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$100,000 in mining shares is not the same as having $100,000 in physical gold or silver.

Owning mining shares are for profit, but the profit is the same as a profit made in Apple or Google stocks.  At some point, you convert out of the stocks and into dollars.  It makes no difference if the dollars came from SLV, TRX or any mining share or Apple; a dollar is a dollar, it’s the same dollar.

At what point will you sell your mining shares?  Most likely when they have risen dramatically in price and the bull market is in full gear.  If the bull market follows the model on the 1970s, the dollar will be “like a hot potato” and there will be a mad rush, globally, to dump dollars.  Once started, a move out of the dollar will rapidly gain momentum and its “value” will drop fast and far.  The cause probably will be rapidly rising inflation – or the loss of the dollar’s “Petro Dollar” status, or “Reserve Currency” status.  At that point, all I can say is “Lots of Luck” in trading your unwanted dollars for real physical precious metals.  If you are lucky, you will find some, any form will do because you probably won’t have a choice, and you’ll buy it at a ridiculously high premium.

I hope you’ve learned that owning gold shares or silver shares is NOT the same thing as owning Gold Buffalos or Silver Eagles.  Many of our readers figured this out a long time ago, and we hope that those who haven’t yet will get the message while there’s still time to freely move fiat paper into physical gold and silver.  Those of you who choose to ignore this scenario will eventually figure it out down the road, and believe me; you will wish you had taken this seriously now, not later.

I am not outright telling you not to own mining shares.  They have a place in a portfolio as a profit generator.  But they do NOT replace the core position of real coins and bars.  The former is a speculative investment, one to buy and sell, and the later is money, and it is set-aside for a rainy day.

Wall Street and the bankers have brainwashed you.  They will tell you to your face that only a fool would own gold or silver.  A NY banker friend of Backwoods Jack told him that the only reason anyone owns gold or silver is because they are afraid!  When he told me that, I couldn’t contain myself and was unable to keep my mouth shut – so I told Backwoods, “Yes, of course!  They are scared!  They have every reason to be scared!  For once, you banker friend got it right.  It’s a shame you aren’t a little more scared yourself!”  Backwoods buries his fear beneath a large layer of HOPE.  Most people do.  Hope is good, but only if it is realistic and you have already prepared for the worst.  If ever there was a time to prepare for the worst and hope for the best, which time is now.

I asked my friend Trader David R if he was on the right side of the trade when the Fed informed us that they were not cutting back on QE.  He said:

I had a great day. I didn’t think they would taper (I won dinner in NYC from an economist from one of the NY banks).  After the July jobs revision, down to 104k, I knew there was no way they could ease back.  It’s QE Forever.  As long as this administration continues to be anti-business, pro regulation and pro taxation we cannot get the growth we need.  I still think gold hits $1,600 by year-end.  We will do more QE before less!

All the best


David R sent me the following email late on Thursday night below:

(Pretty interesting, see link on bottom for charts)

Market reaction to the FOMC news was instant. Within a thousandth of a second, the move was already over. What any human saw was like reading yesterdays newspaper.

See also: charts of all the stocks during the announcement.

The Fed news had to be released early to a news service that pre-loaded machines timed to release the news at exactly 14:00:00.000. The reaction in Chicago was at the same exact millisecond as the reaction in New York – both cities separated by about 5-7 milliseconds of time. Compare the charts of ES Futures (traded in Chicago) with SPY (traded in New York, well, technically New Jersey).

Why is the Fed giving early access to market impacting news (an understatement) to private news services that turn around and sell this data to co-located high frequency traders? This is not privately compiled information. This is information paid for by all U.S. Taxpayers.


Update: September 19, 2013

We are surprised at how many people don’t realize that information does not travel instantly from point A to point B. It is limited by the speed of light, which under ideal conditions takes 1 millisecond to travel 186 miles. Our experience analyzing the impact of hundreds of news events at the millisecond level tells us that it takes at least 5 milliseconds for information to travel between Chicago and New York. Even though Washington DC is closer to Chicago than New York, the path between the two cities is not as straight or optimized: so it takes information a bit longer, about 7 milliseconds, to travel between Washington and Chicago. It takes about 2 milliseconds between Washington and New York.

Therefore, if information is released in Washington, then New York will see it 2 milliseconds later, and Chicago will see it 7 milliseconds later. Which means we should see a reaction in New York (where stocks trade) about 5 milliseconds before a reaction in Chicago (where many futures, including the eMini trades). And this is in fact what we normally see when news is released in Washington.

However, the data, reflected in the charts below (compare 2 and 3), clearly shows that the reaction in New York was in the same millisecond as the reaction in Chicago. Also, the reaction was within 1 millisecond, meaning it couldn’t have possibly reached New York. Then there is the case that the information on the Fed Website was not easily parse-able – not enough for someone to commit well over a billion dollars to effectively buy all stocks, futures and options at any price.

We’d also like to note, that even Bloomberg was not aware of this practice, and when they asked the Fed, the reply was “no comment”.


Jim Sinclair discusses, The process of the emancipation of physical gold from paper gold as the price determining medium, globally.

Jim Sinclair’s Commentary

Gold Deliveries From Shanghai Bourse Jump on Physical Demand

By Bloomberg News – Jul 15, 2013 3:43 AM MT

Physical gold delivered to buyers by China’s largest bullion bourse in the first half of this year almost matched the entire amount taken from its vaults in 2012, and was more than double the country’s annual production.

The Shanghai Gold Exchange supplied 1,098 metric tons in the six months through June, compared with 1,139 tons for the whole of last year, according to data from the bourse today. Output in China, the world’s largest gold producer reached a record 403 tons last year, according to the China Gold Association.

The surge in deliveries underscores buying interest in China, which may pass India as the largest bullion consumer as early as this year after the government in New Delhi raised import taxes while regulators in Beijing made investing in the metal easier. Miners, smelters and refineries are required to sell gold via the Shanghai bourse, the only state-sanctioned marketplace for spot bullion in China.

“The number shows demand for bullion as an underlying asset in China that investors here remained big buyers of the physical commodity this year,” said Fu Peng, a commodity strategist in Beijing at Galaxy Futures Co, a brokerage controlled by the country’s sovereign wealth fund.

Bullion lost 23 percent last quarter amid speculation that the Federal Reserve would curb its asset-buying program as the U.S. economy recovers. Bullion may drop to $1,050 an ounce over 12 months as demand for the metal as a safe haven wanes, UBS AG said on July 4. Citigroup lowered its 2013 gold estimate to $1,358 an ounce.


jsmineset.com, September 19, 2013

The following commentary comes from LeMetropole Café. I think Bill Murphy understands “the game” as well as anyone.  It is honest and clear analysis that can help to clear up the mis-direction and confusion that accompanies the gold and silver markets.

9/19 Just Warming Up

This morning the beneficiaries of the Fed’s non-move are all maintaining their strength of yesterday afternoon … with gold up $3 from its Access Market close of $1365.10 and silver up 30 cents from its late close of $22.99. However, gold is already well off its early $1374 high and we know The Gold Cartel will go all out to muffle any sort of meaningful follow-through. This is what they do, almost ALWAYS, no matter what sort of news surfaces.

How today plays out will be most interesting. This is The Gold Cartel’s worst nightmare as not allowing excitement over gold to build in any meaningful way is another one of their most kept mantras. Of course, we all know what they did to the price two weeks ahead of this planned announcement in order to make sure the price would not be breaking out in a manner that might threaten our fragile note/bond markets.

The bottom line is the Fed admitted that what they have put in motion regarding their QE efforts has still not improved our economy enough to warrant even the slightest tapering. Clearly they felt even the most modest of QE curtailing might set up a negative chain reaction in financial markets and crimp our economy further in the process.

As we have covered the past weeks, the DOW has gone into all-time high ground, moving steadily up the past year due to QE. At the same time, gold has dropped from $1793 to below $1300 as recently as yesterday afternoon. To say this dichotomy stands out is an understatement if there ever was one, yet almost no one goes there. The bottom line is The Gold Cartel planned out their price suppression campaign with other central banks well in advance to prevent the eventual ramifications of QE to infinity from appearing on the investment radar screen … for the reasons so often discussed here … those being fears of how a sharply rising gold price would affect our interest rates, dollar, derivatives exposures, etc. As PRICE ACTION MAKES MARKET COMMENTARY, the fall in the price of gold was expected to elicit one negative comment after another (which is just what happened), sending investors in other directions.

But now, as much as they will try, it is going to be very difficult to prevent more and more focus to turn to gold as time goes on here. The Fed was able to pull off a con in a way. But, by not at least beginning to taper, that con has run its course. The gold market may be the least understood and worst reported on one in the history of markets, but what the Fed just didn’t do has to make an impact on those who couldn’t even pass Economics 101 in college.

To accomplish its mission The Gold Cartel mobilized an enormous amount of central bank gold to hit the market and take down the price. In addition, it was able to flush out a great deal of gold from ETFs, especially from money managers whose performance was suffering relative to others who were not in the collapsing gold market. The move up in the general stock market vis-à-vis gold (when they should have been going in the same direction because of QE) was extremely detrimental to the precious metals markets.

As we know by now The Gold Cartel always seems to mobilize physical gold from central/bullion banks when they most need it, but that has to hit the wall at some point. After what they just did, they ought to be staring at it now, especially with so much physical being consumed at these cheap prices, led by the Chinese. In addition, that other source of major supply, the exodus from the ETFs should also have run its course and ought to start going the other way again after what the Fed just did.

LeMetropole Café, September 19, 2013

The following chart shows you how affective the Fed has been in ramping up the economy with the trillions they have injected into the system.  Look at the increase in their balance sheet versus the growth in the economy.  Aren’t they a marvelously efficient bunch?

Five Years of Hard work

Here is a worthwhile article from Zero Hedge.  BoA is now bullish on silver.

Bank of America Closes Silver Short, Says Bearish Precious Metal View Was “Incorrect”

Submitted by Tyler Durden on 09/19/2013 11:39 -0400

Yesterday it was Goldman capitulating on their near-term gold, er, capitulation reco (expectedly so after gold ripped over $75 in the span of 24 hours). Now, it is Bank of America’s turn to close their silver short. To wit: “The Wednesday Bullish Candlestick formations (Bullish Engulfing Candles) in gold and silver say that our bearish view on precious metals now incorrect. Indeed, this is supported by the US $ breakdown and the increasingly constructive environment for risk assets generally. As such, we are cutting our Silver Short and moving to the sidelines. Silver should see a test of long term resistance at 24.24/26.23, in the sessions and weeks ahead while gold should re-test its 1433, August highs. In both cases, watch trend lines at 23.20 & 1375. A close above confirms the bullish candles and upside trajectories.”

(Silver is currently 22.91 and gold is 1363.90.  These levels can be taken out in a day, maybe on Friday.)

When was the trade put on? September 4. This was their justification then:

We have turned bearish silver following the series of intra-day impulsive declines from the confluence of long-term resistance between 24.78/24.97. It is now time to act. Initial downside targets should be seen to 22.44/31 (382% of the Jun/Aug advance and Aug-20 low), before making a push back toward 18.22.Sell Spot silver at 23.60, target 20.00, risking 24.55

What a difference two weeks makes. Below is the “technical” reason to make physical silver purchases more expensive: