THE DOLLAR IS DOOMED
…and It's Fate Will Be Sealed Later This Month…
Dear Clients and Other Friends:
The total destruction of the US Dollar is nearer now than at any time in our lives. And, that's kind of like saying that my death is closer than at any time in the past. Both are equally true, because no frail human has ever lived forever and NO unbacked paper currency in the entire history of mankind, has EVER survived. The mortality rate is 100% in both cases. Perhaps you don't wish to think about either case, but you better - in both cases! If you aren't ready to leave your mortal body, we need to talk. If you aren't ready to face the fact that the US Dollar is nearing the end of well over 200 years of its life, you are going to experience some terrible consequences financially - and this newsletter contains many of the reasons why I know the end is near.
The next few paragraphs may bore you, but a little history can help you understand the future. In 1945, our country was the strongest military power, with the strongest economy and with the strongest gold-backed currency that the world had ever known. Because of this, and the fact that the US would redeem our dollars for gold to Central Banks, our leaders were able to convince these banks to establish the US Dollar as the reserve currency of the world. And, since the US had more gold than nearly all the gold held by all these Central Banks combined, it seemed that this was a sure thing, so they formed to the Bretton Woods Agreement in 1945. But, this "sure thing" only lasted for 26 years, because in 1971, President Nixon announced the default (actually the bankruptcy) of the US Dollar, declaring that those Central Banks could no longer redeem their US Dollars for gold. As you may recall, that was when the price of gold left the launching pad of about $42/oz, rising to $197.50 in late 1974. This same type of abrupt rise is again staring us in the face - right now!
As it became clearer and clearer that the US would not be able to buy back its dollars for gold, in 1972-73 our government made an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for their accepting only US Dollars for their oil, and the rest of OPEC was to follow suit. Therefore, since the entire world had to buy oil from the Arab oil countries, it had good reason to hold dollars as payment for their oil. This was the case because even though those dollars could no longer be exchanged for gold, they could be exchanged for oil. This is the only reason why the US Dollar has been able to maintain its domination of the world currencies and stay in its place as the reserve currency of the world. However, this is about to change - THIS MONTH!!! You may be asking, "How do you know that?" Read on.
Here's the title of an article published by "LEAP/E2020," on 2/11/2006 - "The End of the Western World we have known since 1945." The article is 5 ½ pages long, and here are the first five paragraphs: "The Laboratoire European d'Anticipation Politique Europe 2020, LEAP/E2020, now estimates to over 80%, the probability that the week of March 20-26, 2006 will be the beginning of the most significant political crisis the world has known since the Fall of the Iron Curtain in 1989, together with an economic and financial crisis of a scope comparable with that of 1929. This last week of March 2006 will be the turning-point of a number of critical developments, resulting in an acceleration of all the factors leading to a major crisis, disregard(ing) any American or Israeli military intervention against Iran. In case such an intervention is conducted, the probability of a major crisis to start, rises to 100%, according to LEAP/E2020.
"An Alarm based on 2 verifiable events.
"The announcement of this crisis results from the analysis of decisions taken by the two key-actors of the main on-going international crisis, i.e. the United States and Iran:
- On the one hand there is the Iranian decision of opening the first oil bourse priced in Euros (instead of US Dollars) on March 20th, 2006 in Teheran, available to all oil producers of the region;
- On the other hand, there is the decision of the American Federal Reserve to stop publishing M3 figures (the most reliable indicator on the amount of dollars circulating in the world) from March 23 onward.
"These two decisions constitute altogether the indicators, the causes and the consequences of the historical transition in progress between the order created after WW II and the new international equilibrium in gestation since the collapse of the USSR. Their magnitude, as much as their simultaneity, will catalyze all the tensions, weaknesses and imbalances accumulated since more than a decade throughout the international system."
Later quotes include: "This double development will thus head in the same direction, i.e. a very significant reduction of the importance of the Dollar as the International reserve currency, and therefore a significant and sustainable weakening of the American currency…LEAP/E2020 estimates that the American decision to stop publishing M3 (money supply figures) aims at hiding, as long as possible, the monetization of the US debt." In other words, our government will simply print enough paper dollars to pay off our countries debts, and in the process destroy the remaining purchasing power of our dollars. This process will probably result in a two-tier dollar currency, namely an overseas US dollar, and a domestic dollar. I wrote an article about this probability about three years ago. And, guess which one will be worth less?
Near the end of this article, this paragraph leaps off the page: "LEAP/E2020 anticipates that these two non-official decisions will involve the United States and the world in a monetary, financial, and soon economic crisis without precedent on a planetary scale. The monetization of the US debt is indeed a very technical term describing a catastrophically simple reality: the United States will undertake to not refund their debt, or more exactly to refund it in "monkey currency." LEAP/E2020 also anticipates that the process will accelerate at the end of March, in coincidence with the launching of the Iranian Oil Bourse, which can only precipitate the sales of US Treasury Bonds by their non-American holders." My reader friend, THIS IS SERIOUS!
Whether you ever buy another gold or silver coin from yours truly or not, PLEASE get your savings out of
US paper currency and other US dollar denominated assets, such as CD's, bonds, savings accounts, etc!!
In another insightful article "The Proposed Iranian Oil Bourse," Dr. Krassimir Petrov states: "…this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro's, to be able to transact on the (Iranian Oil Bourse), thus circumventing the US dollar altogether, meaning: 1. The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the Euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans: 2. The Chinese and the Japanese will be especially eager to adopt the new exchange because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros: 3. The Russians have inherent economic interest in adopting the Euro - the bulk of their trade is with European countries: 4. The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars…At any rate…should the Iranian Oil Bourse accelerate, the interests that matter - those of Europeans, Chinese, Japanese, Russians, and Arabs - will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange, by: 1. sabotaging the Exchange; 2. negotiating acceptable terms and limitations; 3. joint U.N. War Resolutions; 4. unilateral nuclear strikes; or 5. unilateral total war…Whatever the strategic choice…it will precipitate the demise of the dollar…(the) ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world - that barbarous relic - GOLD."
Trust me friend - THE US DOLLAR IS DOOMED!!!!!!!!! That's the dark side. If you think we've seen inflation in this country in our lifetime (the 3-cent stamp of our childhood is now 42 cents) has been bad, "you ain't seen nothin' yet." The bright side is that gold is destined to shine more brightly than it ever has!
This quote was taken from an article about gold by one of the top gold fund managers in the business, John Hathaway. He manages the Tocqueville Gold Fund. Simply put, Hathaway believes "…the bull market in gold has just begun, but 2006 will contain wild swings in the gold price…and these swings will offer good buy spots (like I believe we are presently seeing)."
Gold cleared $570 an ounce three weeks ago -- for the first time in over 26 years, and has been as low as $538 in the meantime. Wild price swings are here with more to come. And, continues Mr. Hathaway, "Four digits no longer seems like a stretch to me…Rather, it would seem that gold would be correctly priced at $1,000, just to catch up to other commodities like oil, base metals, natural gas, and platinum."
The way Hathaway sees it, "…you can divide a bull market into four phases: 1. The beginning, 2. The end of the beginning, 3. The beginning of the end, and 4. The end. Right now, we are starting 2. The end of the beginning phase. The 'beginning' phase is now over. In phase 2., the market moves higher, but no one really knows why, so the press doesn't really discuss it, and the public at large doesn't notice. More people are talking about gold these days. Media awareness has increased. And the attention is attracting new money into gold. These are the hallmarks of the 'end of the beginning' phase. The big moves are still ahead of us."
As the price advance continues, the reasons for the bull market become more apparent. That will be the third phase, the beginning of the end. The money on the sidelines turns bullish. Finally, when it's obvious why gold is advancing and all the fundamental explanations can be summed up in a banner headline in your local newspaper, you know you've reached the final days of the bull market. In Hathaway's opinion, "…those days are still well ahead of us, both in terms of time that must elapse and the magnitude of price appreciation."
After reading Hathaway's article, my advice to you is still the same: Hold as much gold (and silver) as you can possibly afford - especially as you see the deterioration of the US dollar as described in the early part of this newsletter. But beware, as the gold price rises, so will the volatility. Don't let it shake you out of your position.
In terms of the US Dollar, gold is still dirt cheap - and silver is an even better bargain! I hope you have enough to survive what's coming, because it won't be pretty! There is hope for those who don't insist upon holding depreciating paper dollar assets.
Excuse me for repeating a paraphrase from Richard Russell, who writes the Dow Theory Letter, but in case you missed it before, he contends that, "As gold and the Dow Jones Industrial Average met at the same price in 1980 (850), they will again reach the same level in this gold bull market, somewhere between 2500 and 3500." This will result in a disaster for those who continue to hold most industrial type stocks, and will allow those who see the wisdom of his newsletter to survive the difficult times ahead. I hope you're in the gold group.
If you already hold sufficient gold and silver coins, perhaps it's time to tell close friends that they might benefit from reading my website: www.goldeneagleenterprises.net and then calling me. And, feel free to make copies of this newsletter for anyone you care about.
Top of Page....^
HERE WE GO!!!
Dear Clients and Other Friends -
Well, two more days like yesterday (11/16 - gold up $10) and today (11/17 - gold up $7) and we'll have gold above the long awaited price of $500! And, whether it takes two days or two months is immaterial. Gold is going over $500, then $600, then $700 and then up to the old high in 1980 of $850. After a significant pull-back from that old high, we'll see gold eventually reach several thousands of dollars per ounce. If you think this is a pipe dream, consider this. In 1971, the author of the Dow Theory Letter, Richard Russell, predicted that gold and the Dow Jones Industrial Average would meet at the same level some day. At that time the price of gold was about $40/oz and the DJIA was near 200. They met at 800 in 1980. Now, Russell is predicting that they will again meet, this time between 2500 and 3500. If you're in most industrial type stocks this means a serious decline in value. If you're in gold this means a serious increase in value is coming.
The primary "reason" given for this beginning of the move in the precious metals comes from the CPI (Consumer Price Index) being up 1.2% in September and another 2% in October - and we all know that this index is massaged downward and is realistically double those figures when you consider the daily essentials that are not included in the index.
The secondary "real reason" for the current strength in gold and silver (silver was up 33 cents yesterday and today) is that both the Russian and Argentinean Central Banks have announced their intentions to double their official gold reserves! Folks, that's IMPORTANT, and in my opinion, just the beginning of many similar announcements to come from other central banks. The move from paper to gold is underway!
Most of you don't appreciate what's ahead because you haven't studied the history of unbacked paper currencies, but there has never been ONE, in the entire history of mankind, that has ever survived! Admittedly, the US paper dollar has lasted longer than any other unbacked paper currency, but folks, its days are numbered! When the central banks of the world divest the US dollar of its reserve currency status, it will be all over. And, it's not a matter of IF, it's simply WHEN. This is a prediction of the future of our worthless dollars based upon historical facts, not some pipe dream. And, you know I'm right. But you need to do something to protect your savings from the eventual demise of the dollar. Historically, gold, silver and real estate have proven to be the best answers - and I recommend all of them to you, although real estate seems considerably overpriced at this time in many parts of our country.
Call my toll free number shown below if you would like me to help you select some appropriate gold and silver coins for your family.
Feel free to share this newsletter with anyone whose financial future you care about.
Top of Page....^
GOLD ALERT July 2005
Dear Clients and other Friends –
For clients, this will seem like a strange newsletter; certainly different than any I can remember ever writing in the past. Normally I wait to publish a newsletter until gold seems to be at a buy spot and ready to move up, so that if you have funds available, you can acquire gold and silver coins at that time and watch them rise. That’s not the case at this moment, in my opinion.
Based upon the cycles I follow and the comments from other knowledgeable gold analysts with whom I’m in contact, it is my current analysis that gold has about a 40% chance of pushing above $460 this summer, but a 60% chance of dropping to the $375 level by about Labor Day.
The reason I’m expecting a 40% chance of the long term bull market to resume from here is that just last week; “Thirty-nine, or 78 percent, of 50 traders and investors surveyed from Sydney to New York on June 16 and June 17 forecast a rise in gold, which gained $10.70 to $440 an ounce last week in New York. It was the most bullish consensus since the survey began April 2004. Nine respondents forecast a decline and two expect little change. European central banks, which agreed to limit gold sales to 500 tons a year through September, shed 346 tons as of April 1, or about 13 tons a week, London-based researcher GFMS Ltd. estimates. If that rate was maintained, central banks that accounted for most of a 23 percent rise in gold supply in the first quarter will reach their sales target this week. `They cannot keep selling at this rate,’ said Ian MacDonald, managing director of precious metals trading in New York for Inter-national Assets Holding Corp. `We should really be asking where the gold is going to come from to meet growing investor demand.’'' When the “consensus” is so strong in favor of an up market, I’m suspicious!
Therefore, for clients who have 25% of their assets already in precious metals, it’s a time to wait before adding to your holdings – until gold either breaks above the December high at $456, or drops below $400, hopefully to about $375 where the major support line lies. Due to the Central Bank announcement, it’s fairly likely gold will rise from here, but I’m not willing to bet your money on it.
But, if gold drops below the recent low at $412 for three business days, I’ll anticipate it will go all the way to the major support at $375, at which time I’ll fill the buy orders you place with me in the meantime. If, however, gold closes above $456 for three business days, it will mean that we aren’t going to see a nice dip in the price, so I’ll fill your orders at that time. I
suggest that this will be a good strategy for adding to your existing account. However, if you don’t hold any gold and/or silver coins presently, then I would suggest that you commit half of whatever amount you intend to invest RIGHT NOW, and hold the other half until gold either reaches $375 or $456. Call me with your questions and/or orders. Incidentally, if you haven’t read my website (www.goldeneagleenterprises.net) article, “Real Estate – Boon or Boom?” I’d suggest that you do so. In case you don’t have access to the web, here’s an important passage from that article which was written in early 2003:
“We moved to this modest home 13 years ago, paying $155,000 for it. Due to the condition of the economy at the time, I was concerned that we might lose the $10,000 we made as a down payment. But, lo and behold, when we had it appraised a few months ago, it came in at $279,000. So, now we have a $250,000 mortgage costing us about $1,800/mo (of which $1,300 is tax deductible interest) and a lot more gold coins. In Scottsdale , AZ , you can’t rent a house of this value at anywhere near that $1,800 (none of which would be tax deductible). So, we have our home, a tax-deductible expense and more gold coins. While I don’t pretend to be the shiniest coin in the stack, the way I see it (after being in the investment business for 45 years) is that we’ve simply moved about $100,000 from where it was saving us 5.5% per year in interest by being tied up as home equity, to gold coins where they have the potential of making many times that amount each year for the next several years. When the coins we hold appreciate to where we expect them to, we’ll sell them and pay off the mortgage, if we decide that’s best for us.
“Now, if my suspicion is incorrect and we actually have a healthy real estate market for the next four or five years, then I guess I’ll just refinance again or sell this place at a higher price than it is today, and invest the additional profits into something else. If, however, my analysis of the current real estate market is right and the property values are about to nose-dive, our mortgage contract says that if we stop making the payments, the bank gets the house. Well, we originally put up $10,000, but have taken out well over $100,000 by refinancing, so I don’t think we’ll miss the current equity of about $30,000 if we lose this house by legally defaulting. And, let’s face it, the system that has put us in the financial mess our country now faces, is the one that established the contracts that allows us to default, if we find it necessary or to our advantage to do so. Additionally, if the current real estate bubble does go “boom” in the next few years, I suspect we’ll be able to find a comparable home (in the then depressed market) for about half what this one is appraised at today.
“And, if the real estate market gets as weak as I think it might, perhaps the banks will have to repossess so many houses that they’ll find it will be to their advantage to pay us to stay here, so this house won’t be vacant and subject to vandals and normal deterioration. A friend (who used to be a V.P. of a large national bank – now a coin dealer, at my instigation) tells me that this is very similar to what occurred to many folks during the great depression of the ‘30’s. I can think of other interesting possibilities, too – and all of them favor our holding a large mortgage at this time in the real estate cycle. And especially with interest rates at the current levels, it simply makes a lot of sense to me. It not only makes a lot of sense, but I predict that if gold and gold coins do what I expect them to, it will make us a lot of dollars, too.
“Of course, most folks refinance their homes in order to buy something (present consumption) or pay off their credit cards (past consumption), so the are simply incurring more debt on their home to save the higher interest rates required by the credit card company (and that’s not a bad idea). While that may be admirable, what I’m doing is simply moving dollars tied up in equity in our home (costing us about 5% in interest per year) to an investment in gold that has the potential (and a past real track record) of over 200% per year. If you do the math here’s what happened between 1970 and 1980: gold rose from $35 to the closing high on 1/21/80 of $825/oz (the interday high was $875). This means that in ten years, gold rose 2,257% (on a closing price basis). You do the rest of the arithmetic if it’s important to you to determine an exact annual rate of return, because I don’t know how to figure compound interest rates. But it doesn’t take a masters degree in mathematics to figure that it’s going to be a lot more than what one needs to pay in interest for a larger mortgage on their home now.”
That was about 2 ½ years ago. As of 05/05/05 , we have again been pleasantly surprised to learn that the mortgage company calculates that our home is worth more -- $190,000 more, or a total appraised value of $470,000. Since they’re in the business of lending money and I’m in the business of investing money, I’ve just agreed to let them give me some more ($132,000) money to invest into gold. Even though the current interest rate is nearly 6%, it’s all tax deductible and the capital gains tax on coins is very low – when, as, or if I ever sell them.
To recap, 15 years ago we bought this place for $155,000 with a down payment of $10,000. The recent appraisal said this property is now worth $470,000, and so far, we have withdrawn over $230,000 in cash and invested it into more gold coins and stocks. If real estate continues to appreciate (how much further can they blow this “bubble?”), I guess we’ll just have to sell or refinance it at more profit in a few years. If real estate drops from this hyper-inflated level, I guess we’ll either give it back to the mortgage company, or renegotiate the terms of the loan. Either way, all we can figure is that refinancing was a WIN-WIN situation. Meanwhile, I strongly suspect that our gold coins and stocks will do rather well for us. Perhaps you might find it beneficial to consider freeing up some of your real estate equity for such a purpose. Call me if you’d like additional insights.
ROAD MAP ON THE MINING STOCKS
Kenneth J. Gerbino -- June 9, 2005
“Gold and commodities are going higher in this decade. The graph below shows how commodity prices are relatively priced versus the cost of living. Two important things about the chart is that commodity prices the last four years have already risen by 50%, but from a historic perspective the move looks as if it is just beginning a new and prolonged trend. The inflation adjusted price level today is the same as 1932 at the depth of the U.S. depression when commodity prices had collapsed.
“Scarce resources such as beachfront property or certain metals are a function of Mother Nature, not man. Men can make machines to make millions of widgets and influence the price by overproduction, but certain metals, and other natural things like oil take billions of years to form and are not subject to the laws of oversupply unless these commodities are found in abundance. In the case of metals and natural occurring commodities, the supply is limited.
“But populations grow continually over time generally increasing demand. This, plus inflation from money supply increases will add to upward price pressures. The graph above states the obvious, that the commodity decline from the 80's and 90's is over. A prolonged and strong across the board increase in many commodity prices is under way. This will influence inflation rates and move the price of precious metals higher in the years to come. The above graph is your road map.”
DING DONG - WHO DO THEY THINK THEY ARE FOOLING?
Mike Hoy -- June 9, 2005
“For the first time I believe that we are seeing the street (in the currency markets) say that both the Dollar and the Euro are "Junk!" This is a very important point to understand because it also should be the signal that the next leg of the gold bull is about to be unleashed. After all what do they have left for an alternative? I have said before that the time will come when all currencies fall at the same time because of the lack of faith in paper and debt, and gold will be the last resort.”
BULLION, THE GOLD METAL PRICE
Jim Willie -- July 1, 2005
“In early 2001, gold put in a low of $265, although the continuous contract chart built in a slight premium at the time, over the cash market gold price. In December 2004, gold registered a high of $456. My forecast stated at a Chicago gold conference in October 2004 was $455, in friendly opposition to Jim Turk's $485 forecasted target (and plenty of witnesses). That means we had a $190 rise in the major Elliott Wave #1 upleg. Typically, the EW3 third upleg is 50% to 60% larger than the EW1 upleg. That translates to $285 to $305 of potential power in the virtuous major EW3 upleg, to a level bounded by $700 to $720 per ounce. Let it be known that the textbook three impulse moves up seem more like five here over the past three years. Let's not quibble, and instead employ some pro-forma asterisks in honor of gold cartel ambushes. The textbook two impulse moves down might have been completed, unsure actually. The $415 level might prove to be the starting point for the major EW3 wave. Its start might instead turn out to be in the $390 to $400 range. Regardless, the next major upleg is foretold by the following charts related to stocks, which are much clearer along textbook lines. We appear to be headed to a $700 gold price in US$ terms in the future.”
A Process of Elimination: A Speculation on Gold and the Credit Cycle
John Hathaway – July1, 2005
“The dollar price of gold bullion is trading within 3% of a seventeen year high, despite negative sentiment. Over the past five years, the dollar gold price has increased 50% versus a 16% decline in the S&P 500 and an 18% decline for the trade weighted dollar. Swooning sentiment while gold trades within a few percentage points away from a seventeen-year high? Sounds like a bull market to us. It is the nature of every bull market to take along as few as possible. The recent shakeout, which began in earnest in early March, has done an excellent job of chilling investment sentiment. The early stages of all bull markets are characterized by widespread skepticism. Gold remains in a multiyear bull market that will last another decade. The deflowering of the euro represents a major milestone along the way…Those who feel able to predict the precise moment when foreign central banks turn their backs on the dollar should wait until then to position gold. All others are advised to start now.
“Convenient though government sponsored currencies such as the dollar and the euro may be, they are first and foremost tools of government policy…The dichotomy of monetary interest between the public and private sector will be exposed as the current secular credit contraction runs its course. It will culminate in a grass roots mandate for sound money, and will be expressed as a dollar gold price well into four digits.” (emphasis added)
Based upon what these and many other knowledgeable gold observers are saying, don’t you agree that it would be smart for you to make decisions regarding which coins you should purchase and how many? All we need to do then is let the price action on gold bullion tell us when to place those orders. Simply call me now and I’ll help you decide which coins will be the best buys for you, when that time arrives. Remember, successful investors buy the significant dips in a bull market – which, by definition, we now are in, in the gold market.
Top of Page....^
On April 15th (interestingly, our tax day), NM Rothschild announced its withdrawal from the London Gold Pool, which has "fixed" the price of gold twice a day since that organization created the gold pool in 1919. Many of us are puzzled and are asking WHY? The conclusion drawn by one wag was that: "Gold is on its way out as an investment and a reserve asset. Three cheers for that."
I've been personally involved in gold for over 44 years and I don't think, "gold is on its way out…" - quite the opposite! I'm convinced that there is something both imminent and eminent relative to gold - thus this article that contains information I've not seen on "gold-eagle."
The official justification for the Rothschild withdrawal was that: "Our income from commodities trading in London, including gold, has fallen as a percentage of our total income in each of the past five years. Following a strategic review of our activities we have concluded that this is no longer a core area of activity and have, therefore, decided to withdraw from the market." As Mr. Warren Pollock of "The Macroeconomic Newsletter," in an article titled, Something Significant at Rothschild, commented, "…we should consider that the cover story Rothschild provided regarding profitability concerns are absurd." Well, if the announcement is "absurd," what is (are) the real reason? Obviously, we can only speculate - hopefully intelligently.
It's been over two weeks since these items appeared and I've been thinking about them ever since. Yes, I know I'm a little slow and several other articles have appeared since, but none that I've seen cover several items that I consider extremely important. I don't pretend to be able to comprehend everything I read, so I called long time friend Frank (rehabilitated graduate from the school of organized crime for gentlemen - namely fractional reserve banking) to get his slant on these extremely important items. Since Frank's been following gold nearly as long as I have, he's also qualified to make an educated analysis of the matter. The following is an amalgamation of our thoughts.
First, there have been numerous "guesses" regarding WHY Rothschild's has withdrawn from the London Gold Pool. They range from the potential of significant derivatives market problems, to the unfounded perception that Central Bankers don't believe that gold has a function in the world's finances anymore, to the probability of problems in the Central Banks deceptive gold leasing program, to potential lack of liquidity between Central Banks, to Rothschild intelligence that it would have among their extensive banking connections concerning geopolitical threats that may include a more extensive Middle East war, and on and on.
Friend Jason Hommel stated in his April 30th newsletter: "In the press release, it says the Rothschild's are getting 'out of the gold business.' People will assume they are thus selling gold. This is probably exactly the opposite assumption one should make, just as everyone made the wrong assumptions about what Nathan Rothschild was doing after the battle of Waterloo, namely a pretense of selling British consols (the T-bonds of their day), just prior to the announcement of the British victory at Waterloo hit the London Stock Exchange (see: google.com article, "rothschild waterloo napoleon"). Reading a bit closer, you can see that the Rothschild's are getting out of the gold leasing business." www.goldismoney.com/ssr/SS32.html
But, we can be certain that whatever the reason(s), it must have been of major significance, not some blather about falling income! You don't create, oversee and virtually control the world price of gold for 85 years and then just withdraw because it was "the sound thing to do," according to Baron David de Rothschild.
Our guess is that there is something very significant about to occur in the international gold market that is going to cause major disruptions of global importance, in which the Rothschild's don't wish to be involved. When? Your guess is as good as ours, but the following comments may hold a timing clue.
On January 23rd of last year, Jim Sinclair wrote an extensive and insightful paper for his email readers. The title was "Gold to be Remonitized: First by the 'Malaysian Dinar' in June of 2003 followed by the 'US Dollar' in June of 2004. The Gold Price Will Continue to Float." At that time, I'm quite certain that Mr. Sinclair had no inkling that NM Rothschild would ever bow out of the London Gold Pool, which it founded. Frank and I are convinced that there's a connection between what Mr. Sinclair wrote 16 months ago and the Rothschild's action - but what could it be?
Brief excerpts of Mr. Sinclair's email are quoted here for your consideration.
Early in his 6½-page article, Mr. Sinclair indirectly inferred the number one economic rule: everything is political. He pointed out that, "June 2004 is when the Bush re-election campaign will make its push for the November elections…You must see the 18-month (at that time, January 2003 to June 2004) time line that the economic stimulation tax plan has for those that will fund the 2004 Bush Campaign." Was the Rothschild withdrawal done in anticipation of something really significant to occur between June and November of this year? We think so.
This article gives some insight as to how this may happen, namely, an international accord to stabilize the paper currencies of the world.
But, to continue with the salient points in Mr. Sinclair's article, a lengthy quote is necessary: "Gold will not be set in price as there is no way anything monetary can be fixed at this time...It is enough that we know what is planned and how it will occur. I disagree entirely with the author (a Mr. Murenbeeld) of the National Post article on the basis of Chairman Greenspan and Governor Bernanke's statements that the goal for gold is $350 and it will be fixed at that price. That simply will not and cannot happen in today's floating exchange world.
"The (National Post) article did not approach the means by which gold would re-enter the system but only said it would. Convertibility is out of the question in light of the profuse use of dollars as the primary international settlement mechanism. (Frank points out that the majority of dollars are "computer blips" for which the Fed has zero responsibility.) Gold is headed back into the system by a modernized and revitalized Federal Reserve Gold Certificate Ratio tied to the expansion of M3 (the broad monetary aggregate figure). The value of Treasury gold (if there is any) on the day of enactment will be considered to be that value which is required to have (for) that size M3. From that point forward, more gold, (and) or a higher price for gold will be required in order to expand the broad based monetary aggregate (M3) beyond a modest percentage. The Treasury could simply benefit from a higher price or could buy gold in the open market to effect a higher price (does such an increase in our central bank buying of gold lead you to believe that the gold price would go down?) should the need arise to expand beyond the present level in M3, beyond a predetermined expansion of (say) 3% per year." (highlighting and underlining added)
Upon reading these two paragraphs 16 months ago, friend Frank said, "Very interesting! If the open market price of gold 18 months hence will be the criteria, look for our M3 to be greatly expanded between now and then." Since then, M3 has risen from $8.5 to nearly $9 trillion, or about 6%. This would be much more dynamic if it weren't for the numerous deflationary factors such as bankruptcies and business failures of the past year.
If Mr. Sinclair is correct, and the new Federal Reserve Gold Certificate Ratio is to be introduced in an effort to stabilize the dollar and government bond market and get President Bush reelected, here are some figures to consider. The euro currency has risen (because it's inversely related to the US$) from a low of a bit over 80 to a recent high of about 127, and is currently about 119 due to the recent rally in the US$. One of the primary reasons for this rise in the euro is that it's backed by 15% in gold (WHY, if it has no monetary value?). At $390 spot gold, the US$ has approximately a 13% gold ratio to currency-in-circulation. Problem: as gold rises in price, the euro will exceed that 15% ratio and the US will need to either increase its holdings of gold or reduce the currency in international circulation (not likely). Solution: block US domestic currency, removing it from the equation thus rendering it valueless outside the US; as history shows other nations have done from time to time (likely). Result: 1. domestic inflation, as the domestic gold price goes ballistic in terms of the domestic currency (almost a given), and 2. US living standard plummets! (almost certain)
If the same ratios are applied to the M3 money supply, there are two probable scenarios: 1. with M3 divided by the (supposed) US gold holdings of 260,000,000 ounces, this would equate to a per ounce gold price of approximately $34,600. If a 15% "Gold Cover Clause" were to apply (ala the euro percentage), the gold price would equate to approximately $5,190, and 2. currency-in-circulation if divided by the 260,000,000 ounces of gold that is supposed to be in the US Treasury assets, gold would compute to a per ounce price of approximately $2,600. All other aspects of the money supply are simply "computer blip money," fiction, made possible by the fractional reserve banking system. M3 is approximately 13 times the currency-in-circulation, the majority of which is held in foreign hands.
It seems likely that some combination of 1) and 2) will be required to give meaning and credibility to a new gold cover index; the Fed lacking sufficient control of M3, even with their control of the short term interest rates.
WHY? Obviously, the point of this article is an attempt to tie the Rothschild's announcement and the Sinclair article in with the present action in the precious metals markets. If friend Frank and I are correct, there is an excellent likelihood of a major increase in the price of gold when the dust settles. But, whether this scenario is correct or not, we can certainly rest assured that there is some connection between the Rothschild withdrawal from the London Gold Pool that they created, and the perilous gold derivatives market. It's my opinion that they are expecting counter-party derivatives failures in the gold market (and probably silver) in the very near future, and they don't wish to be a victim of the ensuing pandemonium.
If (since?) there will be a gold clause tied to the paper currencies of the world, it will mean that either: 1. the world-wide money supplies will be kept stagnant -- not a chance!, 2. the price of gold will increase -- VERY likely (in conjunction with the increase in the money supply of the respective countries), and/or 3. some, if not all, central banks will need to increase their holdings of gold (to meet or maintain the currency/gold ratio, at whatever level it may be set) - which will obviously put upward pressure on the price of gold -- ultimately. For those of us who hold gold (especially coins), this would be GOOD news! However, it may very well mean that one of my fears for several years now, will come true -- nationalization of the gold mining industry, because our government will need every ounce of gold they can acquire (paid for with paper), by whatever means!
Also, keep in mind that every Central Bank in the world, but especially OPEC, Europe, China & Japan would welcome such a gold-backed program for world currencies with open arms!
The recent collapse of the gold and silver prices couldn't have been better "timed," if Sinclair's pre-election scenario is accurate. Gold dropped from it's interday high of about $440 to an interday low of about $380, and silver from it's high of about $8.50 to $5.63. Now that speculators and weak holders have been washed out of these metals (especially silver), we can have a period sideways movement (accumulation time for the "big-boys"), and then the real reason for the Rothschild's withdrawal from the London Gold Pool can become apparent, where there may be a short position slaughter of illiquid counter-parties.
Is it just possible that, after several generations (since Meyer Amschel Rothschild began his financial enterprises in 1770 - see The Rise of the House of Rothschild by Count Egon Caesar Corti, Western Islands, 1972) of creating the "leading edge" of the financial world, the Rothschild's are anticipating (or perhaps causing?) some financial maneuvering in the monetary world that will cause a dynamic gold market - and they don't wish to be selling anymore to anyone (including Central Banks), in the meantime? Perhaps they need this present time frame in which to buy more, and were precluded from doing so by being members of the London Gold Pool. We'll probably never be privy to the exact answer to such questions, but the next few weeks or months might prove to be very exciting to those of us who are prescient enough to add to our gold assets during this "quiet before the storm."
Frank and I firmly believe that we are presently in the "eye" of a financial hurricane, and since the backside is always the more destructive, it seems that the worst is yet to come. I trust that you have enough physical gold "insurance" to weather the turbulence ahead.
To date, we've been correct in anticipating a rising gold price as the dollar falls. Under a Gold Cover Clause we could expect a rising gold price concurrent with a stable dollar -- not guaranteed, but reasonable.
And not insignificantly, the US$ index had dropped from it's 2002 high of about 124 to a recent low of 85, and is currently about 91 with major resistance at 92. To stop the downward spiral of the US$, something must be done to stabilize it and regain some semblance of long-term faith in that paper asset, or it could trigger a collapse of all paper currencies. A "Sincliar" described "Gold Cover Clause" would fill the bill -- to say nothing of stabilizing all currencies, especially of gold-holding nations. In addition it would reduce animosity between trading nations and buy some urgently needed time for a world currently toying with a systemic fiat-money credit collapse. Should it ever happen, life would become too ugly to write about.
Are we approaching a crisis in the financial world? It would seem that we are, based upon the foregoing items. Should we panic? I believe it would be more appropriate to remember the meaning of the Chinese word for crisis, which is composed of two characters: one represents "danger," and the other represents "opportunity." I see the current dip in the precious metals prices as just that - an opportunity. I sincerely trust that you have enough gold to weather the extremely interesting turbulence just ahead.
I leave you with a recent comment by renowned author of The Dow Theory Letter, Richard Russell, who said this about the recent dip in the gold price: "Personally, I'm going to hold my gold. Holding the metal doesn't worry me. I still have gold that I've carried from the '70s. Gold is the only real money. I don't care, inflation, deflation, boom or bust -- gold is money, and I can't say that about any paper currency. I'm holding all my gold. In the long run, I believe both gold and gold shares will win. But a lot can happen between now and "the long run." Personally, I've decided that I'm going to sit with my gold-share position. But if I do anything additional in the gold area, it will be to buy more coins."
Comments or questions are welcomed at: 1866-465-3496
This article is not copyrighted. Feel free to send a copy to anyone about whom you are concerned.
Top of Page....^
The second shoe drops!
Dear Clients and Other Friends:
You'll recall (I hope) that last month I sent you my newsletter entitled: "WHY?" My question was in reference to the suddenly announced "withdrawal" of NM Rothschild as a member of the London Bullion Market Association (LMBA), sometimes called the London Gold Pool. It still remains a total mystery as to why no one else that I read (and I do read extensively), including James Sincliar (whom I quoted extensively) has made any in-depth references to this startling, and I believe extremely significant move by NM Rothschild.
And now (6/1) we have fuel added to the "fire," namely a second giant in the precious metals market has made a similar announcement through Reuters: "AIG International Limited no longer an LBMS market maker in gold, silver." NO EXPLANATION OF ANY KIND WAS GIVEN!
What is going on!? Are the "rats" abandoning a sinking ship?
There is no question in my mind that something very significant is going to happen in the precious metals (especially gold) in the very near future. You may recall that in my "WHY?" letter, I quoted Jim Sinclair as saying: "Gold to be Remonitized: First by the 'Malaysian Dinar' in June of 2003 followed by the 'US Dollar' in June of 2004. The Gold Price Will Continue to Float." At that time, I'm quite certain that Mr. Sinclair had no inkling that NM Rothschild would ever bow out of the London Gold Pool, which it founded." I'm equally confident that Jim had no idea that AIG would also bow out. He continued: "June 2004 is when the Bush re-election campaign will make its push for the November elections…You must see the 18-month (at that time, January '03 to June '04) time line that the economic stimulation tax plan has for those that will fund the 2004 Bush Campaign." Was the Rothschild, and now the AIG withdrawal done in anticipation of something really
significant which is yet to occur between June and November of this year? I have no doubt!
Is the real reason that the Middle & Far East countries about to terminate their acceptance of
the paper dollar? Jim Sinclair made such an intimation a year and a half ago: "Gold is
headed back into the system by a modernized and revitalized Federal Reserve Gold
Certificate Ratio tied to the expansion of M3 (the broad monetary aggregate figure). The
value of Treasury gold (if there is any) on the day of enactment will be considered to be
that value which is required to have (for) that size M3. From that point forward, more
gold, (and) or a higher price for gold will be required in order to expand the broad
based monetary aggregate (M3) beyond a modest percentage. The Treasury could
simply benefit from a higher price or could buy gold in the open market to
effect a higher price (does such an increase in our central bank buying of gold
lead you to believe that the gold price would go down?) should the need arise to
expand beyond the present level in M3, beyond a predetermined expansion of
(say) 3% per year." (highlighting and underlining added)
And, as I intimated in my "WHY?" newsletter, the "smoke" that has been emanating from the gold derivatives market for the past several years may be the key to these bizarre announcements. According to the "Q1 04 Hedge Book" it states that the total gold hedges have been reduced from 102 million ounces to a mere 68 million ounces. Well, if my calculator is correct, this is still over $26,000,000,000 worth of gold that has been sold by producers, etc., and if delivery were required in any short time frame, it simply isn't available! Do these London gold bullion market makers see something gigantic on the horizon (such as defaults on gold derivative contracts) that has gotten them to take such drastic steps as to withdraw from the LBMA? As I said in "WHY?": It's my opinion that they are expecting counter-party derivatives failures in the gold market in the very near future, and they (NM Rothschild) don't wish to be a victim of the ensuing pandemonium.
Another item I mentioned in "WHY?" was "…the US$ index had dropped from it's 2002 high of about 124 to a recent low of 85, and is currently about 91 with major resistance at 92. To stop the downward spiral of the US$, something must be done to stabilize it and regain some semblance of long-term faith in that paper asset, or it could trigger a collapse of all paper currencies. A "Sincliar" described "Gold Cover Clause" would fill the bill -- to say nothing of stabilizing all currencies, especially of gold-holding nations." Meanwhile, the US$ index did slightly exceed 92 and is currently back down to 88.97 on its way to…oblivion?
It might be appropriate for you to reread my "WHY?" newsletter. If you didn't retain it, feel free to contact me and I'll either email or "snail-mail" a copy to you. All I know is that I'm very glad we hold extensive positions in gold and silver coins and stocks. If you don't, I suggest that now that June first has come and gone, this would be an excellent time for you to do likewise. I truly believe that the time is now very short until an explosion (or implosion) in the financial world will hit.
I sincerely trust you have enough gold to weather the extremely interesting turbulence just ahead.
This closing thought from my "WHY?" newsletter: "I leave you with a recent comment by renowned author of The Dow Theory Letter, Richard Russell, who said this about the recent dip in the gold price: 'Personally, I'm going to hold my gold. Holding the metal doesn't worry me. I still have gold that I've carried from the '70s. Gold is the only real money. I don't care, inflation, deflation, boom or bust -- gold is money, and I can't say that about any paper currency. I'm holding all my gold. In the long run, I believe both gold and gold shares will win. Personally, I've decided that I'm going to sit with my gold-share position. But if I do anything additional in the gold area, it will be to buy more coins.'" (highlighting added) Do you have enough coins?
Looking forward to hearing from you, I remain
Comments or questions are welcomed at: 1866-465-3496
This article is not copyrighted. Feel free to send a copy to anyone about whom you are concerned.
PS As I mentioned in a previous newsletter, I was a stockbroker for 27 years, specializing in gold mining stocks for 14 of those years. I am currently holding some, what I consider to be, exciting gold and silver stocks. If you are presently holding as many gold and silver coins as you intend to acquire, but might wish to diversify further in the precious metals, call me and I'll tell you about some of those stocks. Keep in mind that I'm no longer a stockbroker (nor a financial consultant)
and have no financial interest in whether you buy any or not. Should you decide to purchase any
of those you select, you will need to do so through a stockbroker.
Top of Page....^
REASONS WHY YOU SHOULD HOLD GOLD?
1. THE DECLINING VALUE OF THE US DOLLAR
The number one reason to own gold is as a counter-balance
to the ever-declining value of the US dollar! One case in point: in the
early ‘40’s, you could send a one ounce letter across the
country for 3 cents. As you may recall, a few months ago we had an increase
of that much, to the current price of 37 cents. As you can see, it now
costs more than 12 times as much to send a letter than it did 60 years
ago. In other words, the dollar has declined in purchasing power by a
factor of 92%! There are other equally glaring examples but you probably
know them well.
2. THE US DOLLAR IS A BUBBLE ABOUT TO BURST
Since early 2002, the unbacked US paper dollar index has fallen
from 121 to the current level of about 90 (that’s over 25%). Several
authorities predict that the index is headed for 70. This alone
would move the price of gold to at least $455. As author M.A.
Nystrom stated, “Make no mistake, the dollar is a bubble in the
same way that the NASDAQ was, and the same fate awaits it.
Like with any bubble, there is a rush to create more of the asset in order
to cash in on the easy money. Our government is already $6.4 trillion
in debt – this figure grew 8% last year, well over twice the rate
of the economy…The debt ceiling went from $6 trillion to $6.4 trillion
last year and it will be moved up again this year to over $7 trillion.
Before long something will have to give (could that ‘something’
be the price of gold?)…Gold’s recent rise in price, as world
tensions have increased, demonstrate that it remains the premier financial
safe haven in times of instability. The barbaric metal increases
in value as men behave more and more like barbarians.”
3. NO UNBACKED PAPER CURRENCY HAS EVER SURVIVED
The US dollar has already survived longer than any other unbacked
paper currency in the entire history of the world. This anomaly will not
last forever. Warren Buffett’s father, a Congressman from Nebraska,
warned in a 1948 speech: “The paper money disease has been a pleasant
habit thus far and will not be dropped voluntarily, any more than a dope
user will give up narcotics…I find no evidence to support a hope
that our fiat paper money venture will fare better than such experiments
in other lands.” In all other lands and times, the story is the
same. Paper money does not work; the moral hazard is
too great. Central bankers cannot resist increasing the money supply faster
than the growth in goods and services. Asked to produce a list of the
world’s worthless paper currencies, a Mr. Addison was soon overwhelmed.
He said, “I don’t think you want all these. They’re
in alphabetical order but there are 318 of them – and I’m
still in the B’s.” Against this sorry record of paper
currencies is the exemplary one of gold. No matter whose face adorns the
coin, what inscription it bears, or when it was minted, a gold coin today
is still worth at least the value of its gold content, and will
generally buy as much in goods and services today as it did the day it
4. CURRENCIES WITH GOLD BACKING WILL REPLACE THE US DOLLAR
Other countries are beginning to go the direction of gold-backed
currencies. As friend Bob Chapman recently stated: “We believe there
are three possible reasons that the US Government may return to a gold
exchange standard. We believe the elitists were the shadow purchasers
of the gold that was sold by central banks at their direction
over the past several years. The Malaysian Gold Dinar, which will be actively
trading by June 2003 and an Islamic Arab Dinar to follow, are coins that
will force Western governments to again back their currencies with gold.
We also believe the euro to be a mitigating factor with its 15%
gold backing. As gold prices rise so will the value of the gold
backing the euro, thus the percentage of gold backing will rise. There
is no question that Islamic countries are putting financial pressure on
the US, UK and Germany. The Muslims believe they can destroy capitalism
by forcing gold to the forefront and we agree that this could and probably
will be successful. We then also have other mitigating events such as
new gold exchanges in Dakar and China as well as rampant anti-American
sentiment forcing the gold backing issue. Now we can better understand
Sir Alan Greenspan’s comments regarding “monetary
policy, unleashed from the constraint of domestic gold convertibility,
has allowed a persistent over issuance of money. He realizes that
the US will have to return to a gold exchange standard to compete with
other currencies. We would not expect a US or Fed move in this direction
until gold traded higher than $1,500 an ounce. Once the dollar’s
value was reset against gold then economic recovery could begin. Then
these criminals, if still in power, would begin the financial debauchery
(for information regarding a free trial subscription)
5. DEMAND IS GREATER THAN THE SUPPLY
Annual demand for gold is much larger than the annual supply.
According to the World Gold Council, recent world usage of gold has been
3,760 tons while supply has amounted to 2,540 tons. Therefore we’ve
had a worldwide deficit in gold of 1,220 tons each year. However, beginning
this year, the annual supply of gold is expected to be only 2,000 tons
while consumption is likely to be 4,500 tons, leaving a deficit of 2,500
tons! This deficit is expected to expand. This means that the price must
eventually rise significantly!
6. THE PRICE MUST RISE
The world’s Central Banks are nearly out of saleable gold.
Several authorities state that the past deficits have been supplied by
Central Bank gold bullion sales and that many of those banks are
now nearly depleted of any gold that can be sold. Since the demand
is unlikely to go down and the supply is likely to decrease, it seems
logical to assume that the price must rise.
7. THE WORLD’S GOLD MINES ARE NEARLY OUT OF ORE TO MINE
Gold authority and author Joe Miller writes; “…from
the dawn of civilization only 140,000 tons of gold have been mined. Of
this amount, only about 120,000 tons remain. We just learned (from the
U.S. Geological Survey) that from now until the end of time we have only
50,000 more tons of gold available (to be mined around the world). This
is a frightening revelation. We have been consuming gold at the rate of
3,760 tons per year. That means we only have about 13 years of
gold available until we run out of gold to mine. What then? Isn’t
it obvious that it is the height of folly to have an official policy to
depress the price of gold when this only increases consumption and moves
closer the date when we will run out of gold? A crisis is brewing, and
few people are aware of what is happening. A decade (13 years, or 11)
can go by rather quickly and I doubt that we will have to go very far
into that decade before strains in the gold supply and demand balance
will show up in higher prices.”
8. INFLATION IS RETURNING
From an article by David Chapman: On Shaky Ground. “Our
chart of the CRB Index and the US Dollar Index (see above) shows the two
moving in opposite directions. The CRB Index appears to have made a huge
double bottom in 1999 and again in 2001. This could be significant as
the 1970's inflationary cycle began with a low in the CRB Index in 1971.
The double bottom projection is to about 275. World commodities are priced
in US$. The rising CRB Index is also reflecting the falling US$. The CRB
Index has clearly broken the downtrend line from the mid-nineties top.
The falling US$ is problematic and with it now breaking under the up trend
line that has been in place since 1995, a new bear market appears to be
underway. A falling dollar is bad as capital flows out of the country
away from the US bond and stock markets. With growing US budget deficits
and virtually no savings this will put further pressure on interest rates
as the demand for capital grows to finance the twin deficits and crowds
out capital needed for the private sector…With the banks tightening
credit the real fear is a credit crunch that will put further upward pressure
on interest rates. With these long-term trend lines now penetrated, reversing
the current rise in the CRB Index and fall in the US$ is nigh on impossible.
As proven in the past efforts to stem a tide once it gets underway usually
exacerbates the problem. As well, the Japanese are now concerned that
their currency will rise and they are desperate to keep it low, raising
the specter once again of ‘beggar thy neighbor’ trade policies
and competitive currency devaluations that always end badly, as we saw
at the height of the 1997 and 1998 Asian currency crisis and during the
Great Depression. Already we are seeing numerous mini trade wars break
out as each country tries to give their industries an advantage. In
this type of environment only one thing shines, and that is gold.”
9. LOW INTEREST RATES PRECEDE A HIGH GOLD PRICE
Low interest rates certainly make gold a more attractive investment,
as the opportunity costs are close to zero. Low rates are also causing
negative interest rates. That is, inflation at 1.8%, which is higher than
the Fed funds rate of 1.25%. That is a negative return of .55%
-- and that’s before considering the income tax.
10. YOU SNOOZE, YOU LOSE
Institutional accounts have yet to find gold. Not only does
the public live in darkness but so do many of the professionals. They
don’t understand that gold is real money and is about to
again replace the dollar as the world’s preeminent currency. Foreigners
understand but Americans don’t. Then again, their news media is
freer than ours and they do get some of the truth, while we get none of
the truth except through newsletters and the Internet. Gold producers
and bullion banks are still short and they have to eventually cover, which
is an explosive situation. As you can see gold and silver will
surge, but remember you have to be in the game to win.
The Federal Reserve Bank has indicated that it will print up
paper dollars and drop them out of airplanes if necessary to avoid deflation,
and our nation is running the largest trade deficit in history.
Here’s a chart of what happened when Germany did this shortly after
If you don’t believe this type of decline in the value of the purchasing
power of the US dollar can happen, you better read a good book on the
history of unbacked paper currencies (such as Fiat Money Inflation In
France, by Andrew White)! Is there anything that could possibly sabotage
this dismal outlook for the US dollar? Yes, if the dollar somehow rallies
because of severe deflation in the upcoming years. This is a possibility,
but it’s difficult to envision in the face of the Fed’s recently
announced intentions, to anticipate any kind of sustainable rally for
12. OUR TRADE DEFICIT IS VERY BULLISH FOR GOLD
“America’s trade deficit will force the Fed to compete
in the (currency) depreciation game. This will put all major currencies
into the toilet, and push gold upwards to $500-$600, and then who knows
how much higher?” Nelson Hultberg, Why the Prechterian
Theory is Wrong on Gold. Any number of additional reasons for owning
gold coins could be listed here, but hopefully you have found these sufficient
to lead you to call (or email firstname.lastname@example.org)
Golden Eagle Enterprises today so you can begin to accumulate non-confiscable
gold and silver coins to secure your financial future.
Top of Page....^
Some coin dealers make a big point of encouraging clients to buy US
coins because they are “legal tender” in this country. I’m
not favorably impressed by this label, because the agency that has decreed
certain coins to be legal tender also has the right to determine the future
status of those coins, among other things. In his article, Gold, Money
and the U.S. Constitution, 1/30/03; Dr. Eugene C. Holloway had this
interesting comment concerning legal tender: “The Court takes three
important positions here (in a 1910 Supreme Court case). First, the power
to coin money includes the power to prevent its outflow from the country.
Second, even though the bullion is the property of the individual, by
its conversion to legal tender, it has been impressed with the
interest of the sovereign (the country, not the individual citizen of
that country) and thus becomes something over which the government has
the right to exercise control as part of the prerogatives of sovereignty.
Third, depriving the owner of the opportunity to realize the difference
between the face value and the bullion value of coins is not an
unconstitutional taking of property without due process.”
This is one of the primary reasons G.E.E. strongly encourages
clients to hold a large percentage of their gold holdings in coins minted
in foreign countries. Call 1866-465-3496 for current best buys.
Top of Page....^
WHY NOT GOLD MINING STOCKS?
Friend Alex Wallenwein recently wrote: "Euro vs Dollar" is
the story of a deadly attack on American economic prosperity, primarily
from the new European currency, but also from the Gold Dinar. This currency
war is the European strategy to displace the US dollar as the world’s
reserve currency, which will drive the US into hyperinflation.
“Because of inherent weaknesses of the purely fiat, structurally
anti-gold, nature of the dollar, this Euro vs Dollar attack cannot simply
be ‘beaten back’; its inevitable effects on the US economy
can only be delayed - and possibly partially neutralized.
“The US government cannot help but defend its fiat dollar by covertly
suppressing the price of gold. Because of this price suppression through
covert gold leasing and ‘gold-swaps,’ US official gold reserves
are now seriously depleted. They are virtually gone. The government is
now in a ‘Catch 22’ situation. If it does not reacquire enough
gold to defend the dollar against the ongoing attack, the dollar will
collapse and hyper-inflate. If the government does buy gold, the price
of gold will shoot through the roof before a sufficient amount can be
acquired. Also, if it goes on a gold buying spree, it virtually admits
that the gold is gone - a fact it has steadfastly denied. Therefore, the
government will, in all likelihood, not buy any gold anytime soon.”
If it is true that the US government is in a “Catch-22” situation
(and I believe it is) and it will be required to produce some gold backing
for the US dollar from somewhere, what would be the most likely sources?
I predict that there will be two:
1) CONFISCATION of the gold bullion holdings of the US
2) NATIONALIZATION of the US gold mining industry.
Top of Page....^
IGNORANCE & ARROGANCE REGARDING CONFISCATION
If memory serves me correctly, it was Mark Twain who said: "We're all ignorant - just about different things." There are undoubtedly things you know that I don't and there are probably some things that I know after 45 years in business that you probably don't know. So it's not necessarily bad to be ignorant, unless one volunteers to remain that way. The following article was written to help those who choose to not volunteer. It is also written with the understanding that it may be severely criticized by those who may be voluntarily ignorant of the facts and have a vested interest in keeping other folks that way. With that in mind, I submit the following comments.
During the past 37 of my 70 years, I've followed gold on a daily basis. I don't pretend to have all the answers concerning gold; in fact, it's possible I've not heard all the questions. But, I began placing clients' savings into gold stocks and coins before anyone of whom I'm aware, and was undoubtedly one of the top five brokers in gold stock sales in the country during the '70's, thanks to friend and author Harry Browne who thought enough of my abilities to put my name and comments in his two NY Times best selling books in 1970 and 1974. Therefore, I may be aware of some things that others haven't come across yet. Hopefully, this doesn't sound arrogant.
What I especially like about the articles that are published on the "gold-eagle" website is all of the well-reasoned and accurate insights that appear nearly every day. But, what concerns me is that there are others on the Internet who seem to want us to believe that they do know all the questions and answers. This bothers me; not relative to myself, but because of the arrogant ignorance they are foisting on others.
A case in point. I know one fellow who claims to have been selling gold for over 20 years who tried to impress me with his extensive knowledge on this subject by telling me that when FDR issued his Executive Order on May 1, 1933, that it was not a "confiscation" but simply a "call in" of citizens gold. Question: is this fellow simply argumentative and arrogant, or is there some difference between his term and the one that everyone else uses? In fact, what difference does it make which we call it, since the 1933 Executive Order uses neither term? The point is that our honest citizens either turned their gold in at a Federal Reserve Bank (or branch), or faced 10 years in prison and/or a $10,000 fine. Some claim that no one ever served time over this matter, while others claim that some did. My question is, what difference does it make what occurred in 1933 when the important question is, what will happen the next time? Considering the rate of inflation since 1933, it's my expectation that next time, the fine will be substantially more than $10,000 and prison time for "extremists" who hoard gold will be considered a proper punishment by the vast majority who have none.
You may be of the opinion that our trustworthy government would never do such a dastardly thing a second time. Wrong! In fact, if (and in my opinion, WHEN) our leader(s) should do it again, it wouldn't be the second time, but the fifth! Gold ownership is a temporary and revocable privilege, not a fundamental right and was taken away during the Civil War and two other times prior to the signing of our Constitution. This immoral act has been administered during times of national crises and few would argue that we are rapidly headed for another one. And whether the crisis is precipitated by problems in the banking system, a stock market crash, a war(s), a collapse of the derivatives market; or the continuing threat of terrorists, we will see a crisis (natural or contrived), and gold will again be confiscated. Therefore, gold investors need to understand and heed the following:
Quote from an article published several years ago by ICTA (Industry Council for Tangible Assets, Inc.), entitled, "Numismatic or Bullion?"
"Are numismatics still defined as 15% over intrinsic value? In the proposed 'Broker Reporting' rules which were published in the Federal Register of 1/5/84, ICTA had succeeded in getting a 'definition' of numismatic vs. bullion material included...example...If the gross proceeds from the sale of a gold coin (such as a Krugerrand, Maple Leaf, 50 Peso or 100 Crown coin) do not exceed by more than 15% the bullion value of the gold in the coins, the coin is a (confiscable) commodity under paragraph (a)(5)(i)(D) of this section and is not excluded by paragraph (a)(5)(i)(D) of this section...The IRS example clearly states the '15%' criterion for distinguishing a precious metals numismatic item from a reportable commodity...For future legislative or regulatory purposes, this will remain a valid reference point."
NOTICE-I believe confiscation of gold bullion is inevitable in the near future due to several possibilities, but most probably to the huge derivatives positions of some of our major banks. And, the U.S. Supreme Court has already ruled that upon confiscation, the government must give you only the official price of gold, which was set by them in 1973 at $42.22/oz. Therefore, while some dealers will arrogantly sell you gold bullion coins, I feel it is foolhardy to hold gold bullion bars or gold bullion coins. Those coin dealers who advocate such purchases are apparently either acting out of ignorance or simply don't care about their customers' potential future problems as they make an easy sale.
Another case in point. I've had numerous coin dealers tell me that the newly minted American Eagles are not bullion coins because they are "collector" coins. Well, I don't know where they got their definition, because not only does the "Guide Book of United States Coins" (the "Red Book" -- the "bible" of the coin industry) refer to them as "bullion" coins, but so does the U.S. Treasury's own sales pamphlet refer to them as "American Eagle Gold Bullion Coins" -- fourteen different times in the same brochure! And that brochure never mentions the term "numismatic" or "collector" coin. The Amendment to the 1933 Executive Order defines "collector" coins as those that have "…a recognized special value to collectors of rare and unusual coins…(and) have been exempted from such delivery requirement…" American Eagle Gold Bullion Coins are neither "rare" nor "unusual."
Incidentally, you may not be aware, but under the RICO Act, when government agents confiscate drugs, cash, weapons, etc., they also confiscate the vehicle in which they found that contraband, including cars, trucks, boats, airplanes and/or homes. That Act can also be applied to gold bullion bars and bullion coins. If confiscation of gold bars and bullion coins does occur again and you figure you simply won't turn them in, you are not only facing potential confiscation of those coins (which will be considered to be contraband), but also, potentially, the storage place where the agents find them.
And, if the penalty for being caught with such gold coins is only as severe as it was back in 1933, you could be placed in prison and fined, in addition to losing your car or home in which the coins were found. Is it really worth such a huge risk? I don't think so. Or don't you think your government will do again that which they have already done at four different times in our country's history? Some coin dealers arrogantly or ignorantly don't; but do you think they will pay your fine, serve the time or replace your home if it does occur?
I've had several people tell me that their confiscable coins are well hidden and it's unlikely that they will ever be found by any agent. That's not the point. The problem will come when you need to use the coins. To eventually use the coins, you will need to remove them from their hiding place. When you do, you will need to give them to someone in order to consummate a transaction. How do you know you can trust that person to not turn you in for a reward, like the IRS does now concerning tax evaders? Think ahead!
I've had lots of other people tell me that their American Eagle Gold Bullion Coins are not only not well hidden, but that they are in their 401k retirement program. My first question to each of them is: "Where are your coins at the present time?" The answer is always the same: "In the custodian bank." (Incidentally, the coins my clients own are always held by them.) The reason that answer is always the same is that it is an IRS requirement that the coins in a 401k plan be held in a custodian bank - of which there are about five in the US. If (when) the next confiscation occurs, to whom would you guess the very first phone call would be made? This might be the conference call conversation: "Hello Custodian Bankers. You are holding American Eagle Gold Bullion Coins for several thousand 401k plans. Those are gold bullion coins and have just been subjected to confiscation. Therefore, you are hereby directed to send them to the nearest Federal Reserve Regional Bank today. Goodbye." And, that's "goodbye" to your gold bullion coins. No recourse.
When gold bullion and bullion coins rise, the coins I encourage clients to accumulate normally rise much faster. The most recent case in point was last year. Gold bullion (and bullion coins) rose 24% but the coins in which I specialize rose at least 39%. This is an additional excellent reason to get out of (or stay out of) harms way by getting out of bullion coins such as the currently minted American Eagles, Canadian Maple Leafs, South African Krugerrands, etc. It simply makes no common sense to take such a chance by holding them; but as someone once said, common sense isn't very common anymore. I'd like to think that coin dealers offer gold bullion coins to clients out of ignorance of the rules; but since they are such an easy sale, I wonder.
Coins which we have every legal reason to believe will not be subject to confiscation are the Liberty, St. Gaudens and Indian Head gold coins that have been properly certified as to their collector grade. All others are suspect unless they cost more than 15% above the spot gold price, as defined by the IRS (see above). These coins allow you to enjoy several privacy and tax advantages that are impossible with bullion coins. The reason you turn to gold in the first place is for safety, so why would you consider placing any of your savings into holdings which are the least bit questionable?
Incidentally, if "collectible" gold coins should be confiscated (very unlikely), under the Rule of Eminent Domain the government must give you the "fair market value" of your asset, not some governmental decreed price as with bullion coins. If they want my collectable coins and are willing to pay me the fair market value, they can have them -- I'll simply turn the paper they give me into land, stocks, bonds or whatever is prudent at the time. But, even if they called them in and all of them were surrendered, at the present market value for all gold coins certified by the two largest companies in the business (PCGS and NGC), they'd only get about $1.5 billion worth -- not worth their trouble. While a billion dollars is a lot of money to you or me, it's less than one day's interest on the national debt. Never happen.
A word of caution: don't have any more of your money in confiscable gold than you can afford to lose. To do so is to take an unnecessary risk. If you already have some coins that you don't wish to lose, convert them to the proper kind as soon as possible through someone who has proven they are worthy of your trust and confidence. If you submit your bullion gold coins to me for conversion to nonconfiscable gold coins, I do not charge any fees or commissions on the sale of your coins, and my markup on "collectable" coins is about half what most national coin companies charge. Yes, it does cost a little more to buy the semi-numismatic coins rather than bullion gold coins, but the additional cost may well be worth it in the end. And, even if you refuse to make such a change, wouldn't it make sense to put some of your paper savings into coins that are not subject to confiscation, just for the purpose of diversification - in case I do know what I'm talking about? Incidentally, I do not recommend high-grade, one-of-a-kind numismatic or proof coins. I do recommend generic collector coins in grades MS63, 64 and 65, and BU Swiss Francs, British Sovereigns, French Francs, etc. as long as the were minted prior to 1933.
As a few of us did in the '70's, some folks are going to benefit greatly from their gold holdings over the next several years, but only if they hold the proper form of gold, namely, nonconfiscable gold coins. Even though I helped hundreds of clients make several million dollars from gold mining stocks, I do not presently encourage clients to place any of their savings into them because I am suspicious of the probable necessity of governmental nationalization of the gold mining industry in order to save the banking system.
In an attempt to defuse any emotional reaction to this article, let me point out that there is really only one of two possible ways for this confiscation argument to go - either there will be confiscation of bullion gold or there won't. If I'm wrong and there is no confiscation, then my clients will only benefit from the greater increase in the value of their coins and no one gets hurt. If I'm right, then my clients will not only obtain the greater appreciation in their coins but will not need to turn any of them in to the government. As I see it, it looks like a win-win for my clients.
In conclusion, none of the previous comments apply to PROOF gold coins, as they supposedly are defined as "collector" coins and as such, are not subject to confiscation.
Jack Weber, Pres.
Golden Eagle Enterprises, Inc.
P.S. While I know that some who read this article will not want to agree with it because they have already bought the wrong kinds of gold coins, I do welcome your questions and comments, but I have neither the time nor the energy to debate something I've studied for many years. The article above is based upon documented facts gleaned from numerous books and articles and if you disagree with the conclusions, you do so at your own peril. I've taken my time to write these comments in an effort to assist folks who will listen and/or do further research with these facts at hand. I wish you the very best in your search and stand ready to help those who choose to contact me.
P.P.S. This article is not copyrighted, however, I encourage you to credit "gold-eagle" as your source. Please feel free to share it with anyone you care about.
Here is another article on Confiscation. It was written by Roland Watson.
Top of Page....^
NATIONALIZATION OF GOLD MINING STOCKS?
Another pitfall that few have mentioned is the potential nationalization
of the gold mines in the US. I dealt primarily in the South African gold
mining stocks during the ‘70’s and was always concerned that
would be a problem there, but fortunately for me and my clients, that
hasn’t been a real problem until just recently. But, if the widely
reported gold derivatives problem with banks like J.P. Morgan Chase and
Citibank are real, what better way for the government to bail out those
banks than to nationalize the mines and pay a predetermined fixed price
per ounce, regardless of what the free market gold price might be at that
time. While it’s possible that the mining companies would be given
a price somewhat related to the world free-market gold price, there is
no obligation for the government to do so. In fact, there is published
information stating that the US Supreme Court has already decreed that
upon confiscation of gold, the government can ONLY give
the official US price, which since 1974 has been $42.22/oz.
Are you willing to gamble your hard earned savings on a hope that your
government will do differently regarding acquisition of gold produced
from the mining industry? I’m not and feel it is financially suicidal
for anyone to hold US gold mining shares, which really are simply pieces
of paper, not real pieces of gold. I feel it is absolutely essential that
Americans buy and hold physical gold (or silver) to shield both the United
States, and themselves (and their families), from the inevitable fallout
of the apparently inevitable governmental process of separating American
citizens from historically proven money, namely – GOLD COINS.
Top of Page....^
All “collector” coins offered by Golden Eagle Enterprises
are certified by either NGC or PCGS.
These are the two largest certification companies in the business and
the only ones we will handle, either to buy or to sell.
Top of Page....^
POSSESSION -- SHIPPING
Who holds your coins? You do! All coins you order through G.E.E., Inc.
are sent directly to you by “Registered & Insured” mail
(USPS), with no exterior indication of what the package contains. From
the time your good funds are received by G.E.E. until you receive your
coins will normally be 7 – 10 business days. The day is coming when
the only financial asset that will be important to you will be the non-confiscable
gold coins that you personally hold.
Top of Page....^
Safe storage of gold coins is very important, although it’s only
been a minor problem in my 43 year experience. If you trust your local
bank, you can keep your coins in a bank safe deposit box. If you’re
concerned that such a box might not be safe (as in confiscation or bank
failures), then you might feel more comfortable by keeping your coins
in a private vault company, and most major cities have at least one such
company. On your internet address line, type in: qwestdex.com When
the page comes up, type city and state in the appropriate spaces. Where
it says: enter your own category, put: safes & vaults This should
get you several locations in your desired city. There is no way that
G.E.E. can possibly validate any of them as being reputable. You need
to do your own research on that matter.
If that doesn’t fit your comfort level, there are always inconspicuous
place around your residence. I have thousands of coin clients all over
the country and I’ve only had one ever report any losses to me due
to “illegal” thieves.
Top of Page....^
TIME TO BUY GOLD COINS?
Considering the bull market we’re in, the best time to buy gold
investments is when you have the money. If history is any indication,
we are currently at the comparable level of $100 in 1973, just prior to
the rise to $875 in January 1980. And, don’t forget, gold started
from the $35/oz level in 1970 – that was a rise of 2400%! This new
bull market started at $250. I leave it to your imagination as to what
the ultimate top in gold will be in this bull market, but I have my target
well in mind.
Yes, it’s time for YOU to buy gold if you’d like to benefit
from a similar bull market!
Top of Page....^
WHEN TO SELL GOLD?
If the Good Lord keeps me here for the next top in gold (as in January
1980), I’ll either call or write you when I feel it would be prudent
for you to consider selling part or all of your gold holdings. I don’t
know of any other gold broker who took their clients out of gold above
the $700 level. Almost unanimously, gold brokers were predicting $2,000/oz.
in the immediate future. Incidentally, at that time I agreed that they
were reasonable in that price – it’s just that their timing
was going to be a little off.
In conjunction with my thoughts on a time to be out of gold, here is
an excellent article that was published on August 1, 2003 in “gold-eagle”
website. I have held this author in high regard for many years, and am
glad to see that someone else is anticipating a time to be out of gold
– even though the long-term bull market may not be entirely over.
This is another reason why clients are willing to pay my very reasonable
prices for coins – even though they may find another dealer with
slightly lower prices from time to time. I encourage you to read this
article carefully – then call me to acquire the coins that will
be right for your investment purposes – with a view to selling when
it seems reasonable.
The Long-Term Gold Bull
By Steve Saville
Despite the high positive correlation between gold and the SF, which,
by the way, has been as strong over the past 2 years as it has been at
any time over the past 30 years, the long-term gold chart looks different
from the long-term SF chart shown above. This is perhaps because gold
is a less-liquid market and therefore tends to make larger moves in both
directions. In any case, the below chart shows that gold, like the SF,
has been in a long-term bull market against the US$ since the early 1970s
and that another leg in gold's long-term bull market began over the past
3 years. As opposed to a steady progression within an upward-sloping channel,
as has been the case with the SF, gold's long-term chart can best be described
as a 5-wave structure. The way we see it, Wave 3 was complete at the 1980
blow-off top, Wave 4 was complete at the 1999 bottom, and Wave 5 to a
new all-time high is currently underway.
It is important to keep the above 'big picture' views in mind at all
times and to continue checking the evidence against these views to make
sure they remain valid. However, it really isn't enough to simply understand
that the gold price is probably going to reach a long-term peak in 5-7
years time. This is because at some point there is probably going to be
a large counter-trend move lasting 1-3 years, which, unless you are a
masochist, you will want to avoid. For example, the SF rose strongly during
the 1972-1975 period but then spent 2-3 years trading sideways before
rocketing higher to its major peak. And, during this period of currency
market stability that occurred between the two big dollar declines of
the 1970s the gold price fell by around 50% and the average gold stock
fell by around 70%. If you are an investor in gold (coins) and gold stocks
at the present time it is therefore important to understand what could
bring about a multi-year period of stability in the currency market.
Top of Page....^
THE BULL MARKET IN GOLD: COMPELLING OPPORTUNITY
June 6, 2003: Investor’s Digest of Canada
By: John Embry
“The gold story that is currently unfolding is arguably
one of the most compelling opportunities in recent memory, but
there is remarkably little interest from the vast majority of investors
who prefer to look in the rear-view mirror and chase overpriced technology
stocks in the expectation that the halcyon days of the bubble are back
“But why should anyone be surprised? Because gold continues to
get bad press even when the message is extremely positive. There is no
better example of this dichotomy than the recent article on gold in The
Economist, justly regarded as one of the world’s most influential
publications although admittedly no fan of gold at the best of times.
“While detailing the very positive changes for gold demand in China
due to a dramatic liberalizing of rules pertaining to individual ownership,
the magazine couldn’t restrain itself from poisoning the article
with this opening:
“In uncertain times, gold still retains a special luster for some
investors: although its price has fallen back from recent war-spurred
highs. Yet gold’s golden age, so to speak, is long gone. Since the
1970s, it has become almost like any other precious metal, and increasingly
one that central banks no longer care to hold in reserve.”
“With an introduction like that, why would anyone care to read
the remainder of the article, which was resolutely bullish?
“However, this is exactly what one would expect to read
in the early stages of a bull market where widespread skepticism
reigns and only those who have taken the time and made the effort to understand
the basic fundamentals of a subject get involved…
“When gold was $35 per ounce in 1971 and President Richard Nixon
closed the gold window in the US, few people foresaw gold going anywhere,
let alone to $800 per ounce in less than a decade.
“Prior to the onset of the great bull market in equities in 1982,
articles pronouncing the death of equities festooned magazine covers and
no one could imagine that the Dow Jones Industrial Average index, which
had essentially traded between 575 and 1,000 for 16 years, could increase
more than 10-fold in the next 18 years.
“People today may also forget that the crash of 1987, which many
feared might mark the end of the bull market occurred at 2,700 on the
Dow and that the index more than quintupled from the subsequent lows.
“The point I’m trying to make is that at major inflection
points the vast majority of observers have trouble grasping the change
of direction let alone the upside (or the downside in the case of bear
markets) that may lie ahead.
“As The Economist stated, gold’s golden age is long gone
and since the ‘70s it’s almost like any other precious metal
which, I guess, is better than calling it “a barbarous yellow relic,”
as John Maynard Keynes did many years ago.
“What it failed to say, however, is that in the decade of the ‘70s
it performed spectacularly and protected the wealth of those who were
prescient enough to identify the inflationary environment that was ravaging
“In the ‘80s and ‘90s, when disinflation reigned and
financial assets performed brilliantly, gold receded to the shadows, providing
little competition for the spectacular returns of stocks and bonds…
“The financial landscape has changed dramatically and one’s
investment preferences had better change also.
“I don’t find it unusual that many gold analysts have great
difficulty wrapping their minds around a materially higher gold
price, given a 20-year bear market in gold and ongoing rhetoric
that questions the validity of the metal.
“Nor am I surprised that when I venture the opinion that gold could
easily achieve a price of $500 per ounce within 18 months and might reach
$800 to $1,000 per ounce in the next three to five years that most people
look at me as if I’m slightly deranged. This is just as
it should be at the outset of what may well turn out to be one of the
greatest bull markets in history.
“The reasons for my enthusiasm are many: a yawning gap between
mine supply and traditional demand, the inevitability of falling mine
supply in the next few years, the amount of central bank gold that has
already been mobilized in the attempt to suppress the gold price, the
stale short positions and toxic landscape and the emerging investment
demand driven by concerns about the rapid deterioration in the US financial
scene and the vulnerability of the US dollar.
“All of these are subjects for more extensive examination in future
columns, but the important thing to realize is that the time for
gold is now.” (emphasis added)
John Embry is president of Sprott Asset Management Inc.
Gold is like a coiled spring and it’s only a matter of time before
it can no longer be suppressed. So, have patience. The economic scene
is a disaster and the dam will soon break, sending gold to what today
would be considered unbelievable levels.
Top of Page....^
SIXTY-SIX SPECTACULAR SPECIFICS ABOUT WHY
SILVER IS SET TO SOAR!!
Gold has the "glitter," but Silver is the "sleeper!"
You have undoubtedly read numerous articles about the new bull market in gold during the past two years, but few articles have been written about the potential for a massive rise in the price of silver. You may have even invested into gold coins, and you're going to be glad that you did, but this article gives you 66 specific reasons why you need to give serious thought to placing a substantial portion of your serious savings into silver coins.
I was a stockbroker for 27 years, specializing in gold mining stocks for 19 of those years. For the past 32 years I've been helping clients invest into gold and silver coins. I've been an individual investor in gold and silver coins since 1960 and saved silver dimes and quarters out of circulation since the Treasury stopped minting them in 1964. I've "been-there-done-that" and therefore I probably have a track record that can help provide you with an excellent return in silver coins during the next few years.
Built into the current price for silver (just over $5/oz at the time of this writing) are numerous factors, but the following list is about future forces that will contribute to a MUCH higher price. How much higher? No one, including yours truly, has any way to know. All I do know is that I began telling people they needed to get into gold (it was $35/oz in 1966) because it was going to $100 in the near future. But, very honestly, I had no idea that it would soar to $700 before I'd tell them to sell and take profits. And, although my target for a final top in the price of silver is high, it's probably not high enough!
It's my opinion that the current situation in silver is many times more explosive than gold was in the late '60's when I entered that market, expecting to triple my money - and ended up making over 20 times my investments. But, what I do know is that since 1945, the U.S. government has been selling the ENTIRE silver stockpile - which was the largest stockpile of silver in the entire history of the world! In other words, during the past 59 years, our government has dumped a total of over 6 billion ounces of silver at dirt cheap prices, and as of late 2002, the entire U.S. strategic stockpile is now officially GONE!
The logical conclusion of this analysis is that ANY MARKET that has undergone this degree of distortion (of selling pressure versus buying pressure) for this long, has lost all contact with the reality of supply and demand, and that will ultimately result in a much higher price, now that virtually all above-ground supply is gone. And this leads to an interesting fact - when gold is mined (taken from the ground) the vast majority of it goes right back into the ground (in vaults). When silver is mined, the vast majority of it is CONSUMED! And with the previous government supplies gone, there is not even the potential for any dumping of silver onto the market like there is (and has been done for decades) from the Central Bank's or other gold hoards, including CHINA.
Therefore, with these thoughts in mind, if you hold any significant savings that you would like to see increase in value, I urge you to carefully consider the following specific factors which unquestionably lead any thinking investor to logically conclude that -- an investment into silver coins at this time is uniquely appropriate.
SIXTY-SIX SPECTACULAR SPECIFICS
1. Because of the ongoing silver supply deficit (every year since 1990), known silver stockpiles are extremely low and are well on their way to zero. Between now and "zero-stockpile day", SOMEONE-SOMEWHERE WILL ATTEMPT TO BUY AS MUCH AS POSSIBLE OF THE REMAINING PHYSICAL STOCK. Wealthy individuals, hedge funds, political entities and un-named countries are all possible candidates. At $5 silver, the 120 million-ounce COMEX stock could be had for $600 million. This "accident waiting to happen" will come unannounced and as a surprise to nearly all investors, but especially "gold-bugs."
2. For eons the US GOVERNMENT has been a silver seller. They announced that beginning in 2002, they became a buyer due to exhausted supplies; providing an effective double whammy for the silver bull market just ahead -especially if they intend to continue minting the Silver American Eagle coins.
3. In a rapidly rising price environment, the process of metal coming to market will SLOW. Why? DELAYED SHIPMENTS will stand an excellent chance of being worth even more!
4. The historically common practice of stockpiling silver by the big money crowd is not currently in vogue. WORLDWIDE REBUILDING of government STRATEGIC STOCKPILES, central banker VAULTS and Swiss custodial BANK ACCOUNTS will come back into fashion by "The Powers That Be."
5. Due to such a long period of low prices, there has been a decrease in silver SUBSTITUTION research than would otherwise have been the case.
6. Since silver cannot be created, it can only originate from three sources: 1. above ground supplies, 2. re-cycled silver, and 3. mine production. Above ground supplies are nearing exhaustion, leaving only two remaining sources. Simple math: 3 - 1 leaves us with only 2 sources.
7. Silver MINES open and silver mines close. More primary silver mines are CLOSING than opening (usually due to depletion). A report from silver expert David Morgan showed a loss of 50 million ounces of production in 2001.
8. History reveals that year-by-year silver production has increased for as far back as one can see. A new era began in 2002 as YEAR-BY-YEAR SILVER PRODUCTION BEGAN DECREASING. This production decrease is aggravating the current supply/demand imbalance.
9. Because silver has been priced below its production cost for so long, silver EXPLORATION has practically ceased. The net result is that there are almost no silver projects in the pipeline to activate. Rather than just re-opening shuttered mines to meet demand, the industry will have to start their exploration from ground zero for all intents and purposes. While there are multiple gold mining exploration projects in the works, true silver projects are in the extreme minority. During this next 2 to 3 year period, demand for silver could cause the price to skyrocket!
10. And, even if a discovery is made, a mining project must advance through a series of pre-production steps (in-fill drilling, feasibility studies, permitting, project financing, infrastructure construction and the like) before a mine is opened. Because silver has been priced below its production cost for a so long, DEVELOPMENT and ADVANCEMENT phases of silver projects has practically ceased.
11. Because silver has been profitless for so long, when the price of silver rises and the mining companies do decide to gear up, one of their 'discoveries' will be that there is a SHORTAGE OF EXPERIENCED WORKERS. Who will be available that still has the technical knowledge, experience and gumption to get the job done?
12. About 75% of mined silver originates as a by-product of base metal mining. A deepening RECESSION, particularly in manufacturing, will dampen the demand for base metals (such as copper and lead), resulting in decreased silver production.
13. Any ANXIETY BASED CRISIS that comes along will boost demand. Stock market, holy war, oil shock, civil unrest, default, currency crisis etc. are all likely possibilities.
14. Presently, the PAPER CURRENCY PRICE is determining the physical silver price. A price jolt will occur when prices begin to be set by physical silver availability - or lack thereof.
15. Large quantities of silver have been LEASED into the world market. Leasing is generally only productive in a falling price environment. During this process, silver that is BORROWED (leased) is actually SOLD into the physical market, depressing prices. As falling prices reverse or the supply of lease silver evaporates, this prevailing negative counterforce will nearly evaporate. Leasing is like holding your hand in a fire.
16. In most cases there will be a legal and/or contractual obligation to RETURN LEASED SILVER to the lenders (not paper). This force will add to the demand side of the equation. (Some bankers may have leased material in their safekeeping without the knowledge or approval of the actual owners).
17. A historically huge PAPER SHORT POSITION has depressed prices. When prices begin to rise in earnest, most short sellers will switch to becoming buyers (some will default). To close out a short position, the short must deliver physical silver or buy out their contracts, IF such will be allowed.
18. The same PROFESSIONAL DEALERS and INSIDERS that have made so much money and done so much structural damage on the downside will surely be positioned to capitalize on the upside. At the very least, their personal accounts will somehow be properly positioned. (For example, as recently as the summer of 2002, these insiders had been short more than 350 million ounces of silver when the entire COMEX warehouse only holds about 120 million ounces.) These people are just too big, powerful, smart and well connected to let this stellar opportunity pass them by. Their activities are not simply analogous to holding a lifejacket underwater but rather like holding a helium filled balloon underwater. It doesn't want to just float to the surface --it wants to soar to the moon.
Special Note: As you can see from the following chart, silver has been "underwater" for the better part of the past 14 years. You can have total confidence that the professionals know this chart by heart and are simply waiting for the inevitable silver price explosion through the downtrend line near $6/oz. When (not if) that over-head resistance is penetrated, the price of silver is going to explode, and those of us who are properly positioned, will reap a financial bonanza! We hope you will soon join the hundreds of our clients who have already taken such positions.
19. During the formation stage of new bull markets, ASTUTE INVESTORS do not try to pick bottoms. Rather, the preferred technique is to wait until an apparent bottom can be observed before large positions are initiated. With silver fundamentals as well known as they are, you can be assured that there are huge amounts of INFORMED investment money poised to enter this arena once a technical turnaround is apparent. We believe that will become very apparent when silver moves over the $6/oz level.
20. At this point in the silver cycle, "Joe-six-pack" has placed a higher value on accumulating ever-depreciating piles of paper promises rather than on the accumulation of real, tangible wealth itself. Consequently, on a historical basis, SILVER INVESTMENT DEMAND is vastly under-represented compared to its other uses. When this "blonde moment" passes and history repeats itself, "Joe" will again discover why all history books refer to the beautiful, white metal as a PRECIOUS METAL. Accumulating INVESTMENT SILVER COINS will once again become popular - at much higher prices, unfortunately for most folks.
Special note to the above: Because physical silver is so scarce, this is likely to be one of the few times in history when "waiting for the big breakout" may completely fail the investor. The market may resemble the game of musical chairs with only one major rule change. This time when the music stops, there will only one empty chair for each ONE HUNDRED players. Therefore, prudent silver coin purchases should be made NOW!
21. When supplies are exhausted and prices skyrocket, GOVERNMENT will be expected to "do something." The usual, counterproductive political answer is to interfere and regulate. In economic circles, it is a well-established fact that when anything is regulated, you get less of it. (We would not be surprised if they seized all available supplies and rationed them "according to need.") This could happen with all visible COMEX stocks no matter who the supposed legal owner is. A similar situation recently happened to energy suppliers to California.
22. A percentage of FORWARD SELLING MINERS will repay their metal loans with physical silver thus removing those ounces from the grasp of the marketplace and thus increasing the shortage in the marketplace.
23. A percentage of UNDERWATER, HEDGED MINERS may slow production, close down, or go bankrupt. Because they will owe so much while being denied the profit from higher prices, they will have little remaining incentive to produce their product.
24. LEGAL attacks and LAWSUITS by a wide range of parties will be launched that will effectively curtail some production. Lawsuits by two or more of the following parties will be commonplace: auditors, bankers, bullion banks, central bankers, commodity houses, counter parties, depositors, employees, government agencies, hedge funds, individuals, insurance companies, lessees, lessors, management, mining companies, regulators, shareholders, speculators, third parties, and users.
25. As the US dollar continues its downward plunge, as is expected, it will take more dollars to buy the equivalent amount of silver.
26. The RULES, under which the COMEX and Commodity Futures Trading Commission (CFTC) presently operate, could be described as being ignored and have contributed greatly to the depressed metal prices. More rigid enforcement should be anticipated.
27. In a free market, INFLATIONARY FORCES are unevenly manifest in different economic sectors. One day it's Nevada land prices. The next day it's the price of milk. The price of silver has gone nowhere for years, which seems to indicate in part, that ongoing price inflation has not yet been properly priced into this commodity.
28. When INFLATIONARY FORCES once again sweep the land, SILVER and other precious metals will again shine. Why? Because they have always been one of the vehicles of choice by astute investors during inflationary periods.
29. INVESTMENT DEMAND -- JAPAN -- A SPECIAL CASE: DESIRE and NEED are not the true forces that move markets. The potential consumer/investor must also have the FINANCIAL ABILITY to meet his desires and needs. Many third world people have a desire and need for refrigerators & air conditioners. But, they lack the financial means to follow through. Enter -- the JAPANESE SILVER INVESTMENT DEMAND -- a special case scenario. The world's most successful SAVERS (financial ability) are being pushed to the edge of a financial cliff. Precious metals investments represent their only viable means of both escape & PROFIT. With an average family nest egg of $115,000 and $5 silver, 5,217 Japanese families could theoretically buy the entire 120 million-ounce silver COMEX stockpile. DESIRE, NEED AND ABILITY are all in place for this GIGANTIC TSUNAMI to begin.
30. The prophecy that "China is a sleeping giant" is certainly proving to be true. As a group, CHINESE PEOPLE are not only extremely hard-working but they also RANK NEAR THE TOP AS SAVERS. Furthermore, they have more experience with the pitfalls of paper currency than any other nation. The combination of the above factors clearly suggests a future, high level of precious metals demand. Shanghai, 12/5/03 "In the past 50 years, the gold market was under a government monopoly with gold consumption focused on jewelry or industrial use in China. Total consumption is at a low level as compared with other nations. In 2002, per capita consumption in China was only .16 grams, far lower than the world average f .7 grams, or the US of 1.42…trading gold is expected to become a crucial investment arena for Chinese individuals. Experts predict that nearly 7.5 million investors will try gold…calculating that each one will invest 10,000 yuan (1,200 US dollars), or a total of about 9 billion US dollars." We believe that the Chinese will invest into silver even more heavily than gold, especially at the current price of $5/oz, compared to $400 gold.
31. A certain percentage of investors will be attracted to silver for only one reason -- BECAUSE IT'S GOING UP! Like a moth attracted to light, these momentum investors will want to jump on the bandwagon as they begin to see a rising price pattern develop.
32. Due to the INTERNET etc., the world will quickly be alerted to what is happening and why. They will want their piece of the action.
33. The total silver market IS TINY compared to the stock and bond markets. It would only take about $6 billion dollars to buy all the remaining physical silver in the world at today's price. Just a few dollars moving into this market will have the resultant force of a tsunami.
34. Mutual funds and other institutional players are grossly underrepresented in ownership of precious metals stocks and bullion. If and when these investors simply RE-BALANCE their PORTFOLIOS to include silver, it will result in a tidal wave of demand for this tiny market.
35. If GOLD FUND MANAGERS only agree that silver will make appreciably larger percentage moves than gold, then we can conclude that even the GOLD FUNDS (who can own silver shares and physical), ARE UNDERWEIGHTED in silver. Once they begin listing multiple silver mining companies among their "largest holdings", we will know that they finally got the proper message.
36. Virtually every US and world citizen already has a WORKING KNOWLEDGE of what silver is. We're not talking brain surgery, semiconductors, megabytes, export quotas, or quasars, where the learning curve is extreme. When silver begins to get world attention, this residual, in-place knowledge will grease the skids for the novice silver investment demand.
37. In the coming economic environment, precious metals may be one of the few investment areas making established up trends. Individuals, businesses, mutual funds, pension funds and hedge funds that WOULD NOT NORMALLY CONSIDER INVESTING IN METALS TODAY, may have few other choices then.
38. NEW USES are constantly being discovered in a very immense range of applications. It now appears that SILVER may be the most versatile metal of all.
39. NEW USES -- Special case. SUPERCONDUCTIVITY technology as applied to electricity transmission efficiency will increase silver demand. (On one hand this is just a repeat of "new uses for silver being discovered." However the amount of silver that this area may use is so relatively high, that it merits its own place on this list.)
40. NEW USES -- Special case. Increased use in battery manufacture as automobiles evolve into ELECTRIC-GAS HYBRIDS for greater fuel efficiency.
41. NEW USES -- Special case. Traditional SOLDERING MATERIALS have primarily contained a TIN-LEAD alloy. In Japan, environmental concerns have prompted regulations calling for the complete phasing out of lead in consumer and electronics products sold there by 2005. A TIN-SILVER alloy containing about 3.5% silver has proven to be the best of the alternative alloys.
42. The PERCENTAGE OF SILVER BULLS in the newsletter business is now at historically low levels. This number and their newsletter readership can only go up.
43. The more our taxes rise (the overall trend has always gone up - and will do so big-time after the 2004 elections), the more people will seek ways to keep the government out of their pockets. Silver coins are one of the few remaining alternatives available to AVOID SOME TAXATION.
44. In a growing environment of litigation, envy & financial distress, the NON-REPORTABILITY advantages of silver coins will enhance their demand.
45. Due to a growing need for ever increasing government revenues and mass computerization, a rapid DETERIORATION OF PERSONAL FREEDOM & PRIVACY is underway. Many will conclude that rather than opening an offshore trust, secret (?) Swiss account or the like, most of the same benefits can be had by simply trading those pieces of paper dollars locally for non-counterfeitable and non-confiscable assets like gold and silver coins. These holdings represent pure freedom & privacy -- and you don't need to be a real good swimmer (it's a long way to Europe) to use them. Assuming that they are properly concealed, they are pure wealth that can never ever be taken away from you, taxed or litigated away.
46. If a mineral is found in great abundance in the earth's crust, depletion will never be a real issue. But a silver occurrence is an extremely rare event. Therefore, every day that a silver mine is in production makes it one day closer to its inevitable closing date, due to TOTAL DEPLETION of all the silver ore. "They ain't making any more of it."
47. In broad geologic terms, the deeper you go in a gold mine, the richer the ore deposit becomes. Silver is the opposite. The deeper you go in a silver mine, the lower are the concentrations of silver. To state this PERCENTAGE DEPLETION another way, because silver deposits are found near surface, nearly all have already been found and mined out.
48. At this point in the business cycle, there is a very high level of confidence in paper (or fiat) currency, especially the US dollar. This cycle can be expected to change. The result will be INCREASED TRANSFER OF PAPER WEALTH to PRECIOUS METALS.
49. Presently, there are NO currencies in the world that are fully backed by any precious metals. Yet, the history of currency shows us that EVERY paper currency has eventually crashed. The U.S. dollar has already lasted longer than any other unbacked paper currency, and when (not if) it loses its status as the world's "reserve currency," it too will crash. Some authorities believe that time is very near. A gold and/or SILVER BACKED CURRENCY is just a matter of time. The discussion phase has already begun in some quarters.
50. For many reasons, WE HAVE NOT HAD A PURE OR FREE MARKET IN WORLD SILVER since the US government began supporting the price of silver in the late 1800's. Also, they have been selling silver nonstop since the end of WWII. This LONG-STANDING, ARTIFICIAL INTERVENTION (selling the U.S. strategic silver stockpile) has finally coming to an end and eventually (sooner rather than later) the market just won't know how to act rationally. It will be like turning a 50-year-old elephant loose in your community that has been held captive in a zoo all its life. Both silver and the elephant would be expected to produce considerable chaos as they adjust to their newly found freedom.
51. In world markets, virtually all commodities go from being under priced to being overpriced and back again. There is no reason to believe that the price of silver will stop rising when it reaches its equilibrium price. Like gold in 1980, it will go far ABOVE equilibrium before stabilizing. We will want to take profits before the stabilization phase occurs.
52. As a civilization advances, the per capita usage of silver increases by a disproportionately wider margin. Much of the third world population, particularly in Asia, is rapidly advancing toward the ranks of the "developed world". This APPROACHING MASS OF HUMANITY will want to take their share of family pictures and connect their new refrigerators, TV's, washing machines, cell phones and air conditioners to the electric/electronic silver-consuming grid, just as you and I have.
53. Considered all by itself, the industrial demand for silver significantly exceeds the supply from mines and recycling. When above ground inventories run out, mines and recycling will not be able to gear up to fill all of the demand. SOME SILVER USERS MUST NECESSARILY BE DENIED the SILVER they need to stay in business. Who will they be? If the macro users (jewelry, flatware & coin makers) were the biggest buyers, rising prices could shut them out of the market and price equilibrium would be quickly reached. However, this is not the case. It is the micro users (companies that use the tiny amounts of silver per product - and therefore are not price sensitive) that are the largest silver consumers. The point is that equilibrium will occur, but only at prices that are extreme.
54. For both the big and the little people in the distant corners of the world, squirreling away US dollars has been one of the preferred methods of saving. It is estimated that two-thirds of the US currency in existence is in circulation in other countries. The "USS Titanic" has already struck a few icebergs but still larger, unavoidable ones are directly ahead. Once it finally becomes apparent that the paper Titanic is hopelessly waterlogged and headed for the ocean bottom, those foreigners WILL SHED what they consider to be DOLLAR BILL "LIFEJACKETS" and SUCCESSFULLY ESCAPE in the SEAWORTHY GOLD and SILVER "LIFEBOATS."
55. Unlike real estate, farmers, bankers, doctors, labor unions, and even the homeless, silver has NO POLITICAL ADVOCATES and enjoys NO LEGALIZED PRIVILEDGES that everyone else seems to enjoy. Silver presently gets "no respect" and it shares the doghouse with only gold, uranium and tobacco. (It even earns negative respect from the Silver Users Association whose mission seems to be to depress silver prices for their own benefit). Once stockpiles go to zero, an immense appreciation for the unloved metal will emerge and special financial favors will follow.
56. Gold is ACCUMULATED, but silver is LOST due to micro-usage-depletion. Consequently, silver has less total quantity in existence every single day. As hard as this is to believe, reliable estimates indicate that there is currently 10 times more ounces of gold than silver in above ground stocks! While this phenomenon has been going on for some time and is not a new force, THIS OBSCURE STATISTIC IN NOT WIDELY KNOWN and clearly has NOT been factored into the current price of silver.
57. For eons top brokerage houses, astute financial advisors and professional money managers have RECOMMENDED a baseline 5-10% PORTFOLIO DIVERSIFICATION into precious metals. Partly due to the lengthy, worldwide bull market in equities and the extended bear market in precious metals, this sage advice has largely been ignored in recent years. A return to this prudent guideline will equate to an increase in demand for precious metals.
58. "A true investor looks for "REVERSE BUBBLES" (the exact opposite of BUBBLES or MANIAS) where everything that can possibly go wrong over an extended period of time (at least several years) HAS, and the bear has fed upon itself to a point of hyper-pessimism. That still viable investment will be on sale for 90% off, or more!" All competing market forces are ultimately reflected in one single measurement; the price. The primary evidence of a reverse bubble in silver is that it has been priced below its worldwide cost of production on a multi-year basis, and at $5.20, is 90% below its 1980 high of $52/oz. Therefore, SILVER EASILY QUALIFIES AS A REVERSE BUBBLE.
59. By all CONTRARIAN AND PSYCHOLOGICAL MEASURES, the outlook for AN IMMINENT SILVER BULL MARKET just couldn't be any better. This essential ingredient of all modern societies is thoroughly un-loved, un-wanted, un-appreciated and un-heard of by the mainstream. (Who can name more than one silver mining company?) Its stellar investment merits are un-popular and completely un-recognized in the investment community at large to a point that nobody cares and nobody wants to know. Profound, unwarranted pessimism is at the heart of all historically important bear market bottoms.
60. Both gold and silver appear to be "joined at the hip" and have historically moved together in price. And, gold appears to be in the early stages of a strong bull market that is supported by excellent fundamentals. DUE TO THE INTERRELATIONSHIP OF THESE TWO PRECIOUS METALS, A MAJOR MOVE IN GOLD (which just started two years ago) WILL AUTOMATICALLY FUEL A CORRESPONDING BUYING INTEREST IN SISTER SILVER.
61. A precious metals INVESTOR is an individual who buys precious metals today with the expectation of selling in the future for a profit. There are generally three classes of precious metals investor's that will emerge: 1) the un-informed-wealthy, 2) the smart-wealthy, and 3) Joe-six-pack-amateur-investor. When the inevitable wave of precious metals investment buying begins, the un-informed-wealthy will buy gold because it's going up -- that's why they always buy. The smart-wealthy will buy a higher proportion of silver over gold because SILVER WILL OFFER the POTENTIAL OF A HIGHER PERCENTAGE RETURN. When Joe-six-pack-amateur-investor starts his investment buying, he will choose silver over gold because he GETS "MORE" FOR HIS MONEY. Conclusion: By all accounts, SILVER WILL WIN the precious metals INVESTMENT POPULARITY CONTEST. Evidence that this scenario is occurring will be observed by the inevitable narrowing of the gold-silver price ratio - which currently stands at 75:1 (396/5.27). Throughout recorded history, that ratio has normally been closer to 15:1. So, either gold is considerably over-priced, or silver is way under-priced. Perhaps this essay will help convince you that it is the latter. In fact, we are convinced that both metals are drastically under-priced and both are on the verge of major bull markets - far surpassing the moves they made in the '70's.
62. The present public perception says:" BECAUSE SILVER IS SO CHEAP, IT CAN'T BE VALUABLE!" A Ted Butler essay said it this way, "PEOPLE DON'T LIKE SILVER BECAUSE YOU GET TOO MUCH FOR YOUR MONEY." What can we conclude? After silver becomes high priced, people will then recognize that silver IS VALUABLE and then they will want it…adding greatly to the demand.
63. Many entering the precious metals investment arena will be correctly armed with the simple truth that $5 SILVER CAN MORE EASILY TRIPLE THAN $400 GOLD!!
64. In the approaching economic climate we face, the long established cycle of a "preference for cash" will very likely be replaced at the precious metals producer level with "holding onto the commodity they produce" as a MONEY SUBSTITUTE. One major gold producer already appears to be doing this.
65. Present and future silver mines are and will continue to be located in multiple countries and political jurisdictions around the world. In the current low silver price environment, the miners are accepted and welcomed. IN A HIGH PRICE ENVIRONMENT, ENVY, GREED AND "THE LAW OF THE JUNGLE" WILL ENTER THE EQUATION. Increased political interference will surface and run the gamut from increased taxation and bribes to nationalization and outright confiscation of "our national treasures." All interference will ultimately result in higher silver prices to the silver end-user and those individuals who hold physical silver.
66. And last, but far from least is this comment from Richard Russell, who is undoubtedly the premier "gold-bug" of our generation: "I believe gold (and very probably silver) will make fortunes for those who now take major positions in the precious metals. For myself, I want roughly one-third of my assets in gold with some silver." Published in Richard Russell's Dow Theory Letters on 11/25/03. Mr. Russell has authored his newsletter for nearly 50 years and written numerous articles for Barron's and the Wall Street Journal, and has been quoted extensively by every major financial publication here and abroad. We consider this recent concession of including silver with gold by Mr. Russell to be very significant.
WHAT'S THE REST OF THE STORY?
You have just read 66 specifics as to why SILVER IS ABOUT TO EXPLODE IN PRICE! However, it would not be fair to only present one side of the silver story for your consideration. So the question is; what forces might keep the silver price in the $4.40 to $5.40 price range indefinitely? Here are the only ones we can foresee and they are truly insignificant compared to the positive factors shown above.
1. In a high price range, some jewelry, tableware, silver coins and the like will come out of hiding and be sold to into the market. But, it's most likely that most of that silver is long gone. As of 1980, most people don't have any more sterling to sell and many have never seen a real silver coin.
2. In a very high price environment, STERLING SILVERWARE and TABLE ITEMS will be too costly and many potential buyers will be priced out of this market. However, this is a relatively small market compared to industrial demands.
3. Sales of silver JEWELERY that is now being sold at your local shopping mall and flea markets will practically vanish. However, investment demand can be expected to more than take its place.
4. High prices will cause end users to attempt to MINIMIZE USAGE by any means available. If an electronics manufacturer can get by with using just a little bit less silver solder, it will. But, in a $1,000 computer, the present cost of the silver used is probably less than $5. Even at $50/oz, it's still a minor factor in the total cost of a finished product.
5. A RECESSION or DEPRESSION will result in less industrial silver demand. This factor is more than likely to be offset by decreased by-product mining.
6. DIGITAL CAMERAS - For an exhaustive article on this matter, Doug Kanarowski has an excellent one at: http://www.financialsense.com/fsu/editorials/2003/0822.htm but here is his Summary:
- The nail-gun and hammer is a good working analogy that suggests co-existence of digital and analogue cameras, but not replacement.
- Silver photo usage has recently slowed but this is mostly attributed to the huge downturn in the Japanese economy, not digital inroads.
- Silver photographic usage is grossly overstated in the minds of most market participants. When recycling is taken into account, only 96 million ounces are actually consumed and not the much larger 256 million-ounce figure widely believed.
- Scrap silver objects (198 million ounces) that one would normally think would count for so much, don't amount to a hill of beanie babies compared to the 160 million ounces of that figure that are recycled from mostly color photography which has more than an 80% silver recovery rate.
- The refusal of the CFTC to reign in the mega-money Wall Street silver (futures) market manipulation, which has thus far kept a cap on the silver price through huge "short sales," that are largely unbacked.
- Digital usage often incorporates silver at various points in the production/storage process.
- When all costs are considered, of the two processes, digital is the more costly and complicated.
- Digital growth has been fueled from WITHIN the larger, historical credit and consumption bubbles. Much smaller digital sales would have taken place had it not been for these bubbles. Due to much larger and more powerful economic considerations, the biggest percentage gains in digital may soon be behind us.
Conclusion: THE EVER GROWING DIGITAL PHOTOGRAPHY MARKET WILL HAVE LITTLE OVERALL EFFECT ON SILVER DEMAND. For the silver investor, "the coast is very clear."
HOW HIGH COULD THE PRICE OF SILVER GO?
Basically, making investment price projections is a real waste of time because few are ever right. However, virtually all investment decisions are exercises in price prediction. We only buy when we expect a price increase and sell only when anticipating a general price decline. Short-term, medium-term and long-term predictions all have their place.
In projecting the future prices of gold and silver, we believe that the foregoing factors have given us the basis for anticipating that between 2005 and 2010, the price of silver could very possibly exceed the price of gold. This is not an idle wish, but a carefully calculated "staking-our-reputation" conclusion, based upon the foregoing factors. We hope this essay has helped you to make a beneficial financial decision - to GET SOME SILVER!
Does this mean that those who have invested a major portion of their savings into gold should sell and buy silver? Not in our opinion. The two should be held for different reasons. We hold gold for the ultimate store of value that history has shown is valid. At this incredibly fortuitous time however, it is our opinion that silver offers an unbelievable price appreciation potential. Therefore, we believe that it makes sense to have a significant portion of one's assets in silver coins - in your hands. Is this inconvenient? Yes, but it will be well worth the trouble. As one example, we can currently provide Silver American Eagles for about $8. If silver only rises half as much as we anticipate, by 2010 those coins could be worth many times today's price. Meanwhile, we believe that any minimal expense or inconvenience in holding them will be well worth it to you. Incidentally, there are other silver coins that we believe will do even better.
You are undoubtedly a thinking individual, or you wouldn't have read this far. And, you may disagree with some of the 66 reasons for a soaring silver price in the next few years, but even if you only agree with half of them, you still end up with a HUGE number of reasons that show you why silver is just in the beginning stage of a MAJOR BULL MARKET. The evidence is overwhelming and we hope you will let us help you benefit from it.
WHEN MIGHT IT BE WISE TO SELL SILVER? During the final days of 1979, I decided that since the price of gold was rising more per day than the total price ($35/oz) was when I began buying it, that that performance would not last long. In fact, I also stated that: "straight up moves are normally followed by straight down moves." (On 1/21/80, gold hit the inter-day high of $875 - the next day it closed at $670!) Therefore, on January 2, 1980, I sent letters to every client suggesting that it was time to take profits by selling our gold holdings. Fortunately, every one of my several hundred clients called me and we sold out all our positions while gold was between $700 and $850. It's my opinion that such a day will present itself again during the next six years, in both gold and silver. But, since I don't have a crystal ball and am not omniscient, I don't know for sure what the exact timing will be. However, as the weeks and months pass, we will see many, if not all, of the 66 factors shown above come to fruition. All we need to do is check them off as they occur, and when they are nearly all so marked, we will be close to the end of this opportunity. If you don't feel qualified to make such a decision, as long as our Good Lord leaves us here, we'll be pleased to welcome your call and help you sell all or part of your holdings.
Jack Weber, Pres.
Golden Eagle Enterprises, Inc.
Much of the aforementioned information was quoted with permission from a July 2003 article by Douglas Kanarowski.
Top of Page....^