David’s Commentary:
If it sounds like I’m repeating myself it’s because I am – more or less. In order to get you to pay for information, or to keep you coming back to their website, the financial newsletter writers have conditioned most of us to think in the short-term. They focus on what gold, silver, the dollar or the Dow did yesterday. Sure, I read them too, to stay informed, which is a good thing. But the truth is, the proper way to approach the physical precious metals market is to focus, not on today, or yesterday, but on the big picture and the events that will ultimately move the market.
The latest rumor that is circulating from something that one of the Fed governors just said, or the latest rumor of a new trade deal between the US and China that is picked up from Trump’s Twitter account are not what will affect your portfolio over the long haul. This type of information is only important if you are a day trader and make your money by moving in and out of the market quickly. But if that’s what you do, then you are buying and selling paper contracts, not buying and selling physical gold or silver. And, you probably wouldn’t be reading this newsletter. You would be paying a hefty price for “timing” information. That is not what we do. We don’t pay much attention to yesterday’s “news.” We don’t over-react to the day-to-day “noise.” We strive to keep our focus on the trends that will actually influence the movement of the products we sell.
It simplifies things to filter out the day-to-day moves and news releases, at least those that affect physical gold and silver. The only relationship between physical gold and silver, and paper gold and silver contracts traded on the Comex is that the Comex contracts set the price of the physical metals. It should not be that way! The price of gold and silver (and the rest of the commodities that are traded on the Comex) should be priced based on their supply and demand fundamentals. Instead their price is set by banks and hedge funds that are buying and selling huge volumes on speculation, with no intent to ever deliver or take delivery on any physical metals. I am not a tin-hat conspiracy nut, but in my mind it is impossible that the precious metals market (make that all of the markets) are freely traded. There is manipulation and it starts with the Fed, the Treasury, the big banks and the hedge funds. Some of the manipulation is done for political reasons and some is done for financial gain. But the important thing to remember is that in the end, market manipulation does not work long-term. The markets we focus on like the currency markets and the bond markets, which set interest rates, are too large to control, for any length of time. That is where I set my focus.
Here is what needs to happen, short of some type of totally unexpected black swan event, to get gold and silver moving up again, and I don’t mean a small short-term move. No, I’m talking about a new primary-trend, a powerful bull market run up.
I recently read an article that talked about the huge increase in the Federal deficit since the first of the year. According to the latest Treasury Department figures, there was a 77 percent spike in the deficit over the first four months of the budget year, which was driven by falling revenue and steady growth in spending. It’s frightening if you believe that debt actually matters. By and large, the dim wits in Washington do not. Military spending and social spending are out of control.
Between the Trump tax cuts and the out-of-control Federal spending, the deficit is exploding. It looks like our national debt will grow by more than a trillion dollars this year. Numbers like this are hard to grasp, but let’s make it easy. That amounts to $3,100 per person in additional borrowed money that will never be repaid. That’s extra, in addition to the current Federal debt, which is $21 trillion and counting. That’s almost $65,000 a person, increasing by a trillion a year and the interest on this massive sum is compounding annually. Interest alone last year were $364 billion. And that is with interest rates hovering near all-time lows. You know what will happen when interest rates start to rise.
Under current law, CBO projects that net interest costs will nearly triple over the next 10 years, soaring from $315 billion in 2018 to $914 billion in 2028 and totaling $6.9 trillion over the period.
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It’s pretty obvious that this trend cannot go on indefinitely. The amount of new dollars that will have to be created to service this monster is screaming at you – buy gold and silver and dump dollars.
Do you really expect Congress to agree on anything for the next two years? Do you think the Democrats will do anything to help President Trump get re-elected to a second term? How long will it be before our lenders (the foreign countries who buy our debt) demand much higher interest rates or outright cease buying our Treasuries? This is going to happen, and sooner rather than later since we have lost control of our finances. Russia and China are already selling US Treasuries. Once this happens, interest rates will rise, which will derail the economy and the stock market. Inflation will increase, as the Fed is obliged to purchase the debt in an attempt to slow down the rising interest rates and to keep the bond market from imploding.
This alone guarantees the coming bull market in gold and silver. Smart money will quickly move to safety, to avoid the risk from the falling dollar, falling stock market and falling bond markets. The number one asset, the safest asset, the only asset that is unencumbered, free and clear, is gold. Yes, “risk aversion” assets will become the “Go To” assets.
I read something every day where the author is trying to time the move, up or down, in gold and silver. It’s a waste of time.
It’s enough for us to understand what the end game is all about here, because it is not far off. Just look around you. Things are not going well and there are new fires to put out every time you turn around. Trump is not a magic-worker. In fact, he seems to be causing more disruption and instability than good. His key projects, like the wall, tariffs, disarming North Korea’s nuclear capability and reigning in Iran are not going well. They are very disruptive (which is not to say they are bad ideas). We will not, cannot grow our economy sufficiently to avoid the ultimate penalty of too much debt and money creation. If you think I am wrong in saying this, then sell your metals and put all your money in the stock market, and I wish you well.
Weak U.S. Domestic Growth Needed To Push Gold To $1,400 – Analyst
Kitco News
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The U.S. dollar and U.S. interest rates remain the key headwinds to gold prices as the yellow metal tries to find momentum after dropping from last month’s 10-month high.
Although gold needs a dovish fed to push higher, Jim Iuorio, managing director at TJM Institutional Services, wrote in a commentary for the CME Group that the reason behind low interest rates will key for prices to push towards $1,400 an ounce.
“If the Fed’s change of heart is caused by problems in Asia or in Europe, the dollar could maintain its strength in a lower rate environment because its value is primarily measured against the yen and the euro,” he said.
However, if the Fed keeps interest rates low because of domestic growth concerns, which could be enough to propel gold higher.
“Additionally, if the domestic weakness appears that it may persist and require long-term central bank intervention, gold could swiftly shift to the ‘gotta have it’ asset of 2019,” he said.
Another side-effect of weak economic growth could be panic selling in equity markets, which would also benefit gold, Iuorio said.
The gold market is currently digesting a significant economic downgrade from the European Central Bank, which prompted it to loosen monetary policy.
According to the latest ECB staff projections, Eurozone gross domestic product will increase by 1.1% this year, 1.6% in 2020 and 1.5% in 2021, compared to December’s forecast of 1.7% growth in 2019, 1.7% in 2020 and 1.5% in 2021.
At the same time, the central banks sees consumer prices increasing 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021, compared to the previous estimates of 1.6% inflation this year, 1.7% in 2020 and 1.8% in 2021.
April gold futures last traded at $1,286.10 an ounce, down 0.12% on the day.
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Greg Hunter interviews Catherine Austin Fitts. She says the world is choking on debt-Buy Gold.
Greg Hunter
Catherine Austin Fitts – World Choking On Debt – Buy Gold
What is investment advisor and former Assistant Secretary of Housing Catherine Austin Fitts looking to put money in? She has long been lukewarm on gold, but not any longer. Fitts now says, “The world is choking on debt. . . . It’s not just peak oil, it’s peak everything. So, it is one of the reasons you see margins falling, and we tried to fight it by blowing bubbles. We are reaching the end of that sort of strategy, and it’s one of the reasons you are seeing more and more people become aware of gold and want gold. They are saying, okay, the financial asset bubble game is over, and now we want real things. . . . To me, gold was a core position, and I have always felt that gold was a core position. So, I like gold now. For many years, I said I don’t think gold is going to have a good investment run. I am changing that this year. I think gold as an investment will do reasonably well this year, and it should. . . . Basel III rules are basically making gold more attractive and focusing more on financial soundness. Yes, the central banks and banks are going to be buying, but I think as you see global investors see the extent of the lawlessness, and like the determinations in the U.S. federal credit, they are going to be looking for real assets. Gold is just going to be a place to go. . . . Away from jewelry, you’ve got about a $3 trillion gold market. So, it only takes a little bit of a pension fund or a sovereign wealth fund to increase their gold allocation to run the market up. I think there is going to be a steady drum beat of support for the price of gold for some time to come.”
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David’s Commentary:
The next topic I want to touch on today is Palladium. By now everyone must be aware of the bull market in Palladium. Very few of our clients own any Palladium. I hate to chase a market on the way up, but the “fundamentals” justify owning some now. If you don’t have any, now would be a good time to add some to your portfolio.
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Palladium
Palladium is making new all-time highs right now. It’s pushing towards $1,500 an ounce, up from $800 back in August. That’s because there is an extreme physical supply shortage. We see that because of the lease rates in London, the backwardation, there is an extreme shortage. The problem with Palladium is that its producer is Russia. They’re not likely to supply a lot of Palladium to let the banks off the hook. And the banks are on the hook because the Palladium market is structured identically to the way it’s structured in gold and silver. If we get a real run on Palladium, which is bond to happen, and all of a sudden we get a “force majeure” and the banks say, look I know we made all these promises, but we just don’t have the metal. Palladium could be the “magic bullet” that breaks the system, that ends the whole party. If the Palladium market fails, and there is no reason to think it won’t, it is not some kind of parabolic blow-off, but it’s not. On the Comex there are only 42,000 ounces of Palladium in the vaults, both combined and eligible yet there are 4.2 million ounces of contracts. It only makes sense that the hedge funds say, hey if the Palladium market is structured that way, isn’t the gold and silver market structured the same way too? A collapse of the scam in Palladium will open a lot of eyes. Will it happen? Don’t know, but there is a point when people will figure out that the banks are between a rock and a hard place and then it’s off to the races.
In silver, JPMorgan now has this vault that has the 150-million ounces of silver. If you add up all of the silver in the Comex vaults and divide it by the open interest, which is 1.1 billion ounces, which is 130% of mine supply, against 280 million ounces of silver in the Comex vaults, you’ve got total leverage of the amount of contracts versus the silver in the vaults about four to one. In gold, if you add up all the gold between registered and eligible, and divide by the open interest, the leverage is about 5.5 to 1.
There is 2.9 million ounces of digital Palladium versus 42,000 ounces of physical Palladium in the vaults. The ratio is 68 to 1. A failure to deliver is when the music stops. That’s what we’re waiting for. When the large hedge funds and even the central banks who have loaned their gold out (like Switzerland) realize that this is all just one big scam and they say, hey, I’d like my gold now, that’s when the banks scheme can collapse. That is what happened in the 50s when the U.S. couldn’t supply the gold and in the 60s when the London Gold Pool collapsed. They couldn’t deliver. That’s the same boat the bullion banks are in now if people realize this is just one big Ponzi scheme and demand their physical metal back. The scheme of getting people to accept digital make-believe gold for the real thing will collapse. So how high could the price of gold go? No one knows how many ounces are out there, with no claim against them to be delivered so there is no way to know how high the price will go, but it will be very high
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About Miles Franklin
Miles Franklin was founded in January, 1990 by David MILES Schectman. David’s son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin’s primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.
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