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Is The Perfect Storm Coming For Gold?
Due to western central bank price manipulation, the mining sector is in critical condition, the supply line is all but halted, and the physical supply is being swallowed up by Asia. The last shoe to drop is for major mining companies to start closing down production at major mines. Though this would be perceived as the end for gold, speculators will be happy to know that this would be the beginning of the biggest Fed induced bubble in history! But unlike previous Fed bubbles where they support the price increase, the gold bubble will be a result of western central planners mis-managing the gold price for the past 3 decades and finally losing control. As Peak Resources explains in the brief clip, the perfect storm is coming for gold...
Friday October 11th, gold trading was shut down for 10 seconds according to the CME.
Why, because someone sold 2 million ounces of gold at one time. Who does this? Who sells nearly 2 and half percent of annual gold production in a single minute? The gold valued at over $2.5 billion could not have been sold by a small trader, and certainly not the smart money, institutional investors know that you don't exit a large trade like this...
So who could it be? Try the dumb money, The Western Central Banks.
As noted by organizations like GATA, TF Metals Report, ZeroHedge, and Shtfplan, gold manipulation is out in the open. Friday October 11th is just one of the daily examples.
With the western central banks suppressing the price, the eastern central banks have been happy buyers.
However, PeakResources.org believes this gold price suppression scheme is nearing its end.
With the Federal Reserve on a fiat currency suicide mission with QE forever, and the U.S. federal government bankrupt, the days of dollar supremacy are in its last days.
For gold though, the central banks have really screwed themselves.
At a price of $1,250, gold mining companies can no longer make a profit. Recent studies show their all in cash cost anywhere from $1,400 to as high as $1,700. Liquid fuels, human energy, and new exploration are costly in the mining process, so it is unlikely these costs can be cut to accommodate the low gold price.
Since gold's peak in 2011, the TSX Venture exchange, home to the worlds gold exploration companies, is down more than 59%
The gold juniors index, the GDXJ, is down 83%
And the large cap gold companies, despite seeing a 400% increase in the price of gold over the past 12 years, are trading at lower valuations then they did even 20 years ago.
As noted in our video Peak Gold, no major gold discoveries have been found in more than 10 years! Gold production as a whole has plateaued.
Remember, all mines have a limited supply of gold, at some point in time they either deplete themselves or become uneconomical. Uneconomical meaning companies can't mine for profit, which is exactly the case for nearly all gold mines today!
Consider a very famous gold mining region, South Africa
In 1971 South Africa produced 47.5 million ounces of gold, accounting for 68% of global mine production.
In 2011, South Africa accounted for only 7% of gold production with about 8 million ounces of mine production.
Despite all the technological advances and billions in exploration and development, South African gold production is down 82%.
South Africa isn't an anomaly either, here in the U.S. production in the past 20 years is down 30%.
Current discoveries are small, in remote areas, and are lower grade deposits.
PeakResources.org recently attended a gold mining event in London, what we learned was that exploration budgets were being slashed! No development, no exploration, and a scaling back of projects.
What this all leads to is a price spike in gold, just as gold rose rose from $35 to $850 in the 70s, The Dow Jones from 2,000 to 11,000 in the 1990, and Bitcoin from a penny to $1,200 more recently, so to can gold have a parabolic spike.
The perfect storm is coming for gold...
Due to western central bank price manipulation the mining sector is in critical condition, the supply line is all but halted, and the physical supply is being swallowed up by Asia.
The last shoe to drop is for major mining companies to start closing down production at major mines. Though this would be perceived as the end for gold, speculators will be happy to know that this would be the beginning of the biggest Fed induced bubble in history! But unlike previous Fed bubbles where they support the price increase, the gold bubble will be a result of western central planners mis-managing the gold price for the past 3 decades and finally losing control.
With fiat currency being pumped into the system daily and the gold sector in shambles, the central banks are in for a big surprise because sooner or later supply and demand economics will crush the very people who are behind the devastation we have seen in the gold mining and precious metal industry.
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try doing that to a golden eagle!
On another note
Gold got ahead of it's self price wise................so a correction was an absolute.
roughly 50% retracement is normal ...................
You don't see thye CB's that bought at the top selling thier Gold and bitching, they are still buying...................at any price
of course its a perfect storm, CAVEAT; if noone was allowed to manipulate the numbers
"... the central banks are in for a big surprise because sooner or later supply and demand economics will crush the very people who are behind the devastation we have seen in the gold mining and precious metal industry."
I wouldn't be so sure about that .
We are apparently at some kind of "end of the game" . I wouldn't be surprised to learn that "central banks" try to keep gold price down so that loads of people will eventually sell their mining stocks (and buy S&P 500). And guess who will buy mining stocks ?
Maybe a very good strategy for "central bankers" to take control of the entire existing PM mining sector.
add the further specification of which central banks. Western, Eastern, in-between?
" add the further specification of which central banks. Western, Eastern, in-between? "
Or entities which are not necessarily central banks .
I wrote : "... "central bank" ... "central bankers" ..."
instead of simply : " ... central bank ... central bankers ... " , precisely because I'm not sure of what hides behind those terms .
I was buying coins for my collection when I was kid made my money mowing lawns for $2 when silver started going up you could buy it at a multiple of face value for coins. i paid 1.6X face for silver so that was .16 for a dime. that was in 74-5 maybe. you could buy bags of 1000 morgans for $3000 people were still taking them to the bank sometimes and the tellers would buy them up and sell to friends or dealers. I got rolls of halves from the bank and found silver easily many times over 50% were silver. there is no resemblence to what is going on now. we are going to have deflation then the money will get tight and the C B's will flood the market. maybe by allowing all homeowners to borrow 150% of thier home value, it will be a survival of the currency situation. they will panic and gold will be very hard to get except for lats of money. if at all.most people will sell thiers to pay bills or something.it will all go to the big banks.
Its always worrying that whenever there is discussions over both gold and silver there is a perceived "value" priced in USD
The dollar has to my understanding lost 95% of its "value" or purchasing ability and diminishes with every run of the presses
therefore cannot effectively be a currency to use to value anything.
" ... Its always worrying that whenever there is discussions over both gold and silver there is a perceived "value" priced in USD .... therefore cannot effectively be a currency to use to value anything. "
But at this very moment you can still buy things with USD .... even gold.
But, of course, what is probably meaningless is to talk about future prices of gold in USD (or in any other currency for that matter) .
as long as gold is also traded with ETFs which are not backed up by physical gold, it is like printing gold, and fundamentals are distorted.
Unfortunately governments will not prohibit this, because they are scared to lose control, gold could substitute the fiat currency, so they better sympathise with the big financial institutions to leave it open to the market.
Put yourself in the shoes of the Chinese.
You are sitting on a pile of American paper, and are looking for diversification. You need to re-vamp your investment portfolio.
You want to get a large position in gold. Large, that is in relation to the world market. The acutal value of the position is small in relation to the US paper you hold. You need help.
You make an offer to the US Government that they cannot refuse. You agree to an informal floor price methodology for the many tonnes of gold you will be buying over the next "little while".
The US-EU actors in the market pound the price down and you buy your allotment. You look at the market's reaction to gauge the clearing price (going forward). As long as both parties to the deal agree to the timeline, prices can be managed at a level that is acceptable to the US and the Chinese. The Central Banks need to be on-side as they will replace their gold holdings with the US paper.
There is a timeline and endpoint assumed in this scenario. What happens after is likely a significant rise in the price of gold.
This is not my profession so feel free to shoot me if I get this wrong.
Miners have fixed costs and variable costs. If they shut down production because its uneconomic to mine gold then they can lay off their staff and reduce their variable costs. However, they are still left with their fixed costs. All of their equipment will be on the never never. Therefore they still have to make their monthly payments. If they don't meet those then the bank calls in the loan and seizes their assets. So, to postpone the day of reckoning they have to continue production using the (reduced) income from that to cover their fixed costs. All the time this is happening they will use up any reserves paying the portion of the variable costs they can otherwise not meet with revenue until until they have none left. At that point they can't cover their fixed costs and the bank forecloses. End of business. Or at least until one of the banksters mates picks up the assets for pennies on the dollar and continues mining with a reduced (interest payment) overhead.
Can someone who understands accounting please correct the above statement in the light of the article content.
If there's paper gold and physical gold why doesn't some country start printing currency paper gold? Just asking.
They would have to fix the price of gold then match printing to that value in oz and only increase the currency by increasing the gold holding. They would have to have everyone agree that gold was worth $400 per Oz ( prior it was 28 and then 42 . So that when they dig up new gold it does not devalue all the rest of the gold and the currency with it. When they need to expand the GDP they would have to wait for new gold before they could. In the old gold standard days they did not wait they borrowed at about 10 to 1 from the holders of gold. A run on the gold holders would collapse the system just as the run on the banks did in 1929. There were multiple gold based crashes in gold standard days
http://stockcharts.com/def/servlet/SC.pnf?chart=$silver,PGTLWANRBR[PA!B13][D][F1!3!!!2!20]&pref=G
Price objective of $2 whats gold at 16 to 1?
Replace with $gold to see the current target
Gold miners lease equipment, layoff workers and hedge gold futures on the way down
Gold prediction for 2014
https://medium.com/gold-silver-analysis/c9519647fdfare we to believe that all in costs are really above $1000 ?
that would put miners out of business in 2008 when the price was sub 1000
unless we are also to believe that there is an inflation in mining costs...
The low hanging fruit is no longer there, just like when oil was cheap because the oil deposits were easy to get to.
Also, most gold is not consumed, gold derived from mines that's "new" is a small percentage of the supply of gold that's traded.
I do agree that I would like to see an honest assesment of "all in" costs, because I would think nearly every miner would be out of business. I don't think though you have to be a conspiracy theorists to see miners have been getting slaughtered, so we have to be close or past the point where it's simply not economically feasible to pull new gold out of the ground.
How long that takes before it causes prices to shoot upwatd is anyone's guess.
But my reasons for stacking PM's have not changed, even if the price has.
The price of gold isn't set by the supply of gold...it's set by paper gold. Naked paper dictates the price period. The fiat makers are in charge of oversight. Oh sure there are men somewhere that claim price discovery, but they base evaluation on paper gold not real metal. If they did that with our food...we would be screwed.
62:1
irrelevant: this number has no meaning.
Actual correlations show for gold2 / silver
e.g. 1241 2 / 19.95 = 77072.6817 or 1500 2 / 30 = 75000 or 1800 2 / 35 = 92571.428 (a little high)
meaning if you made a scatterplot of gold log scale on the x axis & silver log scale on the y axis you'll see a steady line for a long time (trend) before bending to another line that has a steeper slope (bullish on silver) or shallower line (generally bearish for both metals in USD short term)
scatterplot: http://flic.kr/p/f17z1s and http://flic.kr/p/f5bHkJ
Right now you can see there is no average or meaningful gold/silver ratio, in fact, the more accurate relationship is
ln (silver) = gold x 1.1385 / 1000 + 317/200