Precious metals news

Certain deflationists have recently gone on record saying that the increase in the Fed’s balance sheet is meaningless with regard to creating inflation because our central bank can’t print money, it can only create bank reserves. The problem with their view is that it both disregards the definition of money and ignores the process of creating bank reserves.
Money is commonly defined as “a medium that can be exchanged for goods and services and is used as a measure of their values on the market, including among its forms a commodity such as gold, an officially issued coin or note, or a deposit in a checking account or other readily liquefiable account.” The Fed creates a “readily liquefiable account” when creating excess bank reserves, so it is also creating money. Since inflation is properly defined as an increase in the money supply, the Fed unquestionably creates both money and inflation when it creates reserves.
The deflationists’ error is to suppose that because the amou...

The continued bull market in the price of gold has been one of the staple discussions in the financial media for the better part of a decade. But, in that time, almost no consensus has emerged to explain the phenomenon. If you ask ten Wall Street pundits to explain the upward movement, you will most likely get nearly ten different answers.
While most logically identify global currency debasement as a primary cause, others say that gold is driven by: fear of economic uncertainty, central bank gold hording, international political conflict, or the ebb and flow of the Indian wedding season. The truth is the main drivers for the price of gold are the level and direction of real interest rates and the intrinsic value of the dollar.
Most people (outside of Washington) understand that printing money dilutes the value of the currency being printed. When a currency drops, the nominal price of hard assets in that currency generally rises. But the relationship between gold and monetary...

By Peter Schiff
While it’s true that history repeats itself, the patterns should always be separated by a generation or two to keep things respectable. Unfortunately, in today’s economic world, it seems the cycle can be counted in months.
On July 24, 2009, just as the Federal Reserve unleashed its first quantitative easing campaign (now called “QE1” – an echo of the reclassification of the Great War after still more destructive subsequent developments), Fed Chairman Ben Bernanke wrote an opinion piece in the Wall Street Journal to soothe growing concerns about excess liquidity. He assured the public that the Fed had an “exit strategy.”

It seems the Fed has given up on the idea that the country can build a viable and stable economy through the conventional means. Instead, our central bank has resorted to once again growing GDP and increasing employment by the creation of asset bubbles. This is a dangerous game that no one, least of all the Fed, knows how to play.
We learned this past Wednesday that the FOMC decided to increase its purchases of longer-dated Treasuries by $600 billion within the next eight months. That means the Fed is on course to fund about 75% of our annual deficit! Such figures are the stock in trade of banana republics. While most of the rest of the world is fighting inflation and strengthening their currencies, we are doing everything in our power to end the dollar's status as the world's reserve.
Canada, China, India, Brazil, and Australia have all recently taken steps to raise interest rates and/or curtail bank lending. Compare that to the US, which has left interest rates at near-zer...

By Peter Schiff As the world awaits another $500 billion flood from Bernanke's printing press, central bank governors from Brasília to Tokyo are preparing to respond in kind. This is the monetary equivalent of a nuclear war, except instead of radiation, bombs of inflation threaten to make the world economy uninhabitable for saving and productive enterprise.
While much of the attention has been focused on China and accusations that it is a "currency manipulator," the first shot in this war was clearly fired by the US Federal Reserve. Last month, the Fed came out with a statement that, for the first time ever, said inflation is rising at a rate "below its mandate." That is, they acknowledged that the deflation threat had passed, that prices were stable - but they still intended to send prices higher.
Since the Bretton Woods Agreement was signed in the wake of World War II, the global monetary system has been based on the US dollar. This means that when the Fed decides to creat...

The following article was written by Mary Anne and Pamela Aden for the November 2010 edition of Peter Schiff's Gold Letter.
October saw gold soaring to record highs while silver shot up even more, reaching a 30-year high. Yes, the stronger phase of the bull market is flexing its muscles.
Gold's exceptional rise has now reached our current target level at $1,350. It's been a super rise, up 55% since April 2009... or, to put it another way, gold has soared 17% in the last 10 weeks alone!

Super-Rich Investors Buy Gold by Ton Reuters - A survey of private wealth managers catering to high net worth individuals has shown that the world's ultra-rich are selling currencies and buying gold "by the ton." One notable difference from past downturns is the demand for physical gold, as opposed to just ETFs and mining stocks. Anecdotal evidence from bankers shows the wealthy buying tons of gold for physical delivery, then storing the assets away from the banking system. Read Full Article>>
Drinks Are Free as Bartenders Refill Punchbowl Bloomberg - Noted Bloomberg columnist William Pesek openly challenges the myth of central bank independence. In the 13 years since the Bank of Japan was granted "independence," it has left interest rates near zero the entire time. To explain why, Pesek brings the illustration to American shores. He imagines what would happen if Fed Chairman Bernanke were to try to raise interest rates under present conditions. The answer? Immediate Congr...

By Michael Pento
It seems the current Chairman of the Federal Reserve is of the belief that diluting the dollar is the cure for everything from a recession to male pattern baldness. And like other snake-oil salesmen before him, Mr. Bernanke is heavy on promises and light on results. Here are five prescriptions that money printing can't fulfill:
Unlike the snake oil of printed money, these genuine therapies take time and effort, and sometimes have painful side effects. The quack remedies offered by Dr. Bernanke promise to cure all ills with no effort on the part of the patient.
If the measures I propose are established in concert, we would lay the groundwork upon which to rebuild the country’s goods-producing sector. If allowed to flourish, manufacturing can create the needed jobs to lower the long-term unemployment rate and restore the county’s economic vitality.
The Fed's plan, by contrast, has only one predictable consequence: inflation. Indeed, Bernank...

The following article was written by Mary Anne and Pamela Aden for the October 2010 edition of Peter Schiff's Gold Letter. Gold's strength is unusual. Just when we thought that gold was taking a breather from its stellar rise, it quickly turned up.
Gold has already surpassed its June record high. Its decline through July was moderate, giving up less than 8%, and this action is bullish.
Someone is clearly buying up gold at every opportunity. Is it central banks, hedge funds, or nervous investors?
We think it's all of the above.

By Peter Schiff
There has been so much discussion recently about "QE 2" that you would think the entire financial sector were about to embark on a transatlantic cruise. Unfortunately, they, and we, are not so lucky. In the year 2010, "QE 2" doesn’t refer to a sumptuous ocean liner, but a second, more extravagant round of "quantitative easing" – stimulus. In the past, this technique was simply called "printing money." As if the nation has not already suffered enough from the first round, Captain Ben Bernanke and the Fed are determined to compound the damage by hitting us with another monetary juggernaut. Their stated goal is to boost the economy and create jobs. However, since economic growth cannot be achieved by printing money, their QE 2 will sink just as surely as the Titanic.

By Peter Schiff
Much of the content of the latest Fed statement, released on September 21, echoes the central bank's previous post-credit crunch pronouncements: there is still too much slack in the economy, interest rates are still going to be near-zero for an "extended period," and the Fed will continue to use payments from its Treasury purchases to buy yet more Treasuries. But this recent statement uses a new turn of phrase that should have Americans very upset. The Fed says that "measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate." Though the wording treads lightly, it should not be taken lightly. It may signal the final push toward dollar collapse.
The Fed's dual mandate, since an amendment in 1977, has been to promote "price stability" and "maximum employment." While often discussed as if both goals are complementary facets of one mandate, they tend to have been at odd...

The following article was written by Mary Anne and Pamela Aden for the September 2010 edition of Peter Schiff's Gold Letter.
Gold is looking good. Over the past few weeks, it surged from $1160 to near $1250. That's an impressive 7.8% monthly rise, and even though gold is rapidly approaching its all time record high, it's poised to move still higher.
What's Driving the Gold Price Up?
There are several key factors coming together at the same time and all of them are bullish for gold. But if we had to boil it down, the bottom line is uncertainty. This makes investors nervous, which has always been good for gold. But is this response rational?

Gold Demand Jumps 36% as Investors Step Up Purchases of ETFs, Council Says Bloomberg - Private investors and central banks are stepping up purchases of gold-backed ETFs. Concerns about sovereign debt in Europe and the continuing viability of the dollar have sent gold prices up 30% year-over-year. In June, Gold shattered all previous nominal records against the euro, pound sterling, and Swiss franc. With the Federal Reserve reiterating its pledge to keep interest rates near zero and the EU setting up a $1 trillion bailout fund for its weaker member-states, individuals, institutions, and creditor governments have found gold to be the last reliable safe haven. As investors pour into ETFs for liquidity and accounting purposes, gold moves off the market and into vaults, allowing holders of physical gold the benefit of rising prices without counterparty risk. Read more>>

Gold first broke $1,200 on December 2, 2009; nine months later, instead of witnessing the birth of the full-on gold boom I have long anticipated, the yellow metal has gained a modest 4%. Fortunately, it has spent the summer solidly above $1,150, which should put to rest the claim that we are seeing an exponential gold bubble like we saw in 1980. And those waiting for the "big pullback" to $8-900 might be seeing the futility in their cause. But I never doubted the strength of this secular bull market. In fact, I still maintain that gold is grossly undervalued. So, what's holding gold back?
First, it's important to account for the season. While everyone is at the beach, on their boats, or switching apartments, very few are out buying gold. June and July have always been low-volume months in the gold market. August tends to pick up a bit, and then by September, we're off to the races. The fact that gold hasn't had a major pullback this summer is very bullish for the fall.

Sinai Says Fed's Statement Means "Gotta Buy Gold" Bloomberg - The FOMC policy statement on Sept. 21 said that inflation too low for the Fed to achieve its dual mandates of price stability and maximum employment. This language was much more aggressive that previous statements, and lays the groundwork for a second round of ‘quantitative easing,' i.e. money printing. Respected private economist Allen Sinai explains that the statement was "code for: ‘we don't want to go the way of Japan so we're going to print money.'" How does one trade this information? "You gotta buy gold," says Dr. Sinai. Read Full Article>>
Gold Bull Market Has a Long Way to Go, Says Jim Rogers Kitco News - Famed commodities investor Jim Rogers describes the recent gold rally as a direct response to aggressive money printing by the governments of the United States and Japan. Both manage what have traditionally been considered "safe haven" currencies, so their devaluation efforts have destabil...

By Peter Schiff
As gold hovers near $1,200 an ounce and pundits speculate about a ‘gold bubble', it's important for investors to remember that a mere decade ago the picture was very different. In the year 2000, gold sat at an unimpressive annual average of $279 an ounce - a two-decade low. At that time, most analysts thought gold was finished as a monetary metal. They said its price would never recover and only kooks with tin hats would invest in it. I was one of the very few financial commentators publicly saying that gold was not only viable, but entering a long-term uptrend.
With the benefit of hindsight, we can all see that the consensus was wrong. Gold has performed remarkably against the Dow, NASDAQ, and US real estate. The reason I was able to confidently forecast this result is because I ignore the ‘certainties' determined by Wall Street consensus, and instead study the fundamental trends.
2000's - The Great American Century?
Ten years ago, the Un...

The following article was written by Mary Anne and Pamela Aden for the August 2010 edition of Peter Schiff's Gold Letter.
Gold has been rising steadily for the past decade. In recent years, the rise has gained momentum, in large part thanks to the world's central banks.
"Follow the money" is a secret that smart investors have known about for years. In a nutshell, it just means go where the money goes.
Well, the world's central banks have a lot of money, and they've been buying gold. This is expected to continue, and it'll keep upward pressure on the gold price.

Prices Excluding Food, Energy in US Rise More Than Forecast Bloomberg - Trouble in the eurozone may be helping to bolster the US dollar, and hold down the CPI, as investors seek perceived safety. Meanwhile, retailers are aggressively cutting prices in an attempt to improve weak sales figures. Nonetheless, the "core" Consumer Price Index (CPI) increased slightly in June, surprising many analysts who were bracing for deflation. More Americans are losing their jobs, and yet the cost of living continues to climb. Read Full Article>>
Silver - The Next Belle of the Ball? Barron's - Gold is trading at 66 times silver, compared to a historic average of 16 times. Many analysts, notably Jim Rogers, expect this gap to narrow. While Jim Turk points out that silver is more volatile than gold, he believes the gold/silver ratio will return to 20:1. With gold at its current prices, this would mean a silver price of about $60/oz - a gain of some 240% from current levels. Reasons to be bull...

By Rob Kirby: “Gold Finger - A New Take On Operation Grand Slam With A Tungsten Twist” I’ve already reported on irregular physical gold settlements which occurred in London, England […]