The rate at which global silver production increased over the past century is quite astonishing. When Columbus arrived in America (1492), the world was only producing 7 million oz of silver a year. Today, the world"s largest primary silver mine, Fresnillo"s Sauicto Mine, produced three times that amount in just one year (22 million oz, 2016). Yes, we have come along way in 500 years.
Just think about that for a minute. One silver mine last year produced three times the global amount in 1493. According to the U.S. Bureau of Mines 1930 Report on Summarized Data of Silver Production, the average annual silver production in the world from 1493 to 1600 was 6.9 million oz (Moz). If we look at the following chart, we can see how world silver production increased over the past 500+ years:
As we can see, average annual world silver production increased from 6.9 Moz during 1493-1600, to 13 Moz from 1600-1700, 18 Moz from 1700-1800, 51 Moz from 1800-1900, 274 Moz from 1900-2000 and a stunning 722 Moz from 2000-2017. Again, these figures represent the average annual silver production for each time period.
In the current period, 2000-2017, the world has produced 103 times more silver per year than from 1493-1600. However, the next chart shows the total silver production for each period. From 1493-1600, the world produced a total of 747 Moz of silver, compared to 13,000 Moz (13 billion oz) in just 18 years from 2000-2017:
Now, the reason the last silver bar on the right of the chart is lower than the previous one has to do with comparing 18 years worth of silver production (2000-2017) versus 50 years (1950-2000). It took 50 years to produce 17,061 Moz during 1950-2000 versus 13,000 Moz in the 18 years from 2000-2017.
If we compare world silver production from the different periods, here is the result:
Percentage Of World Silver Production (1493-2017)
2000-2017 = 26.4%
1950-2017 = 61%
1900-2017 = 82%
While a little more than a quarter of all world silver production (1493-2017) was produced in the past 18 years, 82% were produced since 1900. That is a lot of silver. It turns out that 40.4 billion oz was produced from 1900-2017 out of the total 49.3 billion oz produced since 1493. Interestingly, more than half of that silver was consumed in industrial silver applications. I will be writing more about that in future articles.
The last chart I find quite interesting. If we go back a little more than a century, the United States was the largest silver producer in the world. In 1915, the U.S. produced 75 Moz of silver out of the total 189 Moz mined in the world that year:
Thus, in 1915, the U.S. produced 40% of all world silver production. Mexico came in second in 1915 by producing 39.3 Moz. However, U.S. silver production in 2017 will only be 34 Moz versus the estimated 870 Moz globally. Thus, U.S. silver production only accounts for 4% of world mine supply versus 40% back in 1915. What a change in 100 years.
Lastly, the U.S. imports approximately 22% of world mine production each year. That is 193 Moz of the total 870 Moz in 2017. While domestic mine supply is only 34 Moz, the United States has to import more than a fifth of global mine production to meet its silver market demand.
It took a lot longer than it should have, but gold futures traders have finally started behaving “normally.” The speculators who were extremely, stubbornly long – and who are usually wrong when they’re this excited — had maintained their over-optimistic bets when they should have been stampeding for the exits, making the last few months both boring and depressing for gold bugs and related investors.
This departure from the familiar script raised questions about whether the action in futures (aka paper gold) was still relevant in the age of Chinese physical gold exchanges and cryptocurrency. The jury’s still out on that one, but for now the numbers are reassuring.
The following table (courtesy of GoldSeek) shows speculators cutting way back on long bets and adding to short bets, while the “commercials” – who tend to be right at sharp turns — did the opposite, going a lot less short.
Same thing only more so in silver, where another week like the last one will bring net positions into balance for both groups, which has historically been extremely bullish.
Here’s the same data depicted graphically for gold: Note how both the speculators (silver columns) and the commercials (red columns) held their positions from spring into fall, producing the previously-mentioned boredom and depression. Also note the sharp drop in the most recent reporting week.
The numbers we’re seeing here are as of Tuesday the 5th, and the final three days of last week were a bloodbath for precious metals, so it’s highly likely that the next COT numbers – due out on Friday the 15th – will show absolute panic among speculators, leading to an even bigger swing in the right direction.
If history is still reliable, January will be a great month to own precious metals and mining stocks.
Questions or comments about this article? Leave your thoughts HERE.
There is a Disinformation War taking place in the silver market as certain industry analysis is confusing individuals by purposely disregarding the tremendous impact of rising investment demand. Not only do I find this troubling, but I am also quite surprised how much the silver industry pays attention to this faulty analysis. So, it"s time once again to set the record straight.
Setting the record straight has now become a new mission for me at the SRSrocco Report because the amount of disinformation and faulty analysis being published in the mainstream and alternative media is quite disturbing. I decided it was time to say enough was enough, so I started by destroying the myth about the 1 million tons of gold hidden in the Grand Canyon in my recent article, THE BLIND CONSPIRACY: The Gold Market Is Heading Towards A Big Fundamental Change.
If you haven"t read that article and are still confused on whether or not there are billions of ounces of gold hidden in the Grand Canyon, I highly recommend that you do. Now, if you read the article and still believe the U.S. Government decided to make the Grand Canyon a national park to protect all that gold, then you have my sympathies. However, the reason certain individuals in the U.S. Government decided to make the Grand Canyon a national park because it was probably a GOOD IDEA to keep a beautiful part of the country off-limits from those who had no problem with destroying the banks of the Colorado by trying to extract gold at a pathetically low uneconomical yield.
If you have seen some of the episodes of the Discovery Channel"s Gold Rush show, the result of gold dredging operations isn"t pretty. Here is a picture of the beautiful landscape outside of Dawson City in the Yukon that shows the effects of placer mining and gold dredging. Now, how many families in the U.S. and abroad would have taken their kids on vacation to the Grand Canyon if it looked like this? I am quite amazed at the lack of dignity and respect by individuals who only seek at the almighty Dollar.
(aerial photo of Dawson City, Yukon - picture courtesy of Peter Mather)
To tell you the truth, I am glad that Teddy Roosevelt had the foresight to dedicate the Grand Canyon as a national monument back in 1908. At least some politicians had the wisdom to keep OFF LIMITS parts of the country, so we weren"t able to destroy it by mining it for ultra low-grade gold or bulldoze it, pour concrete and build another million suburban homes.
Okay, let"s get back to subject at hand... Silver Market Disinformation.
The motivation to write this article came from several of my readers who sent me an interview by CPM Group"s Jeff Christian, at the San Franciso Gold and Silver Summit. In the video, Jeff claims that there has been a silver market surplus for ten years and those industry analysts, who have reported deficits, "Are simply wrong." Jeff goes onto to say, "they have been wrong the entire time they have been on the silver market."
Jeff continues by explaining that to analyze the silver market correctly, you must look at surplus and deficits based on total supply versus total fabrication demand. Furthermore, he criticizes industry analysts who may be promoting metal by throwing in investment demand to arrive at a deficit. He says this is not the proper way to do "commodities research analysis."
Jeff concludes by making the point, "that if you keep silver investment demand as an "off-budget item," then the price matches your supply-demand analysis almost perfectly." Does it? Oh... really?
If we look at the CPM Group"s Supply & Demand Balance chart, I wonder how Jeff is calculating his silver price analysis:
This graph is a few years old, but it still provides us with enough information to show that the silver price has nearly quadrupled during the period it experienced supposed surpluses. According to the CPM Group"s methodology of analyzing total fabrication demand versus supply, how on earth did the silver price rise from an average of $5.05 during the deficit period to an average of $19.52 during the surplus period? I arrived at the silver prices by averaging the total for each time-period.
Again, Jeff states during the interview that their supply-demand analysis, minus investment demand, provides an almost perfect price analysis. According to the CPM Group"s 2016 Silver Yearbook, the total surplus for the period 2008-2016 was approximately 900 million oz. With the market enjoying a near one billion oz surplus, why would that be bullish for a $20 silver price?? It isn"t... and I will explain why.
As I have mentioned in many articles and interviews, the price of silver has been based upon the price of oil which impacts its cost of production. If we look at the following chart, we can plainly see how the price of silver has corresponded with the oil price going back until 1900:
You will notice the huge price spike in the 1970"s after Nixon dropped the Gold-Dollar peg causing inflation to run amuck in the United States. Now, the oil price didn"t impact just silver; it also influenced the value of gold:
As with the oil-silver trend lines, the gold and oil price lines remained flat until the U.S. went to a 100% Fiat Currency system in 1971. So, if we decided to throw out all gold and silver supply-demand forces, we can see that these precious metals prices paralleled the oil price. Now, the reason the price of silver shut up to an average of $19.52 from 2006-2017 was due to its average cost of production. Today, the market price of silver is $16.42, and the average cost of primary silver production is between $15-$17 an ounce. According to my analysis of the top two gold mining companies, their cost of production is about $1,150. Hence, the 71-1 Gold-Silver price ratio.
Did Jeff Christian include the cost of production in his analysis of the silver price? How many silver mining companies are producing silver for $5 an ounce and making an $11 profit? Or how many silver mining companies are producing silver at $35 and losing nearly $20 an ounce? I will tell you... ZERO.
The only way an individual would believe that the primary silver mining companies are producing silver at $5 an ounce is if they believe in the investor presentations that report CASH COSTS. Anyone who continues to use CASH COST accounting needs to get their head examined. It is by far the most bogus metric in the industry that has caused more confusion for investors than anything else... well, if we don"t include faulty analysis by certain individuals.
I find it utterly amazing that the CPM Group entirely omits silver investment from their fundamental analysis. Here is a chart of their total world silver fabrication demand from their 2016 Silver Outlook Report:
If you are a silver investor, your demand doesn"t count. It doesn"t matter if you purchased 100 of the half a billion oz of Silver Eagles sold by the U.S. Mint since 1986. How many Silver Eagles have been sold back, melted down and returned to the market to be used for industrial applications?? According to the 2017 World Silver Survey (GMFS), total Official Silver Coin sales were 965 million oz (Moz) since 2007. If we add Official Silver Coin sales for 2017, it will be well over one billion. I highly doubt any more than a fraction of that one billion oz of Offical Silver Coins were remelted and sold back into the market.
Moreover, what term do we give to companies who produce Silver Eagles or private silver rounds?? Aren"t companies fabricating silver bars and coins? While it is true that physical silver bar and coins can be sold back into the market, a lot of new demand is coming from fabricating new silver bullion products.
CPM Group only values silver as a mere commodity for the sole purpose of supplying the market for industrial, jewelry, silverware, photography and photovoltaic uses. I gather 2,000+ years of silver as money no longer matters. Yes, I would imagine some precious metals investors are feeling a bit frustrated as they watch Bitcoin go vertical towards $12,000. But a word of caution to Bitcoin investors who are dreaming about sugar plums dancing in their heads and dollar signs in the eyes.
There is a wonderful scene where a pole dancer is explaining to a fund manager how she"s buying five houses.
A lowly paid pole dancer who survives on unpredictable tips should not be able to afford multiple houses, but this was the sub-prime USA where the ability to repay a loan was apparently not a prerequisite.
What a coincidence... ah?? Pole dancers buying five homes and becoming a Bitcoin Guru. What"s next? LOL.
Regardless, the notion by CPM Group that investment demand shouldn"t be included in supply and demand forecasts suggests that the gold market has experienced a total 418 million oz (Moz) surplus since 2006. Yes, that"s correct. I calculated total global gold physical and ETF investment demand by using the World Gold Council figures:
The reason for the drop-off in net gold investment in 2013-2015 was due to Gold ETF liquidations. For example, 915 metric tons (29 Moz) of Gold ETF inventories were supposedly liquidated into the market. Even though the gold market experienced a record 1,707 metric tons of physical bar and coin demand in 2013, the liquidation of 915 metric tons of Gold ETF"s provided a net 792 metric tons of total gold investment. Please understand, I am just using these figures to prove a point. I really don"t care if the Gold ETFs have all their gold. I look at Global Gold ETF demand (spikes) as an indicator for gauging the amount of fear in the market.
The CPM Group does the same sort of supply and demand analysis for gold. They omit investment demand from the equation:
(CPM Group Chart Courtesy of Kitco.com)
Again, according to the CPM Group, gold bar and coins aren"t fabricated. They must be produced by Gold Elves in some hidden valley in the Grand Canyon. No doubt, under the strict control by the NSA department of the U.S. Government.
For anyone new to reading my work... I am being sarcastic.
Moreover, the significant change in gold investment demand is a clear sign that investors are still quite concerned about the highly inflated bubble markets. If we go back to 2002, total gold investment was a paltry 352 metric tons compared to 358 metric tons of technology consumption and 2,662 metric tons of gold jewelry demand. However, in 2011, the gold market experienced a massive 1,734 metric tons of total gold investment versus 2,513 metric tons of jewelry and technology fabrication.
What is significant about this trend change? In 2002, global gold investment was a mere 10% of total gold demand. However, by 2011, gold investment demand surged to 41% of the total, not including Central Bank demand. Even in 2016, global gold investment demand was still 40% of the total. As we can see, investors still represent 40% of the market, whereas they were only 10% in 2002.
Precious metals investors need to understand there is a huge difference between Gold and Silver versus all other metals and commodities. The overwhelming majority of commodities are consumed while gold and to a lesser extent, silver, are saved. And, they are being purchased as investments and saved for an excellent reason.
The world continues to add debt at unprecedented levels. In just the month of November, the U.S. Government added another $137 billion to its total debt. This doesn"t include the $610 billion of additional debt added since the debt ceiling was lifted on September 8th. So, the American public is indebted by another $747 billion in less than three months.
Getting back to silver, according to the GFMS team at Thomson Reuters, who provide the World Silver Survey for the Silver Institute, the market will experience a small annual silver surplus this year for the first time in several decades:
The reason for the surplus has to do with a marketed decline of silver investment demand this year. With the election of President Trump to the Whitehouse and the "Pole Dancing Guru" Bitcoin market moving up towards $12,000, demand for the silver investment fell by 50% this year. However, I don"t look at it as a negative. Oh no... it"s an indicator that the market has gone completely insane.
This reminds me once again of the movie, The Big Short. In the movie, the main actor bets big against the Mortgaged-Backed Securities. Unfortunately, just as the housing markets start to crash and the mortgage-back security market begins to get in trouble, the bets that the main actor in the movie made, began to go against him. That"s correct. His short bets against the market should have started to gain in value, but the banks wanted to dump as much of that crap on other POOR UNWORTHY SLOB INVESTORS before they would let it rise.
We are in the very same situation today. However, the entire market is being propped up, not just the housing market.
It is impossible to forecast a more realistic gold and silver price when 99% of the market is invested in the wrong assets. So, for the CPM Group to value gold and silver based on their fabrication demand totally disregards 2,000+ years of their use as monetary metals.
Thus, it comes down to an IDEOLOGY on why Gold and Silver should be valued differently than mere commodities, or even most STOCKS, BONDS, and REAL ESTATE. Valuing gold and silver can"t be done with typical supply and demand fundaments. The only reason I analyze supply and demand fundamentals is to understand what is happening to the market over a period of time.
For example, if we look at total global silver investment demand and price, there isn"t a correlation:
But, if we look at what happened to silver investment demand since the 2008 Housing and Banking collapse, we can spot a significant trend change:
As we can see, world physical silver bar and coin demand nearly quadrupled after the 2008 Housing and Banking collapse. This is the indicator that is important to understand. While silver investment demand after 2008 has increased partly due to the higher price, the more important motivation by investors is likely a strategic hedge against the highly-leveraged fiat monetary system and stock market.
Investors who follow the CPM Group"s analysis on gold and silver based upon fabrication demand only, are being misinformed. Jeff Christian who runs the CPM Group has no idea about the Falling EROI - Energy Returned On Investment or does he understand the dire energy predicament we are facing. Thus, Mr. Christian and the CPM Group still look at the markets as if they will continue business as usual for the next 50 years.
We are heading into a future that we are not prepared. The economy and markets will likely disintegrate much quicker than anything we have experienced before. I believe the Bitcoin-Cryptocurrency market is going to collapse shortly due to what I see as extreme leverage in the system with very little in the way of cash reserves. I hear stories that trading in and out of cryptos isn"t a problem until you want to receive a substantial amount of funds in your bank. That is a huge RED FLAG.
So, take this warning... as well as the knowledge that pole dancers are becoming Bitcoin gurus. If it"s too good to be true, it"s likely too good to be true.
Lastly, I want to thank everyone who continues to support the SRSrocco Report site. Those who have become members of my site or Patreon might wonder why the membership count does not rise that much. This is because while I receive new members, some fall off each month for various reasons. However, I sincerely appreciate the support and believe the SRSrocco Report site is providing analysis, information, and data not found anywhere else on the internet.
For gold investors, the major thorn in our side continues to be the USDJPY so we need to discuss it again.
Over the past weekend at TFMR, we had a discussion about how so many well-intentioned people could have been so wrong about "the metals" over the past five years. It included this sentence: "What we failed to predict was the successful, collective manipulation of nearly all "markets" by the CBs, their primary dealers and their willing/sycophant media through HFT."
That one sentence could be the subject of a full post or podcast but, for now, let"s just focus upon the market manipulation through HFT. As you know by now, the USDJPY is just about the single most important general input for HFT buy/sell decisions. Whether it"s S&P futures, bond futures or Comex Gold, the direction of the USDJPY generally impacts all of these "markets" more than anything else. The chart below plots the inverse of USDJPY (JPYUSD) with gold futures. Note clear correlation that began in 2008.
In observing the central bank market manipulation...when we see the same pattern again and again...and this pattern is followed by the desired equity or bond market reaction...then you know something is up. How many times have we captured screenshots of the BoJ, Fed, SNB or whomever buying the USDJPY in size at just the right moment to create and paint a double bottom on the chart? From there, how many times have we watched a near perfect and uninterrupted, 45-degree angle recovery ensue?
Here are just a couple of egregious examples that I just chose at random from my desktop folder that holds about 40 charts. (I"ve only been keeping them since late summer.)
Well, since we just used the term "egregious", let"s apply it again to the charts below. Recall that things were sailing along surprisingly well last Monday. Over the previous week, the USDJPY had failed to hold support near 113 and again near 112 and it had fallen to near and just below the very-important 111 level. Then, as we chronicled that day, a sudden spike occurred on NO NEWS and not even any rumors. Just a spike from out of the blue that drove the pair immediately back above 111.
And what followed over the next five days? Well, outside of the sudden plunge on the now disproven stories from Brian Ross at ABC News, the USDJPY has followed the same glide path all the way back to 113. Also, IT"S VERY IMPORTANT TO NOTE where USDJPY reopened Sunday afternoon...RIGHT ON the glidepath. Remove the reaction to Friday"s unexpected headlines and it"s a near-perfect, 45-degree angle for nearly FIVE FULL DAYS.
(And in case you"re wondering which tail wags which dog, note the turn in USDJPY last Monday clearly preceded the turn in the S&P.)
How is this even possible? It"s not...well, at least not in the traditional and "free market" sense...the pre-2008 and pre-2012 sense. All of these things used to move somewhat independently as human, carbon-based traders made rational investment decisions based upon a number of inputs. However, in 2017, where 90% of all trading is now done through HFT....well, the results are pretty clear. The Central Banks and their Primary Dealer trading desks manipulate the key inputs and HFT does the rest. This is why yours truly and so many other "experts and mavens" have been confounded for the past five years. It"s not nefarious intent and it"s not because gold bugs are cruel, heartless charlatans who are intent upon stealing as many dollars as possible from the easily-duped. Instead, it is a failure to anticipate the levels to which The Central Banks would successfully go to keep their system alive.
Understanding this is why you consistently hear me cite the refrain of PHYSICAL DEMAND. It is only through a renewed crisis of confidence that this system can be broken...at least as it pertains to the precious metals. Physical demand will bust The Bullion Banks by breaking their just-in-time and unallocated delivery system. Physical demand will force price to be discovered through the exchange of physical metal, not the alchemized digital garbage that permeates the system today.
We"ll leave you today with stories from each end of The Bank monster. The first, and one that we"ve been following closely since last March, is the continued run-up to renewed war on The Korean Peninsula. WHILE NO ONE IN THEIR RIGHT MIND IS CHEERING THIS ON, it is important to be prepared for all of the unknown unknowns that would come with such a catastrophe, one of them being financial calamity that could again shatter confidence in the current system.
And the other story deals with gold alchemy and the continued shunting of physical demand into sham/scam paper investments. It seems the World Gold Council is hungry to increase their fees. They are apparently planning to offer a whole new "gold" ETF, perhaps designed to compete with the IAU. Ask yourself, from where will this fund get the 200-300 metric tonnes of gold needed to fund its "inventory"? Once again, The Banks will simply perform the alchemy of leveraging current unallocated stockpiles into more and more digital "gold".
Again, true physical demand is the only antidote to the poison created by the Central Bankers and the Bullion Banks. Sadly, 2018 promises another surge in war, debt, negative interest rates and de-dollarization. Will these events finally prompt enough physical demand to break The Banks? Only time will tell.
Questions or comments about this article? Leave your thoughts HERE.
At 0907ET, someone decided it was the perfect time to dump $1.5 billion notional worth of gold, smashing the precious metal below its 200-day moving-average and back down to 4-month lows...
And so, once again, gold futures are tumbling...
To 4-month lows...but still up around 10% year-to-date...
What"s driving the gold weakness? Who knows... because it"s not the dollar...
Though Gold"s sensitivity to USDJPY has picked up notably...
Ole Doc Copper has performed very well over the past 2-years, as it has rallied 50%. Maybe the rally has been sent a positive message about the worlds macro picture? Could have and maybe stocks liked it.
Below look at the price action of Doc Copper over the past 5-years and why price action of late might be something one might not want to hide from–
CLICK ON CHART TO ENLARGE
The 24-month counter-trend rally took Doc Copper to test 5-year falling resistance at (1), where it attempted three times to breakout. While attempting to breakout, Doc Copper created several bearish wicks (bearish reversal patterns) at (1).
The rally pushed momentum to the highest levels since the 2011 peak of late, which looks to be turning lower.
Doc Copper this week, could be breaking 6-month rising support at (2).
Time will tell if ole Doc Copper is sending an important global macro message to stocks and about global inflation or lack of. Stick your head in the sand and ignore the message from Doc Copper? I am not at this time.
Chart pattern analysis with brief commentary:
There is a ton of news and opinions about markets and stocks that make the decision-making process more difficult than it needs to be.
I believe the Power of the chart Pattern provides all you need to see what is taking place in an asset and determine the action to take.
This approach has worked well for me and our clients and I encourage you to test it for yourself.
Send an email if you would like to see sample research and take me up on a trial of our Premiumor Weekly Researchwhere I provide actionable alerts on breakouts and reversals in broad market indices, sectors, commodities, the miners and select individual stocks
“Uber-bull predictions of gold at over $5,000 per ounce are not beyond the realms of possibility…”
So says GoldCore founder and self-confessed gold bug, Mark O’Byrne.
Indeed, I recently caught up with Mark to get his thoughts on gold and what’s going on with it right now…
But before we got to the nitty-gritty, I started by asking him a little about his background:
GLENN: How long have you been in the gold business, Mark?
MARK: Well, I founded GoldCore more than 14 years ago and it’s been my passion and a huge part of my life ever since.
I strongly believe that due to the significant macroeconomic and geopolitical risks of today, saving and investing a portion of one’s wealth in gold bullion is prudent.
Indeed, I believe it will reward patient investors again in the coming years.
GLENN: Interesting… and I want to dig into your views on where you see gold going in a moment. First, though, for those who don’t know about GoldCore, can you tell us a little about what you do?
MARK: Sure. Basically, my passion is helping people to protect and grow their wealth with the provision of the safest forms of precious metals ownership – allocated and segregated physical gold, silver, platinum and palladium bullion coins and bars.
GLENN: And that ownership is key, right, as far as you’re concerned?
MARK: Definitely. We believe actual outright legal ownership of physical coins and bars is vital, rather than owning digital and paper gold.
We now have over 15,000 clients in over 140 countries with over $130 million in bullion assets under management & storage.
We completed the sale of our wealth management division in 2015 to focus on our core business. A major milestone of sales of over $1 billion was reached in September and it’s our next corporate goal to help our clients own $1 billion worth of coins and bars stored through us in the safest vaults in the world.
GLENN: Those are some big numbers – well done. MARK: Thanks. It’s great to be moving in the right direction and you know I have long endeavoured to educate our clients and the wider public about our modern monetary and financial system and how a precious metals diversification remains an important way to grow wealth in today’s uncertain world.
Today, I am concerned that we have not learnt our lessons, we are repeating the same mistakes as before and there will be similar negative consequences for the unprepared.
So, the more we can help people protect themselves with physical gold, the better as far as I’m concerned.
GLENN: Makes sense. And obviously, you’re a major gold bull… but let me ask you, as I’m sure many other would ask the same: why do you think gold makes a good investment?
MARK: Well, that’s the question isn’t it?
Put it this way…
We live in a world beset by risks – Brexit, Trump, North Korea and major central banks, including the Bank of England, are all engaged in a gigantic monetary experiment.
Fact is, the UK – and most other country’s economic recoveries remain very fragile.
But gold is a proven safe haven asset and acts as a hedge against a fall in stocks and property and against currency devaluation. This was seen during the global financial crisis.
And it was the same for those with sterling exposure after Brexit, when gold rose 30% in sterling terms last year. GLENN: In other words, over the long term gold has performed well?
MARK: Exactly. Since GoldCore was established in 2003, gold has seen average gains of over 12% per annum in British pound terms. I think that makes it pretty good investment.
GLENN: Indeed, here’s the thing, though… for a while now gold seems to have been underperforming. Many commentators suggest the gold price should be much higher right now? Do you agree?
MARK: Yes I do.
We believe gold will reach a new inflation adjusted high over $2,500 per ounce in the coming years.
Indeed, uber-bull predictions of gold at over $5,000 per ounce are not beyond the realms of possibility given the scale of the coming global debt crisis and the magnitude of the geo-political risks facing us.
GLENN: Hmm. That is very interesting. What do you think could be the next catalyst for a significant rise in the gold price?
MARK: For me it has to be geopolitics and the supply demand fundamentals…
We are on the cusp of peak gold production.
Gold production is South Africa has already fallen over 75% and it is the canary in the gold mine so to speak.
All the data is suggesting this and leading people in gold mining industry itself to say we are on the verge of peak gold.
GLENN: That’s interesting you mention mining there… I’m currently working on a project with our in-house gold mining expert all about an area in British Columbia called ’The Golden Triangle’… are you familiar with it?
MARK: Yeah, a little. I’m aware that there sizeable gold deposits in the area and that they are seeing a lot of exploration and increased mining.
Canada is interesting from a gold supply perspective as it is the 5th largest gold producer, after China, Australia, Russia and the U.S.
Arguably given its size and the inaccessibility of many of the mines, Canada likely has to best potential for an increase in gold production. This supply will be needed to meet global demand as global gold production faces the challenge of peak gold production.
[Editor’s note: This backs up exactly what Simon Popple has been writing about in a new report he’s preparing right now. I’ll be in touch with more details on this as soon as it’s ready.]
GLENN: Great. I’m glad an expert like yourself is hearing the same things we are and I must thank you for all you’ve shared today. I think our readers will find it really interesting to get your view.
Before I let you go, though… before we started talking properly, I mentioned I saw a piece recently suggesting cryptocurrencies are now ‘the new gold’ when it comes to a safe haven asset and you, shall we say, smirked somewhat. What are your thoughts on that and cryptocurrencies generally?
MARK: Look, Bitcoin and cryptos generally, are very interesting and we were actually one of the first bullion dealers and wealth managers to write about them. We were even on CNBC back in 2015 discussing them.
And to be frank, the fledgling digital currency and the technology behind Bitcoin itself is exciting and has potential.
However, it has become massively speculative and has the hallmarks of a bubble after its meteoric 6-fold increase in the last year.
Coinbase, a leading bitcoin exchange saw 100,000 accounts opened in just 24 hours on November 1st, as reported by Bloomberg. In my opinion, Bitcoin is significantly overvalued in the short term.
Conversely, gold appears undervalued as it is flat to mildly higher this year and appears to be consolidating on last year’s gains.
It is important to think of gold in local currency terms. Gold is trading at just below £1,000 per ounce and is still 16% below its record nominal high of £1,160 per ounce in August 2011 and the height of the global financial crisis.
So, gold looks good value versus stocks, bonds and many property markets (especially London) – many of which are at all-time record highs and look overvalued. We are advising clients to rebalance portfolios.
GLENN: Great. Thanks again for taking the time to share your thoughts with our readers, Mark. It’s much appreciated.
Indeed, if people would like to find out more about Mark and what he and the team are GoldCore are up to, you can visit www.goldcore.com.
Important Guides
For your perusal, below are our mostpopularguides in 2017:
The way gold has been moving the past few weeks, it’s easy to overlook the 11% growth it is enjoying during 2017. As we move towards year end, we see gold has been flat while suffering attack after attack from the banking cabal. The charts over the past ten trading day have these massive waterfalls that are intended to frighten traders. A few years ago this worked like a charm - today, not so much.
While these waterfalls make the chart look horrific, if you look just past where the attack ends, you will see a reversal. Not just a reversal, but over the past ten days, close to a 100% reversal. This shows just how the “strong hands” are not letting go and not being shaken at all from their stance. The word is out – gold is where it’s at and physical gold is really where it’s at.
We have one more Federal Reserve meeting scheduled for the second week of December. We can only hope Fed Chairman Janet Yellen aka Mother Felon does her thing and raises the Fed Rate by another 0.25% – 0.50%. If this happens we expect a similar reaction as has happened in January 2016 and January 2017.
On December 15, 2015, gold bottomed out at $1,049 (on the London pm gold price fix) the day after the Federal Reserve raised rates for the first time in almost 10 years. Gold immediately took off and rose by almost $200 per ounce to $1,241 in less than two months (by February 11, 2016).
On December 20, 2016, gold bottomed out at $1,125 on December 20, shortly after the Fed raised rates again. Gold then rose gradually to $1,257 in February and $1,346 by the next September.
It could happen again this year. Even if gold fell to the low $1,200s range, it could take off again in late December. That’s the theory of the Commodities Corner column in last week’s Barron’s. First, the article points out that gold rose 8.6% in 2016 and is on track to gain over 10% in 2017, so each year’s low gold price is higher than the previous year’s low. Then, Barron’s explained that speculative gold traders tend to ‘short’ gold in advance of the FOMC meeting and then cover those shorts when the Fed meets. Source
We are hoping Mother Felon signals that 2018 is going to another great year for gold. Keep your eyes and ears open for the Fed Chair to, hopefully, announce an early Christmas present on December 12-13. The only question that remains is whether she will or she won’t do as she has done the past two years.
Starting last Sept. 20, immediately after the Fed’s “pause” on rate hikes, the market began to price in a Fed rate hike for December. Asset classes adjusted in line with those expectations.
Treasuries, gold, euros and yen all fell. Bond yields and the dollar both rose. Tight money was on the way.
The problem is that the markets have now priced in a 100% chance of a Fed rate hike in December. You can’t get any more sure of yourself than that. This means that Treasuries, euros, gold and yen have all found a bottom.
They’re just waiting for confirmation from the Fed in a few weeks. As I said, markets are waiting for Godot.
This sets up one of my favorite trading situations. I call it the “asymmetric trade.”
When something is fully priced, the happening of the event does not move prices. But if the event does not happen, prices move violently to reprice for the unexpected outcome.
This means you have a “Heads I win, tails I don’t lose” situation. Source
I agree people that are holding physical gold, and not an illusion of gold like GLD, it’s a “Heads I win, tails I don’t lose” scenario. While gold is still under the control of the West, gold is nothing more than a hostage and does what it is told by its capture. Gold, in our opinion, is going higher: not just higher, but much higher from where it is currently. Will the next “gold master” allow it to roam free? We doubt it - we just hope gold has some breathing room and the leash is slightly longer than it is today.
The global monetary system is beginning to change. Gold is going to be part of the change and a major player in the future global trade system. If one simply reviews gold through the lens that is the countries in Mackinder’s Heartland, you will see nations scooping up gold with both hands. These nations are members of the BRI, EAEU, SCO, AIIB and the endless list of economic and military alliances that are currently developing and solidifying their future economic growth. The picture is very clear – gold, probably on the blockchain or some form of new fintech, is going to be included in the future of global trade. The major players, Russia and China, are making this crystal clear. How we get to the new system is the question of our life time that could have a very ugly answer.
We will continue holding physical gold and encouraging people to research reasons to hold physical gold. As we see it, our financial insurance policy increased by more than 8% in 2016 and another 11% in 2017 and is poised to continue to post gains over the next few years. Either way, gains or losses, insurance is insurance and only works if you hold it. We choose to hold it.
Questions or comments about this article? Leave your thoughts HERE.
It has been a rough year for many primary silver miners as two-thirds have suffered declines in production. Also, many high ranking silver producing countries are also experiencing a pronounced reduction in their domestic silver mine supply. According to the data put out by World Metal Statistics, Chile"s silver production is down 20% in the first eight months of the year, while Australia is down 19%, Mexico declined 2% and Peru lower by 1%.
The Silver Institute will be releasing their 2017 Silver Interim Report shortly which will provide an update on current silver production and forecasts for the remainder of the year. However, I believe global silver production will take a big hit this year due to several factors including, falling ore grades, mine closures, and strikes at various projects.
For example, Tahoe Resources was forced to shut down its Guatemalan Escobal Mine in July due to a temporary suspension of its operating license by the country"s Supreme Court. However, even after the Guatemalan Supreme Court reinstated Tahoe Resources Escobal Mine"s license in early September, an ongoing road blockade has hampered the ability of the project to continue mining. Regardless, Tahoe"s silver production declined a stunning 6.7 million oz Q1-Q3 2017 versus the same period last year.
Now, on the other hand, silver production at Fresnillo"s operations in Mexico jumped by nearly six million oz during the first three-quarters of 2017 primarily due to the start-up of its San Julian Mine phase II expansion and a ramp-up of its phase I:
While the gain in silver production at Fresnillo"s operations helped to offset the significant decline at Tahoe"s Escobal Mine, two-thirds of the top primary silver companies in the group experienced a reduction in mine supply this year. Hecla"s silver production fell by 3.7 million oz in the first three-quarters this year due to an ongoing strike at its Lucky Friday Mine in Idaho. Moreover, output at Silver Standard"s Puna operations in Argentina fell by 3.2 million oz due to a 36% decline in ore grade at is open-pit Pirquitas Mine. Silver Standard"s Pirquitas Mine is one of the few open-pit silver operations in the world. The overwhelming majority of primary silver mines in the world are underground operations.
Overall, production at these top primary silver miners fell 9 million oz in 2017 compared to the same period last year:
Now, if Tahoe Resources Escobal Mine was not forced to shut down or if Hecla"s Lucky Friday Mine"s strike was resolved, overall production at these top primary silver miners would have likely increased by approximately one million oz this year. Unfortunately for Tahoe"s Escobal Mine and its investors, it may be quite some time before full production resumes. As I have mentioned in previous articles about the troubles plaguing the Escobal Mine by the local and indigenous peoples living by the operation, there are two very different opinions on the underlying problems.
While I have stated that the negative issues put forth by the local and indigenous peoples about the Escobal Mine are likely more valid than the pro-western stance taken by the Tahoe Managment or the Mainstream financial media, time will tell how this is resolved. However, the notion put forth by Tahoe Management that the problems are stemming from "non-locals" who are supposedly radicalizing the locals around the plant, is unfounded when we understand that it is a huge ground-roots movement led by a large percentage of the inhabitants surrounding the mine.
Tahoe CEO Ron Clayton is also wrong when he states in a recent press release that community opposition comes from “non-locals”. Lack of social license has dogged Tahoe Resources since the beginning of its project. Since 2011, tens of thousands of residents in eight municipalities around the Escobal mine have voted in municipal plebiscites demonstrating their opposition to the project, or any mining in the area, out of concern for their water supplies, health, and local agriculture. Five municipalities refuse to receive any royalty payments from Tahoe’s mine operations and are now parties to the legal proceedings over discrimination of the Xinka Indigenous population and the Ministry of Energy and Mines’ failure to consult with them.
As the article states, five municipalities refuse to receive any royalty payments from Tahoe"s mine operations and are now supporting legal proceedings. This does not sound like a small group of non-locals instigating trouble. Rather, this has been an ongoing issue ever since the Escobal Mine was initially planned, during its construction phase and ever since it produced its first ounce of silver in 2014.
Lastly, it looks like global silver production will take a big hit this year. We could see world silver mine supply fall by 40-50 million oz in 2017 if the trend continues for the remainder of the year. One country that I did not report on about silver production was China. According to the World Metals Statistics, they show Chinese silver production down by a stunning 25% in the first eight months of 2017. However, I don"t believe the decline is that high. Even though the World Gold Council stated that Chinese gold production was down 10% so far this year, I doubt their silver production fell 25% this year.
We will have to wait and see what production figures the Silver Insitute will release in their 2017 Silver Interim Report when it"s published in the next few weeks. Regardless, the world"s economies are being propped up by a massive amount of debt, derivatives and money printing. When the markets finally crack, global silver production will fall considerably as for demand for base metals will drop like a rock. We must remember, 58% of world silver production is a by-product of copper, lead and zinc production. So, when base metal demand falls, so will base metal production.
Thus, as the market and economy continue to disintegrate, global silver supply will fall right at the very same time investment demand surges.
Check back for new articles and updates at the SRSrocco Report.
