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Tuesday, September 1, 2020

REAL INFLATION?

 (FROM THE DAILY PFENNING) 

I’ve told you all this before… But Clinton put the onus on Greenspan to come up with a plan to lower inflation… Greenspan hired the Boston Commission, who came up with hedonic adjustments to the inflation calculator, and voila! Inflation was lower, and so were interest rates….  The biggest change was to allow substitutions for the items in the basket that were used previously , when their prices got too high….


For instance, if steak got too expensive, they would say that mom’s would substitute hamburger, so that’s what they did, they substituted by taking steak out of the basket of goods, and adding hamburger…. And so on through the years…. They took out housing and substituted rents, they played these games with the Inflation Calculator… So, if they want to figure out to get inflation going again, calculate it like it was pre 1995….

John Williams at Shadowstats.com does a fantastic job of calculating inflation the way it was calculated Pre 1995… Right now, he’s showing that CPI (consumer inflation) is above 4%.... While the CPI that is hedonically adjusted is just .3%....  And don’t forget what I showed you a couple of months ago where the Chapwood Index…. They show the real price increases in goods & services for the top 50 cities, and just for the top 10 their 2020 inflation average is 10.8%....

Sunday, August 30, 2020

THIS GOLD BULL HAS BARELY BEGUN

 

If you think gold has had a good run up over the last year, here's a chart that should give some perspective.  It shows that in inflation adjusted dollars gold has barely budged.  We have entered a period of unlimited out of control Federal Spending under the Trump regime.  They pay lip service to holding the line on aid to the working class and broke States.  But for corporations and banks the spigot is wide open to the tune - so far - of Ten TRILLION dollars.  The Budget Deficit this year alone will be four to five times that of any previous administration.  And now the central banks of the world have pledged openly to hold rates at zero or below for years and years to come.

Here is some historical information from the four previous gold bull markets. 

Bull #1  June 1970 – Aug 1974   gold advanced from $36.56 to $154.50.  The rate of increase was 422%

Bull #2  May 1976 – Feb 1980 gold rose from $127.00 to $850.00.  The rate of increase was 669%.

[Between Jan 1979 and Jan 1980 gold pulled back 11 times at a rate of 3% or more.  During the same time period silver pulled back 12 times at a rate of 5% or more;  (source Jeff Clark).  Investors need to expect corrections along the way!].

Bull #3  July 2001 to Aug 2011 gold rose from $267.000 to $1.925.00 The rate of increase was 720%. Bull#4  Oct 2015 to who knows when   $1,070 to who knows how high.  The expectation for minimum targets for the gold price during the current bull market, from the $1.070.00  starting point, based on history, ranges from $4,500.00 (at 422%), to $7,700.00 (based on 720%). 



Monday, August 17, 2020

Why Digital Currency and Block Chain will send the price of gold soaring.

 

Bitcoin Vs. Gold: Whose Future Looks More Promising?

There's this idea floating around the digitization is the enemy of physical gold.  The argument runs that "innovations" such as block chain technology and the move to global digital currency will undermine the value of holding physical gold.  Physical gold is a relic from another era, the argument runs.

The problem with this argument is that the very technological breakthroughs that enable the inventions of things like Block Chain and digital currency will soon undermine their viability.

How so?

Well the next innovation which is a year away, two years away, five years away. depending on who you ask, but is coming as sure as the sun will rise, is Quantum Computing.  The upshot is that with a Quantum Computer every single existing Digital Currency, including block chain, including the most sophisticated .online banking and trading programs will be able to be hacked in minutes.

Nothing Digital is safe.  All forms of digital transaction will have to be secured through in person verification otherwise nothing will be secure.

But won't there be some sort of Quantum Currency?  Would you bet your life savings that whatever it is won't be hackable by Quantum Computing 2/0?

Which leads us all the way back to physical gold and silver as the only secure store of value.

As the French say: The more things change, the more they stay the same.



LONG TIME GOLD HATER WARREN BUFFETT INVESTS IN BARRICK GOLD


Is it time for Gold bull run?


 Barrick Gold’s stock is popping 10% Monday after legendary investor Warren Buffett’s Berkshire Hathaway revealed a stake in the gold miner’s stock. 

Berkshire added a $562 million position in Barrick Gold in the second quarter, according to SEC filings Friday. While the position is small for Berkshire — which owns more than $89 billion in Apple stock — the conglomerate is the 11th largest shareholder of the gold mining company, according to FactSet. 

This was an unusual move considering Buffett, a long-time value investor, has long professed a dislike for gold, preferring assets that have cash flows or pay dividends. 

Buffett on gold:

“[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Looks like the last of the big time gold haters has suddenly changed his mind.

Sunday, August 9, 2020

GOLD COIN AND MEDAL UPDATE


The most significant auction in historical gold medals in recent history has just been completed at Stacks Bowers Auctions.  The Duke of Lansing collection featuring many high grade British gold coronation and jubilee medals brought historically high prices.  The Charles II coronation and William and Mary coronation in gold pictured above both brought just a touch below $40,000.  Each of these is the finest of these rare issues to have been auctioned in recent memory.  Many others hammered at record levels.  

  this George VI medal in SP 64 brought $28,800.  Last year at the New York International the same medal in the same grade brought $16.500.  With a mintage of only 274 pieces in this high grade the medal is certainly worthy of such a high bid, but the jump from year to year is remarkable.

Even the silver coronation medals are following suit.  Last year a George I silver coronation medal in sp 63 sold for $2000.  This year an SP 64 sold at Heritage for $7000..

These high prices were not confined to the medals selection. Both at Stacks and Heritage high grade coins of interest brought historically high prices.  

The reason for this jump in prices should be obvious to anyone who has been tracking global central bank activity.  The Federal Reserve Bank in the United States alone has printed 10 trillion dollars this year in order to acquire the bad debt of US and International Corporations and Banks that it deemed necessary to preserving the global financial system.  The ECB and the Bank of Japan and printing money at a similarly Furious pace.  Concomitantly the price of bullion gold is at record levels in nominal terms through when adjusting for real inflation (not the absurd central bank inflation figures) the price is sure to go much higher.

So you can look at it as real assets are inflating at a terrific rate - or the value of paper money is being destroyed at a terrific rate.  It amounts to the same thing.  And the trend is only accelerating



Monday, August 3, 2020

WHY THE BIG BANKS COULDN"T KNOCK THE GOLD PRICE DOWN THIS SUMMER: FUTURES BUYERS ARE TAKING DELIVERY!!!!!!

(Kitco News) Trading behavior is changing in the gold space with investors preferring physical versus paper while at the same time investing more in ETFs than futures, according to Commerzbank.

Traders issued the largest delivery notice on record at Comex, declaring their intent to deliver 3.27 million ounces of gold against the August Comex contract.  

“According to traders, 102 tons of gold were delivered to the holders of expiring gold future contracts on the Comex last Thursday – this also fits the picture of changed investor behavior,” said Commerzbank analyst Carsten Fritsch. “Physical deliveries on the Comex have been rising for months: they totaled just 26 tons in February, 98 tons in April and as much as 171 tons in June.”

This trading pattern shows that investors prefer physical to paper gold, Fritsch pointed out. 

Despite the want for physical, no shortages are expected, the analyst added. “Still more gold is being shipped into the COMEX warehouses than delivered on a net basis. Currently over 1,100 tons of gold are being stored there, so no shortages of standard bars are to be expected, even if investor demand remains high,” he said. 

Another shift in the trading pattern has been investors’ preference for gold ETFs versus future contracts, according to Commerzbank. 

“Clearly there has been a shift in investor preferences: rather than investing in futures contracts, they are opting to put their money in gold ETFs,” said Fritsch.

Massive inflows are the proof with 155 tons, which is half of monthly global mine production being reported in July alone, the analyst said, citing Bloomberg data. 


Wednesday, July 29, 2020

DO YOU VALUE GOLD AS A COMMODITY OR AS A CURRENCY?

Gold prices surge to highest level in over seven years

As gold nears $2000 again, there is much speculation as to a "fair value" and what to expect next.

There are many billionaires like Ray Dalio, Jim Druckenmiller, Paul Tudor Jones, Jim Rogers etc who are still aggressive buyers of gold.  Most of these base their decisions on fundamental analysis having to do with expanding money supplies and debt loads in the major economies.

Then there are many technical analysts like Bob Prechter of the Elliot Wave school, and TV personality Jim Cramer's favorite chartist Carley Garner who fee that gold is on the verge of a major bust and has no real intrinsic value at all.

The real difference in analysis comes down to whether you view gold as a currency or a commodity.

Historically gold was the major global currency for at least 3500 years of recorded history.  Silver was also used in about at 10 to 1 ratio as a secondary currency.

Paper chits or IOU's were also used insofar as they were convertible into gold..

In 1933 The United States had issued so many paper chits they decided to freeze the price of gold and make private ownership illegal because they could no longer honor the conversion of paper into gold.

From this point on the Federal Reserve bank and the US Treasury created a system of floating paper money uncorrelated to anything but the "Good Faith" of the US Government.

All the governments of the world still used Gold as the currency of last resort.  All Governments of the world stored gold in their central banks for use as currency of last resort and for large international payments.  And all paper was still supposed to be convertible into gold at a controlled price.

In 1971 Richard Nixon closed the gold window for good in the United States.  Gold was no longer money available for the settlement of commercial transactions.

The Question is: is it still a currency?  If not it's value is purely emotional and sentimental, which is the argument of many technical chartists. 

 If its value is emotional and sentimental what is it's value?  Honestly, I have no idea,

And if it can not be used in the settlement of trade, how can it be a currency?

The answer is: it is a currency because it is held by the central banks of all the major global governments.  Why do they hold it?  Because it is an asset that as readily convertible into every major currency, it is durable, divisible, immutable, and has a 3500 year track record of holding its value over time.  In short, all the conditions that Aristotle laid out for currency in 500 BCE.

And right now Gold is the only asset held by the central banks of the world that are holding many trillions of dollars worth of liabilities in the form of bad debt they've taken onto their balance sheets to bail out the over leveraged banks and corporations of the world.

So if you accept the premise that gold is still a currency then what is the value?  

First, you can ask yourself what price would gold have to go to in order to make the central banks of the world solvent?  This is not an easy question, but surely the answer is much higher than it is now.  And this is the reason many billionaires who are looking at the global economy and seeing great value in gold disagree with many chartists who are looking at their computer screens and computing stochastics and wave counts and relative strength indicators and seeing a commodity trading at perilous levels.