James Rickards interviewed by James Turk

James Rickards is talking candidly with James Turk of GoldMoney.com, about economic issues around the world, especially the Euro countries, the US and China. A common thread throughout the interview is the impact on the value and uses of gold. He also speculates freely about what various outcomes might look like as politicians wrestle with ways to create a needed solution and still be reelected. The interview took place during August 2011 and is still relevant.

Author of "When Money Dies" Interviewed by James Turk

Adam Fergusson is interviewed by James Turk of GoldMoney.com. The focus is on Fergusson's understanding of inflation, and then hyperinflation, as researcher and historian of the Weimar Republic or 1920's Germany experience.

Gold Remains in Price Channel

From Chart of the Day:
Today's chart provides some long-term perspective in regards to the gold market. As today's chart illustrates, gold has been in an extremely strong bull market since 2001 with the pace of its uptrend increasing over time. Recently, however, the price of an ounce of the shiny metal has dropped significantly after bumping up against resistance (red line) and is now down $300 in a little under six weeks. This sharp pullback has brought gold back down to long-standing support (green line) of what has been a nearly three-year accelerated uptrend.

If Big Bank in Crisis, Then Precious Metal for Safety

This is an interview of one great mind talking with another. They are James Turk, interviewer, and Eric Sprott, interviewed. This interview took place at GATA's Gold Rush 2011 conference in London on, or near, August 5, 2011. This is a segment of a thirty-three minute interview that is worth listening to for the range of topics and candid observations from two marketers of precious metals investments. They focus on metals they represent, silver and gold, and point to the possibility of copper maybe having a role in this movement. Even though they are "talking their book", they earned my respect by providing investment vehicles that represent direct ownership of the metals, something Sprott states in the interview about his fund.

Currency Risk, Debt and Gold

This is an interview of one great mind talking with another. They are James Turk, interviewer, and Jim Sinclair, interviewed. This interview took place following Sinclair's presentaion at GATA's Gold Rush 2011 conference in London on August 5, 2011.



Jim Sinclair interviewed by James Turk

GLD May Not Be Good as Gold

The question of whether an investor in GLD owns rights to gold bullion held for shareholders of GLD is relevant. In an old post I asked the question to myself, should I stay or should I go as an owner of GLD shares then. I came to the conclusion that the water is too murky for me to see through and that was perhaps done by design. It is not necessary to be so opaque though and I suspected the big-bank custodians might be being less than honest by providing the appearance of access to bullion for retail investors. I raise this topic still again to point to a legal review of the question initiated by Catherine Austin Fitts. She is an attorney with securities background who hired her attorney to work with her and others to get to the bottom of the question. One paragraph from the summary of their paper, GLD and SLV - Disclosure in the Precious Metals Puzzle Palace, does a great job of describing what I suspected but could not document, as they have.

They wrote: "As we outlined above in the section on exchange traded funds, many of the ETF risks are disclosed in their prospectuses and in the Trust documents filed with the SEC that are available to investors if they look hard enough on the SEC’s EDGAR site. However, we think the complexity of the structure of these funds and the extent of their departure from the usual and expected duties to shareholders make much of the disclosure too complex for the average investor to understand at best and misleading even to experts at worst. We remind readers that market investors thought they understood mortgage-backed securities like CDOs before the financial and housing crises of 2007 and 2008. Since that time, we are assured that few understood what they were getting into."

This paper is easy to read and is thoroughly documented. Recommended.

Residential Real Estate Priced in Gold

Here is a chart, from Chart of the Day, illustrating the long-term historical performance of real estate converted to gold. Yes, things have changed. It might appear that gold is nearing a peak in value and/or that real estate is near the bottom in its swoon. It could turn out to be that way, though there is a higher probability that the issues surrounding the US $ and other major currencies will dictate the rise and fall in gold. I share the opinion of others, gold goes higher. A lot higher.

Declining real estate prices continue to be a concern for investors. For some perspective on the magnitude of the decline in home prices, today's chart presents the median single-family home price divided by the price of one ounce of gold. This results in the home / gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes a relatively low 106 ounces of gold to buy the median single-family home. This is dramatically less than the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down over 80% from its 2001 peak (to a level last seen in 1980) and remains well within the confines of a six-year accelerated downtrend and continues to close in on its 1980 trough.

Balance of Payments Math, Priced in Gold

• International US dollar debt: $4.4792 trillion (approximately 32% of total US debt of $14.32 trillion)
• Portion of international US dollar debt held by China: $1.1449 trillion
• 90% of total US international debt less portion held by China = 0.90 * ($4.4792 trillion – $1.1449 trillion) = $3.00087 trillion (A)
• 50% of international US dollar debt held by China = 0.50 * $1.1449 trillion = $0.57245 trillion (B)
• Total foreign currency reserves held by People’s Bank of China (Central Bank): $3.045 trillion. Therefore, A + B = $3.57332 trillion (C)
• Total US holdings of gold = 8,133.5 tonnes = 8,133.5 * 35,273.9619 = 286.900770 million ounces (D). Therefore, C/D = $12,454.8986 per ounce ~ $12,455 per ounce

Balance of Payments is an account of financial flows between a country and the rest of the world. It consists of the Current account and the Capital account. Current account consists of the trading account (exports minus imports of good and services), income account (factor payments from abroad minus factor payments to abroad) and the transfer payments account (foreign aid received minus foreign aid disbursed). Capital account, which is in surplus on account of increasing foreign investments in US treasury securities and in deficit for increased US investments in foreign securities and reserves. A surplus in the current account should always be balanced by a deficit in the capital account and vice-versa. That is, the balance of payments must always balance.
Suppose the balance of payments account does not balance. Then there are two options to balance BOP, first, the Central Bank of the country (in this case US Federal Reserve) should increase/reduce its reserves, that is the Central Bank’s holdings of foreign currencies and gold to bring BOP to balance. Second, if the Central Bank cannot increase/decrease its reserves or has decided against changing its existing reserve holdings, then the exchange rate of the country’s currency will be decided by the market and the government will not have any control over its currency.
Now, US has a current account deficit and the BOP is balanced by capital account surplus. If the BOP was not in balance and if US wanted to keep the existing exchange rates fixed, assuming it had a BOP deficit (international debt we calculated above), then it would either have to sell foreign exchange reserves or appropriate amount of gold to the tune of $12,455 per ounce. Thus, to balance the US government balance sheet, its holdings of gold should be valued at $12,455 per ounce.
Present market value of gold = $1,528.80 per troy ounce = $1,528.80 / 1.09714286 per ounce = $1,393.44 per ounce. This means that gold is heavily undervalued at it existing market price. Thus the price of gold has to be raised 8.94 times ($12,455/$1,393.44) ~ 9 times to the present price of gold for US balance sheet to balance.

References:
1. Link: http://en.wikipedia.org/wiki/United_States_public_debt
2. Link: http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
3. Link: http://en.wikipedia.org/wiki/Foreign_exchange_reserves
4. Link: http://en.wikipedia.org/wiki/Gold_reserve
5. Link: http://finance.yahoo.com/

Credit to:
Ayan Kole, intern to employer
Michael F. Price College of Business,
University of Oklahoma

Isaac Matzner 
Research Coordinator
Auerbach Grayson & Company, employer
25 West 45th Street
New York, NY 10036 USA

Made available on Jim Sinclair's MineSet

S&P 500 Priced in Gold

For some perspective on the long-term performance of the stock market, today's chart presents the Dow priced in ounces of gold (i.e. the Dow / gold ratio). For example, it currently takes 8.8 ounces of gold to 'buy the Dow' which is considerably less that the 44.8 ounces it took back in 1999. Priced in gold, the Dow has been in a severe 11-year bear market. Lately, however, the Dow (priced in gold) has stopped declining for long enough to break above its six-year, accelerated downtrend channel.

Got Gold?

This chart from Chart of the Day provides a long-term view of the gold market. As today's chart illustrates, gold has been in a strong bull market since 2001. Today's chart illustrates that the pace of that upward trend increased beginning in mid-2005. Following the financial crisis of late 2008, gold surged once again. More recently, gold has pulled back from resistance (red line) of its accelerated trend channel. However, gold has pulled back to and is currently testing what is two-year, intermediate support (see green dashed line) for the eighth time.

The Gold Express

Today's chart (provided by Chart of the Day) provides some long-term perspective in regards to the gold market. As today's chart illustrates, gold has been in a strong bull market since 2001. The pace of that upward trend increased beginning in mid-2005. Following the financial crisis of late 2008, gold surged back up to resistance of its accelerated uptrend (see red line) -- a 100% gain in just over two years. After having tested the upper bounds of its accelerated uptrend, gold has pulled back -- another failed test of resistance. Over the past week, however, gold has resumed its upward trend and is once again approaching/testing resistance.

Median Home Cost in Terms of Gold as Money

Today's chart presents the median single-family home price divided by the price of one ounce of gold. This results in the home / gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes 144 ounces of gold to buy the median single-family home. This is considerably less that the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down 76% from its 2001 peak (to a level last seen in January 1983) and remains well within the confines of its six-year accelerated downtrend.

Scanner here: This chart is making the case for gold more clearly than the case of real prices still falling. But it is also saying that there is no question which one should be owned as an investment. Own a home for housing, decorate it with gold.

Do You Own Gold - A Follow Up

A couple of months ago, I spent some time reviewing the prospectus for the iShares Gold Bullion Trust. This is an exchange traded fund (ETF) with the ticker symbol GLD. In my interest of owning exposure to gold and owning it to protect myself from the possibility of a currency problem, GLD was convenient. Then came the popularity of GLD and some other ETF's, followed soon after by various writer's claiming expertise, who were sounding alarms about an environment where misrepresentations or fraud could exist. I could not prove or disprove these claims but I felt I could review the prospectus in the light of these claims and come to a conclusion, will I stay or will I go. Am I a trader or an investor?

Do You Own Gold?

The ownership of precious metals is an important, not-correlated to the stock market, alternate investment category. I say it is an alternate category because we do not see the category included in modern portfolio theory (MPT) allocations. We usually see it as a highly volatile and corrupt business sector and I have historically avoided exposure to it. During 2008 and 2009 I used SPDR Gold Bullion Trust (GLD) until I grew concerned about owners rights and other issues that I could not disprove. I miss it. In the current crisis conditions, gold and silver are taking on importance as a currency hedge and as a store of value. Some might use it as a hedge for inflation. Owning the metals is very desirable in a deflation economy, as a hedge against currency devaluation. Metals do not provide business risk and do not have common stockholders who demand certain behavior from management.

Gold, is the luster off?

Gold is a timely topic today, as a friend so presciently pointed out yesterday. This morning the SPDR Gold Bullion Trust (GLD) is down 5%. I imagine funds that invest in the miners will see negative 10-12% results today, if the weakness continues into the close. The miner's are very volatile normally, so the result should be expected, though these results have not been observed very much this year. So the question is asked, is today's market seeing a tide change for gold? Is there continued price weakness ahead?

Recently, a detailed analysis of gold and the forces that work for and against it was posted on Financial Sense by Chris Puplava. He is very analytical in his work and uses a lot of charts to illustrate his message. Here is a link to his 11/25/2009 article for those interested in an in depth analysis. http://www.financialsense.com/Market/cpuplava/2009/1125.html
Here is the conclusion he makes, for you bottom liners:

In short, an object in motion tends to stay in motion and that is certainly the case with gold. The bullish supports for gold are far greater than any bearish factors and even a USD rally may not stop gold as was seen in the 1st half of the 05/06 rally and the 2nd half of the 07/08 rally. Given that the IRD (interest rate differential) between the US Fed and other central banks is likely to weaken going forward, it is hard to envision a strong cyclical bull market in the USD that would derail gold. As shown from prior gold advances, gold may move close to the $1,500 an ounce mark before this advance is over, and relative to fiat currencies, the secular bull market in gold may continue until gold hits levels as high as $6,888 to $7,321 an ounce. You’ve heard many times over the past year that “the worst is yet ahead” in reference to the U.S. economy or credit markets. Well, in terms of gold it appears that “the best is yet ahead.”