Welcome to SurvivalBlog’s Precious Metals Month in Review. Each month we take a look at “the month that was” in precious metals. We cover the price action of gold and examine the “what” and “why” behind those numbers.
What Did Gold Do in April?
Gold prices started April steady, after gaining 8.1% in the first three months of this year. This changed on the 4th, when gold rallied after North Korea launched a missile into the Sea of Japan. President Trump ordered a cruise missile strike boosing Gold. The Syrian airfield is thought to have been the staging point for a poison gas attack on civilians. The resulting safe haven demand saw gold gain $30 an ounce in three days. Gold made runs closing above $1,290 multiple times. However, it was unable to sustain more than momentary breaks above this important level. Even so, spot gold stayed above $1,280 an ounce until the French Presidential elections on the 23rd. The centrist candidate won the first round. That began a slide in gold prices to end near where it started the month.
Factors Affecting Gold This Month
Rogue State Risks – Syria
A poison gas attack on a Syrian town on April 4th resulted in a reported 74 dead and 574 wounded, including many children. Several Western intelligence agencies blamed the Syrian government. Airstrikes on the town occurred shortly before the gas drifted over the town.
The Syrian government, backed by its sponsor Russia, carried out airstrikes against a suspected weapons depot warehouse. An Al Queda-affiliated rebel group is suspected of running the warehouse. They further went on to say that any chemicals released would have been stored by those rebels in the warehouse. The group, formerly known as the Al Nusra Brigade, is implicated in past chemical weapons attacks.
President Trump responded to the tragedy by quickly reversing a campaign pledge to keep the U.S. out of Syria. He ordered 59 Tomahawk cruise missiles launched against the Syrian Air Force base. The base is believed to be the staging point for the attack. The U.S. missiles did no lasting damage, and the airfield was back in operation in 48 hours. This led some analysts to believe that the strike was simply a warning shot to the Syrian government.
These events plunged Russia-U.S. relations to a level last seen during the Cold War.
Rogue State Risks – North Korea
Also on April 4th, on the other side of the world, North Korea successfully tested a medium-range ballistic missile, which fell into the Sea of Japan 40 miles away from the launch site. This missile launch occured the day before the President of China met with President Trump. This is seen by Western analysts as North Korea sending a message to both nations.
President Trump responded with threats against the North Korean regime regarding its missile tests and efforts to build larger nuclear weapons. Trump states that the United States would punish Pyongyang if they continued along this path. These threats included plans for possibly shooting down any further missiles launched by North Korea, an act that terrified South Koreans. This act could incite North Korean dictator Kim Jong Un into ordering a nuclear or poison gas strike against South Korea. Seoul is only 35 miles away from the North Korean border. Kim responded to Trump’s threats by ordering another missile test on April 15th, but the rocket exploded shortly after takeoff.
Unnerved by the thermonuclear game of Chicken that is escalating between North Korea and the Trump Administration, Japanese citizens are frantically trying to get family fallout shelters built with air filters that can stop poison gas as well as radioactive fallout.
Rising Yen, Falling Dollar
More evidence that the U.S. dollar is losing its dominant position in the world: the Japanese yen once again was the safe haven currency of choice, even though the country is a prime target for a North Korean poison gas or even nuclear missile attack.
The British pound sterling didn’t do the greenback any favors either in April. It shot up three cents to the dollar on April 18. UK Prime Minister Theresa May called for snap elections on June 8. This was a reversal from numerous pledges to not call an early election. May believes her Tory party can substantially increase its slim majority in Parliament. This would give her more power to negotiate a Brexit from the European Union.
Gold was up and the euro down in the last half of April. Worries that far-right, nationalist candidate Marine Le Pen might see victory in the first round of the election were prominent. She was riding French fear and anger over multiple terrorist attacks. She ended in a strong second place, less than three points behind the centrist candidate, Emmanuel Macron (21.3% to 24%).
However, the odds tilted drastically in Macron’s favor after the first-round poll results came in. Republican candidate Francois Fillon, with 20% of the vote, and surprisingly Socialist candidate Benoit Hamon, with 6% of the vote, urged supporters to rally behind Macron in the runoff in order to prevent Le Pen from becoming President.
This caused the euro currency to soar, further weakening a dollar already under attack by the yen and pound. This did not help gold and save haven demand immediately evaporated in every major market around the globe
India Gold Demand
Indian citizens now have a great distrust of paper money, after PM Modi demonetized 86% of the nation’s currency with no warning. What’s to prevent him from doing it again? Nothing. Therefore, everyone’s converting as much cash as they can into gold.
On the Retail Front
The big stock market rally and expectations of a huge stimulus spending package from the Trump Administration has cut into mainstream precious metals demand. The U.S. Mint sold only 835,000 American Silver Eagles in April and only 5,500 American Gold Eagles of all sizes. Consumers only purchased 3,000 of the .9999 fine gold American Buffalo 1 oz coins.
These low mintages have collectors wondering if 2017 might be a key date for Silver Eagles? Adding to the excitement among collectors, a Freedom of Information Act request against the U.S. Mint revealed the rarest bullion strike Silver Eagle in history.
The Perth Mint issued a new Silver Swan 1 oz coin with a 25,000 coin mintage limit. They were sold out in less than 48 hours.
Aside from this big hit, things were slow Down Under. Perth Mint gold sales for March slipped by 12%, after falling a huge 65% in February compared to January. Perth Mint silver sales for March were more than 42% higher than February’s totals, but 59.2% as much as a year ago.
State-controlled media in China reported this month that Chinese gold consumption rose 14.73% in the first quarter of the year to 304.14 metric tons. While gold jewelry sales were up by 1.4%, gold bar demand flew 60% higher to 101.19 tonnes on safe haven demand. Gold bullion demand almost exactly matched domestic Chinese gold production for the first quarter. 101.2 tonnes of gold was mined in China in the first three months of the year, down 9.29% from the same time last year. In other Chinese bullion news, Commerzbank reported that Chinese silver imports in March were 42% higher than a year ago, totaling 357 tonnes. For the entire first quarter of 2017, Chinese silver imports were 948 tonnes, the highest in six years.
International Sactions hit the domestic gold mining sector hard. The Russian government once again helped out. March saw the nation’s official gold reserves grow by another 25 metric tons.
India is seeing a huge surge in gold demand ahead of Akshaya Tritiya on April 28. This is one of the four most holy days on the Hindu calendar. Jewelers are bracing for gold demand to be 30% higher than last year.
Modi isn’t the only national leader trying to force his population into giving up physical cash. Unlike the west, Modi forced Indians to start using online payments and debit cards. He took away most of the nation’s paper money. Their campaign to abolish physical money and move to the “so convenient” cashless society is almost finished. Good luck with trying to pull your money out of your account to prevent it from being seized in a bank “bail in”.
War on Gold
The banks and governments know the best way to store your wealth outside of the banking system. This is why Jim Rickards warns that the “War on Cash” is over, and the “War on Gold” is beginning.
The crown of King Dollar continues to tarnish, as the world moves away from the view that it is still the best currency to hold during times of unrest. The Japanese yen is the new safe haven currency, as we have seen on several occasions in the last few years. Of course, gold is still the ultimate safe haven currency.
Is The End Near?
Steve St. Angelo at SRSrocco Report says that the collapse of Western Civilization is now unavoidable, as energy markets implode. The time to act ended 20 years ago, nothing can be done now.
Doug Casey says that we won’t have to wait long for it to start. He warns that the EU will be destroyed in short order, as the globalists are overthrown by the new wave of nationalist populism. (Of course, the leftwing and rightwing populists will fight in the streets, making sure everything is destroyed.)
Also in the “imminent crisis” category, Jim Rickards warns that even Donald Trump can’t stop the imminent financial crisis. If he could follow through on campaign promises to force big Wall St banks to separate their investment bets from their lending business (Glass-Steagall) and ban the derivatives that caused the 2008 Financial Crisis, he might have a chance. Having bank lobbyists leaning on Congress and Trump’s own White House full of former Goldman Sachs executives means that would be impossible to actually implement.
Max Keiser notes that the President may need to follow in Nixon’s footsteps and force the Fed to print more money to keep the economy from imploding.
Naturally, currency debasement is always good for gold. This is why hedge funds are scrambling for a “golden life raft”, according to the analysts at Schiff Gold.
Peter Schiff remarks on the destruction we’ve already seen of the American Dream, specifically the death of the middle class. He points out that “We USED to be the envy of the world”, but now what counts as the Middle Class in America would be considered poor in the 1950s. A man used to be able to support his family while his wife stayed at home and raised the kids, buy a house, and retire with savings in the bank. Today, both work full-time, but if they miss one paycheck, calamity ensues.
Alessandro Bruno at Lombardi Letter warns that the average American citizen’s debt-to-income ratio is high. The highest since the eve of the Great Financial Crisis. Government debt-to-GDP ratio is also at crisis proportions. These unsustainable debt levels are on the verge of triggering another economic collapse in the U.S., which will drag the rest of the world down with it.
Last month a gold analyst used the Mexican version of the Freedom of Information Act to get a list of most of the Mexican central bank’s gold bars being held overseas. This month, the Swedish national bank refused to honor a similar request, hiding behind the excuse of “national security”
The London Bullion Market Association (LBMA) is attempting to deal with the broken London Silver Fix. There are weird swings in the benchmark that are wildly different from the spot price at the same time. This is hitting traders, big banks, and investors with surprise market losses or gains. This explains why the companies the LBMA hired to run the silver fix, CME Group, and Thomsen Reuters suddenly quit. (CME Group also runs the COMEX. Doesn’t that make you feel confident that gold futures are priced correctly?)
Ronan Manly at BullionStar notes that the London Gold Fix is broken as well, costing traders millions of dollars worth of bogus expenses.
Going back to SRSrocco, we read that a huge decline in Peru’s silver production may spell shortages in the near future. Peru has been one of the world’s top silver producers since the Spanish conquest of the area in the 1500s.
Since silver is a by-product of copper, zinc, or lead mining, when “Dr Copper” catches a cold, silver production gets the flu. News that copper production in Chile is at the lowest point since 2011 has really not done much at all to reduce the global copper glut. This glut will force mining companies to scale back copper production. Mining less copper mining less silver.
Peru and Chile are the second-largest and fourth-largest silver producing nations in the world. Global silver production may be lower than you think: There are only nine countries in the world that have annual silver production over 1,000 metric tons, accounting for 80% of global silver mining. The total of every other nation on Earth barely equals Mexico’s output alone.
Venezuelans and Russians
Also in South America, the rule of law continues to rot away under the embattled socialist government in Venezuela. The Maduro regime has been selling national assets hand over fist to the Chinese and especially Russia, without Congressional approval. This includes using their U.S. subsidiary, Citgo, as collateral for a $1.5 billion loan from Russian state-owned oil conglomerate, Rosneft.
If the Venezuelans default on this loan, Russia will gain all Citgo refineries, oil terminals, and pipelines, becoming the largest foreign owner of U.S. oil infrastructure. This would enable Putin to threaten to bring America to its knees by disrupting the flow of oil from wellfields to refineries, if sanctions over the Russian invasion of Crimea aren’t lifted.
Justin Spittler at Casey Research says “Get Ready For The Biggest Gold Move In Years”, saying “the trend is your friend” and the trend is moving into gold.
The largest gold mining companies in the world are exhausting their existing gold deposits. So it’s only natural that they have become really interested in the new high-purity gold strikes happening in the Yukon. The small gold exploration companies who bet everything that the richest gold deposits had remained hidden during the Klondike Gold Rush were right. Now they get to reap their rewards in the form of huge checks from the big boys.
Look for plenty of drama in Washington next month. Trump will work with the House Conservative Caucus to pass a “repeal and replace” plan to get rid of Obamacare. He will also negotiate taxpayer funding of his Mexico border wall.
Senator Ted Cruz of Texas has introduced the “El Chapo Act”, which would seize an estimated $14 billion in blood money belonging to the captured Mexican drug kingpin “El Chapo” Guzman. Reducing the amount of drugs (and illegal immigrants) coming from Mexico is the goal of funding the wall.
Europe is caught up in the second round of presidential elections in France in early May. Semi-establishment candidate Macron and extreme-right National Front candidate Le Pen will battle for the hearts and minds of all Frenchmen.
France has been the victim of more terrorist attacks than any other nation outside of the Middle East. If it suffers more murders of its people at the hands of Islamist terrorists, the anti-Muslim/anti-immigrant Le Pen could ride the resulting outrage into the President’s office.
Of course, what to do with North Korea and its crazy dictator will occupy the U.S., China, Japan, and South Korea for yet another month. On the other side of the world, President Trump will have to defend his “red line” in Syria (over loud objections from Russia), if there is another chemical weapons attack on civilians.
The Israelis are now getting more involved as well, hitting Hezbollah supply dumps near Damascus with airstrikes deep into Syrian territory. This was quickly followed by an incursion into Israeli airspace by a flying object that was struck down by a U.S.-supplied Patriot missile.
Let’s end the month on a positive note, where we hear the story of a woman donating an ultra-rare gold coin to a church that could not afford its own building.
– Steven Cochran is the Content Manager/Editor for Gainsville Coins