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Jeff Clark is Editor of BIG GOLD and Explorers’ League at Casey Research (http://www.caseyresearch.com). Having worked on his family’s gold claims in California and Arizona, as well as a mine in a place to remain nameless, these days Jeff Clark focuses on following some of the most successful... More
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  • Gold Was Up 73% Last Year!

    Dmitry sipped his coffee drink at his favorite café in Moscow, flipping through the newspaper in front of him. It was full of bad news: currency troubles, ongoing sanctions from the West, rising inflation, and more.

    But he ignored all that. He turned to the investment section and began to scan the page, looking for the latest price of one specific investment. He went past the headline that screamed Russia's inflation rate was up to 11.4% last year, as well as the article detailing the ruble's debilitating 46.5% fall. He knew all those things and had experienced them firsthand.

    He went directly to the page that quoted the price of gold in rubles.

    And there it was. And this time, it wasn't just a short price quote, but a full article on the topic of gold, starting with a headline that warmed his heart.

    "Gold Price in Rubles Rises 73% in 2014"

    The article detailed how gold had soared last year due to the depreciation of the ruble. What especially pleased him was that gold rose more than the ruble fell. It also outpaced the rise in inflation.

    The article included a chart of the last six weeks' price movement, during which the ruble had taken an especially ugly drop.

    Dmitry wasn't surprised to read that it wasn't just the gold price in rubles that was up last year…

    The price of gold rose against ALL currencies in 2014-except the US dollar. Yes, gold was up in the euro, Japanese yen, Swiss franc, Canadian dollar, British pound, Australian dollar, New Zealand dollar, Chinese renminbi, Indian rupee, Swedish krona, Brazilian real, Israeli shekel, and South Korean won.

    Even more interesting was that gold outperformed most stock markets around the world…

    Most investors outside North America not only saw their currency lose value but also lost money in their stock market. His fellow Russians were hit especially hard. Whoever owned gold, though, had avoided these debilitating losses and was actually sitting on a profit.

    The article concluded by congratulating those with the foresight to buy gold, which, unfortunately, didn't include many of his fellow citizens-but it did include him.

    Dmitry has every right to feel pleased with himself. While inflation raged all around him, the currency fell through the floor, and global crises remained escalated, his investment in gold had done exactly what it was supposed to do: protect him against currency and monetary calamity. In fact, he'd gained more with gold than he lost in ruble purchasing power.

    He'd read warnings that this could happen-warnings others had dismissed as the ravings of loony gold bugs. He had been skeptical, frankly, and it hadn't happened exactly as he thought it would, but now he sure was glad he'd decided to play it safe and bought some gold as insurance.

    He wondered what those in North America thought about this phenomenon… Did they see the writing on the global economic wall-or did they imagine they were immune because their stock market had risen so much while gold remained weak in their currency? Did they really believe their central bankers were wizards endowed with supernatural powers others lacked? Didn't they remember Ben Bernanke insisting in 2007 and 2008 that there was no crisis and that everything was under control?

    It seemed to Dmitry that many of them were kidding themselves, because he knew that at some point, the very thing that happened to inflation rates and currency values in his country could happen to theirs. And how gold would respond-as he now knew firsthand.

    Like him, sensible Americans who bought gold while it was on sale wouldn't know the timing but would be prepared for the inevitable outcome of the currency-destroying policies their central bank had adopted, just like all the others. He hoped they saw it coming and envied their chance to take advantage of relatively low prices.

    Dmitry could hardly wait for tomorrow, the day the January BIG GOLD would be released. And it wouldn't be just any issue, but a 50-page blockbuster edition that interviewed 17 experts on precious metals and included two actionable steps to kickstart 2015: a discount on international bullion storage and a new recommended stock, one that Jeff Clark described as a must-own company that came with both safety and high potential. He hopes his friends check it out.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jan 05 11:24 AM | Link | Comment!
  • 7 Questions Gold Bears Must Answer

    A glance at any gold price chart reveals the severity of the bear mauling it has endured over the last three years.

    More alarming, even for die-hard gold investors, is that some of the fundamental drivers that would normally push gold higher, like a weak US dollar, have reversed.

    Throw in a correction-defying Wall Street stock market and the never-ending rain of disdain for gold from the mainstream and it may seem that there's no reason to buy gold; the bear is here to stay.

    If so, then I have a question. Actually, a whole bunch of questions.

    If we're in a bear market, then…

    Why Is China Accumulating Record Amounts of Gold?

    Mainstream reports will tell you Chinese imports through Hong Kong are down. They are.

    But total gold imports are up. Most journalists continue to overlook the fact that China imports gold directly into Beijing and Shanghai now. And there are at least 12 importing banks-that we know of.

    Counting these "unreported" sources, imports have risen sharply. How do we know? From other countries' export data. Take Switzerland, for example:

    So far in 2014, Switzerland has shipped 153 tonnes (4.9 million ounces) to China directly. This represents over 50% of what they sent through Hong Kong (299 tonnes).

    The UK has also exported £15 billion in gold so far in 2014, according to customs data. In fact, London has shipped so much gold to China (and other parts of Asia) that their domestic market has "tightened significantly" according to bullion analysts there.

    Why Is China Working to Accelerate Its Accumulation?

    This is a growing trend. The People's Bank of China released a plan just last Wednesday to open up gold imports to qualified miners, as well as all banks that are members of the Shanghai Gold Exchange. Even commemorative gold maker China Gold Coin could qualify to import bullion. Not only will this further increase imports, but it will serve to lower premiums for Chinese buyers, making purchases more affordable.

    As evidence of burgeoning demand, gold trading on China's largest physical exchange has already exceeded last year's record volume. YTD volume on the Shanghai Gold Exchange, including the city's free-trade zone, was 12,077 tonnes through October vs. 11,614 tonnes in all of 2013.

    The Chinese wave has reached tidal proportions-and it's still growing.

    Why Are Other Countries Hoarding Gold?

    The World Gold Council (WGC) reports that for the 12 months ending September 2014, gold demand outside of China and India was 1,566 tonnes (50.3 million ounces). The problem is that demand from China and India already equals global production!

    India and China currently account for approximately 3,100 tonnes of gold demand, and the WGC says new mine production was 3,115 tonnes during the same period.

    And in spite of all the government attempts to limit gold imports, India just recorded the highest level of imports in 41 months; the country imported over 39 tonnes in November alone, the most since May 2011.

    Let's not forget Russia. Not only does the Russian central bank continue to buy aggressively on the international market, Moscow now buys directly from Russian miners. This is largely because banks and brokers are blocked from using international markets by US sanctions. Despite this, and the fact that Russia doesn't have to buy gold but keeps doing so anyway.

    Global gold demand now eats up more than miners around the world can produce. Do all these countries see something we don't?

    Why Are Retail Investors NOT Selling SLV?

    SPDR gold ETF (NYSEARCA:GLD) holdings continue to largely track the price of gold-but not the iShares silver ETF (NYSEARCA:SLV). The latter has more retail investors than GLD, and they're not selling. In fact, while GLD holdings continue to decline, SLV holdings have shot higher.

    While the silver price has fallen 16.5% so far this year, SLV holdings have risen 9.5%.

    Why are so many silver investors not only holding on to their ETF shares but buying more?

    Why Are Bullion Sales Setting New Records?

    2013 was a record-setting year for gold and silver purchases from the US Mint. Pretty bullish when you consider the price crashed and headlines were universally negative.

    And yet 2014 is on track to exceed last year's record-setting pace, particularly with silver…

    • November silver Eagle sales from the US Mint totaled 3,426,000 ounces, 49% more than the previous year. If December sales surpass 1.1 million coins-a near certainty at this point-2014 will be another record-breaking year.
    • Silver sales at the Perth Mint last month also hit their highest level since January. Silver coin sales jumped to 851,836 ounces in November. That was also substantially higher than the 655,881 ounces in October.
    • And India's silver imports rose 14% for the first 10 months of the year and set a record for that period. Silver imports totaled a massive 169 million ounces, draining many vaults in the UK, similar to the drain for gold I mentioned above.

    To be fair, the Royal Canadian Mint reported lower gold and silver bullion sales for Q3. But volumes are still historically high.

    Why Are Some Mainstream Investors Buying Gold?

    The negative headlines we all see about gold come from the mainstream. Yet, some in that group are buyers…

    Ray Dalio runs the world's largest hedge fund, with approximately $150 billion in assets under management. As my colleague Marin Katusa puts it, "When Ray talks, you listen."

    And Ray currently allocates 7.5% of his portfolio to gold.

    He's not alone. Joe Wickwire, portfolio manager of Fidelity Investments, said last week, "I believe now is a good time to take advantage of negative short-term trading sentiment in gold."

    Then there are Japanese pension funds, which as recently as 2011 did not invest in gold at all. Today, several hundred Japanese pension funds actively invest in the metal. Consider that Japan is the second-largest pension market in the world. Demand is also reportedly growing from defined benefit and defined contribution plans.

    And just last Friday, Credit Suisse sold $24 million of US notes tied to an index of gold stocks, the largest offering in 14 months, a bet that producers will rebound from near six-year lows.

    These (and other) mainstream investors are clearly not expecting gold and gold stocks to keep declining.

    Why Are Countries Repatriating Gold?

    I mean, it's not as if the New York depository is unsafe. It and Ft. Knox rank as among the most secure storage facilities in the world. That makes the following developments very curious:

    • Netherlands repatriated 122 tonnes (3.9 million ounces) last month.
    • France's National Front leader urged the Bank of France last month to repatriate all its gold from overseas vaults, and to increase its bullion assets by 20%.
    • The Swiss Gold Initiative, which did not pass a popular vote, would've required all overseas gold be repatriated, as well as gold to comprise 20% of Swiss assets.
    • Germany announced a repatriation program last year, though the plan has since fizzled.
    • And this just in: there are reports that the Belgian central bank is investigating repatriation of its gold reserves.

    What's so important about gold right now that's spurned a new trend to store it closer to home and increase reserves?

    These strong signs of demand don't normally correlate with an asset in a bear market. Do you know of any bear market, in any asset, that's seen this kind of demand?

    Neither do I.

    My friends, there's only one explanation: all these parties see the bear soon yielding to the bull. You and I obviously aren't the only ones that see it on the horizon.

    Christmas Wishes Come True…

    One more thing: our founder and chairman, Doug Casey himself, is now willing to go on the record saying that he thinks the bottom is in for gold.

    I say we back up the truck for the bargain of the century. Just like all the others above are doing.

    With gold on sale for the holidays, I arranged for premium discounts on SEVEN different bullion products in the new issue of BIG GOLD. With gold and silver prices at four-year lows and fundamental forces that will someday propel them a lot higher, we have a truly unique buying opportunity. I want to capitalize on today's "most mispriced asset" before sentiment reverses and the next uptrend in precious metals kicks into gear.

    It's our first ever Bullion Buyers Blowout-and I hope you'll take advantage of the can't-beat offers. Someday soon you will pay a lot more for your insurance. Save now with these discounts.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: gold
    Dec 09 11:40 AM | Link | Comment!
  • Top 7 Reasons I'm Buying Silver Now

    I remember my first drug high.

    No, it wasn't from a shady deal made with a seedy character in a bad part of town. I was in the hospital, recovering from surgery, and while I wasn't in a lot of pain, the nurse suggested something to help me sleep better. I didn't really think I needed it-but within seconds of that needle puncturing my skin, I WAS IN HEAVEN.

    The euphoria that struck my brain was indescribable. The fluid coursing through my veins was so powerful I've never forgotten it. I can easily see why people get hooked on drugs.

    And that's why I think silver, purchased at current prices, could be a life-changing investment.

    The connection? Well, it's not the metal's ever-increasing number of industrial uses… or exploding photovoltaic (solar) demand… nor even that the 2014 supply is projected to be stagnant and only reach 2010's level. No, the connection is…

    Financial Heroin

    The drugs of choice for governments-money printing, deficit spending, and nonstop debt increases-have proved too addictive for world leaders to break their habits. At this point, the US and other governments around the world have toked, snorted, and mainlined their way into an addictive corner; they are completely hooked. The Fed and their international central-bank peers are the drug pushers, providing the easy money to keep the high going. And despite the Fed's latest taper of bond purchases, past actions will not be consequence-free.

    At first, drug-induced highs feel euphoric, but eventually the body breaks down from the abuse. Similarly, artificial stimuli and sub-rosa manipulations by central banks have delivered their special effects-but addiction always leads to a systemic breakdown.

    When government financial heroin addicts are finally forced into cold-turkey withdrawal, the ensuing crisis will spark a rush into precious metals. The situation will be exacerbated when assets perceived as "safe" today-like bonds and the almighty greenback-enter bear markets or crash entirely.

    As a result, the rise in silver prices from current levels won't be 10% or 20%-but a double, triple, or more.

    If inflation picks up steam, $100 silver is not a fantasy but a distinct possibility. Gold will benefit, too, of course, but due to silver's higher volatility, we expect it will hand us a higher percentage return, just as it has many times in the past.

    Eventually, all markets correct excesses. The global economy is near a tipping point, and we must prepare our portfolios now, ahead of that chaos, which includes owning a meaningful amount of physical silver along with our gold.

    It's time to build for a big payday.

    Why I'm Excited About Silver

    When considering the catalysts for silver, let's first ignore short-term factors such as net short/long positions, fluctuations in weekly ETF holdings, or the latest open interest. Data like these fluctuate regularly and rarely have long-term bearing on the price of silver.

    I'm more interested in the big-picture forces that could impact silver over the next several years. The most significant force, of course, is what I stated above: governments' abuse of "financial heroin" that will inevitably lead to a currency crisis in many countries around the world, pushing silver and gold to record levels.

    At no time in history have governments printed this much money.

    And not one currency in the world is anchored to gold or any other tangible standard. This unprecedented setup means that whatever fallout results, it will be of historic proportions and affect each of us personally.

    Specific to silver itself, here are the data that tell me "something big this way comes"…

    1. Inflation-Adjusted Price Has a Long Way to Go

    One hint of silver's potential is its inflation-adjusted price. I asked John Williams of Shadow Stats to calculate the silver price in June 2014 dollars (July data is not yet available).

    Shown below is the silver price adjusted for both the CPI-U, as calculated by the Bureau of Labor Statistics, and the price adjusted using ShadowStats data based on the CPI-U formula from 1980 (the formula has since been adjusted multiple times to keep the inflation number as low as possible).

    The $48 peak in April 2011 was less than half the inflation-adjusted price of January 1980, based on the current CPI-U calculation. If we use the 1980 formula to measure inflation, silver would need to top $470 to beat that peak.

    I'm not counting on silver going that high (at least I hope not, because I think there will be literal blood in the streets if it does), but clearly, the odds are skewed to the upside-and there's a lot of room to run.

    2. Silver Price vs. Production Costs

    Producers have been forced to reduce costs in light of last year's crash in the silver price. Some have done a better job at this than others, but check out how margins have narrowed.

    Relative to the cost of production, the silver price is at its lowest level since 2005. Keep in mind that cash costs are only a portion of all-in expenses, and the silver price has historically traded well above this figure (all-in costs are just now being widely reported). That margins have tightened so dramatically is not sustainable on a long-term basis without affecting the industry. It also makes it likely that prices have bottomed, since producers can only cut expenses so much.

    Although roughly 75% of silver is produced as a by-product, prices are determined at the margin; if a mine can't operate profitably or a new project won't earn a profit at low prices, the resulting drop in output would serve as a catalyst for higher prices. Further, much of the current cost-cutting has come from reduced exploration budgets, which will curtail future supply.

    3. Low Inventories

    Various entities hold inventories of silver bullion, and these levels were high when US coinage contained silver. As all US coins intended for circulation have been minted from base metals for decades, the need for high inventories is thus lower today. But this chart shows how little is available.

    You can see how low current inventories are on a historical basis, most of which are held in exchange-traded products. This is important because these investors have been net buyers since 2005 and thus have kept that metal off the market. The remaining amount of inventory is 241 million ounces, only 25% of one year's supply-whereas in 1990 it represented roughly eight times supply. If demand were to suddenly surge, those needs could not be met by existing inventories. In fact, ETP investors would likely take more metal off the market. (The "implied unreported stocks" refers to private and other unreported depositories around the world, another strikingly smaller number.)

    If investment demand were to repeat the surge it saw from 2005 to 2009, this would leave little room for error on the supply side.

    4. Conclusion of the Bear Market

    This updated snapshot of six decades of bear markets signals that ours is near exhaustion. The black line represents silver's decline from April 2011 through August 8, 2014.

    The historical record suggests that buying silver now is a low-risk investment.

    5. Cheap Compared to Other Commodities

    Here's how the silver price compares to other precious metals, along with the most common base metals.

    Percent Change From…
     1 Year Ago5 Years Ago10 Years
    Ago
    All-Time
    High
    Gold-2%38%234%-31%
    Silver-6%35%239%-60%
    Platinum3%20%83%-35%
    Palladium14%252%238%-21%
    Copper-4%37%146%-32%
    Nickel32%26%17%-64%
    Zinc26%49%128%-47%

    Only nickel is further away from its all-time high than silver.

    6. Low Mainstream Participation

    Another indicator of silver's potential is how much it represents of global financial wealth, compared to its percentage when silver hit $50 in 1980.

    In spite of ongoing strong demand for physical metal, silver currently represents only 0.01% of the world's financial wealth. This is one-twenty-fifth its 1980 level. Even that big price spike we saw in 2011 pales in comparison.

    There's an enormous amount of room for silver to become a greater part of mainstream investment portfolios.

    7. Watch Out for China!

    It's not just gold that is moving from West to East…

    Don't look now, but the SHFE has overtaken the Comex and become the world's largest futures silver exchange. In fact, the SHFE accounted for 48.6% of all volume last year. The Comex, meanwhile, is in sharp decline, falling from 93.4% market share as recently as 2001 to less than half that amount today.

    And all that trading has led to a sharp decrease in silver inventories at the exchange. While most silver (and gold) contracts are settled in cash at the COMEX, the majority of contracts on the Shanghai exchanges are settled in physical metal. Which has led to a huge drain of silver stocks…

    Since January 2013, silver inventories at the Shanghai Futures Exchange have fallen a remarkable 84% to a record low 148 tonnes. If this trend continues, the Chinese exchanges will experience a serious supply crunch in the not-too-distant future.

    There's more…

    • Domestic silver supply in China is expected to hit an all-time high and exceed 250 million ounces this year (between mine production, imports, and scrap). By comparison, it was less than 70 million ounces in 2000. However, virtually none of this is exported and is thus unavailable to the world market.
    • Chinese investors are estimated to have purchased 22 million ounces of silver in 2013, the second-largest amount behind India. It was zero in 1999.
    • The biggest percentage growth in silver applications comes from China. Photography, jewelry, silverware, electronics, batteries, solar panels, brazing alloys, and biocides uses are all growing at a faster clip in China than any other country in the world.

    These are my top reasons for buying silver now.

    Based on this review of big-picture data, what conclusion would you draw? If you're like me, you're forced to acknowledge that the next few years could be a very exciting time for silver investors.

    Just like gold, our stash of silver will help us maintain our standard of living-but may be even more practical to use for small purchases. And in a high-inflation/decaying-dollar scenario, the silver price is likely to exceed consumer price inflation, giving us further purchasing power protection.

    The bottom line is that the current silver price should be seen as a long-term buying opportunity. This may or may not be our last chance to buy at these levels for this cycle, but if you like bargains, silver's neon "Sale!" sign is flashing like a disco ball.

    What am I buying? The silver bullion that's offered at a discount in the current issue of BIG GOLD. You can even earn a free ounce of silver at another recommended dealer by signing up for their auto accumulation program, an easy way to build your portfolio while prices are low. Check out the low-cost, no-risk BIG GOLD to capitalize on this opportune time in silver.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: silver, invest
    Aug 11 3:04 PM | Link | Comment!
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