murphy metal monday

Whenever you find yourself on the side of the majority, it is time to pause and reflect.
–Mark Twain

As you know, gold and silver spot prices have worked their way lower this year based on rising interest rates, rising dollar and bullion bank price manipulation. As a result of prices trending down, the excitement of owning gold and silver is very low and the average investor remains on the fence or is shying away altogether. And this is unfortunate for John Q. Public because evidence suggests the bullion banks are easing up on their manipulation tactics, supply/demand fundamentals are off the charts bullish for gold and silver and on Friday gold was up $50 and silver $1.50, despite a stronger than expected employment number that should have knocked the precious metals down sharply. (Friday’s extraordinary price action is typical of market that is “sold out”).

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As reported this week by Anna Golubova of Kitco News, a total of nearly 400 tons of gold was purchased by central banks in the third quarter, which is the on record, and “year-to-date, the central banks have bought 673 tons, more than any other total since 1967.” In Russia alone, citizens are lining up to buy gold and the refiners can’t keep up. And this shortage of deliverable gold is happening in the second largest gold mining nation in the world! So, one needs to ask themselves,

Why are central banks worldwide, especially Chin, Russia, and India buying gold like there is no tomorrow?

Several weeks ago Alasdair Macleod reported that banks are starting to cut back on lending credit. Why? Because banks and managed funds worldwide are overleveraged in derivative investments, making the entire world exposed to rising interest rates. Supporting Macleod’s observation is Matthew Piepenburg of Matterhorn Asset Management who stated:

“Last week, US Treasury Secretary Janet Yellen, told reporters that her office is “very focused” on Uncle Sam’s IOU’s, and even confessed concern regarding “episodes of illiquidity” wherein it has been difficult to buy or sell US Treasuries. These “episodes of liquidity” are undeniable evidence that the world is running out of faith in Uncle Sam’s bloated bar tab after years of monetary addiction in order to monetize the so-called “American way.” In short, the US has become good at just borrowing and printing, which has resulted in less and less of the world wanting more and more of Uncle Sam’s sovereign debt, which means US Treasuries are falling and hence rates are rising. And these rising yields are like shark fins approaching a debt-soaked global system already bleeding in the water.”

As per Alasdair Macleod, the gold and silver paper market is disconnected from the reality of the physical market. Banks worldwide are starting to run scared and are cutting back on lending. Central Banks are taking advantage of the low paper prices and buying all the gold and silver in sight. Physical supply worldwide is extremely tight. High interest rates and inflation are not good for the stock market, bond market and real estate market. But like the 1970’s, gold and silver will prosper as stagflation prevails for years to come. Because of these factors, Macleod says, “Anyone who tries to play the bottom in the metals market is being very, very foolish. Buy whatever physical gold and silver you can today. I think we are looking at a sign of times to come.”