Welcome to SurvivalBlog’s Precious Metals Month in Review, by Steven Cochran of Gainseville Coins 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 July?
The usual summer doldrums in precious metals were nowhere to be seen in July. Gold started the month on the right foot, rapidly hitting prices not seen since March 2014. Silver prices also accelerated right out of the gate to hit a 22-month high. Stocks reversed their declines in the middle of the month, rallying to hit new record highs. This impacted precious metals and other safe haven assets, as money was pulled out and moved into stocks. Gold slid to test important long-term support at $1,315 an ounce on the 21st, pressured by the US dollar hitting a 7-week high.
Precious metals ended the month on a high note, as the dovish Fed policy statement on the 27th sent gold $20 higher to $1,340 an ounce. This gives gold a gain of $140 an ounce since the lows seen in May. Gold is up 26% so far this year, and silver is up by a huge 48%.
Factors Affecting Gold This Month
Non-farm Payrolls
The non-farm payrolls report showed 287,000 new jobs were added in June. This is over 100,000 more than expected. The huge jump in new jobs had surprisingly little effect on precious metals, aside from some immediate volatility. In fact, gold gained $20 an ounce shortly afterward. While the non-farm payrolls had no real effect on gold prices, the fact that it didn’t is worth noting as a measure of the strength of gold.
Terror Attacks In Europe
Another area that has had surprisingly little affect on gold prices is the multiple terrorist attacks this month in France and Germany. It seems that “maximum terror safe haven” has been hit.
Staged Coup In Turkey
Turkish president Tayyip Erdogan staged a coup attempt in Turkey on July 15, using it as an excuse to purge the army, the police, the courts, and the media of people critical of his regime. He has used this false flag operation as an excuse to consolidate even more power unto himself, including putting the nation’s military and intelligence services under his personal control. (How do you say “Reichstag fire” in Turkish?)
These developments roiled European markets that were already trying to deal with Brexit and the imminent failure of Italy’s banking system.
Central Bank Failures
Central banks around the world have cut interest rates a combined 659 times since Lehman Brothers filed for bankruptcy on Sept. 15, 2008, says Michael Hartnett, Chief Investment Strategist at Bank of America Merrill Lynch. All this has done is bring bond yields below zero, destroying retirees’ lives and forcing pension funds into the stock market bubble in an attempt to make money for workers. As a result, it would now take 107 years for an American saver to double his money in a 1-year deposit account at the bank. It would take a Japanese saver nearly 7,000 years to just double his money.
There’s been $24.6 trillion dollars of quantitative easing (aka money-printing) by all central banks, and the average Joe doesn’t even get a t-shirt. The writing on the wall is so plain to see that even the big investment banks are telling people that the Fed, ECB, and Bank of Japan are now powerless to stop the next recession.
Europeans are still heavy buyers of gold, since Mario Draghi and the European Central Bank have destroyed the European bond market.
And in case you thought that the Fed were professionals, we find out from Reuters that it was just dumb luck that the NY Fed didn’t give hackers all of the $1 billion they were trying to steal from the account of the central bank of Bangladesh.
On the Retail Front
2016 American Silver Eaglesales continue to slide this summer, with just 1.37 million sold in July. The year-to-date total of 27.6 million coins still beats the full-year total for every year from 1986 through 2008.
After a one-year hiatus, the U.S. Mint has struck a bullion version of the American Platinum Eagle coin. 18,400 coins were sold in the first two days of availability. The bullion Platinum Eagle was not produced last year, due to a shortage of blanks. In fact, this year is only the second year since 2008 that the Platinum Eagle has been minted.
Across the pond, the Royal Mint in Britain announced that its 2015-2016 fiscal year resulted in the highest annual revenue in its 1100-year old history. This was due in large part to a 87% increase in profits for its bullion sales.
Sales of the Perth Mint’s newest silver bullion coin, the 2016 1oz Silver Kangaroo, are already double the expected demand of five million coins and going strong.
China is back at the gold hoarding game, purchasing 500,000 troy ounces of gold for its official reserves. This moves the official total (which we all know is far from the real numbers) to 58,620,000 troy ounces, or roughly 1,823 metric tons.
Market Buzz
“Bond King” Bill Gross blames the world’s central banks with destroying the global economy through their “worship of false idols.”
David Stockman tells readers that “helicopter money” is just a code word for “monetization of the public debt”. The concept is so crazy in actuality that even Japanese prime minister Shinzo Abe repudiated the idea. Stockman notes that the Fed probably could never implement helicopter money, not from any attack of reason but because the big Wall St banks would no longer get their cut.
Japan
Ordinary Japanese have no faith in Abenomics and are crowding into physical gold before the government depreciates the yen into oblivion. Sales in June were 60% higher than May. Tetsushi Kudo, a 50-year-old office worker, has started buying his daughter a 1 ounce gold coin for her birthday every year. “She will thank me for the gift when she grows up because gold will have value wherever she goes.”
Other Japanese investors have decided to send their gold to Switzerland for safekeeping. They aren’t going to risk their wealth with a government financial policy that seems to get crazier by the month.
The Tokyo Commodities Exchange (TOCOM) is introducing a new physical gold contract and revising the “Rolling Spot” contract to have the option of physical gold settlement instead of cash settlement.
Staying in Asia, we hear that “Big Mammas” from Mainland China are buying physical gold in Hong Kong at five times the previous rate.
Think that the “Big Boys” are using COMEX silver futures contracts to suppress prices in the face of a physical silver shortage? Steven Knight at Blackwell Global Investments Ltd has your back.
We take a look at the current bull market in gold, including a chart showing top 20 gold reserves in the world at our news blog.
Famous fund manager Jeffrey Gundlach says that gold remains the best investment in these shaky, dangerous times. Calling the European banking system “heading toward insolvency,” he remarked. “Banks are dying and policymakers don’t know what to do,” Gundlach said. “Watch Deutsche Bank shares go to single digits and people will start to panic.”
Warning that the end of fiat currencies may happen sooner than you think, James Rickards opines that gold is the only option when paper currencies die.
The world’s best gold forecaster says we will see $1,425 gold this quarter, where it will pause to see if the Fed is going to hike interest rates in December. Piper Jaffray analyst Craig Johnson sees gold continuing to rally, with $1,525 in the cards.
Swiss super-bank UBShas upgraded its short-term forecast for gold prices from $1,250 to $1,400. Bank of America/Merrill Lynch analysts take a slightly longer timeframe and forecast gold hitting $1475 by the end of 2017.
Doug Casey takes it to another level, predicting $3,000 gold by the end of 2017.
TD Asset Management reveals this month that they went “maximum overweight” on gold in the second quarter with their $230 billion fund, which seems to have been a pretty smart move. Chief Investment Officer Bruce Cooper notes the high levels of stress and volatility in markets across the world, telling Bloomberg, “Job one today is about capital preservation. It’s not about shooting the lights out.”
If you don’t think that the world is on crazy pills by now, how about Alan Greenspan calling for a gold standard?
Looking Ahead
Brexit jitters seem to have calmed down for the moment, but there are signs that the EU is going to play hardball with Britain in negotiations over the UK’s exit from the Union.
In the U.S., we get to suffer through endless political ads as the presidential race kicks into high gear. Watch for any big economic policy reveals by either candidate to move gold prices.
The Fed doesn’t meet in August, but central bankers from all over the world will fly in to Jackson Hole, WY for a policy conference.
We end this month with the news that scientists in India have found gold in cow urine (and no, this is not a joke).
