Wednesday, July 31, 2013

Gold Drops for Second Day as Investors Await Fed Policy Decision

Gold declined for the second straight day as investors awaited a policy statement from the Federal Reserve that may signal whether the central bank will begin trimming its stimulus efforts.

The precious metal climbed 8.3 percent in July through yesterday, set for the biggest gain since January 2012. Fed Chairman Ben S. Bernanke said this month that it’s too early to decide whether to begin scaling back debt purchases in September, after saying on June 19 that bond buying could slow if the economy improves. The U.S. expanded more than projected in the second quarter, the Commerce Department said today.

“The market is going to be very choppy and nervous today,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “The data has got some investors worried that tapering may begin this year.”

Gold futures for December delivery fell 0.6 percent to $1,316.90 an ounce at 10:22 a.m. on the Comex in New York. Prices earlier rose as much as 1.1 percent.

Bullion dropped 21 percent this year through yesterday after some investors lost faith in the metal as a store of value and on speculation the Fed may curb its bond-buying program. The Fed is buying $85 billion of debt a month. While none of the 54 economists surveyed by Bloomberg from July 18 through July 22 expected policy makers to begin paring purchases at this meeting, half predicted a reduction to $65 billion per month in September.

Silver futures for September delivery slid 0.4 percent to $19.61 an ounce in New York.

Source: Bloomberg

QE Is a Euphemism for Inflation

“When the Fed monetized three trillion dollars worth of mortgages and Treasuries, by definition that is inflation. Quantitative easing is just a euphemism for inflation. We’re talking about the effect of inflation when we talk about rising prices. We already have rising real estate prices, we have rising stock prices. Inflation has caused that. But I believe consumer prices are also rising much faster than government admits.”

Monday, July 29, 2013

Peter Schiff: Buy Gold and Silver Now, Money Printing Until We Have A Currency Crisis & More

“Gold is really setting up for a huge reversal, because once the technicals turn around and the momentum goes back to the upside…the gold that speculators sold on the way down isn’t going to be available on the way up… The people who own it aren’t going to sell it at any price, because they didn’t buy it to trade out of it. They bought it to own it, to keep it. So this is going to be a big problem for the shorts, and even people who want to re-establish longs, because I think most of the people who want to get back into the market are going to get back in a lot higher than people got out.”

Friday, July 26, 2013

Peter Schiff on Gold: 'You Have to Love a Market Everyone Hates'

Euro Pacific Capital CEO Peter Schiff is calling a bottom of sorts in gold — one of the most ardent defenders of the precious metal has launched his first gold mutual fund, which invests primarily in gold mining companies rather than in the metal itself.

Given the recent 20 percent drop in gold and 40 percent plummet in gold-mining stocks from their highs, Investment News said the outspoken Schiff is "either crazy like a fox — or just plain crazy."

The new EuroPac Gold Fund to some extent puts Schiff's reputation where his mouth is.

"The [gold mining] stocks have just been crushed," he told Investment News. "I've never seen sentiment this bad, and you have to love a market everyone hates."

Ever the gold bull, Schiff predicted the Federal Reserve's ultra-loose monetary policy would send gold to $5,000 per ounce in the next few years by stoking inflation.

"Inflation is not low," he maintained. "A lot of people on Wall Street think inflation is low because they believe the government and not their own eyes."

Mining stocks are often viewed as a leveraged play on gold, which means big swings in gold prices can be amplified at the mine level.

"The No. 1 reason gold miners have done terribly is they've done a terrible job of managing their capital. They were very profitable during the gold bull run, but they've misused all that money," Sam Lee, an analyst at Morningstar, told Investment News.

However, some assess the problem differently for gold mining stocks.

Joe Foster, a portfolio manager for Van Eck Global, told Index Universe the average cost of production across the industry is about $1,050 per ounce, but the World Gold Council put that figure closer to $1,400 per ounce.

"Unlike most industries, there's very little a mine can do when the price of its product falls below the price of its manufacturing. The realities of the business are simply crushing," Index Universe said.

Hedge fund manager Jim Rogers believes gold's price could be headed for a bottom at $1,090 per ounce, Financial Advisor reported. In mid-day trading on Thursday, gold was priced at $1,329 per ounce.

Speaking at a conference in Denver, Rogers said he suspected a gold correction could be an anomaly and that he is still long-term bullish on the precious metal.

Not for the first time, Rogers blamed Fed policies for U.S. economic woes. "The first two central banks in the U.S. went bust and the Greenspan-Bernanke Fed will, too," he predicted.


Peter Schiff: US Is Destroying Its Middle Class

“Obama's got a new concept, ‘the middle out’. He wants to grow the economy from the middle class out… This is the economic cart before the horse. We don’t have a strong economy because we have a strong middle class; we have a strong middle class because we have a strong economy… The reason the middle class is shrinking is because you destroyed the incentives for people to create wealth and to employ people. It’s because of the policies that were targeted at the so-called rich. That’s why the middle class is disappearing.”

Thursday, July 25, 2013

Jim Rickards: The Fed Is Just Wrong About Recovery (Audio)

“The Fed’s forecasting record has been abysmal. The Fed has been wrong four out of the last four years in terms of their growth projections… They’ve been wrong by a lot. Sometimes they project 3 1/2 to 4% growth and it comes in around 2%. Sometimes they lower the forecast to 3% and it comes in at 1.5%. So you shouldn’t put any stock in the Fed’s forecast at all. In fact, as a guide, you should kind of assume the opposite or at least a lot worse than what the Fed is saying. You have to look at the fundamental economy, which is in terrible shape.”

Listen to the Full Interview

Peter Schiff: America! We're #... 27?

Wednesday, July 24, 2013

Peter Schiff: The Dollar Is Going to Collapse Before the Market (Audio)

“The Fed pretends that there is an exit strategy, knowing that exit is impossible. They just have to maintain the pretense as long as they can before the market figures out the true predicament that they’re in. Now they talk about tapering in the future but they can’t taper right now. If the economy is strong enough for tapering, why wait four months, why wait six months? Why not just do it? It’s kind of like the guy who is overweight, and he constantly tells you he is going on a diet but he’s going to start next month. Why don’t you start right now? It’s easy to talk about something you’re going to do in the future. What’s hard is to actually do something in the present. No matter what Ben Bernanke says, between now and the time when he’s supposed to taper, he will come up with an excuse why he can’t. I think he already knows this.”

Listen to the Audio Interview Here

Tuesday, July 23, 2013

Peter Schiff on Detroit and Bernanke’s Gold Ignorance

Bernanke is the head of a central bank. Gold is a monetary asset. Central banks hold gold as reserves… How can our chief central banker admit that he doesn’t understand gold? … It’s kind of like a coal miner having no idea what that canary is doing in a coal mine. Maybe the canary drops dead and the coal miner [says], ‘What’s up with that canary?’ And then just going about his day… If he doesn’t get out of that mine, he’s going to die too! … Gold tells you if your monetary policy is correct.”

Peter Schiff Does Stand Up Comedy 7/21/13 in NYC

Detroit Destroyed by Democracy


Thursday, July 18, 2013

Peter Schiff's Commentary: The Powerful Case for Silver

After a couple generations of purely fiat currency in the United States, a lot of people have forgotten that money used to be backed by something of value - gold and silver. It wasn't until 1965 that the US stopped making its dimes and quarters out of 90% silver, and the dollar was backed by gold internationally until 1971.

In spite of fiat money's ubiquity, more and more people around the world are waking up to the dangers of paper currency and turning to gold and silver to protect their savings. Silver is particularly useful to everyday citizens around the world because of its smaller value-to-weight. A half-ounce of silver can buy you dinner. A half-ounce of gold can buy dinner for you and 60 of your closest friends. That's why for centuries, gold has been considered the money of kings, while silver is known as the people's money.

It's not hard to see the growing importance of a stable medium of exchange worldwide - look to the Cypriot banking crisis or the barter markets evolving spontaneously in economically devastated countries like Argentina or Greece. Here are places where having an stash of silver versus a roll of banknotes can mean the difference between keeping your family well-fed and having to beg for assistance.

Developed nations are also waking up to this reality, translating into record silver sales at the US Mint and other major bullion producers despite the recent correction in global spot prices. This investment demand is providing a baseline of support to silver's price and helping to re-establish silver as a universally recognized form of money.

Peter Schiff: “All Evidence Points to Recession”

So you don't think that they'll roll QE back to $65 billion a month by September, like Bernanke alluded last month?

No, I think they'll step on the gas and roll it up to 125 billion or 150 billion. Because it's like drugs and a tolerance. The economy is so addicted to QE, that the more you maintain it, the more the economy needs to stay high. As the bubble gets bigger, the more air you need to sustain it.

So I don't think $85 billion is enough. They're going to have to take it to $125, $150, $200 billion, $250 billion... They're going to have to do it bigger and bigger. The minute they stop, it's going to implode.

The more easing we do now, the bigger the government gets, as the national debt gets bigger and bigger. The Fed has to monetize more debt.

What happens when the budget deficit is $2 or $3 trillion a year?

The more QE we do now, the bigger the government gets because its able to run bigger deficits, so its just more QE will have to do tomorrow to sustain it all.

Speaking of recession, I just read that the second largest employer in the United States is a temp agency.

Yes, I think something like 10% of the entire nation's workforce is now temp. They can't afford full-time workers, the government has made it too expensive. That's a big sign that we never had a real recovery. We have a smaller labor force.

Only 47% of Americans have full-time jobs. But we actually have fewer people working full time. What we have is part-time jobs to replace the full-time jobs that are being lost.

So some people have two jobs now: The same guy working two places counts as two jobs. But its just one guy.

The economy is shrinking. There's more and more people on food stamps, welfare, and disability. So all the anecdotal evidence says we're still in a recession. It's just the government's phony numbers that say otherwise... It's a phony recovery that will fade if the Fed stops.

The analogy everyone wants to use is that the economy is a bicycle and the QE is the training wheels. The truth is that QE aren't the training wheels, they are the only wheels we got. The economy is just a frame. We're rolling on QE.

To take the analogy further, I'll say the bicycle is heading towards a cliff. If we don't remove the wheels, we'll go over the cliff. Either way, we're aiming for a fall. But it is far better to fall now then to go over the cliff and drop a great distance to your death.

But the Fed doesn't care, the Fed doesn't want that short-term pain, so they'd rather kill the economy in the long run — which is where we're headed.

Friday, July 12, 2013

Santelli & Peter Schiff: The Fed Will Lose Control

“I think eventually you’re going to see a real attack on the dollar and the US Treasury market and the Fed’s ability to maintain artificially low interest rates without destroying the dollar… Eventually the Fed is going to lose control of this. And I think the biggest danger is when you start to see the bond market and dollar selling off simultaneously. You throw in a rally in gold and that’s basically the triple threat – you’ve got all the warning bells that the end is near.”

Peter Schiff: Is Shorting Treasuries The Next Big Trade?

Monday, July 8, 2013

Peter Schiff Dissects Gold Bull Market and US “Recovery” (Audio)

“The fundamental narrative behind this [downward] move [in gold] is wrong. What’s giving the shorts the motivation to sell is a number of false beliefs. One, that the US economy is recovering. It’s not. Two, that inflation isn’t a problem. But it is. And three, that the Fed’s about to tighten. When they’re not! So I think everything the market is anticipating is wrong. And therefore their expectations of a lower gold price are based on assumptions that are all wrong. When they figure that out…I think the price goes way up.”

Friday, July 5, 2013

Peter Schiff: New Jobs Report Is Actually Dismal on

“We lost another 6,000 manufacturing jobs… You know where all the big job gains are? It’s in leisure and hospitality. We have more people in America now working in bars and restaurants than ever before. These are not good jobs, they are low paying, part-time jobs and you cannot build an economy on these types of jobs… The numbers are going to get worse. The jobs that we are creating – these phony jobs – are a function of all the cheap money and all the excess spending and borrowing that goes along with it.”

Wednesday, July 3, 2013


“Gold's second quarter price plunge is now the largest on record, dropping 23% in the last three months to finish a little over $1,200. Wall Street is gloating that a new metals bear market is upon us. A Duke professor even forecast gold returning to its "fair value" of $800 or lower. Naturally, he was quick to point out that he wasn't offering investment advice, only academic speculation.

For those of us who examine commodity fundamentals, the overwhelming conclusion is that the yellow metal simply cannot stay at these low prices for much longer. Gold is nearing a point at which miners are forced to scale back their operations, thereby pinching supply. Not only is diminished production likely to halt gold's downward trajectory, but an imminent supply crunch could also propel gold back to new highs. The likelihood of a strong rebound is supported by both a struggling mining industry and gold's performance during the last great bull market of the 1970s.

Domestic Policy vs. Commodity Fundamentals

If you listen to the US financial media, you might think gold's price is solely determined by events in the domestic economy. The generally accepted narrative of gold's correction is fairly straightforward: the US economy is slowly recovering with seemingly low inflation, and the Federal Reserve is now hinting at unwinding its quantitative easing programs by this time next year.

I've argued against these renewed recovery fairy tales for months, reminding my readers and the media that the fundamentals of gold remain very strong. The recovery mindset is mostly driven by misguided consumer sentiment, unreliable government data, and, most importantly, the Fed's ongoing injections of cash into the economy.

As far as tapering or even ending QE, even the IMF agrees with me that the Fed has "no clue" how to do this. Last month, when Bernanke simply mentioned the idea of halting QE within the next year, global markets went into a tailspin. Imagine how much worse things would be if the Fed were to stop talking and actually take action to taper.

Meanwhile, it is important to remember that gold is a global commodity. While the US has a huge impact on global financial markets, gold itself has no special allegiance to any particular nation-state.

With the latest drop in gold's price, the time has come to take a closer look at these commodity fundamentals.”

Peter Schiff: "U.S. Bond Market Is a Ponzi Scheme"

Gold Market Rhyming

With thanks to Peter Schiff for digging out this gem, we should point out the article was from 1976, written just a few days after gold completed its mid-1970s correction from nearly US$200 to US$100 an ounce.
The similarities with today’s mainstream commentary on gold are striking. We obviously don’t know if gold bottomed last week or whether there’s more downside to come. But we do know that gold is a very popular investment to rubbish right now.
Financial journalists, like hedge fund traders, find it easy to go with the momentum. When you don’t understand something, you let the price action do the talking, or the informing. So if gold has declined by nearly 40% over the last two years then it must be a bad investment, right?
So the journalist looks around to find out why gold is in such a rut. He or she gathers all the chestnuts and starts preparing the story: Gold doesn’t pay interest, the US economy is recovering, interest rates are heading higher, stocks offer a better long term return, gold just sits there and does nothing, etc etc.
All these arguments suddenly seem to resonate with people who bought gold simply because it was going up in the first place, without understanding why they actually owned it. Perhaps they owned too much. So they sell in a panic. But someone is on the other side of that transaction, buying as the price gets cheaper.
At some point it reaches a crescendo — the panic selling and the value buying — and the market finds a bottom. We don’t know whether the market has reached a bottom now or not. But we do know that there are many parallels to this gold market and the one in the 1970s.

The Golden Cycle - Peter Schiff

By Peter Schiff:

The New York Times had the definitive take on the vicious sell off in gold. To summarize one of their articles:

Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.

The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.

Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.

This analysis provides a good representation of the current conventional wisdom. The only twist here is that the article from which this summary is derived appeared in the August 29, 1976 edition of The New York Times. At that time gold was preparing to embark on an historic rally that would push it up more than 700% a little over three years later. Is it possible that the history is about to repeat itself?

At the time The Times article was written gold had fallen to $103 per ounce, a decline of nearly 50% from the roughly $200 it had sold for in the closing days of 1974. The $200 price had capped a furious three-year rally that began in August of 1971 when President Nixon "temporarily" closed the gold window and allowed gold to float freely. Prior to that decision gold had been fixed at $35 per ounce for nearly two generations. That initial three year 450% rally had validated the forecasts of the "gold bugs" who had predicted a rapid rise in gold prices should the dollar's link to gold be severed. The accuracy of these formerly marginalized analysts proved to be a bitter pill for the mainstream voices in Washington and Wall Street who, for reasons of power, politics and profit, were anxious to confine the "barbarous relic" to the dustbin of history. Incredulous as it may seem now, with gold still priced at $35 per ounce, official forecasts of both the Secretary of the Treasury and the Chairman of the Federal Reserve were that demonetizing gold would undermine its value, and that its price would actually fall as a result.

Of course government experts could not have been more wrong. Once uncoupled from the dollar, gold's initial ascent in the early 1970's was fueled by the highest inflation in generations and the deteriorating health of the U.S. economy that had been ravaged by the "guns and butter" policies of the 1960's. But the American economy stabilized during the mid-years of the 1970's and both inflation and unemployment fell. When gold reversed course in 1975 the voices of traditional power elite could not contain their glee. When the gold price approached $100 per ounce, a nearly 50% decline, the obituaries came fast and furious. Everyone assumed that the gold mania would never return.

Although the writer of The Times piece did not yet know it, the bottom for gold had been established four days before his article was published. Few realized at the time that the real economic pain of the 1970's had (to paraphrase The Carpenters 1970's hit) "Only Just Begun". When inflation and recession came back with a vengeance in the late 1970's, gold took off (to quote another 1970's gem), like a skyrocket in flight. By January 1980, gold topped out at $850 an ounce. The second leg of the rally proved to be bigger than the first.

The parallel between the 1970s and the current period are even more striking when you look closely at the numbers. For example, from 1971 to 1974 gold prices rose by 458% from $35 to $195.25, which was then followed by a two-year correction of nearly 50%. This reduced total gains to just under 200%. The current bull market that began back in 2000 took a bit longer to evolve, but the percentage gains are very similar. (We should allow for a more compressed time frame in the 1970s because of the sudden untethering of gold after decades of restraint.) From its 1999 low to its 2011 peak, gold rose by about 650% from $253 to $1895 per ounce, followed by a two year correction of approximately 37%, down to around $1190 per ounce. The pullback has reduced the total rally to about 370%. The mainstream is saying now, as they did then, that the pullback has invalidated fears that rising U. S. budget deficits, overly accommodative monetary policy, and a weakening economy will combine to bring down the dollar and ignite inflation. But 1976 was not the end of the game. In all likelihood, 2013 will not be either.

The biggest difference between then and now is that until 1975 ordinary Americans were barred by law from buying and owning gold. About the only route available to participate in the earlier stage of the precious metal rally was by hording silver dimes, quarters and half dollars minted prior to 1965. My father indulged in this process himself by sifting through his change, the cash registers of any merchant who would allow him (exchanging new non-silver coins and bills for silver), and by sifting out silver coins from rolls he bought from banks. It was a time-consuming process, and most of his friends and family members thought he was crazy. But the $10,000 face value worth of those coins he collected had a melt value of over $230,000 when silver hit its peak.

By the mid 1970's none of the problems that initially led to the recession in the early years of the decade had been solved. Contrary to the claims of the "experts" things got much worse in the years ahead. It took the much deeper recession of the late 1970's and early 1980's, which at the time was the worst economic down-turn since the great Depression, to finally purge the economy of all the excesses. The lower marginal tax rates and cuts in regulation implemented by President Reagan and tight money under Volcker helped get the economy back on track and create investment opportunities that drew money away from gold. As a result gold fell hard during the early 1980's. But even after the declines, gold maintained levels for the next 20 years that were three to four times as high as the 1976 lows.

Although the economy improved in the 1980's, the cure was not complete. Government spending, budget and trade deficits continued to take a heavy toll. The U.S. was transformed from the world's largest creditor to its largest debtor. When the time came to face the music in 2001, the Fed kept the party going by opening the monetary spigots. Then when decades of monetary excess finally came to a head in 2008, the Fed open up its monetary spigots even wider, flooding the economy with even more cheap money.

Unfortunately just like 1976, a true economic recovery is not just around the corner. More likely we are in the eye of an economic storm that will blow much harder than the stagflation winds of the Jimmy Carter years. And once again the establishment is using the decline it the price of gold to validate its misguided policies and discredit its critics. But none of the problems that led me and other modern day gold bugs to buy gold ten years ago have been solved. In fact, monetary and fiscal policies have actually made them much worse. The sad truth is that as bad as things were back in 1976, they are much worse now. Whether as a nation we will be able to rise to the occasion, and actually finish the job that Ronald Reagan and Paul Volcker started remains to be seen. But I am confident that the price of gold will rise much higher, and that its final ascent will be that much more spectacular the longer we continue on our current policy path. Don't believe the mainstream. Just as before, they will likely be wrong again.

Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.


Tuesday, July 2, 2013

Jim Rickards: Buy Gold, Not Stocks

“Fundamentally, the case [for gold] hasn’t changed. It has to do with Fed money printing and instability in the international monetary system… [The Fed] needs to drive nominal GDP, they need negative real rates, they need more inflation, or else [US] debt will be un-payable. And that’s good for gold.”

Peter Schiff Show: The Consequences of Free Money