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Commodity Cycle Upturn Lift Metals Prices

Commodity Cycle Upturn Lift Metals Prices

By Money Metals News Service

Safe-haven demand for physical precious metals came in soft through the first half of the year as a rising stock market reinforced investor optimism toward the economy.

U.S. stocks are expensive by just about every valuation measure you can think of – price/earnings, price/sales, dividend yield, total market capitalization as a percentage of GDP, etc. Even Fed chair Janet Yellen remarked recently that equity valuations appeared “rich.”

The inverse of the extreme overvaluation in equities is the extreme relative cheapness of hard assets. Commodity indexes entered the summer at generational lows in real terms.

Equities Expensive, Commodities Cheap? Chart

The perception has been that the world is awash in plentiful, cheap oil. Just a few years ago, with oil over $100 per barrel, the headlines blared warnings about peak oil and supply shortages. At major cyclical turning points in commodity markets, the news tends to reinforce whatever trends brought about major highs or lows in prices.

What investors need to keep in mind is that commodity markets are always cyclical in nature. No matter how bullish or bearish the outlook happens to appear at any given time, prices will eventually turn and trend in the opposite direction.

Oil and agricultural commodities perked up as summer officially began. Whether it’s the start of a major cyclical bull market remains to be seen. But the supply and demand fundamentals are setting up bullishly for commodities markets.

Lower Prices Stunt Production & New Shortages Push Up Prices

The cycle for any commodity follows the same basic pattern. When prices are low, production falls. As new supplies diminish, the market tightens and prices move higher. The higher prices incentivize producers to invest in production capacity and increase output.

Eventually, the market becomes oversupplied, prices fall, and the cycle starts all over again.

As a resource investor, it’s important to have some idea of whether you’re investing in a commodity at a time in the cycle when it’s favorable to do so. Gold, for example, tends to be less correlated to swings in the economy than oil and industrial commodities. It responds more to investor fear and flight from paper asset markets.

Gold prices crashed from $850/oz in 1980 to $300/oz in 1982. It wasn’t until 2002 that gold crossed above the $300 level for the final time. The new gold bull market rose out of a 20-year base and reached a cyclical high of $1,900 in 2011. A four-year downturn followed, and since 2016 a new cyclical upturn appears to be taking shape.

Chart reading is always a tenuous undertaking, but when combined with supply and demand fundamentals it can help investors identify favorable times to be a buyer or seller. Right now it appears that gold, silver, oil, and other commodities are transitioning one by one into a period in the commodity cycle of diminishing supply.

In the case of crude oil, the major storyline in recent months has been a supply glut. North American shale production has swelled inventories in the U.S.

The longer-term supply outlook actually augers for shortfalls… and much higher prices.

Curde Oil

According to the International Energy Agency (IEA), new oil discoveries last year sunk to their lowest number in decades.

The IEA warns that in order to offset recent declines and meet rising global demand, the oil industry will need to develop 18 billion new barrels every year between 2017 and 2025.Oil’s recent price range in the low $40s to $50s per barrel doesn’t seem to be incentivizing the necessary new production capacity.

Higher energy costs would mean higher production costs for the gold and silver mining industry. Mines are already having to process more and more tons of earth to extract ounces of precious metals.

According to metals analyst Steve St. Angelo, “The global silver mining industry will continue to process more ore to produce the same or less silver in the future. While the cost of energy has declined over the past few years, falling ore grades will continue to put pressure on the silver mining industry going forward.”

The cycle appears to be in the early stages of turning bullish for commodity prices – making it a favorable time to be taking out long positions in hard assets. That doesn’t necessarily mean metals markets will immediately begin moving up in a big way.

Gold and silver still face potential headwinds from two sources: first, another Fed rate hike or two before year end; and second, a vowed gradual reduction of the central bank’s QE-bloated balance sheet, which could cause longer-term bond yields to go up.

Contrary to popular misconceptions, nominal increases in interest rates aren’t inherently negative for metals prices. More important is whether inflation, and expectations of future inflation rates, are rising or falling relative to interest rates. If oil prices break out of their trading range to the upside, that could help ignite inflationary fires.


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

Answering Questions: Bitcoin, Low Silver Premiums, and Pre-1933 Gold Coins

Answering Questions: Bitcoin, Low Silver Premiums, and Pre-1933 Gold Coins

By Money Metals News Service

Questions and Answers

One of the core tenets of our business is educating people who have never owned physical gold or silver. We introduce them to the metals markets and put the spotlight on dishonest money as the foundation for unrestrained government. We get lots of great questions and we like to publish our responses to the most common of them.

Reader Question: What is your take on Bitcoin?

Answer: We believe in honest money. Although flawed, Bitcoin represents a remarkable innovation on that front. That is why Money Metals was among the first bullion dealers to accept Bitcoin payments for precious metals.

If decentralized cryptocurrency proves to be beyond the ability of central bankers and bureaucrats to manipulate or control, it will be a meaningful step forward for personal liberty and a blow to corrupt governments, banks, and markets. It has that potential in common with gold, which imposed restraint on Wall Street and Washington DC right up until Richard Nixon slammed the gold window shut and removed the last bit of integrity from the fiat U.S. dollar.

While Bitcoin and bullion share the potential to work as alternative money, they are not substitutes for one another. The differences are quite important to consider.

The first distinction is that gold and silver rounds, coins, and bars are tangible assets that will never become worthless. Precious metals are beautiful and serve a useful purpose in goods ranging from jewelry to electronics. They have thousands of years of history serving as money and as a reliable store of value.

Bitcoin, on the other hand, is a very recent phenomenon and a purely digital asset. It may ultimately change the world, but it hasn’t yet stood the test of time. Bitcoin itself must still clear some hurdles.

We Accept Bitcoin

It needs to become far easier to acquire, safeguard, and use. There are many alternative cryptocurrencies and there is no guarantee Bitcoin will prove itself to be the best mousetrap and survive.

Some technological problems still need to be solved in order for Bitcoin to scale and serve as a replacement for existing monetary systems. It will need to weather regulatory attacks by bankers and bureaucrats seeking to protect their fiat monetary systems.

While Bitcoin itself has not yet been hacked, several exchanges holding bitcoin have been.

Lastly, it is important to note that physical bullion is truly “off the grid,” while Bitcoin depends upon the network. Metals don’t need electricity and an internet connection to work. The exact whereabouts of a gold coin cannot be tracked electronically and it will leave no digital fingerprints when used in a discreet transaction. This cannot be said for Bitcoin.

Q: Can I get paid in Bitcoins instead of dollars when selling you my gold and silver?

Money Metals will be adding a great new option for clients interested in transacting in bitcoin. Customers can already use their bitcoin to purchase our precious metals products. Soon they will be able to exchange bullion coins, rounds, and bars directly for bitcoin.

Exchanging metal for bitcoin or vice versa will be a quick and easy process. And it won’t have the hassle or limits people often encounter when buying or selling bitcoin with dollars.

Reader Question: I notice the premiums have fallen significantly on silver coins. What is the explanation for that?

Answer: Bullion has transitioned from a seller’s market to a buyer’s market in recent months. Mints, refiners, and wholesalers who had struggled to consistently keep up with demand for several years and responded by raising premiums are reversing course now that demand has fallen.

The election of Donald Trump and optimism over the President’s plans for reforms have temporarily impacted retail U.S. demand for gold and silver. Precious metals have also been underperforming other markets, including stocks, which diminishes safe-haven interest. We suspect buyer fatigue is also playing a role.

In our view, the fundamental reasons to own physical metal are unchanged. The future of the U.S. dollar remains dark. For those who share our view, now looks like the best time to buy silver coins in years.

Reader Question: I know Money Metals recommends staying away from collectibles. Does that mean I should steer clear of ALL pre-1933 gold coins?

Answer: No. The main thing it to ignore the song and dance of some rare coin dealer who wants you to pay a lot more for coins that have been graded as numismatics. Paying “collectible” premiums is a great way to immediately lose 30% or more on your investment. Learn more here.

Every year we sell thousands of circulated U.S. gold coins minted before 1933, and we sell them at premiums which are competitive with modern bullion coins. There is absolutely nothing wrong with buying some of this historic gold, provided you don’t pay any numismatic premium to do it. Make sure you know what the melt value of the precious metal any particular coin contains and don’t pay much more than that.


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

WORLD’S 2ND LARGEST SILVER MINE SHUT DOWN: Implications For Company & Market

WORLD’S 2ND LARGEST SILVER MINE SHUT DOWN: Implications For Company & Market

By Money Metals News Service

World's 2nd Largest Silver Mine Shut Down

The world’s second largest primary silver mine, Tahoe Resources Escobal Mine, was forced to shut down operations in Guatemala by a ruling from the country’s Supreme Court. This was due to a provisional decision by the Guatemalan Supreme court in respect of a request by CALAS, an anti-mining group, for an order to temporarily suspend the license to operate the Escobal Mine until there is a full hearing. (picture courtesy of Tahoe Resources)

While this story has been out for a few days, I believe there is a great deal of misinformation on the Mainstream and Alternative media about the current situation and future outcome of Tahoe’s flagship Escobal Mine. Some analysis suggests that this is just a small speed-bump for Tahoe, so when they are able to address disputed regulatory issues, production and profits will shortly return once again.

However, there also seems to be a another side to the story that could cause more problems for Tahoe with a much longer suspension time than the company is publicly stating. For example, the following was published in the article… Tahoe Resources forced to halt Escobal mine in Guatemala:

While Tahoe is preparing for a three-month mine suspension, Haywood analysts project no production from the mine for the remainder of 2017.

Here we can see that the company (Tahoe) is very optimistic that production at Escobal will start back in three months, while Haywood analysts forecast operations won’t likely resume this year. So, who should we believe, or which forecast is more correct? Before we get into the details, let’s first look at the impact of suspending the 2nd largest primary silver mine in the world on the market.

A Shutdown Of The Escobal Mine, Ranked #2 In The World, Would Remove 21 Million Oz Of Supply

According to the 2017 World Silver Survey, Tahoe Resources Escobal Mine ranked #2, behind Fresnillo PLC’s Saucito Mine in primary silver production in 2016. Here are the top five producing primary silver mines in 2016 (Moz – million ounces):

  1. Saucito (Mexico) = 21.9 Moz
  2. Escobal (Guatemala) = 21.2 Moz
  3. Dukat (Russia) = 19.8 Moz
  4. Cannington (Australia) = 18.2 Moz
  5. Uchucchacua (Peru) = 16.2 Moz

Furthermore, the data in the 2017 World Silver Survey reports that a total of 265 million oz (Moz) of primary silver was produced last year. Thus, the Escobal Mine represents 8% of total global primary silver mine supply. If Haywood Analysts are correct that production at Escobal may not resume in 2017, than the mine is likely to lose nearly half of the 20-21 Moz forecasted for 2017.

While this is not a great deal of silver compared to total world silver supply of 886 Moz (in 2016), if the Escobal Mine is shut for a longer period of time, or indefinitely, it could impact the silver market over the next few years.

So, again… the big question for investors is, HOW LONG will the ESCOBAL MINE be shut down? Well, let’s look at some information and data that seems to be overlooked by the Mainstream and Alternative media.

What Is The True Nature & Future Impact Of The Suspension Of Tahoe’s Escobal Mine?

First… after the Guatemalan Supreme Court suspended operations at Escobal, Tahoe’s stock price took a real beating falling 33% that day. In the past week, Tahoe’s stock price decline 40%:

Tahoe Resources Chart

A lot of investors were caught by surprise as Tahoe Resources has been making a lot of money from its mines, especially from its Escobal Silver Mine in Guatemala. For example, in 2016 Tahoe Resources reported profits of $118 million on revenue of $784 million. That is a stunning 15% margin of profit… and the majority of that profit was from the Escobal Mine.

Second…. the rich profits from the Escobal Mine came at a cost. And the cost was in the way of “serious human rights violations through its operations”, stated by several sources. Unfortunately, many investors that follow the Mainstream financial media do not understand that the Escobal Mine has been, and continues to be, a subject of human rights abuse and violations from day one.

I wrote about this in my 2014 article, Top Silver Supply Figures & Forecasts Are Incorrect:

Escobal will become a big player with forecasted silver production in 2014 of 18-20 million oz. Unfortunately for Tahoe Resources, the locals are not too happy with their Escobal mine. There have been murders and killings on both sides of the protest.

This is by no means a small matter by a few disenfranchised locals:

Tens of Thousands Oppose Tahoe Resource’s Escobal Project in Guatemala

Tuesday, December 17, 2013

(Guatemala City/Ottawa) Contrary to Tahoe Resources’ recent claims, tens of thousands of people oppose its Escobal project in southeastern Guatemala. Repression and violence have been the outcome of company and government efforts to install the project without social support. A recent high-court decision in Guatemala reinforces the legitimacy and importance of local decision-making processes.

More than half of the communities in the municipality of San Rafael las Flores, where the Escobal project is located, have declared opposition to the mine. In five neighbouring municipalities, in the departments of Santa Rosa and Jalapa, a majority have voted against the mine in municipal referenda, in which tens of thousands of people participated. The most recent vote took place on November 10th in the municipality of Jalapa, department of Jalapa. Over 23,000 people participated with 98.3% voting against mining and 1.7% in favour.

This is a perfect example of what Jim Sinclair states “As the wrong way to go about starting up a mining project in a foreign country.” Jim believes you must have the support of the locals, or the project will be doomed for failure.

And it didn’t help Tahoe Resources PR one bit when their contracted head of security, Alberto Rotondo gave direct orders to assassinate members of the community of San Rafael Las Flores.

Tahoe Resources executive in Guatemala orders killing of protestors

“The preliminary investigations found that Rotondo gave the order to attack the community, he also ordered the crime scene to be cleaned up and change the police report.”

The information reveals Rotondo making several statements: “God dam dogs, they do not understand that the mine generates jobs”. “We must eliminate these animals’ pieces of shit”. “We can not allow people to establish resistance, another Puya no”. “Kill house sons of Bitches”

Rotondo was apprehended at the airport La Aurora, when he trying to flee the country. Wire tapping of conversations between him and his son reveal that he planned to leave Guatemala for a while, because “I ordered to kill some of these sons of Bitches.”

What seems to be missing from the current license suspension of the Escobal Mine is the extremely negative history it has had with the local community. As stated above, Tahoe’s former contracted head of Security, Alberto Rontondo gave the direct order to assassinate members of the San Rafael Las Flores community.

While the wire-tapped conversation between Alberto Rontondo and his son, where he says, “I ordered to kill some of these sons of Bitches”, was published in the media, it didn’t get much coverage in the Mainstream press. This was BAD NEWS for a large corporate mining company, so many news agencies seemed to just ignore it.

So… the assumption by many WESTERN investors that Tahoe Resources is only dealing with pesky legal regulatory issues, is a seriously inaccurate assessment that could cost them dearly going forward. Now, I am not saying that Tahoe’s Escobal Mine will not be able to return to operating status, but there are more serious issues that are coming to light that could be quite detrimental for the company going forward.

For example…. according to the website, Tahoe On Trial, they published the following:

The legal cases against Tahoe Resources are being carried out in a larger context of opposition to the Escobal mine. The violence, repression, and criminalization community leaders continue to face is not limited to what transpired on April 27, 2013.

THE ESCOBAL PROJECT DEPENDS ON A MILITARIZED SECURITY STRATEGY TO SUPPRESS OPPOSITION AND HAS LED TO VIOLENCE AND CRIMINALIZATION.

  1. in 2011, Tahoe Resources hired a US security and defense contractor – International Security and Defense Management, LLC – that boasts experience with corporations working in war zones like Iraq and Afghanistan to develop a security plan that has treated peaceful protest and community leaders as if they were armed insurgents.
  2. In June 2012, Tahoe sued the Guatemalan government, stating that protests were hindering its operations and that the State was not doing enough to allow its activities to proceed.
  3. Between 2011 and 2013, some 90 people were slapped with unfounded criminal charges and made to endure legal processes causing them distress and hardship. Several spent months in jail before being cleared of all charges.

This is just the tip of the ESCOBAL MINE PROTEST ICEBERG… I could fill pages. However, those who believe the protests have gone away and now the public is totally supportive of the Escobal Mine, are completely being deluded.

If we fast forward to this year, the protests continue as reported in the article on June 23rd, 2017, Guatemala police clear access to Tahoe’s blocked Escobal mine:

…Police have used teargas to clear a public road near the town of Casillas, in south-east Guatemala, of protesters blocking access to Canadian miner Tahoe Resources’ controversial Escobal mine…

This proves that the public protests continue even as the Escobal Mine in in its fourth year of full commercial production.

I would imagine some readers-investors are probably thinking… “Well, this is just a matter for the local and federal governments to deal with in getting the LOCAL PEOPLE to BEHAVE, so they will leave the Escobal Mine alone to continue producing lots of silver and profits.” Well, that is one opinion, but if you think that is a WISE ONE… think again. Several large Funds have dropped Tahoe Resources from their portfolios due to what they term as, “A HIGH RISK .”

According to the Feb 2017 report titled, European Report Features Tahoe Resources as a ‘Harmful Investment’, Reveals Billion Dollar Funds Have Divested

Tahoe Resources is one of fourteen companies featured as a dangerous investment in the fifth edition of ‘Dirty Profits’ launched today in Hamburg, Germany and edited by the organization Facing Finance.

The publication identifies two billion-dollar European pension funds that have divested from the company, the Netherlands’ Pensioenfonds (PGB) and Norway’s Norges Bank Investment Management. The group calls for binding regulations on financial institutions and for the elimination of this and other harmful investments from their portfolios.

Problems cited include Tahoe Resources’ lack of respect for communities that have peacefully and democratically expressed their opposition to its Escobal mine in southeastern Guatemala, and a campaign of persecution through unfounded legal cases, violent incidents and militarization.

….The article about Tahoe Resources further describes how the company was granted a permit to put the mine into operation with disregard for over 200 individual complaints submitted against the license on the basis of environmental concerns. The officials responsible for this decision resigned in mid-2015 over serious allegations of corruption.

As we can see, the disinvestment of Tahoe Resources by two large European Funds should be a WARNING to investors that things may not be ROSEY for the company going forward.

Please understand, I am not only painting a negative picture for Tahoe, but rather providing additional information that seems to be missing from the Mainstream press. Thus, investors are making decisions without the COMPLETE information or story.

To be honest, as a silver analyst, I like the Escobal Mine’s performance. It is one of the most profitable primary silver mines in the world. However, I view this performance in a vacuum. By that, I mean based on the production and financial data alone. If we include the public and environmental issues, the Escobal Mine seems to be a very BAD DEAL for many of the local people that live adjacent to the mine.

I believe the suspension of Tahoe’s Escobal Mine by the Guatemalan Supreme Court may open a CAN OF WORMS that many individuals or companies invested in Tahoe do not realize or understand.

On the other hand, Tahoe might be able to work with the local people and Guatemalan government to resume operations. That being said, investors need to understand that the Escobal primary silver mine is a much HIGHER RISK than other silver mining companies. So, it would be wise to learn as much as one can before making a longer term investment in the company.


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

Is Manipulation to Blame for Silver’s Plunges?; Chris Powell: Futures Markets Give Trading Discounts to Governments

Is Manipulation to Blame for Silver’s Plunges?; Chris Powell: Futures Markets Give Trading Discounts to Governments

By Money Metals News Service

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll discuss the ongoing manipulation of the gold and silver markets with Chris Powell of the Gold Anti-Trust Action Committee. Chris tells us why he thinks the regulators are so powerless, the troubling authority that allows the government to legally rig markets, and what might happen to the metals if and when this manipulation finally comes to an end. Don’t miss a terrific interview with GATA’s Chris Powell, coming up after this week’s market update.

Well, this week brought both good news and bad news for precious metals bulls. The bad news is that gold and silver prices broke down from their major consolidation patterns. Based on the technical damage done, the momentum and the short-term trend in precious metals markets is pointing lower until new buying interest kicks in.

As you may recall we spoke about how silver was at an inflection point here on the show last week and that we would be looking for a move one way or the other during this the first week of the third quarter. Well, that move came as predicted and it was to the downside. Silver has now given back ALL of its 2017 gains.

Gold, however, is still holding onto gains of about 6% year to date. So the good news is that the yellow metal is still in a longer-term uptrend until proven otherwise. The even better news is that the long-term supply and demand fundamentals for gold and silver only get better with lower prices and the likelihood of diminishing mining output.

The question for traders, though, is whether silver will bring gold down in the days ahead or whether gold will lead silver back up. Silver prices are close to double bottoming at their lows of last December. Bulls will be looking for that level to provide some support.

As of this Friday recording, silver prices come in at $15.70 an ounce, down 5.9% on the week. Spot gold checks in at $1,215, off 2.3% since last Friday’s close. Platinum is down 2.4% to trade at $909, while palladium is lower by 0.9% to trade at $839 per ounce.

Earlier this week, the Federal Open Market Committee released the minutes from its most recent meeting. The Fed is still expected to stand pat on interest rates for the rest of the summer at least. But Fed officials are indicating that by September they may finally begin quantitative tightening – gradually scaling down their trillions of dollars in Treasury bonds and mortgage-backed securities.

Fed chair Janet Yellen is operating under the assumption that the last financial crisis has been solved, and the conditions that led up to it have been fixed. She even went to so far as to say that we probably won’t see another financial crisis in our lifetime, a rather smug and arrogant sounding claim to say the least.

It’s reminiscent of former Fed chair Ben Bernanke’s notorious claim that the problems in the sub-prime mortgage market were “contained.” Shortly thereafter, they nearly took down the entire financial system.

Now it’s true that the next financial crisis probably won’t look like the last one, which forced everyone to pay close attention to bank lending practices. No, the next crisis will probably emanate from somewhere else. Perhaps it will be the trillions of dollars in underfunded pension programs that governments and corporations are running.

Promise now, pay later. Kick the can down the road. It works for a while. But eventually, the road will reach its end and the unfunded obligations will come due.

The state of Illinois alone has accumulated $200 billion in pension liabilities. As of now, it could only afford to pay out about 40 cents on the dollar for its IOUs.

Illinois is effectively bankrupt. For the past several months, it has stiffed contractors and creditors. It has fallen behind on its utility bills. State legislators are now moving to raise taxes sharply in a desperate effort to plug holes in the budget.

But the longer-term problem of underfunded pensions remains insoluble in Illinois, in most other states, and at the federal level where unfunded liabilities loom totaling more than $100 trillion. Quite simply, the kind of money that’s needed to make governments financially sound again doesn’t exist in taxpayers’ pockets for governments to extract.

The only entity capable of generating the trillions of dollars needed to fill the gaps in pension funds is the Federal Reserve. The Fed may try to bail out U.S. pension and Social Security systems stealthily through inflation. But a sudden crisis would require more drastic action.

If you are a pensioner or planning to one day retire on pensions and Social Security, don’t count on these programs alone to carry you through into old age. It’s mathematically impossible for every beneficiary to get every dollar they are promised – at least in terms of today’s dollars.

As such, hard assets including physical precious metals should have a place in any sound retirement plan. Gold and silver bullion coins aren’t IOUs – and can’t be ruined by inflation.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Chris Powell

Mike Gleason: It is my privilege now to welcome in Chris Powell, Secretary-Treasurer at the Gold Antitrust Action Committee, also known as GATA. Chris is a long-time journalist and hard money advocate, and through his tireless efforts at GATA he is working to expose the manipulation of the gold and silver markets. Through GATA’s work over the years. Some important revelations have come to light, which quite honestly should concern everyone.

It’s great to have him back on with us. Chris, how are you, and thanks for taking the time to talk with us today.

Chris Powell: Great to be with you Mike.

Mike Gleason: Well it’s been more than a year since the last time we had you on, and there actually are some developments finally in the whole precious metals manipulation realm, specifically Deutsche Bank coming under fire for rigging gold and silver markets. Talk about this Chris, bring us up to date here on the whole lawsuit, and then give us your thoughts on whether or not this is going to finally get us somewhere on ending the manipulation that has occurred in the precious metals markets for years, if not decades.

Chris Powell: Sure Mike. Deutsche Bank has essentially confessed to manipulating the gold and silver futures markets. It has offered to settle the antitrust lawsuits against it for manipulation for just a little less than $100 million. More importantly, I think the bank has volunteered to provide the antitrust lawsuit plaintiffs with evidence against other bullion banks that participated with the Deutsche Bank traders in the manipulation of the gold and silver markets. And that raises the possibility of all sorts of money that could be due in damages to at least gold and silver futures traders now.

Now unfortunately, the U.S. Justice Department is seeking to intervene in the antitrust case in New York to delay further discovery and deposition in the case, so that the government could undertake its own investigation of the rigging – which is pretty ironic since the U.S. Commodities Futures Trading Commission (CFTC) for years, was supposedly doing its own investigation of the silver market and kept saying they couldn’t find anything. Now, they want to hold up the civil lawsuit so they (the government) can investigate it. I don’t think that the government really wants to investigate the case at all, I think the U.S. government simply wants to delay any further disclosures that would come from discovery and deposition, because they know that eventually, the rigging investigation proceedings like these are going to lead to the U.S. government’s own participation.

But, anyway, there is now a formal admission by one major international bank, Deutsche Bank, that it helped rig the gold and silver markets, in collusion with other bullion banks. So, that degree of manipulation can’t be denied anymore. The other day, I guess last month, a former Deutsche Bank trader was convicted of a criminal violation for rigging the gold and silver futures markets through what’s called “spoofing,” placing a lot of fake orders that were immediately withdrawn after causing other traders to position themselves in certain ways. So, there’s more and more evidence and more and more documentation of this rigging that’s coming out.

My organization is more interested in evidence of manipulation by governments in central banks, so we’re pretty convinced that the bullion banks that are involved in the instance of litigation were most likely functioning as agents of central banks, and making trades on the market that the central banks wanted made in order to suppress prices controlled, prices. But the litigation has not yet gotten around to incriminating governments and central banks. We’re hoping that will happen eventually.

Mike Gleason: Yeah, certainly if nothing else, the latest developments here with the whole Deutsche Bank case have at least made it known that it’s no longer conspiracy theory, it’s conspiracy fact as we’ve been saying for a while now, and at least now everybody is aware of the fact that yes, the markets are actually being rigged.

Now Chris, people are finding out that the CFTC is simply a joke. GATA exists at least in part because regulators are completely in the hip pockets of those on Wall Street. In fact, we are learning more through Freedom of Information and Wikileaks about why the futures markets for gold and silver were created in the first place.

Our government wanted volatile markets largely to discourage ownership of physical gold and silver. Wikileaks released powerful evidence of that earlier this year. That, and the cozy relationship between regulators and Wall Street explains a lot about why the CFTC could investigate for five years, and somehow miss the fact that banks cheat. We wonder if they were embarrassed when Deutsche Bank admitted to rigging prices while the CFTC investigation took place, turning over 350 pages of documents and some audio recordings to settle a civil suit, helping plans to pursue other banks. So, can we expect regulators to ever do their job, Chris? And if so, can the civil courts hold the bullion banks accountable?

Chris Powell: Well you’ve got to realize, Mike, that what has been happening with gold and silver, the manipulation and the price suppression, is probably completely legal, because the government is doing it. If you go to the U.S. Treasury Department’s internet site and find the page for the Exchange Stabilization Fund – which is an agency of the Treasury Department – you’ll find that the Treasury Department maintains that under the Gold Reserve Act of 1934, as amended, I think, through the 1970s, the Treasury Department, through the Exchange Stabilization Fund, is fully authorized to trade secretly, and manipulate, and rig any market in the world. Not just in the United States, but any market in the world.

I think that, in the end, is why the regulatory agencies have done nothing about the rigging of the gold and silver markets, because it has most likely been done, or most of it most likely has been done at the behest of the U.S. government, which is fully authorized by federal law to rig any market in the world in secret. I’m pretty confident, I mean if I had to bet my life, I would bet my life, that the CFTC knew this when it was investigating the gold market and the silver market, that all signs led back to the government, and the government most likely was using these big investment banks as its agents in manipulating the gold and silver markets, and that the investment banks could just shrug and say, “Hey, we’re only doing this as an agent for the government, and the government is fully authorized to do it, so there’s no violation by us here.”

I’d like to call people’s attention to that. I’m not privy to every trade that is undertaken by an investment bank or a bullion bank on behalf of the government, but I do know that according to documents filed by a CME Group, which operates all of the major futures markets in the United States, documents CME Group has filed with the Securities and Exchange Commission, and has come out of the Futures Trading Commission that CME Group numbers, governments and central banks, has among its clients in-secret trading of all futures contracts in the United States. And not just financial futures contracts, but commodity futures contracts as well. The CME Group offers a volume discount trading program to governments and central banks for trading futures contracts on all CME Group exchanges.

So, we know that governments and central banks are surreptitiously trading all of the major markets in the United States that have futures contracts attached to them. We also know that the gold reserve after 1934 fully authorizes the Exchange Stabilization Fund to rig any market on the planet. I think that’s the direction that financial journalism, if we had any, ought to go in. The CFTC and SEC are powerless here, I think, because the law fully authorizes the U.S. government to rig every market on the planet in secret.

Mike Gleason: And speaking of that, GATA focuses on manipulation in the metals markets, first and foremost, but these days people legitimately wonder if there are any markets that aren’t being rigged in some fashion. I mean, the Federal Reserve has hiked interest rates three times since December. The response in the markets has been a weaker dollar, flat bond yields, and roaring stock markets. Given that the Fed has been tightening, none of these things were expected, but hey, it’s sure working out for Janet Yellen and her comrades at the Fed. They are normalizing rates with none of the negative side effects, it’s almost like magic.

Chris Powell: Yeah, we know that central banks around the world are heavily purchasing various assets… not just government bonds, but they’re also purchasing stocks and derivatives and things like that. We know from the CME Group filings with the CFTC and SEC that governments are secretly trading the futures markets in every respect in the United States. And we know from the filings, the annual reports at the Bank for International Settlements and certain statements by central bankers that governments are surreptitiously trading in the gold market and the gold derivatives market, according to a French central banker, nearly on a daily basis. I think there’s documentation that central banks are openly and surreptitiously trading virtually every market in the world here.

So, yes, certainly, every major market is manipulated, I think there’s whole documentation of that. The problem here, I think, is not so much that any particular market is being manipulated, but rather that the world is losing, or already has lost its free market system. And if you believe as we at GATA do that free markets are a great engine of human progress, then this speaks very poorly about our future. It means we’ve lost the market economy, that we’re transitioning into a totalitarian system.

Mike Gleason: That leads me right into my next question here. Some may be listening to this and might be thinking that it doesn’t matter, or that what these governments and central banks are doing is in the best interest of the people. But speak to that, and discuss more about why it’s in fact harmful, and then who’s getting hurt here by this gold suppression scheme specifically?

Chris Powell: I would argue that really the whole world is getting hurt by the gold price suppression scheme, because gold is a measure of currencies, it’s a measure of asset prices, and if you tamper with the gold price, you’re really tampering with every price, because these prices are related. You’re distorting the whole world’s economy, you’re destroying the market system. Now, I don’t think you can find examples of history where a totalitarian system, over the long term, achieved great economic progress. I think you can find examples in history where market systems produce the greater prosperity and progress.

Well, if we’re losing the market system, we’re losing economic progress, and we’re also losing democracy because people cannot see how prices are being established, they cannot see how power is being allocated in society, and for what purposes? And if you lose the free market system and you lose democracy, I just wonder, what else is there?

Mike Gleason: Isn’t there a limit to how long price suppression can persist though? I mean, if prices are held lower than a free market would cause for years or even decades, it seems, at some point, shortages would crop up, and prices would shoot up. What are your thoughts on this as we begin to close, do you think we are near such a point in time?

Chris Powell: Well yes, theoretically you’re right, but that theory has really developed before the age of derivatives. And now, we have this derivative system where infinite supply, at least infinite paper supply of commodities and financial assets can be created with just a few keystrokes on a computer. Eventually, there will be shortages, but not necessarily in the near future. If people, for example, with gold and silver, if investors in the monetary metals are prepared to accept unbacked paper as equivalent of real metal, then I imagine the gold and silver suppression scheme can go on forever.

If the metal eventually does run out, as it did run out in March 1968 upon the collapse of the London Gold Pool and then again in 1971 when President Nixon took the United States out of the Bretton Woods agreement. You know, governments can just declare force majeure, they can outlaw the private possession in the monetary metals or try to outlaw them. They can impose capital controls, they can impose windfall profits taxes on monetary metals, investors. There’s really no limit to the power of totalitarian governments, or governments that want to engage in totalitarianism.

So I make no prediction as to whether or when this system is going to end. I think it’s just as likely that it’ll grow worse. George Orwell’s vision of the future expressed by one of his characters in his novel 1984 was a boot stomping on a human face forever. I hope that’s not the future that we’re heading for, but I think there’s a chance that is unless people around the world are going to stand up for individual liberty and limited government, and accontable government and free markets.

Mike Gleason: You certainly have to wonder what may happen if we have another financial collapse, and how many people will actually run to the safety of physical gold and silver. Maybe we have a real divergence between the paper market price and the physical price. I think that’s certainly a possibility.

Chris Powell: Well, when that day comes, the metal will not be available to people. If they think that there’s any chance that the monetary metals will ever be fairly valued, I think you’ve got to get your metal now, and maybe it’ll never be fairly valued, and maybe it will. But when the great reset comes, if it does come, it’ll be too late to get your hands on any real metal.

Mike Gleason: Yeah, very well put. Well excellent stuff Chris. I want to thank you for your insights today, and for the work you’re doing there at GATA. Now before we let you go here, can you give our listeners more information on how they can learn more about this and follow what you’re doing there at GATA?

Chris Powell: Sure Mike. We’ve got an internet site, gata.org. We have daily dispatches to our supporters on our mailing list. You can enroll at our internet site to receive our dispatches there. They’re free. If you do care for our work, if you take a look at the documentation we’ve collected on our internet site and the agitation we do, we welcome financial contributions. We are federally-recognized tax-exempt civil rights and educational organization in the United States under Section 501c3 of the U.S. internal revenue code.

So, financial contributions to GATA are not just gratefully accepted, but they are tax deductible, and we really do solicit support from metals investors and people who believe in free markets. The mining industry, the monetary metals mining industry now, is so demoralized. I think it’s really cowardly that we can’t get too much support from them. So individual investors and supporters of free markets are vital to our continuing.

Mike Gleason: Well it’s a very noble cause, we certainly appreciate everything you’re doing there. We’re big fans of those efforts and would love to visit with you again down the road. Thanks very much for your time, and enjoy your weekend Chris.

Chris Powell: Thank you Mike.

Mike Gleason: Thanks again to Chris Powell at the Gold Antitrust Action Committee. Again, check out gata.org for more information. They publish a lot of great content there at GATA, and we highly recommend everyone check that out. I also want to urge folks to consider going to GATA and making a tax-deductible donation, as Chris just mentioned, to ensure that GATA has the resources to continue this important work.

Well that will do it for this week’s Market Wrap Podcast. Be sure to check back next week and throughout the year as we look to bring you more great content and exclusive interviews. Until then, this has been Mike Gleason with Money Metals Exchange, thanks for listening, and have a great weekend everybody.


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

Why Gold & Silver Have Frustrated Investors Since 2011

Why Gold & Silver Have Frustrated Investors Since 2011

By Money Metals News Service

The biggest frustration to many precious metals investors, is why have the gold and silver prices under-performed the market since 2011? Actually, for gold it was since 2012. Even though gold hit a new record high of $1,900 in September 2011, its average annual price was higher in 2012 at $1,669 compared to $1,571 the prior year.

Regardless, the precious metals analysts back in 2012 were forecasting the market was going to experience even higher gold and silver prices, especially after the Fed announced QE 3 at the end of 2012. However, the precious metals community was taken by surprise as the gold and silver prices were hammered at the end of 2012 and into the beginning of 2013:

Gold Continuous Contract - July 3 2017

During this period, the gold price fell 30% and the silver price declined nearly 50%. Did something fundamental change in the markets for investors to suddenly ditch precious metals? Actually, something really big happened… THE MARKETS BROKE. Of course, many in the alternative media believe the financial market died in 2008, but when we look at another indicator… it clearly shows that the markets drastically changed even further in 2012.

The following charts (below) from the article, Deutsche: The Market Broke In 2012, “This Is What Everyone Is Talking About”, show that the market is totally under-pricing RISK by orders of magnitude never seen before. Now, when I say “under-pricing risk”, all that means is that the market has no idea of the dangers ahead. It is similar to someone driving a car that doesn’t realize the engine is burning up and the brakes don’t work because the WARNING LIGHTS aren’t functioning. So, the poor slob continues to speed down the road, without out a care in the world… until the car blows up or he heads over a cliff.

In the Deutsche Bank article linked above, analyst Aleksandar Kocic providing actual evidence that the WARNING LIGHTS in the market are no longer working:

Regular readers are familiar with the Economic Policy Uncertainty (EPU) index which is constructed by counting the frequency of articles in ten leading US newspapers that contain three of the target terms: economy, uncertainty; and one or more of Congress, deficit, Federal Reserve, legislation, regulation or White House. These numbers are then properly normalized by their means and standard deviations of occurrence and combined into an aggregate index. As such, EPU is completely market independent (in the same way the mechanics of a coin toss is relative to any particular gamble).

Figure 12: Economic Policy Uncertainty index and VIX

Okay… the description of the indicator above may be a bit difficult to understand, so I will simplify it. The BLUE LINE represents the “Economic Uncertainty Policy” (EPU index) shown by the frequency of articles in the MainStream media. The BLACK LINE is the VIX index, the volatility index (S&P 500). Basically, economic uncertainty printed in articles in the Mainstream Media should correspond with the volatility indicator of the markets (the VIX).

And… this is precisely what took place from 1996 to 2011. The blue and black lines moved up and down in tandem. However, after 2011, something changed. According to Kocic:

Intuitively, when VIX is in tune with EPU, the market is acknowledging the levels of risk through the prices. However, when VIX is low and EPU high, markets are complacent – they are underpricing risk.

After 2011, the two measures of risk decouple with VIX consistently low despite growing uncertainty. The breakdown is structural, and it is visible across all market sectors, not only equities.

What Kocic is saying is that the market has become highly complacent and is seriously underpricing risk. In the next two charts, Kocic takes the difference between EPU Index and the VIX to get the second chart at the bottom. As we can see, something changed after 2011, and especially after 2016.

Figure 14: Economic Policy Uncertainty index and regression scaled VIX | Figure 15: Complacency Index (Residuals between EPU and VIX)

This chart is showing the level of COMPLACENCY in the market. From 1996 to 2011, the market complacency level fluctuated around the base line. However, after 2011, market complacency is now trended much higher.

According to the article:

This is where things get even more interesting, because by this measure, “it appears that the markets have made a structural shift towards higher levels of complacency in the last six years.” Here, Kocic reverts back to his old, cautious self, warning that this decoupling will end in tears. This is how he frames it:

Current levels of complacency are alarming. This is what everyone is talking about. Despite growing uncertainties and tensions, the market volatility refuses to rise. Persistence of low volatility is increasing the penalty for potential dissent and reinforces one sided positioning. As a consequence, the risk of disorderly unwind is growing.

Because market volatility is so low, investors have been brainwashed to believe EVERYTHING IS OKAY. Unfortunately, the situation is quite dire because the market’s “Warning Lights” have been turned off.

I decided to take that chart above and show at what point the gold price peaked:

Figure 15: Complacency Index (Residuals between EPU and VIX) - The Gold Price Peaks in 2011

There’s no coincidence that the gold price peaked at the same time the EPU – Economic Policy Uncertainty index decoupled from the VIX, shown at the end of 2011. The market has been deluded to believe that GOLD DOESN’T MATTER anymore. This is shown in VIX index, as it continues to trend lower to the same level in 2007… before all hell broke lose in the markets:

(VIX) Volatility Index - New Methodology - July 3 2017

Again, the EPU Index just shows how much “Uncertainty” is taking place in the markets via articles on the MainStream media. According to Kocic, the EPU Index below, has been at a record high level since 2016:

Figure 12: Economic Policy Uncertainty index and VIX

However, the VIX Index (volatility) is now at the same level it was in 2007. Which means, the market is totally disregarding ALL THE BAD NEWS coming out of the Mainstream Financial Media. Again, it is just like a speeding car heading down the road with an engine ready to blow and with no brakes, but the driver doesn’t know anything is wrong because the warning lights aren’t working.

So, for all the frustrated precious metals investors out there who continue to BELLY-ACHE and COMPLAIN that the “Analysts Got It Wrong” about gold and silver since 2011… have also been BAMBOOZLED, like the rest of the market, that EVERYTHING IS FINE. Well, it isn’t.

Okay… so, WHEN does COLLAPSE happen?? If I had that answer, I would be able to pick the winning numbers on the lottery ticket. However, the indicators, like the ones shown in this article, point out that the situation in the markets are deteriorated much quicker than before. The Central Banks asset purchases of $1.5 trillion in the first five months of 2017, are more than double the annual trend since 2011.

The U.S. and Global Oil Industry is being GUTTED from the inside out due to the current low oil price. As Chris Martenson stated during my interview with him, the global oil and gas industry’s total debt is now closer to $3 trillion versus $1 trillion in 2006. These energy companies have to pay a lot of INTEREST EXPENSE just to service their massive debt. Once the energy industry starts to really disintegrate, then it will take down the entire market.

My gut tells me that this will likely start to occur within the next 6 months to 2 years. It could happen sooner, or it could take a bit longer. However, there is no way to TIME THIS EVENT. So, don’t try to. It would be prudent to own some physical precious metals before the market cracks, or it may be difficult to access any…. or if so, only at much higher prices.

For those who continue to be frustrated by the low precious metals price, silver is down another 20 cents as I write this article, take a GOOD LOOK at the charts in this article. The market WARNING LIGHTS are no longer working, so when the CRASH happens, it will be a complete surprise.


The Money Metals News Service provides market news and crisp commentary for investors following the precious metals markets.

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