I woke up this morning (the last trading day of the year) and watched again as gold and silver prices were taken down in New York, I chuckled a little bit and then took off for the road with my amigo Principe’. People have many different ways to relax, get some quiet time and be able to “ponder,” my method is out in nature on horseback.
When I say “chuckled,” I thought to myself “how fitting” at the end of a year where prices were absolutely “forced” down in the face of unprecedented physical demand…and while the COMEX (scene of the crime) is facing some very serious delivery hurdles. The signs of demand are many; deliveries into China, India and Dubai are unprecedented. We know that refineries in (all four) Switzerland are running flat out 24/7 melting Western delivery bars into “kilo” bars to satisfy Eastern demand. We even have seen metal exported from both NY and Florida (of all places) to a South African refinery because the capacity didn’t exist in Switzerland. We have seen GLD lose over 500 tons and GOFO rates trade negative several times over the year.
Think about this, GOFO rates are negative. How is this even possible? I will tell you how. I can think of only 2 possibilities, either the supply is very very tight OR the fear exists that “delivery” at a future date will not be made. Of course there is one more possibility…BOTH of these occurring at the same time?
In any case, we have witnessed an entire year where demand has grossly outstripped supply and existing inventories were bled fiercely to meet the demand. Price has been retarded in an effort to demoralize demand into the metals and corral capital into the stock markets. It has worked…so far. So far, equity markets are buoyant, credit markets though weakened have not collapsed and the metals are at 2 year lows.
I will ask you a couple of questions and yes you can call me a conspiracy whacko if you’d like (at least a handful of ‘conspiracy theories’ were proven as ‘conspiracy facts’ in just the last year). Is it possible that the action over the last year or more has been a “planned” operation to make as few as possible “ready” for the plug to be pulled? Has the picture been painted to prolong the game long enough for those “in the know” to be able to cull risky positions and fortify into one of safety? Has the picture been painted to allow an exit at firm prices and entry into weak ones?
The entire system from top to bottom is built on credit; please never forget that credit can evaporate literally overnight. Think of Credit Anstalt, think of Enron, LTCM, Lehman Bros. and now Greece and Cyprus. Who’s next? Italy or Spain? Another large U.S. city…or a state? In effect the U.S. government itself has had its credit line shut off; we haven’t seen the ramifications yet because the Fed has stepped in as “the buyer of first, last and any resort.” How long does the music continue to play once credit gets “withdrawn” and becomes unavailable somewhere “important?” The answer is “it doesn’t.”
J P Morgan himself testified before Congress back in 1912 that “gold is money, everything else is credit.” That was true then and is even much truer today. Why? Because back then gold was prevalent everywhere and credit was still a “privilege” to be granted. Today, credit is everywhere and gold is so under owned it’s scary. I have heard many different numbers as far as “ownership” percentages of the population go. Less than 1% of Americans own gold which is probably the correct number. I’d like to put some perspective here by using Zero Hedge’s own numbers. They listed their 20 most popular articles of 2013. Number 20 came in with about 100,000 reads and their most popular had 300,000 reads. They are not a gold site but they are an “alternative” (truth) site to go to read about what is really happening. Even mainstreamers like Art Cashin and Jim Cramer (sorry to put those two together in the same sentence) read Zero Hedge.
So, what does this number of 300,000 reads tell us? This number is less than .1% of the US population…and don’t forget that MANY foreigners (it is not printed in Chinese however) read them also. This tells you just how small the number actually is of those digging or seeking the truth. By “association” it also tells you just how few have already sought refuge in precious metals. Going back to my title, “Are you demoralized?” you shouldn’t be. You are “supposed to be” because this is the plan but you shouldn’t be because you are correct in your logic. You are not only correct in your logic if you are part of a VERY small group of investors who are seeking the truth. You are part of an even smaller subset than I and many others had previously thought. Based on the most popular post only receiving 300,000 reads tells me that the “1% of Americans” figure is WAY TOO HIGH! It also tells me that when the “tower of credit” does finally come down that fewer than I had originally thought will financially survive the collapse. Don’t be demoralized; be confident that you are smarter than you thought!