Gold & Silver Digest: 2/6/13

Adam Taggart
By Adam Taggart on Wed, Feb 6, 2013 - 6:39pm

The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.

If you have articles to submit for the next digest, please email them to me by clicking here.

2/6/13 6:17 PM EST US close metals price quotes from Finviz

Reuters: Gold quietly higher; players eye ECB meeting, equities

NEW YORK, Feb 6 (Reuters) - Gold edged up in light volume on Wednesday, trading in a narrow range as investors focused on an upcoming European Central Bank meeting and trends in equities prices against the backdrop of a better economic outlook.

Platinum rose 1.5 percent on concerns over the supply outlook in the world's top-producing country, South Africa, and as a brighter global growth outlook boosted investor appetite for the metal which is largely used as an autocatalyst.

321Gold: The ever-changing yardstick

To illustrate the difficulty of measuring performance in terms of the US dollar, today we are presenting three inflation-adjusted (IA) gold charts. Our method of inflation adjustment was outlined in the December-2010 article posted here.

First, we present the long-term monthly chart that we normally use to show gold's 'real' performance. This chart puts historical prices into current (in this case, December-2012) dollar terms, which means that prices from past times are adjusted upward to reflect the estimated decline in the dollar's purchasing power from the past time to the present. For example, we calculate that the January-1980 gold price of $722 is the equivalent of around $3100 in current dollar terms. This means that by our calculations it takes more than four dollars today to buy what one dollar would have bought in January-1980, or, to put it another way, the US$ has lost more than 75% of its purchasing power since January of 1980. Politicization, Currencies & Gold: The Lost Battle of Central Banks

Central banks have many losing battles ahead. 

The world finds itself immersed in the depths of an economic crisis.  This crisis however, is unlike any other experienced in recent history.  What is at stake is the very foundation of our monetary system, the currency.

Today's unbacked fiat currency experiment is at the very root of an emerging global monetary problem.  While the talk of "recovery" in recent months now populates headlines, the desperate actions of politicians and central bankers show the contrary.

CNBC: Pro: Levels to Watch on Gold

It's probably the most frustrating trade of this young year: gold.

Between the Federal Reserve, the Bank of Japan and Bank of England in all-out race to debase their respective currencies, you would think gold would be the trade this year. I certainly did.

But alas, that has not been the case. So what to do now?

Arabian Money: Credit supernova to drive investors into hard assets in debt-free nations and precious metals says Bill Gross

Bond King Bill Gross of Pimco is telling investors to turn to gold and other commodities as well as hard assets in countries without huge central bank debt loads like Australia, Brazil, Canada and Mexico. It is a pretty clear message about the fragility of equities and bonds in current economic conditions.

In his February newsltter Mr. Gross says: ‘When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets… Our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic…

BusinessWeek: China Gold Imports From Hong Kong Climb to Record on Wealth

Gold imports into mainland China from Hong Kong surged 94 percent to an all-time high last year as rising incomes in the world’s second-largest economy underpinned increased demand and helped the metal to post a 12th annual gain.

Mainland China imported 834,502 kilograms (834.5 metric tons), including scrap and coins, compared with about 431,215 kilograms in 2011, according to Bloomberg calculations based on data from Hong Kong’s Census and Statistics Department. Imports in December rose to a monthly record of 114,405 kilograms, according to data from the department yesterday.

Gold Seek: Print those blues away - why gold is under accumulation globally

"Lenin was certainly right, there is no more positive, or subtler, no surer means of overturning the existing basis of society than to debauch the currency...The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million is able to diagnose." -- John Maynard Keynes

Neither Keynes nor Lenin would have envisioned currency debasement on a global basis yet that is exactly where we find ourselves today. As mentioned in last month's The Gold Owners Guide to 2013, it is as if John Law had been reincarnated simultaneously in every major nation state in the world. At this stage, it is difficult to gauge the potential effects though, as you are about to read, there is plenty of speculation. Though the price of gold remained range bound this past January, global demand for coins and bullion has been anything but restrained. The U.S. Mint reports the highest monthly sales ever for the Silver Eagle in January and the highest monthly total for the Gold Eagle in over two years. Similarly ETF gold holdings are up about 12% since last August reflecting strong interest among financial institutions and funds. Though Keynes was right about currency debasement, he missed the mark on the public's ability to identify the problem. Apparently, a good many understand the problem all too well.

Forbes: FOCUS: Platinum Climbs To 17-Month High; Market Remains Focused On Supply Worries

Platinum prices surged to their highest level in nearly 17 months Wednesday as South African supply worries continue to underpin prices.

The rise appears to be the result of traders continuing to factor in ongoing supply concerns rather than any fresh breaking news, said Jim Steel, precious-metals analyst with HSBC.

“It’s a continuation of the bullish conditions,” he said. “We’re seeing new entrants coming into the market predicated on the recent developments.”

Minyanville: Is Silver Price Manipulated? Maybe, but That's the Wrong Question

Every now and then my firm receives questions about JPMorgan (NYSE:JPM) and the allegations that the company suppresses the price of silver. We recently replied to a question about this issue, and in that answer we wrote the following:

Despite a (…) lawsuit accusing JPMorgan and HSBC (NYSE:HBC) of jointly controlling "over 85 percent of commercial net short positions," a position inherited mainly from the liquidated Bear Stearns businessicon1.png, the CFTC seems inclined to  drop any case it has against JPMorgan, making this the third case in a row that has not found proof of wrongdoing.

This actually happened last year, and the CFTC didn’t find any substantial evidence of foul play on the part of JPMorgan after leaving out HSBC from the case.

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1 Comment

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
sorry I'm late to the party

A couple of thoughts about this:

I'm a retired professor.  One of the things I used to do in class (sociology), was to talk about money, paper money, as intrinsically worthless.  I used to point out that "it's just paper" and we collectively give it all the meaning it has.  We learn this through our socialization and we keep it all going "in the social matrix" of our daily lives.  Many of the people in the video really look like my typical students of days gone by.  They are very likely emersed in pop culture/consumerism and all that means.    Well, one idea that used to come up regularly in class  was the notion that "yes, but our money is backed by gold", which I'm sure everyone on this site knows is total nonsense; BUT, the fact that this idea regularly came from the students points to an enduring, underlying belief in Gold (and Silver too) as value. I think this underlying collective belief in gold will emerge when  we reach the crtical tipping point in regard to paper money. 

I'm not particualarly a Gold Bug in the sense that I think "if we just return to a Gold standard" everything will be fine.  Gold as currency brings a whole set of alternative problems and challenges.  What I do think is this:  As paper erodes, PMs (and land if your really lucky) are simply the default.  As my students  showed, this idea runs very very deep in the human psyche, or at least the culture. Gold may have no more intrinsic value than paper, save it's pretty and heavy, but the idea of its intrinsic valuable runs very very deep. 

This is one of the reasons I have a lot of faith in PMs over the long haul: "But, Dr. Bob our money's backed by Gold - right".  "No little Emily it's not backed by shit, it's paper". 

Pop culture seems to greatly reinforce this; after all, what do the Hollywood pirates want to get?  There are many examples.  Goldfinger (This one dates me), etc etc

I wonder if you did the same experiement in regard to the price of a barrel of West Texas Intermdiate (Brent is maybe a better choice), how many people would know the spot price within 25%.  Yet, their lives are actually maintained in every moment, in every way, on that one.

I think the interviewees would probably know the current price of gasoline at the pump.  That's viewing the world from inside the matrix, so they'd know that one.  But not all of the structures and prices that support it.

Also, just thinking; I wonder if you were to perform the same little street experiment on  middle class/emerging middle class people in say, India (with rupees or whatever), if you'd get different results.  I'd bet on that one too.


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