It’s New Year’s Eve morning, and I had planned on taking the day off from writing. However, given the incredibly blatant Cartel attacks of the past two days, I thought a PM “reality check” was in order. First, we experienced the 20th “Sunday Night Sentiment” attack in the past 21 weeks; yet again, with the quite obvious intention of holding silver below the $20/oz. “line in the sand” erected six weeks ago.
Next, the Cartel executed its third blitzkrieg attempt to break the June gold and silver lows of $1,182/oz. and $18.50/oz., respectively; conveniently, on the year’s final day, per this DEAD ON comment by Zero Hedge:
It seems someone wants the status-quo-defying precious metals going out at their lows, as central-planning-supporting stocks go out at their highs.
-December 31, 2013
I mean, you simply had to see this one to believe it; as with NOTHING going on elsewhere, gold suddenly plunged $10/oz. in a matter of seconds – and silver, an even more incredible 3%.
But then again, in this “year of infamy,” silver has endured at least one 2+% PAPER attack on more than half of all trading days. And as you can clearly see below, most of such attacks were utilized to cap silver rises; as despite 135 such intra-day attacks – out of 252 trading days – on only 33 occasions did silver actually close at least 2% lower. FYI, the “Dow Jones Propaganda Average’s” only 2+% down day was on June 20th – i.e., the day the Fed first hinted it might taper QE, when the PPT allowed it to fall a whopping 2.3%.
Whilst this fraudulent, manipulative paper naked shorting was ongoing (I’ll get to the “happy conclusion” shortly), the COMEX December gold contract went off the board. Roughly 660,000 ounces stood for delivery this month, very little of which has yet left the COMEX warehouses. And thus, unless JP Morgan magically comes up with a new source of supply in the next few days, the COMEX’s registered gold inventory will likely end the year at no more than 200,000 ounces – worth $240 million at current prices. Better yet, last year’s February contract was as big as the December contract. And thus, with 223,000 contracts currently open – representing 22.3 million ounces of gold – the odds of a February “default event” grow exponentially larger. FYI, assuming the Fed is actually printing $75 billion/month (last week, I proved that amount is closer to $130 billion), its daily “production” is roughly $250 million; i.e., the value of the entire COMEX registered gold inventory.
Meanwhile, the year ended with yet another explosive burst of global PHYSICAL buying, as characterized by these dramatic Chinese pictures. I initially wrote of China’s “irrefutable physical gold reality” from Guangzhou (Canton) in August; and if these photos of “holiday shopping” don’t drive the point home, I don’t know what will.
Based on published data, Chinese physical gold imports will end 2013 at more than double 2012’s record levels, at roughly 1,200 tonnes (below data is through October); and who knows how much more demand the unpublished data would uncover?
Clearly, Chinese silver consumption is off the charts as well; as given a relatively weak year for U.S. demand, U.S. Mint Silver Eagle sales still exceeded 2011’s record level. Of course it was the Chinese buying them; and likely the Indians as well, given that Indian silver imports will end 2013 at a record level as well, exceeding the previous high from 2008.
As most readers know well, Indians have dramatically increased silver purchases in response to onerous gold import restrictions imposed by the soon-to-be-deposed Indian government; which itself, is likely seeing record demand as well, when incorporating the exploding Indian smuggling trade. According to William Kaye, Indian gold imports could also total a staggering 1,200 tonnes in 2013, despite such restrictions. But heck, you don’t need to take his word for it. Just look at the surging PHYSICAL premiums being paid as we speak – of nearly 25% over the paper “spot price,” and draw your own conclusions. FYI, total global gold production is roughly 2,700 tonnes; and thus, India and China alone will likely acquire ALL of it.
Moreover, as Cartel banks like JP Morgan, Goldman Sachs, and Bank of America try to scare you into believing PMs are about to “crash,” we ask you to consider the largely ignored issue of fundamentals. I don’t think anyone has focused more on PM cost of production than the Miles Franklin Blog – other than Steve St. Angelo at the SRSRocco report, of course; and I think fourth quarter mining “earnings” will bear this out in spades. For gold, the “all in” cost of mining – i.e., mining and reserve replacement – is at least $1,500/oz., per this quote from Gold Fields’ CEO, Nick Holland (Gold Fields is the world’s fourth largest gold producer). As for silver, St. Angelo proved prices must be above $25/oz. to enable the mining industry to produce positive cash flow; and thus, at current levels, we anticipate dramatic mine closure announcements in the coming months. Heck, silver industry capital expenditures are down 62% in 2013 alone; and as for 2014, look out below at the current price levels.
Worse yet, mining companies typically update their reserves at year-end. And thus, when fourth quarter earnings reports are released, we expect dramatic reserve reductions across the entire industry. In other words, proving economic gold and silver “ceases to exist” at current prices. According to this Financial Times article, for example, industry leaders Barrick Gold and Newmont Mining assumed prices of $1,500/oz. and $1,400/oz., respectively, for the majority of their 2012 reserve calculations. And trust me, if the world’s two largest gold miners – owning many of the world’s low-cost mines – will be dramatically cutting reserve estimates, you can imagine what “the rest” will do.
Irrespective of what the Cartel attempts in the paper markets in 2014, this “reality check” should make it crystal clear that the “shelf life” of such manipulations has never been shorter. Physical demand has never been stronger; nor has the political, economic and social factors weighing against fiat currency and for real money. Per our “2014 predictions,” the odds of a further separation between paper and physical prices in 2014 are extremely high; as inevitably, reality will win out – as it always does.
To end the year on a particularly positive note, here is how the PM markets reacted to the Cartel’s latest attempt to break the June lows – whilst interest rates broke out to a new multi-year high. The more the Cartel fails to break the metals, the stronger the price support; and thus, the greater the odds of a true, sustainable bottoms. Although, if they actually do manage to break those lows, they will simply accelerate the PHYSICAL drain that will ultimately destroy them. FYI, I bought more PHYSICAL silver this morning; and hopefully, you too will realize that NEVER in history have prices been more inexpensive.
From the entire Miles Franklin team, we wish you a happy, healthy, and prosperous New Year. And as always, we ask you to “give us a chance” to earn your business!