining states. But in the process, the U.S. government acquired a stockpile of over two billion ounces of unneeded silver.

All the while, the market price for silver continued to decline. In 1887, the average annual price of silver dropped below $1.00 and by 1932, at the depths of the Depression, reached a low of $.25 per ounce.

Screen Shot 2017-06-16 at 6.34.14 AM

Also concurrent with this, the gold-to-silver ratio continued an upward march. By the time silver reached its Depression era low of $.25 per ounce, the gold-to-silver ratio had risen to 80-to-1 ($20.67 divided by $.25). By 1940, the ratio had risen to an all-time high of 97-to-1 ($34.00 divided by $.35).

Silver’s primary value as an industrial commodity asserted itself beginning with U.S. involvement in World War II and the gold-to-silver ratio began a gradual decline that lasted for twenty-seven years reaching a low of 16-to-1 in 1968.

After that, and coinciding with free markets for both gold and silver, the ratio proceeded to climb all the way back to near 100-to-1 in 1991. There was one, very brief, period of six months between July 1979 and January 1980 when the ratio fell from 32 down to 16 but was back up to 40 almost immediately after that.

Silver investors who are depending on a declining gold-to-silver ratio are betting that silver will outperform gold going forward. But, if anything, the chart (see link above) shows just the opposite. For the past fifty years, the ratio has held stubbornly above a rising trend line taking it to much higher levels.

The last spike of any consequence below that trend line happened in 2011; and lasted all of three months.

Other than that, any downward moves of significance in the ratio were from much higher levels. And, to add further discouragement, some favorable – for silver – changes in the ratio occurred with actual silver prices either in decline or already at much lower levels.

Gold and silver are two different items with their own independent functions and uses.

Gold is real money. Silver is an industrial commodity with a secondary role as money.

The gold-to-silver ratio that existed one hundred fifty years ago was mostly the result of political influence and appeasement. It was an arbitrary number.

It might be reasonable to expect a ratio for purposes of consistency and uniformity within the existing monetary system. However, the price used for silver at $1.29 per ounce was considerably in excess of the current (then) market price. It was an early form of price support.

There is no fundamental reason which justifies any particular ratio between gold and silver.

(also see Hi Yo Silver! Sort Of… and Silver Is Not Real Money)

One Massive, Global, Serial Bubble

Posted by Michael Balllanger for The Gold Report

on Thursday, 15 June 2017 14:16

Precious metals expert Michael Ballanger reflects on the state of the stock and bond markets and their effect on the gold market.

Ballanger6-13-17cover

 

These missives that I construct periodically usually have as their genesis a “Eureka!” moment while reading a research piece or a written commentary from one of the thousands of self-styled market authorities or if I have the random luck of catching an interview on Bloomberg or (UGH!) CNBC. During a normal week, I will text myself a quick note or leave myself a voice note when and if an idea comes to mind so when I am travelling, it is usually preferable that I be close to a decent WiFi signal in order for my ramblings to be relevant. 

During the past two weeks, I found myself swept up in a wondrous journey to the land of my ancestors and rather than bore you all with the bark and rings of my Family Tree, suffice it to say that walking through castles built in the 10th century that are still intact and more magnificent today than they were when constructed is, to put it mildly, awe-inspiring. Just walking up the side of the hill in front of the walls gives one a sense of just how dangerous it was to live and how important was the need for protection and strategic advantage. That is relevant to the topic of valuations in today’s bond and stock markets as there has never been a greater need for that very protection and strategic advantage, so by merely looking at Rock of Cashel Castle, you get a sense of that urgency through the imagery.

Rock of Cashel Castle

During the trip through Western England and Ireland, the only notes I could make were through photographs taken on my phone and after downloading 453 pictures to a 4-gig data stick, I took the time to go through them and, as I did, I was able to reclaim the thoughts I had as they related to gold, the gold miners and global markets. The larger story of the first week was that gold had “BROKEN OUT” above a six-year downtrend line and was now poised for a move of several hundred dollars to the upside. Sadly, as long as I have been writing this missive, I have contended that as valuable as technical analysis is for some markets and certain commodities, it is ineffectual for any and all markets that are “rigged.” The markets that are “rigged” are defined as “all markets deemed important to the national security of the United States” and that means debt markets (bonds), equity markets (stock, ETFs), and precious metals (gold, silver). 

All three of these markets are targeted by the Working Group on Capital Markets (“Plunge Protection Team”) with the first two (debt and equities) manipulated higher while the third (precious metals) is manipulated lower. The purpose of this is to insulate the almighty U.S. dollar from attack because to successfully undermine the U.S. dollar would undermine the fundability of the U.S. military and its propensity to protect nations abroad such as the U.K. and Japan. Now, since the U.S. dollar has been under pressure since the end of December 2016, these Interventionalists are intent upon keeping all markets levitated in order to insulate bank collateral from unexpected markdowns. So, with the world all rejoicing and in full voice, the siren of the majestic “Gold breakout!” was in no fewer than fifty separate commentaries that I have read since last Sunday and I watched as if it was a beer bottle sliding off the edge of a table in suspended slow motion as the Commercial Traders fed over 70,000 contracts out into a $50/ounce rise and capped the rally at exactly the point where the “technicals” turned “long term positive.” 

Gold COT Report

COT Gold, Silver and US Dollar Index Report – June 9, 2017 | GoldSeek.com

Whatever the rationale might have been for a “breakout,” the memory-challenged algorithms trading the futures decided after the pattern-recognition software spit out a “BUY” signal, that they should pile into gold futures leading up to last Tuesday’s 30,397 gluttonous buying frenzy. The Commercial traders under express instruction and guidance from their bullion bank masters at 33 Liberty (and at the Bank of Japan and the European Central Bank) did it again—they set up the trade like a Titleist 3 on the 18th tee at Augusta National. So here we sit at $1,271.40 after an assault on one of the downtrend lines drawn between $1,800 in late 2013 and the top last year at $1,380, and, once again, I beseech you to ignore any and all technical analysis when trading gold other than to recognize its importance to the bullion bank criminals that rig markets on a regular basis. 

I have written about the ineffectiveness of technical analysis since 2001 with missives like “Sell breakouts; buy breakdown” (2013), “Trade and think like criminal” (2015) as well as a few others. When the net short position of the commercial traders undergoes a sharp and rapid change in response to a technical “signal,” I will always “Follow the Commercials” (2015). Sell Breakouts; buy breakdowns – always.

Gold

Global markets have now moved into (what I believe is) the final, parabolic, public-entrapping vertical ascent that typically punctuate established trends with cataclysmic reversals. The problem I have with making such a bold statement is that the body bags are lined up at the side of the road with those that have fought this move firstly since the 2008 Meltdown and then after the 2016 U.S. elections. 

The large banks with their supercomputers and unlimited cheque books have now successfully hijacked the markets and appear to have eliminated the need for protection while smashing volatility (the VIX) to a 9.5-11 range with only three harmless pops to over 15 since the Trump election. Their skillful suppression of all volatility by way of indiscriminate bludgeoning of the VIX has allowed the large portfolio managers to glide over the financial landscape completely unhedged such that current mantra is that to buy volatility insurance is a stupid way to shave points off your performance because the government-supported, bank-driven interventionalists have ensured that any and all dips will be bought. 

In fact, that narrative forms the basis for my persistent warnings because it has been eight years since the Armageddon-like March lows in the S&P were made and with the exception of a couple of blow-offs, long-term stock and bond investors have been richly and abundantly rewarded not, however, by brains, but by extremely good fortune and loyalty to the central bank motto that they will do “whatever it takes” and they most certainly have done that.

The issue of “moral hazard” is now moot because politicians everywhere look to the role the central banks have played in rescuing a decayed and corrupt political and financial system and all they need to use as their benchmark is the S&P or the FTSE or the NIKKEI. With every central banker in “PRINT” mode with zero exceptions, my old and now VERY relevant phrase “One can NEVER underestimate the replacement power of equities within an inflationary spiral” has been the ONLY rule in my quiver of investment arrows to which I have adhered. 

Valuations are now ridiculously aberrant; sentiment is outrageously complacent; and risks are spiralling into uncharted waters based on historical data, but—and this is an enormous “but”—the “invisible hand” has continued to save stocks and bonds and cap the rallies in the precious metals with astounding consistency. So, in the interest of the health and well-being of my favorite dog and the mental sanctity of my better half, I refrain from making big bets against the serial manipulators. In another life and in another era, I would be “balls to the wall” short this bloated pig of a stock market but trying to play this in a rigged casino where there has been ZERO chance of winning using conventional analytics has been and continues to be a mug’s game.

VIX Volatility Index

Our beloved junior explorers as represented by the TSX Venture Exchange are now backing off despite (in some cases) positive results and rising gold and silver prices. It also doesn’t help that despite new highs in global equities, base metals are now well off the highs of early February when copper traded up to $2.76/lb and zinc up to $1.345/lb. Copper has since retraced to $2.58/lb but zinc has undergone a mini-crash with the current price around $1.0988, which is an 18% correction. The amount of “heat” I took back in late March when I penned “Buy Precious, Sell Base (Metals)” is now rather irrelevant with gold having traded up from the date of the missive through $1,295 from $1,248 and zinc down from $1.25/lb. to under $1.10/lb. 

While it was actually a call on the US dollar, it was, nevertheless, an on-the-money call but it hasn’t benefitted anyone holding the junior explorers as my current darlings, Canuc Resources Corp. (CDA:TSX.V) ($0.375) and Stakeholder Gold Corp. (SRC:TSX.V) ($0.245) have retraced along with most of the other TSXV names. Both companies are fully funded and are a few short weeks from the commencement of exploration on their respective projects with CDA (market cap: $15.75 million) drilling the highly prospective silver-gold San Javier in northern Sonora while Stakeholder (market cap: $5 million) is drilling the Goldstorm project tied onto Seabridge’s Snowstorm project in Elko County, Nevada. (The Canuc project at San Javier is under the direction of ex-Tinka V.P. Exploration John Nebocat [discoverer of the Ayawilca deposits] while Stakeholder’s Goldstorm project is under the direction of ex-Newmont Mining V.P. Exploration Robert Cuffney.)

S&P/TSX Venture Composite Index

Finally, I know that many of you out there have been rendered “weary” by the length of time it is taking for the precious metals to break free from the shackles of intervention, collusion, manipulation and fraud. While I like to fancy myself as somewhat immune to the debilitating impact of the psychological poundings of capped breakouts and coordinated assaults, it actually DOES have an impact when I sit down to write these commentaries. There are only so many topics to discuss and when they all converge around the criminality of central bank and government management of the global economy and politics through the financial markets, the mind sort of “shuts down” in attempting to utilize creativity to get a point across. 

However, my recent trip into the U.K. and Ireland allowed me to reflect outside of the warmth of my comfort zone upon the state of the global economies and based upon conversations that I have had over the past month in Bristol, Cheltenham, Dublin, Limerick and good old Oshawa, Ontario, the main focus for EVERYONE is housing. The main collateral in the portfolios of the global banking cartel has always been real estate and because the wonderchild financial engineers have found a way to lever up their balance sheets, the only way that another meltdown could be averted was to reflate the collateral. 

Now, with housing bubbles being reflated everywhere, affordability is no longer important (in terms of carrying costs); all that matters is equity. As long as you bring enough skin into the transaction, bankers EVERYWHERE will allow you to step up to the wicket of land speculation and that is exactly what it is – rampant and blatant speculation. 

In order to keep the flow of money moving in the direction of that all-important bank collateral, these timely interventions serve to train the millennial horde of selfie-snapping, Facebook-posting newbies that “Gold is bad” and that “Stocks, bonds, and housing are good” and only through this constant pounding in both actual and psychological warfare has the public narrative been able to reshape the accepted methods of inflation hedging. 

While 40 years ago my mentors were busy reaping the rewards of sound money philosophies and practices through gold ownership in the late 1970s, today’s synthetic narrative allows the new generation to abandon the historical use of precious metals in favor of cryptocurrencies and blockchains with little regard for the risk associated with the old adage that “Possession is nine-tenths of the law.” Only through a cataclysmic confiscation by way of cyber warfare or attack will the sheer veracity of that adage be felt; only AFTER such an event will the true value of physical ownership and possession of gold and silver be truly appreciated and ACTED UPON.

In the meantime, my loved ones cower under beds and sheds, my friends look upon me with wonderment and pity, the dart board is filled with tattered pictures of CNBC anchors past (Simon Hobbs) and present (Brian Sullivan), and my ball-and-chain hammers stays beside me at the ready.

Such is the life of a seasoned and very stubborn gold and silver bull.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Michael Ballanger: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Canuc Resources Corp. and Stakeholder Gold Corp. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: Consulting fees for corporate finance work for Canuc Resources Corp. and Stakeholder Gold Corp. My company has a financial relationship with the following companies mentioned in this article: Canuc Resources Corp. and Stakeholder Gold Corp. I determined which companies would be included in this article based on my research and understanding of the sector. 
2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. 
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Canuc Resources Corp. and Stakeholder Gold Corp., companies mentioned in this article.

All charts and photos courtesy of Michael Ballanger.

 

Michael J. Ballanger for The Gold Report

1.   The next US central bank interest rate announcement is scheduled for tomorrow (Ed. Today 06/14/17) afternoon.  Gold and related assets are now in “pause mode”against most fiat currencies.

2.   Gold has a rough general tendency to decline ahead of a rate hike, and then rally strongly after a hike is announced.

3.   That has happened in textbook fashion with the first three rate hikes in the current hiking cycle.  

4.   There’s no guarantee that it happens again this time, but if it does gold should take out the weekly chart downtrend line that has the attention of institutional technical analysts.

5.   Please click here now. Double-click to enlarge this fabulous monthly gold chart.

6.   Note the buy signal flashing on the Stochastics oscillator at the top of the chart.  It’s happening in the 50 area, which indicates strong momentum.  

7.   Also, the TRIX indicator at the bottom of the chart is about to cross over the zero line.  This is extremely positive technical action.

8.   Technical breakouts that are produced by fundamentally important events are significant.  

9.   The bottom line is that a breakout on the monthly gold chart that occurs in the days following tomorrow’s Fed announcement could be a gamechanger for gold market investors.

10.        Please click here now. Double-click to enlarge this weekly chart of the US dollar versus the Canadian dollar.  

11.        The dollar already looks like a train wreck against both the Japanese Yen and the Indian rupee.  Now it’s poised to go off the rails against the Canadian dollar.  I’ve set an initial target zone in the $1.25 area.

12.        Please click here now. Double-click to enlarge this oil chart.

13.        Oil is by far the largest component of the major commodity indexes.  A rally in the Canadian dollar tends to coincide with a rally in those indexes.  

14.        That’s inflationary, and more good news for gold.

15.        Please click here now.  Good news for gold is happening around the world, and when it’s coming from India, commercial traders tend to buy long positions in size on the COMEX.

16.        After years of gold-negative policy announcements, India’s government has begun to make announcements that are cheered by the gargantuan gold jewellery industry.  

17.        Millions of industry workers have been sidelined by the barbaric legislation of the government in recent years.  I’m predicting that most of them will be back at work within twelve months.  

18.        India’s gold jewellery market will be in expansion mode very quickly, which means the COMEX gold price will be in upside expansion mode even more quickly!

19.        Please click here now.  Double-click to enlarge this gold chart. Active traders can take action on the buy-side right now to capitalize on a potential rate hike rally following tomorrow’s Fed announcement.  Long term investors can place buy orders in the $1220 price zone.  

20.        My personal focus for fresh precious metals sector buying is GDX, the gold stocks ETF.  

21.        Please click here now.  Double-click to enlarge this GDX versus gold chart.  

22.        There’s not much point in buying a high-risk asset class like gold stocks if they are not poised to outperform the underlying low-risk asset class of gold bullion.  The good news is that gold stocks are technically poised to do so right now.  

23.        Most of the gold stock pipeline news flow is now positive.  More rate hikes are needed to reverse the multi-decade bear cycle in US money velocity, and Fed-focused economists have assigned roughly a 95% chance of a rate hike tomorrow.  

24.        GDX has been drifting sideways to lower against gold bullion since February.  I’m a very aggressive buyer on any price weakness between now and tomorrow’s Fed announcement.  There’s no guarantee that the Fed’s fourth rate hike will be followed by a fourth glorious gold sector rally against global fiat, but I will suggest that all investors should be poised to profit, if it happens! 

Thanks!  

Cheers

St

Stewart Thomson  

Graceland Updates 

Note: We are privacy oriented.  We accept cheques, credit card, and if needed, PayPal.

Written between 4am-7am.  5-6 issues per week.  Emailed at aprox 9am daily.

https://www.gracelandupdates.com 

SWOT Analysis: Gold’s Strength Is Justified Says UBS

Posted by Frank Holmes - US Global Investors

on Tuesday, 13 June 2017 14:24

Strengths

 

  • The best performing precious metal for the week was palladium, up 5.10 percent.  Grant Sporre, an analyst at Deutsche Bank, noted there is a genuine physical tightness in the market, but the spike had all the hallmarks of someone being caught short and being squeezed.  Bullionvault’s Gold Investor Index, which measures the balance of client buyers against sellers, rose the most in two years reaching a high of 55.3 in May versus 52.1 in April, reports Bloomberg. In India, gold imports jumped fourfold in May to 126 metric tons from 31.5 metric tons in the same month last year. In a report by the World Gold Council, consumption in India could climb dramatically this year as a “simple” nationwide Goods  Services Tax will boost the economy, making the gold industry more transparent to benefit buyers, reports Bloomberg.
  • Amid unease over a congressional hearing on possible links between Russia and the Trump campaign, holdings in SPDR Gold Shares (the world’s largest gold-backed ETF) climbed to the highest this year on the back of safe-haven demand, reports Bloomberg. In the two weeks through the end of May, hedge funds and other large speculators boosted their bullish bets on the precious metal by 37 percent, notes another Bloomberg article, the most since 2007 according to government data.
  • Japanese investors sold a record amount of U.S. debt in April, reports Bloomberg. “Political turmoil in Washington and uncertainty about French elections pushed down Treasury yields, diminishing their attractiveness,” the article continues. Japanese investors cut holdings of U.S. debt by $33.2 billion in April, the most in data going back to 2005, according to a Ministry of Finance balance-of-payments report.

 

Weaknesses

 

  • The worst performing precious metal for the week was silver, off 1.90 percent and largely in sync with the fall in gold.  Data from the People’s Bank of China show that the Asian nation kept its gold reserves unchanged for the fifth straight month. Holdings stand at 59.24 million ounces for the end of May, the same level since the end of October. UBS commented on the moves in a report this week. “We maintain our base case that purchases should resume up ahead as overall official reserves stabilize, given that the diversification argument remains intact,” writes Joni Teves at UBS. “Nevertheless, we acknowledge growing risks to this view considering that the pause in buying has gone on longer than we initially expected.”
  • According to an emailed statement from the Athens-based Energy Ministry, the Greek government will seek arbitration against Hellas Gold to “ensure contractual obligations of the company,” reports Bloomberg. The compliance measures are in reference to Kassandra mines in northern Greece. On the flip side of things, Eldorado Gold says is hasn’t been notified of the Greek arbitration, and says it operates in accordance with all applicable laws and regulations in jurisdictions where it conducts business.
  • Employees at Freeport McMoRan’s Grasberg mine in Indonesia who stopped showing up for work in mid-April (totaling 4,000 employees and contractors), are in the process of being replaced, reports Bloomberg. Freeport CFO Kathleen Quirk said in a presentation in Chicago that all 4,000 are deemed to have resigned. The company’s top priority for the remainder of 2017 is getting a long-term extension to operating rights in Indonesia.

 

Opportunities

 

  • A rush to haven assets has led to two firms saying they plan to open vaults in Europe capable of holding more than 100 million euros in gold, reports Bloomberg. This would offer customers lower costs that ETPs as well as protection from rising prices. “Inflation is a key concern for many of our clients,” said Ross Norman, CEO of Sharps Pixley. In a related note, China (the world’s biggest gold market) could boost its imports through Hong Kong  by about half this year, as investors seek to protect their wealth from currency risks, reports Bloomberg. In fact, China’s gold imports are already heading higher in 2017. A slowing property market and volatile stocks also add to the safe-haven allure, according to the Chinese Gold & Silver Exchange Society.

 

chinagoldimports2017

 

 

 

  • In its Global Precious Metals Comment this week, UBS writes that gold’s strength is justified by macro forces. “In particular, lower rates, weaker dollar and broader uncertainty provide good foundation for the market to continue its journey higher,” the report reads. The group adds that gold’s use as a portfolio diversifier has become increasingly relevant in the current environment and that despite the rally from May lows, UBS believes gold positioning is not crowded overall and there should still be room for the move to extend.
  • Sean Casey, contributing analyst with Bloomberg, writes “Commodities’ negative correlation to the dollar has never been more stressed in the Bloomberg Dollar Spot Index’s 13-year history.” The note continues by stating that commodities could rally 20 percent just by catching up to the declining dollar. Over the past 26 weeks the dollar is down 6.1 percent and the Bloomberg Commodity Index is down 2.2 percent. “This unusual disparity has never happened since the dollar index’s start in 2004,” the article continues. “In the 73 weeks where the dollar ended down 5 percent or more on a 26-week basis, commodities have increased 20 percent on average.”

 

Threats

 

  • Mexico’s tax agency owes Canadian mining companies over $360 million in tax rebates, reports Reuters and Bloomberg. The sum includes $230 million owed to Goldcorp and $66.5 million to Torex Gold Resources, just to name a few. “It’s damaging the ability to reinvest the dollars in assets that actually pay real tax,” said Torex chief executive Fred Stanford. The situation proves even more difficult for smaller, cash-strapped miners and explorers.
  • A note from Global Mining Research this week states that wholesale electricity prices have nearly tripled over the last 18 months in Australia, primarily driven by capacity closures and higher gas costs, according to Energy Australia. Although short-term fluctuations are nothing new, “these price increases look here to stay with new generation capacity needed.” The mining industry in South Africa is also facing cost pressure. Its new mining charter will be gazetted and become law next week, Mineral Resource Minister Mosebenzi  Zwane said Tuesday. The mining industry doesn’t think it has been consulted enough on these changes and is thus losing investment. Similarly, Tanzania plans to introduce a 1 percent clearing fee on the value of mineral exports in 2017/18, according to its finance minister, part of government measures aimed at getting a bigger share of revenues from tis natural resources.
  • Mitsubishi Materials Corp. processed 20 percent of all electronic waste gathered globally last year to recover gold, silver and copper, reports Bloomberg. The “urban miner” plans to expand processing capacity by 14 percent to 160,000 tons next year, according to senior managing executive officer Yasunobu Suzuki. The company plans to open a facility in the Netherlands in November to collect waste in Europe for processing at its Japanese facilities and should be additive to recycled gold supply.

 

………Find out what’s driving gold!

 

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The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).

U.S. Global Investors, Inc. is an investment adviser registered with the Securities and Exchange Commission (“SEC”). This does not mean that we are sponsored, recommended, or approved by the SEC, or that our abilities or qualifications in any respect have been passed upon by the SEC or any officer of the SEC.

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Why the World’s Billionaire Investors Buy Precious Metals

Posted by Visual Capitalist

on Tuesday, 13 June 2017 14:00

billionaires-precious-metals

Why are these billionaires buying precious metals? 

Their cited reasons can basically be summed up with six categories: wealth preservation, store of value, inflation hedge, portfolio diversification, future upside, and investment fundamentals.

What Billionaire Investors are Doing

1. Lord Jacob Rothschild
In late summer 2016, Rothschild announced changes to the RIT Partners portfolio because he was worried about very low interest rates, negative yields, and quantitative easing, saying they are part of the “greatest monetary experiment in monetary policy in the history of the world”.

His solution? Buy gold to help preserve wealth, and as a store of value for the future.

2. David Einhorn
Einhorn has a similar assessment. He believes that monetary policy is becoming increasingly adventurous, and that this – along with the policies of the Trump administration – will eventually lead to large amounts of inflation. 

In February 2017, he shorted sovereigns, and bought gold. 

3. Ray Dalio
Ray Dalio is the founder of the world’s top hedge fund, Bridgewater Associates, but he’s also no stranger to gold. 

If you don’t own gold, you know neither history nor economics.

– Ray Dalio, Bridgewater Associates

More recently, in 2016, Dalio is quoted as telling investors to own a well-diversified portfolio that is 5-10% gold.

4. Stanley Druckenmiller
Druckenmiller, some people argue, is the best money manager of all time. 

Lately, he’s placed his bets on gold as well, but for different reasons than the above managers. Druckenmiller has always placed big trades with lots of conviction, and in February 2017 he put his money in gold because “no country wants its currency to strengthen”.