Gold's Message To The Market

Let’s put this into perspective.  When did anyone in the mainstream media say gold was a great investment?  What you are hearing is a huge bias not borne out by the facts.  - Robert Wiedemer, "100% Fake Recovery"  LINK

Gold has been the best performing asset since the Fed tapering began on December 18th, 2013.  Most analysts were, and many still are, calling for gold to hit $875 this year.  How they arrived at that conclusion is beyond rational comprehension, given that if gold stayed below $1200 for any length of time most gold mines would be shuttered.  Moreover, almost every bearish Wall Street analyst never even considers the enormous amount of gold being accumulated by China.  I don't understand how these people can call themselves professionals when they are ignoring two obviously fundamental variables affecting the price of gold.

As we know, belief without evidence is nothing but faith.  It would seem to me that Wall Street is exercising bad faith in their assessment of the gold market.

At any rate, the fact and evidence stands that gold has been outperforming everything since mid-December.  One reason for this is that the Fed and the bullion banks have been forced by the sheer size of the demand from Asia to "retreat" from the unprecedented manipulation of the price of gold over the last 2 years.  The reason for the "retreat" is to let the price of gold rise in an attempt to slow down the massive demand for physical gold.

But there are several fundamental reasons that investors now perceive gold to be undervalued, especially relative to the U.S. stock market.  First, there's no question now that the U.S. economy is rapidly slowing down.  Auto, retail and home sales are declining and it's becoming clear that the cold weather/dog ate my homework excuse is not cutting it.  Again, when you look at data available that Wall Street and CNBC conveniently overlook, it's pretty obvious that the majority of  Americans are cash strapped, have piled on new debt and are living from hand to mouth.  I doubt 99%'ers are going to be rushing out this year to buy a new Lennar home and a shiny BMW for the driveway.

Because of this, it is probable that Janet Yellen will have to reverse the taper and start printing even more money than the $65 billion/month being printed after the first two tapers.  Let's not forget, taper or not, the Fed is still printing at a rate of $780 billion per year.  In addition, assuming Stanley Fisher is confirmed as Yellen's partner in crime, we can expect to see them implement a negative Fed funds rate policy.  Most people are unaware of this, but Fisher is a huge academic proponent of negative interest rates as a means to try and stimulate economic growth (Israeli-born, he was an economics professor at the University of Chicago and at MIT before going on to try and destroy the world with his ideas).  Furthermore, Janet Yellen launched her bid to replace Bernanke with a speech in early 2012 advocating negative rates to stimulate employment.

For the record, negative interest rates are gold's rocket fuel.

Finally, I find it curious that very little attention has been paid to the fact that the Government is now operating until March 15, 2015 without any debt ceiling limit.  Quite frankly, there should be outrage from both the media and the public.  No one seemed to even notice.  But letting the Government go for a year without ANY spending restraints is the equivalent of letting a multi-convicted pedophile operate a daycare center that has a sleepover option for parents who travel a lot.

In my view, unlike most mainstream investors, the smart money buying gold did happen to take notice of the unlimited credit card that Congress just gave the Obama Government.  It actually became obvious last Friday to those few of us who do follow the news that affects our system that Boehner's House would pass a "clean" debt issuance extension.  Since last Friday gold is up $57, or 4.5%.  The GDXJ junior mining stock index is up 14%.  In comparison, the S&P 500 is up 2.6%.

Things are going to start to really unravel in our economic and political system this year.  As the underlying conditions deteriorate expect the Orwellian "things are getting better" lies to intensify.  Try to enjoy what you can, while you can because life will likely become a lot more difficult for most of us this year.

China's Huge Gold Demand Opens The Gate For The Gold Bull

Based on analysis derived from physical gold delivery data on the Shanghai Gold Exchange - the world's biggest physical gold exchange - in January, a record amount of gold was imported and purchased/delivered in China last month:  Chinese Gold Demand At All-Time High

Because the Comex can't print up physical gold and deliver it the way it prints up Comex gold futures contracts, the Fed/bullion banks are having trouble right now containing the price of gold.  Rest assured, China will not buy Comex futures and wait for delivery OR leave its gold in U.S. vaults for safekeeping - just ask Germany how that has worked:  U.S. Defaults On German Gold Deliveries

I wrote an article reviewing the Chinese gold demand data and why it will override the blatant U.S. manipulation of the gold market and push gold significantly higher this year:  The Gold Bulls Are Starting To Run

When you factor in that the Indian Government may be forced politically to ease the gold import restrictions put in place last summer which severely limited the amount of gold India imported in the second half of the year, it makes my $2,000 price forecast for 2014 even more compelling.

The rest of the world outside of the zombified U.S. public is starting to understand the paper gold Ponzi scheme that the U.S. Fed/Govt has been operating for the better part of the last two decades in order to contain the price of gold,  to support the reserve currency status of the dollar and to prevent a higher price of gold from signalling to the market that U.S. monetary and fiscal policy has failed - badly.

Go Figure! Since "Tapering" Started In December, Gold Has Been Best Asset To Own

The only theory I can think of to explain this is that the smart money in the market is anticipating that the Fed will have to soon reverse itself and pump even more money into the banking system.

Although I was wrong that gold would fly when QE3 started - primarily due to the the Fed's price containment of gold (see today's earlier post) - I did say late last year that if the Fed did start to taper I would not be surprised to see gold start to chew threw the market obstacles being thrown at it by the Fed/bullion banks and move higher in anticipation of an eventual reversal of the taper.  Janet Yellen is just person for that task given her stance on interest rates and "deflation fighting."

source:  Zerohedge, with a few of my edits to clarify

A good friend/colleague called today wondering why the mining stocks were going nuts the past few days.  Again, given that mining stocks are leveraged to the price of gold, market theory explains that stocks move ahead of the growth in their underlying source of profit - gold/silver in this case.  I also averred that there's a massive short interest in mining stocks by hedge funds and that they are aggressively covering ahead of a possible upward explosion in the miners.

In fact, in the fund I manage, we had several holdings where were up double digits, with some of them outperforming the triple-leveraged mining stock ETFs:  AAU +14.5%, Wildcat Silver up 17.9%, Exeter Resources (XRA) up 13%  and ATAC Resources up 13.8%.   Some of our holdings have more than doubled since early December.

I have suggested to a few colleagues that properly selected junior miners could end up returning 20-30x your investment at these levels.   We've seen that occur in the past and now the big mining companies like Newmont and Goldcorp are starving to replace their reserves.    A couple of the ones mentioned above have monster reserves and will eventually be swallowed up by the bigs.

There's no rush like a gold rush...

Comex Gold Manipulation Is Getting More Blatant/Desperate - It Will Fail

Of course the gold and silver markets are manipulated. You have to be either blind or a Harvard Graduate with doctorate in Economics to ignore the fact.  The purpose of the manipulation is the same as the purpose of the French Revolutionaries in attacking gold when they were printing their “Assignats” paper money like crazy; to try to suppress the indicator which showed the destruction they were carrying out with unlimited printing of fiat money. Gold tells the Truth and so it is an enemy of those who wish to deceive their populations.   - Hugo Salinas Price, Mexican Billionaire and crusader for sound Government financial policy

Here's my latest article, co-authored with Dr. Paul Craig Roberts - detailing how the Fed/banks manipulate the price of gold using Comex paper gold futures as their conduit:  Market Manipulations Become More Desperate

The outright lies and absurd propaganda streaming from the Government, the Fed and Wall Street are now reminiscent of the old Soviet Politburo and Pravda during the Cold War days.  Remember that?  You have to wonder exactly just how badly the system is collapsing behind the Capitol Hill "curtain" given the extent to which those in charge of the financial system are doing everything they can to prevent the markets from freely determining gold's free market price...
 

Just How Much Money IS Eric Holder Getting Paid Under The Table To Look The Other Way?

Many of you probably do not recognize the name, Eric Holder.  He's the Obama-appointed head of the Justice - or rather, "Justice" - Department.   He's the scoundrel who penned the Marc Rich pardon letter signed by Clinton on his way out of the White House for the last time (and on his way to Denise Rich's 5th Avenue apartment for his "fee" to sign the letter).  Marc Rich was the wealthy commodities trader who didn't think he should pay taxes so he fled to Switzerland to avoid enforcement of the law.  I guess Eric Holder didn't think so either.

Most of you do know that, despite a rapid acceleration in Wall Street criminality and fraud, the Eric Holder/Obama Justice Department has seen a precipitous drop in financial crime prosecutions compared to the Bush years.  Hard to believe this is the same presidential candidate who promised to clean up Wall Street and Capitol Hill.

This one may well take the gold medal for examples of just how corrupt system has become:

 Gangster Bankers: Too Big To Jail

I guess instead of "hope and change," if Obama were running for a 3rd term his new marquee campaign slogan would be:  "Pay us to commit the crime and don't do any time."  I stand by my prediction in 2008 that Obama's presidency would go down in history as being even more despised by the public than his predecessor's.  Judging from his approval ratings my call is looking pretty solid.

January Auto Sales Did A "Step-Function" Decline

The distortion and perversion of the truth has reached new levels.  What's going on right now is right out of Animal Farm.  - The Golden Truth

 Winston worked in the RECORDS DEPARTMENT (a single branch of the Ministry of Truth) editing and writing for The Times. He dictated into a machine called a speakwrite. Winston would receive articles or news-items which for one reason or another it was thought necessary to alter, or, in Newspeak, rectify. If, for example, the Ministry of Plenty forecast a surplus, and in reality the result was grossly less, Winston's job was to change previous versions so the old version would agree with the new one.  "1984,"  George Orwell

Blame it on the weather!  January auto sales released on Monday showed a precipitous decline in auto sales in January compared to January 2013.  Of course the first words out of every analysts' mouth was "bad weather."

As it turns out; in order to seek the facts, I did some research on weather patterns across the country in January.  Looking at just the facts, the average daily temperature in January for the top 10 cities by population was about same as the historical average.  In fact, on the west coast (i.e. San Diego and L.A.) the weather was warmer than average.

Furthermore, just because there's a couple days of snow and cold weather in the northeast, that would not prevent someone who wants to buy a new car from waiting until a warmer day to shop ("aw gee, it's cold today and the roads are snowy so I'll wait til next month to buy a new car...").

If you look at the year over drop in car sales for December 2013/2012 and compare it to the year over drop for January 2014/2013, the decline was roughly 7x more for January than December.  December had bad its fair share of bad weather days as well.  Even if the weather affected sales a little, the huge relative decline for January reinforces my theme that the economy hit a wall in November and 2014 will see economic contraction.

You can read my brief article on car sales here:  January Auto Sales: Another Big Drop  Please note that January is one of the lowest seasonal months for car sales, but that's why the January 2014/2013 comparison is so significant - it washes away seasonality.

Just for the record, expect an insanely absurd jobs report on Friday.  It seems that the Government's attempt to cover up the truth varies inversely with the degree to which the U.S. economy is collapsing.

Bad Weather And The Economy: Wall Street's Version Of "The Dog Ate My Homework"

 We can ignore reality, but we cannot ignore the consequences of ignoring reality

         - Ayn Rand

I would be remiss if I didn't acknowledge my humiliation over Denver's thorough beating yesterday by the Seattle Seahawks.  My congrats to the team and its fans.  They outplayed the Broncos in every phase of the game.  It looked like the dog ate [coach] John Fox's homework on Seattle because he certainly can't blame Denver's demise on bad weather.

The economic data that's been released for December and January now appear to be confirming my view that the economy hit a wall in November.  As I suggested here:  Expect A Decline In Auto Sales Going Forward, auto sales would start to plummet this year.  Based on today's auto sales report for January, I may be on the right track.  Ford's sales were down 7.5%, GM down 12% and Chrysler was up 8%.  Note that Chrysler's sells the least number of cars of those three.  Toyota's sales dropped 7.2% and Volkswagon's fell 19%. 

The bad weather excuse just does not hold water.  What makes it even more absurd is the fact that private construction spending - i.e. housing and commercial real estate - increased a little in January.  Wall Street analysts and financial media reporters want me to believe that the same weather across the entire country that didn't prevent outdoor construction spending prevented people from looking for new cars?  Really?   Just for the record, I bought a new (used Subaru WRX) in January and I was test-driving in 20 degree weather right after a big snow storm. 

And what about the plummet in manufacturing?  The ISM manufacturing index registered its biggest miss of expectations on record for January and the new order index plummeted the most since 1980:  Bad Weather Inside?   Is Wall Street going to explain to us that leaky factor roofs and broken heating systems prevented factories from operating during bad weather days in January?  Well the Purchasing Managers manufacturing index also missed expectations and the sub-indices for new export orders and order backlogs slipped below 50, indicating a contraction.  Hmmm...did bad weather prevent purchasing managers from picking up their office phone and placing new orders?

The truth is that the consumer is done.  According to reports from insiders at Dell, they are getting ready to cut 15,000 from the workforce.  Several major retailers are chopping heads and closing stores.  JC Penny and Sears are fighting off bankruptcy.   The economy is in big trouble and Wall Street wants us to believe that bad weather is the culprit.  George Orwell is looking down on us from somewhere in the heavens with a giant grin on his face.