end badlyThings in the U.S. will begin to fall apart in 2014 as the energy production begins to peak and decline impacting supplies and price in a big way.  This will cause a profound shock to the Stock, Bond and Paper markets.
Precious metals will be some of the best and safest assets to own during this “Energy Induced Collapse” period.
As Wall Street and the financial media carry on business as usual, the underlying foundation of the U.S. economy continues to disintegrate.  Very few Americans realize we have past the point of no return.  This holds true for many of the precious metals investors.


From The SRSRocco Report:

Even though precious metal investors are more educated and better prepared than the typical American as it pertains to the upcoming economic collapse, I still believe a good percentage fail to grasp that the energy situation is the root cause of our problems.

I would guarantee that most precious metals investors know the price of the metals are up substantially since the beginning of the year, but how many realize the price of natural gas is up twice as much silver and three times as much as gold?

Change in Gold, Silver Natural Gas Price 2014

If we take a look at some of the recent metals and energy spot quotes, we can see that while the metal prices are moving up nicely, the price of natural gas is going berserk:

Ktico Quotes 22014

NatGas Chart 21914

The Kitco metal prices are from Thursday’s trading, while the energy spot quotes are from Wednesday.  The price of natural gas was up another $0.15 at one time today, but is currently trading at $6.04.

So why has the price of natural gas spiked so high and what does it have to do with the precious metals?

Let’s first look at why the price of natural gas has gone up 28% year to date and then I will get into the reason precious metal investors need to pay more attention to the energy markets.

The so-called “Polar Vortex” hitting the Midwest, Northeast and to a lesser extent the South this winter, has caused record withdrawals of underground natural gas supplies.

Here is a graph I posted in my article, Natural Gas & Precious Metals Prices To Spike Higher in 2014 last week:

U.S. Natural Gas Storage 21314

At the time of the U.S. EIA (Energy Information Agency) Natural Gas Report dated Feb. 13th, gas storage levels in the country were already down 34% compared to the same period last year.  I included an estimated trend (blue dashed line) of where the level would fall by the end of March.

Today, the EIA came out with their latest natural gas storage report and we can see… the trend continues:

U.S. Natural Gas Storage 22014

(NOTE:  Bcf = Billion cubic feet)

In just the past two EIA Natural Gas Reports, reported withdrawals were 237 Bcf (Feb 13th) and 250 Bcf (Feb 20th).  Thus, 25% of the total remaining gas supplies were withdrawn in this two-week period.  Here are two tables from the EIA detailing the natural gas withdrawals from the two weekly periods:

U.S. Natural Gas Storage Table 21314

U.S. Natural Gas Storage Table 22014

The dates on these tables represent the last reporting day for that week.  The reports are releasing data from the previous week.  If the Northeast continues to be plagued by the frigid weather, I estimate that underground gas storage levels could fall to 800-1,000 Bcf.

This is not that unrealistic as there are still 6 weeks remaining (on average) for gas withdrawals.

If the U.S. gas underground storage levels fall this low (or lower) by the end of March, it could push the price of natural gas up even higher… possibly towards the $7-8 level.

Even worse, the shale gas industry will have to rebuild the underground gas storage from an extremely low-level.  There is speculation by some energy analysts that the U.S. could peak in natural gas production this year.

If this is the case, it could spell disaster for next winter as the U.S. could head into the cold season with a much lower underground gas supply.  Not only would the market have less gas going into the winter season, we may see natural gas prices double of what they are today.

Last year, most energy analysts and institutions were forecasting much lower prices than what the market is trading presently.  The EIA stated this last summer from a quote fromEnergyWire:

Shale gas production doesn’t make a major upward move until 2016, according to EIA.Spot prices for natural gas at the major Louisiana pricing hub will drop to $3.12 per million British thermal units in 2014 and 2015, below this year’s average forecast price of $3.25, according to EIA’s Annual Energy Outlook. Prices don’t pick up until 2016 either, in the EIA assessment.

The EIA forecasted a price for natural gas almost $3 less than where it is today.  While the weather is a major factor pushing the price of natural gas to a new highs…. energy analyst, Bill Powers believes we would have seen much higher prices ($5-$7) by 2015 even if weather wasn’t an issue.

This is due to what Powers forecasts is the “Bursting of the U.S . Shale Gas Bubble.”  Bill believes the high annual decline rates of the existing U.S. shale gas fields will not allow new production to keep production growing in the not so distant future.

According to a Citi Report last year, they calculate the annual decline rate for the U.S. natural gas industry is about 24%.  Thus, the shale gas industry has to replace nearly 100% of all production within the next four years, just to keep production flat… much less growing.

So what does natural gas have to do with the precious metals?….a great deal as you will find out.

There is this notion that the U.S. will become energy independent within the next several decades.  This gives the public and investors an illusion that growth will continue.  If domestic shale gas and oil production peaks and declines much sooner (possibly in the next 1-2 years) than the market anticipated… it could cause serious trouble for the Stock & Bond Markets.

People need to realize that the supposed “American Dream”,  what I label as the LEECH & SPEND SUBURBAN ECONOMY, cannot survive without a growing energy supply. 

Once the world realizes that Shale Energy will not allow business as usual to continue, valuations of Stocks, Bonds and most paper assets GO OUT THE FRICKEN WINDOW.

That is why it is so damn frustrating to see my energy articles receive 20-30% of the typical readership compared to a precious metal article.  Do gold and silver investors still not realize that ENERGY IS THE KEY???  The guy in the cartoon below does:

Cartoon Gas Prices

I believe things in the U.S. will begin to fall apart in 2014 as the energy production begins to peak and decline impacting supplies and price in a big way.  This will cause a profound shock to the Stock, Bond and Paper markets.

Precious metals will be some of the best and safest assets to own during this “Energy Induced Collapse” period.

 

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As Low As $1.99 Over Spot at SDBullion!

  1. Insofar as the Ukraine situation, it is all about Gazprom and Russia’s pipeline through the Ukraine and supplying the EU. The Ukraine owes billions to Russia from loans. Don’t think for a minute that there will not be a takeover of the Ukraine, because of the natural gas debt.
    Russia owns the Ukraine.

  2. Here is a prepper note for those who can store fuel.
    Buy a few 55 gallon  metal drums–$20 or so–from Craigslist or other source. Fill them..  Most of the drums are air and water tight.  They can be moved with a dolly and tucked away out of site in a corner of the back yard or storage building.  Get a decent electric pump.    We have 10 filled at a secure location.
    If you can’t store 55 gallon drums buy a few jerry cans   5 gallon or 20 liter.  Available at sportsmansguide.com and other places they cost maybe $25 each   buy 4-6.
    Keep fuel tanks topped
    Buy an electric bike with a solar trickle charger and a wagon to haul stuff. Or a good mountain bike.

    • One area I am weak in, I need some transportation, with the solar I am putting up, plans for a wind generator if things don’t fall apart before my lawyer reaches a settlement with the insurance company. Money coming in is going to preps

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