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Well my crystal ball tells me otherwise. The Fed will not lift rates. They will gaze into each other eyes with a vague look and do what they always do. Which is - crap their pants. It's far easier to do nothing than upset the Wall St ponzi apple cart. Expect another round of QE, and another frenzy on the markets. It's important to look after ponzi. It's not quite end game yet. Silver and gold are going nowhere in the next 6 months. And why should it when 40 % profit can be made on the markets in a short time, and silver and gold lose money. That will not always be the case. However, while the West is not buying then China is not manufacturing. So commodities are staying down baby. We have some considerable blood letting to go.
 
silversearcher said:
Well my crystal ball tells me otherwise. The Fed will not lift rates. They will gaze into each other eyes with a vague look and do what they always do. Which is - crap their pants. It's far easier to do nothing than upset the Wall St ponzi apple cart. Expect another round of QE, and another frenzy on the markets. It's important to look after ponzi. It's not quite end game yet. Silver and gold are going nowhere in the next 6 months. And why should it when 40 % profit can be made on the markets in a short time, and silver and gold lose money. That will not always be the case. However, while the West is not buying then China is not manufacturing. So commodities are staying down baby. We have some considerable blood letting to go.
Click to expand...

+1

Kicking the can down the road.
 
The problem is that gold and silver unlike to rest of the commodities were not massively over produced due to miss-pricing. So while the paper derivative game continues where swapping bits of paper masquerades as a metal market of price discovery, all is good. While there is plenty of copper oil, zinc, etc to prop up a bloated market the same is not true of Pm's. When that system breaks then we will see which banks have the metal and which are swimming without bathers. Who cares if Edelson's timing is right or wrong, the prediction is correct, the timing 6 months less or more ? not so sure. I think it is wrong to group the PM's especially gold into the commodity sector which every mainstream analyst does without a second thought.
 
silversearcher said:
Well my crystal ball tells me otherwise. The Fed will not lift rates...
Click to expand...
I think there are layers and layers of bullshit clouding our view so it's impossible to make predictions. And remember, these people are no smarter than any of us and could f*ck things up monumentally, either accidentally or by the command of those with influence and an agenda.

Maybe we should be planning for multiple eventualities?
 
Indian Gold A Lesson in Counterparty Risk

Listeners to our weekly wrap podcast will know that India's central bank recently launched its desperate bid to 'monetise' the enormous amounts of gold sitting in what used to be, prior to China's last few years, the world's largest consumer of gold. Gold is India's second biggest import after oil, so the higher the imports the more damage to their trade deficit and pressure on their currency and they are long term holders of gold so it's not circulating in the economy either. After efforts to curtail imports through extraordinary import charges and restrictions (with increasingly limited effect), this latest cunning plan would see the government pay owners of physical gold a return for them lodging it in their trusty hands in return for a paper bond. The idea is the government can then 'lend' the gold to jewellers and auction it to bolster foreign reserves cash holdings. This is gold rehypothecation by any other name. We often talk of the 'strong hands' of the East and the 'weak hands' of the West (most recently here https://www.ainsliebullion.com.au/g...t-crash-e2-80-a6/tabid/88/a/1097/default.aspx). It should be of no surprise that the strong hands of India are not falling for this trick and in its first week a laughable 30kg has been processed.

One of the fundamental virtues of owning physical gold is it has no counterparty risk. EVERY other financial asset (including cash) is built upon unprecedented debt. The canny Indian's, indeed the East as a whole, know through 1000's of years of history that there is only one 'money' when this debt based house of cards comes crashing down. They are not about to introduce counterparty risk to that proposition.
 
2015 Silver Market Review Summary

GFMS Thomson Reuters just released its interim silver market review for 2015 and we summarise the findings:

> Total silver supply forecast to fall 1.01b oz, down 3% on 2014.

>> Mine production (at 867m oz) flat, scrap return down 5% and dehedging down 12.6m oz

>> Increases in primary production from Mexico offset by falls in base metal by product

> Silver bullion coin sales reached a new record high in Q2 at 32.9m (up 95% YonY). Demand lead shortages experienced amongst most world mints. 2015 total now forecast at all time record of 129.9m oz. up 21% and accounting for 12% of all physical demand. (Note the report does not cover bar demand)

> Industrial demand is forecast at 570.7m oz, 54% of total silver demand and down 4% on 2014

>> Solar (PV) demand is to increase 17% to 74.2m oz, fractionally below the 2011 record of 75.8m, and accounting for 13% of industrial demand.

>> Ethylene Oxide use is up 49% to 8m oz, the highest since 2010

>> Electronics demand dropped 12.9m oz, a trend since 2011 and exacerbated by weakness in China and miniaturisation of devices.

> Jewellery fabrication demand is forecast at 218.9m oz, down 2.5% on last year driven almost entirely by a big drop in China, with most other countries increasing.

> All up, the silver market is expected to be in an annual deficit of 42.7m oz in 2015. That makes it the third consecutive year of demand outstripping supply.

Economics 101 Supply & Demand should dictate these low prices can't last much longer
 
Confidence Is All That's Left

Many readers may already know of David Stockman, he was the Director of the Office of Management and Budget under President Ronald Reagan. In an interview last week he was asked how much longer this global monetary stimulus program can last and this is what he had to say:

"No one really knows. That's the problem. We are in such uncharted waters. None of this has ever been tried before. None of this is sustainable. It defies every law of common sense and sound economics and finance. Therefore, you are building up a larger and larger combustible element in the system that sooner or later will blow.

This is the final spasm of a dying bull market that has been entirely fuelled by central bank money printing. But if you look at the underlying trends both in the domestic and in the global economy and the outlook for earnings, everything that matters is heading south and the real global recessionary forces are just getting started."

Bank of America yesterday said there are over $17 trillion of government bonds now yielding less than 1%. In other words the 'smart money' is so afraid of financial markets they are happy to get a return of less than 1%. There are now many examples throughout Europe where bonds are yielding negative returns. The US Fed themselves said they would go there if necessary. This is not normal and common sense says it is not good.

Stockman also had this to say:

"We're headed for a very severe monetary crisis and period of great instability the very opposite of what has been experienced for the last six or seven years,when these markets have been effectively tranquilized by the central banks and their massive quantitative easing and intrusion into financial markets...

But it's going to change because we're reaching the point where they (central banks) are out of dry powder. I don't think the central banks have infinite power.I don't think they can keep interest rates suppressed forever if confidence is lost."

His point is a salient one at a time when holders of gold and silver may be feeling disheartened at the declining (USD) price. Irrespective of his credentials, it is a simple statement of logic. We have experienced an unprecedented and desperate economic experiment that has accumulated global debt eclipsing anything before it supported by near zero and negative interest rates but much more than that, by confidence. To take on such debt, to spend that credit on shares and property supported by the very same debt with consumers and businesses buying stuff on credit is, in its most simplistic basis, a confidence game. You are confident that everything will be awesome and that somehow this is not a Ponzi scheme. Confidence is a fickle beast. When this house of cards comes crashing down you may well just reflect on this recent period as simply the buying opportunity of a lifetime for the one thing that maintains it's value.
 
12th Year of Silver Supply Deficits

The Silver Institute released its interim 2015 report recently which we summarised here. It reported an annual deficit for 2015, which whilst important itself, becomes quite alarming when you consider the chart below illustrating that 2015 is set to see the 12th consecutive year of demand v supply deficits.

Global-Annual-Silver-Net-Balance-2004-2015.png


Our summary on Monday reported a 42.7m oz deficit and stated it was the 3rd consecutive year of deficits. That report however doesn't account for the inflows and outflows of ETF's and derivatives exchanges such as COMEX. The chart above does so. This year we saw 21.4m oz leave these holdings (as the USD spot has declined) and hence the net of -21.3m oz. What is quite amazing is that the total of the last 12 years' deficits is 1.02 billion oz! So where does this all come from? There is an abstract side source called 'Unreported Above-ground Stocks'. Respected research house CPM Group have previously estimated that has moved from a peak of 2.2b oz back in 1990 to just 200m oz in 2014.

The big question is of course 'when will the price respond to such supply v demand pressure?' Given the apparent near nullifying of the 'Unreported Above-ground Stocks', the current demand trends, and low silver and by product hosting commodities prices seeing pressure on production one could only logically conclude 'soon'.
 
Is the gold leverage game nearly up?
Last week we reported on the epic set up in COMEX vaults (a must read, with its links, if you missed it). To give the full picture of this leverage game Money Metals Exchange had this to say on Tuesday:
"The drop in physical inventory isn't limited to COMEX vaults.Trouble is brewing in London's LBMA market- the world's largest exchange - as well. Ronan Manly authored a report estimating that LBMA stocks outside the Bank of England vaults have fallen by 67% since 2011.

LBMA%20vault.jpg


However, the report estimates that ETFs hold 1,116 of the 1,122 tonnes remaining, leaving only 6 tonnes - roughly 200,000 ounces - really in play for delivery.
Consider that LBMA banks often trade 1,000 times that amount - 200,000,000 ounces - in paper gold per day, and you find the same completely untenable scenario.
The price is falling because exchanges around the world are happy to let traders and banks sell more and more metal they don't have and almost certainly can't get. On the other side are folks busily buying the paper gold and ignoring the metastasizing counterparty risk. And behind-the-scenes inventories are vanishing as players with greater concern take delivery of bars and head for the exit.
There is no tellinghowthis scenario will end. It could end if spot prices rise to the point that sellers with actual bars show up to sell. Or we may see exchanges engulfed and destroyed by a massive wave of delivery defaults. Who knows?
However, given the explosion in leverage over the past few months, the question ofwhenit will end may be easier to answer. The reckoning for metals markets may not be far ahead."
 
New record on silver coin sales
It is looking certain 2015 will be an all time record year for the sale of the 2 biggest selling silver coins the US Mint's Silver Eagle and Royal Canadian Mint's Silver Maple.
The US Mint will cease sales of 2015 US Silver Eagles from 11 December and have already sold 43.8m of them. 2014 set the record at 44m so that will be easily surpassed and there are estimates of 47m being reached for 2015.
As mentioned in today's Weekly Wrap podcast the Royal Canadian Mint just announced their 2015 Q3 figures and they were staggering. Silver Maples were up 76% to 9.5m oz (gold Maples were up 135%!). Year to end Q3 saw 25.2m silver Maples sold, 20.6% up on 2014 and extrapolates to another record 33.6m oz.
The graph below illustrates clearly the shortfall in supply to produce these as well. We sell both the US Silver Eagles and Silver Maples (and of course a whole range of Perth Mint silver coins too!).

U.S-Canadian-Silver-Production-vs-Eagles-Maple-Sales.png
 
Yet another new Comex record
About a month ago we reported the new record of COMEX futures contracts per ounce of registered gold available for delivery hitting 293oz paper to 1oz of physical gold with a measly 151,000oz available. Well that just got worse (or potentially better if you own the real stuff) with registered gold inventories dropping again to just 134,877oz. That is just over 4 tonne and hence less than a 10% of the weekly Chinese consumption figures we report each week in the Weekly Wrap podcast. The last week actually saw over 50t all real physical gold.

comex%20open%20int%20Nov30.jpg


And it's not just registered gold that's dropping with eligible inventory on the decline too.

comex%20reg%20and%20elig.jpg


Bill Holter wrote the following over the weekend (before the 150Koz dropped again) after the big sell off on Comex Friday night and puts it into context:
"Yesterday's post-Thanksgiving and illiquid trading day saw some 18,000 contracts sold at the COMEX within a 30-minute time frame.
In fact, there were 4 single minutes, which saw a total 7,000 contracts dumped on the market. For perspective, 18,000 contracts represents 1.8 million ounces of gold ...while COMEX claims to have a grand total of 150,000 ounces [now 134,877oz] available for delivery! 1.8 million ounces of gold is equal to well over one week's production of every gold mine on the planet, 150,000 on the other hand is just over 16 hours! For further perspective, China has been importing over 1.3 million ounces of real physical gold each and every week and amounts to nearly 80% of all gold produced. Why is this important? China is importing each week nearly 10 times the total amount of gold COMEX has for delivery in total. Put another way, COMEX gold "pricing" rests on a foundation 10 times smaller than what China imports each and every week! How is it credible that COMEX can sell 12 times as much "gold" ...in just 30 minutes as they claim to have available for delivery?
COMEX currently has a problem in my opinion. Their registered (dealer deliverable) category has not received any gold over the last two plus months and has done nothing but shrink to a level equal to just 16 hours of global production. First notice day for December gold is this coming Monday. With just one day left there are still 24,000 contracts open. If history is any guide, Monday will see a drop of 12,000 contracts and a 40% bleed down during the month. If this were to occur, we will see over 600,000 ounces standing with only 150,000 ounces available for delivery. We have seen this potential situation several times over the last couple of years but never with an available inventory as feeble as it is now."
 
Gold and Gresham's Law
Gresham's Law of economics (also known as Copernicus' Law, as Nicolaus Copernicus first formulated the theory in 1519) states simply that:
"When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."
Regular readers will straight away see the application of this law to what's going on right now in the world. Gresham's Law often gets quoted in terms of 'good' money and 'bad' money. From Wikipedia:
"This is because people spending money will hand over the "bad" coins rather than the "good" ones, keeping the "good" ones for themselves. Legal tender laws act as a form of price control. In such a case, the artificially overvalued money is preferred in exchange, because people prefer to save rather than exchange the artificially demoted one (which they actually value higher)."
Since we left the gold standard and in particular since the GFC, the US, Euro, China, Japan, etc, etc have 'printed' literally trillions in 'bad' fiat currency in a desperate attempt to reflate the economy. At the same time we have seen the massive and unprecedented shift of gold ('good money') from West to East that we often update you on. See the correlation?
There is another application of Gresham's Law playing out right now and that is of 'paper' or 'synthetic' gold and silver in the form of COMEX futures contracts (bad money) and real or physical gold and silver (good money). As we wrote last week, that is seeing a record disconnect as the physical gold is being 'saved' to the tune of 294 'bad money' claims to each 'good money' ounce of gold. When that comes undone, you would most certainly want to be in the 'good money' camp.
Topically, last night gold and silver prices got dragged down again within a global commodities rout. But as we wrote on Friday, gold is money not a commodity. Silver in effect 'wears two hats' in that it is both (hence in part the sky high gold silver ratio right now note to contrarians). The 'good money' dynamic must overcome this misconception at some stage soon.
So whilst the hapless hoards spend their freshly printed dollars the smart ones are snapping up the 'good' money in the form of gold and silver at low prices. If you've missed it before, the following cartoon sums it up.

china%20gold%20usd%20cartoon.jpg
 
Rate rise, USD strength and recession
Head of Global Macro Investor and ex Goldman Sachs Hedge Fund Manager, Raoul Pal has a reputation for making some pretty good calls of late. At the end of last year he picked the USD to rally strongly in 2015 (as it has done hitting a 12 year high), the price of oil would fall to $40 (as it has done), and that the US ISM Manufacturing index would fall below 50 in late 2015 (as it did last week printing 48.6). Such indices show growth above 50 and below 50 represents contraction. 48.6 is the lowest reading since the GFC and is in large part due to the rising USD making exports uncompetitive together with faltering Emerging Markets (EMs) not buying as much off the US. Pal points out the close correlation between the US economy as a whole and the ISM Manufacturing Index. He believes at current levels there is a 65% chance of a recession in the US and if it drops to 47 that jumps to an 85% chance. The graph below illustrates the correlation.
He said "The economic situation is deteriorating fast. And meanwhile the Fed seems to want to raise interest rates into that, which I think is a bit of a policy mistake and I think the market is getting more and more concerned from not understanding why they're doing it,"
As mentioned this is in part due to the USD and EM's. Topically, the Bank for International Settlements (BIS the central bank of central banks) just expressed grave concerns last week in a report highlighting the deterioration in EM's around the world and particularly the effect of the strengthening USD (which a rate rise would almost certainly see rise further). They said:
"The financial vulnerabilities in EMEs have not gone away.The stock of dollar-denominated debt, which has roughly doubled since early 2009 to over $3 trillion, is still there [and] in fact, its value in domestic currency terms has grown in line with the US dollar's appreciation, weighing on financial conditions and weakening balance sheets."
Again this highlights the dilemma of the US Fed. Raising rates has potentially dire domestic and global consequences in terms of the USD strength versus exacerbating the situation by perpetuating it. Good luck Janet.

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Tonight's the night
Finally, at last, we are almost here. At 6am tomorrow morning our time we will finally have the US Fed's rate rise announcement. In easily the most anticipated global financial market 'event' in a very long time the scene is an interesting one to say the least. Whilst surely such a talked up, jaw-boned and 'near certain' decision is 'priced in' few expect the markets to idly go on as they were. The scene is an incredibly dramatic, tenuous and complicated one. On one hand we have the common sense 'need' to normalise markets that have been artificially stimulated with near zero interest rates and money printing for 9 years. They have created asset bubbles everywhere and need to start letting markets be markets and stop the bubble inflation. On the other hand those markets are largely still languishing but addicted, and no one knows how they will handle a cut back in the 'juice'. The cheap USD saw emerging markets around the world borrowing rapaciously ($9 trillion) fuelled by strong commodity prices and a strong Chinese economy. The talks of raising rates has seen the USD rise to long term highs making all that USD debt harder to service (and perversely driving it up further) seeing EM currencies around the world plummeting, the likes of Brazil now in a full depression, others in recession and most others simply struggling under the burden. Plummeting commodity prices, at 13 year lows, mean lower incomes to service that same debt. Along with Brazil, Canada is in a recession and Australia yesterday saw our budget deficit blow out $34b for the same reason. As we've reported the last couple of days, all the corporate and junk bonds funding the massive energy sector growth at oil prices triple what they are today are starting to haemorrhage. As regular listeners to our weekly podcast will know the majority and certainly the details beyond the headlines of most US economic data indicators are anything but rosy. A rate rise would ordinarily see a stronger USD, a stronger USD makes US manufacturing and export even harder to compete globally, especially amongst all the falling currencies around the world. China just last week devalued the Yuan again and have flagged pegging it to the SDR basket rather than USD, another clear warning shot to the US Fed at the implications of its actions.
Adding to the drama of the scene, just 2 days after the announcement there is $1.1 trillion in S&P500 options expiring on 18 December.
What all this means for gold and silver is unclear in the short term. A jump in the USD could see more downward pressure but that USD / gold correlation is historically weaker than most commentators credit. Should markets rupture there are plenty predicting more QE stimulus could be deployed, especially in a US Presidential election year. Should that happen you could be fairly certain gold and silver will jump as it is a clear sign of desperation and to be damned with the consequences. One thing is almost certain and that is if they raise rates (and again, lets face it we are only talking 0.25%) it will be accompanied by some very very dovish commentary along the lines of nothing more to see here folks for a long time. This is a face saving, reputational move by the Fed and there appears no going back. Nothing will have materially changed, all the debt, all the derivatives, and all the bubbles are still there. The reasons for owning gold and silver remain as strong as ever.

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Lift off!
So in the least surprising move in some time the US Fed FOMC committee this morning voted unanimously to lift the US fund rate by 0.25% to 0.5%. In a classic case of buy the rumour, sell the news instead of predictions of immediate carnage we saw an almost bipolar reaction of both shares and gold and silver both surging on the news. The survey of officials, the so called dot chart, indicates expectations of the rate hitting 1.375% by the end of 2016. But let's be clear, that is 'expectations' not fact. If we look at the 2 previous hiking cycles and the environment they were in it gets a little scary looking. Recall too our previous article on their track record.
They previously hiked from 1994 to 1995 and 2004 to 2006. Let's compare:
Both 1994 and 2004 had higher unemployment rates but their participation rate was much higher (we are at nearly 40 year highs of 'given up') and earnings growth was also much higher then (household incomes are at a decade low in real terms now).
Inflation in 1994 was 2.1% and 2004 at 2.8%. Today it sits at just 0.2%, well below the Fed's 'target' of 2% which they seem to have given up on waiting for and are resorting to talking up 'expectations' of a rise this coming year. Just remember there are only 2 ways to deal with the record debt they have racked up and that is inflate it away or default. Raising rates amongst 0.2% inflation is part of the "policy error" call of many analysts.
GDP growth in 1994 was 3.4%, in 2004 it was 4.2%. Today it sits at just 2.2%. To give this weak number more gravity consider that in 1994 global growth was 3.4% and in 2004 it was 5.4%. Today it is just 3.1% (bolstered heavily by a falling, not stable, Chinese GDP). Worse still the share of US GDP from exports is now up to 12.5% compared to only mid 9's% for the previous. As we predictably saw last night, higher rates mean higher USD which will put more pressure on US GDP as the USD make their exports more uncompetitive, especially as China (and everyone else) keeps devaluing their currency.
Finally, and tellingly, the 1994 tightening cycle started after just over 2 years of post-recession recovery and 2004 after 2.5 years. Today is 6.5 years after the recession technically ended. This period also included unprecedented money printing to help stimulate the economy. It quite simply hasn't worked and 6.5 years marks 'too long' and they just had to do it and hope. The following chart from short term money market expectations maybe says it all.

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History lesson on real money
Amid this unprecedented (in scale only as you will shortly read) global monetary experiment it is worth putting the last 40 years (latest Fiat currency) into historical context. Simon Black wrote this earlier this week:
"Thousands of years ago in ancient city of Babylon, specially trained scribes gathered each day in the Temple of Marduk to record the day's events.
They used cuneiform writing instruments and clay tablets, over 1200 of which still survive today.
These scribes kept excellent records, detailing astronomical observances and water levels of the Euphrates River, as well as market prices for the most popular commodities like wheat, barley, and wool.
It's incredible that we have detailed records of grain prices going back thousands of years.
The ancient Babylonians quoted grain prices in shekels, a unit of weight equivalent to 8.33 grams of silver.
Over the 3+ century period between 384 BC and 60 BC, for example, the price of barley averaged 0.02053 shekels per quart in Babylonia.
At 8.33 grams per shekel, this would be equivalent to about 0.171 grams of silver per quart, or about $3.75 based on today's silver price.
After converting the unit of measurement from ancient quart to modern hundredweight (cwt), that means that barley in Babylonian times sold for $5.23 per cwt when priced in today's dollars.
And according to the US Department of Agriculture, yesterday's price for barley was $5.25 per cwt.
Amazing. When denominated in silver, the price of barley is almost exactly the same as it was thousands of years ago.
In other words, if a farmer from 23 centuries ago had sold a quart of barley, he would have received 0.171 grams of silver.
Fast forward to today and that 0.171 grams of silver would buy almost the exact same amount of grain as it did 23 centuries ago.
This is an important reminder, especially today as the entire financial system waits with bated breath to see if the US Federal Reserve will raise interest rates for the first time in nearly a decade.
It's ultimately a complete farce. Our entire financial system is based on awarding total control of our money to a tiny, unelected committee of bureaucrats.
They have the power to conjure trillions of dollars, euros, yen, pounds, renminbi, etc. out of thin air that are backed by absolutely nothing other than a thin veneer of confidence.
Civilizations have been experimenting with this model for thousands of years. And every single time it has failed.
Future historians will certainly wonder why we chose a financial system based on a model with such a long history of failure, and why we gave control of our savings and economic activity to unelected bureaucrats who are consistently wrong.
When you step back and look at the big picture, this system is totally mad. And full of risk.
Governments are insolvent. Central banks are nearly insolvent. Banking systems are extremely illiquid. National pension funds are insolvent.
And their solution is to keep borrowing and printing more money.
Look, holding some physical cash does make sense right now as a *short-term* hedge against risks in the financial system.
If the GFC 2.0 hits, you'll be glad that you're holding some physical cash (more on this soon).
But how much do you think your paper currency will be worth 23 centuries from now? Or even 23 years? Or potentially even 23 months?
Bottom line you're not protected unless you own some real assets.Gold. Silver. Land. Productive business. This should be part of any rational person's Plan B."
 
2015 in review
As we close for business tomorrow for another year let's do a little wrap for the year just passed.
In the US we saw:
S&P500 down 3.5% and at one stage in late August down 10%
US 10 year Treasuries finished where they started at around 2.25% but saw lows of 1.64% in Feb and high of 2.5% in June.
The USD index started at 89.6 and finished at 99.2 reaching a high of 100.5.
Gold is down 9.9% and silver down 9.7% in USD spot terms.
In Australia we saw:
All ords down 4.8% and as low as 8.4% in September.
The AUD fell from 81.5 to 71.7, almost mirroring the rise in the USD and which of course has been positive for gold and silver.
Gold is up 2.6% and silver up 2.8%
Observations
The year provided more insights into the underlying fragility of financial markets and economies after the unprecedented monetary stimulus and debt splurge programs undertaken, particularly since the GFC but more broadly over the 40 years since we left the gold standard. Greece, whilst a small fish in the pond, gave us a clear example of unsustainable debt levels early in the year and the need to have some of your wealth kept out of 'paper' and the system. It was 'fixed' with more and different debt.
The year saw growing calls of concern from the likes of the IMF and BIS about the unsustainability of the global debt v growth situation we find ourselves in and of course we saw the McKinsey Global Institute released their report showing that rather than the 'deleveraging' expected since the GFC 'lesson' we have indeed seen global debt RISE by $57 trillion to $199 trillion or 286% of global GDP.
The debt burden, rising USD, plummeting commodities and sluggish consumer demand saw most economies tepid at best and many on the brink of or in recession. In this scene, last week's US rate rise will be interesting to watch wash through markets early next year.
The year continued to see the monumental shift of gold from west to east with China setting a new gold consumption record of over 2500t and Indian's starting to defiantly shrug off their draconian import restrictions to rebound strongly too. India and China alone will have consumed over 80% of the world's gold for the year. The US Mint saw a record year of 1oz silver eagle sales at 47m, easily surpassing last year's record of 44m. In contrast to all this real metal, the futures market through COMEX saw an all-time record of 294 contract claims to each available ounce of gold.
As for what 2016 will bring, no one knows but the scene is an interesting one. Simplistically it is still a global economy founded on credit and stimulus over substance. Whilst the so called US recovery is heralded as the saviour, regular readers and listeners to our podcasts know it is anything but robust. It now needs to deal with a dollar strengthening rate rise and fracturing global markets to which it is inextricably linked. But let us repeat, no one knows. And it is for that reason having an allocation of gold and silver in your portfolio balances and protects your wealth. We escaped the muted crash of September but even that 'wobble' exposed the thinness of the physical gold and silver market. Waiting to pick the bottom when the real crash comes may mean you simply can't get it at all.
 
On 01 December 2014

Silver prices.

20 x 1oz Kooks cost $23.61 per coin.

20 x 1oz Lunar cost $30.01 per coin.

10 x 2oz Lunar cost $49.02 per coin.

10 x 5oz Lunar cost $121.55 per coin.

5 x 10oz Lunar cost $217.27 per coin.

1 x 10oz Perth bar cost $201.50 (From the Perth Mint)

1 x kg lunar cost $672.60

The exchange rate was 0.84436
 
"Sell shares, buy gold"
Welcome back to what is shaping up to be a very very interesting year for financial markets and precious metals. To set the scene for 2016 last week's Chinese sharemarket falls saw the worst start to a new year in the all important S&P500's history, down 6% in 5 days, and Australia is set to continue its worst start ever today with more big falls predicted. Of course the rest of the world followed suit too. Gold and silver, as you probably know, did the opposite and rallied as the market started looking for a safe haven.
Before this even played out financial giant UBS came out in the new year with a very clear warning to investors to sell shares and buy gold in 2016. Their analysts walked us through a number of charts and facts that are screaming an imminent financial crash. They also see gold bottoming and starting its next "multi-year" bull run.
Below is but one chart and they note "the S&P-500 now trades in its 4th longest and 5th strongest bull market since 1900."

S&P%207%20yr.jpg



Critically too is they debunk the US Presidential Election year bull market myth (which this author had been concerned about this year for gold). Most believe that sharemarkets always rally in a US Presidential year (the powers that be keeping things looking good for the incumbent). However this is most certainly not the case when it is the 8 year of a presidential term, as is the case with this year and Obama. The 100 year average for 8th term elections is actually negative! So in a market largely inflated by years of money printing and zero interest rates, not even political intervention has its 'back' this year.
We promise to keep our daily news short so we will stop here but the message is abundantly clear for 2016. Just last week legendary billionaire investment manager George Soros had this to say (Soros is one of the greatest traders of all time. From 1969 to 2011, he generated an average annual return of 20%...nearly double the S&P's average return of 11%) (ex Bloomberg):
'China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world. A return to positive interest rates is a challenge for the developing world, he said, adding that the current environment has similarities to 2008.
'"China has a major adjustment problem," Soros said. "I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008."'
Tomorrow we will pass on one of the best explanations of what is happening in China. Until then
 
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