Gold & Silver Digest: 2/6/13
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
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.
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.
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.
It's probably the most frustrating trade of this young year: gold.
But alas, that has not been the case. So what to do now?
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…
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.
"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.
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.”
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 , 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.
Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.