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 examine the “what” and “why” behind those numbers. What Did Gold Do in November?
Gold fell prey to the Fed and its pet monster the dollar in November. A huge non-farm payrolls report on November 6th set the tone for commodities for the rest of the month. Traders took much better than expected non-farm payrolls as pretty much a guarantee that the Fed would raise rates from near-zero at the December 16th meeting.
The dollar, which was already strong, grew stronger during the month on those rate hike expectations. This put pressure on all commodities that trade internationally in dollar amounts, including precious metals. Gold moved from $1,135 an ounce at the start of November to finish the month near $1,070.
Factors Affecting Gold This Month
CENTRAL BANK DIVERGENCE
While a parade of Fed officials have spent the month signaling that a rate hike is very probable next month, the European Central Bank and Bank of Japan have been continuing in the opposite direction. “Super Mario” Draghi, head of the ECB, has pledged to raise inflation “as fast as possible” as the EU looks to be slowing down.
Japan has dropped into its fifth recession in a row, despite the world’s most ambitious QE program. While the BoJ kept rates at the same level at its latest meeting, analysts believe that the pressure will grow for even more stimulus. The question is, what more could they possibly do?
Of course, all this overseas talk about money printing had people piling into the US dollar. As November went on and the odds of a Fed rate hike increased, the dollar was pushed up to fresh highs for the year. Dollar was already stronger, thanks to falling euro and yen. As odds of Fed rate hike grew, the dollar became even stronger. Higher interest rates make each dollar worth more.
EU MELTDOWN AFTER DAESH ATTACKS
The Eurozone was already fracturing over a tidal wave of immigrants from the Middle East and Africa before the terrorist attacks in Paris. The attacks, the largest atrocity on French soil since WWII, has brought national security to the forefront. France and other nations are abandoning budgets and austerity measures as they ramp up their security forces and military. European politicians are using the attacks as an excuse to enlarge the surveillance state, just as the US government did with the PATRIOT Act after 9/11.
French president Hollande asked parliament to extend the national state of emergency for three months, and to rewrite the Constitution to allow him more freedom to declare and extend states of emergency. Parliament is also working on what had been called the French PATRIOT Act. Reports note that the Paris attackers did not even use encryption in their texts or emails.
After the attacks in Paris, we have taken to calling this extremist terrorist army by their Arabic nickname, Daesh. They see this name as disrespect and ridicule (because it is, kind of) and threaten to cut out the tongues of anyone who uses it. The word denies them the legitimacy they desperately crave. Every time a news outlet or politician uses “Islamic State,” it cements the view that these murderers and cutthroats are rulers of a nation.
On the Retail Front
Despite the efforts of the proponents of fiat money, and rationing by the US Mint, American Silver Eagle bullion coins are set to make a third annual record in a row. At press time, 2015 ASE sales were at 43 million coins, comfortably in second place. This is only one million coins shy of the all-time record.
Australia’s Perth Mintannounced on November 5th that gold coin sales in October were the best in over a year, and 21% over this time last year. Silver coin sales were so good, that they had to start rationing them.
According to Thomson Reuters GFMS, we will see a worldwide silver shortage for the third year in a row this year. Lower prices have seen scrap silver recycling dry up. Mining has also slowed down as copper, lead, and zinc mines are closed due to even worse prices. Nearly 70% of silver comes from these mines, as it often appears with these base metals.
Peter Schiff says there’s no need to fear the rate hike, as gold has shown before that it can flourish in an environment of rising rates.
Lawrie Williams notes the fallacy of the mainstream press using Hong Kong as a measure of Chinese gold imports. China began importing gold directly into Beijing or through Shanghai, to keep prying Western eyes from knowing how much gold they were accumulating. That gold accumulation is still going strong, as it seems that they bought another 14 metric tons of the stuff in October. Russia also continues to be a big buyer, getting good prices by absorbing domestic production. This helps keep the Russian gold mining industry afloat while Western sanctions over Ukraine remain in effect.
On the subject of central banks and gold, our friend Koos Jansen explains why Austria is repatriating its gold from the Bank of England.
The recent GOP Presidential debates exposed mainstream America to the concept of the Gold Standard, as Ted Cruz takes up a cause long espoused by Rand and Ron Paul. Both Paul and Cruz are working to have the Fed audited, as well. This appreciation of sound money is echoed by the CEO of Overstock.com. He has set aside $10 million in physical gold and silver to pay his employees in the event of a collapse in the banking system. He also has stocked a 30-day supply of canned food for every employee and their families.
That bank crisis may not be as far away as many think, as Marc Faber explains that a worsening global economy and money printing overseas will force the Fed to reverse course and do the same.
Peter Schiff explains how the unprecedented quantitative easing by the Bank of Japan is turning that nation into a state-owned economy, and how the US could be next.Even Bloomberg is picking up on just how much of the Japanese economy is now owned by the government.
Over at Casey Research, they run down a list of the best fund managers on Wall St that are getting out of the stock market.
The much-heralded plan by the Modi government in India to get their citizens to deposit their gold at the bank to earn interest (and let the bank sell and loan that gold) has gotten a resounding raspberry. Only 400 grams (less than 13 troy ounces) has been deposited at banks nationwide. Indians have known for centuries that “if you don’t hold it, you don’t own it.”
December starts off with Fed Chair Janet Yellen doing her regularly scheduled testimony before the House and Senate on December 2 and 3. The third is also when the ECB has its last policy meeting of the year. All eyes will be on Europe to see if the ECB cuts rates and/or expands its money printing.
The very next day (December 4th,) the November non-farm payrolls will be released. This will be the most important economic report in a long time, as it is seen as the final “go/no go” for the Fed’s interest rate hike. This is going to have a big effect on the dollar and commodities. On December 16th, we finally find out if the Fed is bluffing on a rate hike. If they don’t hike, their credibility (and ability to affect the markets) will be shot. If they do hike, even just a tiny bit, it could have serious effects in emerging markets that could spill over into Europe and the US.
We end this month with the story a Swiss cherry farmer who found a stash of 4,166 ancient Roman coins under his orchard, thanks to a mole that had kicked one out of his burrow. (The government has seized the coins, of course, while the farmer will get a “small finders fee” for his honesty.)
– Steven Cochran is the Content Manager/Editor for Gainsville Coins