Why the Gold Price Expressed in Euros Is Beating its Historical Record

Published by Philippe Herlin | Sep 5, 2019 | Articles 8416

A fundamental event went unnoticed last week: expressed in euros, the price of an ounce of gold surpassed its historic record from October 4, 2012 (€ 1380). We are evolving to € 1400 on September 4th. No one mentioned it because economists and the media only take into account the price of gold in dollars, which, at $ 1537 on September 4, is still far from its record of $ 1,908 on August 16, 2011. This difference is explained by a weak dollar against the euro between mid-2011 and mid-2012.

However, we are in Europe: prices, our salaries and our savings are denominated in euros, so it is the price of gold in euros that must be taken into account. So how do you explain this gold fever? By a significant decline in the euro against other major currencies? This is not the case, so we have to look for an internal cause.

The price of gold remained above € 1200 between mid-2011 and the first quarter of 2013 and then fell back to around € 1000 until September 2018, from which date it began a strong rise, in which we are still in. During this period, Europe struggled in a sovereign debt crisis affecting Greece, as well as Ireland, Portugal and Spain. A disappearance of the euro is mentioned by several commentators, so it is not surprising that gold then remains at a high level, nor that it will then fall back when the crisis will be resolved (seemingly) with aid funds and a banknote plate from the European Central Bank.

However, there is no sovereign debt crisis at the moment – on the contrary – since zero rates make the budget deficit and debt painless. So how do we explain this increase in the price of gold? In our opinion, we must turn to a sector that receives little media coverage : that of European banks. To get a synthetic and accurate picture, what better way than to look at the EURO STOXX Banks (the stock price of the major European banks) over 10 years: it’s catastrophic! The price goes through a higher point at 240 points, then collapses three times. We are at 80, a division by three, and a clear downward trend.

This is the source of the problem, which is silent this time, unlike the Greek crisis: the major European banks. Some are worse off than others (the Italians, the Greeks, the Spanish, Deutsche Bank), but those that do not cause concern in the specialized press, such as French banks, pale in comparison to their American counterparts. Because the latter have made a real effort to restore their accounts and their leverage effect is around 1/10 (one dollar of cash for 10 of commitment) when European banks are around 1/30… Investors are not fooled and they remain far from these values, hence a massacred stock price. The ECB, which is unable to get out of the zero rate rut, is of course adding to the concerns.

For once, the next financial crisis may come from Europe and not from the United States, as we explained in January 2018, and this prognosis seems to be confirmed. Faced with this threat, the best protection is gold, of course, and obviously more and more people are telling each other and taking action.

Precious Metals: The Time of Consolidation

Since the dawn of time, commodity prices have been rising and falling in turn, as demonstrated by Leonardo Fibonacci (1175-1250). Any strong upward push of the price of a raw material will bring a period of consolidation more or less deep, regardless of the market, before a further increase if the conditions are met for that.

Precious metals are set to rise much higher, but after the sharp rise in recent months, a correction is needed and probably imminent.

Silver has developed its third leg up (see article of June 24) and arrived on September 4 at the expected level (see the chart of August 9).

Since September 2018, the main oblique resistance has blocked the increase more than 5 times, it is more than likely that it will once again force prices to a consolidation.

 

 

If we look at the monthly prices, the 50 months Mobile Average (MM50M) has played a major role as mobile resistance since 2016, the chart logic imposes a pull-back on this resistance.

We could therefore have a violent downward push towards $ 16.35 this month, a correction which should last about two weeks.

 

 

Once this correction is completed, the increase should resume. The price of silver is expected to reach $ 21 towards the end of the year and could reach $ 26 or $ 27 in March 2020.

After a brief consolidation on the Fibonacci threshold of $ 21, silver will continue to rise towards a strong resistance at $ 31, which will likely be hit in August.

 

 

After the very strong surge of gold during the last 3 months, it would be logical to witness a consolidation.

Since the threshold of $ 1,350 has played a major role since 2013, a pullback on this resistance seems necessary. Here too, the correction could be very brutal in September.

The 100-month Mobile Average (MMA100M) broken in June is currently at $ 1,351. This reinforces this resistance that probably is now a support.

If the Fed’s speech at the end of the FOMC meeting of 17-18 September announced a new monetary injections (QE), gold would rebound strongly upward.

 

India’s demand for silver tripled in July 2019 compared to the same period in 2018, from 314 tons to 1,041 tons.

 

 

On August 7, 2018, in the second part of my article “Someone is cornering the silver market to cause a shortage”, I was talking about India’s silver buying:

“India imported an average of 2,667 tonnes of silver between 1999 and 2010. Then, from 2011 to 2017, India imported an average of 5,375 tonnes per year. In 2018, if it continues at the same pace, India could import 8,667 tonnes.

Indian industry (which includes jewelery) only needs 2,667 tonnes. The average surplus of 2,700 tons since 2011 has been imported by six banks and eight agencies, as you can see in the World Silver Survey 2017. Since 2011, these buyers could have accumulated a treasure of 25,000 tons (881 million ounces).”

What I did not specify in this article is that China imposes a tax on silver import, Chinese banks and hedge funds (but not only Chinese) take advantage of the facilities of the “free zones” created in India and have their silver delivered there excluding tax. We are therefore witnessing a continuation of this “Corner of Silver”, with a strong acceleration of this phenomenon. “The Big Fish” that I evoke in my article of August 12 does not hunt alone, since the World Silver Survey 2017 reports six banks and eight agencies importing silver in India.

These gigantic investments in silver have everything to do with the monetary reform in preparation and the RESET that has already begun, without the masses noticing it. All currencies are devaluing in concert against gold. In euro, british pounds and in many currencies gold has set new historical records. It is never gold that goes up, it is the purchasing power of money that diminishes. As you already know, the purchasing power of every fiat money will be very seriously eroded in the years to come. It should be divided by 7 at least.

For now, remember that if you have to complete your purchases in gold or silver, it should be done on September 17 or 18 in the morning… If my analyzes are correct, obviously.

 

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China Has Added Nearly 100 Tons of Gold to Its Reserves

Published by Goldbroker ™ | Sep 10, 2019 | Articles 572

China has added almost 100 tons of gold to its reserves since it resumed buying in December, with the consistent run of accumulation coming amid a rally in prices and the drag of the trade war with Washington.

The People’s Bank of China raised bullion holdings to 62.45 million ounces in August from 62.26 million a month earlier, according to data on its website at the weekend. In tonnage terms, August’s inflow was 5.91 tons, following the addition of about 94 tons in the previous eight months.

 

 

Bullion is near a six-year high as central banks including the Federal Reserve cut interest rates as signs of a slowdown mount amid the U.S.-China trade war. Central-bank purchases have been another key support for prices as authorities from China to Russia accumulate significant quantities of bullion to help diversify their reserves.

Original source: Bloomberg

Silver – Golden Opportunity

There is one spectacular investment opportunity today that virtually no one talks about. It represents less than 0.1% of global financial assets. This investment has a potential upside of 36x or 3,500%. The downside is extremely limited since supply is finite and demand strong. It is selling at around production cost and has a real intrinsic value. It has also been money for thousands of years.

Yes, I am of course talking about silver. It is probably one of the most undervalued investments that you can buy today. Since the top in 2011 at $50, silver went as low as $14 in 2015. But we must remember that silver was $4 in 2002. Many investors have been burnt by silver, buying high and selling low. I heard of investors who bought at $50 as they expected a breakout above the 1980 high at $50. A fall of up to 70% since then obviously hurts but fortunately all silver investors will be amply rewarded in coming years, whatever their buying price was.

If you hold silver today, or if you intend to buy, you are now looking at one of those times in history when an investment is likely to make spectacular gains for an extended period of several years. At some point, probably this year, silver will move up several dollars in a day or two and later tens of dollars. Over the next 5 years silver could exceed $500.

SILVER IS NOT FOR WIDOWS AND ORPHANS

But let me warn you already now. Silver is not for widows and orphans. The move up will also see periods of vicious corrections that will keep you awake at night, if you are a nervous investor. Thus there will be a massive volatility so the gains will also involve regular pains.

So definitively better to buy now before the real move starts. We have already seen a $4 move from the lows at the end of June, but that is nothing compared to what is coming.

 

 

It is normally not worthwhile to wait for pullbacks because they might not come or they will come from much higher levels. So although we will see massive volatility in silver, most of the surprises will be on the upside. There will be periods when all technical indicators are screaming overbought but the price continues to run. But don’t forget that there will also be vicious corrections like the one we have just seen which is a great opportunity to buy silver.

GOLD / SILVER RATIO IS THE KEY

So why I am so certain that silver will move up now. I have often stated that the real upturn in the precious metals will always be led by silver. Once gold broke the 6 year Maginot resistance line at $1,350 in late June, this was the signal for the metals getting out of the starting blocks.

So that break was the signal and the gold/silver ratio peaked a few days later at 94. (See chart) As silver is now going up faster than gold, the ratio is coming down fast and has so far lost 13%. But that is just the beginning. I expect that ratio to first come down to the 2011 low at 30. This means silver will go up 3x faster than gold (ratio goes from 94 to 30).

 

 

WHEN GOLD REACHES $2,000, SILVER COULD BE $66

If we take an example that gold will reach an intermediate top at say $2,000, and the gold/silver ratio then reaches 30. That would mean a silver price of $66.

The long term historical average of the ratio is 15. That corresponds pretty well to the quantity of silver to gold in the ground which is 19 times and to the quantity of silver to gold mined which is 9, ( 9 ounces of silver mined for every one ounce of gold ).

LONG TERM TARGETS GOLD $10,000 & SILVER $666

If we take our long term forecast for gold which is at least $10,000 in today’s money, and apply the gold/silver historical ratio of 15, we get a silver price of $666 which is quite possible.

 

 

GoldChartsRUS has produced a silver chart adjusted for real inflation (Shadow Statistics inflation index) which produces an adjusted silver price of $840 in 1980 instead of the actual peak price of $50. Thus, a price of $666 is certainly possible in the next 5 years.

 

 

SILVER PAPER SHORTS – ONE YEAR’S PRODUCTION

We must remember that the futures markets are totally manipulated with chronic short massive positions. Just the silver shorts in New York and China represent more than one year’s silver production. Once the futures market breaks, there will be no physical silver available.

Silver demand is now increasing dramatically and the ETFs have seen an increase of 125 million ounces in the last month. That makes 500 million per year which is 50% of annual production. Investment silver is normally around 30% of demand with the rest being industrial use and silverware. Thus, there is not enough silver for this elevated demand and we must question if the ETFs actually are getting the deliveries of physical silver or just paper promises. I would not count on that they are getting physical silver.

There is a similar situation in gold. Since June gold ETFs, Published Repositories and Mutual Funds increased their gold holdings by 250 tonnes which is a record since 2016. The question is where is the gold coming from to meet this increased demand?

SWISS REFINERS REPORT WEAK PHYSICAL DEMAND

Swiss refiners are still reporting very slow business and high stock levels. They are seeing material coming back from the Far East including China and Thailand. The same with many bullion banks which are reporting unusually high stocks. We would clearly have expected the Swiss refiners who produce 70% of all the gold bars in the world, to reflect the increase in demand from ETFs and other sources. I can only assume that the ETFs are not actually getting physical deliveries but are just buying paper gold with an undertaking by the bullion bank to deliver physical.

This confirms my strong opinion that no one should ever buy gold or silver ETFs. All you get is a piece of paper that you own x ounces of gold. Most ETF prospectuses state that they don’t have to hold the physical. And judging by the slow business and high stock levels of refiners and bullion banks, the ETFs seem to top up their paper stock rather than the physical.

Even if the ETFs do hold physical metals, it is still within the banking system with all the risks that involves. Investors in ETFs don’t have their own bars, they have no access to their gold. The gold is not insured and it is subject to all the risks of the financial system, especially if the ETF only has a paper claim on the bank it bought the gold or silver from.

Gold has had a spectacular year so far and outperformed virtually all major investment classes. In 2019, gold is up 20% in US dollars, 24% in Euros, 25% in UK Pounds and 15% in Yen.

In August we have seen strong moves in gold. Gold took off when the Maginot Line was broken at $1,350 back in June.

GOLD PAPER MARKET STILL RULES

The lack of physical demand confirms what we have always known, namely that the gold price is determined by the paper market. So in spite of the best year for gold since 2009, it is not yet reflected in the physical market. In one way, this situation makes the coming price move in gold and silver even more bullish. Futures exchanges and bullion banks are clearly accumulating even bigger short paper positions in gold and silver. When the paper market breaks there will be absolute panic in the physical market with gold going up by $1000s and silver by $10s. That will definitively happen in the next few years but it could happen at any time.

GOLD IS FOR WEALTH PRESERVATION AND NOT FOR PRICE GAINS

I have given some potential price projections in this article. They are by no means meant to be sensational since I believe they are very realistic. But remember that you are not buying gold or silver for short term price gains and therefore price targets are unimportant.

 

 

Physical precious metals are bought for wealth preservation purposes. You buy and own physical gold and silver as insurance against a totally rotten and manipulated financial system which is unlikely to survive in its present form.

If you don’t already own gold and silver, buy now. Don’t be greedy and wait for pullbacks. That way, you might miss the boat totally which doesn’t just mean losing a potential investment gain. No, it means that you will be totally unprotected and unprepared for what is going to hit the world in coming years.

Even if you have to pay up when buying in the near term, that is totally irrelevant. In a few years gold and silver will be multiples of where it is now. And if you store it in the safest vaults and jurisdictions, you will be able to sleep well at night.

 

Original source: Matterhorn – GoldSwitzerland

ECB Cuts Its Deposit Rate, Launches New QE

The European Central Bank cut its key interest rate and launched a sweeping package of bond purchases Thursday that lays the groundwork for a long period of ultraloose monetary policy, jolting European financial markets and triggering an immediate response from President Trump.

Donald J. Trump

@realDonaldTrump

European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!

25.4K people are talking about this

The ECB said it would cut its key interest rate by 0.1 percentage point, to minus 0.5%, and buy €20 billion ($22 billion) a month of eurozone debt starting in November, relaunching a so-called quantitative easing program that it only phased out in December.

The new QE program is expected to “run for as long as necessary,” and only to end shortly before the bank starts raising interest rates, the ECB said.

The ECB also promised not to raise interest rates “until it has seen the inflation outlook robustly converge” with its target of just below 2%. Thursday’s cut was the ECB’s first since March 2016.

zerohedge @zerohedge

The ECB lasted 9 months without QE

181 people are talking about this

Mr. Draghi said at a news conference that the ECB was reacting to a longer-than-expected slowdown in the eurozone and persistently weak inflation. “We still think that the probability of a recession in the euro area is small, but it has gone up,” Mr. Draghi said.

 

 

By launching such a bold stimulus package, Mr. Draghi has left the central bank with very little ammunition to fight any new downturn, while aggravating possible side effects that include asset-price bubbles and weakened banks. Mr. Draghi said the ECB was closely monitoring those side effects, and called urgently on eurozone governments to step up spending to support growth.

The package also binds the hands of Mr. Draghi’s successor, former International Monetary Fund Managing Director Christine Lagarde, who will take office on Nov. 1.

With interest rates falling further below zero, the ECB also moved Thursday to provide relief for the region’s embattled banks, whose profits have been hurt by negative interest rates. The ECB will create a mechanism to shield banks from the full force of negative rates, and sweeten the terms of a fresh batch of long-term loans.

Gold prices pushed higher in initial reaction to the expected dovish announcements.

 

Original source: WSJ

JPMorgan Metals Executives Charged With Market Manipulation

Published by Goldbroker ™ | Sep 16, 2019 | Articles 600

Two current and one former JPMorgan Chase & Co executives were charged over allegedly participating in market manipulation in the trade of precious metals including gold, silver, platinum and palladium between 2008 and 2016, the Department of Justice said in a statement.

The three men – global precious metals desk head Michael Nowak, precious metals trader Gregg Smith, and former trader Christopher Jordan, who left JPMorgan in 2009 – were charged with a racketeering conspiracy and other federal crimes.

“The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants,” said Assistant Attorney General Brian A. Benczkowski. “These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets.”

“Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand,” said FBI Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Not only did their alleged behavior affect the markets for precious metals, but also correlated markets and the clients of the bank they represented.”

The trio allegedly engaged in “spoofing” on a massive scale – placing bids to buy or offers to sell contracts with the intent to cancel them before execution – dating back over 10 years, openly discussing their illegal behavior in chat logs obtained by the prosecution and included in the indictment.

The DOJ claimed the bankers made millions of dollars by defrauding other market participants, including some of their own clients, in thousands of illegal trade sequences.

Reuters reported on Sept. 12 that Nowak and Smith had been placed on leave from JPMorgan in connection with the ongoing investigation.

A spokesman for JPMorgan declined to comment. The bank said in an August regulatory filing it was “responding to and cooperating with” investigations by various authorities, including the Department of Justice, relating to trading practices in the metals markets.

The charges were the latest turn in a years-long investigation that has previously yielded guilty pleas to illegal spoofing activity from traders at several banks, including two from JPMorgan.

There has been a surge in spoofing-related prosecutions in recent years. Bank of America Corp’s Merrill Lynch commodities unit, for example, paid $25 million in July to resolve actions by the U.S. Commodities Futures Trading Commission and Department of Justice for precious metals spoofing trades between 2008 and 2014.

 

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King Solomon and 666 Gold

Published by Egon Von Greyerz | Sep 17, 2019 | Articles 294

What is history’s greatest illusion? Is it the Indian Rope Trick or is it performed by Houdini or maybe David Copperfield. No, this is an illusion which is so big that the whole world has fallen for it. Virtually every individual in the Western world and also many in the East believe in this illusion.

The illusion is so big and really so obvious but still nobody can see it. The reason nobody can see it is because nobody wants to see it. Everybody prefers to be under the illusion that the emperor has clothes although he is totally naked.

Later in this article I also will talk about the King Solomon and the importance of the number 666 for gold and silver investors.
WEWORK AND WELOSELOTSOFMONEY

Before we talk about the big illusion, let’s look at one of the many mini-illusions that has emerged in this century. The name of the company should really be “WeLoseLotsOfMoney” but they have chosen another name which is just as bad, namely “WeWork”.

I have learnt since I was a young man that when you work, you are supposed to earn money. But this is a company that in this modern era is based, on as they state, “elevating consciousness” and not on something as mundane as making money. Because this company really seems totally unconscious. How else can they make losses of $500 million, $900 million and $1.9 billion in the last three years and lose still more this year. The management is valuing the company at $47 billion but few people agree with them. So what do they do? They rent out office space on short term leases whilst they have long term lease obligations of almost $50 billion. A very dangerous mismatch.

The founder and CEO has already sold shares for $700 million. Sounds that he doesn’t believe what he is preaching. This reminds me of a company in the UK during the South Sea Bubble era in the 1720s that was raising money for a new venture. They had no activity and no detailed plans. The prospectus just said that their purpose was to make money. Well at least that is a better goal than losing billions like WeWork.
GLOBAL WEALTH OF $325 TRILLION WILL IMPLODE

And this is sadly the case with the world as a whole too. Soon, we will discover that virtually all wealth is built on an illusion. Because global wealth around $325 trillion was never real but just an illusion based on fake or manufactured money. As global debt of $250 trillion implodes, so will the assets that were supported by this debt. In addition there is at least $1.5 quadrillion of derivatives that will totally disappear into a black hole. This will make the asset devastation exponentially greater.

The destruction of assets when all this is finished will mean that in real terms, stocks, bonds and property values will lose on average probably 90-95%. Many paper assets will disappear totally whilst some hard assets will fare a bit better.

Since most people in the West have debt, they will not suffer terrible losses but the problem will be if they borrowed money against their houses, they will be left with negative equity. The wealthy who have most of the wealth in the world will naturally see the biggest losses.
GOVERNMENTS WILL NOT SAVE THE WORLD THIS TIME

The big problem for most people is that they live under the illusion that they will be saved by governments or the central banks. Because for decades, governments have always stepped in, printed more money to prop up stock or bond markets, for social security, pensions and saved failing banks and businesses. Since governments have access to endless free money through money printing, there have been unlimited resources to solve every financial problem that arises. And now with $17 trillion of debt with negative interest, government is also being paid for borrowing money. What an absurd world.

But it will lead to even greater absurdity before it is over. Because now with negative rates, governments can borrow more than ever, and will! Many investors will do the same thing and invest millions or billions into projects that are just marginally profitable. So with negative rates, governments and central banks are not solving the debt problem of the world but exacerbating it. By trying to solve a debt problem with more debt, the problem will grow exponentially before it implodes.

In the end, no one will buy the debt of course. Why should you buy a debt paper from a government that will either not repay it at all or with money which has lost at least 99% of its value.
THE NON-ILLUSORY ETERNAL ASSETS

There is of course one asset class which is not an illusion but very real. It has an intrinsic value, is nobody else’s liability and has been money for thousands of years. I am talking of physical gold and silver of course.

Precious metals are absolutely essential to hold as protection and insurance against the coming destruction of assets. There is still less than 1/2% of world financial assets in physical silver and gold. Neither individual investors, nor institutions have yet woken up to the fact that there is this wonderful investment that you can hold which over time has always maintained purchasing power whilst all paper money has always gone to ZERO. And sadly most investors won’t realise the importance of gold and silver for their economic survival before it is too late.

As I have pointed out a few times lately, the precious metals have now started the next phase in the bull market that began in year 2000. After a six year correction we have moved to new highs in gold in most currencies except for the dollar. So it is only a matter of time before also gold in dollars makes new highs above the $1,920 high in 2011. It could happen later this year or early in 2020.
BULL MARKET HAS JUST STARTED BUT CORRECTIONS WILL BE VIOLENT

In the very strong metals bull market, which we will experience in coming years, it will be very difficult to time corrections since the big risk will be to miss the upside moves. There will of course be violent corrections, especially in silver, but they will be rapid and quickly reverse. Last week we saw such a correction. For long term holders they are irrelevant. But if you are not fully invested, they give an excellent opportunity to purchase metals. The current correction could last one or two weeks maximum. Price wise we will probably not see much lower levels than today.

Thereafter I expect a very strong move lasting into the year end and continuing in 2020. Gold at $2000 by the year end is not impossible with silver above $30. But wealth preservation investors must remember that holding metals is much more important than focusing on whatever level gold and silver reaches by a certain time. I am only giving these potential targets to indicate that the metals are now in a phase or cycle when the moves to the upside are likely to be significant.
KING SOLOMON GOLD 666 AND SILVER

I have a few times talked about $666 in connection with silver. Some investors are superstitious and either like to change the number to 665 or 667 or talk about 666 as Luciferian.

My long standing minimum forecast for gold is at least $10,000. If we assume that the gold/silver ratio goes back to its long term historical average of 15 (82 today), that would give a silver price of $666. People who think that this figure is ominous have read the wrong chapter in the bible.

666 is a very important figure for precious metals in the bible. Let’s go to: 2 Chronicles 9:13

“The weight of gold that came to Solomon in one year was six hundred sixty-six talents of gold.”

666 talents of gold is 22 tonnes which today is worth over $1 billion. This was the amount of gold that King Solomon received in payments and gifts. Thus 666 is a very important figure in the bible for precious metals investors rather than the inference that some think about.

So follow the wise King Solomon and collect as much gold as you can afford, whether that means one gramme every month ($50) or much bigger amounts. For the very few Venezuelans who did before their money was destroyed, it saved their lives.

Original source: Matterhorn – GoldSwitzerland