Gold and Market News 2-5-2014

Global Market Collapse Coming?

Rick Rule sees trouble on the horizon…

“We are seeing investors in global markets, be they debt or equity markets, reacting to the modest threat of a decline in stimulus and a reduction in the amount by which the interest rate is manipulated down.

What we saw yesterday was very clearly a reaction to the fact that the United States government while it will not stop quantitative easing, which you and I call ‘counterfeiting,’ it will reduce it. The very fact that they intend to reduce it will probably reduce downward pressure on interest rates, which will lower the capitalized value of distributions on long-dated government debts, and increase their competitiveness with the equity markets.

So we are seeing difficulty with the thesis surrounding convergence, lower interest rates, and liquidity-fueled debt and equity markets. And we are seeing that unfold on a global basis. One of the reasons that the response has been so dramatic, despite the modest tapering, is because of the leveraged nature of trading which takes place on a global basis. So what you are seeing now is a leveraged unwinding take place in global markets.”


JP Morgan is Holding the Greatest Amount of Silver in History?
Many in the precious metals market see JP Morgan manipulating the silver market for their own gain. Silver expert Ted Butler expands on this…

While everyone is focused on the massive outflows in COMEX registered gold inventories and the gold ETF, GLD, it seems that an important evolution in silver is passing unnoticed. In what follows, Ted Butler, precious metals analyst specialized in COT analysis, reveals a remarkable insight in the physical silver market.

Butler’s calculations show that JPMorgan (JPM) has piled up the largest holding of physical silver in modern world. Since the silver price peak in May 2011, the bank has accumulated between 100 and 200 million ounces of physical silver (if not more). The equivalent in metric tonnes is between 3,110 and 6,220 tonnes.

To put that number in perspective, it surpasses the amounts held by the Hunt Brothers or Warren Buffett (in his investment company Berkshire Hathaway).

On a yearly basis, some 100 million ounces of silver reach the investment market, which translates into 250 million ounces between May 2011 and December 2013. That has a value of approximately $5 billion. Given the size of the too-big-to-fail bank, that amount of silver, how large it may seem, is easily affordable:

JP Morgan’s quarterly profit is $5 billion (approximately 200 million ounces of silver).
In 2013, the closing of the gold short position, as well as the 20,000 contract reduction in the silver short position, netted JPM more than $3 billion.
In COMEX silver, JPM was the largest buyer in 2013.


Gold Price Suppression lends to Buying Opportunity?

Precious metals expert David Levenstein sites a strong demand for physical gold around the world and especially from China but prices remain down. Is this time to stock up on the yellow metal?

As gold prices continue to hover around the $1240 an ounce level, demand for the physical metal remains extremely robust especially demand from China. Yet, despite reports of strong demand, prices still seem to be taking the lead from traders reacting to announcements from central banks, particularly the US Federal Reserve and certain non-related economic news.

After gaining for most of the month, the price of gold notched up its first weekly drop in six due to further signs of U.S. economic growth, concerns over the U.S. Federal Reserve’s withdrawal of monetary stimulus and a slump in Chinese demand.

Last Wednesday, the US Federal Reserve announced its’ FOMC’s decision to taper its asset-purchase program. The FOMC decided to trim its bond purchases by another $10 billion in its first meeting of 2014. In December when the Fed announced that it was going to taper its purchases, gold prices fell sharply. But, this time the Fed’s decision to cut down on its asset-purchase program had little adverse effect on gold prices. Therefore, even if the Fed continues to taper its asset-purchase program, it is unlikely to have any long-term effect on gold.


With prices of gold and silver at low points, stocking up would be reasonable for anyone bullish on precious metals. In fact a tax savvy method for owning physical metals without worry of home storage is through a gold IRA. These IRS approved retirement accounts allow for a simple and straight forward  transfer or rollover from an existing IRA or 401k into a self directed individual retirement account where you can purchase approved precious metals, real estate and more…

Musings on Money, Investing, and Finance…