Zeal071213AGold’s biggest psychological overhang this year has been the fate of the Fed’s third quantitative-easing campaign. Gold futures traders hang on every word of Fed officials, extrapolating them into a timeline for ending QE3. This consuming obsession fueled unprecedented selling that spawned a stunning gold anomaly. But as QE3’s nature becomes more apparent, gold is due for a massive mean reversion higher.

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Chris Duane joins The Doc & Eric Dubin as a special guest host for this week’s SD Weekly Metals & Markets.   Chris, Eric, & The Doc discuss:

  • India’s sudden massive taste for silver- which is blowing away US demand for silver eagles and could be a game changer in the physical silver market
  • Historic implications of the GOFO rate remaining negative for 5 consecutive days
  • Chris Duane announces the re-launch of the SBSS series with The Warbird

Download the podcast, or click the play button below, this is a Metals & Markets you Wont Want To Miss!

ron-paul-dont-steal-government-hates-competitionDon’t say I didn’t warn you about your 401k’s and IRA’s.  Orrin “Magic Underwear” Hatch has introduced legislation to “create a new public retirement plan in which insurance companies pay benefits through annuity contracts”.
Now it’s the Government’s turn to takeover your retirement funding.
Good luck to you all who keep your money in your IRAs.  Don’t cry that you weren’t warned when it happens in totality.

Federal Reserve Chairman Ben Bernanke said this week that inflation in the United States needs to be higher.  Yes, he actually came right out and said that.  It almost seems as if Bernanke is trying to purposely hurt the middle class.  On Wednesday, Bernanke told the press that “both sides of our mandate are saying we need to be more accommodative“.  Of course he was referring to the Fed’s dual mandate to keep unemployment and inflation low, but Bernanke has a very unique interpretation of that mandate.  According to Bernanke, inflation in the U.S. is now “too low“.  The official inflation rate is currently sitting at about 1 percent, and Bernanke insists that such a low rate of inflation is not good for the economy.  He would prefer that the rate of inflation be up around 2 percent, and he is hoping that more “monetary accommodation” will help push inflation up and the unemployment rate down.
But what Bernanke will never admit is that the official inflation rate is a total sham.  The way that inflation is calculated has changed more than 20 times since 1978, and each time it has been changed the goal has been to make it appear to be lower than it actually is.

Chris Duane has released the 5th coin in the SBSS series, The Warbird. warbird
With the caption Spreading Debt & Death, the coin is produced by the Golden State Mint, and is available for pre-order now for the July 29th release on SDBullion!

Duane reveals the Warbird and explains the concept and story behind the latest SBSS release below:

JP Morgan Dimon MastersJPM is getting out of the silver manipulation game. Perhaps they’ve been warned by the CFTC.
Perhaps they simply see the writing on the wall. It’s impossible to say.
What we do know is:

no deliveriesGovernments and central banks are losing the war against gold behind the curtains.  The recent fall in the price of gold has not taken it out of backwardation but has only intensified it.
This is sending us clear signals that are hidden from the eyes of the majority, who pay attention just to the falling prices and not to something quite more important: the gold Basis and Co-basis.
Backwardation
is a symptom of an apparent “shortage” of gold, an abnormality.  Gold is not physically “scarce” in the market because its inventories have accumulated for thousands of years.  So, this shortage can only be possible if “strong hands”, the ones who keep hoarding it, are every day less willing to sell it at bargain prices in a moment of financial distress, like today.
In other words, this backwardation tends to become permanent and is a sign of distrust in the fiat monetary system. Sooner or later, the collapse of the futures market is unavoidable: the delivery of gold will become impossible.
The warning is very clear: ignore gold, at your own risk.

North ColoradoThere are ten counties in northern Colorado that are discussing plans to secede from the state of Colorado in order to form a new state that would be known as “North Colorado”.  North Colorado would have a population of more than 300,000 people, and it would be the 42nd largest state in the country by land area.  The county officials that are leading this movement say that a “collective mass” of issues has resulted in this desire to leave the state of Colorado for good.  In recent years, the Democratically-controlled state legislature has been pursuing new regulations on the oil and gas industries, it has imposed strict new renewable energy standards throughout the state and it has adopted new gun control measures that are highly unpopular with rural voters.
Recently, representatives from ten Colorado counties held a meeting in the town of Akron to map out the boundaries for the new state…

Jamie DimonSilver HFT algos are the perfect mechanism for enabling the complete the control of prices hidden far beyond the realm of regulation.
Market manipulation can be effective at maintaining the disconnected state between price and reality as long as it is profitable for those who control or enable it.
What the silver market is now seeing in terms of price is based solely on a skewed trading structure in what remains the most important price determining exchange.

gold eagleGold prices peaked in September 2011 and have dropped over one-third in the past 22 months. Sentiment by almost any measure is currently terrible. Few in the US are interested in gold (although gold is selling well in China), most have lost money (on paper) if they bought in the last two years, and the emotional pain seems considerable. It reminds me of the S&P, gold, and silver crashes in 2008-9.
So, will gold drop under $1,000 or rally back above $2,000?

Nevada Gold Production ChartWith the most recent data out by the USGS, U.S. gold production declined substantially year over year from its number one producing state, Nevada.  According to the statistics, Nevada’s gold production declined a whopping 9% in the first three months of 2013 compared to the same period last year.
Furthermore, total gold production from the United States has declined 5.4% compared to the same three months in 2012.  This can clearly been seen in the next two tables:

I had the great opportunity yesterday to reconnect with legendary founder and former CEO of GoldCorp, Rob McEwen. He is now the CEO, Chairman, and largest shareholder of McEwen Mining.
It was a fascinating conversation, as Rob explained that the financing markets are “effectively closed” for mining company concerns, with the fundamentals strengthening for gold—creating an environment for mining stocks in which 50% moves coming out of this bottom will be quite normal.
When asked how challenging this market has been for gold mining operators Rob said:

Bernanke-Dimon-Fed-TunnelThe GOFO is the interest rate that is used in a gold-for-dollars swap transaction.  Someone who is long gold and needs dollars for short term use can use his gold as collateral and get a much lower interest rate in borrowing the dollars.  But when the GOFO is negative, it means that someone with dollars needs the short term use of gold and is willing to pay the owner of the gold a rate of interest plus use dollars for collateral.
A negative GOFO rate means that gold in hand today is worth more than U.S. dollars in hand.  Think about that the next time someone tries to explain to you why gold has no value.
Just like the previous three times, I am confident that the current GOFO means the bottom of the 2-yr correction in gold and silver is over and that there is a very high probability that the next cyclical move higher will see new records for both the price of gold and silver.

I had the chance this morning to reconnect with Vishal Vyas, head of operations at India’s top bullion dealer, Pushpak Bullions Pvt. Ltd.   It was a sobering conversation, as Vishal indicated that the Indian government has just stepped in and crushed the domestic gold market with punitive taxation and trade controls. He also indicated that Dubai is now becoming a major recipient of “gold tourism”—with tourists flooding into the United Arab Emirates in order to buy gold.
Speaking to the recent steps taken by the Indian government to smash demand coming from the world’s largest gold market, Vishal said, “In India, due to the monetary policy and pressure from the finance ministry to control the current account deficit, the government is trying to curb the import of gold into India. They [just] increased customs duties by 2%, which is now at 8%. Apart from that, they have also banned the import of gold on a consignment basis—which was the normal practice worldwide to import gold.”
These new measures have crushed domestic Indian demand by about 86%!