Silver

The Price Of Silver Explodes Past 20 Dollars An Ounce As The European Banking Crisis Deepens

July 4, 2016July 4, 2016 by Michael

Have you seen what the price of silver has been doing? On Monday, it exploded past 20 dollars an ounce, and as I write this article it is sitting at $20.48. Earlier today it actually surged above 21 dollars an ounce for a short time before moving back just a bit. In late March, I told my readers that silver was “ridiculously undervalued” when it was sitting at $15.81 an ounce, and that call has turned out to be quite prescient. The Friday before last, silver started the day at $17.25 an ounce, and it is up more than 18 percent since that time. Overall, silver is up more than 30 percent for the year, and that makes it one of the best performing investments of 2016. So what is causing this sudden surge in the price of silver? This is something that we will discuss below…

This sudden spike in the price of silver has definitely caught a lot of analysts off guard. Some are suggesting that the fact that the Fed is now less likely to raise rates after the Brexit and the fact that the dollar has been slipping a bit lately are the primary reasons for silver’s rise…

This isn’t a gradual increase either. It’s an explosive growth spurt. Just three months ago silver had reached an 11 month high. Now silver prices have reached a 23 month high. Several factors appear to be influencing these gains, including a weakening dollar, and the fact that the Fed may cut interest rates in light of the Brexit vote.

Personally, I don’t buy those explanations.

To me, the continuing implosion of major banks over in Europe is the main factor that is driving investors to safe haven assets such as silver.

Rumors continue to spread that Deutsche Bank is essentially insolvent at this point, and many are watching for the imminent collapse of the largest and most important bank in Germany. When this happens, it will be a much, much more cataclysmic event for the global financial system than the collapse of Lehman Brothers was back in 2008.

But today I want to focus on the ongoing implosion of the major banks in Italy.

Italy has the 8th largest economy on the entire planet, and their banks are drowning in approximately 400 billion dollars worth of non-performing debt.

The Italian government would like to bail these banks out, but the rest of the EU appears ready to block that effort because it would violate EU rules. As a result, the big Italian banks experienced a bloodbath on Monday…

Italy’s Banca Monte dei Paschi di Siena SpA BMPS, -13.99% closed down 14%. The move came after a report that the European Central Bank is pushing the lender to draft a new plan aimed at reducing non-performing loans.

Other Italian bank shares were lower, with Banca Popolare dell’Emilia Romagna BPE, -6.73% down 6.7%, Intesa Sanpaolo SpA ISP, -3.04% off 3% and Banca Popolare di Milano SpA PMI, -1.40% lower by 1.4%.

And these stunning declines come on the heels of last week’s nightmare…

As a reminder, the Euro Stoxx Banks index was down -0.88% last week and is nearly 19% down from its pre-referendum levels. Italian Banks are at the heart of that weakness with the likes of Unicredit, Intesa, Banco Monte dei Paschi and UBI down -9.78%, -3.44%, -15.79% and -6.11% respectively last week, in the process sending Italian stocks to levels not seen since Draghi’s famous “whatever it takes” speech.

So what happens when all of the major banks of a country collapse at the exact same time?

Basically, Italy is facing “financial Armageddon” if nothing is done, and so some Italian politicians are desperate to step in and do something about this crisis even if it means defying the EU…

The Financial Times reported Sunday that Italy was prepared “to defy the EU and unilaterally pump billions of euros into its troubled banking system if it comes under severe systemic distress … despite warnings from Brussels and Berlin over the need to respect rules that make creditors rather than taxpayers fund bank rescues.”

Citing “several officials and bankers familiar with the plans,” the FT said that the threat has raised alarm along Europe’s regulators “who fear such a brazen intervention would devastate the credibility of the union’s newly implemented banking rule book during its first real test.”

But of course the rest of the EU is not about to let this happen because it would be a gross violation of European Union rules…

Michael Hewson, chief market analyst at CMC Markets UK, said: “Under current EU state aid rules any attempts to help banks must involve a bail-in process that doesn’t involve using taxpayer’s money.

“Italian Prime Minister Matteo Renzi has tried to argue that the Brexit uncertainty has destabilised Italy’s already fragile banks.

“The reality is the problems of Italy’s banks predate last week’s Brexit vote, and he knows it.”

So what is going to happen?

Could Italy be forced to leave the EU?

Will the rest of the European Union eventually cave in and save Italy?

We all remember how difficult it was for the EU to save Greece, and they are just the 44th largest economy on the planet.

So where in the world are they going to come up with the resources to rescue the 8th largest economy on the planet?

Immediately following the Brexit vote on the Friday before last, we witnessed the biggest one day global stock market loss in world history. But since that time many global markets have bounced back, and a lot of people seem convinced that the crisis has passed.

Unfortunately, the truth is that the crisis is just getting started. As I warned before the Brexit vote, European banks were going to continue to implode no matter what the result was, and that is definitely what we are seeing come to pass right now.

Without bailouts, virtually all of the major banks in Italy are going to fail. It is just a matter of time. And each of those failures would send financial shockwaves all over the planet.

Personally, I am convinced that the second half of 2016 is going to be even more eventful that the first half of 2016, and this new global economic crisis is going to continue to accelerate.

Unfortunately, most Americans are preoccupied reading about Taylor Swift’s new boyfriend and things of that nature, and so they are totally oblivious to the global events that are about to turn their lives totally upside down.

Why Investing In Silver Is Vastly Superior To Investing In Gold Right Now

March 20, 2016March 20, 2016 by Michael

When panic and fear dominate financial markets, gold and silver both tend to rapidly rise in price. We witnessed this during the last financial crisis, and it is starting to happen again. Because I am the publisher of a website called The Economic Collapse Blog, I am often asked about gold and silver when I do interviews. In fact, just a few days ago I was sitting right next to Jim Rickards during the taping of a television show when this topic came up. Jim expressed his belief that investing in gold is superior to investing in silver, but I had the exact opposite viewpoint. In this article, I would like to elaborate on why I believe that silver represents a historic investment opportunity right now.

I should start out by disclosing that my wife and I have been able to put away a little bit of silver over the years. I wish that it could have been a lot more, but so often there are other priorities that need to be addressed. For example, I have always said that people need to take care of their emergency food storage first before even thinking about any kind of investments.

But if you have money left over after taking care of the basics, I am fully convinced that silver is a wonderful investment for the mid to long term. In this article, I am going to explain why this is the case. However, I have always warned that you have got to be ready for a rollercoaster ride if you get into precious metals. So if you can’t handle the ups and downs, you should probably avoid them altogether.

As I write this article, the price of gold is sitting at $1254.30 an ounce.

Meanwhile, the price of silver is sitting at just $15.81 an ounce.

That means that the price of gold is currently more than 79 times higher than the price of silver. For the ratio between gold and silver to be this high is truly unusual.

You see, the truth is that there is only about 17 times as much silver as there is gold in the Earth’s crust. And currently silver is being mined at about an 11 to 1 ratio to gold.

So it makes sense that throughout history gold has typically sold at about a 15 to 1 ratio to silver.

During the years to come, I do believe that gold will multiply in price.

But I am also convinced that the price of silver will go up much, much faster.

As they both skyrocket in price, the price ratio between gold and silver will shift very quickly from 79 to 1 in the direction of 15 to 1.

Perhaps we may never even get all the way back to 15 to 1, but if we even got to 40 to 1 or 30 to 1, what that would mean for silver would be history making.

Let us also keep in mind that unlike gold, silver is constantly being used up in thousands of different industrial applications. The following comes from Jeff Nielson…

Over the past quarter century, more silver-based patents have been created than with any other metal on the planet. But not only does silver have unparalleled versatility, it is an extremely potent metal, meaning that in many of its commercial applications it is used in only trace amounts.

Why is this of significance? Because in such tiny quantities it is economically impractical to ever recycle any of this silver, at prices anywhere near the (absurd) levels of recent decades. Thus this silver is being consumed in tiny amounts, but in billions and billions of consumer products, over a span of decades.

Unlike gold, our stockpiles of silver are disappearing. As previously mentioned, for at least the last thirty years, the only way that our strong demand for silver could be satisfied has been through consuming portions of these stockpiles.

It has been estimated that approximately one billion ounces of silver have been used in consumer products over the past ten years alone.

Even if the world could somehow avoid the great financial turmoil that has already begun, the truth is that eventually a great demand crunch for silver would come just based on how much of it we are steadily consuming.

At less than 16 dollars an ounce right now, silver is ridiculously undervalued.

Those that are wise see this, and they are stocking up on silver coins at an unprecedented level. Just check out these numbers…

Silver Eagle sales will likely jump by 25% in the first quarter due to deteriorating market conditions. During the first three months last year the U.S. Mint sold 12 million Silver Eagles. Already, sales of Silver Eagles have reached 13 million. There are two weeks remaining in March and the U.S. Mint will likely sell another two million. This will put total Silver Eagle sales for the first quarter at 15 million….. the highest ever.

I have always said that I believe that the price of silver will eventually go over $100 an ounce.

When that happens, those that got in today will be exceedingly happy with their returns.

Others are projecting even greater gains. For instance, investing legend Egon von Greyerz believes that the price of silver could ultimately go as high as $660 an ounce, and Jeff Nielson believes that $1,000 an ounce for silver would be a fair price.

But once again, don’t even think about getting into precious metals until you have the basics squared away. It is often said that you can’t eat gold or silver, and that is very true.

In our new television show, my wife and I are always going to tell it to you straight. A lot of people out there are relaxing right now because they think that the recent stock market rally means that the crisis is over. What they don’t understand is that this new financial crisis is just in the very early chapters. There are going to be more ups and more downs, and the shaking that we have seen so far is just the beginning.

Many of you may not want to believe me at this moment, but by the end of 2016 life in America is going to look dramatically different than it does right now. So please get prepared while you are still able to do so.

Why Is JP Morgan Accumulating The Biggest Stockpile Of Physical Silver In History?

April 25, 2015April 24, 2015 by Michael

Why in the world has JP Morgan accumulated more than 55 million ounces of physical silver? Since early 2012, JP Morgan’s stockpile has grown from less than 5 million ounces of physical silver to more than 55 million ounces of physical silver. Clearly, someone over at JP Morgan is convinced that physical silver is a great investment. But in recent times, the price of silver has actually fallen quite a bit. As I write this, it is sitting at the ridiculously low price of $15.66 an ounce. So up to this point, JP Morgan’s investment in silver has definitely not paid off. But it will pay off in a big way if we will soon be entering a time of great financial turmoil.

During a time of crisis, investors tend to flood into physical gold and silver. And as I mentioned just recently, JPMorgan Chase chairman and CEO Jamie Dimon recently stated that “there will be another crisis” in a letter to shareholders…

Some things never change — there will be another crisis, and its impact will be felt by the financial market.

The trigger to the next crisis will not be the same as the trigger to the last one – but there will be another crisis. Triggering events could be geopolitical (the 1973 Middle East crisis), a recession where the Fed rapidly increases interest rates (the 1980-1982 recession), a commodities price collapse (oil in the late 1980s), the commercial real estate crisis (in the early 1990s), the Asian crisis (in 1997), so-called “bubbles” (the 2000 Internet bubble and the 2008 mortgage/housing bubble), etc. While the past crises had different roots (you could spend a lot of time arguing the degree to which geopolitical, economic or purely financial factors caused each crisis), they generally had a strong effect across the financial markets

And Dimon is apparently putting his money where his mouth is.

If Dimon believes that another great crisis is coming, then it would make logical sense to stockpile huge amounts of precious metals. And in particular, silver is a tremendous bargain for a variety of reasons. Personally, I like gold, but I absolutely love silver – especially at the price it is at right now.

Over the past few years, JP Morgan has been voraciously buying up physical silver. Nobody has ever seen anything quite like this ever before. In fact, JP Morgan has added more than 8 million ounces of physical silver during the past couple of weeks alone. The following is an extended excerpt from a recent article by Mac Slavo…

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According to a detailed report from The Wealth Watchman JP Morgan Chase has been amassing a huge stockpile of physical silver, presumably in anticipation of a major liquidity event.

They’re baaaaack. Yes, “old faithful” is back at it again!

Of course, they never really left silver, and have been rigging it non-stop in the futures market, but for awhile there, there were at least no admissions of newly-stacked silver being made in their Comex warehousing facilities.

Yet, after a 16 month period of “dormancy” within their Comex warehouse vaults, these guys have returned with a vengeance.

In fact, our old buddies at JP Morgan Chase, not only see value in silver here, but they’re currently standing for delivery in their own house account in such strong numbers, that it commands our attention. Let me show you what I mean.

Here’s a breakdown of the Comex’s most recent silver deliveries to JP Morgan:

April 7th: 1,110,000 ounces

April 8th: 1,280,000 ounces

April 9th: 893,037 ounces

April 10th: 1,200,224 ounces

April 14th: 1,073,000 ounces

April 15th: 1,191,275 ounces

April 16th: 1,183,777.295 ounces

This is a huge bout of deliveries in such a short space of time. In fact, within the realm of Comex world, it’s such an exceptionally large amount, that it even creates quite a spike on the long-term chart of JP Morgan’s vault stockpile:

All in all, JP Morgan has added over 8.3 million ounces of additional silver in just the past 2 weeks alone.

Full report at The Wealth Watchman (via Steve Quayle and Realist News)

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So why is JP Morgan doing this?

Do they know something that the rest of us do not?

Meanwhile, JP Morgan Chase has made another very curious move as well. It is being reported that the bank is “restricting the use of cash” in some markets, and has even gone so far as to “prohibit the storage of cash in safe deposit boxes”…

What is a surprise is how little notice the rollout of Chase’s new policy has received. As of March, Chase began restricting the use of cash in selected markets, including Greater Cleveland. The new policy restricts borrowers from using cash to make payments on credit cards, mortgages, equity lines, and auto loans. Chase even goes as far as to prohibit the storage of cash in its safe deposit boxes . In a letter to its customers dated April 1, 2015 pertaining to its “Updated Safe Deposit Box Lease Agreement,” one of the highlighted items reads: “You agree not to store any cash or coins other than those found to have a collectible value.” Whether or not this pertains to gold and silver coins with no numismatic value is not explained.

What in the world is that all about?

Why is JP Morgan suddenly so negative about cash?

I think that there is a whole lot more going on behind the scenes than we are being told.

JP Morgan Chase is the largest of the six “too big to fail” banks in the United States. The total amount of assets that JP Morgan Chase controls is roughly equal to the GDP of the entire British economy. This is an institution that is immensely powerful and that has very deep ties to the U.S. government.

Could it be possible that JP Morgan Chase is anticipating another great economic crisis?

We are definitely due for one. Just consider the following chart from Zero Hedge. It postulates that our financial system is ready for another “7.5 year itch”…

JP Morgan certainly seems to be preparing for a worst case scenario.

What about you?

Are you getting ready for what is coming?

Silver At Less Than 19 Dollars An Ounce? Are You Kidding Me???

June 26, 2013 by Michael

The day that silver traders have been waiting for has arrived. On Wednesday, the price of silver dropped another 5 percent. As I write this, it is sitting at $18.55 an ounce. On Wednesday it hit a low that had not been seen in three years. Overall, the price of silver has declined by 34 percent this quarter. That is the largest quarterly move in the price of silver in more than 30 years. So what does all of this mean? It means that we are looking at a historic buying opportunity for those that are interested in silver. Yes, gold is undervalued right now as well, but it is absolutely ridiculous how low the price of silver is. At the moment, the price of gold is about 66 times higher than the price of silver is. But they come out of the ground at about a 9 to 1 ratio, and unlike gold, silver is used up in thousands of common consumer products. Those that want to invest in silver should be shouting for joy that prices have fallen this low. If you have been waiting and waiting and waiting to “load the boat”, your moment has arrived.

In my previous articles, I have warned over and over again that we would see wild swings in the prices of gold and silver. For example, I wrote the following back in April…

As I mentioned above, gold and silver are going to experience wild fluctuations over the next few years. When the next stock market crash comes, gold and silver are probably going to go even lower than they are today for a short time. But in the long run gold and silver are going to soar to unprecedented heights.

Investing in gold and silver is not for the faint of heart. If you cannot handle the ride, you should sit on the sidelines. We are entering a period of tremendous financial instability, and holding gold and silver is going to be like riding a roller coaster. The ups and downs are going to shake a lot of people up, but the rewards are going to be great for those that stick with it the entire time.

Right now, a lot of people that bought silver when it was 25 dollars an ounce or 30 dollars an ounce are probably feeling discouraged.

Don’t be. You will be just fine. When the price of an ounce of silver hits 100 dollars an ounce you will be very thankful for the silver that you stored away at those prices.

We are moving into a time when we will see more volatility in precious metals prices than we have ever seen before. That means there will be some tremendous opportunities to make money. But in order to make money, you have to buy low and sell high.

The current decline in the price of paper silver does not have anything to do with the demand for actual physical silver. In fact, demand for physical silver is higher than it ever has been before.

For example, sales of silver coins by the U.S. Mint have set a brand new all-time record high during the first half of 2013.

Last year, the U.S. Mint sold 33 million ounces of silver for the entire year.

This year, the U.S. Mint is on pace to sell 50 million ounces of silver for the entire year.

So don’t be alarmed that the price of silver is falling.

Instead, be very, very thankful.

Hopefully it will go even lower.

And you know what? There is a decent possibility that the price of silver may go down a bit more. This will especially be true during the initial stages of the next financial panic.

When the price of silver does dip, it is a perfect opportunity to load the boat, because even many mainstream analysts are projecting that the price of silver is headed into the stratosphere over the long-term. For example, the following is what Citi analyst Tom Fitzpatrick told King World News the other day…

Again, if you look at silver going back to the 2008 correction, we got down to levels below $9, then we saw the silver price multiply by a factor of over 5 times. So assuming this marks a point near the end of the correction in silver, then our bias would be one that would take silver not only to new all-time highs, but we would look for a target as high as $100 for silver

A chart illustrating the projections that Fitzpatrick is making can be found right here.

There are so many reasons to own silver (even as opposed to owning gold). The following is an excerpt from a recent article about silver that really caught my attention…

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7. Silver is way below its nominal record price of $50 in 1980. It is even further below the government inflation adjusted level of $135. And if you use REAL inflation adjusted numbers, like Shadowstats, the REAL 1980 inflation adjusted price of silver would have to be $450! Silver is a precious and depleting resource and when you look at the price of housing, cars, education, food, energy, taxes, insurance back in the 1980′s, it is insane to think that silver is so cheap on any level. Especially when the uses of silver have skyrocketed since the 1980’s. It is now used in technology on a massive scale and is even now said to cure cancer. Heck, they did not even have Silver Eagle sales back then, or the Silver Bullet Silver Shield for that matter.

8. This time it is going to be much larger! None of the problems from the 2008 Banking Crisis have been solved. In fact it is orders of magnitudes worse. What started out as an institutional problem, is now a sovereign nation problem. This collapse will not be a puny multi – billion dollar corporation like AIG disintegrating, it will be the Trillion dollar economies of the nations of the world and the Quadrillion dollar derivative monster markets cracking apart. There is no financial, political or social safety net left. We destroyed all of that in 2008 and are on a debt based junkie delusion.

The collapse of currencies will affect every counter-party, debt based asset in the world. Your cash, stocks, bonds, Real Estate, pensions, insurance, all of it. The collapse of financial contracts will lead to the collapse of all political and social contracts. The Anger Phase of humanity is coming and only real assets with no counter party risk will be worth anything. Most commodities have storage or degradation issues leaving only precious metals as a real store of wealth.

9. 1:65 Ratio makes silver the only choice. The current gold to silver ratio is: 1 ounce of gold is worth 65 ounces of silver. These come out of the ground at a 1:9 ratio! That means just to get back to the natural mining ratio, silver would have to out perform gold 600%. This is regardless what happens to the dollar value of gold. If gold goes to $13,000 an ounce, silver at a 1:9 ratio would be $1,444 silver.

10. The historical stockpiles of silver are destroyed. We know implicitly that gold has been treasured and kept secure. While silver has been used and abused as a cheap, industrial metal like tin. Since the price of silver has been under attack since the Crime of 1873, silver has been used in such small quantities that it has been destroyed. The US government in 1950 had 5 billion ounces of silver in its strategic stockpile, now it has ZERO. So if gold and silver come out of the ground at a 1:9 ratio and gold has been treasured and silver stockpiles destroyed, logic would dictate that the end of this silver bull market will find the gold to silver ratio BELOW 1:9 and I think it will come close to a 1:1. Either way, we are a long way away from those levels which makes silver so exciting right now.

It is the destruction of huge stockpiles like this that explains the decade long supply deficit to the growing demand of silver. Do not forget that we are only 7 years away from the United States Geological Survey’s prediction that if we continue to consume silver at these rates, silver would be the first metal to become extinct. When I challenged the USGS on that statement, they said that only a massive revaluation of silver to bring on more production and wiser use of silver would stop the extinction. I don’t think we will ever run out of silver, but I do believe that the free market will crush this paper manipulation and that anyone holding physical silver on that day will then have a lottery ticket in real value.

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You can read the rest of that excellent article right here.

Do you want some more reasons to own silver?

The following are some excerpts from an excellent article by Mark Thomas…

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The amount of silver consumed annually and bought for investment exceeds currently exceeds total annual mining output and has for years. That gap has been filled by sellers willing to sell from existing inventories and as prices rise. As time passes this will naturally push prices significantly higher until this fundamental imbalance reaches a true equilibrium price where supply is closer to demand.

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Both industrial and investment demand for silver is growing in excess of the annual increase in mining production growth. The available inventory is low and will get even tighter over time. These two factors will lead to a continued tighter supply-demand situation going forward.

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Silver is an industrial metal with over 10,000 commercial applications. Because it is one of the best electrical and thermal conductors, that makes it ideal for electrical uses such as switches, multi-layer ceramic capacitors, conductive adhesives, and contacts. It is used in some brazing and soldering as well. Silver is also used in solar cells, heated automobile wind shields, DVD’s and some mirrors.

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Silver is an essential element in the electronic gadgets that are a growing part of our digital age. It is in every cell phone, smart phone, tablet, computer keyboard, solar cells and every radio frequency if ID device (RFID). This makes it an essential element going forward as the world becomes more addicted to gadgets. The growth and rising living standards of people in the emerging economies will drive long-term growth of new customers that will demand more and more electronic gadgets.

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Silver’s industrial demand should increase 60% to 666 million ounces per year by 2016 from 487 million ounces in 2010. Current annual mine production is only around 700 million ounces per year growing a few percent annually.

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Of a total of fifty billion ounces of silver that have been mined in history, only two ounces (estimate) or 5% remain in above ground inventories available to be bought and sold. This is due to silver being used up in industrial applications in very small quantities, which makes it unprofitable to recycle at today’s prices. A lot of silver is used in minute quantities in industrial products which are used up and discarded without being recycled.

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The total amount of silver available to trade in the physical silver market is only about $70 billion versus the total gold market which now exceeds $4.3 trillion. As you can see from these numbers, the total market size of the silver market is only 1.6% of the size of the entire gold market. This lack of liquidity and use of extreme leverage in its respective futures market produces wild volatility in price fluctuations of silver.

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You can read the rest of his excellent article right here.

Are you starting to get the picture?

Let us hope that the price of silver stays below 20 dollars an ounce for as long as possible, because once this opportunity is gone we will probably never see it again.

It is important to realize where we are in the greater scheme of things. The world is moving toward another major financial crisis which will usher in a brief period of deflation. Unlike many others that are talking about the coming economic collapse, I have always maintained that we are going to see deflation first and then the response to the crisis will give us the rip-roaring inflation that so many talk about. The following is an excerpt from one of my articles where I talk about this…

So cash will not be king for long. In fact, eventually cash will be trash. The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.

That is why gold, silver and other hard assets are going to be so good to have in the long-term. In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.

During the initial stages of the next major stock market crash, gold and silver will not do very well. But that is okay. Dips are buying opportunities.

As the coming economic crisis unfolds, governments and central banks all over the world will desperately attempt to resuscitate the global financial system. We are going to see money printing and “stimulus packages” on a scale that we have never seen before. Crazy things will happen with stocks, bonds and currencies.

When the dust finally settles, those that are holding “real money” will be the ones that will be in the best shape.

Mass Carnage: Stocks, Bonds, Gold, Silver, Europe And Japan All Get Pummeled

June 20, 2013 by Michael

Can you smell that? It is the smell of panic in the air. As I have noted before, when financial markets catch up to economic reality they tend to do so very rapidly. Normally we don’t see virtually all asset classes get slammed at the same time, but the bucket of cold water that Federal Reserve Chairman Ben Bernanke threw on global financial markets on Wednesday has set off an epic temper tantrum. On Thursday, U.S. stocks, European stocks, Asian stocks, gold, silver and government bonds all over the planet all got absolutely shredded. This is not normal market activity. Unfortunately, there is nothing “normal” about our financial markets anymore. Over the past several years they have been grossly twisted and distorted by the Federal Reserve and by the other major central banks around the globe. Did the central bankers really believe that there wouldn’t be a great price to pay for messing with the markets? The behavior that we have been watching this week is the kind of behavior that one would expect at the beginning of a financial panic. Dick Bove, the vice president of equity research at Rafferty Capital Markets, told CNBC that what we are witnessing right now “is not normal. It is not normal for all markets to move in the same direction at the same point in time due to the same development.” The overriding emotion in the financial world right now is fear. And fear can cause investors to do some crazy things. So will global financial markets continue to drop, or will things stabilize for now? That is a very good question. But even if there is a respite for a while, it will only be temporary. More carnage is coming at some point.

What we have witnessed this week very much has the feeling of a turning point. The euphoria that drove the Dow well over the 15,000 mark is now gone, and investors all over the planet are going into crisis mode. The following is a summary of the damage that was done on Thursday…

-U.S. stocks had their worst day of the year by a good margin. The Dow fell 354 points, and that was the biggest one day drop that we have seen since November 2011. Overall, the Dow has lost more than 550 points over the past two days.

-Thursday was the eighth trading day in a row that we have seen a triple digit move in the Dow either up or down. That is the longest such streak since October 2011.

-The yield on 10 year U.S. Treasuries went as high as 2.47% before settling back to 2.42%. That was a level that we have not seen since August 2011, and the 10 year yield is now a full point above the all-time low of 1.4% that we saw back in July 2012.

– The yield on 30 year U.S. Treasuries hit 3.53 percent on Thursday. That was the first time it had been that high since September 2011.

-The CBOE Volatility Index jumped 28 percent on Thursday. It hit 20.49, and this was the first time in 2013 that it has risen above 20. When volatility rises, that means that the markets are getting stressed.

-European stocks got slammed too. The Bloomberg Europe 500 index fell more than 3 percent on Thursday. It was the worst day for European stocks in 20 months.

-In London, the FTSE fell about 3 percent. In Germany, the DAX fell 3.3 percent. In France, the CAC-40 fell 3.7 percent.

-Things continue to get even worse in Japan. The Nikkei has fallen close to 17 percent over the past month.

-Brazilian stocks have fallen by about 15 percent over the past month.

-On Thursday the price of gold got absolutely hammered. Gold was down nearly $100 an ounce. As I am writing this, it is trading at $1273.60.

-Silver got slammed even more than gold did. It fell more than 8 percent. At the moment it is trading at $19.57. That is ridiculously low. I have a feeling that anyone that gets into silver now is going to be extremely happy in the long-term if they are able to handle the wild fluctuations in the short-term.

-Manufacturing activity in China is contracting at a rate that we haven’t seen since the middle of the last recession.

-For the week ending June 15th, initial claims for unemployment benefits in the United States rose by about 18,000 from the previous week to 354,000. This is a number that investors are going to be watching closely in the months ahead.

Needless to say, Thursday was the type of day that investors don’t see too often. The following is what one stock trader told CNBC…

“It’s freaking, crazy now,” said one stock trader during the 3 p.m. ET hour as the Dow sunk more than 350 points. “Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities – I wouldn’t say it’s panic, but we’ve seen aggressive selling on the lows.”

Unfortunately, this may just be the beginning.

In fact, Mark J. Grant has suggested that we may see even more panic in the short-term…

Yesterday was the first day of the reversal. There will be more days to come.

What you are seeing, in the first instance, is leverage coming off the table. With short term interest rates right off of Kelvin’s absolute Zero there was been massive leverage utilized in both the bond and equity markets. While it cannot be quantified I can tell you, dealing with so many institutional investors, that the amount of leverage on the books is giant and is now going to get covered. It will not be pretty and it will be a rush through the exit doors as the fire alarm has been pulled by the Fed and the alarms are ringing. There is also an additional problem here.

The Street is not what it was. There is not enough liquidity in the major Wall Street banks, any longer, to deal with the amount of securities that will be thrown at them and I expect the down cycle to get exacerbated by this very real issue. Bernanke is no longer at the gate and the Barbarians are going to be out in force.

If we see global interest rates start to shift in a major way, that is going to be huge.

Why?

Well, it is because there are literally hundreds of trillions of dollars worth of interest rate derivatives contracts sitting out there…

The interest rate derivatives market is the largest derivatives market in the world. The Bank for International Settlements estimates that the notional amount outstanding in June 2009 were US$437 trillion for OTC interest rate contracts, and US$342 trillion for OTC interest rate swaps. According to the International Swaps and Derivatives Association, 80% of the world’s top 500 companies as of April 2003 used interest rate derivatives to control their cashflows. This compares with 75% for foreign exchange options, 25% for commodity options and 10% for stock options.

If interest rates begin to swing wildly, that could burst the derivatives bubble that I keep talking about.

And when that house of cards starts falling, we are going to see panic that is going to absolutely dwarf anything that we have seen this week.

So keep watching interest rates, and keep listening for any mention of a problem with “derivatives” in the mainstream media.

When the next great financial crash comes, global credit markets are going to freeze up just like they did in 2008. That will cause economic activity to grind to a standstill and a period of deflation will be upon us. Yes, the way that the Federal Reserve and the federal government respond to such a crisis will ultimately cause tremendous inflation, but as I have written about before, deflation will come first.

It would be wise to build up your emergency fund while you still can. When the next great financial crisis fully erupts a lot of people are going to lose their jobs and for a while it will seem like hardly anyone has any extra money. If you have stashed some cash away, you will be in better shape than most people.

Are We On The Verge Of Witnessing The Death Of The Paper Gold Scam?

May 8, 2013 by Michael

The legal claims on physical gold far exceed the amount of physical gold that the banks actually have by a very, very wide margin. And right now the bankers are scared out of their wits because their warehouses are being drained of physical gold at a frightening rate. So what happens when their physical gold is gone but they still have lots and lots of people with legal claims to gold? When that moment arrives, it will represent the end of the paper gold scam. Many believe that the recent takedown of the price of paper gold was a desperate attempt by the bankers to put off that day of reckoning, but it appears to have greatly backfired on them. Instead of cooling off demand for precious metals, it has unleashed a massive “gold rush” all over the globe. Meanwhile, word has been spreading among wealthy families in both North America and Europe that they had better grab their physical gold out of the banks while they still can. This is creating havoc in the financial community, and at least one major international bank has already declared that it will only be settling those accounts in cash from now on. The paper gold scam is starting to unravel, and by the time this is all over it is going to be a complete and total nightmare for global financial markets.

For years it has been widely known that the promises that banks have made regarding their gold far exceed their actual ability to deliver, but we have never reached a moment of such crisis before.

Posted below are quotes from people that know precious metals far better than I do. What these experts are saying is more than a little bit disturbing…

–CME President Terry Duffy: What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tangible real gold. That’s going to show you, people don’t want certificates, they don’t want anything else. They want the real product.

–Billionaire Eric Sprott: So we see all of these paper (trading) volumes going through that bear absolutely no relationship to what’s going on in the physical markets. As you know I have always been a proponent of the fact that supply in the gold market was way less than demand, and by a very large factor. I think demand exceeds supply by at least 60%. The central banks are surreptitiously supplying that gold, and ultimately they will be running on fumes.

When we hear about the LBMA not willing to deliver gold, and JP Morgan’s inventories at the COMEX have gone from 2.4 million (ounces) down to 160,000 ounces, it just makes you realize that all of this paper trading means nothing. It’s the real physical market that you have to rely on.

–JS Kim: FACT #1: COMEX gold vaults were recently drained of 2 million ounces of physical gold in one quarter, the largest withdrawal of physical gold bullion from COMEX vaults in one quarter during this entire 12-year gold and silver bull. There has been speculation about the reasons that spurred these massive withdrawals of gold from COMEX vaults, but the most reasonable speculation is that no one trusts the bankers to hold on to their physical gold anymore, especially in light of Fact #2. Note below, that both registered AND eligible stocks of gold had heavily declined in recent months. Such an event signals a general distrust of the banking system from everyone holding gold in registered COMEX vaults.

FACT #2: One of the largest European banks, ABN Amro, defaulted on their gold contracts and informed their clients that they would only settle their gold bullion contracts in cash and not in physical. So much for the supposed legality of financial contracts as a “binding” contract. So whether Fact #1 caused Fact #2 or vice versa is irrelevant. What IS apparent is that the level of trust in bankers to safekeep physical gold and physical silver is disappearing, as it should be, and as it should have already been for years now. But truth always takes some time to catch up to banker spread lies and that is what is happening now. I have been warning people never to trust bankers in deals involving gold and silver for years now, as in this article I wrote nearly four years ago informing the public that the SLV and GLD are likely a banker invented scam as well.

FACT #3: Silver fraud whistleblower and London trader Andrew Maguire stated that the LBMA was having trouble settling gold contracts in bullion as well and stated that institutions that asked for physical settlement “were told they would be cash settled instead by a bullion bank.” In plain English, this is a default. So Andrew Maguire reported that the LBMA had already gone into default. In light of Fact #1 and Fact #2, the dominoes were starting to tumble and the house of cards that the bankers had built in gold and silver paper derivatives to deceive and hide the true fundamentals of the physical gold and physical markets from the entire world was rapidly starting to crumble. A financial earthquake of magnitude 2.5 was quickly threatening to evolve into one of the biggest financial earthquakes of all time in which the world’s confidence in all global fiat currencies would effectively have a well-deserved funeral.

–Jim Sinclair: I think the reality is the supply situation is extremely volatile at this point, and even discussing it is like rubbing a raw nerve to the people who are in charge. The amount of discussion on the subject of warehouse supply, supply that is represented by the gold leases, indicated to the central planners that the demand for physical was going to continue to effect the exchanges.

Although they did not expect any grandstand delivery, the mere continued draining of physical inventories was threatening the very functioning of the paper exchange. That threatening of the paper exchange and its ability to continue functioning is really taking off the blinders and revealing the truth behind the critical question, ‘Where is the gold?’

The question now is, ‘Where has the gold gone?’ Who has all of this gold? Because of the nature of gold leasing, all of this gold has been purchased and it has gone somewhere. The reality of the empty vaults reveal that the gold has gone missing.

–Ronald Stoeferle: We’re seeing this rush to physical gold not only in the retail market, but also for the institutional players…[it’s] just overwhelming…I [estimate] a 130-to-1 [ratio of paper to physical gold]…and I think in the last week we were really close to [triggering] a default of the paper market.

–Gerhard Schubert, head of Precious Metals at Emirates NBD: I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…

I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.

–James Turk: Another indication of the demand for large bars is the huge drawdown in the gold stock in COMEX warehouses. It is noteworthy that COMEX reports show the drawdown is largely the result of dealers removing their inventory, their working stock. When that happens, you know the availability of supply is constrained.

What all of this means, Eric, is one thing. If the central planners want to keep the precious metals at these low prices, to meet the demand for physical metal they will need to empty more metal from central bank vaults, or borrow metal from the ETFs as some have suggested is happening. Otherwise, the central planners will have to step back and stop their intervention, thereby letting the price of gold and silver rise so that demand tapers off, bringing demand and supply of physical metal back toward some kind of balance.

We’ve seen this same situation several times over the last twelve years. It is what I have been calling a “managed retreat.” Despite the current weakness, I firmly believe we have again entered a critical period where the central planners will need to retreat once again in order to let the gold and silver prices climb higher.

–The Golden Truth: And then I get a call from a close friend in NYC last Friday. His career has been in private wealth management in the private bank department of the Too Big To Fail banks. He’s been looking for work and chats with old colleagues all the time. He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.

This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact. He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment. The Bundesbank/Fed and the ABN/Amro situations triggered this move. He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it’s very wealthy clients assuring them their bars were safe, in allocated accounts. He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100’s of millions in investment portfolios to competitors. His wording was “these people are putting a gun to the heads of private banks and demanding their gold.”

I know this information is good because I know my friend’s background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend’s source said that there’s no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.

Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting – supposedly – in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes. After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years. To this day, the time required for that shipment has never been explained. Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.

And regarding the ABN/Amro situation. ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out. About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.

I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.

*****

So what does all of this mean?

It means that we are entering a period when there will be unprecedented volatility for precious metals. There will be tremendous ups and downs as this crisis plays out and the bankers try to keep the paper gold scam from completely unraveling.

Meanwhile, nations such as China continue to stockpile gold as if the end of the world was coming.

According to Zero Hedge, Chinese gold imports set a brand new all-time record high in March…

Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons.

And the number for April is expected to be even higher.

Does China know something that the rest of us do not?

We are also seeing a rapid decoupling between spot prices and physical prices. In fact, it is quickly getting to the point where the spot price of gold and the spot price of silver are becoming irrelevant.

For example, demand for silver coins has become so intense that some dealers are charging premiums of up to 30 percent over spot price for silver eagles.

That would have been regarded as insane a few years ago, but people are now willing to pay these kinds of premiums. People are recognizing the importance of actually having physical gold and silver in their possession and they are willing to pay a significant premium in order to get it.

We are moving into uncharted territory. The paper gold scam is rapidly coming to an end. In the long-term, this will greatly benefit those that are holding significant amounts of physical gold and silver.

10 Signs The Takedown Of Paper Gold Has Unleashed An Unprecedented Global Run On Physical Gold And Silver

April 18, 2013April 18, 2013 by Michael

The crash of the price of paper gold on Monday has unleashed an unprecedented global frenzy to buy physical gold and silver. All over the planet, people are recognizing that this is a unique opportunity to be able to acquire large amounts of gold and silver at a bargain price. So precious metals dealers now find themselves being overwhelmed with orders in the United States, in Canada, in Europe and over in Asia. Will this massive run on physical gold and silver soon lead to widespread shortages of those metals? Instead of frightening people away from gold and silver, the takedown of paper gold seems to have had just the opposite effect. People just can’t seem to get enough physical gold and silver right now. Those that wish that they had gotten into gold when it was less than $1400 an ounce are able to do so now, and it is absolutely insane that silver is sitting at about $23 an ounce. If the big banks continue to play games with the price of gold, we are going to see existing supplies of physical gold and silver dry up very quickly. And once reports of physical shortages of gold and silver become widespread, it is going to absolutely rock the financial world. But this is what happens when you manipulate free markets – it often has unintended consequences far beyond anything that you ever imagined.

The following are 10 signs that the takedown of paper gold has unleashed an unprecedented global run on physical gold and silver…

#1 According to Zero Hedge, the U.S. Mint set a new all-time record for the number of gold ounces sold on Wednesday…

According to today’s data from the US Mint, a record 63,500 ounces, or a whopping 2 tons, of gold were reported sold on April 17th alone, bringing the total sales for the month to a whopping 147,000 ounces or more than the previous two months combined with just half of the month gone.

#2 Precious metals dealers all over the United States are having a really hard time keeping up with demand right now. According to Chris Martenson, many are warning customers to expect waiting times of five to six weeks at this point…

In the U.S., all of the dealers I talk to are reporting huge demand and brisk buying. Silver in any form is quite hard to come by unless you want to pay premiums of 20%+ per ounce above spot price. Delivery times are 5 to 6 weeks out now – that’s an unusual situation. If this recent slam was designed to scare people away from gold, it did not have that desired outcome; in fact, just the opposite.

#3 Individual dealers all over the country are confirming that we are seeing a voracious appetite for precious metals at the moment. For example, the following is what a spokesperson for JM Bullion had to say…

We still have certain things in stock, like 10 oz bars, while others, like Silver Eagles, are a bit of revolving inventory.

The shipments are going out as soon as inventory comes in.

Our main challenge right now is actually getting the silver into the boxes and shipped out – we have been experiencing astounding volume.

This appears to be a widespread phenomenon. Just check out what other dealers are reporting…

“There has been a marked increase in demand since the plunge,” said Mark O’Byrne, executive director at Dublin-based investment and bullion specialist GoldCore, referring to the drop in gold prices seen Friday and Monday. Gold futures lost more than $200 an ounce, or over 13%, on those two days. They were at $1,392 an ounce, moving higher ahead of the close on Thursday.

GoldCore has seen more buying than selling on Wednesday and Thursday, with buy orders “lumpier and from high net worth clients, and with most of the selling in small orders of less than 50 ounces, said O’Byrne.

On Wednesday, David Beahm, executive vice president at Blanchard & Co., said his precious-metals investment firm has seen “2008-like demand” for gold since Monday.

#4 Large international banks are also experiencing tremendous demand for physical gold and silver by customers right now. The following is what Keith Barron told King World News about what he is hearing…

At the Bank of Nova Scotia in Toronto the gold window has been absolutely swamped. I have confirmed there were people lined up in droves recently for multiple-hours at a time to buy gold and silver bars and coins….

I then confirmed with UBS today in Zurich, Switzerland, that they are experiencing exactly the same thing. They told me people are waiting in long lines for bullion related bars and coins. The physical market is incredibly tight, and there is a huge buying opportunity right here.

The damage in gold will not be long-term because physical supply is already drying up. Asian countries have been aggressively buying gold. This really is an unprecedented opportunity for investors. This takedown in the metals has created incredible demand for both gold and silver, and anyone who wants to unload dollars or euros and put them into gold because they don’t trust the currency, now is the time to do it.

#5 The demand for physical gold and silver is heating up over in Europe as well. For example, the following is from an emergency message posted on the website of a precious metals dealer in the UK…

Due to the unprecedented demand triggered by the recent fall in the Gold Price we are currently not able to guarantee Next Day Delivery of orders.

We anticipate that all orders will be delivered within 7 days of receipt by us.

Whilst we appreciate that these delays are frustrating for our customers we would like to stress that all accepted orders are guaranteed at the order price and will be dispatched as soon as possible.

It is necessary for all of our staff to be utilised in fulfilling orders and we ask for your cooperation by not calling us to query delivery times. If you do need to contact us, please do so by e-mail and we will endeavour to respond within 48hrs.

#6 On the other side of the globe, demand for precious metals is skyrocketing as well. According to Bloomberg, people are “running through the gate” to get gold in Australia…

Gold sales from Australia’s Perth Mint, which refines nearly all of the nation’s bullion, surged after prices plunged, adding to signs that the metal’s slump to a two-year low is spurring increased demand.

“The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said by phone, without giving precise figures. “There’s been people running through the gate.”

#7 Reuters is reporting that customers are waiting for up to three hours to buy gold in Japan…

A week ago, as the yen-denominated price neared a new peak, jewelry stores and gold merchants across Japan saw long lines of mostly older Japanese looking to cash in on unwanted jewelry and other items that they had held for years.

But on Tuesday, buyers outnumbered sellers by a wide margin. At Ginza Tanaka, the headquarters shop of Tanaka Holdings, gold buyers waited for as long as three hours for a chance to complete a transaction.

#8 According to a Chinese article quoted by the Blaze, there is a mad rush to buy gold in China right now…

People have to rush to buy gold … gold bullion out of stock yesterday, investors yesterday to spend as much as 600 million yuan to buy 20 kilograms of gold bars

The mad pursuit gold insufficiency is not just a game for the rich. Yesterday, the Yangcheng Evening News reporter learned from the East flowers to Bay store, many growers, pork traffickers, fishmonger recently put down his job went straight to the mall to buy gold.

#9 According to Reuters, dealers in Singapore are having significant trouble finding enough of a supply to keep up with the intense demand for gold that has erupted this week…

“People are actually buying everything, gold bars, gold coins. People are rushing to get a hand on it. We have a problem meeting the demand because we are unable to get new supply,” said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore.

#10 Bloomberg is reporting that over in India people are “flocking to stores” to purchase gold jewelry and coins…

Gold buyers in India, the world’s biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff that plunged bullion to a two-year low may be overdone.

“My daughter is just six months old, but I think it is never too early to buy gold,” said Sharmila Shirodkar, a 28- year-old housewife, while displaying a new pair of earrings she bought from a store in Mumbai’s Zaveri Bazaar. “I had been asking my husband every day if prices will go down more. I couldn’t wait anymore.”

If the big banks were trying to scare people away from gold and silver by crashing paper prices for those metals then they have utterly failed.

Instead of being frightened away, the global appetite for physical gold and silver is now more voracious than ever.

If the prices for gold and silver stay this low, we are eventually going to start seeing some very serious shortages in the marketplace.

And once reports of shortages of the actual physical metals become widely circulated, it will cause an “adjustment” in the marketplace that will shock everyone.

So hold on to your hats. We are entering a period of time when there will be unprecedented volatility for the prices of precious metals. It will be quite a roller coaster ride, but if you can handle the ups and downs it will be worth it in the end.

History Tells Us That A Gold Crash + An Oil Crash = Guaranteed Recession

April 17, 2013 by Michael

Is the United States about to experience another major economic downturn? Unfortunately, the pattern that is emerging right now is exactly the kind of pattern that you would expect to see just before a major stock market crash and a deep recession. History tells us that when the price of gold crashes, a recession almost always follows. History also tells us that when the price of oil crashes, a recession almost always follows. When both of those things happen, a significant economic downturn is virtually guaranteed. Just remember what happened back in 2008. Gold and oil both started falling rapidly in July, and in the fall we experienced the worst financial crisis that the U.S. had seen since the days of the Great Depression. Well, a similar pattern seems to be happening again. The price of gold has already crashed, and the price of a barrel of WTI crude oil has dropped to $86.37 as I write this. If the price of oil dips below $80 a barrel and stays there, that will be a major red flag. Meanwhile, we have just seen volatility return to the financial markets in a big way. When volatility starts to spike, that is usually a clear sign that stocks are about to go down substantially. So buckle your seatbelts – it looks like things are about to get very, very interesting.

Posted below is a chart that shows what has happened to the price of gold since the late 1960s. As you will notice, whenever the price of gold rises dramatically and then crashes, a recession usually follows. It happened in 1980, it happened in 2008, and it is happening again…

A similar pattern emerges when we look at the price of oil. During each of the last three recessions we have seen a rapid rise in the price of oil followed by a rapid decline in the price of oil…

That is why what is starting to happen to the price of oil is so alarming. On Wednesday, Reuters ran a story with the following headline: “Crude Routed Anew on Relentless Demand Worries“. The price of oil has not “crashed” yet, but it is definitely starting to slip.

As you can see from the chart above, the price of oil has tested the $80 level a couple of times in the past few years. If we get below that resistance and stay there, that will be a clear sign that trouble is ahead.

However, there is always the possibility that the recent “crash” in the price of gold might be a false signal because there is a tremendous amount of evidence emerging that it was an orchestrated event. An absolutely outstanding article by Chris Martenson explained how the big banks had been setting up this “crash” for months…

In February, Credit Suisse ‘predicted’ that the gold market had peaked, SocGen said the end of the gold era was upon us, and recently Goldman Sachs told everyone to short the metal.

While that’s somewhat interesting, you should first know that the largest bullion banks had amassed huge short positions in precious metals by January.

The CFTC rather coyly refers to the bullion banks simply as ‘large traders,’ but everyone knows that these are the bullion banks. What we are seeing in that chart is that out of a range of commodities, the precious metals were the most heavily shorted, by far.

So the timeline here is easy to follow. The bullion banks:

Amass a huge short position early in the game

Begin telling everyone to go short (wink, wink) to get things moving along in the right direction by sowing doubt in the minds of the longs

Begin testing the late night markets for depth by initiating mini raids (that also serve to let experienced traders know that there’s an elephant or two in the room)

Wait for the right moment and then open the floodgates to dump such an overwhelming amount of paper gold and silver into the market that lower prices are the only possible result

Close their positions for massive gains and then act as if they had made a really prescient market call

Await their big bonus checks and wash, rinse, repeat at a later date

While I am almost 100% certain that any decent investigation by the CFTC would reveal that market manipulating ‘dumping’ was happening, I am equally certain that no such investigation will occur. That’s because the point of such a maneuver by the bullion banks is designed to transfer as much wealth from ‘out there’ and towards the center, and the CFTC is there to protect the center’s ‘right’ to do exactly that.

You can read the rest of that article right here.

There are also rumors that George Soros was involved in driving down the price of gold. The following is an excerpt from a recent article by “The Reformed Broker” Joshua Brown…

And over the last week or so, the one rumor I keep hearing from different hedge fund people is that George Soros is currently massively short gold and that he’s making an absolute killing.

Once again, I have no way of knowing if this is true or false.

But enough people are saying it that I thought it worthwhile to at least mention.

And to me, it would make perfect sense:

1. Soros is a macro investor, this is THE macro trade of the year ~~so far~~ (okay, maybe Japan 1, short gold 2)

2. Soros is well-known for numerous market aphorisms and neologisms, one of my faves being “When I see a bubble, I invest.” He was heavily long gold for a time and had done well while simultaneously referring to it publicly as a speculative bubble.

3. He recently reported that he had pretty much exited the trade in gold back in February. In his Q4 filing a few weeks ago, we found out that he had sold down his GLD position by about 55% as of the end of 2012 and had just 600,000 shares remaining. That was the “smartest guy in the room” locking in a profit after a 12 year bull market.

4. Soros also hired away one of the most talented technical analysts out there, John Roque, upon the collapse of Roque’s previous employer, broker-dealer WJB Capital. No one has heard from the formerly media-available Roque since but we can only assume that – as a technician – the very obvious breakdown of gold’s long-term trend was at least discussed. And how else does one trade gold if not by using technicals (supply/demand) – what else is there? Cash flow? Book value?

5. Lastly, the last public interview given by George Soros was to the South China Morning Post on April 4th. He does not mention any trading he’s doing in gold but he does reveal his thoughts on it having been “destroyed as a safe haven”

It is also important to keep in mind that this “crash” in the price of “paper gold” had absolutely nothing to do with the demand for physical gold and silver in the real world. In fact, precious metals retailers have been reporting that they have been selling an “astounding volume” of gold and silver this week.

But that isn’t keeping many in the mainstream media from “dancing on the grave” of gold and silver.

For example, New York Times journalist Paul Krugman seems absolutely ecstatic that gold has crashed. He seems to think that this “crash” is vindication for everything that he has been saying the past couple of years.

In an article entitled “EVERYONE Should Be Thrilled By The Gold Crash“, Business Insider declared that all of us should be really glad that gold has crashed because according to them it is a sign that the economy is getting better and that faith in the financial system has been restored.

Dan Fitzpatrick, the president of StockMarketMentor.com, recently told CNBC that people are “flying out of gold” and “getting into equities”…

“There have been so many reasons, and there remain so many reasons to be in gold,” Fitzpatrick said, noting currency debasement and the fear of inflation. “But the chart is telling you that none of that is happening. Because of that, you’re going to see people just flying out of gold. There’s just no reason to be in it.Traders are scaling out of gold and getting into equities.”

Personally, I feel so sorry for those that are putting their money in the stock market right now. They are getting in just in time for the crash.

As CNBC recently noted, a very ominous “head and shoulders pattern” for the S&P 500 is emerging right now…

A scary head-and-shoulders pattern could be building in the S&P 500, and this negative chart formation would be created if the market stalls just above current levels.

“It’s developing and it’s developing fast,” said Scott Redler of T3Live.com on Wednesday morning.

Even worse, volatility has returned to Wall Street in a huge way. This is usually a sign that a significant downturn is on the way…

Call options buying recently hit a three-year high for the CBOE’s Volatility Index, a popular measure of market fear that usually moves in the opposite direction of the Standard & Poor’s 500 stock index.

A call buy, which gives the owner the option to purchase the security at a certain price, implies a belief that the VIX is likely to go higher, which usually is an ominous sign for stocks.

“We saw a huge spike in call buying on the VIX, the most in a while,” said Ryan Detrick, senior analyst at Schaeffer’s Investment Research. “That’s not what you want to hear (because it usually happens) right before a big pullback.”

The last time call options activity hit this level, on Jan. 13, 2010, it preceded a 9 percent stock market drop that happened over just four weeks, triggered in large part by worries over the ongoing European debt crisis.

And according to Richard Russell, the “smart money” has already been very busy dumping consumer stocks…

What do billionaires Warren Buffet, John Paulson, and George Soros know that you and I don’t know? I don’t have the answer, but I do know what these billionaires are doing. They, all three, are selling consumer-oriented stocks. Buffett has been a cheerleader for US stocks all along.

But in the latest filing, Buffett has been drastically cutting back on his exposure to consumer stocks. Berkshire sold roughly 19 million shares of Johnson and Johnson. Berkshire has reduced his overall stake in consumer product stocks by 21%, including Kraft and Procter and Gamble. He has also cleared out his entire position in Intel. He has sold 10,000 shares of GM and 597,000 shares of IBM.

Fellow billionaire John Paulson dumped 14 million shares of JP Morgan and dumped his entire position in Family Dollar and consumer goods maker Sara Lee. To wrap up the trio of billionaires, George Soros sold nearly all his bank stocks including JP Morgan, Citigroup and Goldman Sachs. So I don’t know exactly what the billionaires are thinking, but I do see what they’re doing — they are avoiding consumer stocks and building up cash.

… the billionaires are thinking that consumption is heading down and that America’s consumers are close to going on strike.

So what are all of those billionaires preparing for?

What do they know that we don’t know?

I don’t know about you, but when I start putting all of the pieces that I have just discussed together, it paints a rather ominous picture for the months ahead.

At some point, there will be another major stock market crash. When it happens, we will likely see even worse chaos than we saw back in 2008. Major financial institutions will fail, the credit markets will freeze up, economic activity will grind to a standstill and millions of Americans will lose their jobs.

I sincerely hope that we still have at least a few more months before that happens. But right now things are moving very rapidly and it is becoming increasingly clear that time is running out.

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