Quantum Pranx

ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Archive for August 4th, 2011

Why gold and silver prices will more than double again even from current “expensive” levels

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by J. S. Kim
SmartknowledgeU
Posted August 4, 2011

THOSE THAT ARE  FAMILIAR WITH MY WRITINGS ABOUT GOLD AND SILVER for the last six years know that I have said gold was cheap at $500, $600, $700, $800, $1000 and $1,200 a troy ounce and know that I have said silver was cheap at $11, $12, $14, $16, $25, and $30 a troy ounce.

Today, I will reiterate that gold is still cheap in the $1500 to $1600 range and that silver is still cheap in the $40 range because the largest movements in gold and silver prices as well as gold and silver mining stocks have still not happened and will materialize over the next four to five years.

Again, this doesn’t mean that gold and silver can’t or won’t correct or consolidate again in the future because both PMs always do. I have written publicly so much about this topic over the years (and even in much greater depth to my subscribing members) because I truly believe it is insanity not to participate in one of the best ways to invest in gold and silver today – the ownership of physical gold and physical silver.

Hundreds of millions of investors worldwide, influenced by the propaganda of Western bankers, have consciously made poor decisions not to own a single ounce of physical gold and physical silver today. One of the first realities an investor must understand about the gold and silver market is that the Economics 101 concept of price being set by physical supply and physical demand is an utter lie. In today’s world of banking and financial industry lies, the price of gold and silver are NOT set by the physical demand and physical supply of either of these metals, but rather by the artificial supply and demand of paper contracts predominantly backed by no physical metal.

By now, the following facts are very well known by seasoned physical gold and physical silver buyers but likely still unknown to the average investor worldwide. A CPM Group document released in the year 2000 stated, “With the start of the London Bullion Market Association’s release of monthly trading data, the market has become aware that 100 times more gold and silver trade hands each year, just in the major markets, than is produced or used. Some market participants have wondered aloud how 10 billion ounces of gold could trade via the major markets each year, compared to 120 million ounces of total supply and demand, while roughly 100 billion ounces of silver change hands, compared to around 628 million ounces of new supply.”

Thus, one can see that the fraud perpetrated by bullion banks in the silver futures market exceeds even the fraud they commit in the gold futures markets. Take the figures provided above, and a quick calculation reveals that bankers were trading nearly 160 times of paper ounces of silver every year than the annual physical supply of silver mined from the earth.

However, break down these numbers even more and the fraud becomes even more astounding. While in 2000, about 628 million ounces of new supply of physical silver came to market, in 2010, mine production of new silver supply was slightly higher at 735.9 million ounces. Net government sales accounted for another 44.8 million ounces, old silver scrap provided an additional 215 million ounces, and producer hedging accounted for the final 61.1 million ounces. Thus a total annual supply of roughly 1 billion ounces of silver existed in 2010. However, industrial usage, photography and jewelry used up nearly 78% of the one billion ounces of physical silver supply in 2010 and left less than 100 million ounces available for minting in the form of silver coins. (Source: The Silver Institute).

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Markets give ‘thumbs down’ to prospect of hyperinflationary depression…

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by Clive Maund
Posted Wed, Aug 3, 2011

RESOLUTION OF THE IMMEDIATE DEBT CEILING CRISIS in the US came with the expected and predicted raising of the ceiling from about $14 trillion to $17 trillion, but it also came with announced plans for seemingly strident austerity measures to cut the deficit. The situation could not be more contradictory – they raise the debt ceiling to accommodate the results of their prior profligacy and then talk about reining in spending! No wonder the markets gave the whole package a massive thumbs down yesterday. It’s too late, way too late, to put the brakes on spending and any attempt to do so will result in the already fragile economy collapsing into depression.

They can’t have it both ways – they raise the debt ceiling so that they can continue to pay their own salaries and the miserable interest on their intrinsically worthless Treasury paper, and at the same time plan to impose more austerity on the American middle and lower classes – the result of this will be a hyperinflationary depression, as broke consumers are known to be bad for corporate profits.

THIS is why the stockmarket caved in yesterday. I’ll be honest – I’d figured out, as you know, that they would raise the debt ceiling, after a few weeks of showmanship, but never thought they’d be mad enough to try imposing austerity at this late stage – they should have used this medicine years ago when the patient had a chance of surviving, if they go ahead and do what they say they will it will kill the patient, the US economy, stone dead.

We can, therefore, only come to one conclusion, which is that all this talk about austerity measures and cuts etc is humbug – a lot of hot air designed to make it look like they are making an earnest attempt to get a handle on the central problem of the runaway debt – and that any measures tabled to deal with it will later be rescinded or plain forgotten – they got what they really wanted which was a blank check to carry on spending with no limit.

Our chart for the US S&P500 index shows that yesterday’s plunge has brought us to the cusp of a catastrophic breakdown, for if the support at the bottom of the potential Head-and-Shoulders top fails, and the heavy volume driving the decline of the past week suggests that it may, it will usher in a brutal bearmarket decline, and given the now dire fundamentals, possibly a crash. The heavily oversold MACD histogram shown at the bottom of the chart calls for a brief bounce, after which it’s a case of “look out below”. There is some chance that the market will recover from here, but only if it dawns on market participants in time that all the talk about cuts and fiscal prudence is bluff and bluster for the benefit of the media.

Investors should take appropriate steps to protect themselves, which may include the use of bear ETFs and/or Put options. Unlike in 2008 it is thought likely that gold and silver and some other commodities will soar, even in the event of a market meltdown, as Europe and the United States fall apart economically going forward – we could very easily see a situation where they go parabolic, and from the look of the gold chart that process may have started just yesterday.