This page has been archived and commenting is disabled.

How Western Bankers SERVE Precious Metals Holders

Sprott Money's picture




 

 

 

 

Hold your real assets outside of the banking system in a private international facility  -->  http://www.321gold.com/info/053015_sprott.html 

 

 

 

.

 

How Western Bankers SERVE Precious Metals Holders

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

For the last four years (in particular), those who have chosen to convert their paper wealth into gold and silver have been suffering – just ask them. It might be time to remind these individuals of an old adage:

Be careful what you wish for; you just might get it.

Playing the “what if” game with precious metals markets (and invoking the old adage) is relatively simple. For instance, what if the silver market had not been subjected to the most ruthless financial attack on a commodity market in the history of commerce?

Back in the spring of 2011, it was the silver market that was leading the way through the strongest segment of what was (at the time) a ten-year, uninterrupted bull run in precious metals markets. This is a matter of both empirical and historical fact. The trough-to-peak move in the silver market during that run was much greater in magnitude than the same move in the gold market. Historically, the trough-to-peak move in the silver market is always stronger.

 

 

 

For the sake of simplicity, let’s assume that there were only two possible alternative scenarios if precious metals markets had not been subjected to the price capping operation of 2011 and the permanent (until default) price suppression we have seen in these markets since that time. Let’s call one possibility the “fair-price” scenario, and let’s call the other one the “full-price” scenario.

Then we have our definitions. The “fair-price” scenario is defined as a partial move in gold and silver markets, where the prices move roughly halfway toward their full value. The “full-price” scenario, as the name implies, means a full price for gold and silver, or as close to full price as we can get, given that Western paper currencies are already worthless .

For readers not familiar with previous commentaries, a “full price” for precious metals today waspreviously pegged at $10,000/oz for gold, and $1,000/oz for silver. For the purpose of this analysis, the fair-price scenario will peg the price of gold at $5,000/oz and the price of silver at $200/oz. The fair- price scenario represents a partial reduction in the utterly absurd gold/silver price ratio, while (naturally) the full-price scenario represents a relatively correct gold/silver price ratio, given the depletion of global stockpiles of silver.

Let’s begin with the fair-price scenario. It is undoubtedly the more benign scenario, since it does not require precious metals holders to make the most difficult decisions. Imagine the full implications of $5,000/oz for gold and $200/oz for silver.

At those prices, gold and silver holders would already be listening to a deafening crescendo from the mainstream propaganda machine. Gold is a bubble! Silver is a bubble! Run for your lives! Simply remember how loud that cacophony grew with gold under $2,000/oz (USD) and silver still below $50/oz (USD).

Thus, we begin our benign scenario with precious metals holders already feeling intense psychological pressure to reduce their concentration of wealth in gold and silver. Add to this struggle the “wealth effect,” where the paper exchange rate for gold and silver would make precious metals holders feel much wealthier.

Part way into the benign scenario, gold and silver holders would be seeing/reading/listening to a constant propaganda barrage urging them to “diversify” out of their gold and silver, or face the consequences. Meanwhile, feeling much wealthier (with the same amount of metal), many precious metals holders would conclude that they didn’t need all of that gold and silver, the trouble of storing it, or the added cost of insuring it at higher prices. They’d think, “Why not lighten the load and take some (paper) profits?”

Of course, most of us would not have much metal to begin with in the fair-price scenario. If the price of gold and silver had not been capped (and then reversed) with gold below $2,000 and silver below $50, it would have cost us much, much more for each ounce we purchased between 2011 and today. This means (unless we had inexhaustible wealth) that we would start our fair-price scenario with fewer ounces of metal and then have to fight the psychological impulse to sell that is fuelled by media propaganda and our own delusions of greater wealth.

Now it’s time for us to move to the full-price scenario, where gold and silver holders “get what they deserve.” Let’s think about what a wonderful world that would be. To begin with, we would have even less metal, as the much higher paper exchange rate would dramatically reduce our purchasing power.

And remember how much sell-and-run propaganda came from the mainstream media with gold at $5,000/oz and silver at $200/oz? Now imagine the decibel level of that Chicken Little propaganda when the price of gold doubled, yet again, and the price of silver quintupled (after an already greater-than-tenfold rise in price).

Imagine dealing with that “sell, sell, sell” pressure every day, while simultaneously feeling much wealthier. How long could we listen to the chant of “Bubble, BUBBLE, BUBBLE!” from the mainstream media before we began to reallocate our wealth away from gold and silver

What would we hold instead of our gold and silver? Bushels of wheat? Barrels of oil? A warehouse-full of lumber? True, we could follow those wealthier than ourselves and funnel our gold and silver into high-priced art, or antiques, or some other wealth-preservation vehicle of the Ultra Wealthy. But this presents two additional issues.

First of all, when the Ultra Wealthy put some of their wealth into such vehicles, they do so to shelter their wealth from the Tax Man. And they have no need, or intent, to liquidate such holdings in “an emergency.” Most of the people reading this commentary will not fall within that privileged group.

If we choose to move our wealth out of gold and silver and into art and antiques – with these asset classes already at record prices – we do so with the knowledge that we may be forced to sell these less-than-liquid assets during a trough in the market. Out of the frying pan and into the fire. Moving from one (supposed) asset bubble to another, less-liquid asset bubble is not the path to “financial security.”

Of course, we could not move our wealth directly from gold and silver and into art-and-antiques, or even into other commodities. First we would have to convert our gold and silver back into the bankers’ paper currencies (sell our metal). But now we are traders of gold and silver, and we say hello to the Tax Man.

Different readers around the world with different income levels would face different “hits” as the Tax Man took his cut, so readers are invited to pull out their calculators and think about how much of their wealth would evaporate into taxes, should they liquidate any substantial amount of their bullion holdings with gold at $10,000/oz and silver at $1,000/oz, or even at the previous fair-price numbers.

After facing the taxation consequences, we would be trying to move between asset classes without assurance that (priced in the bankers’ worthless paper) the new asset class would be at any less of a “bubble” price.

Of course, we haven’t yet arrived at the best part, should precious metals holders be lucky enough to see a “fair” or “full” price for gold and silver today. As regular readers have been warned in these commentaries, we enter the New Year facing another scenario: the Next Crash in 2016. The bankers scripted this nightmare for us right after the Crash of ’08 ended.

Imagine feeling the daily pressure of the media “warning” you that the gold and silver bubbles were going to implode “in a deflationary crash” in the near future. Imagine your joy as you watch the Tax Man snatch a large chunk of your profits from whatever portion of your gold and silver you liquidated to alleviate that pressure, and then imagine choosing another asset class in which to invest the remains.

Now imagine trying to juggle those financial pressures knowing that the greatest economic crisis of our lifetime could come at any time – like tomorrow.

There are worse things in life than being able to exchange debauched paper currencies for gold and silver at absurdly advantageous prices. An ounce of silver costs little more than an average pound of steak in Canada today, an even more advantageous ratio than when the ten-year bull run began in gold and silver, and silver was priced at under $5/oz.

There are worse things in life than going to sleep at night feeling financially secure, with not the slightest doubt that your wealth is misallocated and not the slightest intention of liquidating even a single ounce of bullion – with gold and silver ridiculously undervalued. Certainty and security. How much is that worth?

Yes, there are worse things in life than the suffering we have been forced to endure in the gold and silver markets over the past four years. Be careful what you wish for, you just might get it.

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

 

How Western Bankers SERVE Precious Metals Holders

Written by Jeff Nielson (CLICK FOR ORIGINAL)

 

 

 

 

 

 

 

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 12/31/2015 - 11:06 | 6981587 EcoJoker
EcoJoker's picture

If gold went to 10,000, I woudl definitely sell a bunch for paper fiat and then give that to the bank to pay off my mortgage.   I would keep some silver and gold back but I don't wany DEBT. 

 

 

Thu, 12/31/2015 - 09:15 | 6981287 NoBillsOfCredit
NoBillsOfCredit's picture

Ask Sprott how an investor in his funds gets paid if the paper money collapses since redemption in metal is not an option in his funds? At least for the little guy. Like me, you won't get an answer.

Thu, 12/31/2015 - 02:37 | 6981002 Conax
Conax's picture

This guy is saying a less valuable stack is preferable to a more valuable one.

A groveling statist weeny, frightened of the big bad boogerman.

1*.

The bankers do assist those buying, but not holding. They (holders) are being demoralized more every day. Constant dollar price declines make holding it tough.  Buying more is foolish if you believe it will continue to depreciate.

Hold Fast.  Buy even more if you can. If you must sell, sell to a private party to keep it out of the wrong hands.

Wed, 12/30/2015 - 23:57 | 6980758 acetinker
acetinker's picture

Lmo Mutton has asked a very serious question, cloaked in smartassery.  As long as we think of PM's, or any other commodity- be it iron ore, corn, coal or coke in terms of USD, JPY, CNY, RUB or any other 'currency', we are practicing a most malicious form of self-deception.

The value of all human endeavor is pretty much only valuable to other humans, no?

What is the value of an ounce of silver to an independent man who has accumulated/produced the things that sustain his/his family's lifestyle?  Probably about zero.

Some say this is infantile- no man is an island.  No man can survive without trade, regulated by currency, which depends entirely on his having CONfidence in the coin of his realm.  This is demonstrably untrue.

History says so.

Zimbabwe says so.

Weimar Germany says so.

Thu, 12/31/2015 - 09:21 | 6981296 NoBillsOfCredit
NoBillsOfCredit's picture

Focus on that word "lifestyle".

Wed, 12/30/2015 - 20:22 | 6980131 Lmo Mutton
Lmo Mutton's picture

Can somebody convert this to Zimbabwe dollars for me?

Wed, 12/30/2015 - 19:42 | 6980018 honestann
honestann's picture

The only thing better than gold and silver is:

-----

#1:  Productive equipment and supplies that you operate to produce an endless supply of goods and goodies.

#2:  As much food, clothing, shelter and basic goods and goodies required to survive and enjoy life.

-----

The truth is, the purpose of gold and silver is to accumulate wealth until we have enough to convert into #1 and #2.  Those who hate gold and silver (or some real, physical goods as something to save) essentially hate the notion of an honest, prudent responsible lifestyle.

Wed, 12/30/2015 - 22:14 | 6980501 Bunghole
Bunghole's picture

Goodies is right.

That's why i'm making a boka reflux column for my 10 gallon stock pot.

Vodka bitchez.

Wed, 12/30/2015 - 16:50 | 6979459 lakecity55
lakecity55's picture

PMs, Bit-Chez!

Wed, 12/30/2015 - 22:15 | 6980505 samlowrey
samlowrey's picture

I see Bitcoin as a transitory medium of exchange........in that it is much better than PMs in two ways......ease of storage and transportability.  

Thu, 12/31/2015 - 08:52 | 6981248 Wow72
Wow72's picture

If you dont hold it you dont own it, just like your bank account? Yea ease of storage and transportablity is important, but its not everything when your not able to access it? It does no good unless there is access? What is bitcoin? Can I hold it or see it? It exsist only in digital land? Unless your using bitgold or bitrice or something like that? Who do you really trust to hold your money these days? Bankers? Bitcoin Banks? WTF is the difference, get some diversity in your life.  Gold and Silver will hold their values.  1000 bucks for an oz of gold? seems to be holding its own just fine? Im not saying it wont go down in the near future, but we have a massively corrupt system? make sense now?

Wed, 12/30/2015 - 14:15 | 6978891 Argenta
Argenta's picture

Compare silver and gold to what they can trade for in terms of something other than dollars.  This is the only real way to determine whether value is rising or falling.  The dollar is merely the comparison medium.  A gallon of gas in 1964 was about two silver dimes.  Those two silver dimes can still buy a gallon of gas.  Metals aren't investments, they're the ultimate form of wealth preservation.

-Argenta

Wed, 12/30/2015 - 16:54 | 6979472 Getting Old Sucks
Getting Old Sucks's picture

Let me first say that my icon actually exists.  You say "Those two silver dimes can still buy a gallon of gas".  Can you tell me where? 

I agree with the rest of your post.

Wed, 12/30/2015 - 13:42 | 6978707 Bemused Observer
Bemused Observer's picture

I don't care what they're doing with gold and silver prices...I'm just taking advantage of it. I can't be sure if it will go up, down or sideways...all I know that this time next year I'll have a lot MORE gold and silver than I have now.

9 out of 10 Americans couldn't assemble an ounce of gold from their 'holdings' at gunpoint. There are a lot who have only the 3-5 grams from their wedding rings, and maybe a few pieces of sterling jewelry...

A lot of them have sold theirs to me over the years. It's all good...I'll keep it nice and safe. :-)

Someday I will look back on these days of artificially low prices, and wish they had gone on longer...I'll actually mourn when they turn around, even as many PM holders scream "Finally!" and rush off to cash in.

Thu, 12/31/2015 - 11:47 | 6981775 HoserF16
HoserF16's picture

Be happy in your accumulation of PM's. Now we all need to be looking at the depressed, under-loved comodity sitting out there. Oil? Coal? I'm still researching this but when the metals take-off you need to be ready to swith out and over into the next comodity run. Mike Maloney does a good job of explaing this. You just need to be ready to pull the trigger on one and pull-it for the next. Easier said than done and I'm still wrapping my head around this. At some point, it will be time to get out of PM's and into something else...

Wed, 12/30/2015 - 20:33 | 6980174 Uchtdorf
Uchtdorf's picture

This is where many of us are now. Can you trust the "market?" The fundamentals? The Federal Reserve? No, no and no.

Therefore, as long as you aren't using your grocery money to buy gold, or buying with money from a home equity loan, every ounce stacked now is a future blessing. It doesn't matter if gold is $500 or $5000, one should shed Federal Reserve Hiney Wipes at every opportunity.

Wed, 12/30/2015 - 13:35 | 6978669 ExploitedCitizen
ExploitedCitizen's picture

*yawn* more gold/silver propaganda.  Meanwhile life goes on, and gold/silver keeps crashing in price.  Real estate oddly enough is sky rocketting.  Land is always going to be worth more than shiny metal.

Wed, 12/30/2015 - 19:24 | 6979961 Agstacker
Agstacker's picture

How much in property taxes do you shell out every year on your land?  Funny, I look at my stack and don't get taxed on it every year.

Thu, 12/31/2015 - 09:31 | 6981326 ToSoft4Truth
ToSoft4Truth's picture

Then you rent.  Your landlord collects the property tax for the municipality and shaves a small profit off your back for providing the service to you.

 

Clever? 

Wed, 12/30/2015 - 18:35 | 6979827 cpnscarlet
cpnscarlet's picture

Het, EC, grow up. Price stats are probably from the NAR - LIES, LIES, and more LIES.

Wed, 12/30/2015 - 16:44 | 6979426 chicmagnet
chicmagnet's picture

Ha Ha Ha! I used to think land was the end all be all investment.  Wait unti you ar taxed 10% a year on full value, then 20, then 30 on and on. This will be the only way for towns to get money pay for day to day operations as state and federel monies dry up.

Wed, 12/30/2015 - 15:52 | 6979234 SILVERGEDDON
SILVERGEDDON's picture

Yeah, no bubbles happening in urban real estate prices. See you on the flip side of Recession USA Part Two, when gold and silver buy land for pennies on the dollar.

I would downvote you too, but meh to that.

Wed, 12/30/2015 - 16:53 | 6979469 lakecity55
lakecity55's picture

Ima hold out to trade some Au or Ag for Land.

Or I could say also barter for some land.

Wed, 12/30/2015 - 13:29 | 6978627 8th Estate
8th Estate's picture

It's worse that that.

Firstly, legal tender bullion is currently exempt of CGT.

So as we stand today, no tax burden.

However, once things go crazy TPTB will implement a 90% windfall tax.

So in the medium-term, all the paper profit will be gone.

You'll have to get out early, which will be infuriating.

Wed, 12/30/2015 - 15:01 | 6979045 Bemused Observer
Bemused Observer's picture

Oh please...fuck them and their stupid taxes. There will be an overnight industry in black market gold-buying/selling that will aggressively 'outbid' the official prices. You will be able to find plenty of buyers who will pay you a proper price outside the official market if PM's stage a come-back. The official markets will be the LAST place you'd sell your gold if they did that, because they'd be offering the WORST price with the added tax. At best they'd get the few folks with scrap they didn't get around to selling the last time the price spiked...by now, most gold in the US is owned by people with a little more respect for it than that. Those jewelry boxes got a good clean-out in 2011/2012, there isn't that much left, and don't expect many of the gold holders to part with it at a 90% tax rate.

If (when) PM's start to rise, it will have great significance in today's economic environment. It will trigger a buying-panic, not just because of the usual emotional "It's GOLD!" argument, but because it will be seen as an asset that is gaining value, thus attracting millions of yield-starved investors with more money than sense. This could send prices into a new 'bubble'' territory. Especially if the stock market languishes between now and then, and there aren't any other opportunities for investment or trade. There is going to be some real desperation out there to see returns on SOMETHING as the global economy continues to slow. A rising gold price would draw them like moths to a porchlight..."Look! It's going UP!"...(mob turns and stampedes in new direction)

Actually, ANY asset that starts going up will probably see the same...I just think PM's are as good a bet as anything else out there, and now more accessible to me than ever before. But anything that raises its head these days is going to get mobbed by the investor class as 'the next great thing' as all the other investments languish or lose value. That is the recipe for bubble-prices, and there is no reason gold and silver couldn't get as crazy and unrealistic as real estate, art, tulips, etc...The best situation to find yourself in is to have enough of the asset to sell some into the crazy prices, and enough to hold for a (hopefully) more stable future.

That's my plan for PM's. It may work out, or not, but it is a plan based on thought and assessment and not just on emotion, as many seem to think PM investing is. It is also an affordable option for me these days (thanks gold-slammers!) unlike most of the other traditional paths, like real estate, stocks, art, coins, etc. For those of us priced-out of most other investment vehicles, currently cheap gold and silver is a logical and sensible choice.

I know we 'gold bugs' are considered to be tinfoil hat types, or anarchist militia survivalists, but most of us are pretty sensible. It isn't all about TEOTWAWKI, or 'boating accidents' and roving gangs, it's about TODAY. And tomorrow, assuming the world is still intact. I'm not one who believes we'll have a single, catastrophic collapse. I see more of a slow exhalation as things wind down, get smaller. Though I see the death of fiat, I also think we'll get new currency, or currencies. Rules will change over time, as will prices, etc. But we'll all still need something to get through TODAY. I've posted before about how PM's, especially gold, have, for me, been an incredibly lucrative and liquid form of wealth-holding, so for me, PM's are a no-brainer. They WORK for what I need them to do, and they work TODAY. I don't just accumulate them to bury in coffee cans in the backyard for some imaginary Mad Max scenario that I'd be unlikely to live through anyway.

PM's aren't for everyone, I guess. And everything has its pros and cons. But we all must do what we feel will work for us. We can only base that on knowledge about the world we live in, and personal experience. Since those will differ for everyone, so will the methods they choose to get by.

Wed, 12/30/2015 - 16:56 | 6979481 lakecity55
lakecity55's picture

"grant me Patience, Lord, but hurry!"

I might let a few coins go for some fiat. Maybe. Barter is better.

Wed, 12/30/2015 - 13:45 | 6978726 lasvegaspersona
lasvegaspersona's picture

...or not...

Central banks may need a reserve asset to recapitalize. Gold is the one they have chosen (it is the only non paper asset they own). If they decide to change the status of gold then these assumptions about taxation may be wrong.

Those who hold gold tend to see the world as conspiring against them. In truth most of the world does not even think about gold. If the government changed rules to favor gold ownership most would not notice. They are not savers. They might feel a tinge of envy but then go on with life.

These assumptions could all be wrong in a new monetary system...and most here believe we are headed toward a new monetary system.

Wed, 12/30/2015 - 22:11 | 6980495 Transformer
Transformer's picture

I subscribe to the Weekly Standard, the NeoCon magazine, and pretty much every week there is a full page ad from some PM dealer.  If those guys are the main ones buying, then maybe there won't be a windfall tax after all.

Wed, 12/30/2015 - 13:11 | 6978561 cpnscarlet
cpnscarlet's picture

Can we really take much solace in anything (except the purest of fundamentals) that sprott, sinclair, butler, mahoney, holter, turd, or maguire have to say at this point. Broken clocks, all of them. They are either shills for the coin dealers, selling thier book, or just plain useless as analysts go. Yes, the FED is in control, but that's no excuse when they are supposed to be the "smartest men in the industry" (to paraphrase KWN). Face it, believers in PMs - we can rely on no one but ourselves. Just see "The Big Short". We PM "bugs" are where those guys were when they were yelling and screaming at their terminals - completely at the mercy of the crooks at the COMEX and CFTC. And that will continue until the day it stops. And that day will be epic. Yes, Eric - I do want what I wish for - sanity and truth returned to the markets even if millions are hurt.

December 31, 2015 puts the last nail in ALL their analyst coffins.

Wed, 12/30/2015 - 17:01 | 6979509 SuperRay
SuperRay's picture

Was it good for you? That is, being jerked off by this article. PM's are insurance against central banks. There are a million ways to masturbate this simple fact, and the sellers of gold seem to be endless in their iterations. It used to be interesting. Used to. A world where gold is $10,000 an oz will be dangerous and "unpleasant."

Thu, 12/31/2015 - 10:06 | 6981410 Thee Barbarous Relic
Thee Barbarous Relic's picture

a world where facebook is worth more than GE is a dangerous and unplesant place.I'm no fan of GE either!

Wed, 12/30/2015 - 18:32 | 6979816 cpnscarlet
cpnscarlet's picture

Catharsis and a good wank -  hard to tell the difference sometimes.

Yes, it was more interesting in the past, but like I alluded to, only the fundamentals seem at all important at this point. CB insurance? Yes, that's fundamental. An unpleasant world? Yes I think that's in the cards still.

But for me, a world of lies and deceit in the financial markets is pretty unpleasant already.

Wed, 12/30/2015 - 18:11 | 6979740 atthelake
atthelake's picture

"Unpleasant" is what's coming.

Wed, 12/30/2015 - 12:14 | 6978307 Seal
Seal's picture

The day will come where NO AMOUNT OF US DOLLARS will biy even one ounce of gold

Thu, 12/31/2015 - 09:25 | 6981310 ToSoft4Truth
ToSoft4Truth's picture

Good point.  I just googled 'uranium 235 for sale' and came up empty.     

Wed, 12/30/2015 - 15:56 | 6979186 Captain Debtcrash
Captain Debtcrash's picture

I own hundreds of pounds of silver and I am adding every month, that said all else being equal (ie. prices of houses, stocks, cars, and other goods and services remained the same) I would not think twice about diversifying out if gold and silver prices did what is discussed in this piece. Of course if gold and or silver went up 20 fold or more, and stocks, real-estate ect. were going up 10 fold, I would have to take that into consideration. But no, if gold and silver went from 10% of my portfolio to 90% I wouldn't stand pat on my portfolio, only a fool would.  I could care less how many dollars buy an ounce of silver, but I sure as heck care how much of the S&P, houses, land, boats, and cars my silver can buy.  

If you plan on keeping your gold and silver in your safe till you die, much of your life will be wasted. Sure leave some for the kids, but I want some enjoyment out of my stored wealth. I'd say the same for any asset I own.

Wed, 12/30/2015 - 15:39 | 6979172 Kamehameha
Kamehameha's picture

unfortunately the Fed may be able to keep this thing going longer than you or I can stay alive.  right now the dollar is the strongest currency on the planet.

ummm, you would think it would have crashed in 1974 when it was no longer backed by gold :-).

Wed, 12/30/2015 - 18:49 | 6979857 Vendetta
Vendetta's picture

"you would think it would have crashed in 1974 when it was no longer backed by gold"

yeah except US didn't have its massive debts like it does today and its manufacturing hadn't been gutted by globalization yet.  say hi to the king would ya, loved golfing on the volcano and the incredible trees near the King Kamehameha Kona Beach hotel and along the strip there.

Thu, 12/31/2015 - 11:10 | 6981609 N2OJoe
N2OJoe's picture

The insanity may outlive us, but unlike any counterparty-rich investment, I can say with very near certainty that it will never be worthless.

I can also confidently say the exact opposite of the USD.

Do NOT follow this link or you will be banned from the site!