Today is the rare day when a single, impactful idea isn’t jumping out at me but don’t worry, I still have an important point to make. Frankly, the eerie quietude ahead of tomorrow’s FOMC statement – in which “Whirlybird Janet” is widely expected to announce what may well be the final “taper” of her Chairmanship – is not surprising, given that equities are, for all intents and purposes, not allowed to decline in front of such events. To wit, the below chart depicts how essentially all the S&P’s gains since the turn of the century – yes, all – can be attributed to the 24-hour periods ahead of Fed policy statements with the gap above non-pre-FOMC days widening notably when the PPT quite obviously expanded its operations after 9/11, and again amidst the 2008 financial crisis.
To that end, days like yesterday are the perfect example of “priming” the market to enable the Fed maximum flexibility; as if equities, copper, and other “key markets” continued to decline into tomorrow’s meeting, pressure on the Fed to announce a taper “pause” – or at the least, dramatically increase the “dovishness” of its commentary – would be significant. And thus, amidst “horrible headlines” ranging from the political, to the geopolitical, to the economic, the “Dow Jones Propaganda Average” miraculously rose 180 points, pulling up European indices that had started the day solidly in the red. Meanwhile, what do you know, PMs were viciously attacked from the second markets opened, starting with the 29th “Sunday Night Sentiment” raid in the past 30 weeks, as gold dared to approach the very, very key round number of $1,400/oz.
Actually, as late as 11:30 AM EST yesterday, gold and silver were unchanged from their Friday closes, having bravely fought against the evil forces of naked shorting for 16 straight hours. This is why, as was the case Friday, massive paper raids were executed at the time-honored “cap of last resort” at 12:00 PM EST, to “make sure” PMs don’t act troublesome in front of the Fed meeting. Gold and silver are finally starting to make mainstream headlines – which is very worrisome to TPTB, given how rapidly PHYSICAL demand is rising, whilst supply is starting to decline after nearly three years of prices being artificially held below the cost of production. In fact, the latest bombshell news – that UBS is conducting a comprehensive internal inquiry of suspected impropriety in its precious metals trading operation – will only fuel speculation that prices have been artificially suppressed. Heck, even the great Richard Russell – who for decades has steadfastly claimed markets to be freely-traded, has decidedly changed his tune in recent months, stating yesterday that gold is “outrageously manipulated.”
In fact, gold and silver are thus far 2014’s top performing asset classes. However, you’d never know it from watching the daily action; as TPTB have never been more fearful of what’s coming. The daily raids have only become more blatant; and when a “point” needs to be made – such as that the Fed is “in control,” or the Ukrainian crisis a “non-event,” the Cartel’s naked shorting algos leave no stone unturned – from typical “attack patterns” like last night’s tried-and-true raid at the ultra-thinly traded hour of 8:00 PM EST; to “old reliable” attacks at the 7:00 AM EST open of the equally thinly-traded New York “pre-market” session, as we saw today.
In fact, today’s early morning antics were part of a coordinated effort – with the PPT – to turn sentiment positive, amidst the day after “hangover” as the true meaning of Sunday’s Crimean referendum started to sink in. European markets were down strongly, Dow futures were modestly lower and gold looked ready to surge anew – when Putin gave a speech to the Russian Parliament at roughly 7:00 AM EST. In it, he said nothing incremental – and why would he? – yet miraculously, stocks surged higher and PMs were hit; in essence, a carbon-copy of Tuesday, March 4th – when the PPT and Cartel corroborated with the MSM to purport a “softening” of Putin’s stance, targeting a reversal of the prior day’s panicky PM buying and stock selling. As we all know well, nothing could be further from the truth than a Putin “softening”; but in today’s manipulated markets, the only thing that matters is just how hard TPTB try to push a point on a given day. For the record, the Dow now sits at exactly the same level as when the initial Ukraine invasions occurred in early March – whilst gold is just 1% higher and silver 1% lower. Think long and hard of what is occurring there – potentially, the commencement of a new “cold war” – and decide for yourself what impact it will likely have on equity and the Precious Metals demand in the coming years and potentially decades.
Fortunately, the Precious Metals markets cannot be infinitely naked shorted; as unlike the stock market – or, for that matter, “paper PM investments” like mining shares – gold and silver are underpinned by the limited supply inherent in real, physical markets. And thus, no matter how many times the Cartel waterfall declines paper gold and silver prices, they cannot change the fact that their respective “all-in” costs of production – enabling not only profitable operations, but the replacement and expansion of mineable reserves – are roughly $1,500/oz. and $30/oz., respectively. Not to mention, that above ground inventories are at historic lows; and likely, far lower than purported, now that the world is starting to realize supposed “hordes” like the German gold held at the New York Federal Reserve don’t exist; or better yet, that the COMEX “registered inventory” is probably persona non grata itself – given it hasn’t budged in a month, despite nearly 500,000 ounces still standing for delivery of the long-expired December, January and February contracts. To that end, do you believe there are actually 637,000 ounces in the vaults; particularly, the 33% of it supposedly held by JP Morgan?
As for silver, not only is production starting to cliff-dive, but demand has never been stronger. Both India and China saw record PHYSICAL demand last year – whilst the U.S. Mint shattered its annual silver Eagle sales record. And yet, we’re to believe the “price” fell by a third, to roughly $20/oz. This year, global demand has started far more strongly than last year, to levels so strong, the U.S. Mint appears to be – for the first time ever in a “non-crisis” environment – rationing silver Eagle sales at roughly 1.1 to 1.2 million per week. Irrespective, projected 2014 demand levels are currently on a pace to not only shatter the record 2013 pace, but annihilate it. And don’t forget, January 2013 was the all-time strongest month for such sales – which shows you just how strong the pace has been throughout 2014’s entire first quarter. Yesterday alone, 621,000 silver Eagles were sold by the U.S. Mint – i.e., more than half the weekly allotment – amidst the litany of PM-positive “horrible headlines discussed in yesterday’s article; whilst Miles Franklin had an enormous day of silver demand – including zero customer re-sales. And thus, does anyone really believe a “freely-traded” silver market would have fallen from $21.60/oz. Sunday night to $20.60/oz. this morning?
Trust me, TPTB are fully aware of the onrushing tsunami of bullish PM fundamentals; not to mention, the inevitable “golden crosses” of gold and silvers’ respective 50-day and 200-day moving averages. In fact, as you can see below, the recent, maniacal PAPER silver attack has actually pushed it to the bottom half of its RSI, or “relative strength” range, whilst the 50 DMA has continued to creep closer to the 200 DMA. Here at the Miles Franklin Blog, we believe most technical analysis should be taken with a grain of salt. However, as a rule, the longer the period analyzed the less subject to manipulation; as we noted in January’s “Charts Even We Can Appreciate” – which thus far, has proved quite prescient.
And finally, to the “important point” I referred to at this article’s start which, it turns out, is one I have used as a mantra of sorts, throughout my entire 12-year Precious Metals journey. That is, that never in history has it been “contrarian” to own something in a decided bull market – let alone, one that has been ongoing for 14 years.
By nature, the “sheeple” tend to buy high, and sell low – particularly in paper financial markets, which are typically subjected to wild swings, whilst offering the ability to sell by simply “clicking one’s mouse.” This is why the mainstream typically invests in assets in strong bull markets; given that optimism grows with profits, while the dearth of sharp declines prevents the majority from selling out.
Conversely, Precious Metals, despite having outperformed essentially all asset classes since the turn of the century, are criticized by the media – and public – as non-investments that should be avoided at all costs. And no, this is not just the case today – following 18-months of “manipulation infamy”; as frankly, things weren’t much different at high points such as 2009 and 2011. The “system” relies on the survival of fiat currency – and suppression of real money; and thus, particularly in a “dependency nation” in which the majority of the population relies on some sort of government entitlement, this attitude is unlikely to change until the inevitable, bitter end is upon us – which, as sure as death and taxes are coming.
The below chart of commodity prices over the past 250 years tells us why the current, unbacked monetary system must die; in that, “coincidentally,” they broke above two centuries of support in 1971, when the gold standard was abandoned in favor of fiat currency. Hopefully, this convinces you that being a “contrarian,” for once will essentially be a “sure thing” over the long-term. And more importantly, that with the global fiat regime clearly in its terminal stages, the “long-term” may be a lot sooner than most could imagine.