Thursday, July 30, 2009

Got Gold?

My friend "Andy in Denver" wrote the following commentary, which he generously allowed me post so that I didn't have reinvent the wheel writing the same type of commentary. In the first part, he is referring to the fact that gold production in one of the world's biggest gold mining countries - S. Africa - is plummeting with no turnaround in sight. In fact, gold production is plummeting globally and has been for the last 3 years. And this is in the context of rapidly increasing demand for the yellow dog AND rapidly declining Central Bank supply. THAT's the Golden Truth. So without further adieu:

Several very important things:

To start, the article below shows how the big South African gold miners are getting crushed by the big surge in the South African Rand versus the dollar, as their costs in local dollars are rising faster than the gold price, which continues to be suppressed by the gold cartel (this goes for Canadian miners as well, by the way).

Upon returning from South Africa in February with the Rand/Dollar ratio at 10 : 1, I promptly wrote an article stating my belief that the South African Rand (due to its huge gold reserves and cheap cost of living) was the cheapest currency on the planet, and would dramatically appreciate in the next 3-5 years, likely PAST PARTITY (1 : 1).

As of today, the exchange rate has risen to roughly 7.8 : 1, yet per the article the major minors are reporting losses and/or huge reductions in profits, coupled with mine closures and layoffs that have caused South African gold production to plummet for years.

Until gold surges toward $1,500/oz, in my view, there is not a chance that this trend will be reversed, and mine production will continue to fall while demand continues to surge.

And oh yeah, the world’s Central Banks are no longer selling gold, and in fact are buyers such as the Chinese that two months ago stated that they have accumulated an additional 400 tonnes under the radar (and I guarantee they are still buying hand over fist today).,,25389227-5017999,00.html?from=public_rss

In another topic, as you know I have been persistently writing over the years that I strongly believe the gold ETFs GLD and IAU and the silver ETF SLV are potentially fraudulent, created by the gold/silver Cartel as Ponzi schemes to keep the public out of the physical gold and silver markets and as a tool (via surreptitious leasing/shorting) to suppress the gold and silver prices further. Granted, James Turk gets the blue ribbon for reporting this potential first (back when they were launched in 2004/05), but I have been very vocal about this topic ever since.

Well now it seems that we have some company, not just regarding the potentially fraudulent nature of these securities, but about the entire gold/silver futures market as well. Literally dozens of articles are being published monthly now about these topics, as the blatancy of the Cartel has gone off the charts (such as this week) in their efforts to “save the dollar”, or more likely “save the status quo” of greedy politicians and bankers such as Goldman Sachs ruling the U.S. and fleecing the public.

The below two articles, particularly the first one, give detailed evidence about the frailties of these ETFs, and anyone reading them should recognize, RIGHT AWAY, that Enron and Bernie Madoff had many of the same red flags.

Thus, BEWARE of GLD, IAU, SLV, at all costs. Sell them immediately if you still own them.
And, on that topic, I am proud to announce that Silver Bullion Trust yesterday was priced by the same people that brought the market CEF (Central Fund of Canada, 60% gold/40% silver) and GTU (Central Gold Trust, 100% gold). Right now, it is only trading in Canada under the tickers T.SBT.U (Can $) and T.SBT.UN ($USD), but once it gets larger in size ($75 million of assets versus the current $26 million), it too, will be listed on the AMEX in the U.S..

Hands down, [because these 3 funds require actual physical audits of their gold/silver holdings] CEF/GTU/SBT are the best ways to invest in “paper gold and silver”, the antithesis of Hands down, CEF/GTU/SBT are the best ways to invest in “paper gold and silver”, the antithesis of what GLD/IAU/SLV represent [these 3 funds DO NOT permit an actual independent hands-on audit of their supposed holdings].

And finally, I needed to note that, in my view, the financial system is only worsening, not improving as stock market is trying to suggest. This week, the U.S. has had two of the worst Treasury auctions in its history (with a third coming today), and 150 Chinese diplomats are in town reading the U.S. government the riot act as it prepares to transition the world off the U.S. dollar reserve standard, which will inevitably cause accelerating inflation in the U.S. (that, coupled with the exponentially increase in printed dollars).

Predictably, of course, the gold price was hit in the U.S. futures market to try and divert attention from the weak Treasury auction and ramifications of the Chinese demands, but all they have done is make the MASSIVE reverse head and shoulders formation that much stronger.
Gold and silver WILL be breaking out sometime in the near-future, that is a foregone conclusion. And when they do, the commencement of the perception of accelerating (and potentially hyper-) inflation in the U.S. will have occurred.

1 comment:

  1. Tony here from Sydney Australia;

    All I can say, as a pattern trader too, is WOW! I've never seen such a fiercer looking H&S bottom - ever!

    Christ. If this breaks to the upside as aggressively as is is supposed the only conclusion that can be drawn is that the U.S. will be de jure bankrupt soon. If not this year, then the next...WOW!