Thursday, March 30, 2017

Is 2012 the Year of the Golden Dragon?

January 31, 2012 by · Leave a Comment 

By Eric McWhinnie, Wall St. Cheat Sheet

Earlier this month, markets learned that China’s gold imports from Hong Kong reached a record high in November.  The Hong Kong government reported that Mainland China purchased 102,779 kilograms of gold from Hong Kong, a 20 percent increase from October and an all-time high.  It was the fifth consecutive month of record gold purchases from Hong Kong.  Over the weekend, new data was released that showed strong gold demand in China has continued into the new year.

While 2012 is known as the Year of the Dragon in China, it could very well be the year of gold for investors.  According to data released by the Ministry of Commerce, sales of gold, silver and jewelry increased 57.6 percent at Caibai during China’s week-long Lunar New Year holiday.  Caibai is one of Beijing’s most popular gold retailers.  Guan Qiang, assistant manager at Caibai explained, “Long treasured by Chinese, gold is no longer owned only by a privileged few, but has become a new investment channel open to all.”  More Chinese customers are purchasing gold as a way to give a gift that will also offer protection from inflation and preserve wealth, as opposed to plastic trinkets that decrease in value.

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Xinhua, the official press agency of the government of the People’s Republic of China reports, “During the week-long holiday, which lasted from January 22 to 28, the sales volume in Caibai and Guohua, another of Beijing’s top gold retailers, reached about 600 million yuan ($95.28 million).”  According to the Beijing Municipal Commission of Commerce, the sales number represents a near 50 percent increase from last year’s Spring Festival.  Much like the United States, negative real interest rates and a troubled property market limits investment options in China.

Property consultant Shanghai UWin Real Estate Information Services Co. released an update that showed Shanghai new home prices plummeted almost 41 percent in the week ended January 29.  Sales during the Chinese Lunar New Year declined to their lowest level since 2006, as volume was 36 percent of the 7-year average for Chinese holidays.  The recent data points to a clear indication that the appetite for gold in China is increasing as other investments falter.  The PBOC Zhang Jianhua recently said, “No asset is safe now.  The only choice to hedge risks is to hold hard currency-gold.”

Investor Insight: With Friends Like These Does Gold Need an Official QE3?

Although the Lunar New Year holiday is nearing its end, gold is likely to remain in heavy demand.  Tom Kendall, a precious metal analyst at Credit Suisse in London, believes Chinese gold imports could hit nearly 500 tons for 2011, up from only 245 tons in 2010.  Over the next couple years, many expect China to surpass India as the world’s top gold consumer.  According to the World Gold Council, strong demand for gold investments and jewelry will drive China’s total gold demand to 750 tons in 2011.  Marcus Grubb, Managing Director of Investment explained, “Increasing levels of inflation, the U.S. credit rating downgrade, a worsening eurozone sovereign debt crisis and the lackluster performance of many assets drove investors to increase holdings in gold in order to protect their wealth.”

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To contact the reporter on this story: Eric McWhinnie at

To contact the editor responsible for this story: Damien Hoffman at

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Junior Gold Stocks Rebound from Lows

January 31, 2012 by · Leave a Comment 

By Jordan Roy-Byrne, CMT, The Daily Gold 

The junior sector had a very difficult year in 2011 but has led the recent recovery (at least statistically) in the precious metals sector. Two of our favorite exchange traded funds, GDXJ and are up 30% and 25% respectively. That exceeds GDX (large caps) which has rebounded 15%. These are significant gains but barely put a dent in the low valuations for the sector. Ratio analysis shows us how undervalued the smaller gold stocks are yet an examination of history shows this is not out of the ordinary at this point in a bull market.
First lets take a technical look at the juniors. We show and GDXJ in the chart below. is a Canadian junior ETF which is comprised of entirely gold companies while three of the top ten companies in GDXJ are silver companies. ZJG is nearing resistance at 20-21 while GDXJ is nearing resistance at 31-33. More importantly, both markets have broken out of their downtrends against Gold.
Next we show a plot of our junior gold index (call it JGI), GLD and a ratio of JGI against GLD. Note that the ratio, which peaked at 0.7 in 2007, is currently at 0.4. JGI is presently at 66. Should Gold eventually break to new highs and JGI/GLD rise back to 0.7, then junior gold stocks would gain more than 100%. With large producers reporting record cash flow and profits, it is only a matter of time before all gold equities reach higher valuations against Gold itself.
Our Junior Gold index as well as the other junior indices do not include the “true junior” companies which are of the microcap variety. The CDNX is basically an index for these types of companies. Most but not all of the companies within the CDNX are gold and silver related. Thus, in the chart below we decided to compare the CDNX to the CCI (continuous commodity index). The CCI is somewhat close to an all-time high while the ratio of the junior companies to the CCI is close to multi-year lows. With commodities not far off all time highs, one would expect the junior companies to be trading at higher levels.

Lately we’ve been writing about how gold stocks are faring in comparison to previous equity bull markets. The comparison argues that gold stocks should fare well this year and well into 2013. Even though this bull market is in its 12th year, it remains a few years away from the start of a bubble. In a bubble, valuations expand far beyond fundamentals and it continues for several years. In order for this to happen, valuations must be low prior to the start of the bubble.

From early 1992 to 1995 the price to earnings ratio (PE) on the Nasdaq fell from 50 down to 20. Over the next two years, the PE ratio climbed from 20 back to 50. Then in the second half of 1997, the PE ratio surged past 50 and never looked back.

From 1973 to 1983, the PE on the Nikkei (Japan) ranged from mostly 15 to 23. After 1983, the PE ratio surged to new highs and eventually peaked at 70.

It is clear that prior to a market bubble, valuations are compelling. Not stretched or fair, but compelling. After all, a bubble needs time to develop and then have its final blowoff stage. Prior to the start, valuations begin to move from the low side to the high side. Then as the bubble really gets going valuations break to new records and surge to extremes.

Months ago we wrote about how the PE for large cap gold stocks was near a 10 year low. Now we see that the speculative side of the precious metals sector, (the juniors), is trading at near basement valuations. This is 12 years into a bull market. Not five or eight. It will take time for valuations of precious metals companies to move back to the high end of the range. Companies that grow their business and add value could perform fantastically thanks to a likely increase in the valuation of the sector. If you’d like professional guidance in riding this bull market and uncovering the winning companies then learn about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT

Why Gold Is Shining Bright & What the Fed is Doing

January 31, 2012 by · Leave a Comment 

By Chris Vermeulen, TheGoldAndOilGuy

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

~ Thomas Jefferson ~

Well here we are, caught between resistance in the S&P 500 around the 1,330 area and support around the 1,300 price level. My last two articles have discussed why I was expecting a top in the coming days and weeks ahead, but prices just continued to work higher.

One of the things that I pride myself in as a person who trades and writes about financial markets in public is that I am always honest. If I blow a call I fess up and admit it. When I have made mistakes in the past, I always try to learn something new from them and I discuss losing trades publicly with readers and members of my service.

This time is different. I honestly do not know if I am going to be right or wrong. The price action in the S&P 500 Thursday was certainly bearish short term, but a back test of 1,300 or possibly even 1,280 could give rise to a Phoenix. Granted, the Phoenix is nothing more than Ben Bernanke’s pet, but that is a topic for a different time.

I have scanned through my list of indicators which discuss sentiment based on momentum, put/call ratio, the advance/decline line, Bullish Percent Indicators, and several ratio based indicators and they are all SCREAMING that a top is near. The interesting thing about the previous statement is that it would have been true a week ago and mostly true two weeks ago, yet prices have continued to climb.

The daily chart of the S&P 500 Index demonstrates the recent price action that has continued to climb the “Wall of Worry” for several weeks:

S&P 500 Daily Chart


The culmination of the massive run higher for the S&P 500 was the dovish comments coming from Ben Bernanke during Wednesday’s press release and press conference.

The U.S. & European Central Banks are seemingly in a perpetual race to debase their underlying fiat currencies. The race will not end well. In fact, this type of situation smells like a Ponzi scheme where Ben Bernanke and Mario Draghi (ECB President) are the wizards behind the curtains. Their loose monetary policies and forced reflation are synthetic drugs that juice risk assets higher and ultimately Mr. Market will have his vengeance in due time.

At this point, it seems like Ben Bernanke will do anything to juice equity prices higher. I think his hope is that they will be able to artificially keep the game going until the recovery is on a more sound footing. However, when the entire recovery is predicated on cheap money and liquidity and is not supported by organic economic growth it just prolongs the inevitable disaster.

As an example, the daily chart of the Dow Jones Industrial Average is shown below. I would point out that that Dow came within 35 points (0.27%) from testing the 2011 highs. Furthermore, the Thursday high for the Dow was only 1,356 points (10.55%) from reaching the all-time 2007 October high.

Dow Jones Industrial Average Daily Chart


I have argued for quite some time that the economy and the stock market are two different things. If Bernanke and his cronies succeed in reflating the financial markets and the Dow reaches its October 2007 high in the near term, more retail investors will regard equity markets as being rigged.

Who could blame them for viewing financial markets as a giant rigged casino that stands to win while they continue to lose their hard earned capital? We all recognize that the current economy is nowhere near as strong as it was in 2007. But alas, the regular retail investor does not recognize that the stock market and the economy do not portray the same meaning.

One specific underlying catalyst that has gone largely unnoticed by most of the financial media during this sharp run higher in stocks is the total lack of volume associated with the march higher. The NYSE volume over the past 2 months has been putrid when compared to historical norms.

As a trader, I am forced to take risk through a variety of trade structures. However, the idea that a crash could be coming seems hard pressed as long as Big Bad Ben is at the wheel.

If the Russell 2000 drops 10%, I am convinced that Ben will be out making announcements that the Fed stands ready to intervene with all of the supposed tools they have at their disposal. Let’s be honest here, they really have one tool comprised of 3 separate functions which are all a mechanism to increase liquidity in the overall system. To express this liquidity, the following chart from the Federal Reserve shows the M2 money supply levels:

Current M2 Money Supply


The 3 functions are the printing of currency, the monetization of U.S. Treasury debt (QE, QE2, QE2.5, Operation Twist), and exceptionally low interest rates (ZIRP) near 0 for an “extended period of time (2014).” Since monetary easing is all that the Federal Reserve has done since the financial crisis began, it begs to reason that the Federal Reserve has no other solutions or tools available. If they did, they seemingly would have used them by now.

The first bubble they created due to loose monetary policy was the massive bubble in oil in 2008. Fast forward to the present, and they are currently supporting another bubble in U.S. Treasury obligations. The bubble that they will create in the future when the game finally ends will be in precious metals. The precious metals bubble will be building while the Federal Reserve and the U.S. Treasury attempt to keep the Treasury Bond bubble from bursting.

At this point in time, if we continue down this path stocks will not protect investors adequately from inflation should the Treasury bubble burst. I would argue that the central planning and monetary policy we have seen the past few years continues in the United States and Europe that gold, silver, and other precious metals are likely to begin their own bubble of potentially epic proportions.

As the weekly chart of gold futures illustrates below, gold has recently pulled back sharply and has broken out. I will likely be looking for any pullbacks in gold as buying opportunities as long as support holds.

Gold Weekly Chart


In closing, for longer term investors the stock market might have some serious short term juice as cheap money and artificially low interest rates should juice returns. However, eventually equities will start to underperform. At that point, gold will be in the final stages of its bubble and the term parabolic could likely be applied.

If central banks around the world continue to print money there are only a few places to hide. Precious metals and other commodities like oil will vastly outperform stocks in the long run if the Dollar continues to slide. The real question we should be asking is who will win the race to debase, Draghi or Bernanke?

By: Chris VermeulenFree Weekly ETF Reports & Analysis:
Co-Author: JW JonesFree Weekly Options Reports & Analysis:

Exposing Silver Mythology, Part III

January 31, 2012 by · Leave a Comment 

By Jeff Nielson, Bullion Bulls Canada

In Parts I and II, we were presented with a shocking perspective on the silver market. The principal record-keepers for the silver sector, and the largest single regulator of the silver market both display not only an abysmal level of ignorance concerning the silver market, but the seeming incapacity to even understand basic arithmetic operations.

The result of this display of ineptitude is that the mainstream data and analysis which reaches the market from these official and quasi-official sources has absolutely no basis in reality. It is precisely this sort of vacuous nonsense which is relied upon by mainstream silver bears when they spew their negative drivel.

And one cannot say the words “negative drivel” in connection with precious metals without immediately thinking of Kitco’s Jon Nadler – the man who has gone through a 10+ year bull market for gold without ever once stating that today was a good day to buy it. Apparently his banker biases simply run too deep. Speaking of Nadler’s biases, they were clearly on display in a recent hatchet-job on silver by the Globe & Mail which was so shoddy that it didn’t even rank as good fiction. First the context:

Some market watchers are warning that silver faces a vicious bear market that could eventually take the price to the mid-teens…

Well, we know what the silver-hater who wrote this piece thinks about the silver market. What we don’t know is what planet he is writing about, because it obviously has nothing to do with the planet Earth. The near-total depletion of inventories, and the imminent default-event which that portends, suggest nothing other than that the upward move in the price of silver has just begun.

What clearly identifies this as propaganda, and not even an attempt at journalism is the following passage:

the problem with the bullish case for silver, at least over the near term, is the threat of growing supplies.

A key industry figure highlights the problem. According to the trade association the Silver Institute, the average cash costs at silver mines…worked out to a mere $5.27 an ounce in 2010…

Note that this sleazy shill talks about “the threat of growing supplies” without being able to muster even the tiniest kernel of data about actual growing supplies. The implication that the current profitability of silver mining will thus flood the market with silver “over the near term” is the precise opposite of reality.

1) Despite a ten-fold increase in the price of silver off of its 600-year low (spread over a 10+ year period) we have seen no more than a 1% to 2% annual increase in silver production throughout that period. This means there is absolutely zero empirical evidence to support the fraudulent assertion of this writer.

2) The approximate time to bring a new mine into production typically falls into the range of 5 – 10 years. Thus the profitability of silver mining today couldn’t possibly have a significant impact on silver production until (at least) the middle of this decade. This means that the ridiculous assertion of a surge in supply “over the near term” isn’t even theoretically possible.

More articles from Bullion Bulls Canada….

More about the Vancouver conference from Thom Calandra

January 31, 2012 by · Leave a Comment 


6:45p ET Monday, January 30, 2012

Dear Friend of GATA and Gold:

Financial writer and mining stock promoter Thom Calandra tonight writes again about the just-concluded Vancouver Resource Investment Conference, which he nicknames “The Joe Show” after the CEO of conference organizer Cambridge House, Joe Martin:…

Calandra will speak at the next Cambridge House conference, the California Resource Conference, to be held Saturday and Sunday, February 11 and 12, along with Sprott Asset Management’s chief investment strategist, John Embry, GATA Chairman Bill Murphy, and your secretary/treasurer. Information about the California conference is below.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Turk expects imminent launch for monetary metals

January 31, 2012 by · Leave a Comment 


4:25p ET Monday, January 30, 2012

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk long has been bullish but in an interview with King World News today he sounds like he’s anticipating imminent launch for the monetary metals as Western economies stumble and central banks destroy currencies. An excerpt from the interview is posted at the King World News blog here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Sprott, Turk, Morgan, and Phillips speak at SilverSeek’s online conference Tuesday

January 31, 2012 by · Leave a Comment 


3:30p ET Monday, January 30, 2012

Dear Friend of GATA and Gold (and Silver):

GATA favorites Eric Sprott of Sprott Asset Management, James Turk of GoldMoney, David Morgan of, and Julian Phillips of Gold Forecaster will speak at SilverSeek’s Virtual Silver Investment Conference, to be held via the Internet starting at 10 a.m. ET tomorrow, Tuesday, January 31. Admission is free for those registering in advance, and registration is open now. To learn more or sign up, please visit the conference site at SilverSeek here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Von Greyerz sees gold ready for big move up

January 31, 2012 by · Leave a Comment 


2:30p ET Monday, January 30, 2012

Dear Friend of GATA and Gold (and Silver):

Fund manager Egon von Greyerz today tells King World News that he expects much higher gold and silver prices and then even hyperinflation to result from the vast expansion of the balance sheets of central banks around the world. An excerpt from the interview is headlined “Von Greyerz: Gold Market Positioned for Massive Upside Move” and it’s posted at the King World News blog here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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Reuters picks up on Warsh’s remarks at Stanford

January 31, 2012 by · Leave a Comment 


Fed ‘Activism’ Harms U.S. Growth, Ex-Fed Governor Warsh Says

By Ann Saphir
Friday, January 27, 2012…

The Federal Reserve’s latest efforts to bolster the recovery with unprecedented policy tools will hurt the U.S. economy in the long run, a former member of Fed Chairman Ben Bernanke’s inner circle suggested on Thursday.

In his first public comments since stepping down as a Fed governor last March, Kevin Warsh said there is a place for exceptionally accommodative monetary policy to provide “important transitional support for an economy.”

“But recent policy activism — measures that go beyond a central bank’s capacity or traditional remit — threatens to forestall recovery and harms long-term growth,” Warsh said, according to excerpts of remarks prepared for delivery to the Stanford Institute for Economic Policy Research.

Warsh was the only member of Bernanke’s inner circle with close ties to Republican lawmakers. An inflation hawk, Warsh nevertheless voted in favor of the Fed’s groundbreaking moves to ease monetary policy after the financial crisis, including two bond-buying programs that swelled the Fed’s balance sheet to unprecedented levels.

But Warsh apparently grew increasingly uncomfortable with the dovish stance of the central bank. Shortly after the Fed launched its second round of so-called quantitative easing, in November 2010, Warsh publicly expressed doubt over its effectiveness.

He announced his resignation the following February, and is currently a visiting fellow at Stanford’s Hoover Institution.

Since Warsh’s departure, the Fed has embarked on still more easing, signaling last August its intent to keep rates ultra-low through at least mid-2013. On Thursday it extended that low-rate vow through late 2014.

The Fed also began publishing policymakers’ forecasts for short-term interest rates and adopted an explicit inflation target for the first time, setting the target at 2 percent. Bernanke said both moves would clarify the Fed’s policy decisions, making them more effective.

Bernanke also opened the door wide to a third round of quantitative easing, saying continued low inflation and high unemployment would create a case for it.

On Thursday, Warsh took aim at Bernanke’s latest communications push and his recent foray into housing policy.

“Central bank transparency is good, but transparency that delineates future policy breeds market complacency,” Warsh said. “It threatens to undermine the wisdom of crowds and the essential interchange with financial markets.”

Warsh also was critical of leaning on government-run mortgage finance firms to pull the country from its housing slump, a policy idea the Fed floated in early January in an unsolicited paper to top lawmakers outlining a number of ways to revive the sector.

The paper noted that exposing the firms to losses could be worthwhile if such actions could spur a vigorous recovery in housing, the bane of the current sluggish recovery.

Warsh disagreed.

“The government-sponsored housing entities remain sources of vulnerability to the U.S. economy, and repeated ad-hoc attempts to push Fannie Mae and Freddie Mac to take greater risks at taxpayer expense is deeply counterproductive,” Warsh said, according to the excerpts.

* * *

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2012 Chinese Panda Silver Coins Released

January 31, 2012 by · Leave a Comment 

China Gold Coin Incorporation and the Shenzhen Guobao Mint — both branches of the People’s Bank of China — have released three commemorative 2012 Chinese Panda Silver Coins. The coins are each composed of .999 fine silver and have reverse designs featuring a mother panda and her cub. The three coins are all legal tender [...]
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  3. Chinese Outlaws of the Marsh Silver Commemorative Coins

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