December in Precious Metals, by Terrence Campbell of Gainesville Coins

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Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover the price action of gold and silver and examine the “what” and “why” behind those numbers.

Gold continued to sputter throughout the month of December, hitting a high of just 1,230 per troy ounce on the 10th, and slowly sinking to a low of 1,175 over the next two weeks, ending on the 25th. Market analysts are again attributing the weak performance of gold to continually sagging crude oil prices globally, lower than expected inflation, and gains to the dollars index. Equities have seen a slow and steady growth throughout December; the Dow Jones in particular saw steady growth over the month, after giving up moderate losses during the second week.

Silver was much the same throughout December, starting the month at 15.75 and ending about even after a month of modest activity.

Precious Metals Market Drivers in December

The story again in December seems to be a surging dollar along with crumbling prices for crude and other commodities. While deflation still remains a serious risk for the increasingly fragile European Union, talks of a strong retail year suggest that Janet Yellen and her friends at the Fed will surely need to increase interest rates to prevent the U.S. from falling too far below its inflation target of 2% annually.

The U.S. Job Report painted a rosy picture for investors looking to start cashing in on equities trading. The total number of non-farm payroll jobs added during November was 321,000, leaving the U3 unemployment rate unchanged at 5.8%. Again, why is it that the Fed seems to think it’s okay to forget about people who seem to be stuck in that discouraged workers category. Some people in the industry, like myself, seem to believe that this is just another fabricated jobs report meant to bolster the image of the Federal Reserve cartel as QE measures have come to a close and the reality of a fiat money system are once again realized.

The story hasn’t changed much over the last month, with the big worries coming from European and Asian markets, which are on the brink of a massive deflation, spearheaded by the continuing economic warfare propagated by the U.S. against Russia, as eloquently put by David Stockton.

U.S. Continues Squeeze on Putin

As oil prices continue to plummet, the economic forecast for the Russian nation continues to grow darker and darker. An all out currency and commodity war is currently underway between Obama and Mr. Putin, but who will ultimately win?

As U.S.-led sanctions seem to be taking their toll on the struggling Russian economy, staggeringly low oil prices, which were at $115 per barrel just last June, have sunk to an untenable $60 per barrel and lower over the month of December. The question is, at what point is all this economic warfare and commodity price manipulation going to blow up in Mr. Obama’s and Mrs. Yellen’s fiat face. The Russian economy is teetering on the brink of total collapse, which could threaten the economies of China and the European Union. I’m curious to know what makes the cranky Keynesians in the White House believe that undermining the economic solvency of one of the largest trading partners of Asia and Europe won’t have consequences for the American economy down the road.

As Russian bond prices are once again due to be downgraded by S&P, which would put them in the junk category, the White House and the Federal Reserve seem to believe that the United States is insulated from the possible woes that are sure to be experienced by the Russian people over the next year. However, a defiant Putin seems to be determined to break his nation away from the tyranny of a U.S. Federal Reserve system that is determined to use its power as the world currency as a means of coercion and weapon of mass destruction. Not that you should have any sympathy for an autocratic former KGB dictator, but anyone should be worried about the consequences of cornering a pit-bull like Putin, no matter how starved and weakened he may be.

Increasingly, we are seeing lower gasoline prices at the pump– a constant reminder of Mr. Obama’s economic war on Mr. Putin. However, for as nice as those gas savings are, there is a price to pay for everything. Continuing their currency and commodity war against the Russian nation threatens to send the whole world into a downward spiraling vortex of deflation, which at a certain point could lead to a worldwide economic meltdown of plummeting prices and unemployment.

One must consider, if Russia has the capacity to bring mutually assured destruction through traditional warfare, what’s to make us believe that they don’t have the same capacity economically speaking. No, they don’t have the same degree of global economic control as the U.S., but they wouldn’t need it, much like they don’t need a nuclear arsenal that matches America’s in order to bring on a nuclear winter.

Whatever the case may be, I have to continually hold my breath as the love lost between Putin and Obama grows less and less by the day. As much as I detest the policies and ideology of President Obama, let us all pray (for our own sake) that he comes out on top of this one. Dueling with a Russian pit-bull takes either a vast amount of “manhood” or a complete descension into self delusion. Let us hope it is the former.

Dovish Fed Sends Equities in Fantasyland.

As we stated earlier in this blog-post, American equities are once again on an fiat-fueled frenzy, reminiscent of an ecstasy laden rave club. Janet Yellen’s forecast of low inflation expectations over the foreseeable future have sent the casino gamblers, ahem, I mean Wall Street bankers, on a spending spree that is sure to bring economic doom and destruction, ahem, solid economic performance, over the longer term as the American economy continues to manufacture false prosperity -ahem- recover from the financial crisis.

So, what’s it going to be Mrs. Yellen? As expectations of continually falling commodity prices spur whispers that the Fed will have to raise interest rates at some point in 2015, the question remains, how can an economy that is built with the structural integrity as a third world shanty take the impending beating that is sure to come from a hike in interest rates? On the other hand, with deflation looming throughout the European Union, Janet seems to be stuck between a rock and a hard place. With no more QE money to fuel a false recovery, what sources of fiat sorcery will the embattled Chairwoman turn to this time?

At this point, all the fake money that has been printed to help us pretend that things are okay hasn’t actually been printed at all. It just gets put into the electronic accounts at the many financial institutions that ripped us all off in the first place. Maybe Janet could go to the post WWI Germany well and actually start printing fresh Ben Franklins and Andrew Jacksons. Am I actually advocating for hard currency printing en masse? Of course I’m not, but this is the reality at this point. Since the end of QE3, the Fed is all out of tricks, and the recent “economic gains” over the last couple of months are the calm before the storm.

Now that we’ve printed all the money that the balance sheets of the Fed’s Open Market Committee can handle, we’re faced with either doing nothing, which will lead to the U.S. being pulled into a deflationary downward spiral, or we could engage in more money manufacturing a la the Fed and/or Treasury. Janet already used her last bullet to loot the oil fields of Russia, and she cause great long-term damage to them, the EU, and ourselves, but now she’s out of tricks, and she’s going to be the one left holding the empty bag. Oh, I’m just kidding; you, me, and our children will be the ones holding the bag while she’ll probably be off poolside in Tahiti.

On The Retail Front

It’s been another record setting year for the U.S. Mint, as sales of American Silver Eagles has hit another annual record at more than 44 million total ounces sold. This has been spurred by the four- to five-year lows of silver, which have created shortages on silver products of all kinds. An interesting report shows how the number of silver eagles sold relative to gold eagle sales has also more than quadrupled over the last year– a phenomenon that can’t be fully explained by falling prices, as gold prices have hit four- to five-year lows in recent months.

In fact, in absolute terms, the number of Gold American Eagles has dropped year over year from 2013, continuing the longer-term pattern of decreasing gold demand. The ratio of Silver Eagles sold to Gold Eagles sold stood at a whopping 84/1 for the year 2014, the previous high being 50/1 during the 2013 calendar year.

The Royal Canadian Mint experienced similar sales patterns this year, with Silver Maples Leaf’s sales setting a new record of nearly 16 million total units, while Gold Maple Leaf’s seem to follow the same pattern of declining sales as the U.S. Gold Eagle, both in nominal and relative terms.

Hong Kong seems to have realized a lower gold demand heading into December, a result of crackdowns on corruption by the Chinese Central government. Despite continued low prices, demand for investment-grade gold and gold jewelry plummeted during December, as Shanghai has been drained of most of its gold and silver reserves. Asian demand has put a serious strain on gold over the last two years, but at this point it’s probably safe to say that their gold-buying frenzy is over for the moment.

Looking Ahead

January is historically a slow month, economically; look for little in the way of gains during the first month of the new year, as the hangover from too much egg nog and credit card spending starts sinking in.

Reports on retail sales figures for the month of December, and for the year as a whole, will have a huge impact on commodity prices as well as equities. Much as with anything else, yearly reports on employment, earnings, and inflation will be the drivers of economic activity going forward into the New Year.

From everyone here at Gainesville Coins, may you have a Merry Christmas and a Happy New Year.

Terrence Campbell is a content writer at Gainesville Coins.

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