Q: How is it possible that Platinum and Palladium can drop so much in price now that they may settle the miner’s strike? The strike has taken 1.8 million ozs out of production that will never be recovered. They say it will be 90 days even after the strike is over to start any kind of production. Demand has never been better for these metals and I am sure after the strike the cost to mine will be greater. It seems to me the price should have already factored in the strike would have ended someday. This defies all logic and fundamentals. We must have such a huge excess of these metals lying around to maintain supply as no shortage has occurred. I guess I made a mistake to believe they are rare metals.
David Schectman’s Answer:
Good question. You are being very logical and I understand that it is rather puzzling – unless you accept the fact that the price of platinum, palladium – and of course, gold and silver are completely at the mercy of JPMorgan and their ability to push the prices anywhere they wish, at least in the short-term by massive shorting of the metals with PAPER CONTRACTS on the COMEX.
There will eventually be real shortages, but not yet. Orders are being filled on time. In a “normal” unmanipulated market, prices would rise because of the points you correctly bring up, but whether it is platinum, palladium or gold and silver. Until actual shortages occur, the Cartel can continue to hold down the price of the physical metal(s) in the paper market. But when it comes to an end, and it will soon, those short contracts that are in place to hold down the price will have to be covered with an equal amount of long contracts and the prices will take off like a rocket. Don’t be so concerned with the short-term movements. Think about the fundamentals in the metals, the contracts and the never-ending increase in the number of dollars being created which will eventually affect the price. You are being given “subsidized prices” and if you don’t understand that and don’t take advantage of that fact, it will be a big missed opportunity for you.
Here are a few comments on this topic from Ed Steer who often and accurately discuss this topic – and whom I happen to agree with completely.
Well, dear reader, there’s nothing that higher precious metal prices wouldn’t fix—and one doesn’t have to look far in the New York banking sector to see who holds the keys to that possibility. When JPMorgan decides, or is requested, to loosen their stranglehold on the prices of all four precious metals, a lot of problems for South Africa—and her miners—will disappear in a New York minute.
-Ed Steer, Casey Research, June 11, 2014
Nothing has changed since yesterday, as we’re still at the mercy of JPMorgan et al. This will continue until we aren’t—and all the commentaries by other so-called analysts in precious metals as to where prices are headed [including mine] don’t amount to a bucket of warm spit.
-Ed Steer, Casey Research, April 4, 2014
Q: What’s the skinny on world currency reset and in relation to precious metals? I don’t see anyone really addressing the Basel III goals and rule changes about that. We understand the World Bank has 160+ countries who have agreed to this reset which will be based on a country’s hard assets (including gold and silver, of course) and other factors like debt. There is a natural process occurring in which various countries are gravitating toward a basket of currencies and away from USD. We now hear of private exchanges of Iraqi dinar and especially Vietnamese dong occurring now prior to announcement of public rate exchanges. Your take on the current situation?
Bill Holter’s Answer:
A reset at some point must occur because the dollar as the reserve currency is “unfair” to the rest of the world. We (the U.S.) have played a game of “never pay.” In other words, we pay with dollars and can issue as many dollars as are necessary. For instance, what do the Saudis really have after giving us oil and accumulating dollars? They have a pile of Treasury bonds that promise …to pay more dollars. I believe that the world is fed up with this and will end up using a basket of currencies which will include gold and maybe even oil as a reserve currency. This will isolate and shut the U.S. “out” as the dollar may even become shunned. Whatever the case, it will take more and MORE dollars to purchase the same barrel of oil or ounce of gold. The danger of course is that the U.S. tries to use force to continue the dollar standard. Whatever path that is taken, will not be good for the average American who has saved in dollars as our currency is on its last legs.
As far as 160 countries already agreeing to a new currency, you very well may be correct and a decision or plan already agreed on. The current geopolitical events (Ukraine, Iraq, and South China Sea) may be a symptom or looked back upon as a trigger for whatever reset occurs. While we are not privy to the details, we do know that a reset is called for.
Q: Around the time of the Second World War, the U.S. government held around 5 billion ounces of silver. If we have used up all that surplus. To the point where the U.S. Mint has to buy silver from the world market to meet demand. Why haven’t we developed more shortages if we do not have those 5 billion ounces to draw from?
Andy Hoffman’s Response:
In the physical markets, we have had multiple shortages in recent years; and rest assured, there will be many more in the future.
Just as the pace of financial markets crises have accelerated since the global economy peaked at the turn of the century, so has the pace of silver shortages since the Cartel stepped up their suppressions. In 2008, when the Cartel attacked paper prices to “prove” precious metals were not safe havens during the financial crisis. The entire world sold out of physical silver – to the point that premiums surged to nearly 100%. Then in 2011, when prices rose to $50/oz., we again sold out of product. Next, in January 2013, the U.S. Mint ran out of silver for two weeks; and finally, after the April 2013 “Alternative Currencies Destruction” attacks, shortages again developed – to the point that junk silver premiums (i.e., the “ultimate fear product”) rose as high as $7/oz.
This past year has been marked by maniacal market manipulations across the board. And while physical demand in the Eastern hemisphere has been very strong, it has been equally slow in the West. This will assuredly change and when it does, you can be sure such shortages will re-emerge.
Q: What is the actual cost of gold production? I have heard from you and others that it is around $1450/oz. Then in last week’s Barron’s it said that the cost was about $1250/oz. But a few weeks ago, in a Wall Street Journal article, it said the cost was about $850/oz. Which number is accurate?
Andy Hoffman’s Response:
There are many ways of measuring gold production costs. However, the most inappropriate is the historic “cash cost” measure that is being phased out; as only when measuring the “all-in” cost of production can one accurately understand the dire situation the mining industry faces. If the Wall Street Journal was right – which it rarely is, given it is nothing but a glorified propaganda rag – the miners would be making money hand over fist; as opposed to the massive multi-billion losses they actually reported last year.
Sure any individual currently producing mine can have a low variable cost of production – particularly the high profile mines discussed in the press releases of the world’s largest miners. However the cost of exploring for, developing, operating and maintaining a mine is dramatically higher; let alone, if the company actually wants to replace reserves.
Last year, the CEO of the world’s fifth largest miner, Gold Fields, said the industry needs $1,500/oz. to survive (Miners Can’t Operate With Gold Below $1,500, Gold Fields Says ) – and I’ll take his word over Barron’s (another financial propaganda specialist) or the Wall Street Journal.