Entries Tagged as 'Gold Silver'

Emerging Markets

Emerging markets

Emerging markets

Wikipedia defines emerging markets as “The four largest emerging and developing economies by either nominal or PPP-adjusted GDP are the BRIC countries (Brazil, Russia, India and China). The next five largest markets are South Korea, Mexico,Indonesia, Turkey, and Saudi Arabia...”

Martin Armstrong warns, “The emerging markets have issued debt in dollars which is a currency they cannot print and do not control. This hard-currency debt has tripled in the last decade and is split between $3.1 trillion in bank loans and $2.6 trillion in bonds. This will ripple through the banks causing massive new losses just as the Cyprus banks held Greek debt. This time, it will be the debt of all emerging markets. We are looking at a drastic scale of the biggest cross-border lending sprees of the past two centuries.

“A large portion of this emerging market debt was taken out at real interest rates of 1% on the implicit assumption that the Fed would continue to flood the world with liquidity for years to come. This has made the emerging markets vast borrowers dollars so in a trading position they are “short dollars”. This is the greatest short-position on a currency on the boards and when the dollar RISES, they will face the margin call from Hell itself. This will set off another banking crisis for bankers always buy the high and sell the low. They have NEVER learned even once from any economic crisis.”

Read more at Coming Emerging Market Debt Meltdown

 

THERE’S A STORM COMING

I received this email from a respected friend:
I’ll try to make this short and simple, but you know better. I really hope some of you argue with me, because if we all agree I’m more likely wrong.

THERE’S A STORM COMING!!!!! AND WE NEED TO PREPARE.

Is it Katrina, or a polar vortex, an average winter storm, or the perfect storm?

Don’t know. I don’t need to predict or know what winter will be like in detail to believe that winter is coming.

Why do I think this? And plan to get prepared.

First, history. Bear markets ALWAYS follow bull markets. Are we in the 1st or 2nd inning of the current bull? Seems unlikely. Are we in the 7th or 8th? Don’t know, but I’m pretty sure the game will end – in 9 innings, or extra innings, or due to rain.

Second, look around, at geopolitics, at valuations, at rate spreads and bond covenants, at the omnipotence of central bankers (the Fed is leveraged almost 80 to one), at IPO’s, and on and on. Do you see an environment of bottoms or tops?

Do you see an environment of sustainability, or an environment of complacency?

Third, the world has not de-leveraged in the last five years. Debt to GDP has grown. It has been shifted around with some sectors reducing debt and others increasing, but the world’s debt load is greater today than it was before the ’08/’09 crisis, and the cost to carry that debt has probably never been lower. Crisis and bear markets tend to clean out the previous excesses and produce a more robust, sound, and conservative economic environment. I suspect that has not happened.

Fourth, I think the theory that “economic and financial stability creates instability, and instability creates stability” has merit. The financial markets have been remarkably stable for more than two years. This could go on and on, but you get the point.

This is NOT a panic call to sell everything and get short, or run to gold, or cash. This is a call to get PREPARED; professionally and personally. (My wife) and I plan to review our budget and balance sheet over the next few weeks. (My assistant) and I will continue our strategies and disciplines, but with additional attention to preparation for what will eventually come next; what are the best and most secure places to store cash, what asset classes may be diverging from the markets, are we seeing a deflationary or inflationary environment developing. If one wishes to plan for the inevitable, whenever it comes, there are only three time periods one has available; before, during, or after. “After” is not terribly useful or effective. “During” is quite difficult. Now is “before”.

(My wife) asked me, “What brought this on?” Why today and not a week ago? The best answer I have is the culmination of many, many pieces of input that have finally tipped the scale to say PREPARE. Maybe it was the “alerts”, or the chart on world debt levels, or the Fed’s leverage ratio, or continued reading of “The Fourth Turning”, or the complacency of both investors and voters, or Ben Hunt’s call for a peak in central bank influence and credibility, or watching Putin play his game, or a hundred other things. It might be that I see so much benefit to preparation, and very little downside – or so much downside to not preparing. For now, that’s my story, and I’m sticking to it.

Four final thoughts:

1. I learned long ago that governments and large institutions can delay seemingly huge problems almost indefinitely. They may never fix it, but they can delay for what seems like forever. Theirs is a long game, but our game is the markets – and they do cycle.

2. When things go wrong, they often go wrong fast, but the inflection point may be long in coming. Hemmingway’s quote about going bankrupt two ways comes to mind.

3. The last few weeks seems likely to be setting up for a typical excellent buying opportunity in October, or the next bear market. I’m completely open to both possibilities.

4. Over thousands of years we humans have evolved primarily to react immediately to threats to our survival. If we didn’t act immediately we were often dead. These hard wired reactions are more often than not quite unhelpful in the markets. If one plans and prepares when there is no immediate threat, the prepared reaction is likely to be more useful – not always right, but it has a better chance of being appropriate.

Please heed my friend’s message. He takes longer than I do to reach a conclusion such as this, but his thinking is well thought out and he is risk averse.

Gold Price Charts Widgets

It all started with an innocent email from someone I follow on Linkedin suggesting I take a look at a gold widget. It said, “Please find below our gold spot price widgets. Updated every minute and available in 119 currencies, they will allow your visitors to precisely monitor the evolution of the gold price.” What followed was an interactive gold chart going back 10 years. The chart shows strong support at $1,200

Gold in Bullion and Coins

Gold

I then went to Market Club to see latest pricing of gold. Hmmm $1222! I noticed that Silver was $17.75. The ratio between gold and silver ranges from 15 to 85. Quickly dividing $1222 by $17.75 yielded 68.81. I Googled gold/silver ratio and found Gold Silver website showing the ratio in various time periods:

Gold Silver Ratio History Charts

30 Day gold silver ratio 5 Year gold silver ratio
60 Day gold silver ratio 10 Year gold silver ratio
6 Month gold silver ratio 20 Year gold silver ratio
1 Year gold silver ratio 36 Year gold silver ratio
2 Year gold silver ratio

While the ratio is very high right now, it is still shy of 85, but it sure looks like something to watch closely. Suppose you are bullish on gold and think price could go to $2,000 per ounce. From this price that is a 64% increase. If the ratio stays the same between gold and silver at 68.81, silver would sell at $29. What if the ratio declines to qa more reasonable level. based on the charts a more reasonable level would be 45. If gold went to $2,000 45 times the price of silver, silver would sell at $44.44, a 150% increase.

That is exciting to me!

Inflation: Higher And Higher We Go

Economics / Inflation
Jul 08, 2014 – 10:48 AM GMT
By: Darryl_R_Schoon

Economics
In the end game, truth is found only at the margins

In Time of the Vulture: How to Survive the Crisis and Prosper in the Process(2007, 2012 3rd edition), I wrote about inflation and its root cause:

In a credit-money system, over time the constant infusion of increasing amounts of credit will inevitably lead to higher and higher rates of inflation. Because common knowledge of this fact is not in the best interests of those benefiting from the system, it is hidden away. And in the US, hiding the real rate of inflation is done the old-fashioned way, by lying about it.

Prior to the 1990s, the cost of a basket of standard goods and services was compiled. This was called the consumer price index, the CPI, and any rate of increase was considered to be the actual rate of inflation. However, in the early 1990s, this began to change.

Perhaps the old method of tracking inflation seemed outdated or quaint, much like the Geneva Accords [which outlawed torture], to Alan Greenspan and Michael Boskin, the chief economist under President Bush Sr., and a newer way of calculating the CPI was needed.

What was needed was a way that would show a slower rate of increase rather than the actual rate, a way that would save the US government money by lowering social security payments and Medicare benefits tied to the CPI, a way that would convey to global investors that all was well in America, that inflation was under control.

The government keeps changing the rules

Changing the way inflation is calculated

Irrespective of what the newly reconstituted CPI says about inflation, its effects cannot be hidden. Remember Motel 6? A low cost motel chain started in Santa Barbara, California in 1962 whose advertised price was a part of its name, $6.00 per night for accommodations.

I recently checked the prices Motel 6 charges, forty-four years later. The current room rates of Motel 6 at three different locations in Santa Barbara are:

1962 2006

Motel 6 location #1 $6.00 $105.99 an increase of 1,767 %

Motel 6 location #2 $6.00 $82.99 an increase of 1,383 %

Motel 6 location #3 $6.00 $61.99 an increase of 1,033 %

Home prices are also higher as advertised in Morris County New Jersey.

1966 2006

Three bedroom home $15,900.00 $399,900.00 an increase of 2,515 %

Four bedroom home $19,000.00 $624,900.00 an increase of 3,289 %

Marijuana also shows a similar increase in price since the 1960s.

1966 2006

One lid of pot $10.00 $250.00 an increase of 2,500 %

The cost of attending college at the University of Minnesota also rose.

1968 2004

Cost per unit $8.25 $183.00 an increase of 2,218 %

THE DIFFERENCE IN PRICES

BETWEEN THEN AND NOW

IS DUE TO INFLATION

INFLATION IS THE INCREASING COST

OF GOODS AND SERVICES CAUSED

BY THE CONSTANTLY DECLINING

VALUE OF PAPER MONEY OVER TIME

THE MORE MONEY YOU PRINT

THE LESS IT’S WORTH

ECONOMICS – SHILL OR SCIENCE

Gold/Oil Ratio Redux

I continue to monitor the Gold/Oil ratio (GOR). The last time I wrote about it was December, 2008. At that time Gold closed that day at $837 and Oil closed at $42.36. That is a GOR of 19.75.

Here’s the chart at that time:

Gold/Oil Ratio chart

20-Year History of GOR

Notice there were two peaks, a three step drop, a double bottom and then a BIG rally. We are experiencing the same thing again.

Gold/Oil Ratio from 2011

Gold/Oil Ratio from 2011

We don’t see the first peak in 2011, then we have a three step drop, a double bottom and then… I think we may be setting up for another rally in Gold (and Silver). Oil is now at $106, Gold is $1,317. At a GOR of 20, assuming Oil stays the same, Gold could be trading at $2,120. With all the chaos in the world, suppose Oil goes to $150. Gold could then be $3,000. Silver is currently $21. At $2,120 Gold Silver could be $141; At $3,000, Silver could be $200.

No guarantees, of course.

When Real Interest Rates Fall, Gold Rises

Mike Burnick writing for Money and Markets has this informative piece:

Real Yields Sink

Historically, real interest rates (long term bond yields minus the inflation rate) have always had a very close, inverse correlation with the price of gold. In fact, it’s the single most predictive factor for gold prices.

When real rates fall, gold inevitably rises, and vice versa. As you can see in the chart below, real interest rates declined steadily after the financial crisis and Great Recession in 2008, and gold rose every step of the way.


Click for larger version

But as you can see above, real yields began rising again in 2012, which continued last year. This corresponds almost perfectly with a sharp decline in gold prices, but recently real rates stopped rising and are now rolling over again, as you can see at the far right.

While interest rates around the world are declining steadily this year, inflation is beginning to edge higher.

This is pushing real (inflation adjusted) interest rates down again … which is precisely when gold shines!

Forget the Consumer Price Index. We all know this flawed gauge of inflation is way behind the curve in measuring the true cost of living and it’s a backwards-looking indicator. Instead, focus on leading indicators of future inflation pressure: Higher commodity prices, rising wages, higher rental rates and soaring health-care and education costs … these are all pointing to higher inflation down the road.


Gold Forecast – This Is Going To Be Exciting

Gold Forecast: During the past year there has been very little talk about gold, silver or gold stocks in the media. Yet the year before it was all the media could talk about and they even had the price of gold streaming live all day in the corner of the tv monitor.

I am always amazed how the masses and media can be so off in their timing of the stock market and commodities in general. For example when Greece was having issues in 2012 and everyone was avoiding investments in that country like it was the plague. Looking back now, Greece is up huge and only recently investors are confident enough to put money into the Greek stock market again.

But the truth is that big move has already happend, and the US and global markets are in rotation (changing trends). Money is slowly shifting from what has been hot during the past year or two, to new investments which have a lot more room to rise in value. And this is leads us back to my gold forecast.

If you are at all familiar with Stan Weinstein’s work, then you understand the four market stages. If not, you can learn these four stages on my Stan Weinstein page. Through stage analysis we can predict the type of price action we should expected and have a rough idea just how long a move (new trend) is likely to last. It is important to know that Stan Weinstein’s stage analysis works on any time frame from a one minute chart to a monthly chart. If you do not know this then you are trading almost blind without a doubt.

Current stage analysis looks as though the US stock market may be starting to form a stage three top. There are several indicators and market behaviors which are screaming, telling us to trade with caution to the long side. But the masses do not see this or hear what is unfolding in front of their very own eyes, and that I fine. It actually reminds me of a funny old movie called “hear no evil, see no evil”.

In short, the market is showing some signs of distribution selling in stocks, and the once market leaders are now getting completely crushed with heavy selling volume like the biotech stocks, social media stocks and other momentum stocks and this is bad.

Gold on the other had has been forming a stage one basing pattern. This provides a very bullish long term gold forecast that investors could ride for several years.

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Q: Where Will Investment Capital Go During The Next Bear Market In stocks?

A: One of the places will be precious metals. Click here for my gold forecast which shows the main reason why

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Gold Forecast Coles Notes:

1. The US dollar index has setup a massive stage 3 topping pattern on the weekly chart. A falling dollar will send the price of gold higher naturally.

2. Bullish gold forecasts by the media have dropped substantially, meaning everyone is bearish on gold.

3. Gold stocks are already showing signs of massive accumulation. I always use the price and volume action of gold stocks to help create and time my gold forecasts which it starting to look bullish.

Gold Forecast Conclusion:

Gold market traders should understand that precious metals in general are still months away from breaking out to the upside and starting a new bull market. Do not be in a rush to buy gold or gold stocks yet. There will be plenty of time folks.

Get My Daily Video Gold Forecast & Gold Trading Alerts at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Sincerely,

Chris Vermeulen
Founder of Technical Traders Ltd. – Partnership Program

Gold Forecast & How To Momentum Trade Gold Stocks

Back on April 9th Chris Vermeulen posted a short tutorial on how to momentum trade gold along with my short term gold forecast.

Today I wanted to do a follow up video for my gold market traders for three reasons:

1. I had lots of great feedback from traders taking advantage of what I showed to profit in the past week.

2. To show you how and why this strategy works better with gold stocks and silver stocks.

3. To provide my short term gold forecast so you are on the right side of the market for next week.

4. Also you should see my major long term Gold Forecast

Get My Gold Forecast & Gold Trade Alerts: www.TheGoldAndOilGuy.com

Chris Vermeulen

Sincerely,

Chris Vermeulen
Founder of Technical Traders Ltd. – Partnership Program

100 Years of the Federal Reserve


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