Precious Metals

     

 

 

The “Risk Asset” Dip Not Worth Buying is on its Way

The prices of the metals rose, gold by +$11 and silver by +$0.25. The question on everyone’s mind (including ours) is: what will cause a change in the gold price trend, or what will make gold go up in a large and durable way? And that leads to another way of looking at this question.

 

Here is a very good technical reason to adopt a constructive attitude toward gold despite the fact that its nominal price in USD terms is seemingly not going anywhere of late. By remaining fairly stable in recent weeks, gold is rising relative to the S&P 500 index (SPX). In other words, the purchasing power of gold is increasing – and not only relative to the stock market. Similar trend changes can be observed elsewhere (e.g. in gold vs. industrial commodities). We will soon discuss this in greater detail. [PT]

 

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Precious Metals Patterns

Prices in financial and commodity markets exhibit seasonal trends. We have for example shown you how stocks of pharmaceutical companies tend to rise in winter due to higher demand, or the end-of-year rally phenomenon (last issue), which can be observed almost every year. Gold, silver, platinum and palladium are subject to seasonal trends as well.

 

Although gold and silver are generally perceived to trend in the same direction, there are actually big differences in their seasonal trends [PT]

 

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Degrees of Urgency

Monday was Veterans Day, a bank holiday in the US. The prices of gold and silver dropped $23 and $0.61 respectively. “But isn’t gold supposed to go up when…?”

 

Warren Buffet and Aragorn discuss what to do with the gold. Aragorn wants it, because he knows that even if it’s not today, “that day” will come. [PT]

 

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The Last to Go

Terry Goodkind wrote an epic fantasy series. The first book in the series is entitled Wizard’s First Rule. We recommend the book highly, if you’re into that sort of thing.

 

An image from the title page of Terry Goodkind’s best-selling fantasy epic “Wizard’s First Rule”. We’d be at bit wary of standing around on that stone-slab bridge to be honest. [PT]

 

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While Not Saving The Planet, Let Us At Least Have A Good Time

The price of gold went up seven bucks, and that of silver rose eight pennies.

For many people, the attraction to gold and silver began with a desire to protect themselves from the monetary train wreck of 2008. That often grew into a sense that gold is the solution to that problem.

 

The post 2008 GFC monetary train wreck: US true broad money supply is expanded by more than 153% in a mere decade, as the Fed takes over “money creation duties” from a banking system reluctant to expand credit further. [PT]

 

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Aiming for Knowledge and Better Decision-Making

The price of yellow metal went up nine bucks last week. And the price of silver three rose cents, which is back to where it was two weeks earlier. We need to rant, and promise to tie it back to the prices of the metals. We have written these past several weeks about the fact that the franc has been rendered useless. Owning a franc does nothing for you, other than to trade to the next person at hopefully a higher price.

 

When the money of the realm becomes literally useless as money – the charts and data example above shows excerpts of what happened in Germany from WW1 to the hyperinflation blow-out of 1923. In the end, one simply could no longer use the Reichsmark as a medium of exchange. [PT]

 

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A Chirp from the Deep Level Mines

Back in late 2015 and early 2016, we wrote about a leading indicator for gold stocks, namely the sub-sector of marginal – and hence highly leveraged to the gold price – South African gold stocks. Our example du jour at the time was Harmony Gold (HMY) (see “Marginal Producer Takes Off” and “The Canary in the Gold Mine” for the details).

 

Mining engineer equipped with bio-sensor

Photo credit: Hulton Archive

 

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You Actually Can Eat Gold, But Its Nutritional Value is Dubious

“You can’t eat gold.” The enemies of gold often unleash this little zinger, as if it dismisses the idea of owning gold and indeed the whole gold standard. It is a fact, you cannot eat gold. However, it dismisses nothing.

 

Over-the-top garnish: Gold leaf-laced donut (reportedly costs $100), gold-laced cakes, sushi roll with gold leaf (according to Japanese lore, eating it is supposed to bring luck), gold-cake eater in Dubai. Nutritional value of the gold leaf is zero, but at least it isn’t toxic. So yes, one can eat gold, but it won’t relieve hunger pangs. We would like to point out here that absolutely no-one is trying to eat bank note-laced cakes. [PT]

 

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A Piece of Paper Alone Cannot Secure Liberty

The idea of a constitution and/or written legislation to secure individual rights so beloved by conservatives and among many libertarians has proven to be a myth. The US Constitution and all those that have been written and ratified in its wake throughout the world have done little to protect individual liberties or keep a check on State largesse.

 

Sound money vs. a piece of paper – which is the better guarantor of liberty? [PT]

 

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Running From “Risk-Free” to Not So Risk-Free Debt 

The price of gold blipped $13 last week, while the price of silver was unchanged. Speaking of interest rates and central planning by central banks, we note that in mid-2016, a correction (counter-trend move to the main trend) began in 10-year bond yields.

 

10-year treasury note yield vs. 10-year German Bund yield over the past decade [PT]

 

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The Most Comprehensive Collection of Charts Relevant to Gold is Here

Our friends from Incrementum (a European asset management company) have just released the annual “In Gold We Trust” chart book, which collects a wealth of statistics and charts relevant to gold, with extensive annotations. Many of these charts cannot be found anywhere else. The chart book is an excellent reference work for anyone interested in the gold market and financial markets in general. A download link for the chart book can be found at the end of this post.

 

Turn of the tides: monetary expansion becomes monetary contraction

 

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Hammering the Spread

The price of gold fell nine bucks last week. However, the price of silver shot up 33 cents. Our central planners of credit (i.e., the Fed) raised short-term interest rates, and threatened to do it again in December. Meanwhile, the stock market continues to act as if investors do not understand the concepts of marginal debtor, zombie corporation, and net present value.

 

The Federal Reserve – carefully inching forward to Bustville

 

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