The Great Gold Upgrade, Report 15 July 2018

By Keith Weiner

[biiwii comment: Au & Ag supply/demand report follows opening segment]

In part I the Great Reset, we said that a reset is a terrible thing. The closest example is the fall of Rome in 476AD, in which more than 90% of the population of the city fled or died. No one should wish for this to happen, but we are unfortunate to live under a failing monetary system. Debt is growing exponentially. A way must be found to transition to the use of gold. We covered a few ways that won’t work. The Fed can’t determine the right gold price, or indeed control the price either. Nor would it work to declare the dollar to be gold backed. A high gold price won’t make gold circulate. Nothing less than redeemability will do. But you cannot retroactively declare the irredeemable dollar to be gold-redeemable. Every dollar in the system was borrowed into existence without the expectation of redemption. Changing this rule would create the greatest orgy of lobbying Washington has ever seen.

Interest Draws Gold into Circulation

Interest is the only force that can pull gold out of private hoards and into circulation. We have said many times, that interest is the regulator of flow in the gold standard. A lower rate will tend to push gold out of the market and into hoards. A higher rate will tend to draw it into the market.

Continue reading The Great Gold Upgrade, Report 15 July 2018

Excellon Resources (EXN.to): I want to believe

By Otto Rock

Excellon Resources (EXN.to) is a stock I held from late 2016 to early 2018, finally giving up the position (for a minor profit, but considering the plan it was basically a wash) after one disappointing quarter too many. But it’s one I’ve kept watching, not least because if it does get its act together and start producing the way it could now the La Platosa mine is dry it could be a sudden big winner. So it was good to see its 2q18 production numbers today because…


…that’s a distinct improvement. However, but but buttybut but, I’m not in a hurry to race back into the stock because it has a few things to prove yet, starting with the financials from that production number. When they get filed in mid-August I’ll be looking for lots of things, including…

Continue reading Excellon Resources (EXN.to): I want to believe

The Current Message From the Most Useful Sentiment Indicator

By Steve Saville

As I’ve noted in the past, the Commitments of Traders (COT) information is nothing other than a sentiment indicator. Moreover, for some markets, including gold, silver, copper, the major currencies and Treasury bonds, the COT reports are by far the best indicators of sentiment. This is because they reflect how the broad category known as speculators is betting. Sentiment surveys, on the other hand, focus on a relatively small sample and are, by definition, based on what people say rather than what they are doing. That’s why for some markets, including the ones mentioned above, I put far more emphasis on the COT data than on sentiment surveys.

In this post I’ll summarise the COT situations for five markets with the help of charts from “Gold Charts ‘R’ Us“. I’ll be focusing on the net positioning of speculators in the futures markets, although useful information can also be gleaned from gross positioning and open interest.

Note that what I refer to as the total speculative net position takes into account the net positions of large speculators (non-commercials) and small traders (the ‘non-reportables’) and is the inverse of the commercial net position. The blue bars in the middle sections of the charts that follow indicate the commercial net position, so the inverse of each of these bars is considered to be the total speculative net position.

I’ll start with gold.

Continue reading The Current Message From the Most Useful Sentiment Indicator

The Great Reset, Report 8 July 2018

By Keith Weiner

[biiwii comment: Au & Ag supply/demand report follows opening segment]

Before it collapsed, the city of Rome had a population greater than 1,000,000 people. That was an extraordinary accomplishment in the ancient world, made possible by many innovative technologies and the organization of the greatest civilization that the world had ever seen. Such an incredible urban population depended on capital accumulated over centuries. But the Roman Empire squandered this capital, until it was no longer sufficient to sustain the city (we are aware the story is more complicated than this).

After the collapse, the population fell to about 8,000 people. Some fled and arrived at safe places, but surely most perished.

Monetary Reset

This is what we think of when we hear someone say, “There will be a reset”.

A reset is not a good thing. No one should look forward to it, and you certainly cannot profit from it. Not even from owning gold. Sure, those who don’t own gold may be worse off than those who do, but no one does well in a catastrophe like that.

Continue reading The Great Reset, Report 8 July 2018

Precious Metals Summer Potential

By NFTRH

On June 26 we provided an antidote to some media hysterics about a “Death Cross” in gold.

On that same day we had an NFTRH update (still password protected, but below is the screenshot of the intro) illustrating for subscribers a developing positive risk vs. reward proposition in gold and silver.

On June 28 we noted the out-performance by counter-cyclical gold miners to cyclical copper miners.

Continue reading Precious Metals Summer Potential

An Idea Whose Time Has Come, Report 1 July 2018

By Keith Weiner

[biiwii comment: gold & silver funda report follows opening segment]

“On résiste à l’invasion des armées; on ne résiste pas à l’invasion des idées.”

These are the actual words written by Victor Hugo in Histoire d’un Crime (History of a Crime).Translated literally, it means an invasion of armies can be resisted; an invasion of ideas cannot be resisted. However, there are many alternative translations that try to express the sentiment, if not the exact meaning. Perhaps the most famous of them is this.

“Nothing can stop an idea whose time has come.”

This, itself, is a powerful idea (we have seen it misattributed both to Ghandi and Martin Luther King). It is rife with implications. At least for ideas about how a society ought to be organized, for ideas about governance.

Continue reading An Idea Whose Time Has Come, Report 1 July 2018

Can Silver Rally Without Gold?

By Steve Saville

The article titled “Silver’s Critical Role In Electrification May Fuel Its Rise” contains some interesting comments about the silver market, but with one minor exception the information presented in this article has no bearing on silver’s risk/reward as a speculation or investment. The minor exception is the high (by historical standards) gold/silver ratio, which suggests that the silver price is likely to rise relative to the gold price over the next few years. However, none of the information about silver ‘fundamentals’ presented in the article is relevant to the silver price.

It isn’t relevant for the same reasons that most of the information presented by the ‘experts’ about gold fundamentals is also not relevant: It treats the annual output of the mining sector as if it were the total supply (annual mine production is a small fraction of the total supply) and it confuses flows from one part of the market to another with changes in total demand (every ‘flow’ involves an increase in demand on the part of the buyer and an exactly offsetting decrease in demand on the part of the seller). Furthermore, it isn’t relevant for another reason that can be illuminated by asking the question: within the past 80 years, when was there a major silver rally in the absence of a gold rally?

Continue reading Can Silver Rally Without Gold?

The Wealth Effect, Report 24 Jun 2018

By Keith Weiner

[biiwii comment: as usual, gold & silver funda report follows opening topic]

Last week, we discussed Social Security, a Ponzi scheme that is inevitably approaching its default. That leads us to another point in our broader discussion of capital destruction. Let’s illustrate with an example.

The Fraudulent Promise

Suppose Eric works for wages. He is 50 years old. His house is paid off, he has no student loans, and owns his car outright. He has no debt (he is a rare type of person). His kids are out of college. He has no expenses except ordinary living costs, and no demands on his savings except his own retirement.

Oh, and one other thing. He gets a statement from Social Security telling him that they will pay him a pension when he retires in 17 years.

When faced with a choice to take a vacation or save for retirement, he wonders why he should deny himself a bit of pleasure. With retirement covered by Social Security, there’s no need to save for retirement. So each year, he visits a place on his “bucket list”, not worrying about how he will live when he is in his 70’s and 80’s.

You see the problem. Social Security cannot go on paying as it has promised to pay. Eric will not have the secure retirement that he plans to have. In future years, he will look back bitterly on the bogus account statements they sent to him. He will play over and over in his mind what he spent, thinking he should have saved more. His spending was based on a counterfeit promise, a fraud.

Capital Consumption

This is another way that the system drives people to consume their capital. Social Security may or may not be considered a debt, either legally or for accounting purposes. We will leave that debate to others. However, people certainly count their future Social Security checks as an asset. In order for that asset to be good, there must be a corresponding liability somewhere, and the party with that liability must have the means and intent to make good on their promise.

Continue reading The Wealth Effect, Report 24 Jun 2018

Social Security Deterioration, Report 17 Jun 2018

By Keith Weiner

[biiwii comment: gold & silver fundamental report follows 1st segment]

We have been writing about capital destruction. This week let’s look at an event which is currently making news. Social Security will begin tapping into its trust fund this year. This happens, as the Social Security Board of Trustees states antiseptically, “four years earlier than projected in last year’s report.” In other words, the economy is growing by every conventional measure, yet Social Security is spending more than its tax revenues years earlier than projected. According to those same inaccurate projections, the trust fund won’t run dry until 2034.

Everyone opines on Social Security. Some, like Max Richman of The Hill, claim that, “modest and manageable measures…” will, “keep Social Security solvent.” Others, like Charles Blahous at the Manhattan Institute, say the opposite, it’s “bad and getting worse.”

There are several aspects to this that are worth understanding. We will unpack this mess.

Continue reading Social Security Deterioration, Report 17 Jun 2018

Common Sense Monics

By Keith Weiner

[biiwii comment: gold and silver supply/demand funda follow opening segment]

Suppose you’re driving a car, and you turn the steering wheel left. You will feel the door and pillar of the car push your left shoulder (in a left-drive car). This is an observed fact.

Common Sense Physics

One idea—let’s call it common sense physics—is that a force is pushing you outward into the door. If you picture the center of the circle that the car is making in its turn, there is an apparent radial force on you. The direction of this force is outward. It is called centrifugal force.

Or suppose you fill a jar with water and mixed soil sediments. You put it into a machine that spins it rapidly, with the lid facing inwards toward the center. After the machine spins for a while, you stop it and remove the jar. The heavier particles are at the bottom of the jar. Above them are the slightly less heavy, and so on, to the lightest. The water is at the top. This experiment confirms the idea. Something apparently pushes the heaviest particles farthest out from the center. Centrifugal force.

In any group of people who have not studied physics, this view is entirely uncontroversial. Indeed nearly everyone who hasn’t studied physics would agree with what we wrote above.

However, if you go to a group of people who have taken a college-level physics class, you would get the opposite reaction. The above view is wrong. And not a single one (who received a passing grade) would defend it.

Any first-year university student in physics would draw the circle and the radius. But he would add an additional concept—velocity. The velocity of the object is tangential to the circle. There is a force pulling the object. That is, there is a radial force, but its direction is inward—centripetal force. The object does not fall into the center, because its velocity is tangential. The net result is that the path is a circle.

Continue reading Common Sense Monics

Liquidity Preference Rising, Report 3 June 2018

By Keith Weiner

[biiwii comment: gold & silver supply/demand report follows]

Picture a scene in one of those action moves. Two guys are fighting for control over the steering wheel. The car is going 75mph, the road is narrow, and there is a drop over a cliff on one side. And there are lots of sharp curves.

Central Planning

This is a pretty good picture of the action at our central banks. Desperate men are fighting for who gets control of the monetary steering wheel, and for which rules to use to determine when to turn left and when to turn right. One side wants central planning with discretion and the other wants central planning with rules. Among the latter, a debate now rages whether to use inflation, GDP, or another measure.

For decades, the central banks have centrally planned our economy. Just as the guys fighting in the car don’t notice the abyss they keep not falling into, these central planners don’t notice the falling interest rate.

Perhaps it’s because they scoff at the actual rate at which actual lenders lend actual dollars to actual borrowers in the actual market. This, they dismiss as the mere nominal rate. But they calculate inflation, averaging apples and oranges, gasoline, and housing. Then they subtract inflation from nominal interest to get the real interest rate. That’s what they call this fictitious number, at which no one lends and no one borrows. Their real rate probably isn’t pathologically falling, the way the nominal rate is…

Wait, let’s look.

Continue reading Liquidity Preference Rising, Report 3 June 2018

Precious Metals (NFTRH 502 Excerpt)

By NFTRH

From this week’s Notes From the Rabbit Hole, an excerpt from NFTRH 502‘s Precious Metals segment, since I haven’t given the PMs much airplay on the public site lately. It gets a little prickly at one point, with some views on the gold sector’s perma-pompoms but then gets back on track.

Precious Metals

First off, let’s review some macro fundamental charts. We know that bond yield dynamics are not yet favorable and neither is gold’s standing vs. major stock markets.

gold vs. stock markets

Gold vs. Commodities is still generally not good. Now, this (including gold/silver) is actually a sign that the inflation trades live on. Ref. our thoughts in the commodity segment that it may regenerate for one more thrust. An inflation trade can keep the gold sector afloat, but it is not the preferable fundamental backdrop for buying long-term positions. If this does not change I’d look to sell any decent rallies.

Continue reading Precious Metals (NFTRH 502 Excerpt)