Ainslie Bullion - Daily news, Weekly Radio and Discussions

Enjoy today's Ainslie Radio ~
It's been a massive week for economic news you must tune in to discover how it's affected gold and silver this week (and how it will continue to affect gold and silver)

https://www.ainsliebullion.com.au/g...ive-week-for-news/tabid/88/a/770/default.aspx

 

Can't Buy Me Love
Gold and silver were smashed last night and shares rallied largely off the release of a better than expected US GDP for the 3rd quarter, coming in at 3.5% annualised. As we've explained before GDP can be 'bought' with debt fuelled government spending or stimulus and it appears a strong component of last night's print was exactly that as Bloomberg reported "Government outlays and a shrinking trade deficit boosted growth last quarter, buying time forconsumer spendingin the world's largest economy to strengthen". Buying time?? As we reported in today's Weekly Wrap radio, the real bellwether of how the main economy is going is their housing market. QE has pumped up the sharemarket enriching the minority who own substantial share portfolios but it is the family home that most people have their wealth in and that is just plain sick at the moment as the following graphs (from ZeroHedge) illustrate perfectly. Not everyone understands macro-economics but most can do simple math and budgeting. If you continually spend more than you earn, if you accumulate more debt to fix your debt problem, borrowing to pay your interest bill, you may enjoy the 'good life' for a while but it must and will end badly. Every paper based asset in the system is linked inextricably to this Ponzi scheme. Gold and silver are not, and that is why they have survived as money for thousands of years.

 

Sensible v Sentiment

In a nutshell that is what we are witnessing right now. We just witnessed gold and silver plunge below resistance lines on Friday night with the Gold price at USD1173 and Silver price at USD16.18 and calls for further drops to come. Sentiment is well and truly low. This is the time that canny investors leave emotion behind and look at their investment strategy. A mental checklist of why you bought and what is happening now might look like this:
Insurance against a crash fuelled by unsustainable money printing and debt > yes the US just ended QE (for now but do I believe they can keep it that way?), but the 3rd biggest economy, Japan, announced on Friday they are INCREASING their QE from Y70 to Y80trillion ($750b) plus aggressively ramping up their state owned pension fund domestic share purchase program, and ECB started their QE the week before. Stocks around the world surging on such news or buy back fuelled EPS growth, not business fundamentals. Tick.
Direct investment into Chinese and Indian economic growth > both are again rampantly buying with China last week buying 59.7t and on track to again consume 2000t or about 80% of global production this year (as with last). Tick
Supply / Demand > well documented costs above current pricing mixed with falling production yields and fewer new discoveries, and demand just touched on above plus 21 month high Silver Eagles sales last month and frighteningly low silver inventories all unchanged actually getting worse. Tick

Sentiment so often has little to do with sound logic. The 'sheeple' will follow blindly. The wise leave emotion at the door, check their strategy and stay strong or take advantage of low sentiment prices.

 

Turbo Tokyo
As we touched on yesterday, Friday saw the extraordinary announcement by the Bank of Japan (BoJ) of an increase in its stimulus program given the last one wasn't working. Some perspective is handy here as one can get lost in Yen and $billions. Even though Japan is the world's 3rd biggest economy (4th if you include Eurozone as one economy), if you applied the now $750b annual money printing program to the US on a like for like GDP basis, it would equate to being 3 times larger than the biggest year of QE3, $3trillion. This for a country that already has a debt to GDP ratio of an incredible 250%, or a BoJ balance sheet which is nearly 50% of the country's total income (and again for context the already bad US is only about half of both those figures). To add to this madness, the state owned pension fund (GPIF) is reducing its Japanese government bond holdings from about 60% to 35% in order to fund a massive share buying program. So of course shares rallied (including the US as about $1.8trillion is slated for international shares), bonds didn't tank (indeed rallied!?) because the BoJ has stepped up its bond buying to print more money, the Yen plummeted against the USD (now out to a 7 year high 114 USD/Yen), which of course saw gold down against the strengthening dollar. The inescapable irony is that gold went down despite the core reason for the USD rally was Japan stepping ever closer to an inevitable collapse and the global economic ramifications that presents.

 

Chicken Little

We've all heard the story of Chicken Little running around saying "the sky is falling down!". Sometimes in reporting the things we do, we too feel a little like that young chicken. We don't do it to be sensationalist, we don't do it to unnecessarily scare, and we certainly don't do it for fun. We do it because very few do and someone needs to. Everyone WANTS to believe 'everything is awesome' but that is ultimately an incredibly dangerous investment strategy. Let's just take a snapshot of late last week as a small example. Stocks soared to new records and gold plunged predominately because of a strong US GDP figure (that was largely based on debt fuelled Government defence spending) and news of Japan expanding its stimulus program (because its economy is so very bad)! Awesome? Sustainable? Clearly not.

Now we don't say it's going to happen tomorrow and we don't say sell everything and buy gold and silver. We don't do either of those things because, quite frankly, we don't know. With all due respect, neither do you. That's why we espouse balance. Gold and silver are a well proven hedge or insurance against the crash that WILL happen. How can we say WILL? Simple math. You cannot keep accumulating record amounts of debt through central bank stimulus programs and continual deficits without a day of reckoning. That central banks have 'bought' their way out of the GFC (borne itself of too much debt) with printed money and more debt can only end one way. The graph below illustrates this quite clearly. So forgive us for sometimes looking a little 'doomsday'ish but we are supremely confident you will one day thank us if you've balanced your wealth with some physical gold and silver. We are also supremely confident that when such a day comes and you haven't already got yours, it will be much harder to get hold of. Broken record and all, but we are big believers in "Better a year too early than a day too late".
Today we post an article on how the ex, and arguably most famous, US Fed chairman Alan Greenspan is saying exactly this. That the Fed balance sheet is a tinder box and people should be buying gold as protection. When asked in a separate interview where the gold price will be in the coming years he replied "measurably higher".

 

I'm confused.

Should we still be 'taking heart from the charts'?

 

Now is the time to buy! Quote of the Week

Avi Gilbert is a renowned technical chart analyst. Whilst not everyone will like what he has to say, he has picked this market with surprising accuracy and per the quote below is saying we are nearly at the low and you should start buying your physical gold and especially silver now. Though not captured below, even as a 'trader', he is repeatedly on record saying you should buy physical metal not ETF's, being very critical of the 'security' of these paper instruments. Forgive the technical jargon below but the message is clear
"Based upon the larger degree count, the majority of this 3+-year decline is just about completed, as we are left with a series of 4's and 5's, to be completed over the next two to three months. So, get your shopping lists in order, as the metals are now on sale. And, it is coming at a time when sentiment on metals is in the absolute toilet. Some sentiment matrices are even suggestive that it is worse now than at the 2008 lows, which would make sense from a wave perspective, as I am expecting a larger degree 3rdwave to begin off the lows we make in the metals over the next few months, which should last for many years to come.

As a warning, I want everyone who is serious about this market from a long term perspective to understand that even though I have been right about this decline, and have been right about the count, it does not mean that I will always be right. I can clearly be wrong, and the potential exists that the next lows we make MAY be the final lows in this long-term correction. While my count and expectations are still that we will see a wave IV rally before those final lows are made into the end of the year, I want anyone who is serious about the long term prospects of this market to begin scaling into long term positions. As I have said many times before on my daily Live Video, anyone that is not taking the opportunity to load up on silver when it is below $17 is not considering the long-term opportunity before them, at least in my humble opinion."
Per yesterday's article, be careful trying to pick the absolute bottom as you may find purchasing on the other side of it difficult in the rush

 

2008-like set up in silver
Below is a chart that should put many on notice about how the silver market is being played but also the similarity with 2008 from which silver went from prices of around $9 right up to $48 in just 3 years. We have not had COMEX open interest so high against a price so low since that infamous turnaround.
Bill Holter had this to say last Friday (and it's gotten worse since!) to put it into context:
"On Thursdaythe open interest in COMEX silver ROSE3,164 contracts, this represents 15.8 million ounces. The all-important December contract rose by 4,588 contracts or roughly 23 million ounces! 23 million ounces is the equivalent to 12 days of global silver production.Let me explain this a little further, total volume for the day was 466 million ounces, open interest for Dec. with just one month left before first notice day for delivery stands at 616 million ounces. The entire world (excluding China because they do not sell their production) only produces 700 million ounces of silver per year, yet the COMEX in one day trades two thirds of all production on the planet and has contracts outstanding with only 1 month left for nearly 90% of all global production."

 

Currency Wars and Gold

Central banks are desperately printing money and implementing zero interest rate policies everywhere trying to stimulate their economies and debase their currencies to make their exports more competitive. The Euro just hit a 2 year low and the Yen keeps on diving as BoJ ramp up their stimulus program to frightening levels. The US just finished their record breaking QE program (for now) and are already feeling the effects of a higher USD. The following 2 quotes are salient reminders for investors
Speaking at the Council of Foreign Relations ex US Fed chief Alan Greenspan has this to say when asked "Do you think that gold is currently a good investment?"
"Yes... Remember what we're looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it."
and Mike Savage delivered this last week:
"I fail to see any difference between what the Japanese are doing to their currency and what Weimar Germany did to their currency in the 1920s. It was at that time that the Mark traded from 4 marks to the dollar to over a trillion marks for a dollar just a few years later. People used wheelbarrows to carry the cash to get a loaf of bread. Thankfully, we have credit cards and ApplePay today so they won't need wheelbarrows- just a lot of zeros to count!
This phenomenon, which happened in Germany, did not happen all at once. There were signs, many like we are seeing today. Then, all at once- bang! It hit critical mass and could not be stopped until the currency was destroyed. Anyone who thinks these central banks have this under control- think again. It was the German centralbank that caused the Weimar hyperinflation. This episode is the main reason that the Bundesbank (German Central Bank) will not allow European QE, at least so far.
It is the Japanese Central bank that appears hell bent on decreasing the value of the Yen. They should be careful what they wish for.

Wealthy people around the world have already started to divest of paper assets. They are trading paper for fine art, automobiles, real estate, enduring businesses, and metals.
In the meantime, oil and commodities are selling off which seems to indicate thateconomic activity is slowing and appears to have no end in sight for that trend. So as the stock market continues its rise to new heights the underlying economy is becoming more and more anaemic. This should not be any surprise as all of this new debt that is being created to pay off new debt and interest on previously issued debt is exactly what is choking off lending for productive use- like infrastructure, new companies and jobs.
It is too bad that most people are brainwashed by the propaganda on mainstream TV and think that all of this is normal. It is not! The one thing that is different this time is that in the past there would be a country or two that would debase their currency and pay the price. Today, the whole world is in on it. I am not looking forward to when this comes to a head!

While many may look at this as gloom and doom I look at this as reality. I also look at it as an opportunity. It will only be an opportunity if you have a plan to take advantage of it."

 

Something for Nothing
In the context of the US having added $3.6 trillion of cash into the system with QE, the ECB having just agreed to add 1 trillion this year, and Japan, with already the world's highest debt to GDP ratio, announcing they'll add $750 billion this year, the following excellent reminder of what gold represents is timely. Remember you can't just create gold out of debt accruing thin air. You need to mine about 1 tonne to get 1 to 2 grams and that costs more than the current price
"I do know that gold remains at the heart of the financial system. Try as they might, governments and bureaucrats just can't get rid of gold.
Gold fascinates me because throughout history it's acted as the ultimate 'BS detector'. It's the enemy of kings, despots, powermongers, socialists, world improvers, central bankers, fraudsters, and manipulators.
But gold is just a useless piece of metal. It's not gold that fascinates me; it's what gold represents. And I believe gold represents the will of the people in favour of freedom over repressionit rewards hard work and innovation over laziness and short cuts.
It reminds us that, ultimately, you don't get something for nothing.
And while there are currently more people in the world getting something for nothing (and many, many more getting nothing for something), I remain confident that gold will again break its shackles and assert its force on the global financial system.
After all, that's the way it's been (on and off) for thousands of years. Why should it be any different now?"
(By Greg Canavan)
Gold (and silver) is your insurance for the inevitable day of reckoning when this system inflated by government stimulus (created by debt) crashes. That debt is the "nothing" that Jo Public doesn't see or understand. We really like our "somethings" and our pollies keep giving it to us to get re-elected or not have the system crash 'on their watch'. One of them won't have the choice because Mother Nature doesn't work on "something for nothing".

 

G20 & High Security
Just a reminder we are closed today and tomorrow given our proximity to the 'action' of G20 and city access. Our webshop is open as usual though.
Speaking of high security Today we launch our special pricing on the complete range of Ainslie Bullion Silver Stacker bars up to Xmas. If you aren't familiar with these bars, they are simply the ultimate in security and beauty. Machined, not minted or cast, they include unparalleled security features this manufacturing technique affords as well as being individually numbered. They are now priced barely over our standard cast bars as well and we've welcomed the big 100oz'er to the range (incl 10oz and 1kg). Visit our information page on these bars and you can order directly on line right now.
Things are certainly hotting up with silver around the world with demand overtaking supply with the US Mint now famously sold out of silver Eagles until further notice after selling 3m coins in the first 3 days of November and a record October, the Royal Canadian Mint anecdotally witnessing similar demand pressures, and premiums (for the real thing, not paper contracts) are on the rise.

Check out our current Silver Stacker range - until Dec 20th, from just $1.15 over spot!
Read more here > https://www.ainsliebullion.com.au/BullionInformation/SilverStackers.aspx

 

Debt v Gold
The accumulation of unsustainable government debt is one of the key reasons people buy gold and silver. The chart below clearly illustrates just how insane this has become as governments print money (accumulating debt on central bank balance sheets) to run continual deficits to remain elected and keep markets artificially buoyant and depress their respective currencies against the other to globally compete (which becomes a death spiral when everyone does it.). Last year we saw the gold price deviate from its historic trend of protecting wealth against this debt binge. Many believe this was brought about by orchestrated shorting of paper derivatives and defies global (particularly Eastern) demand. That East and West dynamic has seen 2 distinctly different approaches. China has played the debt game too but has bought things of intrinsic value like gold (at the low prices) in epic amounts and built infrastructure (even derided for its 'ghost cities'). The US has (simplistically) bought shares at very high PE's and which have repeatedly shown can lose 50-80% in value over night The disconnect depicted below looks set to reverse. As a reminder $16t is $16,000,000,000,000.

 

Currency v Money
We've had a couple of emails asking about yesterday's graph (thanks for your questions btw, they are welcome anytime!). The following is from our last seminar and it describes how 'money' is now created (using the US as an example but applies to all fiat currencies).
Money was backed by gold until 1971 "The Gold Standard"
All "money" now is created by debt and is backed by a "promise"
How is it created? USA example:
Government (Treasury) sells debt (Treasuries / Bonds) to raise funds for continual deficits
Buyers get paid interest (yield) and then paid back on maturity
The "Fed" (US central bank) buys Treasuries from member banks
It "pays" for them by simply crediting the banks - "printing money" by a keystroke
Banks then multiply that by around 10 times ("Fractional Reserve Banking")
The more the Fed buys, the less available, increasing the price
The higher the price the lower the yield. Lower yield =
Lower interest rates for you and the Government to borrow
Higher yielding investments look more attractive
But all these bonds purchases sit on the Fed's balance sheet and need to be paid back!
That's why you'll hear people say gold and silver are money, not the bank notes in your wallet. A fundamental requirement of 'money' is it must have intrinsic value. Gold and silver have that by virtue of how rare they are and how hard they are to produce. Paper currency is only an easily produced government promise the paper itself is worth nothing.

 

G20 and gold
So the last of the world leaders has left Brisbane and all are hailing it a great success. There are 2 things that standout for investors of gold to note. One, is there was agreement on 'bail in' failed bank treatment by all. This means that should a bank fail (ala Lehmans and others since) it will be the bank and its creditors that will wear it not the tax payer (ala Lehmans and others since). We remind you, you as a depositor in a bank are an unsecured creditor. The money is not yours if the bank goes broke. The Government Deposit Guarantee only covers $20b per bank. Cash in the form of gold and silver avoids this risk. Secondly, leaders agreed to a 2% growth target. Whilst many in Europe are closer to zero right now and others fragile at best, the risk is this is achieved through further stimulus accumulating further debt. Government's can only 'decide' on growth in an organic market by such means. As David Stockman, White House budget director under President Reagan told Fox Business News last week "Each and every day the central banks in the world get more out of control fuelling a bubble the likes of which we have never seen in modern times, if ever,". This all just reinforces hedging your wealth in gold and silver.

 

20B is about 5% of deposits assuming you get in first which will not happen

 

2 weeks to Swiss Gold referendum

We are now only 2 weeks away from the Swiss Gold Referendum we discussed earlier here. Latest, more credible polls still have the yes vote slightly ahead. The impacts of the yes vote eventuating cannot be underestimated for the gold market as it would see the Swiss National Bank needing to buy around 1600t of gold, or about 320t a year for 5 years. With annual gold demand around 4000t that equates to 8%. With China continuing to snavel up over half of that same global consumption, India snapping at their heels, solid investment demand, and other central banks still buying up (per our summary of World Gold Council's 3rd quarter update on Friday) logic would dictate an increase in price. But that is just on a supply/demand front. What about the implications of the message this sends the world? What about the rehash of the German repatriation fiasco with the US when they ask for their gold back? This "small" domestic referendum could have telling international effects, particularly in the gold market. As Andrew Hecht of Technometals had to say:

"The next two weeks are perhaps the most important weeks for the price and value of gold in years. Technical indicators are currently bullish with consecutive key-reversal days on the past two Fridays. Russia and China are buying gold and increasing their reserves. The gold market is tightening up due to a shortage of physical metal. Volatility, both historical and implied, is on the upswing as daily price ranges widen. The lead-up to the Swiss referendum has caused gold prices to move higher along with the value of the Swiss franc, which also put in a key reversal to the upside on Friday November 14.

The vote in Switzerland on November 30 could prove to be a watershed event for the price of gold and the metal's role as a reserve asset for years to come. A "yes" vote on the referendum could have contagious results, causing pressure on other governments to consider similar monetary policies. Gold is on trial on November 30 in Switzerland; a "yes" vote means higher prices, while a "no" vote means a return to the kind of trading action we have seen since [north hemis] summer. Keep your eyes on the Swiss election - the fate of the direction of gold lies in this decision."

 

Japanese Consequences

The world's 3rd largest economy, Japan, has entered another recession after a shock 1.6% contraction in the September quarter (they were expecting 2.2% expansion) after the previous quarter shrank 7.3%. This from the worlds 'leader' in debt to GDP (over 260%) and most aggressive stimulus program 'Abenomics' which just 2 weeks ago was ramped up even further. In the short term this pushes the gold price down as it strengthens the USD/YEN. There are a number of takeaways from the Japanese situation (very briefly) to think about:

Japan is a classic example of how central bank artificial stimulus can only do so much, for a short amount of time, accumulating massive debt against a structural economic problem.

Japan is somewhat unique in it has massive globally invested capital reserves what happens when they need to start divesting that as their currency continues to collapse and they need to fund the impacts of one of the world's worst aging and zero immigration demographic situations. (Australia in particular would feel the brunt of this).

The snap election called in reaction to this will probably show how we humans will vote for more stimulus over structural reform (Abe has already 'postponed' their scheduled sales tax increase) and kick the can down the road.
The impact for gold and silver investors? Well in the short term it may dish up more bargain prices to buy more. In the medium to long term though this just adds weight to the need to balance and protect your wealth against the inevitable crash, the size and severity of which grows with each day of these desperate attempts by governments to not have it happen 'on their watch'. The choice won't be theirs.

 

India surges back!!
The 2 graphs below make it abundantly clear that despite the best efforts of the Indian Government to curtail their citizens' (balance of trade cruelling) gold imports, demand is very much on the rise again. But it is silver that has upstaged the much loved golden cousin with October's import number of 1243t just 1 tonne short of the all time record of 1244t set in May 2011. Year to date India has imported 5535 tonnes, up13 % year on year. Whilst there is no let up from China to indicate India can reclaim their number 1 gold consumer status, and noting the numbers below don't include the widely accepted very large smuggling volumes, the mere fact that both are buying so heavily and the GOFO rate remains its most negative in 13 years in the future market speaks volumes for the supply demand equation at present.

 

A quick look at the silver chart indicates that the larger amounts have been bought on the dip.

 

Gold To Russia with Love
Listeners to our weekly wrap radio broadcast will know of the monthly gold purchase updates from Russia's central bank however something happened this week that deserves special consideration. The head of their central bank told the lower house of parliament they had purchased 150 tonne of gold this year (far in excess of World Gold Council's recent report) taking gold to 10% of their reserves, up from 77 tonne last year and pushed gold back over USD1200 in reaction. Such an announcement is unprecedented and appears to be a pointed geopolitical message to the west. Unsurprisingly then, they yesterday announced their October purchases were 600,000 ounces taking total reserves to 37.6m oz. Per the graph below September was already a 14 year high record month with 1.2m oz purchased. In reaction to the economic sanctions, it is widely understood Russia has been buying gold as part of its de-dollarization strategy and to support the Rouble which has declined by around 30% causing about 9% inflation. An interesting situation as the Swiss consider a topical referendum