RECORD HIGH DEMAND, RECORD LOW SENTIMENT
by Andy Hoffman, Miles Franklin
Last weekend, my Audioblog focused on how U.S. government book-cookers were preparing to enhance “seasonal adjustments” to its already fraudulent GDP calculations, to increase reported economic “growth” to their politically-motivated, market-goosing satisfaction. Well, such “preparations” were just made official yesterday, starting with the upcoming second quarter calculations. In other words, just as the BEA, or Bureau of Economic Analysis, recently, arbitrarily boosted base GDP by 3% via a variety of nonsensical factors – to lower the widely scrutinized debt/GDP ratio – they are now arbitrarily raising reported GDP growth to “prove” the Fed’s maniacal ZIRP, QE, and other money printing schemes are “working.”
Forget the fact that real, empirical data – not just in the U.S., but worldwide – is inarguably at its weakest level since the 2008 crisis. Let alone, horrifying anecdotal data like the 65-year low in male Labor Participation, or record low Congressional approval ratings. As when the government wants to goal-seek itself a GDP, unemployment, or inflation result – or for that, the closing price of paper financial markets like stocks, bonds, and Precious Metals – there are no limits to how egregious their lies. In this case, they clearly seek to increase reported GDP growth above the well below average (low 2%) level of the past three years of “recovery” – notwithstanding the comically understated “deflator” that fraudulently boosts it.
For example, the first quarter’s hideous 0.2% GDP growth rate – which on Friday, will likely be revised well into negative territory – was only “made possible” by utilizing a negative GDP deflator. In other words, the Bureau of Economic Analysis pretended Americans’ cost of living declined during the first quarter, for the first time in 63 years, to achieve a positive GDP print – despite every imaginable aspect of our lives screaming otherwise; other than the price of gasoline, that is, which not only constitutes an extremely small percentage of the average household’s budget, but has rocketed higher in the second quarter. In fact, not only has the gasoline price surged by nearly 20% since bottoming in January, but just yesterday, the “core” CPI – i.e., excluding food and energy – was reported to have risen at a 3.6% annual rate in April, representing the highest monthly increase in nine years.
And scariest of all is that by far the largest component of the April CPI surge was healthcare spending – which nearly rose at a 9% annual pace, despite Obamacare still far from full implementation! Frankly, I cannot remember a time when my personal cost of living wasn’t exploding so rapidly; which is why it’s so terrifying to consider what will happen as full-blown socialism engulfs the nation – to be funded entirely by draconian tax increases and unfettered money printing. Not to mention, as the Fed “justifies” dollar debauchery by claiming “inflation” is not only below 2%, but unlikely to considerably rise for the foreseeable future.
Yes, the beauty of manipulated markets; which in recent years – certainly since 2011’s Central bank “point of no return” – have enabled politicians, bankers, and corporate “leaders” the world round to lie through their teeth about every topic imaginable. Not that creating historic financial bubbles everywhere, from the U.S. – where the Fed has expanded its balance sheet to an incomprehensible $4.5 trillion; to Europe – where its hyper inflationary QE program was expanded last week, just two months after its launch; to China – where an open-ended QE program, disguised as “municipal debt swaps,” commenced last week as well; has improved economic performance a whit. Not to mention, in Venezuela, India, and South Africa, among others, whose stock markets surges are entirely due to hyper-inflationary plunges in their respective currencies. Heck, in the “Land of the Setting Sun,” which has created more debt and inflation than any “first world” nation in history, Bank of Japan Chief Haruhiko Kuroda – the “mastermind” behind Abenomics – this week uttered some of the most clueless, and irresponsible, “famous last words” since Alan Greenspan opined stocks suffered from “irrational exuberance” just before the NASDAQ’s late 90s blow off top and collapse. Or heck, since last week, when“Greenspan Jr.” – i.e., Helicopter Ben Bernanke, who still hasn’t worked a single day in the real world – claimed there are “no large mispricings in U.S. securities or asset prices.”
“At this moment, we don’t see any indication that the expectations in (Japanese) asset markets or of financial institutions are growing unduly, or are excessively bullish.”
To the contrary, despite an incredible 572 Central bank rate cuts since the 2008 crisis – and tens of trillions of QE schemes, both overt and covert – the global economy sits, as I write, at its singularly weakest point of our lifetimes, getting weaker each day. Moreover, worldwide debt and inflation are at all-time highs, with no possibility of declining; the former, at its most unsustainable in nations where Central bankers have the most money printing power (think the U.S., Europe, and Japan); and the latter, in the other 180 or so nations, where said money printing carnage is the most damaging. But don’t worry, as both income and wealth disparity have hit new all-time highs – so at least “1%” of the world is benefiting
Consequently, the list of economic “deformations” grows by the minute – yielding an exponentially expanding list of potential “black swan” events. This week alone, we witnessed a re-acceleration of the historic commodity crash which, care of the hideous ramifications of decades of unfettered money printing, may last for years; particularly given OPEC’s (rightful) unwillingness to reduce output. Meanwhile, we may be within weeks of a Greek default; or heck, a new U.S.-led Iraqi invasion. And as for financial markets, we have NEVER seen valuations so far from their underlying values, as Central bank manipulation pushes the envelope on the definition of “bubble” to unprecedented territory. No, I don’t know when or how the damn will break; but sure as day follows night, it will.
Meanwhile, gold and silver – i.e., the global financial “barometers of bad tiding” – were again “capped and attacked” at the Cartel’s relentless “lines in the sand” at $1,200/oz and $17/oz, respectively. This time following an utterly comical Yellen speech, clearly scheduled just before the holiday weekend close – in which she made the ambiguous, meaningless statement that rates would be raised this year if the economy improved. Which not only represents the biggest if of all time – especially following a day when seven out of seven economic data releases were “worse than expected”; but has little or nothing to do with the outlook for Precious Metal prices. Which, by the way, were the only markets that materially moved following said speech. Fortunately, $1,200 and $17 again held support; and at this point, if there’s any non-biased person remaining that can’t see what’s going, they aren’t worth the time of day.
Or for that matter, those that don’t realize how strong the global gold bull market is becoming, particularly in the dozens of countries where prices are in powerful up trends. Whilst demand analyses have become clouded by the fact that China now imports much of its gold through non-reported channels; and care of 2013’s maniacal import tariffs, significant Indian gold importation occurs via the black market, anecdotal evidence suggests 2013’s record “Chindia” gold demand was matched in 2014, and on a similar pace in 2015. And despite vicious, relentless anti-PM propaganda, seemingly each day brings to light a new example of gold’s value.
This week alone, we learned of yet another massive Russian Central bank purchase; as well as the Austrian government’s intention of repatriating half its foreign held gold; and massive civilian purchases in Germany. Russia’s Pravda claims China has upwards of 30,000 tonnes of gold – and whatever their motive, you can bet that whatever China does have, it’s dramatically higher than the 1,054 tonnes they officially report. Moreover, in what could be a potentially “game-breaking” – or better put, Cartel-breaking – development, we learned this weekend that China plans to establish a mammoth $16 billion fund to purchase physical gold. And this is no “ordinary” gold fund, as it will be funded by up to 60 “Silk Road” nations that clearly view gold as the real money it always has been, and always will be.
Conversely, the hapless Indian government – which I continue to rank as the world’s worst – appears to have officially unveiled the pathetic Ponzi scheme it seeks to fool the world’s most gold-loving population with. Even I am in awe of the brazenness of a supposedly “pro-gold” administration believing they can trick Indian citizens into doing what they have essentially laughed at in several previous attempts. I.e., to “lend” their gold to the government, which in turn would “sell” it to jewelers to reduce the nation’s gold import needs – under the comical guise of reducing the “national deficit” (as if gold is a “trade good,” as opposed to money). Frankly, the odds of such a scheme “working” are far closer to “none” than “slim” – with the most obvious outcome being yet another disgraced Indian government. Which is probably why, as we speak, the Rupee has nearly fallen to its all-time low level; and this, amidst a major dollar decline that has caused nearly every global currency to appreciate!
And last but not least – before I get to today’s principal topic – I must note this article of how mainstream Wall Street analysts are finally starting to say what I have screamed all along. I.e, the global Precious Metals mining industry – particularly in South Africa, the fifth largest gold producer – is in such dire straits, it must consolidate and cut costs ASAP, or face the potential for dramatic financial stress if prices don’t immediately surge. In fact, I have specifically cited the two names in the article – Anglo gold (the world’s third largest gold miner) and Goldfields – both of whom are experiencing such severe stock price declines, clearly the market is anticipating dramatic write-downs if gold prices don’t significantly rise soon.
Which brings me to today’s topic; which, even in a world of such historic, widespread economic and financial “deformations,” stands out as perhaps the most painful “sore thumb” in the long, ugly history of sore thumbs. Which is, the dichotomy of record high gold demand and record low Western Precious Metals sentiment. The key word, of course, is Western; and frankly, American to be more specific – as plunging values of most Western currencies, like the Canadian dollar, Australian dollar, and Mexican Peso, have bulwarked both prices and sentiment in those nations. Not to mention in Europe; care of not only the Euro’s plunge, but the potential for draconian scenarios ranging from PIIGS bail-ins to outright Euro collapse.
However, here in America; and not coincidentally, its “partners” in money printing, market manipulation, and world-destroying financial fraud – the UK and Switzerland – gold prices are more than a third below their all-time high levels. Combine this Cartel-inspired under-performance with equally maniacal PPT support of stocks and bonds, and Precious Metal sentiment in three of the world’s most highly indebted, currency debauching nations has reached rock bottom levels. In fact, objectively speaking, sentiment is as low today as before the bull market started at the turn of the century – despite gold and silver prices having since risen four to five times. Which, of course, is not only a “tribute” to how deeply the past four years of PM smashing have injured real money advocates’ hopes, but how much cost inflation the mining industry has experienced.
Here at Miles Franklin, one of the nation’s largest bullion dealers, demand has weakened each year since prices peaked in 2011. Thankfully, our lean, mean cost structure; increased mental “mindshare” from the blog; the industry’s most experienced brokers, with the best customer service track record; our unique Brink’s Montreal storage program; and the myriad portfolio optimizing transactions we specialize in; we remain as strong as ever. That said, it is impossible to ignore a general industry weakness so profound, several major competitors have gone bankrupt; likely, with many others on death’s door. Yes, U.S. demand has been that weak (notwithstanding the mysterious case of record U.S. Mint and Royal Canadian Mint Silver Eagle and Maple sales last year), amidst the highest level of overall worldwide gold demand ever; rapidly dwindling, for the most part inconsequential “inventories”; the strong likelihood “peak gold” has arrived; and of course, the most bullish political, economic, and financial fundamental factors gold and silver have experienced in decades – if not longer.
In other words, a dichotomy so deep and nonsensical, it logically must resolve sooner rather than later. And given the aforementioned fundamentals, it’s difficult to believe any scenario other than a Precious Metals explosion – be it sooner or later – is in the cards. And with it, of course, a potentially very scary world, in which the value of real money will never be higher.