Today one of the greats in the business warned King World News that 2015 will be a year of panic, desperation, and radical change for the world. He also said 2015 will be a year of surprises that will have an incredible impact not only people but also major markets and economies around the globe.
Egon von Greyerz: “As we approach 2015 the world is on the cusp of a deflationary collapse. Central banks around the world are fighting trying desperately keep their economies afloat. Zero percent interest rates are no longer helping, so negative interest rates have been introduced in an attempt to create inflation…. "Japan has utterly failed to get anything positive going, despite the endless money printing and zero interest rates. Central banks want to create inflation, but it’s a total fallacy that inflation is good for an economy. And it’s not inflation to save their economies, it’s more so to save their failing banking systems.
The central banks know that without inflation the banking system cannot survive because no loans can be repaid. So the inflation/deflation battle continues to rage. This is why early next year the major central banks of the world will start printing more money. Without that we will have a deflationary collapse. That deflation will not be allowed to happen because it would mean the death of the global banking system, which would take down the global economy with it.
Radical Change In Greece
Greece is a microcosm of what will happen to the rest of the world. Greece has taken on even more debt since the start of the 2008 crisis, totaling 250 billion euros. As they have taken on this massive debt, their GDP has plunged by a staggering 27 percent since 2008. So their Debt/GDP has risen to a jaw-dropping 177 percent. Total unemployment is 27 percent and youth unemployment exceeds 50 percent.
So there is no way for Greece to survive without leaving the euro. A left-wing party looks like they will take power in Greece. Their plans are to raise the minimum wage by 50 percent and not follow any of the austerity measures being placed on Greece. This is typical of the kind of radical change we can expect in major countries. One by one we will see the European countries fail, and the rest of the world will follow.
The falling oil price is due to a slow global economy. China is also slowing down. If you measure their use of energy, transportation, railways, etc, everything is down. This is further exacerbating the plunge in oil prices. But the price of oil may rise if there are serious geopolitical problems in a country such as Saudi Arabia. There is also the risk of hyperinflation which could turn the price of oil around.
UK Gold Imports Into Switzerland Soar
I would also like to note that Switzerland is the largest producer of gold in the world. This is why the Swiss gold imports and exports are important. In November Switzerland imported about 200 tons of gold. 110 tons of gold came in from the UK. For the year the total imports from the UK into Switzerland are 616 tons. Well, I wasn’t aware that the UK was a major producer of gold. Of course they aren’t.
So the incredible amount of imported gold coming in from the UK is in the form of 400 ounce bars, that are then melted down into kilo bars, which are then exported to India and China. Therefore what we are seeing is the continuation of the depletion of gold from the bullion banks and the Western central banks. There must be very little gold left in Western vaults. The entire 110 tons of gold is coming from bullion banks and Western central bank vaults.
The whole LBMA and bullion bank Ponzi scheme will blow up at some point next year because they will literally run out of physical gold. This will have a massive effect as the price of gold will be released to the upside.
Panic In 2015
2015 will be a year of surprises, Eric. In 2015 we will see central banks panicking as they unveil major money printing programs in a desperate attempt to halt the deflation. This is why money printing will be back with a vengeance in 2015. This is also why gold and silver will start a historic and massive rise in the coming year."
Sentiment: Strong Buy
MFRANK I don't see the necessity of patting ones self on the back. Just check it periodically for knives and other sharp objects. I would be happy if posters could limit their comments to articles, their thoughts about germane topics and leave their attack dogs at home. Unfortunately there are those who have an agenda which is usually not in your best interest. You do have every right to complain about this investment. But the forth, fifth and sixth time gets old and boring. Sell and move on or buy mordant lower your overall. Crying just waters down your beer
Sentiment: Strong Buy
To All My Democrat Friends:
Please accept with no obligation, implied or implicit, my best wishes
for an environmentally conscious, socially responsible, low-stress,
non-addictive, gender-neutral celebration of the winter solstice
holiday, practiced within the most enjoyable traditions of the
religious persuasion of your choice, or secular practices of your
choice, with respect for the religious/secular persuasion and/or
traditions of others, or their choice not to practice religious or
secular traditions at all. I also wish you a fiscally successful,
personally fulfilling and medically uncomplicated recognition of the
onset of the generally accepted calendar year 2015, but not without
due respect for the calendars of choice of other cultures whose
contributions to society have helped make America great. Not to imply
that America is necessarily greater than any other country nor the
only America in the Western Hemisphere. Also, this wish is made
without regard to the race, creed, color, age, physical ability,
religious faith or sexual preference.
To My Republican Friends:
Merry Christmas and a Happy New Year!
Another point of view other than mine own. How about them apples MFRANK. Don't post them all the time , but at least I do
Sentiment: Strong Buy
Sick Market Moves While Gold Remains Weak
Monday December 22, 2014 13:32
A wild week for markets as they were very weak but then rallied hard and fast and did so without much of a break, which meant I could never really pull the trigger and feel comfortable doing so, so I missed much of the rally higher.
We do need a rest here and then we should get some buy points, the problem is, we saw a very similar correction back in October.
In October, we rallied hard and fast initially and then we slowly moved higher from there up until this most recent correction.
And while the trend was solidly higher, many stocks did setup and give great moves quickly, but then they slowed or faded.
That just means we may have to buy the breakout and only hold for a day or three before locking in gains.
It looks like it will remain a stocks pickers market, and also an active traders market.
We will make great gains no doubt, but we do have to be active and on the ball, not just using a buy and hold strategy.
As for the metals, they did show some strength briefly two weeks ago, but that faded and they are still pointing to lower prices from what I see.
From what I am seeing, gold will still hit $1,000 and silver should coincide by hitting $10 at the same time.
This could come within weeks, or months.
I have no way of knowing when lows will come, but they are not yet in I can all but guarantee you.Gold lost 2.26% this past week after trying to breakout higher but failing.
Resistance still sits at $1,220 while support is below at $1,180, $1,160 and then $1,140.
It doesn’t look good to me and we should see new lows not long into the new year.
It should be a pretty quiet week ahead with half a day Wednesday, markets closed Thursday and not a soul around Friday I’m sure.
Around these parts, Boxing Day tends to be one of the most festive days of the year and I plan to partake!Silver lost 5.56% this past week and also looks poor.
Support is here at $15.60 and then $15.
Resistance is the $17.20 area.
Silver tried to move higher as did gold, but it couldn’t.
I still don’t see any chance that a gold and silver low is in yet and I think we will see much lower prices in the not too distant future.
And it doesn’t really matter how many email I get telling me I’m wrong.
There is only one right in trading and it is the market.
I don’t do a year in review like most writers, nor do I issue a forecast for the year ahead.
It’s not that I wouldn’t love to issue a forecast but nobody really knows, so why pretend to.
Take it as it comes and play it so.Platinum remains weak and lost 2.52% this past week.
Platinum is still in the range between $1,250 and $1,180 but it is ready to break lower now as it continues its march lower to $900.
Not a pretty chart at all and as much as it does pain me to say, we are going to see much lower prices before we see a low.
I know there are still many pundits calling for a low, still, but it just ain’t so.Palladium lost only 1.07% on the week and remains in a good sized triangle which is a continuation pattern and the dominant trend remains down.
I may or may not have a letter next weekend depending on the action in the week ahead.
2014 has definitely been a tricky year and while we did well, we could have done better, as always.
I’ve made some mistakes and some heroic moves this year and I’ve learned much more from my mistakes, most recently missing the huge S&P bounce from Wednesday to Friday.
I overthought it instead of just reacting to what my eyes saw.
Anyhow, that’s life.
I want to wish you all a very joyous and wonder Christmas season and I want to wish you all a very prosperous, healthy and peaceful 2015.
Sentiment: Strong Buy
Thankyou for your kind words. Too bad that MFRANK can't seem to find the ignore button on his computer if he finds my postings so offensive. I have no trouble finding it on mine. Good luck all in the New Year
Sentiment: Strong Buy
Kitco Metals Inc.
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Gold Stocks: Rational & Profitable In 2015
Tuesday December 23, 2014 12:38
As the end of the year approaches, gold is swooning a bit. Please click here now.
That’s the daily chart for gold. A broad and gently sloping uptrend channel has been established, with very volatile price action between the channel lines.
I expect gold to trade in this manner throughout most of 2015. Short term volatility will be high, but the price will trend higher.
Gold is working off what is an overbought technical condition, and should be poised to stage a significant rally by early January.
Please click here now. That’s the daily oil chart. While the odds of a brief and violent rally are growing, the overall fundamentals are horrific. Demand for oil is collapsing around the world, and supply continues to increase.
While a modest rise in the price of gold in 2015 might not sound very exciting, when coupled with a further collapse in the price of oil, gold stocks could suddenly become the darling of institutional investors around the world.
Gold companies are much more efficient now than they were just two years ago. Lower fuel prices coupled with even modestly higher gold prices could produce a violent move to the upside, for the entire gold stock sector.
Demand for gold from China and India should see another year of superb growth in 2015. While gold may decline for another week or two, that’s mainly due to technical and seasonal factors. The ebb and flow of Indian demand is based on religion, and December is viewed as an inauspicious time to buy gold.
With key physical buyers taking a rest, the price is a little soft. Also, Western investors tend to buy when the price of any asset is high, and sell at a loss each December. They are adding to the gold price softness now.
I expect Chinese demand in 2015 to increase substantially. Trading volume on the Shanghai Gold Exchange (SGE) is experiencing truly dramatic growth, year after year. My subscribers know that I’ve predicted that volume on the SGE will surpass COMEX volume by early 2017.
Gold is clearly the ultimate asset, and it should offer the ultimate in stability to conservative investors for the next decade. Aggressive investors should focus on gold stocks.
Unfortunately, the outlook for the American stock market is much less rosy than it is for gold. Mainstream media claims that debt-soaked consumers working multiple part time jobs are somehow the “economic leader” of the world economy.
Now, the US stock market has lost a prime engine of earnings growth; oil. Healthcare and defensive stocks are keeping the huge stock market rally alive, but the impact of much lower oil prices won’t be felt for another quarter or two.
Technically, healthcare stocks look headed for trouble. Please click here now. This monthly chart of a key biotech ETF shows a rapidly deteriorating technical situation.
I think that the month of December in 2015 will see Western investors back at the “tax loss trough”, selling most of their US stock market investments.
American GDP numbers will be released this morning. With most of India’s gold buyers in “quiet mode” this month, that report could push gold to my $1150 - $1160 short term target area, and provide a short term boost to the US stock market.
US economic data generally has only a short term effect on the gold price. The long term price is determined mainly by the demand from China and India, compared to supply from mines and Western entities. Once the Western funds and retail entities have sold most of their gold, I expect Chinese and Indian jewellers to begin tapping Western central banks for the gold they hold, since mine supply appears to be peaking.
In the Western world, good economic data causes seemingly rational economists to make very irrational statements about gold. In contrast, in China and India, good economic news spurs gold demand. People celebrate the good news, by buying more gold!
As the West becomes more irrelevant to the global gold market, the questionable statements made by Western economists about gold will likely be ignored by most professional investors.
I doubt there will be much gold left anywhere in the West by the year 2050. Crypto currencies like bitcoin are more suitable as central bank reserve assets than gold. Rather than being held as useless bars by bankers and government bureaucrats who can’t be trusted, most gold should be held in the form of fabulous jewellery, by the citizens of the world. Also, he or she who has the most gold, makes the most rules. The citizens should make the rules, not bankers and “Gmen”, and in time they will.
The Swiss government just released that country’s latest import and export statistics, for the month of November. Please click here now. I’ve highlighted a few key numbers from that report.
While the United Kingdom did import about 64 tons of gold, it exported about 109. While gold price enthusiasts may be a little disappointed with the numbers from China, I should mention that Hong Kong also imported about 34 tons.
In 2013, Chinese demand surged far above 2012 levels, but Western exports overwhelmed Chinese and Indian imports, and the price declined. In 2014, demand roughly matched supply, and the price was neutral. By late 2015, I expect Chinese and Indian demand to place noticeable stress on available supply, and the price should begin moving aggressively higher.
Please click here now. That’s the daily GDX chart. Gold stocks are my “trade of the year” for 2015. Like gold, GDX is working off an overbought situation on the chart. There’s a bull wedge pattern in play. In the very short term, US economic data today could create panic selling, by Western gold stock shareholders that respond to that data with irrational action. With the Indian “titans of ton” quiet in December for religious reasons, the price movement in many gold stocks could be a bit frightening, but only for a few days. I’m a buyer of all irrational selling, and I think the entire Western gold community can look forwards to a very rational and profitable year, in 2015!
Sentiment: Strong Buy
As another year goes into the books, gold mining companies are looking into mine plans and strategies for the new year.
While each mining company will naturally have their own specific projections in terms of mine planning, exploration, development, projects in the pipeline and balance sheets – there are underlying similarities.
Among them is a very real possibility of a gold supply crunch in the coming years.
“I think there’s no question that’s going to happen because the lead time on some of these projects is a lot longer than it used to be,” said Sean Boyd, president and chief executive officer of Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) to Kitco News. “If you look at the industry 20 years ago, it’s much more difficult now to advance a project, even to find a good quality project. “Grades are down, projects are tougher, they’re more remote, which makes it a much more challenging business right now,” he continued. “The industry is allocating less to exploration to make new discoveries, or allocating less money to the pipeline – so, the pace of the projects moving through that pipeline is slowing down, that’s going to impact supply.”Rob McEwen, chairman and chief owner of McEwen Mining Inc. (TSX:MUX)(NYSE:MUX) told Kitco News that he expects gold to reach US$2,000 an ounce by the end of 2015, with that figure linked to less supply on the horizon.
“We’ve seen a lot of the gold that went into the ETFs and this hoarding that occurred from 2005 to 2011, a lot of it has come out,” McEwen said. “ETF gold was a multiple or two of annual production at certain points during that period, and that gold has come out of the ETFs and gone to Asia.
“So, the next time gold runs, there’s not as much gold available,” he said. “The supply of gold has been curtailed both through cutbacks and development projects – so there’s going to be a gap in production that could be three to five years long before it’s properly addressed.”
Part of that is mining companies are no longer simply chasing ounces. As Gary Goldberg, president and chief executive officer of Newmont Mining Corp. (NYSE:NEM), said to Kitco News, it’s all about value over volume these days.
“We have refocused Newmont’s strategy on value over volume, positioning the business to deliver safe, responsible and profitable gold production in every cycle,” Goldberg said. “Over the last two years, our work to optimize our portfolio generated nearly $1.7 billion in cost and efficiency improvements, and nearly $1.4 billion from the sale of non-core assets.
“This performance gives us the means to invest in profitable growth, pay down debt and return capital to shareholders,” he said. “We also improved the value and viability of our growth pipeline, which includes expansions in Nevada, Ghana, and Australia; new districts in Nevada and Suriname; and promising exploration prospects in favorable jurisdictions.”
Boyd also noted these are interesting times as he sees this as a great opportunity to be building and drilling, but most company balance sheets won’t allow it.
“I think it’ll be more financial balance sheet driven as we go through 2015 given the uncertainty around the gold price, which is interesting, because if you step back, the state of the support, or the service sector, to the industry – it’s actually the best time to be drilling in terms of cost and value,” Boyd said. “In fact, it’s a great time to be building.
“But the balance sheet and the gold price aren’t allowing the industry to be as aggressive as they may want to be given the conditions of drilling and building things,” he added. “It’s an interesting dilemma companies have.”
McEwen sees balance sheets as part of the main focus in 2015, but thinks that companies are shooting themselves in the foot while trying to raise capital.
He noted that while some balance sheets are in good condition, others are damaging their profiles by selling royalties or metals streams. “Yes it does provide them financing, and yes it is non-dilutive, but it’s reducing their profits. It’s sort of a compelling siren song, but it’s not good for shareholders.”
By Alex Létourneau of Kitco News
Sentiment: Strong Buy
If I do not like a company for what ever reason I do not own any part of it, usually try not to do business with it , and generally stay away from any discussion about it except to say one time I don't like them. The fact that certain posters seem to think they need to assert over and over again how GSS is a lousy company, will never make any real money, is going bankrupt, is a train wreck , should not be part of anyone's portfolio, managers are robbing the company and shareholders, and posting negative comments from analysts who everyone knows are beyond reproach in the integrity department , makes one wonder if perhaps there is an agenda at work. I have personally never encouraged anyone to buy this position except in the long term sentiment portion and if that is enough to make someone run out and buy a position with out doing due diligence then they need a keeper. These supposed dis-satisfied posters are constantly haranguing people to sell and get out before bankruptcy, before the Ebola plague eats the mine , before the rebels come out of the hills and take over, before the position is de-listed. Now I admit I have encouraged a few posters to sell but only because I (and I am sure others) are sick of all of the crying and whining. Put on your big boy pants and grow a pair.And I have based this rant on past posts but I see from all of the ignored posters that are on my screen that they are still around disseminating their brand of BS. merry Christmas and Happy New Year to all, even the grinchs.
Sentiment: Strong Buy
If you focus just on the price alone then you are. Something that is out of favor but will be in favor usually has its price depressed. I am sorry that you are down from your overall purchase price if in fact you are. If you do not think it will recover then sell and cry someplace else.If you think that in a year or two GSS will either be bought or recover in price and surpass its past highs then just quit looking everyday unless you plan on buying more.Or try posting some facts supporting your position that GSS is toast other than the the stock price.
Sentiment: Strong Buy
Golden Star Resources Announces Filing of PEA for Prestea Mine
TORONTO, Dec. 18, 2014 /PRNewswire/ - Golden Star today announces that it has filed a technical report, prepared in accordance with National Instrument 43-101, ("NI 43-101") regarding a Preliminary Economic Assessment ("PEA") on the development of non-mechanized operation at its Prestea mine in Ghana. Golden Star announced the findings of this PEA on November 13, 2014, the highlights of which are as follows:
Post-tax IRR of 72% at $1,200/oz gold price
NPV5% of $121 million at $1,200/oz gold price
Initial capital $40 million required to first production
Total project life of five years, after one year of development
LOM cash operating costs of $370/oz
LOM all-in sustaining costs of $518/oz
Payback period of 2.5 years from the start of development
The report, entitled "NI 43-101 Technical Report on a Preliminary Economic Assessment of Shrinkage Mining of West Reef Resource, Prestea Underground Mine", was prepared by Golden Star Resources, under the supervision of by Dr. Martin Raffield, P. Eng., a Qualified Person pursuant to National Instrument 43-101.
Golden Star Resources (NYSE MKT: GSS; TSX: GSC; GSE: GSR) ("Golden Star" or the "Company") is an established gold mining company that holds a 90% interest in both the Bogoso and Wassa gold mines in Ghana. The Company also has a 90% interest in the Prestea Underground mine in Ghana. Golden Star has Mineral Reserves of 3.9 million ounces and 6.0 million ounces in Measured and Indicated Mineral Resources. In 2013, Golden Star sold 331,000 ounces of gold and in 2014 the Company expects to produce 260,000 – 280,000 ounces. The Company offers investors leveraged exposure to the gold price in a stable African mining jurisdiction with exploration and development upside potential.
Sentiment: Strong Buy
Wildman you would not know honesty if you tripped over it,. I am thinking that Captn is an alternate ID put out by you. Has the same sort of whine to his/her posts. Maybe you shouldn't be investing in the stock market. Will you change your song when GSS goes up as it will. No bankruptcy, no going out of business sale. At the worst they will be bought by another miner, at best they will eventually go higher than you can count using your fingers and toes. If you do not like the company, then sell and move on. Or you and your buddies can go vote for Obama again because Obama voters want someone else to take care of them instead of taking responsibility for themselves and their decisions
Sentiment: Strong Buy
The Dollar versus the Ruble, a very interesting comparison.
December 16, 2014
Castries, Saint Lucia
Last night, the Russian central bank announced a shock decision to hike up its key interest rate from 10.5% to 17%, effective immediately. Incredible.
On Monday alone the ruble declined more than 9% against the dollar, and almost 50% in 2014. It looks like a massacre.
If you listen to conventional financial news, they’ll all tell you that you’d have to be insane to own anything in Russia right now—stocks, bonds, currency, etc.
They’ll tell you that the ruble is in freefall, and that the dollar is the place to be.
But if you have been a reader of this column for any length of time, you know that I am a very data-driven person.
So… just for kicks, I decided to dive into the numbers and make an objective comparison between the US dollar and the Russian ruble.
The results might surprise you.
First of all, I start off with the premise that ALL paper currencies are fundamentally flawed.
Our global monetary system is absurd—the idea of letting unelected central bankers conjure as much money as they want to out of thin air is simply insane.
But it is true that some fiat currencies have better fundamentals than others. And if you want to understand the health of a currency, it’s imperative to look at the ISSUER of that currency, i.e. the central bank.
As with any bank, one of the most important metrics in determining a central bank’s financial health is its level of solvency.
Specifically we look at the bank’s capital (i.e. net assets) as a percentage of its total balance sheet.
The US Federal Reserve only has a basic capital ratio of 1.26%. Talk about razor thin. (This is down from 4.5% just a few years ago)
That means if the value of the Fed’s assets declines by only 1.26%, the issuer of the world’s dominant reserve currency becomes insolvent.
Now, what happens to the liabilities of an insolvent entity? They decrease in value. Just like how Greek bonds (the liabilities of the Greek government) collapsed a few years ago.
What are the Fed’s liabilities? Open your wallet. Those green pieces of paper aren’t ‘dollars’. Just look. They have “Federal Reserve Note” (i.e. debt) printed on them.
So the Fed’s pitiful financial condition directly affects the value of the dollar over the long-term.
On the other hand, the Russian central bank’s ratio is 12.5%—literally almost TEN TIMES GREATER than the Fed.
Capital cushion is crucial because when the unsuspected happens, this is what can help keep you afloat.
Think about it: you might be able to keep going without savings, perhaps even accumulating debt, but only until something happens out of the blue.
Until your car breaks down, or you need to go to the hospital, for example. Then all of a sudden, your lack of capital can become a serious issue.
Another important metric is gold. As I mentioned, since all fiat currencies are fundamentally flawed, it’s important to see the amount of REAL ASSETS that a central bank holds in reserve.
To make an apples-to-apples comparison, we look at a central bank’s GOLD reserves as a percentage of the money supply, i.e. how much gold backs the money supply.
In Russia, it’s 6.2%. And rising. Last year it was 5.5%, and the central bank is continuing to heavily stockpile more.
How much gold backs the dollar?
Precisely zero point zero percent. Zilch. Nada.
The Fed doesn’t own gold. It loudly proclaims this on its own website: “The Federal Reserve does not own gold.”
It holds ‘certificates’ which are redeemable for US dollars. But there’s not a single ounce of gold backing the US dollar.
So… with no gold and pitifully razor thin solvency levels, it really wouldn’t take much of a shock to topple the dollar.
By comparison, the ruble is much better capitalized and actually has something backing it.
Now, I’m not necessarily advocating to buy the ruble, but hard, publicly available numbers clearly demonstrate the discrepancy between “sentiment” and objective data.
And at a time when the ruble and the whole Russian economy have been beaten down so much that Apple alone is now worth more than the whole Russian stock market, Russian assets certainly make for an interesting speculation.
The bottom line, however, is—if you wouldn’t own the ruble, then what are you doing holding 100% of your assets in the dollar?
Sovereign Man’s Tim Staermose is currently on the ground in Sydney and was literally a block away when yesterday’s tragic events unfolded. Here’s his first hand account.
Sentiment: Strong Buy
Janet Yellen: Catalyst For Gold Rally?
Tuesday December 16, 2014 15:29
Is Santa Claus coming to town this year? To find out, please click here now. For US stock market investors, it looks like the Grinch just stole Christmas!
Stock markets around the world are reeling, under pressure from the tumbling price of oil. On that daily chart of the Dow, it appears that all of this year’s gains may soon be lost.
The FOMC meeting begins today, and Janet Yellen holds a press conference tomorrow afternoon. The Fed has consistently failed to raise inflation to their comfort zone, and the global oil price crash will make their job even harder now.
If all the Fed says at the press conference is that “lower oil is good for consumers”, I’m concerned that institutional investors may lose confidence. The current global stock markets decline could morph into a horrific crash.
In the big picture for gold, I’m vastly more focused on Chindian demand versus mine supply, than I am on anything that the Fed says or does. Regardless, if the Fed leaves the “considerable time” language in their statement tomorrow, that should provide a nice short term boost to gold prices.
Please click here now. That’s the daily oil chart. Lower fuel prices may not be good for the Dow, but they should help gold mining companies lower their cost of production.
Even mainstream news outlets like CNBC are recommending that investors buy gold stocks now, and I think that’s a wise move on their part.
“Of course, it hasn't been a great year for many commodities. Gold, too, is off of its highs, which makes Bill Baruch of iiTrader think it could succumb to tax-related selling in the sessions ahead. Still, Baruch says the better trade isn't going short for the short-term, but looking for the buying opportunities that tax-pressured selling could create.” – CNBC News, December 14, 2014.
Junior gold stocks are suffering some “tax loss selling”, but their overall decline is very minor compared with 2013. On that note, please click here now.
That’s the daily GDXJ chart. In 2013, the price declined from about $85 to $29, and terrified many investors in the gold community. This year, it’s declined from $29 to $22. Note the difference in the slopes of decline on the chart.
I think 2015 will be a good year for both the juniors and bigger producers. While deflation from lower oil prices will affect the prices of many consumer goods, the price of gold is largely determined by demand from China and India.
That demand continues to grow, and in the case of India, it’s inelastic. “GST will replace the plethora of indirect taxes — excise, sales tax, service tax, entry tax and other local levies — with one single levy, helping create a national market for goods and delivery of services. State-specific levies and entry taxes lead to loss of revenue and cascading of taxes — taxes on taxes. Some estimates suggest GST could add as much as two percentage points to GDP. The government feels the improving fiscal situation because of softer crude prices and decontrol of diesel has given it room to meet compensation demands.” – The Economic Times, December 16, 2014.
Note the prediction that the GST tax will add almost two percent to Indian GDP growth. I’ve predicted that India is on the cusp of entering an era of double digit GDP growth, an era that will ultimately create gold demand that is five times the size of the already-enormous demand in China.
Please click here now. That’s the weekly GDX chart. A double bottom pattern is beginning to form, and the lower volume in the area of the second bottom suggests this should be a “textbook” formation.
For a closer look at the chart, please click here now. That’s the daily GDX chart. It’s clear that volume is shrinking as the second bottom forms. My gold shares position has never been this large, and I’m ready for a fabulous year in 2015.
I’ve suggested repeatedly that the world’s biggest geopolitical driver of the price of gold is the relationship between Pakistan and India, particularly in the Kashmir “Line of Control” region.
Both nations have significant stockpiles of nuclear weapons. If Pakistan’s government were to become unstable, the situation could quickly escalate into a nightmare scenario.
Please click here now. The Taliban and ISIS both want to rule Pakistan, and if they are even partially successful in achieving that goal, I would expect the price of gold to move significantly higher.
Gold investors need to keep a very close eye on geopolitical events that occur in Pakistan, and particularly in the Kashmir region.
I have received a number of emails from investors in the gold community, asking about the decision of the CME to implement price limits (collars) for gold and silver futures contracts. Collars can create violent price movements, because investors who get margin calls can’t liquidate when the price is halted. When trading begins again, the price can gap higher, causing another trading halt.
Investors who are carrying large leveraged short positions could be wiped out if a series of trading halts were to occur while the gold price was moving violently higher.
I want to finish today’s update with a look at the US dollar versus the yen. Over the past few months, a lot of forex traders thought gold would crash when the yen did, but that hasn’t happened. Gold has little risk from a rising dollar, because most Western investors don’t have any gold to sell, and Eastern buyers mainly buy jewellery for cultural and religious reasons rather than for investment.
A falling dollar will make gold attractive to Western institutional buyers, which is a win-win situation for the gold community! Please click here now. That’s the weekly chart of the dollar versus the yen.
For a closer look at it, please click here now. That’s the hourly bars chart. Note the head and shoulders top pattern that is clearly in play. The dollar looks set to crash against the yen, and I suspect Janet Yellen’s press conference could be the catalyst, and create a nice gold price spike to the upside. Rather than end 2014 on a down note, gold seems set to shock the gold community, and end the year with a big rally!
Sentiment: Strong Buy
Volatility And Fed Language
Wednesday December 17, 2014 08:04
Volatility continues to be the harbinger for the moment, as silver posted another $1 range day yesterday and gold veered within a $40 boundary. Oil again this morning is flirting with the $54 level, after receiving an almost $4 bounce yesterday following a failed break through to the downside by traders. Oil “may” bounce from there again today, but if the bounce doesn’t hold, oil with a front $4 handle, seems a given. The market in the metals will remain edgy for most of the day, until the Fed’s meeting announcement is made public this afternoon. The majority of analysts suspect the Fed will change their language to indicate rate increases are close and I would expect that the metals have factored in this outcome. This is expected to weaken the metals, but if I am right and the Fed doesn’t change language ahead of the holidays, the risk to the metals is a higher, not lower bias.
By Peter Hug
Global Trading Director
Sentiment: Strong Buy
Russia's Sinking Economy Becoming A Global Threat
Tuesday December 16, 2014 4:57 PM
WASHINGTON (AP) — Russia's suddenly escalating financial crisis risks spilling beyond its borders and endangering parts of the global economy.
With economies in Europe, Japan, China and Latin America already ailing, fresh threats have emerged from Russia's shriveled currency, its move to dramatically boost interest rates, the damage from plummeting oil prices and Western sanctions over Russia's action in Ukraine.
The alarming 10 percent drop in the ruble over the past two days has amplified the economic turmoil in Russia. Investors fear that Russia may default on its foreign debt obligations — a move that would inflict hundreds of billions in losses on lenders abroad.
Some analysts also worry that tensions will further escalate between Russia and the United States and its European allies that imposed the sanctions. The White House upped the pressure Tuesday when President Barack Obama committed to approving additional sanctions.
Few see President Vladimir Putin as backing down.
"I do not expect him to blink," said Ian Bremmer, president of the Eurasia Group, a political risk and consulting firm.
The financial consequences for the United States could be modest because of Russia's diminished economic stature. Yet the geopolitical risk could ripple across continents.
Russia began the year as the world's eighth-largest economy, with a gross domestic product of $2.1 trillion, according to the World Bank. A single ruble is now worth less than two pennies, having lost about 50 percent of its value against the dollar since January.
This means Russia's GDP has been halved in dollar terms, putting it roughly on par with Mexico and Indonesia as the world's 15th largest economy.
Before financial markets opened Tuesday, the Bank of Russia hiked its key rate to protect the ruble's value. In doing so, the bank hopes investors will find it more financially appealing to keep their money in Russia. Nevertheless, the ruble fell in trading to close Tuesday at 80 rubles to a dollar, compared with 65 on Monday. It recovered in late trading to a rate of 68 to the dollar.
Russian officials have already projected that their economy will shrink nearly 5 percent next year. That will, by extension, affect its trading partners in Europe and Asia.
Russia imports about $324 billion in goods annually, primarily from China, Germany, Ukraine, Belarus and Japan. Those imports have grown costlier because of the falling ruble.
One potential global risk comes from Russia seeking to retaliate against the sanctions by stepping-up cyberattacks against U.S. targets and asserting itself more aggressively in Ukraine and other nearby countries, Bremmer said.
On Tuesday, Russian Foreign Minister Sergei Lavrov argued in a French TV interview that the sanctions were intended to end Putin's regime.
Unlike during the previous ruble crash in 1998, Russia is unlikely to receive help from the International Monetary Fund and the World Bank, organizations backed by the United States and its European allies that contend that Russia has funneled direct support to rebels fighting in Ukraine.
Isolated and alone, Russia might then choose to default on some of its debt.
"Our deepest fear has been — and still is — that putting Mr. Putin in a 'nothing-to-lose' situation removes any constraint he might have had against reneging on his foreign debt obligations, which Russian borrowers probably cannot pay off or service now," writes Carl Weinberg, chief economist at High Frequency Economics. Foreign lenders would have to brace for $670 billion in losses.
This possibility has sparked an investor retreat from Russia. But that pullback has also caused investors to flee other emerging market currencies that are deemed risky. They include Turkey, Brazil, South Africa and Indonesia, noted John Higgins, chief markets economist at Capital Economics.
Higgins said that oil prices are the central factor that will determine "the depth of Russia's problems and the consequences for the global financial markets." Should oil continue to collapse, the financial and geopolitical turbulence in Russia will worsen.
U.S. crude oil markets rose 2 cents to close at $55.93 a barrel Tuesday, while the international counterpart dipped below $60 a barrel for the first time since May 2009. Oil prices have been cut in half over the past six months.
Analysts generally attribute the plunge in oil prices to rising supplies and slowing demand as Europe and Japan falter and China's growth weakens. But as the price drops further, fears are intensifying that the decline is pointing to slower growth than many analysts had expected, said David Joy, chief market strategist at Ameriprise.
That could make the situation for Russia even more dire.
"Oil hasn't found a bottom yet, so the pain is only going to get worse as the price of oil continues to fall," Joy said.
AP Economics Writers Christopher S. Rugaber and Paul Wiseman contributed to this report.
Sentiment: Strong Buy